Call-Net Enterprises Inc. Reports Continued Growth in Consumer and Business Operations for the First Quarter 2004
06 Mayo 2004 - 8:30AM
PR Newswire (US)
Call-Net Enterprises Inc. Reports Continued Growth in Consumer and
Business Operations for the First Quarter 2004 - Company adds
34,000 local service lines in the quarter - Churn in local services
down to 2.2% - 10% growth in consumer revenue, year over year - 5%
growth in business revenue, year over year - 8% increase in EBITDA,
year over year - 12% increase in gross margin, year over year
TORONTO, May 6 /PRNewswire-FirstCall/ -- Call-Net Enterprises Inc.,
a national facilities-based provider of competitive
telecommunications, data and Internet Protocol (IP) solutions to
households and businesses across Canada, today reported financial
results for the first quarter ending March 31, 2004. "Gains from
the introduction of new bundles, products, services and new pricing
plans, delivered continued growth in our consumer and business
operations, compared to the same period last year," said Bill
Linton, president and chief executive officer, Call-Net
Enterprises. "During the first quarter, we added 34,000 net local
equivalent lines, more than 25,000 were for consumers. Our total
local service line count now stands at over 300,000. Our wireless
customer base grew by close to 6,000 with 15 per cent of new home
phone service customers now opting to add a second wireless line."
Consolidated revenue for the first quarter of 2004 was $202.5
million, a slight increase from the same period last year. First
quarter earnings before interest, taxes, depreciation and
amortization (EBITDA) were $26.5 million, representing a eight per
cent or $2.0 million increase from the first quarter of 2003. Gross
margin for the quarter was $107 million, a 12 per cent or $11.4
million increase from the first quarter of 2003. Consumer services
revenue improved by 10 per cent compared with the same quarter in
2003, as increases in local and wireless service revenue more than
offset decreases in dial-up Internet and long distance. Revenue
from bundled products continued to grow relative to revenue from
stand-alone products. Business revenue grew by five per cent
compared to the first quarter of last year with improvement in
every product category including local, long distance, and data
including IP. The results reflect stronger product offerings
including IP Enabled Solutions, an increase in long distance
minutes, the continued success of cross border sales with Sprint,
and growth in the small and medium-sized business market. Customer
churn in local services declined significantly to 2.2 per cent in
first quarter of 2003, representing a significant improvement from
the same quarter last year and from the previous quarter. The
improvement is attributed to the success of the Company's customer
retention program, improvements to the credit profile of the
customer base, and implementation of recent Canadian
Radio-television and Telecommunications Commission (CRTC)
decisions. These decisions included the unbundling of high-speed
Internet service (DSL) from local service by the incumbent
telephone companies and extending the period of time during which
an incumbent telephone company is prohibited from attempting to win
former customers back from three to 12 months. As expected, gains
in consumer and business operations were offset by a continued
decline in wholesale carrier revenue. Wholesale carrier revenue for
the first quarter was $47.9 million, a $10 million decline from the
first quarter of the previous year. Wholesale carrier revenue
comprises less than 24 per cent of Call-Net's total consolidated
revenue. During the quarter the Company repurchased U.S.$76.4
million of senior secured notes, at a cost of CDN$104.6 million.
