Filed by CoreComm Holdco, Inc.
Pursuant to Rule 425 under the
Securities Act of 1933, as amended
Subject Company: CoreComm Limited
Commission File No. 333-82400
Date: May 15, 2002
The following press release was issued by CoreComm Limited and
CoreComm Holdco, Inc.:
[CoreComm Limited Logo]
FOR IMMEDIATE RELEASE
CORECOMM HOLDCO, INC. AND CORECOMM LIMITED ANNOUNCE
FINANCIAL RESULTS FOR THE QUARTER ENDED MARCH 31, 2002
CoreComm Holdco reports continued growth in EBITDA
New York, New York (May 15, 2002) - CoreComm Holdco, Inc. ("Holdco"
or the "Company") and CoreComm Limited (NASDAQ: COMM), announced today their
operating results for the quarter ended March 31, 2002.
The Company has responded successfully to the challenges in the
telecommunications industry. In 2001, CoreComm Holdco and CoreComm Limited
recapitalized approximately $600 million of debt and preferred stock, and
eliminated more than $100 million of other liabilities and future obligations.
The Company also significantly improved its financial results, generating
EBITDA positive results for the first time in the fourth quarter of 2001. In
addition, the Company is now focused on its most profitable combined voice and
data product lines, and has successfully expanded its customer base and
increased revenues in these markets.
In the first quarter of 2002, the Company continued its positive
trends. EBITDA (before corporate expenses) for the first quarter increased to
approximately $4.0 million, more than double the level of the fourth quarter
of 2001.
Thomas Gravina, President and Chief Executive Officer of CoreComm
Holdco and CoreComm Limited said, "We are very pleased with the continued
progress of our business, as demonstrated by the significantly improved
financial results in the first quarter. We continued to focus on the execution
of our model by selling our most profitable voice and data products within our
current footprint, and we continue to see strong demand for our integrated
data and communications products.
"As a result of all of the efforts of our management team and
employees, I am pleased to announce our second consecutive quarter of EBITDA
positive results. This represents the fifth consecutive quarter of improved
EBITDA results. In the first quarter of 2002, Holdco's EBITDA (before
corporate expenses) was $4.0 million, compared to $1.9 million in the fourth
quarter and to a loss of ($21.5) million in the first quarter of 2001. We have
demonstrated that we are able to grow the profitability of the business, and
we are focused on maintaining this positive trend in our results. We believe
that the Company is in a position to continue to generate additional positive
revenue and EBITDA growth and become cash flow positive by the end of 2002.
"A key factor in the improvement in our financial results has been
our success growing our customer base in our most profitable integrated
communications product lines in both the business and residential markets. In
the first quarter, we continued to sign new large accounts in a range of
industry segments, as well as extend contracts with key existing customers.
These customers are seeing the benefit of our comprehensive, bundled product
lines, as well as our superior customer service. In addition, we have expanded
our product lines to offer even more choices in our communications services,
through both new product development and cost-effective infrastructure
deployment. We continue to believe that customers want choice for their
communications services, and the success we are having in our business model
is proving it.
"Thus far in 2002, we have continued to build on the significant
progress the Company made during 2001. Our recapitalization has created a new
capital structure which is more favorable than many of our competitors in the
industry, and gives us a platform to achieve success going forward. With the
continued execution of our business model, we plan to take advantage of the
strong demand for our voice and data service offerings in both the commercial
and residential markets. Given the continued success of our financial results,
we remain confident in our ability to continue to drive profitability, and
look forward to another successful year in 2002."
The components of EBITDA as defined by the Company are set forth in
the results summarized under the heading "Financial Results." This definition
is consistent across the periods referred to in this release.
RECAPITALIZATION OVERVIEW
On December 31, 2001, CoreComm Limited and the Company announced that
they had completed the first phase of the previously announced program to
recapitalize a significant portion of their debt. During the first phase of
the recapitalization, the following securities were exchanged for
approximately 87% of the equity in CoreComm Holdco, the recapitalized company:
100% of CoreComm Limited's $105.7 million of Senior Notes; 97% ($160 million)
of CoreComm Limited's $164.75 million of 6% Convertible Subordinated Notes;
64% ($28 million) of the Company's $43.7 million in Senior Convertible Notes;
and 100% of CoreComm Limited's approximately $300 million in Preferred Stock.
