ITC^DeltaCom Announces Second Quarter 2009 Results
HUNTSVILLE, Ala., Aug. 7 /PRNewswire-FirstCall/ — ITC^DeltaCom, Inc. (OTC Bulletin Board: ITCD), a leading provider of integrated communications services to customers in the southeastern United States, today announced its operating and financial results for the quarter ended June 30, 2009. For the 2009 second quarter, ITC^DeltaCom reported total operating revenues of $118.6 million, a net loss of $(2.7) million, and adjusted EBITDA* of $22.7 million.
“We are pleased to report again our highest quarterly profitability to date as measured by adjusted EBITDA,” said Randall E. Curran, ITC^DeltaCom’s Chief Executive Officer. “Our strategy to improve our business’s cost structure through process improvements and network optimization is helping our company offset the effects of the challenging economic conditions that are currently impacting our industry.”
Among its operating highlights for the second quarter of 2009, ITC^DeltaCom:
- recorded operating income of $4.9 million compared to operating income of $2.3 million in the second quarter of 2008 and a net loss of $(2.7) million compared to a net loss of $(4.8) million in the second quarter of 2008;
- increased adjusted EBITDA, as defined by the company below, by 4.0% over the second quarter of 2008 to $22.7 million;
- experienced a decrease in total operating revenues of $6.9 million, or 5.5%, from the second quarter of 2008;
- experienced a decrease in business local, data and Internet revenues of $1.8 million, or 2.1%, from the second quarter of 2008;
- ended the quarter with over 428,400 voice lines in service, of which 86.9% were provided on the company’s own network, which represented an increase from 83.8% provided on the company’s network at the end of the second quarter of 2008;
- increased its core, facilities-based business voice lines in service by approximately 10,200 lines over the second quarter of 2008 and by 2,600 lines over the first quarter of 2009;
- experienced a decrease in total business voice lines in service of approximately 3,900 lines from the second quarter of 2008 and 400 lines from the first quarter of 2009;
- continued to derive benefit from investments in process redesign and other efficiency gains, resulting in selling, operations and administration expense equal to 35.3% of revenue compared to 37.3% of revenue in the second quarter of 2008;
- generated $21.4 million in net cash provided by operating activities, which represented an increase of $7.5 million over the second quarter of 2008; and
- increased adjusted unlevered free cash flow, as defined by the company below, by 21.1% over the second quarter of 2008 to $9.2 million from $7.6 million.
“Our total revenues declined in the second quarter due to loss of long distance and regulatory revenues as customers migrate to mobile and bundled minute packages, declines in our wholesale dial-up PRI product, and customer disconnects and pricing pressure related to the impacts of the recession. However, we continue to remain focused on process improvements, increasing efficiencies in our network cost structure, and strengthening our balance sheet,” said Richard E. Fish, ITC^DeltaCom’s Chief Financial Officer. “Our adjusted unleveraged free cash flow reached over $9 million in the second quarter, and we increased our total cash and cash equivalents to $73.8 million.”
Additional information about ITC^DeltaCom’s business and operating results is contained in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2009 filed with the Securities and Exchange Commission.
* Adjusted EBITDA is defined by ITC^DeltaCom as net income (loss) before interest income and expense, net, provision for income taxes, depreciation and amortization, stock-based compensation, non-cash loss on extinguishment of debt, debt issue cost write-off, prepayment penalties on debt, equity commitment fees, restructuring expenses, merger-related expenses, asset impairment loss and other income or loss, all as disclosed in the consolidated statements of operations and comprehensive loss. Adjusted EBITDA is not a measurement of financial performance under generally accepted accounting principles. For a quantitative reconciliation of adjusted EBITDA to net loss, as net loss is calculated in accordance with generally accepted accounting principles, see the accompanying table captioned “Adjusted EBITDA Reconciliation.”
