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EXHIBIT 99.2.2
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA OF
R&B COMMUNICATIONS
You should read "Management's Discussion and Analysis of Financial
Condition and Results of Operations of R&B Communications" and such entity's
financial statements and notes thereto included in this document for a further
explanation of the financial data summarized below.
We have set forth below selected historical consolidated financial data
of R&B Communications:
. as of, and for the years ended, December 31, 1995, 1996, 1997, 1998
and 1999, derived from the consolidated financial statements and
notes thereto of R&B Communications, which have been audited by
Phibbs, Burkholder, Geisert & Huffman, LLP with respect to the
years ended 1995 through 1998 and McGladrey & Pullen, LLP with
respect to the year ended 1999; and
. as of, and for the six-month periods ended, June 30, 1999 and 2000,
derived from the unaudited condensed consolidated financial
statements and notes thereto of R&B Communications, which, in the
opinion of its management, include all adjustments necessary for a
fair presentation of the financial position and results of
operations for these periods. Operating results for six-month
periods are not necessarily indicative of results that might be
expected for the entire fiscal year.
<TABLE>
<CAPTION>
Six Months
Year Ended December 31, Ended June 30,
--------------------------------------------------------------- -------------------------
1995 1996 1997 1998 1999 1999 2000
---------- --------- -------- ---------- ---------- ---------- -----------
(in thousands, except ratio data and operating activities)
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations:
Operating revenues:
Wireline
communications .................. $ 8,863 $ 8,657 $ 9,734 $ 11,703 $ 14,500 $ 7,193 $ 7,826
Wireless
communications .................. 495 653 968 1,219 1,257 740 830
Other communications
services ........................ 1,056 884 922 954 1,012 399 468
-------- -------- -------- -------- -------- -------- --------
Total operating
revenues ........................ 10,414 10,194 11,624 13,876 16,769 8,332 9,124
Operating expenses:
Maintenance and
support ......................... 1,717 2,009 2,312 3,398 4,917 1,699 2,457
Depreciation and
amortization .................... 1,237 1,426 2,104 2,340 2,808 1,358 1,663
Customer operations ............. 934 1,046 1,290 1,928 2,031 1,274 1,525
Corporate operations ............ 1,397 1,444 1,700 1,862 2,356 1,207 1,790
-------- -------- -------- -------- -------- -------- --------
Total operating
expenses ........................ 5,285 5,925 7,406 9,528 12,112 5,538 7,435
-------- -------- -------- -------- -------- -------- --------
Operating income .................. 5,129 4,269 4,218 4,348 4,657 2,794 1,689
Other income
(expenses):
Interest and dividend
income .......................... 543 542 311 261 337 134 162
Other expenses,
principally interest ............ (805) (747) (557) (410) (685) (544) (228)
Equity loss from PCS
investees:.......................
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
VA PCS Alliance ................. - - (822) (5,078) (5,427) (2,854) (2,839)
WV PCS Alliance ................. - - - (1,064) (4,565) (1,859) (3,093)
Equity income from
other investees ................. 1,135 586 634 315 340 153 154
Gain (loss) on sale
of assets and
investments ..................... 1,708 (284) 5,080 31 252 - -
-------- -------- -------- -------- -------- -------- --------
7,710 4,366 8,864 (1,597) (5,091) (2,176) (4,155)
Income taxes (benefit) ............ 2,681 1,582 3,052 (759) (917) 32 (1,610)
-------- -------- -------- -------- -------- -------- --------
Net income (loss) ................. $ 5,029 $ 2,784 $ 5,812 $ (838) $ (4,174) $ (2,208) $ (2,545)
======== ======== ======== ======== ======== ======== ========
Balance Sheet Data (at period end):
Cash and cash
equivalents ..................... $ 8,442 $ 6,001 $ 7,021 $ 6,910 $ 8,218 $ 6,695 $ 8,937
Securities and
Investments ..................... 9,146 6,249 6,495 8,441 18,812 8,427 17,983
Property, Plant and
Equipment, Net .................. 14,760 18,462 20,116 22,465 25,015 21,921 25,640
Total assets .................... 39,026 42,196 46,897 48,125 63,912 45,516 61,636
Long-term debt .................. 9,852 8,529 8,276 7,908 7,520 8,056 7,288
Shareholders' equity ............ 23,645 26,190 31,669 31,258 35,562 29,395 32,430
Operating Data (at period end):
Internet subscribers ............ - 363 686 1,209 2,078 1,445 2,332
ILEC access lines ............... 8,796 9,265 9,919 10,512 12,233 10,898 12,323
CLEC access lines ............... - - - 1,260 3,840 2,557 4,952
</TABLE>
R&B COMMUNICATIONS
Management's Discussion And Analysis Of Financial Conditions And
Results Of Operations Of R&B Communications
The following discussion and analysis should be read in conjunction with
"Selected Historical Financial and Operating Data" and other financial
statements and the notes thereto included elsewhere in this document. Much of
the discussion in this section involves forward-looking statements. Actual
results may differ significantly from the results suggested by these
forward-looking statements
Overview
R&B is an integrated communications provider offering a broad range of
products and services to business and residential customers in the Roanoke and
New River Valleys of Virginia. These communications products and services
include local and long distance telephone, dial-up and high-speed Internet
access, competitive local exchange access, paging and wireless cable television.
