SANTO DOMINGO, Dominican Republic, Aug. 19 /PRNewswire-FirstCall/ --
Tricom, S.A. (OTC Bulletin Board: TRICY) today announced consolidated
unaudited financial results for the second quarter and first six months of
2004.
Results of Continuing Operations
Continuing operations consist of the Company's local service, long
distance, mobile, cable television and broadband data transmission and
Internet services in the Dominican Republic, as well as the Company's
wholesale and retail international long distance operations in the U.S. The
Company's financial results continue to be significantly affected by currency
devaluation. The average value of the Dominican peso with respect to the U.S.
dollar declined by approximately 70.5 percent during the 2004 second quarter
compared to the average value during the 2003 second quarter, and decreased by
85.3 percent during the first half of 2004 compared to the first half of 2003.
The Dominican economy also was affected adversely by inflation, which reached
approximately 31.1 percent during the first six months of 2004 and
approximately 60.4 percent over the previous 12 months ending June 30, 2004.
Notwithstanding the effects of currency devaluation and the declining
Dominican economy, second quarter operating results for the Company's domestic
telephony, mobile, cable and data and Internet business segments improved
sequentially from results in the 2004 first quarter.
"During the second quarter we achieved significant progress in our
domestic core businesses, delivering strong subscriber growth", Carl Carlson,
Chief Executive Officer. "We focused our efforts on improving customer
retention, optimizing our capital expenditures and strengthening liquidity. We
are pleased with the progress we achieved in all those fronts. For the rest of
the year we will remain intensely focused on expense control and cash
preservation, maintaining a rigorous financial discipline with respect to
operational decisions, spending capital in the right places, and continuing to
support our growth drivers", added Carlson.
Operating revenues from continuing operations totaled $43.0 million for
the 2004 second quarter, a 14.3 percent decrease from the 2003 second quarter.
On a sequential basis, operating revenues increased by 4.1 percent. For the
first six months of 2004, operating revenues from continuing operations
totaled $84.3 million, a 19.3 percent decrease from the same period in 2003.
Long distance revenues decreased by 21.0 percent to $17.9 million during
the 2004 second quarter, and by 18.5 percent to $37.4 million during the first
six months, primarily due to lower international long distance traffic derived
from the Company's U.S.-based wholesale and retail operations, coupled with
lower average termination rates to the Dominican Republic during the first six
months of the year. The growth of long distance revenues was also impacted by
the effects of currency devaluation on outbound international and domestic
long distance revenues generated by the Company's retail call centers and
prepaid cards, offset in part by higher prepaid cards sales and minutes.
Prepaid cards sold within the Dominican Republic totaled 7.0 million during
the first six months of the year, representing a 35 percent year-over-year
increase. Prepaid card minutes increased by 59.2 percent to 21.9 million
minutes during the first six months of 2004.
Domestic telephony revenues totaled $13.8 million in the 2004 second
quarter, a 12.2 percent decrease from the 2003 second quarter. On a sequential
basis, domestic telephony revenues increased by 17.3 percent during the 2004
second quarter. For the first six months, domestic telephony revenues
decreased 22.0 percent to $25.5 million. The decrease, principally due to
currency devaluation impacting the conversion of peso-denominated domestic
telephony revenues into U.S. dollars, was offset by a higher average number of
lines in service during the first six months of the year. At June 30, 2004,
the Company had approximately 151,000 lines in service, an 8.3 percent
increase from lines in service at June 30, 2003. New line sales totaled
approximately 23,000 during the first six months of 2004 compared to 14,000
during the first six months of 2003. Net line additions totaled approximately
6,200 during the first six months of 2004 compared to a decrease of
approximately 11,000 during the year-ago period.
Mobile revenues decreased by 4.5 percent to $7.1 million in the 2004
second quarter, and by 15.4 percent to $13.5 million for the first six months
of 2004, primarily due to the devaluation of the Dominican peso. Second
quarter mobile revenues increased by 12.6 percent with respect to mobile
revenues during the 2004 first quarter. Mobile subscribers totaled
approximately 313,000 at June 30, 2004, a 26.4 percent decrease from mobile
subscribers at June 30, 2003. Second quarter mobile subscribers increased by
13.1 percent with respect to mobile subscribers at the end of the 2004 first
quarter. The year-over-year decrease in mobile subscribers is the result of
Company-initiated disconnections of approximately 201,000 "incoming-call" only
mobile subscribers during the 2004 first quarter. Excluding the disconnections
of "incoming-call" only subscribers, the Company added approximately 145,000
gross and 80,000 net mobile subscribers during the first half of 2004. Despite
a lower average mobile subscriber base, total minutes of usage increased
17.4 percent to 145.1 million minutes during the first half of 2004 compared
to total minutes of usage during the first half of 2003.