The successful completion of the first phase of the recapitalization has given
the Company a new capital structure, which is more favorable than many of the
Company's competitors in the marketplace.
Holdco's only remaining debt obligations are its $156.1 million
credit facility, $16.6 million in Senior Convertible Notes, and approximately
$9.7 million in capital leases (all of such leases are obligations of our
wholly-owned subsidiaries); there is no preferred stock outstanding. CoreComm
Limited also has $4.75 million principal amount of its 6% Convertible
Subordinated Notes held by third parties outstanding.
As a result of the completion of the first phase of the
recapitalization, CoreComm Limited now owns approximately 13% of Holdco.
As part of the second phase of the recapitalization, Holdco has
launched registered public exchange offers whereby it is offering to exchange
shares of CoreComm Holdco common stock to all holders of CoreComm Limited
common stock and to all remaining holders of 6% Convertible Subordinated Notes
for their common stock and notes, respectively. The exchange offer enables
holders of CoreComm Limited common stock and warrants to receive 13% of
CoreComm Holdco (the recapitalized company) directly, which is equivalent to
the current ownership of Limited in Holdco. To date, approximately 70% of the
shares of CoreComm Limited have been tendered in the exchange offer. The
expiration date of the exchange offers is currently 12:00 Midnight, New York
City time, on May 21, 2002, unless Holdco terminates the exchange offers or
extends the expiration date. The SEC is still in the process of reviewing the
exchange offer documentation, and this process is currently expected to be
completed in the very near future.
In connection with the recapitalization, Nasdaq has informed us that
it will treat Holdco as a successor to CoreComm Limited following the
successful exchange offers and related transactions. As a result, Holdco will
become the Nasdaq listed entity and will be subject to the requirements of
Nasdaq for maintaining its continued listing.
OPERATING HIGHLIGHTS
The Company continued to successfully execute the revised business
plan that it had adopted in 2001. The Company focused on its most profitable
markets and products and implemented many operating initiatives, which led to
significant improvements to the financial results. The successful operating
initiatives included facility consolidation, efficiency improvements,
elimination of less profitable products, network optimization, headcount
reduction, and vendor negotiations. Holdco expects these initiatives to
continue to drive positive financial results as it continuously monitors all
areas of its business for additional profitability and revenue growth going
forward.
The Company's success in executing this plan continues, as the
Company announced the second consecutive quarter of EBITDA positive results in
the first quarter of 2002. The first quarter of 2002 also marked the fifth
consecutive quarter of improved profitability and operating efficiencies.
Subscriber Data
Holdco had the following subscribers as of March 31, 2002:
March 31, 2002
Residential Local Access Lines 56,500
Business Local Access Lines 220,800
Toll-related Access Line Equivalents 497,800
Internet Subscribers 307,200
Other Data Customers (1) 24,400
-------------------------------------------------------------------------
(1) Other data customers included Point-to-point Data, Frame Relay, Web
Development, Web Hosting, E-Commerce, Co-location and other related
customers.
Revenue Breakdown
Holdco's revenues for the first quarter ended March 31, 2002 were
attributable to the following service categories:
March 31, 2002
Local Exchange Services 35%
Toll-related Telephony Services 24%
Internet, Data and Web-related Services 32%
Other Revenue(1) 9%
------------
Total 100%
-------------------------------------------------------------------------
(1) Other includes Wireless, Paging, and Information Services.
