Corvis Corporation Reports Financial Results for the Second Quarter
Thursday July 31, 4:19 pm ET
Recognizes Initial Revenues from C III Communications Investment
Seeks to `Phase Up' to NASDAQ National Market
COLUMBIA, Md., July 31 /PRNewswire-FirstCall/ -- Corvis Corporation (Nasdaq: CORV - News), a leading provider of intelligent optical networking solutions, today reported revenues of $27.0 million for its fiscal second quarter ended June 30, 2003. Included in this quarter's results for the first time are both communications services revenue resulting from the company's investment in C III Communications and revenues from its optical networking equipment business.
The investment in C III Communications, which now owns Broadwing Communications, a communications services company based in Austin, Texas that provides data, voice and video solutions to select enterprises and service providers, closed during Corvis' second fiscal quarter. By virtue of Corvis' ninety-six percent ownership in C III Communications, financial results of the investment are consolidated in Corvis' quarterly results in accordance with Generally Accepted Accounting Principles. Seventeen days of Broadwing Communications' revenues and expenses are included in Corvis' second quarter financial results. All inter-company accounts and transactions have been eliminated for that seventeen-day period.
The Broadwing subsidiary contributed $26.7 million in recorded communications services revenues in the second quarter. The remaining $0.3 million were generated from the company's equipment and equipment service contracts with Broadwing Communications prior to the initial closing of the C III Communications transaction, the United States Government and France Telecom.
"We are pleased to report the first communications services revenues from our Broadwing subsidiary during the quarter," said Dr. David Huber, Corvis chairman and CEO. "We believe the addition of this revenue stream will strengthen Corvis' long-term prospects and increase shareholder value."
"During the second quarter, our optical networking equipment business was actively engaged in promising opportunities among leading global service providers and various government agencies worldwide who are well positioned to capitalize on our technology and the value it brings to their operations," Dr. Huber continued.
"Corvis' field-proven optical networking solutions, based on industry- leading technology, deliver the lowest total cost of ownership in the industry," Dr. Huber said. "We offer commercial and governmental service providers flexible, scalable and high-performance solutions that dramatically reduce the overall expenses associated with building and operating networks."
The company also announced that it intends to return to the NASDAQ National Market from the NASDAQ Small Cap Market now that its stock has traded over the minimum required bid price of one dollar for more than thirty consecutive business days.
Reported net loss for the quarter, including the seventeen days of Broadwing Communications' revenues and expenses, was $45.8 million, or ($0.11) loss per share, for the current quarter as compared with a reported net loss of $119.1 million, or ($0.31) loss per share, for the second quarter of 2002.
Pro forma net loss for the current quarter, including the seventeen days of Broadwing Communications revenues and expenses, was $27.4 million, or ($0.07) loss per share, excluding intangible assets amortization expense, equity-based expense, and restructuring and other charges compared with a pro forma net loss of $54.9 million, or ($0.14) loss per share, for the second quarter of 2002.
Broadwing Communications
In June, Corvis and its partner Cequel III, a St. Louis-based telecommunications and cable management company, announced that their joint venture, C III Communications, LLC, completed the asset purchase of Broadwing Communications, subject to certain remaining state and local regulatory requirements. The agreement to purchase most of the assets of Broadwing Communications from Cincinnati Bell, Inc., was announced in February. In accordance with the asset purchase agreement, the originally announced network purchase price of $129.0 million was reduced to approximately $90.6 million due to several factors, including the timing and speed of the closing. In addition, C III Communications purchased net working capital for which payment, if due, will be deferred for one year. The purchase price may be subject to certain further adjustments, and the completion of the transaction is still subject to certain state and local regulatory approvals.
Financial Position
Consistent with the company's prior guidance, cash, cash equivalents and investments were $323.6 million at June 30, 2003 compared to $448.6 million at March 28, 2003. This represents a net change of $125.0 million for the quarter that included $90.6 million payment associated with the investment in Broadwing Communications and $12.5 million associated with Broadwing working capital funding. Excluding payments associated with the investment in Broadwing Communications, the company reported a net change in cash of $21.9 million, down $33.9 million or 61 percent from the previous quarter. The company reaffirmed its previous guidance and continues to expect to end fiscal 2003 with between $200 million and $275 million in cash, cash equivalents and short-term investments.
Webcast Information
In conjunction with this announcement, Corvis will host a conference call to review its second quarter financial results and other operational developments including the acquisition of Broadwing Communications, today at 5:30 PM EDT. The live broadcast of the conference will be available via Corvis' website, www.corvis.com. Corvis has also posted information on its website highlighting the company's rationale for the Broadwing transaction as well as its strategies for that business. An archived audio of the conference call and the additional information regarding the Broadwing business will both continue to be available for future reference through the Corvis website at www.corvis.com.
