HUNTSVILLE, Ala., Nov. 13 /PRNewswire-FirstCall/ -- ITC^DeltaCom, Inc. , a leading provider of integrated communications services to customers in the southeastern United States, today reported its operating and financial results for the quarter ended September 30, 2006.
For the quarter ended September 30, 2006, ITC^DeltaCom reported total operating revenues of $124.1 million, a net loss of $11.9 million, and net earnings before interest, taxes, depreciation and amortization (EBITDA)* of $17.5 million.
Among its operating highlights for the third quarter, ITC^DeltaCom:
- Increased total integrated communications services revenues and total
operating revenues for the second consecutive quarter;
- Reported its fourth consecutive quarterly increase in billable retail
business lines in service, ending the third quarter with 386,414 lines;
- Grew its core, facilities-based retail business lines in service (UNE-T
and UNE lines) by approximately 10,300 net lines, representing a 15%
annualized growth rate, and increased those lines as a percentage of
total retail business lines in service from 72% to 74%;
- Managed customer attrition levels in its facilities-based retail
business voice lines to an average of 1.2% per month;
- Reported its second consecutive quarter of strong equipment sales and
related services, with revenues of $6.8 million, representing a 38%
increase over the third quarter of 2005;
- Demonstrated continued stability in its wholesale services revenues;
- Reported strong improvement in reported gross margin, which increased
from 48.0% in the first quarter of 2006 to 48.5% in the second quarter
of 2006 and to 50.5% in the third quarter of 2006; and
- Increased its sequential EBITDA for the third consecutive quarter, from
$16.3 million for the second quarter of 2006 to $17.5 million for the
third quarter of 2006.
"We continue to make solid progress in improving our operating performance," said Randall E. Curran, ITC^DeltaCom's Chief Executive Officer. "Our continued focus on improving our customer's experience and our commitment to the development of new products and solutions to meet customer demands, such as our Simpli-Business offering, is manifesting itself in improved results."
On October 27, 2006, the Company announced that it had (i) entered into an agreement for the private placement of an additional $21 million principal amount of first lien, senior secured notes, which will provide liquidity to fund growth and continued investment in the Company's network; and, (ii) negotiated modified payment terms on its $7.1 million unsecured note that had been payable in full on October 31, 2006, to pay $2.27 million of principal on October 31, 2006, extend payment of $2.4 million of principal over 36 monthly installments beginning November 2006, and defer payment of $2.4 million of principal to October 2009. On November 10, 2006, the Company closed the private placement of $21 million in additional first lien, senior secured notes.
"We're pleased to report significant increases in both reported gross margin to 50.5% and EBITDA to $17.5 million for the third quarter," said Richard E. Fish, Executive Vice President and Chief Financial Officer. "The additional funding provided by the issuance of the new senior notes significantly enhances the Company's liquidity profile and will allow us to aggressively continue our growth strategy."
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 September 30, 2006 filed with the Securities and Exchange Commission.
* EBITDA is not a measurement of financial performance under accounting principles generally accepted in the United States. For a quantitative reconciliation of the differences between EBITDA and net loss, as net loss is calculated in accordance with generally accepted accounting principles, see the accompanying table captioned "EBITDA Reconciliation."
ABOUT ITC^DELTACOM, INC.
ITC^DeltaCom, Inc. ("ITC^DeltaCom") headquartered in Huntsville, Alabama, provides, through its operating subsidiaries, integrated telecommunications and technology services to businesses and consumers in the southeastern United States. ITC^DeltaCom has a fiber optic network spanning approximately 14,500 route miles, including more than 11,000 route miles of owned fiber, and offers a comprehensive suite of voice and data communications services, including local, long distance, broadband data communications, Internet connectivity, and customer premise equipment to end-user customers. ITC^DeltaCom is one of the largest competitive telecommunications providers in its primary eight- state region. ITC^DeltaCom has interconnection agreements with BellSouth, Verizon, SBC, CenturyTel and Sprint for resale and access to unbundled network elements and is a certified competitive local exchange carrier (CLEC) in Arkansas, Texas, Virginia and all nine BellSouth states. 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, 2005, and in the Company's subsequent SEC reports, include the Company's dependence on new product development, rapid technological and market change, 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 collocation 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.
ITC^DeltaCom, Inc.
