Time Warner Telecom Announces Third Quarter 2003 Results - Company
Records Impact of WorldCom Settlement - LITTLETON, Colo., Oct. 27
/PRNewswire-FirstCall/ -- Time Warner Telecom Inc. , a leading
provider of metro and regional optical broadband networks and
services to business customers, today announced its third quarter
2003 financial results, including $172.4 million in revenue, $74.6
million in EBITDA(1), and a net loss of $(5.7) million. "Our
business continues to perform well as we generate success in the
enterprise segment, especially with our metro Ethernet and IP based
products," said Larissa Herda, Time Warner Telecom's Chairman, CEO
and President. "We resolved disputed items and claims with
WorldCom, and, in addition, believe that what we had anticipated in
bankruptcy related disconnects, is behind us. While total
disconnects are up slightly this quarter from last, they are 30%
lower for the first nine months of 2003, as compared to the same
period last year, excluding the WorldCom disconnects. We continue
to grow our end-user customer base and differentiate Time Warner
Telecom in the marketplace with an innovative set of product
offerings." Results from Operations WorldCom Settlement As part of
WorldCom, Inc.'s bankruptcy proceedings, the bankruptcy court
approved the terms of a settlement with Time Warner Telecom that
resolved a number of open disputes and claims through June 30,
2003, including amounts payable to and from each party. This
settlement resulted in a net cash payment to Time Warner Telecom of
$2.0 million, recognition in the third quarter of $5.2 million of
revenue, and the reversal of $15.1 million of expenses, resulting
in a $20.3 million favorable impact to EBITDA and Net Income. In
addition, both parties agreed on amounts due to Time Warner Telecom
related to rejection of certain contracts. Subsequent to the end of
the quarter, Time Warner Telecom monetized this claim by selling it
to a third party for approximately $7 million in cash, which will
be recognized as revenue in the fourth quarter. Revenue Revenue for
the quarter was $172.4 million, as compared to $167.2 million for
the same period last year, representing a $5.2 million increase.
The primary components of the change included: -- $15.1 million net
increase in revenue from enterprise customers (non-carrier) -- $5.2
million favorable impact from the WorldCom settlement -- $3.9
million increase due to a reciprocal compensation settlement --
$11.4 million decrease due to lower revenue from WorldCom,
excluding the settlement -- $5.2 million decrease in intercarrier
compensation due primarily to mandated and contractual rate
reductions and reduced minutes of use -- $2.4 million decrease from
carriers, excluding WorldCom The change in revenue for the third
quarter over the same period last year was as follows: -- 10%
increase for data and internet (44% increase without the impact of
the settlement and disconnects from WorldCom) due to success with
Ethernet and IP product sales -- 8% increase for switched services
(both with and without WorldCom settlement) primarily due to
contract termination revenue -- 2% increase for dedicated transport
services (1% decrease without the WorldCom settlement) Monthly
revenue related to disconnects for the first nine months of the
year totaled $10.3 million in 2003 and $10.2 million in 2002,
including WorldCom related disconnects of $3.5 million and $.5
million in the respective periods. Revenue in the third quarter
from WorldCom was $7.9 million, excluding the settlement revenue, a
$4 million reduction from the prior quarter. EBITDA and Margins
EBITDA for the quarter was $74.6 million, reflecting an 86%
increase from the same period last year. EBITDA increased 26%,
excluding the settlements described above. EBITDA margin was 43%
for the quarter, or 31% excluding the settlements described above.
This compares to 24% for the third quarter of 2002. Gross margin
was 61% for the quarter, or 59% without the settlements. This
compares to 58% for the third quarter 2002. The Company utilizes a
fully burdened gross margin, including network costs, national IP
backbone costs and personnel costs for customer care, provisioning,
network maintenance, technical field and network operations. The
current quarter margins reflect a reduction in bad debt expense as
well as the Company's efforts to reduce costs across the business.
