Call-Net Enterprises Inc. Reports Continued Growth for the Third Quarter of 2004
27 10월 2004 - 10:45PM
PR Newswire (US)
Call-Net Enterprises Inc. Reports Continued Growth for the Third
Quarter of 2004 - Company adds 34,500 local service lines in the
quarter - Growth in both business and consumer revenue, year over
year - Increase in both gross margin and EBITDA, year over year
TORONTO, Oct. 27 /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 third quarter ending September 30, 2004. Call-Net
continued to experience growth in its local service offer, adding
over 34,000 new local service lines during the third quarter. The
total number of local service consumer and business lines now
stands at over 371,000, including 285,000 home phone lines and
86,000 business local line equivalents. "Call-Net's exposure to
long distance pricing continues to decline. Long distance now
comprises 53 per cent of total revenue in the quarter, down from 62
per cent in the same quarter last year," said Bill Linton,
president and chief executive officer, Call-Net Enterprises. "Our
local service offer to households and businesses continues to grow
at a rate of over 50 per cent per year." Consolidated revenue for
the third quarter of 2004 was $204.2 million, a slight decrease
from the same period last year. Gross margin for the quarter was
just under 50 per cent or $101.1 million, a $4.7 million increase
from the same period last year. Third quarter earnings before
interest, taxes, depreciation and amortization were $24.1 million,
representing a $1.1 million increase from the third quarter of
2003. Consumer services revenue improved by almost eight per cent
compared with the same quarter in 2003, as increases in home phone
and wireless service revenue more than offset decreases in dial-up
Internet and long distance sales. Over 65 per cent of consumer
services revenue came from customers who purchased more than one
product compared to 44 per cent in the third quarter of 2003.
During the third quarter, Sprint Canada launched its Internet phone
service. Initial uptake is consistent with the Company's
expectations. In addition, at the beginning of the fourth quarter,
Call-Net expanded its Sprint Canada local service to households and
businesses in three Ontario municipalities: Barrie, Markham and
Richmond Hill. Business revenue grew by over one per cent compared
to the third quarter of last year. The modest growth reflects solid
growth in local service and data services, offset by a decline in
long distance. During the fourth quarter, Call-Net expects to
finalize its agreement with Bell Canada to acquire certain assets
of 360networks Corporation including significant portions of its
business customer base and specific network facilities in Ontario,
Quebec and Atlantic Canada. The transaction is conditional on Bell
Canada's acquisition of the Canadian assets of 360networks
Corporation. "Upon closing, this transaction will greatly increase
our business customer base, strengthen our sales force in eastern
Canada and add over $50 million of primarily data and local service
revenue to our business & carrier services division," added
Linton. Third quarter wholesale carrier revenue grew by $2.1
million from the previous quarter, however, declined by over 13 per
cent when compared with the same period last year. Wholesale
carrier revenue now comprises slightly over 23 per cent of
Call-Net's total consolidated revenue. Carrier costs were $103.1
million in the third quarter, down from $108.5 million in the same
quarter last year. A reduction in costs associated with providing
long distance were offset by increased costs required to support a
higher volume of local, wireless and data business. Operating costs
for the quarter were $77.0 million representing a five per cent
increase over the same period last year. "The increase in operating
costs was primarily due to the Company's continued investment in
sales, marketing, provisioning and customer care, in pursuit of its
growth objectives," said Roy Graydon, executive vice president and
chief financial officer. Regulatory On July 14, 2004, the CRTC made
changes to the interconnection regime for the exchange of traffic.
The decision will allow Call-Net to consolidate traffic on existing
trunks to gain significant efficiencies. In September, Call-Net
participated in the public hearings on voice over Internet protocol
(VoIP). Call-Net's position continues to be that the CRTC should
apply the current regulation governing providers of local phone
service regardless of the technology utilized to provide the
service. "VoIP is simply a voice service being provided over a
broadband facility," said Bill Linton, president and chief
executive officer of Call-Net. "Until we actually see competition
in the local service market, the former monopoly phone companies
should continue to be regulated as they are today. We support the
entry of new competitors in the local service market using VoIP,
providing they comply with the existing rules of competition such
as the requirement to provide consumer protection, equal access and
enhanced services such as 911 and 411." Outlook Call-Net's outlook
for 2004 has not changed appreciably. The Company continues to
expect that growth in consumer and business services revenue will
be offset somewhat by continued decline in carrier services
revenue. While the ARPMs in the long distance market held up in the
third quarter, further declines are expected in the fourth quarter
of this year. Because of continued strong performance in local and
data services fourth quarter results are expected to exceed third
quarter results in both revenue and EBITDA. However, for the full
year 2004, Call-Net expects to be at the low end of its guidance
range on revenue and expects only a modest increase in EBITDA year
over year. This is prior to taking into account the acquisition of
the eastern Canadian business of 360networks from Bell Canada, and
any impact of regulatory decisions. The Bell Canada 360networks
acquisition is expected to close in early November. This
transaction will add an additional $10 million of revenue and $1.5
million of EBITDA to the Company's fourth quarter results. Call-Net
expects to continue to be cash flow self-sufficient in 2004,
generating more in EBITDA than it spends in interest, capital and
taxes. Capital expenditures for the remainder of 2004 will be in
the range of eight per cent of revenue, yielding an average for the
year of approximately seven per cent of revenue. The increase in
