ITC DELTA COM 
By HUNTSVILLE, Ala., May 17 /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 March 31, 2010.
For the quarter ended March 31, 2010, ITC^DeltaCom reported total operating revenues of $111.1 million, net income of $2.4 million, and adjusted EBITDA* of $22.8 million.
"The investments in personnel, products and programs we began making in the previous quarters are having a positive impact on our business," said Randall E. Curran, ITC^DeltaCom's Chief Executive Officer. "Decline in the company's top-line revenue from business customer downsizings, closures and cost-cutting efforts has decelerated in the first quarter and we expect that positive revenue trend to improve as we continue to position the company for future revenue growth."
Among its operating highlights for the first quarter, ITC^DeltaCom:
-- recorded operating income of $7.1 million compared to $4.9 million for
the first quarter of 2009, and net income of $2.4 million compared to a
net loss of $(2.6) million for the first quarter of 2009;
-- increased adjusted EBITDA by 2.1% over the first quarter of 2009 to
$22.8 million;
-- generated $19 million in net cash provided by operating activities,
which represented an increase of $3.5 million over the fourth quarter of
2009;
-- increased adjusted unlevered free cash flow ** by $16.2 million over the
fourth quarter of 2009;
-- ended the quarter with approximately 416,500 voice lines in service, of
which 88.1% were provided on its own network, which represented an
increase from 86.2% provided on its own network at the end of the first
quarter of 2009;
-- reduced its cost of services and equipment as a percentage of total
operating revenues to 44.2% for the first quarter of 2010 from 46.3 %
for the first quarter of 2009 by eliminating excess costs from its
network; and
-- continued to derive benefit from investments in process redesign and
other efficiency gains, resulting in selling, operations and
administration expense of $40.1 million compared to $43.7 million for
the first quarter of 2009.
"Closing our offering of $325 million senior secured notes immediately following the end of the quarter was a very significant event for our company," said Richard E. Fish, ITC^DeltaCom's Chief Financial Officer. "Not only have we extended the maturities of our debt to 2016, our total liquidity increased from approximately $70 million to $100 million and our ability to pursue value-enhancing strategic opportunities has been significantly improved."
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 March 31, 2010 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, asset impairment loss and other income or loss, all as disclosed in the consolidated statements of operations and comprehensive income (loss). Adjusted EBITDA is not a measurement of financial performance under generally accepted accounting principles. For information about management's reasons for providing data with respect to adjusted EBITDA, the limitations associated with the use of adjusted EBITDA and a quantitative reconciliation of adjusted EBITDA to net income (loss), as net income (loss) is calculated in accordance with generally accepted accounting principles, see the accompanying tables 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 information about management's reasons for providing data with respect to adjusted unlevered free cash flow, the limitations associated with the use of adjusted unlevered free cash flow, and 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 tables 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 approximately 12,362 route miles, and offers a comprehensive suite of data and voice communications services, including high-speed or broadband data communications (which consist of Ethernet and Internet access connectivity), local exchange, long-distance and conference calling, and mobile data and voice services. 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, 2009, 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.
ITC^DeltaCom, Inc.
Financial Highlights
(In thousands, except share and per share data)
Three Months
Ended March
31,
-------------
2010 2009
---- ----
OPERATING REVENUES:
Integrated communications
services $93,118 $102,076
Wholesale services 14,289 15,618
Equipment sales and related
services 3,733 4,281
----- -----
TOTAL OPERATING REVENUES 111,140 121,975
------- -------
COSTS AND EXPENSES:
Cost of services and
equipment, excluding
depreciation and
amortization 49,144 56,477
Selling, operations and
administration expense 40,100 43,670
Depreciation and amortization 14,822 16,919
------ ------
Total operating expenses 104,066 117,066
------- -------
OPERATING INCOME 7,074 4,909
----- -----
OTHER (EXPENSE) INCOME:
Interest expense (4,842) (7,539)
Interest income 5 15
Other income 152 19
Total other expense, net (4,685) (7,505)
------ ------
INCOME (LOSS) BEFORE INCOME
TAXES 2,389 (2,596)
----- ------
INCOME TAX EXPENSE - -
--- ---
NET INCOME (LOSS) $2,389 $(2,596)
====== =======
BASIC NET INCOME (LOSS) PER
COMMON SHARE $0.03 $(0.03)
===== ======
DILUTED NET INCOME (LOSS) PER
COMMON SHARE $0.03 $(0.03)
===== ======
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:
BASIC 81,776,504 80,867,040
========== ==========
DILUTED 86,856,698 80,867,040
========== ==========
COMPREHENSIVE INCOME (LOSS):
NET INCOME (LOSS) $2,389 $(2,596)
OTHER COMPREHENSIVE INCOME
(LOSS):
Change in unrealized gains
(losses) on derivative
instrument designated as
cash - 1,807
flow hedging instrument, net
of tax --- -----
COMPREHENSIVE INCOME (LOSS) $2,389 $(789)
====== =====
ITC^DeltaCom, Inc.
