Talk America Announces First Quarter Results
Company Resumes Growth in Local Business in Q1
Increases Guidance for Q2 and Year
RESTON, Va.--(BUSINESS WIRE)--May 7, 2002-- Talk America (NASDAQ: TALK), an integrated communications provider, today announced financial results for the first quarter ended March 31, 2002.
Key highlights for the first quarter:
Billed bundled lines of 194,000 exceeded guidance of 170-180k
Local revenue of $35.5 million is growing and exceeds guidance
Gross margins, in line with guidance, at 49.4 percent
Reduced G&A expense by 19 percent from Q4
EBITDA of $14.8 million, an increase of 16.7 percent from Q4
Net income of $8.1 million; Earnings per share of $0.10
Increased cash balance to $22.9 million; Decreased accounts payable by over $10 million
Completed comprehensive financial restructuring; Eliminated liquidity concerns
Total sales for the first quarter 2002 were $79.4 million, compared with $131.8 million, for the first quarter 2001. Gross profit margins, defined as network and line costs divided by sales, for the first quarter of 2002, were 49.4 percent compared with 50.9 percent for the first quarter 2001.
General and administrative expenses for the first quarter of 2002 were $14.6 million, compared with $20.4 million for first quarter 2001. The provision for doubtful accounts for the first quarter 2002 was $4.0 million, compared with $14.7 million for the first quarter 2001. Marketing and advertising expenses for the first quarter of 2002 were $5.9 million, compared with $31.5 million for the first quarter 2001.
The Company reported positive EBITDA, defined as income (loss) from operations excluding depreciation and amortization, interest, impairment and restructuring charges, and other expenses, net for the first quarter 2002, of $14.8 million, compared with $0.5 million for the first quarter of 2001.
Net income for the first quarter of 2002 was $8.1 million, or $0.10 per share, compared with a net loss of $10.1 million, or ($0.13) per share, for the first quarter 2001.
Commenting on the quarter, Gabe Battista, Chairman and CEO of Talk America stated, "The results of this quarter indicate that we have turned the corner, both operationally and financially. Through the efforts of our employees, our aggressive actions and ongoing execution of our business strategy, Talk America is exceeding its business plan. We are experiencing solid growth in our core local bundled services business as well as continued cost savings and operational improvements that we continue to leverage."
Additionally, during the quarter Talk America successfully restructured its outstanding 4½% and 5% convertible note obligations, exchanging over 94% of the current debt due in 2002 and 2004 for longer-term debt now due in 2007. The restructuring was completed in April with the closing of the exchange offers and the issuance of the new securities.
The Company's operational and financial targets for the second quarter and year-ended 2002 are as follows:
Year end 2002
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Metrics Q2 2002 New Previous
------- ------- --- --------
Billed Local
Lines 215k-225k 290k-310k 250k-270k
Bundled Revenue $37-$40 million $165-$175 million $140-$150 million
Long Distance
Revenue $38-$40 million $135-$145 million $135-$145 million
EBITDA $10-$12 million $35-$45 million $25-$35 million
Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," which establishes the impairment approach rather than amortization for goodwill and indefinite-lived intangible assets. The impact of SFAS 142 for the quarter ended March 31, 2001, on a pro-forma basis, would have resulted in a reduction of the net loss for the quarter ended March 31, 2001 by $5.4 million for goodwill amortization expense.
Effective January 1, 2002, the Company adopted Emerging Issues Task Force (EITF) 01-09, "Accounting for Consideration Given by a Vendor to a Customer or a Reseller of the Vendor's Products." The adoption of this issue resulted in a reclassification of approximately $6.1 million from sales and marketing expenses to net sales for the quarter ended March 31, 2001 attributed to direct marketing promotion check campaigns. The adoption of EITF 01-09 did not have a material effect on the Company's consolidated financial statements for the quarter ended March 31, 2002.
The Company has potential tax benefits of approximately $263 million of Net Operating Loss Carryforwards ("NOLs") which may allow the company to reduce its federal income taxes in future periods on a dollar for dollar basis. Certain rules as defined in Section 382 of the Internal Revenue Code could limit the amount available in future periods based on the changes in ownership of the Company's common stock. Shareholders that own in excess of 4.9% of the common shares outstanding, or 3.9 million shares will impact ownership changes. Therefore, the Company urges investors to advise Talk America in advance of accumulating a position in excess of this amount. More information regarding the Company's NOL Carryforwards may be found in its Annual Report on Form 10KA filed with the Securities and Exchange Commission on April 12, 2002.
As previously disclosed by the Company, given that the trading range of the Company's common stock has been less than $3 per share, the Company expects to receive a notification letter from the NASDAQ on or about May 15, 2002. Upon receipt of the letter, the Company intends to commence the appeal process to preserve its NMS listing. If the Company is unsuccessful in its appeal, the Company believes it meets the requirements for listing on the NASDAQ Small Cap Market.