About Corvis
From point-to-point links to all-optical networks to transoceanic systems, Corvis Corporation delivers innovative optical network solutions that deliver the lowest total cost of ownership in the industry. Headquartered in Columbia, MD, Corvis provides service providers and government agencies worldwide with scalable optical networking solutions and services that dramatically reduce the overall expenses associated with building and operating networks. Customers deploying Corvis' optical network solutions can quickly provision new wavelength-based services and tailor dynamic service- level agreements. Corvis is also the majority investor in C III Communications which recently acquired most of the assets of Broadwing Communications. Broadwing, a consolidated subsidiary of Corvis, is an optical network services company based in Austin, TX. For more information about Corvis, please visit its Web site www.corvis.com.
Corvis and the Corvis logo are trademarks and/or service marks of the Corvis Corporation. All other trademarks are the property of their respective owners.
Investor Note Regarding Forward Looking Statements
This announcement and the quarterly earnings conference call and related information may contain certain forward-looking statements that are subject to risks and uncertainties. Actual results could differ materially from those currently anticipated as a result of a number of factors, including, but not limited to, the risks and uncertainties discussed under "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the company's filings with the Securities and Exchange Commission.
* Corvis Contact:
* Andrew G. Backman
* Vice President
* Investor and Public Relations
* (443) 259-4259
* Fax: (443) 259-4427
* investorinformation@corvis.com
CORVIS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
Quarter Ended
June 30, 2003 June 29, 2002
(Unaudited) (Unaudited)
Revenues:
Equipment sales $320 $3,022
Communications services 26,697 -
Total 27,017 3,022
Cost of sales
Equipment sales 3,428 3,971
Communications services 18,035 -
Total 21,463 3,971
Gross profit (loss) 5,554 (949)
Operating expenses:
Research and development 12,124 25,803
Selling, general and administrative 20,626 23,906
Depreciation 6,490 8,495
Amortization 1,976 4,258
Equity-based expense 5,351 17,022
Restructuring and other charges 7,797 1,792
Purchased research and development - 34,580
Operating loss (48,810) (116,805)
Interest and other income, (expense) net 2,999 (2,305)
Net loss before minority interest (45,811) (119,110)
Minority interest 19 -
Net loss $(45,792) $(119,110)
Weighted average number of common shares
outstanding (in thousands) 403,337 383,412
Basic and diluted net loss per common share $ (0.11) $(0.31)
CORVIS CORPORATION
PRO FORMA
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (a)
(Dollars in thousands, except per share data)
For Discussion Purposes Only
Quarter Ended
June 30, 2003 June 29, 2002
(Unaudited) (Unaudited)
Revenues:
Equipment sales $320 $3,022
Communications services 26,697 -
Total 27,017 3,022
Cost of sales
Equipment sales 91 2,233
Communications services 18,035 -
Total 18,126 2,233
Gross profit 8,891 789
Operating expenses:
Research and development 12,124 25,803
Selling, general and administrative 20,626 23,906
Depreciation 6,490 8,495
Operating loss (30,349) (57,415)
Interest and other income, (expense) net 2,999 2,553
Pro forma Net loss $(27,350) $(54,862)
Weighted average number of common shares
outstanding (in thousands) 403,337 383,412
Basic and diluted net loss per common share $(0.07) $(0.14)
CORVIS CORPORATION
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
For Discussion Purposes Only
June 30, 2003
(Unaudited)
Equipment Communications Eliminations Total
Services
Revenues:
Equipment sales $365 - $(45) $320
Communications services
sales - 26,697 - 26,697
Total 365 26,697 (45) 27,017
Cost of sales
Equipment sales 91 - - 91
Communications services - 18,080 (45) 18,035
Restructuring 3,337 - - 3,337
Total 3,428 18,080 (45) 21,463
Gross profit (3,063) 8,617 - 5,554
Operating expenses:
Research and
development 12,124 - - 12,124
Selling, general and
administrative 11,747 8,879 - 20,626
Depreciation 5,087 1,403 - 6,490
Amortization 1,784 192 - 1,976
Equity-based expense 5,351 - - 5,351
Restructuring and other
charges 7,797 - - 7,797
Operating loss (46,953) (1,857) - (48,810)
Interest and other income,
(expense) net 3,003 (4) - 2,999
Net loss before minority
interest (43,950) (1,861) - (45,811)
Minority interest - - 19 19
Net loss $(43,950) $(1,861) $19 $(45,792)
CORVIS CORPORATION
CONDENSED CONSOLIDATING PRO FORMA STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
For Discussion Purposes Only
June 30, 2003
(Unaudited)
Equipment Communications Eliminations Total
Services
Revenues:
Equipment sales $365 $- $(45) $320
Communications services
sales - 26,697 - 26,697
Total 365 26,697 (45) 27,017
Cost of sales
Equipment sales 91 - - 91
Communications services - 18,080 (45) 18,035