For the third quarter of this year operating costs decreased nearly
6%, and selling, general and administrative costs decreased
approximately 45%, or 18% excluding the impact of the WorldCom
settlement, as compared to the same period last year. Net Loss The
Company reported a net loss of $(5.7) million, or $(.05) per share,
for the third quarter of 2003, or $(26.0) million or $(.23) per
share without the benefit from the favorable impact of the WorldCom
settlement. This compares to a net loss of $(48.4) million, or
$(.42) per share, for the same period last year. The net loss
narrowed primarily due to higher EBITDA and lower depreciation.
Capital Expenditures Capital expenditures for the quarter were
$34.5 million, as compared to $25.1 million for the same period
last year. "Our focus to add more on-net buildings and expand our
network reach remains unchanged," said David Rayner, Time Warner
Telecom's Senior Vice President and Chief Financial Officer,
"However, we believe it will be difficult to deploy our $150
million targeted capital for 2003 within the remainder of the
current year. Despite a delay in the spending cycle into 2004
relative to our original plan, we continue to experience positive
momentum in expanding our network. Approximately two-thirds of our
year to date expenditures were used to expand our existing markets
and add new buildings to the network." Operating Highlights As of
September 30, 2003, the Company reported $464.5 million in cash and
marketable securities. The Company is in compliance with all its
financing agreements. The Company has increased its sales force by
over 28% in the first nine months of 2003, which is solid progress
against the goal of growing the sales force nearly 30% for the
year. The new sales force has strong telecom experience as well as
specialized data skills, which are key in selling to enterprise
customers. The Company is expanding its networks to reach more
customer buildings and to continually add new products and services
that ride over its networks. Time Warner Telecom is broadly
deploying its metro Ethernet services to reach more customer
locations. The Company is growing its product family to include a
launch of "Extended Native LAN" in the fourth quarter to connect
its customers' diverse locations throughout Time Warner Telecom's
national footprint. "Similar to our other metro Ethernet products,
this will utilize technology that most of our customers already
have in place and will leverage our existing network infrastructure
and national IP backbone, creating great cost efficiencies and
scalability," said Herda. "While the selling cycle remains long, we
believe these complex products will provide the basis for a
long-term relationship with our customers." Conclusion "Challenges
remain in the business, including ongoing disconnects and pricing
pressure on our most mature products, however, we remain focused on
incremental initiatives to grow the business. These initiatives
include increasing our sales opportunities through expanding our
network and extending our product line. In addition, we remain
committed to continued customer service and innovation. We intend
to continue to wisely manage our cost structure while we remain
focused on long-term growth," concluded Herda. Time Warner Telecom
Inc. plans to conduct a webcast conference call to discuss its
earnings results on October 28, 2003 at 9:00 a.m. MT (11:00 a.m.
ET). To access the webcast and the financial and statistical
information to be discussed in the webcast, visit
http://www.twtelecom.com/ under "Investor Relations." Financial
Measures The Company provides financial measures generated using
generally accepted accounting principles ("GAAP") as well as
adjustments to GAAP to describe its business trends. These measures
include EBITDA, which is a widely recognized metric of operating
performance and liquidity. EBITDA is not intended to replace
operating income (loss), net income (loss), cash flow, and other
measures of financial performance and liquidity reported in
accordance with GAAP. Management believes that EBITDA is a standard
measure of operating performance and liquidity that is commonly
reported and widely used by analysts, investors, and other
interested parties in the telecommunications industry because it
