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tw telecom Reports First Quarter 2014 Results - abc27 WHTM

tw telecom Reports First Quarter 2014 Results

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SOURCE tw telecom inc.

Delivers Strong Revenue Growth Rate of 7.1% Year Over Year and 2.1% Sequentially

Repurchases $113 million of Shares in the First Quarter

Completes Integration and Commences Selling in 11 Strategic Expansion Markets Year to Date

LITTLETON, Colo., May 7, 2014 /PRNewswire/ -- tw telecom inc. (NASDAQ: TWTC), a leading national provider of managed services, including Business Ethernet, converged and IP VPN solutions to enterprises across the U.S. and to their global locations, today announced its first quarter 2014 financial results, including $408.3 million of revenue, $9.8 million of net income, $136.8 million of Modified EBITDA1 ("M-EBITDA"), $115.2 million of net cash provided by operating activities and $10.8 million of levered free cash flow3.  

"We delivered strong revenue results for the quarter as we returned value to shareholders and advanced our growth initiatives," said Larissa Herda, tw telecom's Chairman and CEO.  "We achieved substantial progress on the integration of our strategic market expansion and our ongoing product innovation.  We launched several powerful new product capabilities, including extending Dynamic Capacity® across our entire data and Internet portfolio, which is a unique offering in the marketplace.  Additionally, we recently announced several new alliances with industry leading cloud and data center providers to position ourselves to win greater market share, as we continue to enable enterprises to efficiently access their cloud applications and help their networks run better, faster and easier," said Herda.

Highlights for the First Quarter 2014

  • Grew total revenue at a higher rate, including 2.1% sequentially and 7.1% year over year
  • Grew enterprise revenue 2.3% sequentially and 9.2% year over year
  • Grew data and Internet revenue 3.6% sequentially and 15.1% year over year
  • Delivered net income of $9.8 million, or $0.07 basic earnings per share
  • Delivered M-EBITDA of $136.8 million, representing a 33.5% M-EBITDA margin1
  • Delivered $115.2 million of net cash provided by operating activities
  • Reported $10.8 million of levered free cash flow
  • Executed $112.6 million of share repurchases

Revenue Reclassification

Effective January 1, 2014, the Company is classifying revenue from certain taxes and fees into a separate revenue line item.  It's also classifying certain high capacity dedicated Ethernet services to data and Internet revenue from network services revenue to better align the reporting of these services.  The Company's total reported revenue is not impacted by these changes, and prior period amounts have been reclassified for comparability as shown on page 15.

Business Trends

"We demonstrated the initial success of our growth initiatives by delivering an accelerated revenue growth rate this quarter," said Mark Peters, tw telecom's Executive Vice President and Chief Financial Officer.  "We also completed $113 million of share repurchases during the quarter, or nearly $500 million over the past year, representing a significant return of cash to shareholders, as we invested in our growth initiatives," said Peters.

The Company's growth initiatives have resulted in strong first quarter bookings7, or sales, which grew compared to the same period in the prior year.  As a result of its sales momentum, the Company continues to expect that its 2014 revenue growth rate will be greater than that of 2013. 

Modified EBITDA margin for the quarter reflected the Company's planned investing in growth initiatives and the impact of payroll taxes communicated in February.  This included a sequential impact of 110 basis points for the resetting of its payroll taxes, with the remaining impact primarily related to higher commission costs and certain taxes and fees as well as costs associated with its growth initiatives.

Modified EBITDA margin is expected to begin to expand toward the end of the year, as a result of anticipated higher revenue growth.

The Company expects to continue its growth investing this year, including capital to integrate and activate its strategic market expansion and ongoing product innovation.  It also expects an estimated 7% increase in its sales associate headcount for the year, inclusive of its market expansion project.

The Company continues to expect business fluctuations to impact sequential trends in revenue, margins and cash flow.  This includes the timing, as well as any seasonality of sales and installations5, usage, rate changes, disputes, settlements, repricing for contract renewals, and fluctuations in revenue churn, expenses, capital expenditures and taxes and fees. 

Balance Sheet Activities

The Company executed $112.6 million of share repurchases for the quarter, with $249.9 million remaining under its $500 million repurchase plan.  The Company expects to continue to be opportunistic with its share repurchases this year as it manages to a targeted cash balance of approximately $300 million, while maintaining its leverage ratios in line with those in the first quarter.  Additionally, in March 2014, the Company retired the remaining $23.5 million principal amount of 8% Senior Notes due 2018 at a redemption price of 104% of the principal amount. 