** Adjusted unlevered free cash flow is defined by ITC^DeltaCom as adjusted EBITDA (as defined above) less capital expenditures (including equipment purchased through capital leases) and changes in accounts payable – construction, all as disclosed in the consolidated statements of cash flows. Adjusted unlevered free cash flow is not a measurement of financial performance under generally accepted accounting principles. For a quantitative reconciliation of adjusted unlevered free cash flow to net cash provided by operating activities, as net cash provided by operating activities is calculated in accordance with generally accepted accounting principles, see the accompanying table captioned “Adjusted Unlevered Free Cash Flow Reconciliation.”
ABOUT ITC^DELTACOM, INC.
ITC^DeltaCom, Inc., headquartered in Huntsville, Alabama, provides, through its operating subsidiaries, integrated telecommunications and technology services to businesses and other communications providers in the southeastern United States. ITC^DeltaCom has a fiber optic network spanning 15,965 route miles, including more than 12,020 route miles of owned fiber, and offers a comprehensive suite of voice and data communications services, including local, long distance, broadband data, Internet connectivity, wireless voice and data services, and customer premise equipment. ITC^DeltaCom is one of the largest competitive telecommunications providers in its primary eight-state region. For more information about ITC^DeltaCom, visit ITC^DeltaCom’s web site at http://www.deltacom.com.
FORWARD-LOOKING STATEMENTS
Except for the historical and present factual information contained herein, this release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. When used in this release, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan” and similar expressions as they relate to ITC^DeltaCom, Inc. or its management are intended to identify these forward-looking statements. All statements by the Company regarding its expected financial position, revenues, liquidity, cash flow and other operating results, balance sheet improvement, business strategy, financing plans, forecasted trends related to the markets in which it operates, legal proceedings and similar matters are forward-looking statements. The Company’s actual results could be materially different from its expectations because of various risks. These risks, some of which are discussed under the caption “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, and in the Company’s subsequent SEC reports, include the Company’s dependence on new product development, rapid technological and market changes, the Company’s dependence upon rights of way and other third-party agreements, debt service and other cash requirements, liquidity constraints and risks related to future growth and rapid expansion. Other important risk factors that could cause actual events or results to differ from those contained or implied in the forward-looking statements include, without limitation, customer attrition, delays or difficulties in deployment and implementation of colocation arrangements and facilities, appeals of or failures by third parties to comply with rulings of governmental entities, inability to meet installation schedules, general economic and business conditions, failure to maintain underlying service/vendor arrangements, competition, adverse changes in the regulatory or legislative environment, and various other factors beyond the Company’s control. ITC^DeltaCom disclaims any responsibility to update these forward-looking statements, whether as a result of new information, future developments or otherwise.
ITC^DeltaCom, Inc.
Financial Highlights
(Unaudited)
(In thousands, except share and per share data)
Three Months Six Months
Ended June 30, Ended June 30,
2009 2008 2009 2008
OPERATING REVENUES:
Integrated communications
services $100,053 $104,357 $202,129 $207,826
Wholesale services 14,625 16,425 30,243 33,064
Equipment sales and
related services 3,925 4,766 8,206 9,441
TOTAL OPERATING REVENUES 118,603 125,548 240,578 250,331
COSTS AND EXPENSES:
Cost of services and
equipment, excluding
depreciation and
amortization 54,627 57,461 111,104 115,829
Selling, operations and
administration 41,817 46,818 85,487 93,072
Depreciation and
amortization 17,216 18,945 34,135 37,261
Total operating
expenses 113,660 123,224 230,726 246,162
OPERATING INCOME 4,943 2,324 9,852 4,169
OTHER (EXPENSE) INCOME:
Interest expense (7,552) (7,868) (15,091) (16,186)
Interest income 14 299 29 876
Other income (expense) (151) 397 (132) 428
Total other expense, net (7,689) (7,172) (15,194) (14,882)
LOSS BEFORE INCOME TAXES (2,746) (4,848) (5,342) (10,713)
INCOME TAX EXPENSE - - - -
NET LOSS (2,746) (4,848) (5,342) (10,713)
PREFERRED STOCK DIVIDENDS
AND ACCRETION - - - (7,073)
NET LOSS APPLICABLE TO
COMMON STOCKHOLDERS $(2,746) $(4,848) $(5,342) $(17,786)
BASIC AND DILUTED NET
LOSS PER SHARE APPLICABLE
TO COMMON STOCKHOLDERS $(0.03) $(0.06) $(0.07) $(0.23)
BASIC AND DILUTED WEIGHTED
AVERAGE COMMON SHARES
OUTSTANDING 80,954,845 80,748,100 80,911,185 78,567,987
COMPREHENSIVE LOSS
NET LOSS $(2,746) $(4,848) $(5,342) $(10,713)
OTHER COMPREHENSIVE LOSS
Change in unrealized
gains (losses) on
derivative instrument
designated as cash flow
hedging instrument, net
of tax 1,529 3,677 3,335 (413)
COMPREHENSIVE LOSS $(1,217) $(1,171) $(2,007) $(11,126)
ITC^DeltaCom, Inc.