eliminates many differences in financial, capitalization, and tax
structures, as well as non-cash and non-operating charges to
earnings. Management uses EBITDA internally to assess on-going
operations and it is the basis for various financial covenants
contained in the Company's debt agreements. The definition of
EBITDA under the Company's credit facility differs from the
definition of EBITDA used in this press release because the credit
facility definition also eliminates certain non-cash losses within
certain limits and certain extraordinary gains. EBITDA is
reconciled to Net Loss, the most comparable GAAP measure to EBITDA,
within the Consolidated Operating Highlights on Page 5. The Company
uses recurring revenue to enhance the comparability of its revenue
performance between periods (see page 10 for reconciliation to GAAP
Revenue). The Company presented EBITDA, gross margins, EBITDA
margins and recurring revenue without the impact of reciprocal
compensation settlements to enhance comparability of those measures
between periods. Due to the significant positive impact of the
Company's settlement with WorldCom, Inc. in the third quarter, the
Company has presented its selected operating statistics on page 10,
both as reported and net of the settlement as well as a
reconciliation between the two, in order to assist in understanding
the impact of the settlement and Company's performance during the
quarter net of the impact of that event. (1) EBITDA is defined as
operating income or loss before depreciation and amortization
expense and impairment charges. Forward Looking Statements The
statements in this press release concerning the outlook for 2003
and beyond, including expansion plans, growth prospects, increased
sales force, customer disconnects and expected capital expenditures
are forward-looking statements that reflect management's views with
respect to future events and financial performance. These
statements are based on management's current expectations and are
subject to risks and uncertainties. These risks include the risks
summarized in the Company's filings with the SEC, especially the
section entitled "Risk Factors" in its 2002 Annual Report on Form
10-K. Time Warner Telecom undertakes no obligations to publicly
update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise. About Time
Warner Telecom Inc. Time Warner Telecom Inc., headquartered in
Littleton, Colo., delivers "last-mile" broadband data, dedicated
Internet access and voice services for businesses in 44 U.S.
metropolitan areas. Time Warner Telecom Inc., one of the country's
premier competitive telecom carriers, delivers fast, powerful and
flexible facilities-based metro and regional optical networks to
large and medium customers. Please visit http://www.twtelecom.com/
for more information. Time Warner Telecom Inc. Consolidated
Operations Highlights (Dollars in thousands) Unaudited (1) (2)
Three Months Ended September 30, 2003 2002 Growth % Revenue
Dedicated transport services $94,066 $92,556 2% Switched services
38,957 36,078 8% Data and Internet services 25,700 23,410 10%
158,723 152,044 4% Intercarrier compensation (3) 9,842 15,121 -35%
168,565 167,165 1% Reciprocal Compensation Settlements 3,863 --
100% Total Revenue 172,428 167,165 3% Expenses Operating costs
66,631 70,799 -6% Gross Margin 105,797 96,366 10% Selling, general
and administrative 31,162 56,293 -45% EBITDA 74,635 40,073 86%
Depreciation, amortization and accretion 56,408 58,263 Asset
Impairment Charge -- 3,500 Operating Income (Loss) 18,227 (21,690)
Interest expense (25,908) (26,760) Interest income 1,326 1,517
Investment gains and (losses), net 922 (1,283) Net loss before
income taxes (5,433) (48,216) Income tax expense 225 150 Loss
before cumulative effect of change in accounting principle (5,658)
(48,366) Cumulative effect of change in accounting principle (4) --
-- Net Loss ($5,658) ($48,366) Capital Expenditures $34,529 $25,105
38% Gross Margin 61% 58% EBITDA Margin 43% 24% (1) For complete
financials and related footnotes, please refer to the Company's SEC
filings. (2) See Page 10 for selected operating highlights. (3)
Intercarrier Compensation includes switched access and recurring
reciprocal compensation. (4) Reflects implementation of Statement
of Financial Accounting Standards No. 143. Time Warner Telecom Inc.