Market Expansion

The Company announced in the fourth quarter of 2013, a strategic market expansion to extend its metro fiber footprint into five new high demand markets and accelerate the density of its metro-fiber footprint in more than a third of its existing markets.  As a result of this strategic market expansion, the Company expects with this project to –

  • Generate an overall 5-year Internal Rate of Return of greater than 40%, after tax, while achieving a greater than 50% incremental Modified EBITDA margin by the fifth year
  • Invest $50 million to fully integrate and activate all of its planned new and expansion markets by the end of 2014, that will not recur
  • Continue hiring sales and operational personnel throughout 2014 to staff its expanded market reach
  • Drive new bookings, or sales, from its expansion project in the second half of 2014, with incremental revenue growth and positive Modified EBITDA in 2015

"Our strategic market expansion is on track and we're pleased with our progress," said John Blount, President and Chief Operating Officer.  "This was a great fiber acquisition that we believe will further contribute to our profitable growth."

Capital Investments

The Company continues to expect capital investments for 2014 to be approximately $440 to $460 million with the majority to be tied to success-based investments, which includes approximately $50 million to integrate and connect the strategic market expansion into its national network and operating infrastructure.

Capital investments ("cap-ex") for the first quarter of 2014 were as follows ($ in 000's):

 



Capital Expenditures


Actuals


Guidance


Three Months Ended


Full Year


Mar. 31


Dec. 31


Mar. 31




2014


2013


2013


2014









Cap-ex - excluding strategic market expansion lease & integration capital (1)

$  94,345


$  88,216


$90,853


$390,000 - $410,000

As a percentage of revenue

23.1%


22.1%


23.8%











Cap-ex - for strategic market expansion lease & integration capital (1)

7,825


119,823


-


50,000









Total Capital Expenditures

$102,170


$208,039


$90,853


$440,000 - $460,000

(1)Investments from the Company's recent strategic market expansion includes a fiber capital lease as well as capital to fully integrate and connect its expanded market reach into its national network and operating infrastructure.








Capital investments for the first quarter, excluding the strategic market expansion, increased sequentially by $6.1 million and year over year by $3.5 million, primarily reflecting the timing of projects. 

Operational Metrics

Revenue churn4 was 0.8% for the first quarter of 2014, comparable to both the prior quarter and the same quarter last year. As a component of revenue churn, revenue lost from customers fully disconnecting service remained low at 0.2% for the first quarter of 2014, which is consistent with the prior quarter and the same quarter last year, and indicative of a loyal customer base, effective customer experience strategy and competitive product portfolio.

The Company served more than 29,500 customers as of March 31, 2014.  Customer churn4 was 0.8% for both the first quarter of 2014 and the prior quarter, down from 0.9% in the same quarter last year.  Additionally, the Company ended the quarter with nearly 33,000 fiber route miles, the majority of which were metro miles.

Intercarrier Compensation

Intercarrier compensation revenue represented 1% of total revenue, as of the first quarter of 2014.  Under an FCC order, intercarrier compensation rates are declining over a six-year period that began in 2012, with the next rate decrease occurring in July 2014.  The Company expects that these rate decreases will have a $4 million impact on full year 2014 revenue, which may be impacted by fluctuations in volume of minutes of use and carrier settlements.

Year over Year Results – First Quarter 2014 compared to First Quarter 2013

Revenue for the first quarter of 2014 was $408.3 million compared to $381.2 million for the first quarter last year, representing a year over year increase of $27.1 million, or 7.1%.  Revenue grew primarily due to ongoing enterprise revenue growth.  Key changes in revenue, which reflects the Company's new revenue reclassification described above, included:

  • $26.1 million increase in revenue from enterprise customers, or 9.2% year over year, driven primarily by data and Internet services
  • $0.6 million increase in revenue from carriers, reflecting growth in Ethernet services, offset by churn and repricing for contract renewals, primarily in network services
  • $2.2 million increase in taxes and fees reflecting growth in revenue subject to these charges
  • $1.8 million decrease in intercarrier compensation revenue, primarily reflecting the impact of a mandatory FCC rate reduction in July 2013 and lower settlements in the current quarter

By line of business, the percentage change in revenue year over year was as follows:

  • 15.1% increase for data and Internet services, primarily driven by an increase in strategic Ethernet and VPN based products and other services, partially offset by churn and repricing. Data and Internet revenue represents 60% of total revenue for the quarter compared to 56% a year ago
  • 1.8% increase in voice services, primarily from converged and other voice solutions and an increase in usage based services, partially offset by churn. Voice services revenue represented 19% of total revenue for the quarter compared to 20% a year ago
  • 10.1% decrease in network services, primarily from the impact of churn and repricing, largely from carrier customers. Network services revenue represents 14% of total revenue for the quarter compared to 17% a year ago in part reflecting the transition from network services to Ethernet-based technologies.

