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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