Quarterly Highlights
(Unaudited)
(In thousands)
Three Months Ended
------------------
March 31, Dec 31, Sept 30, June 30, March 31,
2010 2009 2009 2009 2009
---------- -------- --------- --------- ----------
Integrated
communications
services
revenues:
Long
distance
and access $14,153 $14,007 $15,375 $15,529 $16,021
Business
local,
data and
internet 78,965 80,352 82,293 84,524 86,055
------ ------ ------ ------ ------
Total
integrated
communications
services
revenues 93,118 94,359 97,668 100,053 102,076
------ ------ ------ ------- -------
Wholesale
services
revenues:
Broadband
transport 11,917 12,327 12,284 12,237 12,664
Local
interconnection 120 127 181 308 740
Directory
assistance
and
operator 919 925 986 1,019 1,029
services
Other 1,333 1,215 1,113 1,061 1,185
----- ----- ----- ----- -----
Total
wholesale
services
revenues 14,289 14,594 14,564 14,625 15,618
------ ------ ------ ------ ------
Equipment
sales and
related
services
revenues 3,733 3,394 4,167 3,925 4,281
----- ----- ----- ----- -----
Total
operating
revenues 111,140 112,347 116,399 118,603 121,975
------- ------- ------- ------- -------
COSTS AND
EXPENSES:
Cost of
services
and
equipment, 49,144 48,899 52,627 54,627 56,477
excluding
depreciation
and
amortization
Selling,
operations
and
administration 40,100 44,714 41,378 41,817 43,670
expense
Depreciation
and
amortization 14,822 17,819 17,110 17,216 16,919
------ ------ ------ ------ ------
Total
operating
expenses 104,066 111,432 111,115 113,660 117,066
------- ------- ------- ------- -------
OPERATING
INCOME $7,074 $915 $5,284 $4,943 $4,909
====== ==== ====== ====== ======
ITC^DeltaCom, Inc.
Quarterly Highlights (continued)
(Unaudited)
March 31, Dec. 31, Sept 30, June 30, March 31,
2010 2009 2009 2009 2009
---------- --------- --------- --------- ----------
Retail
business
voice
lines
in
service(1)
UNE-T
and
other
UNE
lines(2) 366,734 367,403 369,752 372,413 369,787
Increase
(decrease)
from
previous (0.2)% (0.6)% (0.7)% 0.7% 0.1%
quarter
Resale
and
commercial
agreement 49,754 51,602 53,456 56,022 59,017
lines(3)
Decrease
from
previous
quarter (3.6)% (3.5)% (4.6)% (5.1)% (5.8)%
----- ----- ----- ----- -----
Total
retail
business
voice
lines
in
service 416,488 419,005 423,208 428,435 428,804
------- ------- ------- ------- -------
Wholesale
voice
lines
in
service(4) 8,694 8,004 6,969 8,625 12,489
Increase
(decrease)
from
previous
quarter 8.6% 14.9% (19.2)% (30.9)% (52.2)%
--- ---- ------ ------ ------
Total
business
voice
lines
in
service
(5) 425,182 427,009 430,177 437,060 441,293
======= ======= ======= ======= =======
Number
of
employees
(6) 1,365 1,398 1,437 1,452 1,511
(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 March 31, December
period end): 2010 31, 2009
---------------------- ---------- --------
(Unaudited)
Cash and cash equivalents
(unrestricted) $73,874 $67,786
Working capital 39,910 40,371
Total assets 373,495 368,494
Long-term liabilities 303,118 303,747
Stockholders' deficit (15,986) (16,724)
Total liabilities and
stockholders' deficit 373,495 368,494
Three Months Ended
------------------
March March
31, Dec. 31, Sept 30, June 30, 31,
2010 2009 2009 2009 2009
------ --------- --------- --------- ------
Other
Financial
Data:
----------
(Unaudited)
Capital
expenditures(1) $11,217 $24,570 $10,315 $13,465 $8,329
Cash flows
(used in)
provided
by:
Operating
activities 19,039 15,579 14,622 21,430 17,271
Investing
activities (10,266) (24,693) (10,385) (12,795) (6,792)
Financing
activities (2,685) (573) (576) (581) (1,414)
Adjusted
EBITDA(2) 22,830 19,936 23,094 22,697 22,357
Adjusted
unlevered
free cash
flow(3) 11,613 (4,634) 12,779 9,232 14,028
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, asset impairment
loss and other income or loss, all as disclosed in the consolidated
statements of operations and comprehensive income (loss). Adjusted
EBITDA is not a measurement of financial performance under generally
accepted accounting principles. For information about management's
reasons for providing data with respect to adjusted EBITDA and a
quantitative reconciliation of adjusted EBITDA to net income (loss), as
net income (loss) is calculated in accordance with generally accepted
accounting principles, see the accompanying tables 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 consolidated
statements of cash flows. Adjusted unlevered free cash flow is not a
measurement of financial performance under generally accepted accounting
principles. For information about management's reasons for providing
data with respect to adjusted unlevered free cash flow and 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 tables 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, asset impairment loss and other income or loss, all as
disclosed in the consolidated statements of operations and
comprehensive income (loss). Not all of these adjustments are
applicable in every period. Adjusted EBITDA is not a financial
measurement under generally accepted accounting principles ("GAAP").