Profitability Initiatives
Holdco has engaged in a significant effort to improve its
profitability beginning in 2001 and continuing through the first quarter of
2002. These efficiencies are reflected in the decrease in Holdco's total
expenses of more than $140 million on an annualized basis, as shown in the
table below:
Three months ended,
% Reduction -----------------------------------
($ in thousands) Q4`00-Q1'02 3/31/02 12/31/00
----------- ------- --------
Operating Expenses 26% $48,038 $65,002
Selling, General and Administrative 42% 22,313 38,414
Corporate Expenses 55% 1,698 3,759
--- ----- -----
Total Expenses 33% $72,049 $107,175
The improvements shown above are the result of a variety of measures,
certain of which are also expected to generate additional savings during the
remainder of 2002 and going forward. The initiatives include: network
operations and asset consolidation; higher gross margin for delivery of
telephony services via UNE, UNE-P, and EEL; elimination of products that do
not meet profitability targets; and consolidation of business service
operations, residential service operations, and Internet operations. These
initiatives and other general cost reduction efforts have resulted in
headcount reductions as well as elimination of expenses related to overhead
and general and administrative expenses.
Other Initiatives
Holdco has announced other advancements and examples of the many
successful customer relationships that it has established:
o The Company has been selected by Ratner Companies, the
parent company of Hair Cuttery, the nation's largest
privately-owned salon chain, to deliver voice services to
more than 800 locations, as well as multiple dedicated T1s
and PRI circuits for inbound and outbound services to its
headquarters in Falls Church, Virginia.
o The Company has been selected by The Baltimore Life
Insurance Company, one of the nation's oldest life insurance
firms, to deliver local exchange carrier services at 21
locations - including its main facility - throughout
Maryland, Pennsylvania, Ohio, and Delaware.
o The Company has expanded its 10-year relationship with the
Philadelphia Eagles, being selected as the team's Internet
Service Provider. In addition to local exchange carrier and
inter-exchange carrier services, the Company is providing a
1.5-megabyte Internet connection via T1 at the Eagles' new,
state-of-the-art NovaCare Complex in Philadelphia.
o The Company has been selected by the Georges Perrier Group
to host web sites for its three notable restaurants in the
Greater Philadelphia area, including Le Bec-Fin
(consistently mentioned among the top U.S. dining
establishments), Brasserie Perrier, and Le Mas Perrier. The
Company also designed the site for Le Mas Perrier, along
with the landing page for all three restaurants, and created
a secure area for the Group to offer online shopping to its
visitors.
o The Company is providing Mercy Health System, the third
largest health care system in the Philadelphia region, with
"Local Link" services at its data center in Conshohocken, PA.
o The Company has established a corporate relationship through
which it will offer dial-up Internet service to all members
and employees of the Michigan National Guard.
o Boy Scouts Cleveland Council has selected an integrated
voice and data solution implemented by the Company.
o Through its partnership with the New Jersey Technology
Council, the Company has earned the business of the Coriell
Institute for Medical Research, an internationally known
not-for-profit, basic biomedical research institution.
Located in Camden, New Jersey, the Institute has selected
the Company for its local exchange carrier and
inter-exchange carrier services, as well as firewall
security for its network.
o The Company is building a Wide Area Network to connect four
remote sites of the DE State Solid Waste Authority to its
headquarters in Dover, Delaware. The four sites are
utilizing the ATX CoreConnect(SM) Preferred solution to
access the organization's servers, applications, and Internet
connection at the Dover location, which benefits from
dedicated Internet and voice services via ATX CoreConnect
Preferred Plus.
o Clear Channel Communications, which operates approximately
1,225 radio and 37 television stations, is leveraging the
Company's ATX CoreConnect Preferred solution to create a
seamless transition for incoming calls at several of its
Philadelphia radio stations.
o International Communications Research (ICR), which offers
customized marketing research studies for both consumer
goods and business-to-business services companies, is taking
advantage of dedicated voice services being provided by the
Company at six locations.
o The Company is providing the Jay Group, a full-service
marketing support and sales promotion company in Lancaster,
Pennsylvania, with local exchange carrier, inter-exchange
carrier, data, and Internet services. The Jay Group is
utilizing several T1s for dedicated voice and data
communications between its four locations in PA.