Operating Costs

Operating costs for the first quarter of 2014 increased year over year, which primarily included increases in network access costs as a result of revenue growth, growth in demand for multi-location customer solutions, both within and outside of the Company's markets, an increase in certain taxes and fees and higher employee-related costs to support ongoing growth and the Company's growth initiatives.  Operating costs as a percentage of revenue were 42.6% for the quarter compared to 42.3% for the same period last year.  Modified gross margin6 as a percentage of revenue was 57.5% for the quarter, a decrease from 57.9% in the same period last year, primarily due to higher certain taxes and fees and network access costs.  

The Company utilizes a fully burdened modified gross margin, including network costs, and personnel costs for customer care, provisioning, network maintenance, technical field and network operations, excluding non-cash stock-based compensation expense, net of costs capitalized for labor and overhead on capital projects.

Selling, General and Administrative Costs ("SG&A")

SG&A costs increased year over year, primarily as a result of higher employee-related costs, including expansion of sales and sales support personnel to support the Company's growth initiatives and commissions resulting from higher service installations. As a result, SG&A costs as a percentage of revenue increased to 26.2% for the quarter from 24.5% for the same period last year.

Net Income

Net income was $9.8 million for the first quarter of 2014 compared to $13.1 million from the same period last year, reflecting higher depreciation expense resulting from net asset additions, offset by lower income tax and interest expense.  The Company delivered basic earnings per share of $0.07 for the current quarter as compared to $0.09 for the same period last year.

M-EBITDA 

M-EBITDA was $136.8 million for the first quarter of 2014, an increase of 0.6% from the same period last year, reflecting revenue growth that was largely offset with costs associated with an increase in personnel primarily to support the Company's growth initiatives and higher commission costs. 

M-EBITDA margin for the quarter was 33.5% as compared to 35.7% last year.  The change in quarterly margin was due to costs associated with growth initiatives, increased commissions, certain taxes and fees and network access costs.

Sequential Results – First Quarter 2014 compared to Fourth Quarter 2013

Revenue for the first quarter of 2014 was $408.3 million, as compared to $400.0 million for the fourth quarter of 2013, an increase of $8.3 million, or 2.1%, representing the 38th consecutive quarter of sequential growth.  Revenue grew primarily due to ongoing enterprise growth.  Key changes in revenue, which reflects the Company's new revenue reclassification described above, included:

  • $6.9 million increase in enterprise revenue, or 2.3% sequential growth, driven primarily by data and Internet services and an increase in usage-based services
  • $0.6 million increase in carrier revenue, reflecting growth in Ethernet services, somewhat offset by churn and repricing, primarily in network services
  • $1.3 million increase in taxes and fees reflecting an increase in rates as well as growth in revenue subject to these charges
  • $0.5 million decrease in intercarrier compensation revenue

By line of business, the percentage change in revenue sequentially was as follows:

  • 3.6% increase for data and Internet services, primarily driven by an increase in strategic Ethernet and VPN-based products and other services, partially offset by churn and repricing
  • 0.7% increase in voice services, primarily reflecting an increase in converged solutions and usage based services, partially offset by churn
  • 2.7% decrease in network services, primarily reflecting the impact of churn and repricing, largely from carriers

Operating Costs

Operating costs increased sequentially, reflecting higher network access costs as a result of revenue growth and an increase in certain taxes and fees as well as employee-related costs, largely due to the annual resetting of payroll taxes.  Operating costs were 42.6% of revenue for the first quarter and 42.2% for the fourth quarter.  Modified gross margin for the first quarter as a percentage of revenue was 57.5%, a decline from 58.0% in the fourth quarter largely due to higher certain taxes and fees as well as the annual resetting of payroll taxes and increased network access costs.

Selling, General and Administrative Costs

SG&A costs increased sequentially, primarily reflecting higher employee-related costs, including the impact of the annual resetting of payroll taxes and higher commissions and non-cash, stock-based compensation.  SG&A costs were 26.2% of revenue for the first quarter, an increase from 24.7% for the fourth quarter largely due to the annual resetting of payroll taxes and higher commissions.  

Net Income

Net income was $9.8 million for the first quarter compared to $15.4 million in the fourth quarter, primarily reflecting a reduction in M-EBITDA, largely attributable to the annual resetting of payroll taxes and higher commissions, as well as higher depreciation expense and non-cash stock-based compensation expense, somewhat offset by a decrease in income tax expense.  The Company delivered basic earnings per share of $0.07 for the first quarter compared to $0.11 for the fourth quarter.

M-EBITDA 

M-EBITDA was $136.8 million for the first quarter, a decrease of 2.7% from the fourth quarter primarily as a result of the impact of the annual resetting of payroll taxes, higher commissions and increased costs to support the Company's growth initiatives, somewhat offset by revenue growth. 

