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Tricom Announces Third Quarter Results SANTO DOMINGO, Dominican Republic, November 12 /PRNewswire-FirstCall/ -- Tricom, S.A. today announced consolidated unaudited financial results for the third quarter and first nine months of 2003. Operating revenues totaled $50.0 million for the 2003 third quarter, a decrease of 23.8 percent from the 2002 third quarter. For the first nine months, operating revenues totaled $160.9 million, an 18.1 percent decrease from the year-ago-period. Adjusted EBITDA totaled $12.6 million for the 2003 third quarter and $44.1 million for the first nine months, compared to Adjusted EBITDA of $21.6 million and $63.8 million for the third quarter and first nine months of 2002, respectively. Net loss for the 2003 third quarter was $21.8 million, or $.34 per share, and $61.9 million, or $.96 per share during the first nine months of the year. During the 2003 third quarter, the Company's operations continued to be under pressure from the devaluation of the Dominican peso, which reached approximately 90 percent over the last twelve months. As a result, the Company did not make an approximate $11.4 million interest payment on its 11-3/8% Senior Notes due 2004, originally scheduled for September 2, 2003. The Company is in active dialogue with its bank lenders as well as an ad hoc committee representing holders of its 11-3/8% Senior Notes due 2004. The Company has engaged Bear, Stearns & Co. Inc. to assist in evaluating financial and strategic alternatives, and formulate a restructuring plan, which may include the refinancing or restructuring of its existing debt or the sale of all, or a portion, of its assets or business to a third party. The Company is in discussions with a number of strategic and financial investors regarding a potential sale or recapitalization. Results of Operations The Company's operating results reflect the impact of currency devaluation, which reached approximately 23 percent in the third quarter and 84 percent during the first nine months of the year, affecting the translation of Dominican peso-generated revenues into U.S. dollars. The Central Bank of the Dominican Republic reported that the inflation rate was approximately 27 percent for the nine-month period ended September 30, 2003, compared to approximately 5 percent for the nine-month period ended September 30, 2002. Despite adverse economic conditions, the Company's peso-denominated revenues increased by approximately 10.6 percent quarter-over-quarter and 4.1 percent year-over-year in peso terms primarily due to price increases and the continued efforts to improve the Company's customer mix, prioritizing those with higher added value. Long distance revenues grew by 2.5 percent to $24.2 million in the 2003 third quarter and by 3.8 percent to $73.3 million for the first nine months of 2003. The revenue increase resulted primarily from higher international long distance termination rates into the Dominican Republic and strong international traffic volume derived from the Company's U.S.-based retail operations. Domestic telephony revenues totaled $13.5 million in the 2003 third quarter, a 35.3 percent decrease from the 2002 third quarter. For the first nine months, domestic telephony revenues totaled $46.2 million, a 28.0 percent year-over-year decrease. The decrease in domestic telephony revenues was primarily the result of the devaluation of the Dominican peso, coupled with lower new line additions. Total lines in service at September 30, 2003 decreased 24.2 percent to approximately 136,000 compared to total lines in service at September 30, 2002. The decrease in lines in service reflects the Company's strategy of improving its customer mix by focusing on higher value customers and phasing out low usage wireless local loop (WLL) customers. Mobile revenues decreased by 33.3 percent to $8.0 million in the 2003 third quarter and by 24.3 percent to $27.2 million for the first nine months of 2003. The decrease in mobile revenues was the