Cable revenues decreased by 14.2 percent to $3.1 million for the 2004
second quarter, and by 24.9 percent to $5.7 million for the first six months
of 2004, primarily as a result of currency devaluation, coupled with a lower
average cable subscriber base during the first half of the year. On a
sequential basis, cable revenues increased by 17.5 percent during the 2004
second quarter. At June 30, 2004, cable subscribers totaled approximately
58,000, a 10.5 percent decrease from cable subscribers at June 30, 2003. The
decline in cable subscribers is primarily attributable to a weak economic
environment. In an effort to reduce churn and increase customer satisfaction,
the Company instituted a number of customer care and retention programs during
the first half of 2004. The Company's average monthly churn rate for cable
television services declined to 2.1 and 2.2 percent during the 2004 second
quarter and first six months of 2004, respectively, compared to 4.5 percent
and 4.8 during the 2003 second quarter and first six months of 2003,
respectively.
Data and Internet revenues increased 43.8 percent to $1.1 million in the
2004 second quarter. For the first six months, data and Internet revenues
decreased 3.4 percent to $2.3 million. The decrease in data and Internet
revenues resulted primarily from currency devaluation, partially offset by a
year-over-year increase in data and Internet subscribers. At June 30, 2004,
data and Internet access accounts totaled approximately 15,000, representing a
32.9 percent increase from data and Internet subscribers at June 30, 2003.
Consolidated operating costs and expenses from continuing operations
declined by 6.2 percent to $50.7 million in the 2004 second quarter, and by
12.8 percent to $96.9 million during the first half of the year. The decline
in operating costs and expenses were primarily the result of a decrease in
depreciation and amortization charges, as well as lower selling, general and
administrative (SG&A) expenses. These decreases were offset in part by costs
related to the Company's financial restructuring efforts totaling $2.6 million
during the 2004 second quarter and $4.6 million during the first six months of
the year.
Cost of sales and services decreased by 2.0 percent to $22.1 million
during the 2004 second quarter, and by 3.5 percent to $43.1 million during the
first six months of the year, primarily due to lower installation costs and
cable programming fees, offset by higher transport and access charges as a
result of higher domestic interconnection rates. SG&A expenses declined by
12.9 percent to $11.6 million in the 2004 second quarter and by 23.5 percent
to $22.4 million during the first six months of 2004. The decline in SG&A
expenses is primarily due to continuing expense reduction efforts and
operating efficiencies, as well as lower Dominican peso-denominated expenses
resulting from currency devaluation. Depreciation and amortization expenses
totaled $14.3 million during the 2004 second quarter and $26.7 million during
the first six months of 2004, a decrease of 20.9 percent and 28.0 percent,
respectively, from the year-ago periods. The decrease in depreciation and
amortization expenses primarily resulted from a lower depreciable asset base.
Interest expense totaled approximately $14.0 million during the 2004
second quarter and $29.4 million during the first six months of 2004, compared
to $16.3 million and $31.8 million respectively in the year-ago periods. The
Company suspended principal and interest payments on its unsecured debt
obligations and principal payments on its secured indebtedness beginning in
October 2003. The Company recorded $463,000 in foreign currency exchange gain
during the 2004 second quarter and $1.9 million for the first six months of
2004.
In 2003, the Company recognized $2.1 million during the second quarter and
$3.9 million during the first six months in losses from discontinued
operations in Central America. The Company will continue to report losses from
discontinued operations in the periods they occur. Net loss totaled
$21.2 million, or $0.33 per share for the 2004 second quarter, compared to a
net loss of $21.8 million, or $0.34 per share during 2003 second quarter. Net
loss for the first six months of 2004 totaled $40.1 million, or $0.62 per
share compared to a net loss of $41.4 million, or $0.64 per share during the
year-ago period.