M-EBITDA margin was 33.5% for the first quarter compared to 35.2% for the fourth quarter. The M-EBITDA margin sequential decrease of 170 basis points included an impact of 110 basis points for the resetting of payroll taxes and the balance primarily reflected the impact of higher commission costs and certain taxes and fees as well as the costs associated with the Company's growth initiatives.

tw telecom plans to conduct a webcast conference call to discuss its earnings results on May 8, 2014 at 9:00 a.m. MDT (11:00 a.m. EDT).  To access the webcast and the financial and other information to be discussed in the webcast, visit www.twtelecom.com under "Investors."

(1) Modified EBITDA (or "M-EBITDA") is defined as net income or loss before depreciation, amortization, accretion, impairment charges and other income and losses, interest expense, debt extinguishment costs, interest income, income tax expense or benefit, cumulative effect of change in accounting principle, and non-cash stock-based compensation expense.  The Company defines Modified EBITDA margin as M-EBITDA divided by total revenue.

(2) Unlevered free cash flow is defined as Modified EBITDA less capital expenditures, which is reconciled to Net Cash provided by (used in) operating activities in the supplemental information posted on the Company's website.

(3) Levered free cash flow is defined as Modified EBITDA less capital expenditures and net interest expense from operations (excluding debt extinguishment costs, non-cash interest expense and deferred debt costs), which is reconciled to Net Cash provided by (used in) operating activities in the supplemental information posted on the Company's website.  

 (4) Revenue churn is defined for the period as average lost recurring monthly billing from a customer's partial or complete disconnection of services (excluding repricing impacts and usage) compared to reported revenue.  Customer churn is defined for the period as average monthly customer turnover compared to the average monthly customer count.

(5) Installations reflect monthly recurring charges for services from signed customer sales that are installed and recognized as revenue from the date of installation

(6) The Company defines modified gross margin as total revenue less operating costs excluding non-cash stock-based compensation expense.  

(7) Bookings, or sales, are defined as monthly recurring charges for services from signed customer contracts.  The timing of when these sales are installed and recognized into revenue varies based on the underlying contract.

Financial Measures
The Company provides financial measures using U.S. generally accepted accounting principles ("GAAP") as well as adjustments to GAAP measures to describe its business trends, including Modified EBITDA.  Management believes that its definition of Modified EBITDA (see above) is a standard measure of operating performance and liquidity that is commonly reported and widely used by analysts, investors, and other interested parties in the telecommunications industry because it eliminates many differences in financial, capitalization, and tax structures, as well as non-cash and non-operating income or charges to earnings.  Modified EBITDA is not intended to replace operating income (loss), net income (loss), cash flow, and other measures of financial performance and liquidity reported in accordance with GAAP.  Management uses Modified EBITDA internally to assess on-going operations and it is the basis for various financial covenants contained in the Company's debt agreements and for operating performance and liquidity.  Modified EBITDA is reconciled to Net Income (Loss), the most comparable GAAP measure for operating performance within the Consolidated Operations Highlights and in the supplemental information posted on the Company's website.  Modified EBITDA, as a measure of liquidity, is also reconciled to Net Cash provided by operating activities on the Company's website.

In addition, management uses unlevered and levered free cash flow, which measure the ability of M-EBITDA to cover capital expenditures.  The Company uses these cash flow definitions to eliminate certain non-cash costs.  Levered and unlevered free cash flow are reconciled to Net Cash provided by operating activities and also to Modified EBITDA in the supplemental information posted on the Company's website.  The Company also provides an adjustment to the measure gross margin by eliminating the impact of non-cash stock-based compensation expense.  Management uses modified gross margin internally to assess on-going operations.  Modified gross margin is reconciled to gross margin in the financial tables.

Forward Looking Statements
The statements in this press release and related conference call concerning the outlook for 2014 and beyond, including statements regarding product and platform plans, growth prospects, market opportunities, market expansion and its implementation, sales growth, cash flow and cash balances, growth initiatives, sales force, customer opportunities, network capabilities, sales and installations timing, demand, revenue growth, revenue growth rate, Modified EBITDA and margin trends, expense trends, service disconnections, business trends and fluctuations, liquidity position, future share repurchases and expected capital expenditures are forward-looking statements that reflect management's views with respect to future events and financial performance.  These statements are based on management's current expectations and are subject to risks and uncertainties.  Important factors that could cause actual results to differ materially from those in the forward looking statements include the risks disclosed in the Company's SEC filings, especially the section entitled "Risk Factors" in its 2013 Annual Report on Form 10-K and elsewhere in its quarterly report on Form 10-Q for the quarter ended March 31, 2014 to be filed shortly hereafter.  tw telecom undertakes no obligations to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

About tw telecom
tw telecom, headquartered in Littleton, Colo., is a leading national provider of managed services, including Business Ethernet, converged and IP VPN solutions for enterprises throughout the U.S. and globally. tw telecom also delivers secure, scalable private connections for transport data networking, Internet access, voice, VPN, VoIP and security to large organizations and communications services companies. Employing a resilient fiber network infrastructure, robust product portfolio and its own Intelligent Network capabilities, tw telecom delivers customers overall economic value, an industry-leading quality service experience, and improved business productivity. Please visit www.twtelecom.com for more information.