expected capital expenditures is necessary to support continued
growth, including the installation of new local switching
equipment, and the purchase of other capital equipment to support
customer growth. Quarterly Conference Call Call-Net will hold a
quarterly conference call today at 1:00 p.m. ET. To participate in
the call dial 416-695-5259 or 1-888-789-0089 (Participation code:
T526243S), or join via web cast at http://www.callnet.ca/. A replay
of the call will be available until November 3, 2004 by dialing
1-866-518-1010 or 416-695-5275. 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 151
co-locations in five major urban areas including 33 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) September 30, December 31,
(millions of Canadian dollars) 2004 2003
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Restated ASSETS Cash and cash equivalents 27.9 56.5 Short-term
investments 46.1 93.6
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Cash, cash equivalents and short-term investments 74.0 150.1
Accounts receivable 23.3 42.7 Other current assets 30.6 48.9
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Total current assets 127.9 241.7
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Capital assets 467.5 516.7 Other assets 57.9 80.7
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Total assets 653.3 839.1
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LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable and accrued
liabilities 138.5 149.4 Long-term debt 281.9 387.1 Other long-term
liabilities 41.7 49.1 Commitments Shareholders' equity Capital
stock Common shares, unlimited authorized 49.4 49.8 Class B
non-voting shares, unlimited authorized 298.7 297.6 Preferred
shares, unlimited authorized - - Contributed surplus 4.5 2.9
Deficit (161.4) (96.8)
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Total shareholders' equity 191.2 253.5
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Total liabilities and shareholders' equity 653.3 839.1
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CALL-NET ENTERPRISES INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND
DEFICIT (UNAUDITED) Three Nine Three Nine Months Months Months
Months Ended Ended Ended Ended (millions of Canadian dollars, Sept
30, Sept 30, Sept 30, Sept 30, except per share amounts) 2004 2004
2003 2003
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Restated Restated Revenue 204.2 607.5 204.9 601.2 Carrier charges
103.1 298.7 108.5 313.1
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Gross profit 101.1 308.8 96.4 288.1 Operating costs 77.0 235.8 73.4
216.9 Realignment and other charges (5.3) (5.3) - 7.0 Depreciation
and amortization 37.2 109.7 38.8 118.7
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Operating loss (7.8) (31.4) (15.8) (54.5) Loss on sale of capital
assets - (0.9) - - Loss on repurchase of long-term debt - (4.0) - -
Release of change in control provision - 4.7 - - Interest on
long-term debt (7.7) (25.4) (11.1) (34.3) Interest and other
expense (2.3) (8.7) (2.6) (3.0) Foreign exchange gain (loss) 17.7
3.2 (0.4) 73.1
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Income (loss) before taxes (0.1) (62.5) (29.9) (18.7) Income tax
expense (1.5) (2.1) (0.3) (1.9)
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Net income (loss) for the period (1.6) (64.6) (30.2) (20.6)
Deficit, beginning of period (159.8) (93.0) (47.1) (57.7)
Adjustment for stock-based compensation - (2.9) (2.0) (1.2)
Adjustment for asset retirement obligation - (0.9) (0.6) (0.4)
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Deficit, beginning of period as adjusted (159.8) (96.8) (49.7)
(59.3)
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Deficit, end of period (161.4) (161.4) (79.9) (79.9)
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Basic and diluted earnings (loss) per share (0.05) (1.81) (1.15)
(0.83)
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CALL-NET ENTERPRISES INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) Three Nine Three Nine Months Months Months Months Ended
Ended Ended Ended Sept 30, Sept 30, Sept 30, Sept 30, (millions of
Canadian dollars) 2004 2004 2003 2003
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Restated Restated OPERATING ACTIVITIES Net income (loss) for the
period (1.6) (64.6) (30.2) (20.6) Add (deduct) operating items not
requiring cash: Depreciation and amortization 37.2 109.7 38.8 118.7
Interest and other income (0.4) 1.7 0.7 2.4 Foreign exchange (gain)
loss on long-term debt (17.1) (4.4) (1.4) (68.5) Realignment and
other charges (5.3) (5.3) - - Losses (gains) on disposals of
capital assets - 0.9 - - 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 12.8 37.3 7.9 32.0 Net change in non-cash working capital
balances related to operations 5.2 (11.3) (1.7) (5.2)
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Cash provided by operating activities 18.0 26.0 6.2 25.6
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INVESTING ACTIVITIES Decrease (Increase) in short-term investments
(0.8) 47.5 (17.2) (2.6) Acquisition of capital assets (15.9) (40.5)
(13.7) (30.8) Increase in Cybersurf Investment - (0.2) - - Proceeds
from sale of accounts receivable - 45.0 10.0 10.0 Change in
deferred costs and other assets - (0.4) - - Acquisition of MPS
Canada - - (20.0) (20.0) Net proceeds on disposal of capital assets
- 0.4 0.9 7.8
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Cash provided by (used in) investing activities (16.7) 51.8 (40.0)
(35.6)
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FINANCING ACTIVITIES Decrease in right-of-way liability (0.7) (1.6)
(0.7) (1.9) Issuance of common shares - - 35.2 35.2 Repurchase of
long-term debt - (104.8) - -
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Cash used in financing activities (0.7) (106.4) 34.5 (1.2)
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Net increase (decrease) in cash and cash equivalents during the
period 0.6 (28.6) 0.7 33.3 Cash and cash equivalents, beginning of
period 27.3 56.5 56.4 23.0
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Cash and cash equivalents, end of period 27.9 27.9 57.1 57.1
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SUPPLEMENTAL DISCLOSURE OF CASH FLOWS Cash received for interest
1.8 4.0 0.9 3.5 Cash paid for interest 1.1 21.4 0.9 24.9 Cash paid
for capital and income taxes 0.9 2.8 0.7 2.9
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DATASOURCE: Call-Net Enterprises Inc. CONTACT: Media: Karen
O'Leary, Corporate Communications, (416) 718-6445,
Copyright