result of the devaluation of the Dominican peso combined with a $1.7 million reclassification of commissions from expenses to revenues during the 2003 second quarter in accordance with Staff Accounting Bulletin (SAB 101) "Revenue Recognition" issued by the Securities and Exchange Commission (SEC). Average revenue per mobile subscriber for the 2003 third quarter increased by approximately 11.2 percent from the 2003 second quarter primarily as a result of higher interconnection revenues and a greater number of post-paid mobile subscribers. Cellular and PCS subscribers totaled approximately 429,000 at September 30, 2003, a 4.4 percent increase from September 30, 2002. Data and Internet revenues totaled $1.1 million in the 2003 third quarter and $3.4 million in the first nine months, representing a 63.5 percent quarter-over-quarter and 59.2 percent year-over-year decrease. The decrease in data and Internet revenues is attributable to the cancellation by the Company of its government contract to provide broadband satellite Internet access to every public high school in the Dominican Republic coupled with the devaluation of the Dominican peso. Cable revenues totaled $3.1 million in the 2003 third quarter, a 47.9 percent decrease from the year-ago period. For the first nine months, cable revenues totaled $10.6 million, a 37.2 percent decrease from the year-ago- period. The decrease in cable revenues is primarily the result of currency devaluation coupled with subscriber loss. Cable subscribers totaled approximately 64,000 at September 30, 2003, a 10.1 percent decrease year-over- year. The Company has instituted expense control measures and eliminated all non-essential expenditures. These initiatives include a 30 percent year-to- date reduction in monthly cable programming fees, lower domestic prepaid commission structure by 7-percentage point's year-over-year and a reduction of its advertising expenses by 43 percent year-over-year. Going forward, the Company expects to generate additional expense savings through planned staff reductions. The Company will continue to assess its operations and conduct certain asset divestitures with a continued focus on profitability. Consolidated operating costs and expenses totaled $57.8 million in the 2003 third quarter compared to $64.9 million in the 2002 third quarter. For the first nine months, consolidated operating costs and expenses totaled $178.1 million compared to $193.5 million during the first nine months of 2002. The year-over-year decrease in operating costs and expenses reflect expense control efforts and streamlined operations, coupled with the elimination of expenses in lieu of income taxes, as well as lower Dominican peso-denominated costs and expenses resulting from currency devaluation. The decrease in consolidated operating costs and expenses was partially offset by higher depreciation and amortization charges. Cost of sales and services, consisting primarily of transport and access charges, cable programming fees and cost of goods sold, decreased by 6.3 percent to $20.9 million during the 2003 third quarter and increased by 0.9 percent to $66.1 million during the first nine months. Selling, general and administrative (SG&A) expenses decreased by 24.0 percent to $17.7 million in the 2003 third quarter and by 24.7 percent to $53.7 million for the first nine months. As a percentage of total operating revenues, SG&A expenses decreased to 33.4 percent for the first nine months of 2003, compared to 36.3 percent for the first nine months of 2002. Interest expense totaled $15.2 million in the 2003 third quarter compared with $17.2 million in the prior year quarter, and totaled $47.0 million for the first nine months of 2003 compared to $46.9 million during the first nine months of 2002. Liquidity and Capital Resources Total debt, including capital leases and commercial paper, amounted to $454.5 million at September 30, 2003, compared to $528.9 million at September 30, 2002 and $467.6 million at December 31, 2002. Total debt included $200 million