Consolidated Operations Highlights (Dollars in thousands) Unaudited
(1) (2) Nine Months Ended September 30, 2003 2002 Growth % Revenue
Dedicated transport services $269,420 $280,170 -4% Switched
services 115,281 110,007 5% Data and Internet services 74,135
65,758 13% 458,836 455,935 1% Intercarrier compensation (3) 37,514
50,583 -26% 496,350 506,518 -2% Reciprocal Compensation Settlements
3,863 13,942 -72% Total Revenue 500,213 520,460 -4% Expenses
Operating costs 198,461 216,966 -9% Gross Margin 301,752 303,494
-1% Selling, general and administrative 128,294 171,710 -25% EBITDA
173,458 131,784 32% Depreciation, amortization and accretion
164,876 172,769 Asset Impairment Charge -- 3,500 Operating Income
(Loss) 8,582 (44,485) Interest expense (78,520) (78,435) Interest
income 4,648 4,317 Investment gains and (losses), net 922 (3,240)
Net loss before income taxes (64,368) (121,843) Income tax expense
675 450 Loss before cumulative effect of change in accounting
principle (65,043) (122,293) Cumulative effect of change in
accounting principle (4) 2,965 -- Net Loss ($68,008) ($122,293)
Capital Expenditures $84,787 $92,096 -8% Gross Margin 60% 58%
EBITDA Margin 35% 25% (1) For complete financials and related
footnotes, please refer to the Company's SEC filings. (2) See Page
10 for selected operating highlights. (3) Intercarrier Compensation
includes switched access and recurring reciprocal compensation. (4)
Reflects implementation of Statement of Financial Accounting
Standards No. 143. Time Warner Telecom Inc. Highlights of Results
Per Share Unaudited (1) Three Months Ended Nine Months Ended
September 30, September 30, 2003 2002 2003 2002 Weighted Average
Shares Outstanding (thousands) Basic and Diluted 114,936 114,827
114,931 114,772 Basic and Diluted Loss per Common Share Before the
favorable impacts of the WorldCom settlement ($0.23) ($0.42)
($0.77) ($1.07) WorldCom Settlement $0.18 -- $0.18 -- As Reported
($0.05) ($0.42) ($0.59) ($1.07) Common shares (thousands) Actual
Shares Outstanding 115,106 114,827 115,106 114,827 Options
(thousands) Options Outstanding 18,074 14,129 18,074 14,129 Options
Exercisable 8,366 6,002 8,366 6,002 Options Exercisable and "in the
money" 741 -- 741 -- (1) For complete financials and related
footnotes, please refer to the Company's SEC filings. Time Warner
Telecom Inc. Condensed Consolidated Balance Sheet Highlights
(Dollars in thousands) Unaudited (1) September 30, June 30, 2003
2003 Cash and Marketable Debt Securities $464,532 $505,237
Receivables 65,165 60,800 Less: allowance (17,084) (16,677) Net
receivables 48,081 44,123 Other current assets 37,483 36,329
Property, plant and equipment 2,181,240 2,149,646 Less: accumulated
depreciation (803,825) (750,331) Net property, plant and equipment
1,377,415 1,399,315 Other Assets 89,019 89,990 Total $2,016,530
$2,074,994 Current Liabilities Accounts payable $36,973 $32,863
Deferred revenue 33,228 41,607 Accrued taxes, franchise and other
fees 75,583 71,942 Accrued interest 15,421 35,349 Accrued payroll
and benefits 27,460 27,229 Current portion of debt and lease
obligations 34,076 31,864 Other current liabilities 90,238 117,262
Total current liabilities 312,979 358,116 Long-Term Debt and
Capital Lease Obligations 9.75% Senior unsecured notes 400,000
400,000 10.125% Senior unsecured notes 400,000 400,000 Senior
secured debt 402,000 408,000 Capital lease obligations 8,921 9,505
Less: current portion (34,076) (31,864) Total long-term debt and
capital lease obligations 1,176,845 1,185,641 Other Long-Term
Liabilities 6,346 6,206 Stockholders' Equity 520,360 525,031 Total
$2,016,530 $2,074,994 (1) For complete financials and related