 


tw telecom inc.

Consolidated Operations Highlights

(Dollars in thousands)

Unaudited (1)















Three Months Ended






March 31,






2014

2013


Growth %










Revenue






Data and Internet services 

$243,671

$211,721


15.1%


Voice services 


77,361

76,030


1.8%


Network services


58,367

64,955


-10.1%



Service Revenue


379,399

352,706


7.6%


Taxes & fees


22,752

20,594


10.5%


Intercarrier compensation 

6,142

7,909


-22.3%




Total Revenue

408,293

381,209


7.1%










Expenses








Operating costs 

174,039

161,082






Gross Margin

234,254

220,127




Selling, general and administrative costs 

106,832

93,562




Depreciation, amortization and accretion

82,456

74,395






Operating Income 

44,966

52,170


-13.8%


Interest expense 

(24,035)

(21,546)




Non-cash interest expense and deferred debt costs 

(1,613)

(6,794)




Debt extinguishment costs

(1,282)

-




Interest income

148

277






Income before income taxes

18,184

24,107


-24.6%


Income tax expense

8,393

10,963






Net Income

$9,791

$13,144


-25.5%



















SUPPLEMENTAL INFORMATION TO RECONCILE MODIFIED GROSS MARGIN AND MODIFIED EBITDA











Gross Margin

$234,254

$220,127




Add back non-cash stock-based compensation expense

539

583






Modified Gross Margin

234,793

220,710


6.4%







Selling, general and administrative costs

106,832

93,562




Add back non-cash stock-based compensation expense

8,847

8,879






Modified EBITDA

136,808

136,027


0.6%











Non-cash stock-based compensation expense

9,386

9,462




Depreciation, amortization and accretion

82,456

74,395




Net interest expense 


23,887

21,269




Non-cash interest expense and deferred debt costs

1,613

6,794




Debt extinguishment costs

1,282

-




Income tax expense


8,393

10,963






Net Income

$9,791

$13,144













Modified Gross Margin %

57.5%

57.9%













Modified EBITDA Margin %

33.5%

35.7%





















Levered Free Cash Flow ("LFCF")






Modified EBITDA


$136,808

$136,027


0.6%


Less: Cap-Ex, excluding strategic market expansion lease & integration capital (2)

94,345

90,853


3.8%


Less: Net interest expense

23,887

21,269


12.3%


LFCF, excluding strategic market expansion lease & integration capital (2)

18,576

23,905


-22.3%


Capex - Strategic market expansion lease & integration capital (2)

7,825

-


NM


Levered Free Cash Flow

$10,751

$23,905


-55.0%





























(1) For complete financials and related footnotes, please refer to the Company's SEC filings.




(2) Strategic market expansion lease and integration capital represents capital investments for the Company's strategic market expansion which includes a capital lease and integration capital to connect the strategic market expansion into its national network and operating infrastructure.

 

 

 


tw telecom inc.

Consolidated Operations Highlights

(Dollars in thousands)

Unaudited (1)















Three Months Ended






Mar. 31

Dec. 31








2014

2013


Growth %










Revenue








Data and Internet services

$243,671

$235,156


3.6%


Voice services 

77,361

76,807


0.7%


Network services


58,367

59,980


-2.7%



Service Revenue


379,399

371,943


2.0%


Taxes & fees


22,752

21,448


6.1%


Intercarrier compensation 

6,142

6,628


-7.3%




Total Revenue

408,293

400,019


2.1%










Expenses








Operating costs 


174,039

168,613






Gross Margin

234,254

231,406




Selling, general and administrative costs 

106,832

98,694




Depreciation, amortization and accretion

82,456

80,155






Operating Income 

44,966

52,557


-14.4%


Interest expense


(24,035)

(23,107)




Non-cash interest expense and deferred debt costs 

(1,613)

(1,620)




Debt extinguishment costs

(1,282)