principal amount of 11 3/8% Senior Notes due 2004, approximately $36 million of secured debt and approximately $218.4 million of unsecured bank and other debt. At September 30, 2003, the Company had approximately $7.1 million in cash and investments. Net debt totaled $447.4 million at September 30, 2003. The Company's net cash provided by operating activities totaled $10.4 million for the first nine months of 2003 compared to $6.3 million for the first nine months of 2002. Capital expenditures were $1.7 million during the 2003 third quarter and $11.8 million during the first nine months of 2003, representing an approximate 87 percent quarter-over-quarter and 78 percent year-over-year reduction. The Company's free cash flow totaled $9.4 million during the first nine months of 2003 compared to negative free cash flow of $36.2 million during the first nine months of 2002. About TRICOM Tricom, S.A. is a full service communications services provider in the Dominican Republic. We offer local, long distance, mobile, cable television and broadband data transmission and Internet services. Through Tricom USA, we are one of the few Latin American-based long distance carriers that is licensed by the U.S. Federal Communications Commission to own and operate switching facilities in the United States. Through our subsidiary, TCN Dominicana, S.A., we are the largest cable television operator in the Dominican Republic based on our number of subscribers and homes passed. For more information about Tricom, please visit http://www.tricom.net/ Cautionary Language Concerning Forward-Looking Statements Statements in this press release that are not strictly historical in nature are forward-looking statements. These statements are only predictions based on current information and expectations and involve a number of risks and uncertainties. Actual events or results may differ materially due to various factors. Factors which may cause actual results to differ materially from those discussed herein include economic considerations that could affect demand for telecommunications services and the ability of the Company to make collections, inflation, regulatory factors, legal proceedings, exchange controls and occurrences in currency markets, competition, and the risk factors set forth in the Company's various filings with the Securities and Exchange Commission, including its more recently filed Annual Report on Form 20-F. The Company undertakes no obligation to revise these forward-looking statements to reflect events or circumstances after the date hereof. (Six tables to follow) Non-GAAP and Other Financial Measures This press release includes a discussion of the Company's historical financial results using certain non-GAAP financial measures, including EBITDA, Adjusted EBITDA, Free Cash Flow and Net Debt. Investors, analysts, valuation firms and lenders, also frequently use these measures although their definitions may vary. A "non-GAAP financial measure" is defined as a numerical measure of a company's performance that excludes or includes amounts so as to be different than the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles ("GAAP"). Pursuant to the requirements of Regulation G, the Company has included in its press release a reconciliation of all non-GAAP financial measures disclosed in the press release to the most directly comparable GAAP financial measure. EBITDA is defined as earnings (loss) before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as earnings (loss) before interest, taxes, depreciation and amortization, adjusted to exclude non-cash charges and expenses not included within the accepted definition of EBITDA, but which management believes their exclusion provides a more appropriate measure of the Company's operating performance and liquidity. Until September 1, 2002, we made payments to the Dominican government in lieu of income taxes. As a result, we calculated Adjusted EBITDA prior to the deduction of payments to the Dominican government in lieu of income taxes. Our