Liquidity and Capital Resources
In light of current conditions in its principal market, the Dominican
Republic, ongoing funding needs and its inability to service its debt, the
Company has taken steps to conserve cash and focus it efforts and resources on
its core businesses, including the suspension of interest payments on
unsecured indebtedness and principal payments on secured indebtedness, the
appointment of a Chief Restructuring Officer, the reduction of SG&A expenses
and capital expenditures, and the sale of its Central American trunking
assets. The estimated net proceeds of the sale received by the Company,
totaling approximately $9 million, will be used to fund the Company's short-
term working capital requirements. The Company continues to evaluate potential
divestments of other under-performing or non-strategic assets.
Total debt, including capital leases and commercial paper, amounted to
$447.3 million at June 30, 2004, compared to $449.3 million at December 31,
2003. Total debt included $200 million principal amount of 11-3/8 percent
Senior Notes due in September 2004, approximately $34.5 million of secured
debt and approximately $212.8 million of unsecured bank and other debt.
At June 30, 2004, the Company had approximately $11.1 million of cash on
hand. For the six-months ended June 30, 2004 the Company's net cash provided
by operating activities totaled approximately $11.9 million. Capital
expenditures totaled $1.6 million during the 2004 second quarter and $2.3
million during the first six months of 2004, representing decreases of 65.1
percent and 73.1 percent, respectively, from the same periods last year.
Financial Restructuring Update
As a consequence of the continuing devaluation and volatility of the
Dominican peso and lower net cash flows being generated by its operations in
the Dominican Republic, the Company suspended principal and interest payments
on its unsecured indebtedness and principal payments on its secured
indebtedness in October 2003. As a result, the Company has defaulted with
respect to its outstanding indebtedness.
As previously announced, the Company has engaged in discussions with
holders of its indebtedness, including an ad hoc committee of holders of its
11-3/8 percent Senior Notes due 2004, regarding a consensual financial
restructuring of its balance sheet. Although there is no assurance that any
agreement will occur, the Company is optimistic that these negotiations will
lead to a consensual restructuring in the near term. The Company's future
results and its ability to continue operations will depend on the successful
conclusion of the restructuring of its indebtedness.
Since these negotiations are ongoing, the treatment of the Company's
existing secured and unsecured lenders, as well as the interest of its
existing shareholders, is uncertain at this time. Accordingly, investors in
the Company's debt and equity securities may be substantially diluted or may
lose all or a substantial portion of their investment in the Company's
securities.
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, including devaluation of the Dominican peso, the effect of the
Company's default on its indebtedness, the inability to reach an agreement
with our creditors on a restructuring plan, 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.
TRICOM, S. A. AND SUBSIDIARIES
Note to Consolidated Financial Statements
Certain amounts in the 2003 consolidated unaudited financial statements
have been reclassified to conform to the 2004 unaudited consolidated financial
statements. The principal reclassifications were to transfer income and
expenses items related to discontinued operations from revenues and expenses
from continuing operations and other.
In addition expenses for commissions paid to distributors of prepaid
calling cards were reclassified as a reduction of long distance revenues in
the case of a long distance calling cards and as a reduction of mobile
revenues in the case of prepaid mobile services. These expenses were presented
as part of operating cost in the consolidated statements of income previously
reported.
TRICOM, S.A. AND SUBSIDIARIES
Selected Financial and Operating Data (unaudited)
(In US$)
Sequential
% Y-o-Y %
2Q'03 1Q'04 2Q'04 Chng. Chng.
Economic Statistics
(1):
Increase in C.P.I. (12
month aggregate) 26.1% 62.32% 60.35% -3.2% 131.2%
Increase in C.P.I
year-to-date 16.6% 24.37% 31.09% 27.6% 87.3%
Exchange rate (at
period end) $34.21 44.58 47.44 6.4% 38.7%
Avg. period exchange
rate $27.75 48.20 47.31 -1.8% 70.5%
Selected Financial
Data:
Capital Expenditures,
including capital
leases $4,537,875 765,921 1,582,743 106.6% -65.1%
Total employees (at
period end) 1,605 1,397 1,386 -0.8% -13.6%
Selected Operating
Data:
Lines in service
(at period end) 139,590 146,567 151,245 3.2% 8.3%
Avg. revenue per line
in service $37.26 26.96 30.17 11.9% -19.0%
Avg. monthly
churn rate 2.9% 1.9% 1.7%
Cellular & PCS
subscribers (at period
end) 424,755 276,343 312,541 13.1% -26.4%
Minutes of use (in
000s) 64,113 69,873 75,272 7.7% 17.4%
Avg. revenue per user
(blended) $4.45 5.94 8.20 38.1% 84.3%
Avg. monthly churn
Rate 4.2% 20.5% 4.8%
Cable subscribers (at
period end) 65,343 59,530 58,469 -1.8% -10.5%
Avg. revenue per cable
subscriber $13.91 11.78 12.34 4.7% -11.3%
Avg. monthly churn rate 4.5% 2.3% 2.1%
Data/Internet
subscribers (at period
end) 11,425 14,356 15,188 5.8% 32.9%
Paging subscribers 5,612 3,748 3,580 -4.5% -36.2%
Long distance minutes
(in 000s) (2) 292,485 267,339 250,174 -6.4% -14.5%
Footnote:
(1) Source: Dominican Republic Central Bank; TRICOM, S.A.
