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Allegiance Telecom Announces Restructuring Plans and First Quarter 2003 Results
14 May 2003, 7:51pm ET
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DALLAS, May 14 /PRNewswire-FirstCall/ -- Allegiance Telecom, Inc. (Nasdaq: ALGX), a facilities-based national local exchange carrier (NLEC), today announced that while its discussions with its senior creditors and other stakeholders are continuing, the Company will pursue its financial restructuring plans under Chapter 11 of the U.S. Bankruptcy Code. Allegiance believes that the filing will facilitate these negotiations while enabling it to conduct business as usual -- offering high- quality, reliable telecommunications services to its customers in major markets across the United States.

"Although we have not yet secured the agreement of our senior creditors, we believe we have a sound plan to restructure our balance sheet in line with current business realities," said Royce J. Holland, chairman and chief executive officer of Allegiance Telecom. "With approximately a quarter billion dollars of cash, Allegiance is free of the liquidity problems experienced by other telecom companies that have filed under Chapter 11. We believe this move is the best way to safeguard the value of our enterprise, reduce costs, and increase our competitive advantage in the market as we continue negotiations with our creditors."

"We continue to make progress in re-orienting our business to focus on achieving free cash flow from operations," said Tom Lord, Allegiance's executive vice president for corporate development and chief financial officer. "We expect to emerge from this process with a stronger balance sheet which will enable us to better serve our customers and provide sustained facilities-based competition in the present communications market," said Lord.

Allegiance Announces First Quarter Results

Allegiance also announced results for the first quarter ended March 31, 2003. The Company reported first quarter revenues of $204.6 million, a decrease of 0.2 percent, compared with fourth quarter 2002; and an increase of 26.2 percent compared with the first quarter of 2002.

"We continued to shift our focus from rapid growth to making progress toward generating free cash flow from operations, a process that was initiated in the fourth quarter," added Holland. "Our focus on system and process upgrades resulted in improvements in customer service, billing, and the quality of our accounts receivable."

The Company continues to see improved productivity and efficiency as it focuses its business on profitability. In 1Q03, the Company's revenue per employee increased to a record level of $220,100, an increase of $15,500 or approximately 7.6 percent over the revenue per employee for 4Q02 of $204,600 and an increase of $62,600 or approximately 39.7 percent over the revenue per employee for 1Q02 of $157,500.

"Allegiance Telecom reduced its cash consumed in the first quarter, using approximately $20.7 million of its cash and short-term investments to fund its operations, capital expenditures and debt service requirements. This represents a reduction of $6.0 million from the $26.7 million used in the 4Q02. The improvement in cash consumption was primarily due to a continued focus on reducing operating and capital expenditures, and strong cash collections during the first quarter 2003. Capital expenditures were held to $9.2 million in 1Q03," said Lord.

Allegiance Telecom had cash and short term investments totaling $263.6 million at the end of 1Q03. Days sales outstanding (DSOs) for 1Q03 was 59.5 days, a reduction of 7.5 days from the 67 days in 4Q02 and an improvement of 23.4 days compared with the 82.9 days from 1Q02.

Corporate Background

Allegiance Telecom is a facilities-based national integrated communications provider headquartered in Dallas, Texas. As the leader in competitive local service for medium and small businesses, Allegiance offers "One source for business telecom(TM)" -- a complete package of telecommunications services, including local, long distance, international calling, high-speed data transmission and Internet services and a full suite of customer premise communications equipment and service offerings. Allegiance serves major metropolitan areas in the U.S. with its single source provider approach. Allegiance's common stock is currently traded on the NASDAQ National Market under the symbol ALGX.

Certain statements in this press release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, and the Company intends that such forward- looking statements be subject to the safe harbors created thereby. The words "believes," "expects," "estimates," "anticipates," "plans," "will be" and "forecasts" and similar words or expressions identify forward-looking statements made by or on behalf of the Company. These forward-looking statements were derived using numerous assumptions and are subject to many uncertainties and factors that may cause the actual results of the Company to be materially different from those stated in such forward-looking statements. Examples of such uncertainties and factors include, but are not limited to, the impact of the bankruptcy filing on the Company's business, the Company's ability to timely and effectively provision new customers; the Company's ability to retain existing customers; the Company's ability to obtain additional financing should it be necessary to do so; the Company's ability to develop and maintain efficient billing, customer service and information systems; and technological, regulatory or other developments in the industry and general economy that might adversely affect the Company. Additional factors are set forth in the Company's SEC reports, including but not limited to the Annual Report on Form 10-K for the year ended December 31, 2002. The Company does not undertake any obligation to update or revise any forward-looking statement made by it or on its behalf, whether as a result of new information, future events or otherwise.

&A as % of Rev 79.9% 73.7% 70.9% 69.5%

Annualized ($ in 000's)
Average Revenue per Employee $119.6 $128.8 $138.2 $150.2
SG&A per Employee 95.6 94.9 98.0 104.4
Cum. Capital Expenditures per Line 1.3 1.2 1.2 1.2


Monthly:
Average Revenue per Line $52.61 $51.58 $48.03 $50.08
Network Expense per Line 25.46 25.28 23.36 24.41
SG&A per Line 42.05 38.00 34.07 34.81


ALLEGIANCE TELECOM, INC.
PERFORMANCE METRICS
(unaudited)


Actual Actual
2002 2003
1Q 2Q 3Q 4Q 1Q

Gross Margin % 49.4% 48.3% 46.1% 46.9% 45.5%

SG&A as % of Rev 62.8% 59.8% 52.0% 54.6% 57.0%

Annualized ($ in 000's)
Average Revenue per Employee $157.5 $169.1 $199.0 $204.6 $220.1
SG&A per Employee 98.9 101.1 103.6 111.7 125.4
Cum. Capital Expenditures per
Line 1.1 1.0 0.9 0.9 0.9


Monthly:
Average Revenue per Line $50.16 $51.54 $55.54 $48.58 $47.52
Network Expense per Line 25.40 26.64 29.93 25.78 25.89
SG&A per Line 31.50 30.81 28.90 26.52 27.08

SOURCE Allegiance Telecom
-0- 05/14/2003
/CONTACT: Media, Jerry Ostergaard, Director of Public Relations,
[phone], Investors, Andrew Albrecht, Vice President of Investor
Relations, [phone], or Company, Thomas Lord, EVP of Corp. Develop. and
CFO, [phone], all of Allegiance Telecom/
/Web site:

http://www.allegiancetele.com

/
(ALGX)

CO: Allegiance Telecom
ST: Texas
IN: TLS
SU: ERN RCN BCY



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7624 05/14/2003 19:51 EDT

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