calculation of Adjusted EBITDA also adds impairment charges, which are non-cash charges related to fixed and intangible assets, extraordinary items and changes in accounting charges. Adjusted EBITDA is the primary basis used by our management to measure the operational strength and performance of all of our operating segments and units. The Company believes Adjusted EBITDA provides meaningful additional information on our performance and on our ability to service our long-term debt and other obligations, and to fund capital expenditures. Because we use Adjusted EBITDA as the measure to evaluate the performance of our core businesses, we reconcile it to net earnings (loss), the most directly comparable financial measure calculated and presented in accordance with generally accepted accounting principles. We define Free Cash Flow as cash provided by operating activities less cash provided by investing activities. We believe Free Cash Flow is a non-GAAP measure as contemplated by Regulation G. We believe that Free Cash Flow provides useful information about the amount of cash our business is generating after interest and capital expenditures for reinvesting in the business. We define Net Debt as the total aggregate amount of our consolidated debt (short and long term), including capital lease obligations, less cash on hand and in banks and equivalents (including investments). We believe Net Debt is a non-GAAP measure as contemplated by Regulation G. Management believes that the presentation of Net Debt provides useful information about the Company's ability to satisfy its debt obligations with currently available funds. EBITDA, Adjusted EBITDA and Free Cash Flow should not be considered as substitutes for operating income (loss), net income (loss), net cash provided by operating activities or other measures of performance or liquidity reported in accordance with GAAP. Net Debt should not be considered a substitute for total debt. A quantitative reconciliation of EBITDA, Adjusted EBITDA, Free Cash Flow and Net Debt follows: TRICOM, S.A. AND SUBSIDIARIES Reconciliation of Non-GAAP Financial Measures (In US$) Three Months Ended Nine Months Ended September 30, September 30, 2002 2003 2002 2003 Adjusted EBITDA Reconciliation Add (subtract): Net loss $(14,913,101) (21,844,199) $(39,695,716) (61,877,370) Income taxes 316,422 651,228 473,500 1,997,811 Interest expense, net 16,882,578 14,603,567 45,584,984 45,627,203 Depreciation and amortization 17,784,420 19,215,589 51,203,350 58,317,649 EBITDA $20,070,319 12,626,185 $57,566,118 44,065,293 Expense in lieu of income taxes 1,564,867 -- 6,246,766 -- Adjusted EBITDA $21,635,186 12,626,185 $63,812,884 44,065,293 Nine Months Ended September 30, 2002 2003 Free Cash Flow Reconciliation Add (subtract): Net cash provided by operating activities $6,292,780 10,375,800 Net cash used in investing activities (42,467,182) (979,651) Free cash flow surplus (deficit) $(36,174,402) 9,396,149 Period ended Dec. 31, Sept. 30, 2002 2003 Net Debt Reconciliation Add (subtract): Short-term debt $81,980,810 130,029,704 Long-term debt 385,583,631 324,423,151 Cash on hand and investments (21,981,013) (7,078,336) Net debt $445,583,428 447,374,519 TRICOM, S.A. AND SUBSIDIARIES Selected Financial and Operating Data (unaudited) (In US$) Sequential % Y-o-Y % 3Q'02 2Q'03 3Q'03 Chng. Chng. Economic Statistics (1) Consumer price index (12 month aggregate) 5.39% 26.10% 33.14% Consumer price index year-to-date 4.97% 16.60% 26.47% Exchange rate (at period end) $19.05 34.21 33.21 -2.9% 74.3% Avg. period exchange rate $18.48 27.75 34.06 22.7% 84.3% Selected Financial Data Adjusted EBITDA 21,635,186 14,604,033 12,626,185 -13.5% -41.6% Capital Expenditures, including capital leases 12,752,648 5,272,160 1,690,416 -67.9% -86.7% Total employess (at period end) 1,489 1,605 1,584 -1.3% 6.4% Selected Operating Data Lines in service (at period end) 179,124 139,590 135,815 -2.7% -24.2% Avg. revenue per line in service $37.86 37.26 33.94 -8.9% -10.4% Avg. monthly churn rate 1.6% 2.9% 2.6% Cellular & PCS subscribers (at period end) (2) 410,918 424,755 429,053 1.0% 4.4% Minutes of use (in 000s) 59,688 64,113 67,474 5.2% 13.0% Avg. revenue per user (blended) $8.45 4.45 4.95 11.2% -41.4% Avg. monthly churn rate 4.6% 4.2% 3.7% Digital trunking subscribers (atperiod end) (3) 4,860 10,160 10,331 1.7% 112.6% Avg. revenue per user $64.81 48.56 44.46 -8.4% -31.4% Avg. monthly churn rate 0.7% 2.6% 4.4% Cable subscribers (at period end) 71,081 65,343 63,921 -2.2% -10.1% Avg. revenue per equivalent cable subscriber $18.47 13.91 11.69 -16.0% -36.7% Avg. monthly churn rate 4.0% 4.5% 2.3% Data/Internet Subscribers (at period end) 10,611 11,425 12,128 6.2% 14.3% Paging subscribers 9,457 5,612 5,105 -9.0% -46.0% Long distance minutes (in 000s) (4) 301,358 292,485 266,092 -9.0% -11.7% Footnote: (1) Source: Dominican Republic Central Bank (2) Represents cellular and PCS subscribers in the Dominican Republic (3) Represents mobile subscribers in Panama. (4) Includes inbound, outbound and domestic long distance minutes. TRICOM, S.A. AND SUBSIDIARIES Consolidated Balance Sheets (In US$) December 31, September 30, 2002 2003 (Audited) (Unaudited) Assets Current assets Cash on hand and in banks $6,080,303 $2,364,866 Accounts receivable: Customers 26,253,107 20,805,996 Carriers 3,806,849 11,811,559 Others 2,848,287 1,828,364 32,908,243 34,445,919 Allowance for doubtful accounts (7,763,109) (7,692,593) Accounts receivable, net 25,145,134 26,753,326 Inventories, net of allowances 3,937,678 1,713,418 Certificates of deposits 15,900,710 4,713,470 Prepaid expenses 7,099,415 2,335,319 Deferred income taxes 1,307,870 1,307,870 Total current assets 59,471,110 39,188,269 Mortgage investments 463,542 807,259 Property and equipment, net 668,120,192 624,066,425 Intangible assets 6,946,978 6,946,978 Goodwill, net of amortization 21,914,327 21,914,327 Other assets at cost, net of amortization 25,312,934 22,199,666 $782,229,083 $715,122,924 TRICOM, S.A. AND SUBSIDIARIES Consolidated Balance Sheets (cont.) (In US$) Dec. 31, Sept. 30, 2002 2003 Liabilities and Stockholders' Equity (Audited) (Unaudited) Current liabilities Notes payable: Borrowed funds $38,609,926 $19,331,446 Commercial paper 9,907,583 60,013,152 Current portion of long-term debt 30,724,888 45,707,738 79,242,397 125,052,336 Current portion of capital leases 2,738,413 4,977,368 Accounts payable: Carriers 11,032,780 17,758,114 Suppliers 15,746,551 13,482,491 Others 7,384,780 2,329,069 34,164,111 33,569,674 Other liabilities 14,910,246 11,224,410 Accrued expenses 17,837,390 30,467,559 Total current liabilities 148,892,557 205,291,347 Reserve for severance indemnities 675,742 208,643 Deferred income tax 1,691,779 1,691,779 Commercial paper 41,708,647 -- Capital leases, excluding current portion 11,792,908 9,553,953 Long-term debt, excluding current portion 332,082,076 314,869,198 Total liabilities 536,843,709 531,614,920 Minority interest -- -- Stockholders' equity: Class A Common Stock at par value RD$10: Authorized 55,000,000 shares; 45,458,041 shares issued at December 31, 2002 and September 30, 2003 24,951,269 24,951,269 Class B Stock at par value RD$10: Authorized 25,000,000 shares at December 31, 2002 and March 31, 2003; 19,144,544 issued at December 31, 2002 and September 30, 2003 12,595,095 12,595,095 Additional paid-in-capital 275,496,964 275,496,964 Retained earnings (loss) (65,634,197) (127,511,567) Other comprehensive income-foreign currency translation (2,023,757) (2,023,757) Stockholders equity, net 245,385,374 183,508,004 $782,229,083 $715,122,924 TRICOM, S.A. and Subsidiaries Consolidated Statement of Operations (Unaudited) (In US$) Three Months Ended Nine Months Ended September 30, September 30, 2002 2003 2002 2003 (Restated) (Restated) Operating revenues: Long distance $23,577,572 24,162,889 70,610,529 73,324,692 Domestic telephony 20,908,415 13,527,381 64,175,234 46,226,742 Mobile 12,159,130 8,049,075 35,956,070 27,218,963 Cable 5,856,373 3,051,894 16,852,230 10,580,026 Data and Internet 2,994,531 1,091,891 8,384,413 3,423,528 Other 82,386 