(2) Includes inbound, outbound and domestic long distance minutes.
CPI = Consumer Price Index
n.m. = Not meaningful
TRICOM, S.A. AND SUBSIDIARIES
Consolidated Balance Sheets
(In US$)
December 31, June 30,
2003 2004
(Unaudited) (Unaudited)
Assets
Current assets
Cash and cash equivalents $2,415,498 $11,069,315
Accounts receivable:
Customers 16,337,166 14,540,365
Carriers 6,855,369 6,578,913
Others 756,085 2,197,110
23,948,620 23,316,388
Allowance for doubtful accounts (5,152,025) (4,515,207)
Accounts receivable, net 18,796,595 18,801,181
Assets held for sale 10,661,300 --
Inventories, net of allowances 1,537,725 1,615,788
Certificates of deposits -- --
Prepaid expenses 106,934 3,129,558
Deferred income taxes 12,403 12,403
Total current assets 33,530,455 34,628,245
Mortgage participation contracts 630,165 642,188
Deferred income taxes 1,355,769 1,355,769
Property and equipment, net 396,372,585 372,831,082
Intangible assets 2,664,641 2,664,641
Goodwill, net of amortization -- --
Other assets at cost, net of
amortization 4,291,369 4,229,721
$438,844,984 $416,351,646
TRICOM, S.A. AND SUBSIDIARIES
Consolidated Balance Sheets (cont.)
(In US$)
December 31, June 30,
2003 2004
Liabilities and Stockholders' Equity (Unaudited) (Unaudited)
Current liabilities
Notes payable:
Borrowed funds $48,603,346 $47,302,648
Commercial paper 59,136,013 58,875,706
Current portion of long-term debt 326,988,922 326,594,601
434,728,281 432,772,955
Current portion of capital leases 14,531,321 14,531,321
Accounts payable:
Carriers 12,784,288 10,134,460
Suppliers 10,165,474 7,175,725
Others 4,064,908 2,886,110
27,014,670 20,196,295
Accrued expenses 46,205,871 73,108,934
Other liabilities 8,550,274 8,080,552
Deferred income taxes 329,092 329,092
Total current liabilities 531,359,509 549,019,149
Reserve for severance indemnities 124,881 74,084
Deferred income tax 853,916 853,916
Long-term debt, excluding current
portion -- --
Total liabilities 532,338,306 549,947,149
Stockholders' equity:
Class A Common Stock at par value
RD$10: Authorized 55,000,000 shares;
45,458,041 shares issued at December
31, 2003 and June 30, 2004 24,951,269 24,951,269
Class B Stock at par value RD$10:
Authorized 25,000,000 shares at
December 31, 2003 and March 31,
2004; 19,144,544 issued at December
31, 2003 and June 30, 2004 12,595,095 12,595,095
Additional paid-in-capital 275,496,964 275,496,964
Retained loss (404,512,893) (444,615,074)
Other comprehensive income-foreign
currency translation (2,023,757) (2,023,757)
Stockholders equity, net (93,493,322) (133,595,503)
$438,844,984 $416,351,646
TRICOM, S.A. AND SUBSIDIARIES
Consolidated Statement of Operations
(In US$)
Three Months Ended Six Months Ended
June 30, June 30,
2003 2004 2003 2004
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Operating revenues:
Long distance $22,602,095 $17,853,570 $45,831,572 $37,351,074
Domestic telephony 15,683,548 13,768,029 32,699,361 25,501,936
Mobile 7,486,739 7,147,334 15,949,289 13,496,914
Cable 3,557,124 3,053,281 7,528,132 5,652,599
Data and Internet 796,148 1,144,520 2,331,637 2,252,406
Other 4,801 3,364 7,921 4,776
Total operating
revenues 50,130,455 42,970,098 104,347,912 84,259,705
Operating costs and
expenses:
Cost of sales and
services 22,584,258 22,142,087 44,665,038 43,096,123
Selling, general and
administrative
expenses 13,350,075 11,629,407 29,323,934 22,445,851
Depreciation and