See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Overview -- Adjusted EBITDA" in our
Annual Report on Form 10-K for our 2009 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 income
(loss), as net income (loss) is calculated in accordance with GAAP
(in thousands):
Three Months Ended
------------------
March
31, Dec. 31, Sept 30, June 30, March 31,
2010 2009 2009 2009 2009
---- ---- ---- ---- ----
(Unaudited)
Net income (loss) $2,389 $(3,516) $(2,117) $(2,746) $(2,596)
Add: non-EBITDA
items included in
net income
(loss):
Interest (income)
and expense, net 4,837 4,889 7,444 7,538 7,524
Depreciation and
amortization 14,822 17,819 17,110 17,216 16,919
Stock-based
compensation 934 1,202 700 538 529
Other (income)
loss (152) (458) (43) 151 (19)
---- ---- --- --- ---
Adjusted EBITDA $22,830 $19,936 $23,094 $22,697 $22,357
======= ======= ======= ======= =======
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 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. ITC^DeltaCom's management believes that consideration of adjusted unlevered free cash flow should be supplemental, however, because adjusted unlevered free cash flow has limitations as an analytical financial measure, including the following:
-- adjusted unlevered free cash flow does not reflect ITC^DeltaCom's cash
expenditures for changes in current operating assets and liabilities;
-- adjusted unlevered free cash flow does not reflect ITC^DeltaCom's cash
expenditures for interest expense or accrued restructuring and merger
costs, prepayment penalties on debt paid in cash, equity commitment
fees, changes in restricted cash balances, or proceeds from sales of
fixed assets;
-- ITC^DeltaCom does not pay income taxes due to net operating losses and,
therefore, generates greater adjusted unlevered free cash flow than a
comparable business that does pay income taxes; and
-- adjusted unlevered free cash flow may be calculated in a different
manner by other companies in ITC^DeltaCom's industry, which limits its
usefulness as a comparative measure.
ITC^DeltaCom's management compensates for these limitations by relying primarily on ITC^DeltaCom's results under GAAP to evaluate its operating performance and by considering independently the economic effects of the foregoing items that are not reflected in adjusted unlevered free cash flow. As a result of these limitations, adjusted unlevered free cash flow should not be considered as a measure of liquidity nor as an alternative to net cash provided by operating activities, cash used in investing activities, cash provided by (used in) financing activities or change in cash and cash equivalents, as calculated in accordance with GAAP. The following tables present adjusted unlevered free cash flow amounts for the fiscal quarters indicated and also set 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
------------------
March
March 31, Dec. 31, Sept 30, June 30, 31,
2010 2009 2009 2009 2009
---- ---- ---- ---- ----
(Unaudited)
Net cash
provided by
operating
activities $19,039 $15,579 $14,622 $21,430 $17,271
======= ======= ======= ======= =======
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 459 1,369 2,858 (4,671) (154)
assets and
liabilities
Provision
for bad
debts (925) (1,300) (1,225) (1,050) (1,680)
Interest
expense
excluding
interest
paid 4,236 4,288 6,839 6,932 6,917
in kind and
in common
stock, and
amortization
of debt
issuance
costs and
debt
discount,
net of
interest
income
Other
(income)
loss 21 - - 56 3
--- --- --- --- ---
Adjusted
EBITDA 22,830 19,936 23,094 22,697 22,357
Less:
Capital
expenditures (15,381) (24,716) (10,437) (12,490) (10,096)
Change in
accounts
payable - 4,164 146 122 (975) 1,767
construction ----- --- --- ---- -----
Adjusted
unlevered
free cash
flow $11,613 $(4,634) $12,779 $9,232 $14,028
======= ======= ======= ====== =======
Investor Contact:
Richard E. Fish
Chief Financial Officer
256-382-3827
Richard.fish@deltacom.com
SOURCE ITC^DeltaCom, Inc.