Financial Highlights
(Unaudited)
(In thousands, except share and per share data)
Three Months Ended
September 30,
2006 2005
OPERATING REVENUES:
Integrated communications services $96,503 $102,538
Equipment sales and related services 6,826 4,942
Wholesale services 20,789 21,009
TOTAL OPERATING REVENUES 124,118 128,489
COSTS AND EXPENSES:
Cost of services and equipment, excluding
depreciation and amortization 61,492 63,432
Selling, operations and administration 45,102 50,132
Depreciation and amortization 15,345 13,329
Restructuring expenses 242 -
Asset impairment loss - 600
Total operating expenses 122,181 127,493
OPERATING INCOME (LOSS) 1,937 996
OTHER (EXPENSE) INCOME:
Interest expense, net of amounts capitalized (14,634) (11,893)
Interest income 619 211
Other income 167 2,353
Total other expense, net (13,848) (9,329)
LOSS BEFORE INCOME TAXES (11,911) (8,333)
INCOME TAX EXPENSE - -
NET LOSS (11,911) (8,333)
PREFERRED STOCK DIVIDENDS AND ACCRETION (1,877) (1,753)
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS $(13,788) $(10,086)
BASIC AND DILUTED NET LOSS PER COMMON SHARE $(0.74) $(0.54)
BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 18,752,130 18,703,069
ITC^DeltaCom, Inc.
Quarterly Highlights
(Unaudited)
(In thousands)
Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
2006 2006 2006 2005 2005
Integrated
communications services
revenues:
Long distance $15,844 $16,844 $17,696 $18,028 $20,274
Business local, data
and internet 80,659 79,197 76,675 76,734 78,183
Residential local - - - 575 1,763
Colocation and managed
services - - - - 2,318
Total integrated
communications services
revenues 96,503 96,041 94,371 95,337 102,538
Equipment sales and
related services
revenues 6,826 6,860 4,576 4,404 4,942
Wholesale services
revenues:
Broadband transport 15,040 14,947 14,975 15,094 14,934
Local interconnection 1,945 1,982 2,139 2,098 2,311
Directory assistance
and operator services 2,633 2,604 2,634 2,512 2,422
Other 1,171 1,377 1,243 1,052 1,342
Total wholesale
services revenues 20,789 20,910 20,991 20,756 21,009
Total operating revenues 124,118 123,811 119,938 120,497 128,489
COSTS AND EXPENSES:
Cost of services and
equipment, excluding
depreciation and
amortization 61,492 63,748 62,316 67,846 63,432
Selling, operations and
administration 45,102 44,219 45,675 45,408 50,132
Depreciation and
amortization 15,345 14,404 13,635 13,707 13,329
Restructuring expenses 242 147 90 - -
Asset impairment loss - - - 12,773 600
Total operating
expenses 122,181 122,518 121,716 139,734 127,493
OPERATING INCOME (LOSS) $1,937 $1,293 $(1,778) $(19,237) $996
ITC^DeltaCom, Inc.
Quarterly Highlights (continued)
(Unaudited)
Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
2006 2006 2006 2005 2005
Retail business
lines in service
UNE-T and UNE
lines(1) 284,415 274,083 262,224 250,242 241,120
Increase from
previous quarter 3.8 % 4.5 % 4.8 % 3.8 % 6.3 %
Resale and UNEP
lines(2) 101,999 108,198 112,681 116,978 125,229
(Decrease) from
previous quarter (5.7)% (4.0)% (3.7)% (6.6)% (11.6)%
Total 386,414 382,281 374,905 367,220 366,349
Wholesale lines in
service(3) 53,222 53,774 62,974 62,606 61,272
Increase (decrease)
from previous
quarter (1.0)% (14.6)% 0.6 % 2.2 % (5.8)%
Total business lines
in service (4) 439,636 436,055 437,879 429,826 427,621
Lines in
service/sold
percentage
Integrated
communications
services 96 % 96 % 97 % 97 % 98 %
Wholesale
services(3) 98 % 98 % 99 % 98 % 99 %
Number of
employees(5) 1,976 1,917 1,925 1,950 2,005
(1) Facilities-based service offering in which ITC^DeltaCom provides
local transport through its owned and operated switching facilities.
(2) Resale service offering in which ITC^DeltaCom provides local service
through a leased switch port and loop from the local operating
company.
(3) Represents primary rate interface circuits provided as part of
ITC^DeltaCom's local interconnection services for Internet service
providers.
(4) Reported net of lines disconnected or canceled. Excludes lines in
connection with ITC^DeltaCom's residential Unbundled Network Element-
Platform, or UNE-P offering.
(5) Includes full-time and part-time employees.
ITC^DeltaCom, Inc.