amortization 18,082,804 14,305,206 37,070,905 26,709,305
Special items and
non-recurring
charges -- 2,584,996 -- 4,637,000
Total operating
costs and expenses 54,017,137 50,661,696 111,059,877 96,888,279
Operating income (3,886,683) (7,691,598) (6,711,965) (12,628,574)
Other income
(expenses):
Interest expense (16,329,429) (14,035,129) (31,767,755) (29,431,738)
Interest income 481,855 20,809 754,009 33,583
Foreign currency
exchange gain
(loss) 606,880 462,798 1,373,903 1,873,126
Other, net 133,359 152,774 149,023 171,422
Other expenses, net (15,107,335) (13,398,748) (29,490,820) (27,353,607)
Loss from continuing
operations before
income taxes (18,994,018) (21,090,346) (36,202,785) (39,982,181)
Income taxes, net (666,549) (60,000) (1,346,583) (120,000)
Loss from continuing
operations, net (19,660,567) (21,150,346) (37,549,368) (40,102,181)
Loss from
discontinued
operations, net (2,089,736) -- (3,881,710) --
Net loss $(21,750,303) (21,150,346) $(41,431,078) (40,102,181)
Loss per common
share:
Loss from continuing
operations $(0.30) $(0.33) $(0.58) $(0.62)
Loss from
discontinued
operations (0.03) -- (0.06) --
Loss per common
share $(0.34) $(0.33) $(0.64) $(0.62)
Average number of
common shares used
in calculation 64,602,585 64,602,585 64,602,585 64,602,585
TRICOM, S.A. AND SUBSIDIARIES
Consolidated Statement of Cash Flows (Unaudited)
(In US$)
Six months ended
June 30,
2003 2004
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net loss $(41,431,078) $(40,102,181)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation 35,108,594 26,590,319
Allowance for doubtful accounts 678,172 --
Amortizations 1,962,311 118,986
Effect of exchange rate in debt -- (1,060,350)
Loss from discontinued operations 3,881,710 --
Net changes in assets and
liabilities: --
Accounts receivable 1,408,796 (4,586)
Assets held for sale -- 10,661,300
Inventories 2,129,619 (773,905)
Prepaid expenses 3,443,299 (3,022,624)
Other assets (264,657) (61,648)
Accounts payable 298,670 (6,818,375)
Other liabilities (1,489,175) (469,722)
Accrued expenses 4,944,871 26,903,063
Reserve for severance indemnities (368,349) (50,797)
Total adjustments 51,733,861 52,011,661
Net cash provided by (used in)
operating activities $10,302,783 $11,909,480
Cash flows from investing activities:
Acquisition (cancellation) of
investments $394,788 $(12,023)
Acquisition of property and equipment (8,674,450) (2,348,664)
Net cash used in investing activities (8,279,662) (2,360,687)
Cash flows from financing activities:
Borrowed (paid) funds (2,395,124) (634,669)
Proceeds from issuance of commercial
paper 11,659,290 --
Payments of commercial paper -- (260,307)
Payments of long-term debt (11,164,847) --
Net cash provided by financing
activities (1,900,681) (894,976)
Net increase in cash and cash
equivalents 122,440 8,653,817
Cash and cash equivalents at
beginning of the period 6,080,303 2,415,498
Cash and cash equivalents at end of
period $6,202,743 $11,069,315
For Further Information Contact:
Miguel Guerrero, Investor Relations
Ph (809) 476-4044 / 4012
e-mail: investor.relations@Tricom.net
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.
SOURCE Tricom, S.A.
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Related links:
http://www.tricom.net
CONTACT:
Miguel Guerrero, Investor Relations, Tricom,
+1-809-476-4044 or 4012, or investor.relations@Tricom.net
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