footnotes, please refer to the Company's SEC filings. Time Warner
Telecom Inc. Financing Highlights -- Senior Secured Debt (Dollars
in thousands) Unaudited (1) Financing Highlights (2) As of
September 30, 2003 Total Undrawn Financing Outstanding Financing
Revolver $380,000 -- $380,000 Term Loan A $220,000 $203,500 -- Term
Loan B $200,000 $198,500 -- $800,000 $402,000 $380,000 Key
Financial Covenants of Senior Secured Debt (2) As of September 30,
2003 Actual Ratio Required Ratio Consolidated Leverage Ratio 2.7
Not to exceed 6.75 Senior Leverage Ratio (0.0) Not to exceed 3.0
Consolidated Interest Coverage Ratio 2.4 Not to be less than 1.25
(1) For complete financials and related footnotes, please refer to
the Company's SEC filings. (2) For full terms and conditions of all
Company financing agreements please refer to SEC filings. Time
Warner Telecom Inc. Selected Operating Statistics Unaudited (1)
Quarter Ended 2002 Mar. 31 Jun. 30 Sept. 30 Dec. 31 Operating
Metrics: Route Miles Metro 10,091 10,433 10,549 10,696 Regional
6,835 6,835 6,835 6,694 Total 16,926 17,268 17,384 17,390 Fiber
Miles Metro 534,974 570,690 575,315 586,721 Regional 229,568
229,569 229,569 237,256 Total 764,542 800,259 804,884 823,977 DS-O
Equivalents (000s) (2) 16,954 16,994 17,793 18,225 Buildings (3)
On-net 3,173 3,303 3,403 3,541 Type II 7,742 8,187 8,385 8,700
Total 10,915 11,490 11,788 12,241 Networks Class 5 Switches 41 41
41 41 Soft Switches 12 12 12 12 Headcount Total employees 2,376
2,182 1,913 1,893 Sales Account Executives 275 253 227 225
Customers 6,658 6,809 7,104 7,309 (1) For complete financials and
related footnotes, please refer to the Company's SEC filings. (2)
Each DS-O equivalent provides 64 kilobits per second of bandwidth.
(3) Buildings "On-net" represents customer locations to which the
Company's fiber network is directly connected.Type II buildings are
carried on the Company's fiber network, including the Company's
switch for switched services, with a leased service from the
Company's distribution ring to the customer location. Time Warner
Telecom Inc. Selected Operating Statistics Unaudited (1) Quarter
Ended 2003 Mar. 31 Jun. 30 Sept. 30 Operating Metrics: Route Miles
Metro 11,075 11,170 11,345 Regional 6,694 6,694 6,694 Total 17,769
17,864 18,039 Fiber Miles Metro 602,988 604,668 614,942 Regional
237,277 269,759 274,459 Total 840,265 874,427 889,401 DS-O
Equivalents (000s) (2) 17,974 17,798 18,444 Buildings (3) On-net
3,616 3,677 3,854 Type II 9,173 10,087 10,662 Total 12,789 13,764
14,516 Networks Class 5 Switches 41 41 41 Soft Switches 12 12 12
Headcount Total employees 1,916 1,932 2,010 Sales Account
Executives 259 275 289 Customers 7,598 7,994 8,420 (1) For complete
financials and related footnotes, please refer to the Company's SEC
filings. (2) Each DS-O equivalent provides 64 kilobits per second
of bandwidth. (3) Buildings "On-net" represents customer locations
to which the Company's fiber network is directly connected.Type II
buildings are carried on the Company's fiber network, including the
Company's switch for switched services, with a leased service from
the Company's distribution ring to the customer location. Time
Warner Telecom Inc. Selected Operating Statistics Unaudited (1)
Quarter Ended 2002 Mar. 31 Jun. 30 Sept. 30 Dec. 31 Financial
Metrics: (1), (3) Revenue ($000) Dedicated transport services
$94,786 $92,828 $92,556 $93,758 Switched services 36,745 37,184
36,078 36,297 Data and Internet services 20,424 21,924 23,410
24,535 Subtotal 151,955 151,936 152,044 154,590 Intercarrier
Compensation 16,764 18,698 15,121 15,335 Recurring Revenue 168,719
170,634 167,165 169,925 Reciprocal compensation settlements --