-




Interest income


148

144






Income before income taxes

18,184

27,974


-35.0%


Income tax expense


8,393

12,573






Net Income

$9,791

$15,401


-36.4%



















SUPPLEMENTAL INFORMATION TO RECONCILE MODIFIED GROSS MARGIN AND MODIFIED EBITDA











Gross Margin


$234,254

$231,406




Add back non-cash stock-based compensation expense

539

522






Modified Gross Margin

234,793

231,928


1.2%











Selling, general and administrative costs

106,832

98,694




Add back non-cash stock-based compensation expense

8,847

7,431






Modified EBITDA

136,808

140,665


-2.7%











Non-cash stock-based compensation expense

9,386

7,953




Depreciation, amortization and accretion

82,456

80,155




Net interest expense


23,887

22,963




Non-cash interest expense and deferred debt costs 

1,613

1,620




Debt extinguishment costs

1,282

-




Income tax expense


8,393

12,573






Net Income

$9,791

$15,401













Modified Gross Margin %

57.5%

58.0%













Modified EBITDA Margin %

33.5%

35.2%





















Levered Free Cash Flow ("LFCF")






Modified EBITDA


$136,808

$140,665


-2.7%


Less: Cap-Ex, excluding strategic market expansion lease & integration capital (2)

94,345

88,216


6.9%


Less: Net interest expense

23,887

22,963


4.0%


LFCF, excluding strategic market expansion lease & integration capital (2)

18,576

29,486


-37.0%


Capex - Strategic market expansion lease & integration capital (2)

7,825

119,823


-93.5%


Levered Free Cash Flow

$10,751

($90,337)


NM










(1) For complete financials and related footnotes, please refer to the Company's SEC filings.

(2) Strategic market expansion lease and integration capital represents capital investments for the Company's strategic market expansion which includes a capital lease and integration capital to connect the strategic market expansion into its national network and operating infrastructure.

 

 

 


tw telecom inc.

Highlights of Results Per Share

Unaudited (1) (2) 














Three Months Ended


Mar. 31


Dec. 31


Mar. 31


2014


2013


2013







Weighted Average Shares Outstanding (thousands)













Basic


138,088


140,673


149,129









Diluted (2)


140,097


143,129


152,452








Basic and Diluted Income per Common Share

$0.07


$0.11


$0.09

















As of



Mar. 31


Dec. 31


Mar. 31



2014


2013


2013

Common shares (thousands)














Actual Shares Outstanding


137,909


141,168


151,388








Unvested Restricted Stock Units






and Restricted Stock Awards (thousands)

3,742


3,989


4,209








Options (thousands)














Options Outstanding


486


1,000


3,233









Options Exercisable


483


860


3,075









Options Exercisable and In-the-Money


483


860


3,075








(1) For complete financials and related footnotes, please refer to the Company's SEC filings.

(2) Stock options, restricted stock units/awards and convertible debt subject to conversion, are excluded from the computation of diluted weighted average shares outstanding if inclusion would be anti-dilutive. See the Company's SEC filings for more details.

 

 

 


tw telecom inc.

Condensed Consolidated Balance Sheet Highlights

(Dollars in thousands)

Unaudited (1)





























Mar. 31


Dec. 31


Mar. 31







2014


2013


2013

















ASSETS


















Cash, equivalents, and short term investments

$355,233


$478,995


$913,285













Receivables

105,101


114,006


111,379



Less: allowance

(6,290)


(6,748)


(6,949)




Net receivables

98,811


107,258


104,430













Prepaid expenses and other current assets

23,734


22,545


24,524


Deferred income taxes

54,026


54,026


76,160




Total other current assets

77,760


76,571


100,684













Property, plant and equipment

4,775,473


4,675,335


4,327,939



Less:  accumulated depreciation 

(3,049,210)


(2,980,379)


(2,812,332)




Net property, plant and equipment 

1,726,263


1,694,956


1,515,607













Deferred income taxes

88,332


96,087


91,238


Goodwill

412,694


412,694


412,694


Intangible assets, net of accumulated amortization

10,322


11,555


16,063


Other assets, net 

43,129


44,344


28,985




Total other non-current assets

554,477


564,680


548,980
















Total

$2,812,544


$2,922,460


$3,182,986




























LIABILITIES AND STOCKHOLDERS' EQUITY 


















Current Liabilities










Accounts payable

$71,711


$38,454


$57,096



Deferred revenue

48,561


48,371


46,758



Accrued taxes, franchise and other fees

52,969


55,043


58,351



Accrued interest 

 

28,740


21,606


20,516



Accrued payroll and benefits

42,820


52,604


33,685



Accrued carrier costs

10,997


25,507


19,183



Current portion of debt and lease obligations

8,878


32,470


380,687



Other current liabilities

37,772


35,241


34,157




Total current liabilities

302,448


309,296


650,433













Long-Term Debt and Capital Lease Obligations 








2 3/8% convertible senior debentures, due 4/1/2026 

-


-


373,702



Floating rate senior secured debt - Term Loan B, due 12/30/2016

-


-


461,787



8% senior unsecured notes, due 3/1/2018, net of unamortized discount

-


23,392


428,098



Floating rate senior secured debt - Term Loan B, due 4/17/2020, net of unamortized discount