This repurchase reduces the interest costs on long term debt by
U.S.$8 million or CDN$11 million per year. Carrier costs continued
to decline to $95.1 million in the first quarter of 2004 as a
result of success of both network optimization and international
carrier negotiations. Total operating costs for the first quarter
were $80.9 million, representing a 13 per cent increase over the
same period last year. The increase in operating costs was expected
as the Company invested in sales, marketing, provisioning and
customer care in pursuit of its growth objectives. "Our revenue has
been quite stable over the past eight quarters, said Roy Graydon,
executive vice president and chief financial officer. "One of our
most significant trends has been a steady improvement in gross
profit. Over the past two years gross profit as a percentage of
revenue has risen by almost 11 per cent. This incremental gross
profit has been reinvested in our business to grow both consumer
and business revenues." Regulatory On January 27, 2004 the CRTC
agreed with Call-Net's assessment of the lack of competition in the
home phone service market, directing the former monopolies to
provide the same quality of service to consumers whether they use
an incumbent telephone company's service or Sprint Canada's. The
CRTC also agreed to Call-Net's request to inform consumers about
the availability and terms of local competition and extended the
prohibited winback period from three months to 12 months. On the
same day, the CRTC issued an interim decision on Ethernet access,
applying an interim tariff to certain services, which should bring
to an end the price discrimination by the ILECs in providing these
services to Canadian business consumers. The Company continues to
be engaged in a number of proceedings including the resale of DSL
and Ethernet services and follow-up matters pertaining to the 2002
price cap decision. Outlook The Company's outlook has not changed
since it released its fourth quarter 2003 results in February 2004.
Call-Net expects continued growth in its consumer and business
solutions revenue offset somewhat by continued decline in carrier
services revenue. Top line revenue growth will be modest, up one to
five per cent over 2003. In the consumer market, Call-Net will
focus on attracting home phone service customers and expects to
continue the momentum in adding home phone service customers in
2004. The business market will remain highly competitive,
particularly in the large corporate and mid-sized market segments.
Call-Net is committed to maintaining a profitable carrier service
operation with anticipated revenue declines in per unit pricing
throughout 2004, offset by declining costs. Carrier charges should
decline from the 2003 level as a result of the Company's ongoing
efforts at network optimization. The savings will be redeployed to
customer acquisition programs. The Company expects to continue to
be cash flow self-sufficient, generating more in EBITDA in 2004
than it spends in interest, capital and taxes. In 2004, capital
expenditures will be in the range of six per cent of revenue,
approximately half of which will be allocated to maintenance and
the other half on growth. Initiatives include the expansion of the
Company's co-location footprint from 134 to 148 wire centres
announced in April, the installation of new local switching
equipment and the purchase of other capital equipment to support
local customer growth. Annual Meeting of Shareholders, followed by
Quarterly Conference Call Call-Net will hold its annual meeting of
shareholders at 2:00 p.m. (ET) this afternoon in the Imperial Room
of the Fairmont Royal York hotel, followed by a quarterly
conference call at 3:30 p.m. (ET). Both the annual meeting and the
quarterly call will be web cast live. To join the annual meeting
via web log in at http://www.callnet.ca/. To participate in the
quarterly conference call (question and answer session) at 3:30
p.m., dial 416-695-5259 or 1-877-888-7019 (Participation code:
T492927S), or join via web cast at http://www.callnet.ca/. About
Call-Net Enterprises Inc. Call-Net Enterprises Inc., (TSX: FON,
FON.B) primarily through its wholly owned subsidiary Sprint Canada
Inc., is a leading Canadian integrated communications solutions
provider of home phone, wireless, long distance and IP services to
households, and local, long distance, toll free, enhanced voice,
data and IP services to businesses across Canada. Call-Net,
headquartered in Toronto, owns and operates an extensive national
fibre network, has over 148 co-locations in five major urban areas
including 31 municipalities and maintains network facilities in the
United States and the United Kingdom. For more information, visit
http://www.callnet.ca/ and http://www.sprint.ca/. Note for
Investors: This news release may include statements about expected
future events and/or financial results that are forward-looking in
nature and subject to risks and uncertainties. For those
statements, we claim the protection of the safe harbour for
forward-looking statements provisions contained in the Private
Securities Litigation Reform Act of 1995. The Company cautions that
actual performance will be affected by a number of factors, many of
which are beyond its control. Future events and results may vary