Quarterly Highlights
(Unaudited)
(In thousands)
Three Months Ended
June 30, March 31, Dec. 31, Sept. 30, June 30,
2009 2009 2008 2008 2008
Integrated communications
services revenues:
Long distance
and access $15,529 $16,021 $16,312 $17,229 $17,996
Business local,
data and internet 84,524 86,055 86,445 86,169 86,361
Total integrated
communications
services revenues 100,053 102,076 102,757 103,398 104,357
Wholesale services
revenues:
Broadband transport 12,237 12,664 12,983 13,046 13,186
Local
interconnection 308 740 1,034 1,193 1,210
Directory
assistance and
operator services 1,019 1,029 1,093 1,146 1,141
Other 1,061 1,185 1,122 1,117 888
Total wholesale
services revenues 14,625 15,618 16,232 16,502 16,425
Equipment sales
and related services
revenues 3,925 4,281 3,826 4,817 4,766
Total operating
revenues 118,603 121,975 122,815 124,717 125,548
COSTS AND EXPENSES:
Cost of services
and equipment,
excluding
depreciation
and
amortization 54,627 56,477 58,824 58,246 57,461
Selling,
operations and
administration
expense 41,817 43,670 45,158 44,893 46,818
Depreciation and
amortization 17,216 16,919 17,035 19,218 18,945
Total operating
expenses 113,660 117,066 121,017 122,357 123,224
OPERATING INCOME $4,943 $4,909 $1,798 $2,360 $2,324
ITC^DeltaCom, Inc.
Quarterly Highlights (continued)
(Unaudited)
June 30, March 31, Dec. 31, Sept. 30, June 30,
2009 2009 2008 2008 2008
Retail business voice
lines in service(1)
UNE-T and other UNE
lines(2) 372,413 369,787 369,496 368,724 362,174
Increase from
previous quarter 0.7% 0.1% 0.2% 1.8% 3.6%
Resale and commercial
agreement lines(3) 56,022 59,017 62,629 66,300 70,167
Decrease from
previous quarter (5.1)% (5.8)% (6.0)% (5.5)% (5.6)%
Total retail business
voice lines in service 428,435 428,804 432,125 435,024 432,341
Wholesale voice lines in
service(4) 8,625 12,489 26,151 38,203 40,595
Increase (decrease)
from previous quarter (30.9)% (52.2)% (31.5)% (5.9)% (0.6)%
Total business voice
lines in service (5) 437,060 441,293 458,276 473,227 472,936
Number of employees (6) 1,452 1,511 1,565 1,615 1,700
(1) Lines in service include only voice lines in service. Conversion of
data services provided to customers to a voice line equivalent is not
included.
(2) Facilities-based service offering in which ITC^DeltaCom provides local
service through its owned and operated switching facilities.
(3) Voice lines for local and mobile services served via commercial
agreements and reselling incumbent local exchange carrier tariff
offerings.
(4) Represents primary rate interface circuits provided as part of
ITC^DeltaCom's local interconnection services for Internet service
providers.
(5) Reported net of lines disconnected or canceled.
(6) Includes full-time and part-time employees.
ITC^DeltaCom, Inc.