513,856


515,063


-



5 3/8% senior unsecured notes, due 10/1/2022 issued Oct 2012

480,000


480,000


480,000



5 3/8% senior unsecured notes, due 10/1/2022 issued Aug 2013, net of unamortized discount

434,209


433,744


-



6 3/8% senior unsecured notes, due 9/1/2023

350,000


350,000


-



Capital lease obligations

145,894


147,046


22,644




Less: current portion

(8,878)


(32,470)


(380,687)




Total long-term debt and capital lease obligations

1,915,081


1,916,775


1,385,544













Long-Term Deferred Revenue

19,871


20,046


22,454


Other Long-Term Liabilities 

42,590


40,274


43,862













Stockholders' Equity 

532,554


636,069


1,080,693
















Total


$2,812,544


$2,922,460


$3,182,986












(1) For complete financials and related footnotes, please refer to the Company's SEC filings.

 

 

 


tw telecom inc.

Condensed Consolidated Statements of Cash Flows

(Dollars in thousands)

Unaudited (1)




















Three Months Ended








Mar. 31


Dec. 31


Mar. 31








2014


2013


2013

























Cash flows from operating activities:








Net Income




$9,791


$15,401


$13,144


Adjustments to reconcile net income to net cash provided by operating activities:








Depreciation, amortization and accretion

82,456


80,155


74,395



Deferred income taxes



8,017


10,635


10,617



Stock-based compensation expense

9,386


7,953


9,462



Loss on debt extinguishment


1,282


-


-



Amortization of discount on debt and deferred debt costs

1,613


1,620


6,795


Changes in operating assets and liabilities:








Accounts receivable, net


8,447


(3,568)


(4,727)



Prepaid expenses and other current and noncurrent assets

(603)


3,192


(2,225)



Accounts payable



19,230


(11,843)


(1,134)



Accrued interest



6,905


(6,130)


150



Accrued payroll and benefits


(9,815)


4,077


(12,016)



Deferred revenue, current and noncurrent

15


550


564



Other current and noncurrent liabilities

(21,499)


5,953


(13,425)
















Net cash provided by operating activities

115,225


107,995


81,600













Cash flows from investing activities:








Capital expenditures



(101,633)


(87,809)


(87,800)


Purchase of investments



(51,703)


(105,317)


(50,932)


Proceeds from sale of investments


69,509


68,554


33,990


Equipment purchases in advance of installation and other, net

4,338


(12,015)


(2,240)




Net cash used in investing activities

(79,489)


(136,587)


(106,982)













Cash flows from financing activities:








Net proceeds (tax withholdings) from issuance of common stock upon exercise of stock options and vesting of restricted stock awards and units

(10,380)


 

4,596


 

6,158


Purchases of treasury stock


(104,170)


(100,503)


(54,627)


Excess tax benefits (shortfalls) from stock-based compensation

412


(1)


601


Proceeds from issuance of debt, net of financing costs

-


(355)


-


Retirement of debt obligations


(24,418)


-


(59)


Payment of debt and capital lease obligations

(2,760)


(2,063)


(1,709)
















Net cash used in financing activities

(141,316)


(98,326)


(49,636)
















Decrease in cash and cash equivalents

(105,580)


(126,918)


(75,018)




Cash and cash equivalents at the beginning of the period

284,419


411,337


806,728




Cash and cash equivalents at the end of the period

$178,839


$284,419


$731,710













Supplemental disclosures cash, equivalents and short term investments









Cash and cash equivalents at the end of the period

$178,839


$284,419


$731,710




Short term investments


176,394


194,576


181,575





Total of cash, equivalents and short term investments

$355,233


$478,995


$913,285













Supplemental disclosures of cash flow information:







Cash paid for interest



$17,083


$19,417


$21,631


Cash paid for income taxes, net of refunds

($76)


$105


($60)


Cash paid for debt extinguishment costs

$939


-


-


Addition of capital lease obligation


$537


$120,230


$3,053













Supplemental information to reconcile capital expenditures:







Capital expenditures per cash flow statement

$101,633


$87,809


$87,800


Addition of capital lease obligations


537


120,230


3,053


Total capital expenditures



$102,170


$208,039


$90,853













(1) For complete financials and related footnotes, please refer to the Company's SEC filings.

 

 

 


tw telecom inc.