Historically, R&B has derived much of its revenues from its ILEC. R&B
introduced Internet services in late 1996 and CLEC services in the second
quarter of 1998. As a result of its increasing focus on and growth in CLEC
services and Internet services, an increasing portion of its operating revenues
and EBITDA will be generated by businesses other than its mature local telephone
operations. These newer businesses have generated lower operating margins due to
start-up costs associated with expansion into new markets and introduction of
new service offerings throughout the region it serves. As it expands its markets
and introduces new products, R&B expects to continue to have lower operating
margins for these businesses.
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R&B's wireless PCS service offerings consist of significant investments
in the Virginia Alliance and the West Virginia Alliance. The Virginia Alliance
and the West Virginia Alliance commenced operation in September 1997 and
September 1998, respectively. R&B has recognized significant equity losses from
these investments.
On June 16, 2000, R&B's board of directors approved an agreement and
plan of merger with CFW Communications.
Results of Operations
Three and Six Months Ended June 30, 2000 Compared to Three and Six Months Ended
-------------------------------------------------------------------------------
June 30, 1999
-------------
Overview
Net loss decreased $.5 million, or 25%, from $1.8 to $1.3 million, and
increased $.3 million, or 15%, from $2.2 million to $2.5 million for the
respective three and six month periods ended June 30, 2000, as compared to 1999.
EBITDA decreased $.6 million, or 30%, from $2.1 to $1.5 million, and $.8
million, or 19%, from $4.2 million to $3.4 million for the respective three and
six month periods ended June 30, 2000, as compared to 1999. Operating income
decreased $.8 million, or 56%, from $1.4 million to $.6 million, and $1.1
million, or 40%, from $2.8 million to $1.7 million for the respective three and
six month periods ended June 30, 2000 and 1999. R&B Communications' share of the
net loss from the Alliances increased $.1 million, or 7%, from $2.6 million,
$1.6 million after-tax, to $2.7 million, $1.7 million after-tax, and increased
$1.2 million, or 26%, from $4.8 million, $3.0 million after-tax, to $6.0
million, $3.7 million after-tax, for the three and six month periods ended June
30, 2000, as compared to 1999.
These results reflect customer growth from wireless, CLEC and Internet
services and R&B Communications' share of the Alliances' losses. The decreases
in operating income and EBITDA results were due to higher levels of depreciation
and amortization generated by capital investments in growth businesses and the
underlying supporting infrastructure.
Operating Revenues
Total operating revenues increased $.2 million, or 4%, from $4.4
million to $4.6 million for the three months ended June 30, 1999 and 2000,
respectively. Total operating revenues increased $.8 million, or 9%, from $8.3
million for the six months ended June 30, 1999 to $9.1 million for the six
months ended June 30, 2000. The increase was due primarily to a $.3 million and
$.8 million increase in network and CLEC-based revenues during the respective
three and six month periods. CLEC customers totaled 4,952 as of June 30, 2000,
which represented an increase of 2,395 customers from June 30, 1999. Internet
customers grew to 2,300 as of June 30, 2000, an increase of 900 customers from
June 30, 1999.
Wireline Communications Revenues. Wireline communications revenues
increased $.1 million, or 3%, and $.6 million, or 9%, for the three and six
month periods ended June 30, 2000, as compared to June 30, 1999. Wireline
communications revenues were $3.8 million and $7.8 million for the three and six
months ended June 30, 2000, and were $3.7 million and $7.2 million for the three
and six months ended June 30, 1999. Network revenues and revenues from fiber
optic network usage, CLEC and long distance accounted for most of this increase.
CLEC revenues increased $.6 million, or 74% from $.8 million for the six months
ended June 30, 1999 to $1.4 million for the six months ended June 30, 2000,
reflecting the growth in access lines noted above.
Wireless Communications Revenues. Wireless communications revenues
remained relatively stable, increasing $.1 million, or 20%, and $.1 million, or
12%, for the respective three and six month periods ended June 30, 2000, as
compared to June 30, 1999. Wireless communications revenues were $.5 million and
$.8 million for the three and six months ended June 30, 2000, as compared to $.4
million and $.7 million for the three and six month periods ended June 30, 1999.