OTHER DEVELOPMENTS
Exchange Offers
As part of the second phase of the recapitalization, Holdco has
launched registered public exchange offers whereby it is offering to exchange
shares of CoreComm Holdco common stock to all holders of CoreComm Limited
common stock and to all remaining holders of 6% Convertible Subordinated Notes
for their common stock and notes, respectively. The exchange offer enables
holders of CoreComm Limited common stock and warrants to receive 13% of
CoreComm Holdco directly, which is equivalent to the current ownership of
Limited in Holdco. To date, approximately 70% of the shares of CoreComm
Limited have been tendered in the exchange offer. The expiration date of the
exchange offers is currently 12:00 Midnight, New York City time, on May 21,
2002, unless Holdco terminates the exchange offers or extends the expiration
date.
FINANCIAL RESULTS
CORECOMM HOLDCO, INC.
FIRST QUARTER FINANCIAL RESULTS (Unaudited)
Three Months Ended March 31,
2002 2001
------------------------ -----------------------
Revenues $74,311,000 $72,811,000
Costs and expenses
Operating 48,038,000 63,520,000
Selling, general and administrative 22,313,000 30,795,000
------------------------ -----------------------
EBITDA 3,960,000 (21,504,000)
Corporate 1,698,000 2,098,000
Non-cash compensation - 3,234,000
Recapitalization costs 1,182,000 -
Other charges - 119,000
Asset impairments - 167,599,000
Depreciation 8,881,000 12,012,000
Amortization 1,287,000 31,509,000
------------------------ -----------------------
Operating loss (9,088,000) (238,075,000)
Other income (expense)
Interest income and other, net 134,000 664,000
Interest expense (3,559,000) (4,141,000)
------------------------ -----------------------
Net loss $(12,513,000) $(241,552,000)
======================== =======================
Basic and diluted net loss per common share $(.42) $(8.46)
======================== =======================
Weighted average number of shares 30,000,000 28,542,000
======================== =======================
DISCUSSION OF OPERATING RESULTS
The increase in revenues to $74,311,000 from $72,811,000 is due primarily to
customer acquisition, increased pricing and carrier access billing.
Operating costs include direct cost of sales, network costs and salaries and
related expenses of network personnel. Operating costs decreased to
$48,038,000 from $63,520,000 due to a decrease in costs as a result of the
implementation of our revised business plan.
Selling, general and administrative expenses decreased to $22,313,000 from
$30,795,000 due to a decrease in costs as a result of the implementation of
our revised business plan.
Corporate expenses include the costs of our officers and headquarters staff,
the costs of operating the headquarters and costs incurred for strategic
planning and evaluation of business opportunities. Corporate expenses
decreased to $1,698,000 from $2,098,000 due to a decrease in costs as a result
of the implementation of our revised business plan.
In accordance with APB Opinion No. 25, "Accounting for Stock Issued to
Employees," in April 2000, we recorded a non-cash compensation expense of
approximately $29.0 million and a non-cash deferred expense of approximately
$31.3 million. From January 1, 2001 to March 31, 2001, $3.2 million of the
deferred non-cash compensation was charged to expense. The remaining portion
of deferred non-cash compensation was charged to expense between April 1 and
December 31, 2001.
We incurred additional costs in connection with our recapitalization of
$1,182,000 during the three months ended March 31, 2002.
Other charges of $119,000 for the three months ended March 31, 2001 are for
adjustments relating to our announcement in December 2000 of a reorganization
of certain of our operations. These charges include additional employee
severance and related costs of $351,000, offset by a reversal of the lease
exit provision of $232,000.
At March 31, 2001, we reduced the carrying amount of goodwill related to
certain acquisitions by $167,599,000. In connection with the reevaluation of
our business plan and the decision to sell non-CLEC assets and businesses, we
were required to report all long-lived assets and identifiable intangibles to
be disposed of at the lower of carrying amount or estimated fair value less
cost to sell. The carrying amount of goodwill related to these acquisitions
was eliminated before reducing the carrying amounts of the other assets. The
estimated fair value of these businesses was determined based on the
information provided by the investment bank retained for the purposes of
conducting this sale.
Depreciation expense decreased to $8,881,000 from $12,012,000 primarily as a
result of the reduction in the carrying value of our fixed assets as
determined by a fair value analysis performed in conjunction with the Holdco
recapitalization.