Selected Operating Statistics

Unaudited (1)




























































Three Months Ended





















2013


2014








Mar. 31

Jun. 30

Sept. 30

Dec. 31


Mar. 31














Operating Metrics:























Buildings  (2) 



18,466

19,082

19,648

20,255


20,778















Headcount 











Total Headcount



3,191

3,287

3,327

3,397


3,407



Sales Associates 



578

612

633

664


664




























Customers 












Total Customers 



28,292

28,526

28,855

29,227


29,521














(1) For complete financials and related footnotes, please refer to the Company's SEC filings.

(2) Reflects on-net buildings and ILEC Local Serving Offices (LSOs) directly served by the Company's fiber network.

 

 

 


tw telecom inc.

New Revenue Reporting

(Dollars in thousands)

Unaudited (1) (2)






















2012



2013



2014





Three Mo. Ended

Full Year


Three Mo. Ended

Full Year


Three Mo. Ended





Mar. 31

Jun. 30

Sept. 30

Dec. 31

2012


Mar. 31

Jun. 30

Sept. 30

Dec. 31

2013


Mar. 31


















By Line of Business































New Reporting(2)
































Revenue
















Data and Internet services 

$186,146

$191,528

$198,524

$207,103

$783,301


$211,721

$220,063

$226,548

$235,156

$893,488


$243,671



Voice services 

74,824

75,727

76,050

75,495

302,096


76,030

76,437

77,267

76,807

306,541


77,361



Network services

70,640

69,399

67,649

67,233

274,921


64,955

64,079

61,574

59,980

250,588


58,367




Service Revenue

331,610

336,654

342,223

349,831

1,360,318


352,706

360,579

365,389

371,943

1,450,617


379,399



Taxes and Fees (2)

19,666

19,843

19,254

21,047

79,810


20,594

20,622

20,500

21,448

83,164


22,752



Intercarrier compensation 

7,649

8,006

7,457

7,015

30,127


7,909

8,282

7,301

6,628

30,120


6,142




Total Revenue

$358,925

$364,503

$368,934

$377,893

$1,470,255


$381,209

$389,483

$393,190

$400,019

$1,563,901


$408,293


















As Previously Reported(2) 
































Revenue
















Data and Internet services 

$176,851

$182,480

$189,164

$197,802

$746,297


$202,082

$209,634

$215,876

$223,705

$851,297


$231,016



Voice services 

89,621

91,008

91,052

92,062

363,743


92,355

93,080

93,913

94,318

373,666


96,018



Network services

84,804

83,009

81,261

81,014

330,088


78,863

78,487

76,100

75,368

308,818


75,117




Service Revenue

351,276

356,497

361,477

370,878

1,440,128


373,300

381,201

385,889

393,391

1,533,781


402,151



Intercarrier compensation 

7,649

8,006

7,457

7,015

30,127


7,909

8,282

7,301

6,628

30,120


6,142




Total Revenue

$358,925

$364,503

$368,934

$377,893

$1,470,255


$381,209

$389,483

$393,190

$400,019

$1,563,901


$408,293



































By Customer Type































New Reporting(2)
































Revenue
















Enterprise

$262,888

$268,627

$274,910

$282,165

$1,088,590


$284,853

$292,647

$298,531

$304,090

$1,180,121


$310,974



Carrier

68,722

68,027

67,313

67,666

271,728


67,853

67,932

66,858

67,853

270,496


68,425



Taxes and Fees (2)

19,666

19,843

19,254

21,047

79,810


20,594

20,622

20,500

21,448

83,164


22,752



Intercarrier compensation 

7,649

8,006

7,457

7,015

30,127


7,909

8,282

7,301

6,628

30,120


6,142




Total Revenue

$358,925

$364,503

$368,934

$377,893

$1,470,255


$381,209

$389,483

$393,190

$400,019

$1,563,901


$408,293


















As Previously Reported(2) 
































Revenue
















Enterprise

$281,227

$287,268

$293,017

$301,980

$1,163,492


$304,227

$312,157

$317,969

$324,514

$1,258,867


$332,739



Carrier

70,049

69,229

68,460

68,898

276,636


69,073

69,044

67,920

68,877

274,914


69,412



Intercarrier compensation 

7,649

8,006

7,457

7,015

30,127


7,909

8,282

7,301

6,628

30,120


6,142




Total Revenue

$358,925

$364,503

$368,934

$377,893

$1,470,255


$381,209

$389,483

$393,190

$400,019

$1,563,901


$408,293


















(1)  For complete financials and related footnotes, please refer to the Company's SEC filings.

(2)  Certain taxes and fees collected on behalf of the taxing authorities have been reclassified and separately stated from the underlying service revenue. 

         In addition, high capacity dedicated Ethernet services have been reclassified to Data & Internet Services from Network Services.

 

tw telecom inc.

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