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Other Communications Revenues. Other communications services revenues
remained unchanged at $.3 million for the three months ended June 30, 1999 and
2000. Other communications revenues increased $.1 million, or 17%, from $.4
million for the six months ended June 30, 1999 to $.5 million for the six months
ended June 30, 2000. This increase was principally the result of ancillary sales
and services related to the growing wireline and wireless services.
Operating Expenses
Total operating expenses increased $.9 million, or 33%, from $3.0
million to $3.9 million for the three months ended June 30, 1999 and 2000,
respectively. Total operating expenses increased $1.9 million, or 34%, from $5.5
million for the six months ended June 30, 1999 to $7.4 million for the six
months ended June 30, 2000. This increase was primarily in the wireline
businesses. Within this business, CLEC and network operations comprised $.3 and
$.7 million of the total respective increase. The CLEC and network operating
expense increased as a result of the expenses associated with managing the
increased fiber network and from strong growth of the CLEC markets.
Maintenance and Support Expense. Maintenance and support expense
increased $.2 million, or 24%, from $1.0 million for the three months ended June
30, 1999 to $1.2 million for the three months ended June 30, 2000, and increased
$.7 million, or 45%, from $1.7 million for the six months ended June 30, 1999 to
$2.4 million for the six months ended June 30, 2000. This increase was due
primarily to CLEC rollout and engineering and operations support growth.
Depreciation and Amortization. Depreciation and amortization expense
increased $.1 million, or 23%, from $.7 million to $.8 million for the three
months ended June 30, 1999 and 2000, respectively, and $.4 million, or 22%, from
$1.3 million for the six months ended June 30, 1999 to $1.7 million for the six
months ended June 30, 2000. This increase was due to an increase of
approximately 15% in the plant-in-service asset base from $38.0 million as of
June 30, 1999 to $43.7 million as of June 30, 2000. Depreciation and
amortization as a percent of the related assets increased from 3.4% for the six
months ended June 30, 1999 to 3.7% for the six months ended June 30, 2000. This
increase was due to a shift in the composition of the asset base from
traditional telephone plant to more network plant and equipment.
Customer Operations Expense. Customer operations expense increased $.1
million, or 16%, from $.7 million to $.8 million for the three months ended June
30, 1999 and 2000, respectively, and $.2 million, or 20%, from $1.3 million for
the six months ended June 30, 1999 to $1.5 million for the six months ended June
30, 2000. This increase related primarily to marketing and sales activities and
customer care growth, which was consistent with the related revenue growth.
Corporate Operations Expense. Corporate operations expense increased
$.5 million, or 75%, from $.6 million for the three months ended June 30, 1999
to $1.1 million for the three months ended June 30, 2000. Corporate operations
expense increased $.6 million, or 48%, from $1.2 million for the six months
ended June 30, 1999 to $1.8 million for the six months ended June 30, 2000. This
increase was a result of growth in the corporate infrastructure commensurate
with the significant growth in operations and merger related expenses, including
corporate bonuses, legal and financial valuation expenses.
Other Income (Expenses)
Other income (expenses) was driven primarily by the effect of losses
from the Alliances. R&B Communications' share of losses from the Virginia
Alliance decreased $.2 million, or 11%, from $1.5 million for the three months
ended June 30, 1999 to $1.3 million for the three months ended June 30, 2000,
and remained unchanged at $2.8 million for the six months ended June 30, 1999
and 2000. Its share of losses from the West Virginia Alliance, which commenced
operations in the latter part of the third quarter of 1998, and expanded
significantly in the second quarter of 1999, increased $.3 million, or 30%, for
the three months ended June 30, 2000, as compared to 1999, and $1.2 million, or
66%, for the six months ended June 30, 2000, as compared to 1999. R&B's share of
losses from the West Virginia Alliance were $1.5 million and $3.2 million for
the three and six month periods ended June 30, 2000, and were $1.1
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million and $1.9 million for the three and six month periods ended June 30,
1999. Further information concerning the Alliances is contained in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" for
each respective Alliance.
Income Taxes
Income tax changed $1.1 million from an expense of $.3 million for the
three months ended June 30, 1999 to a benefit of $.8 million for the three
months ended June 30, 2000. Income tax changed $1.6 million from an expense of
less than $.1 million for the six months ended June 30, 1999 to a benefit of
$1.6 million for the six months ended June 30, 2000. The primary factors causing
this change were an increase in the pre-tax loss of $.6 million for the three
months ended June 30, 2000 and $1.9 million for the six months ended June 30,
2000, as compared to 1999, as well as an additional tax expense from tax
adjustments in the second quarter of 1999.