Balance Sheet and Other Financial Highlights
(In thousands)
Balance Sheet Data (at period end): Sept. 30, 2006 Dec. 31, 2005
(Unaudited)
Cash and cash equivalents (unrestricted) $57,577 $69,360
Working capital 17,155 44,806
Total assets 427,691 456,758
Long-term liabilities 314,908 322,272
Convertible redeemable preferred stock 73,911 68,473
Stockholders' deficit (74,581) (31,654)
Total liabilities and stockholders' deficit 427,691 456,758
Three Months Ended
(Unaudited)
Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
Other Financial 2006 2006 2006 2005 2005
Data:
Capital expenditures $10,960 $10,284 $12,544 $9,294 $6,590
Cash flows (used in)
provided by operating
activities 21,355 1,866 (699) 4,328 (1,206)
Cash flows (used in)
provided by investing
activities (11,062) (9,294) (12,935) (9,737) 19,085
Cash flows (used in)
provided by financing
activities - - (1,014) (1,755) 24,722
EBITDA(1)(2) 17,449 16,251 11,858 (5,489) 16,678
Notes:
(1) EBITDA represents net income (loss) before interest, taxes,
depreciation and amortization. EBITDA is not a measurement of
financial performance under accounting principles generally accepted
in the United States. For information about management's reasons for
providing data with respect to EBITDA and the limitations associated
with the use of EBITDA, and for a quantitative reconciliation of the
differences between EBITDA and net loss, as net loss is calculated in
accordance with generally accepted accounting principles, see the
accompanying table captioned "EBITDA Reconciliation."
(2) For 2006 and 2005, EBITDA included the following items:
Three Months Ended
Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
Included in EBITDA: 2006 2006 2006 2005 2005
Asset impairment loss $- $- $- $12,773 $600
Special consulting
fees for restructuring
operations - - - (76) 430
Restructuring expenses 242 147 90 111 98
Loss on fixed asset
disposals - - - - 983
Stock-based compensation 569 570 746 507 418
Hurricane Katrina impact - - 330 - 1,594
$811 $717 $1,166 $13,315 $4,123
ITC^DeltaCom, Inc.
EBITDA Reconciliation
(In thousands)
EBITDA represents net income (loss) before interest, taxes, depreciation and amortization. EBITDA is not a measurement of financial performance under accounting principles generally accepted in the United States. The following table presents EBITDA amounts for the fiscal quarters indicated. The table also sets forth for these periods a quantitative reconciliation of the differences between EBITDA and net loss, as net loss is calculated in accordance with generally accepted accounting principles:
Three Months Ended
Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
2006 2006 2006 2005 2005
(Unaudited)
Net loss $(11,911) $(11,682) $(14,860) $(32,029) $(8,333)
Add back non-EBITDA
items included in
net loss:
Depreciation and
amortization 15,345 14,404 13,635 13,708 13,329
Interest expense,
net of interest
income 14,015 13,529 13,083 12,832 11,682
EBITDA $17,449 $16,251 $11,858 $(5,489) $16,678
ITC^DeltaCom has included data with respect to EBITDA because its management evaluates and projects the performance of ITC^DeltaCom's business using several measures, including EBITDA. Management considers EBITDA to be an important supplemental indicator of its operating performance, particularly as compared to the operating performance of its competitors, because this measure eliminates many differences among companies in financial, capitalization and tax structures, capital investment cycles and ages of related assets, as well as some recurring non-cash and non-operating supplemental information to investors regarding its operating performance and facilitates comparisons by investors between the operating performance of ITC^DeltaCom and the operating performance of ITC^DeltaCom's competitors. ITC^DeltaCom's management believes that consideration of EBITDA should be supplemental, because EBITDA has limitations as an analytical financial measure. These limitations include the following:
- EBITDA does not reflect ITC^DeltaCom's cash expenditures, or future
requirements for capital expenditures, or contractual commitments;
- EBITDA does not reflect the interest expense, or the cash requirements
necessary to service interest or principal payments, on ITC^DeltaCom's
indebtedness;
- although depreciation and amortization are non-cash charges, the assets
being depreciated and amortized will often have to be replaced in the
future, and EBITDA does not reflect any cash requirements for such
replacements;
- EBITDA does not reflect the effect of earnings or charges resulting
from matters ITC^DeltaCom's management considers not to be indicative
of its ongoing operations; and
- not all of the companies in ITC^DeltaCom's industry may calculate
EBITDA in the same manner in which it calculates EBITDA, which limits
its usefulness as a comparative measure.
ITC^DeltaCom, Inc.
EBITDA Reconciliation (continued)
(In thousands)
ITC^DeltaCom's management compensates for these limitations by relying primarily on its results under generally accepted accounting principles to evaluate its operating performance and by considering independently the economic effects of the foregoing items that are not reflected in EBITDA. As a result of these limitations, EBITDA should not be considered as an alternative to net income (loss), as calculated in accordance with generally accepted accounting principles, as a measure of operating performance, nor should it be considered as an alternative to cash flows, as calculated in accordance with generally accepted accounting principles, as a measure of liquidity.
Investor Contact: Media Contact:
Richard E. Fish Lee A. Kimball
Chief Financial Officer Vice President, Marketing
256-382-3827 919-863-7149