Total 91 18,080 (45) 18,126
Gross profit 274 8,617 - 8,891
Operating expenses:
Research and
development 12,124 - - 12,124
Selling, general and
administrative 11,747 8,879 - 20,626
Depreciation 5,087 1,403 - 6,490
Operating loss (28,684) (1,665) - (30,349)
Interest and other
income, (expense) net 3,003 (4) - 2,999
Pro forma net loss $(25,681) $(1,669) - $(27,350)
EBITDA $(262)
Footnotes:
Consolidated Pro forma Net loss
Pro forma net loss excludes purchased research and development, intangible asset amortization expense, equity-based expense and restructuring and other charges. To assess fully the Company's financial operating results, management believes that pro forma net loss is an appropriate measure of evaluating operating performance and liquidity of the Company, because it reflects more accurately operating performance of the Company for the reporting period by excluding those charges associated with past events that are not related to current operations or, in the case of intangible asset amortization expense and equity-based expense, amounts that are non-cash in nature. This financial measure, however, should be considered in addition to, not as a substitute for or as being superior to, operating losses, cash flows, or other measures of financial performance prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). A reconciliation of these pro forma results to U.S. GAAP is set forth on the following table:
Quarter Ended
June, 30 2003 June 29, 2002
Reported net loss $(45,792) $(119,110)
Write-down of inventory & other 3,337 1,738
Restructuring & other charges 7,797 1,792
Equity-based expense 5,351 17,022
Intangible asset amortization expense 1,976 4,258
Purchased research and development - 34,580
Interest and other income, net - 4,858
Minority interest (19) -
Pro forma net loss $(27,350) $(54,862)
Communications Services EBITDA
EBITDA is the measure of profit or loss our management uses to evaluate performance of our communications services operating segment. EBITDA is defined as operating income before depreciation and amortization. As such, it eliminates the significant level of non-cash depreciation and amortization expense that results from the capital intensive nature of our business and intangible assets recognized in as part of our recent business combination and is unaffected by our capital structure or investment activities. EBITDA is frequently used as one of the bases for comparing our operating performance with other companies in our industries, although our measure of EBITDA may not be directly comparable to similarly titled measures of other companies. This financial measure, however, should be considered in addition to, not as a substitute for or as being superior to, operating losses, cash flows, or other measures of financial performance prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). A reconciliation of these pro forma results to U.S. GAAP for our communications services segment is set forth on the following table:
Net loss $(1,861)
Depreciation 1,403
Amortization 192
Interest and other 4
EBITDA $(262)
CORVIS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
June 30, December 28,
2003 2002
Assets
Current assets:
Cash and cash equivalents $286,034 $457,833
Short-term investments 31,463 24,133
Trade accounts receivable 59,827 1,781
Inventory, net 28,532 26,491
Other current assets 16,823 14,406
Total current assets 422,679 524,644
Restricted cash, non-current 3,129 2,329
Property and equipment, net 123,400 45,760
Goodwill and intangible assets, net 37,099 13,965
Long-term investments 6,080 22,450
Other non-current assets 8,489 1,170
Total assets $600,876 $610,318
Liabilities and stockholders' equity
Current liabilities:
Notes payable, current portion $113 $107
Capital lease obligations, current portion 964 1,982
Accounts payable 46,224 14,973
Accrued expenses and other liabilities 63,823 31,609
Provision for restructuring and other charges 8,383 16,130
Total current liabilities 119,507 64,801
Notes payable, net of current portion 2,689 2,672
Capital lease obligations,
net of current portion 1,718 74
Deferred lease liability and other 20,406 2,693
Total liabilities 144,320 70,240
Minority interest 896 -
Commitments and contingencies
Common stock* 4,165 4,126
Additional paid-in capital 2,822,027 2,809,267
Shareholder notes receivable (32) (32)
Treasury stock, 12,281,800 shares
at cost of $0.77 per share (9,512) (4,405)
Accumulated other comprehensive loss (7,477) (8,191)
Accumulated deficit (2,353,511) (2,260,687)
Total stockholders' equity 455,660 540,078
Total liabilities and stockholders' equity $600,876 $610,318
* $0.01 per share par value; 1,900,000,000 authorized shares;
417,105,016 shares issued and 404,823,216 outstanding as of 6/30/03;
407,199,303 shares issued and outstanding shares as of 12/28/02.
CORVIS CORPORATION
OTHER FINANCIAL INFORMATION
(Dollars in thousands)
Quarter Ended
June 30, 2003 June 29, 2002
Capital expenditures $296 $7,306
Source: Corvis Corporation |