The Company will hold a conference call to discuss these results beginning at 5:00 p.m. Eastern Time Tuesday, May 7, 2002. Dial in number for the call is (800) 558-9407. International callers should dial (212) 748 - 2778. Individual investors are invited to listen to the conference call over the Internet live at www.talk.com and www.streetevents.com. To listen to the live call, please go to the Web site at least 15 minutes prior to the start of the call to register, download, and install any necessary audio software. In addition, a replay will begin shortly after the call has ended and will be available for the balance of the week. The replay number to listen to the call is: (800) 633-8284 (Domestic) or (858) 812 - 6440 (International). Passcode for the replay is 20533360.
ABOUT TALK AMERICA
Talk America is an integrated communications provider marketing a bundle of local and long distance services to residential and small business customers utilizing its proprietary "real-time" online billing and customer service platform. Talk America has added local service to its offerings, after ten years as a long distance provider. The Company delivers value in the form of savings, simplicity and quality service to its customers based on the efficiency of its low-cost, nationwide network and the effectiveness of its systems that interface electronically with the incumbent local phone companies. For further information, visit the Company online at: www.talk.com. Please Note: Certain of the statements contained herein may be considered 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. Such statements are identified by the use of forward-looking words or phrases, including, but not limited to, "estimates," "expects," "expected," "anticipates," "anticipated," and "targets". These forward-looking statements are based on the Company's current expectations. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to have been correct. Forward-looking statements involve risks and uncertainties and the Company's actual results could differ materially from the Company's expectations. In addition to those factors discussed in the foregoing, important factors that could cause such actual results to differ materially include, among others, increased price competition for long distance and local services, failure of the marketing of the bundle of local and long distance services and long distance services under its direct marketing channels and its agreements with its various marketing partners, failure to manage the nonpayment of the Company's bills to its customers for bundled and long distance services, attrition in the number of end users, failure or difficulties in managing the Company's operations, including attracting and retaining qualified personnel, failure of the Company to be able to expand its active offering of local bundled services in a greater number of states, failure to provide timely and accurate billing information to customers, failure of the Company to manage its collection management systems and credit controls for customers, interruption in the Company's network and information systems, failure of the Company to provide adequate customer service, and changes in government policy, regulation and enforcement and adverse judicial interpretations and rulings relating to regulations and enforcement.
For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see the discussions contained in its Annual Report on Form 10-K for the year-ended December 31, 2001, as amended by its Form 10-K/A filed April 12, 2002 and Form 10-Q for the quarter ended September 30, 2001 and any subsequent filings. The Company undertakes no obligation to update its forward-looking statements.
TALK AMERICA HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for per share data)
(Unaudited)
Quarter Ended
----------------------------------
March 31, March 31,
2002 2001
--------- ---------
Sales $ 79,447 $ 131,780
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Costs and expenses:
Network and line costs 40,219 64,705
General and administrative
expenses 14,561 20,445
Provision for doubtful accounts 4,007 14,697
Sales and marketing expenses 5,895 31,454
Depreciation and amortization 4,443 9,214
--------- ---------
Total costs and expenses 69,125 140,515
Operating income (loss) 10,322 (8,735)
Other income (expense):
Interest income 89 523
Interest expense (1,474) (1,584)
Other expense, net (807) (352)
--------- ---------
Income (loss) before provision
for income taxes 8,130 (10,148)
Provision for income taxes -- --
--------- ---------
Net income (loss) $ 8,130 $ (10,148)
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Income (loss) per share - Basic:
Net income (loss) per share $ 0.10 $ (0.13)
========= =========
Weighted average common shares
outstanding 81,555 78,372
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Income (loss) per share -
Diluted:
Net income (loss) per share $ 0.10 $ (0.13)
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Weighted average common and
common equivalent shares
outstanding 81,657 78,372
========= =========
SELECTED BALANCE SHEET HIGHLIGHTS
(Unaudited)
(In thousands)
March 31, December 31,
2002 2001
--------- ------------
Cash and cash equivalents $ 22,895 $ 22,100
Total current assets 48,009 50,698
Goodwill and intangibles, net 29,014 29,672
Total assets 158,418 165,221
Accounts payable 32,749 43,098
Current portion of long-term debt 13,037 14,454
Total current liabilities 73,824 87,273
Long-term debt 150,802 152,370
Stockholders' equity (deficit) (66,208) (74,422)
SOURCE: Talk America Holdings, Inc.
Contact:
Talk America
Ruth E. Abeshaus
Dir. Corp. Comm.
215/862-1305
rabeshaus@talk.com