117,265 382,665 125,186 Total operating revenues 65,578,407 50,000,395 196,361,141 160,899,137 Operating costs and expenses: Cost of sales and services 22,283,023 20,868,076 65,484,843 66,069,747 Depreciation and amortization 17,784,420 19,215,589 50,427,236 58,317,649 Expense in lieu of income taxes 1,564,867 -- 6,246,766 -- Selling, general and administrative expenses 23,290,338 17,713,846 71,319,043 53,743,814 Total operating costs and expenses 64,922,648 57,797,511 193,477,888 178,131,210 Operating income 655,759 (7,797,116) 2,883,253 (17,232,073) Other income (expenses): Interest expense (17,247,946) (15,158,175) (46,919,070) (46,956,606) Interest income 365,368 554,608 1,334,087 1,329,402 Foreign currency exchange gain (loss) 654,984 1,228,770 702,420 2,602,673 Other, net 715,291 (21,058) (280,022) 377,045 Other expenses, net (15,512,303) (13,395,855) (45,162,585) (42,647,486) Earnings (loss) before income taxes and minority interest (14,856,544) (21,192,971) (42,279,332) (59,879,559) Income taxes, net (316,422) (651,228) (636,717) (1,997,811) Earnings (loss) before minority interest (15,172,966) (21,844,199) (42,916,049) (61,877,370) Minority interest 259,865 -- 1,870,833 -- Net earnings (loss) $(14,913,101) (21,844,199) (41,045,216) (61,877,370) Earnings (loss) per common share: Earnings (loss) before minority interest $(0.35) (0.34) (0.99) (0.96) Minority interest 0.01 -- 0.04 -- Earnings(loss) per common share $(0.34) (0.34) (0.95) (0.96) Average number of common shares used in calculation 43,390,464 64,602,585 43,390,464 64,602,585 TRICOM, S.A. and subsidiaries Consolidated Statement of Cash Flows (Unaudited) (In US$) Nine Months Ended September 30, 2002 2003 Cash flows from operating activities: Net earnings (loss) $(39,713,797) $(61,877,370) Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: Depreciation 49,235,588 55,307,933 Allowance for doubtful accounts 5,893,869 2,326,013 Deferred income tax, net 163,213 -- Amortizations debt issue cost 2,078,417 3,009,716 Amortization of radio frequency rights 465,338 -- Expense for severance indemnities 1,474,840 375,830 Minority interest (1,870,833) Loss (gain) on sale of fixed assets, net (1,284,310) Net changes in assets and liabilities: Accounts receivable (895,508) (3,934,205) Inventories (1,011,124) 2,793,268 Prepaid expenses 3,416,761 4,764,096 Other assets (3,777,832) 103,552 Accounts payable (8,048,550) (594,437) Other liabilities 2,039,664 (3,685,836) Accrued expenses 187,847 12,630,169 Reserve for severance indemnities (2,060,803) (842,929) Total adjustments 46,006,577 72,253,170 Net cash provided by (used in) operating activities $6,292,780 $10,375,800 Cash flows from investing activities: Cancellation (acquisition) of investments $5,159,214 $10,843,523 Acquisition of property and equipment (52,654,969) (11,823,174) Proceeds from sale of land 5,028,573 -- Net cash used in investing activities (42,467,182) (979,651) Cash flows from financing activities: Borrowed (paid) funds 22,479,879 -- Principal payments to banks (32,216,455) (19,278,480) Current portion of long-term debt -- (2,230,028) Current portion of capital lease (2,284,830) -- Issuance of commercial paper 31,673,187 8,396,922 Payments of long-term debt (23,278,189) -- Proceeds from issuance of long-term debt 34,367,892 -- Net cash provided by financing activities 30,741,484 (13,111,586) Net increase in cash and cash equivalents (5,432,918) (3,715,437) Cash and cash equivalents at beginning of the period 12,576,050 6,080,303 Cash and cash equivalents at end of period $7,143,132 $2,364,866 For Further Information Contact: Miguel Guerrero, Investor Relations Ph (809) 476-4044 / 4012 e-mail: For additional information, please visit Tricom's Investor Relations website at http://www.tdr-investor.com/ or contact our Investor Relations department at the above numbers. DATASOURCE: TRICOM, S.A. CONTACT: Miguel Guerrero, Investor Relations of Tricom, +1-809-476-4044 or 4012, or Web site: http://www.tricom.net/

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