13,942 -- 5,189 Total Revenue $168,719 $184,576 $167,165 $175,114
EBITDA Reconciliation ($000) As Reported (2) $38,633 $53,078
$40,073 $57,432 Less: Reciprocal compensation settlements --
($13,942) -- ($5,189) Without Reciprocal compensation settlements
$38,633 $39,136 $40,073 $52,243 Capital Expenditures ($000) $36,870
$30,121 $25,105 $12,735 Gross Margin (2), (3) As Reported 57% 61%
58% 64% Without Reciprocal compensation settlements 57% 57% 58% 63%
EBITDA Margin (2), (3) As Reported 23% 29% 24% 33% Without
Reciprocal compensation settlements 23% 23% 24% 31% (1) For
complete financials and related footnotes, please refer to the
Company's SEC filings. (2) Fourth quarter 2002 EBITDA included $7
million in one time expense savings from reduced operating costs
due to settlement and resolution of carrier billing charges. (3)
The Company separately presents EBITDA, gross margin and EBITDA
margin and recurring revenue without reciprocal compensation
settlements to help enhance comparability of these measures between
periods. Total Revenue represents the revenue reported on a GAAP
basis. (4) For the third quarter of 2003, the Company is separately
presenting the metrics shown above net of the WorldCom settlement
in order to enhance comparability of those results between periods.
Time Warner Telecom Inc. Selected Operating Statistics Unaudited
(1) Quarter Ended 2003 Mar. 31 Jun. 30 Sept. 30 Sept. 30 (Note 4)
Financial As WorldCom Net of Metrics: (1), (3) Reported Settle-
Settle- ment ment Revenue ($000) Dedicated transport services
$86,512 $88,842 94,066 2,824 $91,242 Switched services 39,891
36,433 38,957 95 38,862 Data and Internet services 24,304 24,131
25,700 2,245 23,455 Subtotal 150,707 149,406 158,723 5,164 153,559
Intercarrier Compensation 14,306 13,366 9,842 -- 9,842 Recurring
Revenue 165,013 162,772 168,565 5,164 163,401 Reciprocal
compensation settlements -- -- 3,863 -- 3,863 Total Revenue
$165,013 $162,772 $172,428 $5,164 $167,264 EBITDA Reconciliation
($000) As Reported (2) $48,666 $50,157 $74,635 $20,292 $54,343
Less: Reciprocal compensation settlements -- -- (3,863) -- (3,863)
Without Reciprocal compensation settlements $48,666 $50,157 $70,772
$20,292 $50,480 Capital Expenditures ($000) $22,373 $27,885 $34,529
-- $34,529 Gross Margin (2), (3) As Reported 60% 60% 61% n/a 60%
Without Reciprocal compensation settlements 60% 60% 60% n/a 59%
EBITDA Margin (2), (3) As Reported 29% 31% 43% n/a 32% Without
Reciprocal compensation settlements 29% 31% 42% n/a 31% (1) For
complete financials and related footnotes, please refer to the
Company's SEC filings. (2) Fourth quarter 2002 EBITDA included $7
million in one time expense savings from reduced operating costs
due to settlement and resolution of carrier billing charges. (3)
The Company separately presents EBITDA, gross margin and EBITDA
margin and recurring revenue without reciprocal compensation
settlements to help enhance comparability of these measures between
periods. Total Revenue represents the revenue reported on a GAAP
basis. (4) For the third quarter of 2003, the Company is separately
presenting the metrics shown above net of the WorldCom settlement
in order to enhance comparability of those results between periods.
DATASOURCE: Time Warner Telecom Inc. CONTACT: Investor Relations,
Carole Curtin, +1-303-566-1000, , or Media Relations, Bob Meldrum,
+1-303-566-1354, , both of Time Warner Telecom Inc. Web site:
http://www.twtelecom.com/
Copyright
Time Warner Telecom (NASDAQ:TWTC)
Historical Stock Chart
From Sep 2024 to Oct 2024
Time Warner Telecom (NASDAQ:TWTC)
Historical Stock Chart
From Oct 2023 to Oct 2024