Balance Sheet and Other Financial Highlights
(In thousands)
Balance Sheet Data (at period end): June 30, 2009 December 31, 2008
(Unaudited)
Cash and cash equivalents (unrestricted) $73,802 $56,683
Working capital 43,341 33,902
Total assets 377,662 382,661
Long-term liabilities 305,474 307,880
Stockholders' deficit (13,427) (12,401)
Total liabilities and stockholders' deficit 377,662 382,661
Three Months Ended
June 30, March 31, Dec. 31, Sept. 30, June 30,
2009 2009 2008 2008 2008
Other Financial Data:
(Unaudited)
Capital
expenditures(1) $13,465 $8,329 $29,843 $8,005 $14,187
Cash flows (used
in) provided by:
Operating
activities 21,430 17,271 10,685 21,267 13,864
Investing
activities (12,795) (6,792) (9,593) (33,257) (13,435)
Financing
activities (581) (1,414) 2,918 4,417 (583)
Adjusted EBITDA(2) 22,697 22,357 19,269 22,131 21,835
Adjusted unlevered
free cash flow(3) 9,232 14,028 (10,574) 14,126 7,648
ITC^DeltaCom, Inc.
Balance Sheet and Other Financial Highlights (continued)
(In thousands)
Notes:
(1) Includes equipment purchased through capital leases and changes in
accrued capital related costs.
(2) Adjusted EBITDA is defined by ITC^DeltaCom as net income (loss) before
interest income and expense, net, provision for income taxes,
depreciation and amortization, stock-based compensation, non-cash loss
on extinguishment of debt, debt issue cost write-off, prepayment
penalties on debt, equity commitment fees, restructuring expenses,
merger-related expenses, asset impairment loss and other income or
loss, all as disclosed in the condensed consolidated statements of
operations and comprehensive loss. Adjusted EBITDA is not a
measurement of financial performance under generally accepted
accounting principles. For a quantitative reconciliation of adjusted
EBITDA to net loss, as net loss is calculated in accordance with
generally accepted accounting principles, see the accompanying table
captioned "Adjusted EBITDA Reconciliation."
(3) Adjusted unlevered free cash flow is defined by ITC^DeltaCom as
adjusted EBITDA, as defined above in Note (2), less capital
expenditures (including equipment purchased through capital leases)
and changes in accounts payable-construction, all as disclosed in the
condensed consolidated statements of cash flows. Adjusted unlevered
free cash flow is not a measurement of financial performance under
generally accepted accounting principles. For a quantitative
reconciliation of adjusted unlevered free cash flow to net cash
provided by operating activities, as net cash provided by operating
activities is calculated in accordance with generally accepted
accounting principles, see the accompanying table captioned "Adjusted
Unlevered Free Cash Flow Reconciliation."
ITC^DeltaCom, Inc.
Adjusted EBITDA Reconciliation
(In thousands)
(Unaudited)
Adjusted EBITDA is defined by ITC^DeltaCom as net income (loss) before
interest income and expense, net, provision for income taxes, depreciation
and amortization, stock-based compensation, non-cash loss on
extinguishment of debt, debt issue cost write-off, prepayment penalties on
debt, equity commitment fees, restructuring expenses, merger-related
expenses, asset impairment loss and other income or loss, all as disclosed
in the condensed consolidated statements of operations and comprehensive
loss. Not all of these adjustments are applicable in every period.