substantially from what the company currently foresees. Discussion
of the various factors that may affect future results is contained
in the company's recent filings with the Securities and Exchange
Commission, the Ontario Securities Commission and SEDAR. CALL-NET
ENTERPRISES INC. CONSOLIDATED BALANCE SHEETS (UNAUDITED) (millions
of Canadian dollars) March 31, December 31, 2004 2003
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Restated ASSETS Cash and cash equivalents 51.4 56.5 Short-term
investments 27.6 93.6
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Cash, cash equivalents and short-term investments 79.0 150.1
Accounts receivable 26.7 42.7 Other current assets 19.8 48.9
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Total current assets 125.5 241.7
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Capital assets 497.3 516.7 Other assets 73.8 80.7
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Total assets 696.6 839.1
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LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable and accrued
liabilities 131.6 149.4 Long-term debt 292.3 387.1 Other long-term
liabilities 48.6 49.1 Shareholders' equity Capital stock Common
shares, unlimited authorized 48.7 49.8 Class B non-voting shares,
unlimited authorized 298.7 297.6 Preferred shares, unlimited
authorized - - Contributed surplus 3.4 2.9 Deficit (126.7) (96.8)
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Total shareholders' equity 224.1 253.5
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Total liabilities and shareholders' equity 696.6 839.1
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CALL-NET ENTERPRISES INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND
DEFICIT (UNAUDITED) Three Three (millions of Canadian dollars,
Months Months Ended Ended except per share amounts) March 31, March
31, 2004 2003
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Restated Revenue 202.5 202.2 Carrier charges 95.1 106.2
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Gross profit 107.4 96.0 Operating costs 80.9 71.5 Depreciation and
amortization 36.8 40.2
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Operating loss (10.3) (15.7) Loss on repurchase of long-term debt
(4.0) - Release of change in control provision 4.7 - Interest on
long-term debt (9.7) (12.1) Interest and other expense (2.2) (0.4)
Foreign exchange gain (loss) (8.1) 36.2
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Income (loss) before taxes (29.6) 8.0 Income tax expense (0.3)
(0.4)
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Net income (loss) for the period (29.9) 7.6 Deficit, beginning of
period (93.0) (57.7) Adjustment for stock-based compensation (2.9)
(1.2) Adjustment for asset retirement obligation (0.9) (0.4)
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Deficit, beginning of period adjusted (96.8) (59.3)
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Deficit, end of period (126.7) (51.7)
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Basic earnings (loss) per share (0.84) 0.32 Diluted earnings (loss)
per share (0.84) 0.32
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CALL-NET ENTERPRISES INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) Three Three Months Months Ended Ended (millions of
Canadian dollars) March 31, March 31, 2004 2003
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Restated OPERATING ACTIVITIES Net income (loss) for the period
(29.9) 7.6 Add (deduct) operating items not requiring cash:
Depreciation and amortization 36.8 40.2 Interest and other expense
1.3 1.0 Foreign exchange (gain) loss on long-term debt 6.0 (33.0)
Reversal of change in control provision (4.7) - Loss on repurchase
of long-term debt 4.0 -
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Cash provided by operations before changes in non-cash working
capital 13.5 15.8 Net change in non-cash working capital balances
related to operations (9.9) (8.4)
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Cash provided by operating activities 3.6 7.4
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INVESTING ACTIVITIES Decrease in short-term investments 66.0 45.1
Acquisition of capital assets (14.0) (8.3) Proceeds from sale of
accounts receivable 45.0 - Increase in deferred costs (0.5) - Net
proceeds on disposal of capital assets - 2.9
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Cash provided by investing activities 96.5 39.7
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FINANCING ACTIVITIES Decrease in right-of-way liability (0.4) (0.7)
Long-term debt repurchase (104.8) -
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Cash used in financing activities (105.2) (0.7)
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Net increase (decrease) in cash and cash equivalents during the
period (5.1) 46.4 Cash and cash equivalents, beginning of period
56.5 34.1
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Cash and cash equivalents, end of period 51.4 80.5
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DATASOURCE: Call-Net Enterprises Inc. CONTACT: Media Contact: Karen
O'Leary, Corporate Communications, (416) 718-6445,
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