Amortization expense decreased to $1,287,000 from $31,509,000 due to the
reduction in the carrying value our of intangible assets as determined by a
fair value analysis performed in conjunction with the Holdco recapitalization
as well as our adoption of SFAS 142 "Goodwill and Intangible Assets" on
January 1, 2002, which required us to cease amortizing goodwill. Amortization
expense on our goodwill during the three months ended March 31, 2001 was
$31,369,000. Our net loss and our basic and diluted net loss per common share
would have been $210,183,000 and $7.36, respectively, had SFAS 142 been in
effect for the first quarter of 2001.
Interest expense decreased to $3,559,000 from $4,141,000 primarily due to a
reduction in the effective interest rate on our senior secured credit
facility. The effective interest rate on our senior secured credit facility
during the three months ended March 31, 2002 and 2001 was 6.86% and 9.11%,
respectively.
***
The foregoing reference to the exchange offers shall not constitute
an offer to sell or the solicitation of an offer to buy, nor shall there be
any sale of shares of common stock of CoreComm Holdco in any state in which
such offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such state. Investors and
security holders are urged to read the following documents (including
amendments that may be made to them), regarding the exchange offers because
they contain important information:
- CoreComm Holdco's preliminary prospectus, prospectus
supplements and final prospectus;
- CoreComm Holdco's registration statement on Form S-4,
containing such documents and other information; and
- CoreComm Holdco's Schedule TO.
These documents and amendments and supplements to these documents
have been and will continue to be filed, as they may be amended and
supplemented, with the Securities and Exchange Commission. When these and
other documents are filed with the SEC, they may be obtained free at the SEC's
web site at www.sec.gov. You may also obtain for free each of these documents
(when available) from CoreComm Holdco by directing your request to the number
listed below.
For further information regarding the exchange offers, including obtaining
additional copies of the exchange offer materials, we encourage you to contact
the information agent:
D.F. King & Co., Inc.
77 Water Street
New York, New York 10005
Banks and Brokers Call Collect: (212) 269-5550
All Others Call Toll-free: (800) 848-2998
***
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
Certain statements contained herein, specifically excluding references to the
exchange offers, constitute "forward-looking statements" as that term is
defined under the Private Securities Litigation Reform Act of 1995. When used
herein, the words, "believe," "anticipate," "plan," "will," "expects,"
"estimates," "projects," "positioned," "strategy," and similar expressions
identify such forward-looking statements. All references in this Safe Harbor
legend to CoreComm Limited shall be deemed to include CoreComm Limited and its
subsidiaries and affiliates. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause the actual
results, performance or achievements of CoreComm Limited, or industry results,
to be materially different from those contemplated, projected, forecasted,
estimated or budgeted, whether expressed or implied, by such forward-looking
statements. Such factors include the following: CoreComm Limited's ability to
continue as a going concern; CoreComm Limited's continued viability if the
Holdco recapitalization is not consummated on a timely basis; CoreComm
Limited's ability to obtain trade credit and shipments and terms with vendors
and service providers for current orders; CoreComm Limited's ability to
maintain contracts that are critical to its operations; potential adverse
developments with respect to CoreComm Limited's liquidity or results of
operations; CoreComm Limited's ability to fund and execute its business plan;
CoreComm Limited's ability to attract, retain and compensate key executives
and employees; CoreComm Limited's ability to attract and retain customers; the
potential delisting of CoreComm Limited's common stock from the Nasdaq
National Market; general economic and business conditions; industry trends;
technological developments; CoreComm Limited's ability to continue to design
and build its network, install facilities, obtain and maintain any required
governmental licenses or approvals and finance construction and development,
all in a timely manner at reasonable costs and on satisfactory terms and
conditions; assumptions about customer acceptance, churn rates, overall market
penetration and competition from providers of alternative services, the impact
of restructuring and integration actions, the impact of new business
opportunities requiring significant up-front investment, interest rate
fluctuations and availability, terms and deployment of capital. CoreComm
Limited assumes no obligation to update the forward-looking statements
contained herein to reflect actual results, changes in assumptions or changes
in factors affecting such statements.
For further information please contact: Selim Kender, Vice President -
Corporate Development at (212) 906-8485.