Adjusted EBITDA is not a financial measurement under generally accepted
accounting principles ("GAAP"). ITC^DeltaCom's management uses adjusted
EBITDA, together with financial measures prepared in accordance with GAAP,
such as revenue, to assess ITC^DeltaCom's historical and prospective
operating performance. Management uses adjusted EBITDA to enhance its
understanding of ITC^DeltaCom's core operating performance, which
represents management's views concerning ITC^DeltaCom's performance in the
ordinary, ongoing and customary course of its operations. ITC^DeltaCom's
management also uses adjusted EBITDA to evaluate ITC^DeltaCom's core
operating performance relative to that of its competitors. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations--Overview--Adjusted EBITDA" in ITC^DeltaCom's Annual Report on
Form 10-K for its 2008 fiscal year for additional information regarding
management's reasons for including adjusted EBITDA data and for material
limitations with respect to the usefulness of this measure. The following
tables present adjusted EBITDA amounts for the fiscal quarters indicated
and also sets forth a quantitative reconciliation of adjusted EBITDA to
net loss, as net loss is calculated in accordance with GAAP (in
thousands):
Three Months Ended
June 30, March 31, Dec. 31, Sept. 30, June 30,
2009 2009 2008 2008 2008
(Unaudited)
Net loss $(2,746) $(2,596) $(6,848) $(5,336) $(4,848)
Add: non-EBITDA
items included in
net loss:
Interest income
and expense, net 7,538 7,524 8,367 7,628 7,569
Depreciation and
amortization 17,216 16,919 17,035 19,218 18,945
Stock-based
compensation 538 529 436 553 566
Other (income) loss 151 (19) 279 68 (397)
Adjusted EBITDA $22,697 $22,357 $19,269 $22,131 $21,835
ITC^DeltaCom, Inc.
Adjusted Unlevered Free Cash Flow Reconciliation
(In thousands)
(Unaudited)
Adjusted unlevered free cash flow is defined by ITC^DeltaCom as adjusted
EBITDA (as defined above) less capital expenditures (including equipment
purchased through capital leases) and changes in accounts payable-
construction, all as disclosed in the condensed consolidated statements of
cash flows. Adjusted unlevered free cash flow is not a measurement of
financial performance under GAAP. ITC^DeltaCom has included data with
respect to adjusted unlevered free cash flow because its management
considers adjusted unlevered free cash flow to be a useful, supplemental
indicator of its operating performance. When measured over time, adjusted
unlevered free cash flow provides supplemental information to investors
concerning the growth rate in ITC^DeltaCom's operating results and its
ability to generate cash flows to satisfy mandatory debt service
requirements and make other mandatory, non-discretionary expenditures.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Overview--Adjusted Unlevered Free Cash Flow" in
ITC^DeltaCom's Annual Report on Form 10-K for its 2008 fiscal year for
additional information regarding management's reasons for including
adjusted unlevered free cash flow data and for material limitations with
respect to the usefulness of this measure. The following tables present
adjusted unlevered free cash flow amounts for the fiscal quarters
indicated and also sets forth a quantitative reconciliation of adjusted
unlevered free cash flow to net cash provided by operating activities, as
net cash provided by operating activities is calculated in accordance with
GAAP (in thousands):
Three Months Ended
June 30, March 31, Dec. 31, Sept. 30, June 30,
2009 2009 2008 2008 2008
(Unaudited)
Net cash provided by
operating
activities $21,430 $17,271 $10,685 $21,267 $13,864
Adjustments to
reconcile adjusted
unlevered free
cash flow to net cash
provided by operating
activities
Elements included
in net cash
provided
by (used in)
operating
activities not
included in
adjusted
unlevered free
cash flow:
Total changes in
current operating
assets and
liabilities (4,671) (154) 2,025 (5,204) 1,882
Provision for
bad debts (1,050) (1,680) (1,200) (950) (900)
Interest expense
excluding
interest paid
in kind and in
common stock,
and
amortization of
debt issuance
costs and debt
discount, net
of interest
income 6,932 6,917 7,759 7,018 6,958
Other (income)
loss 56 3 - - 31
Adjusted EBITDA 22,697 22,357 19,269 22,131 21,835
Less:
Capital
expenditures (12,490) (10,096) (22,063) (15,486) (11,387)
Change in
accounts
payable
-construction (975) 1,767 (7,780) 7,481 (2,800)
Adjusted
unlevered free
cash flow $9,232 $14,028 $(10,574) $14,126 $7,648
Investor Contact:
Richard E. Fish
Chief Financial Officer
256-382-3827
Richard.fish@deltacom.com
SOURCE ITC^DeltaCom, Inc.