Tricom (NYSE:TDR)
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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/