Covad to File for Extension of Filing Date for First Quarter 2004 1O-Q; No Material Impact Expected to First Quarter '04 Financial Guidance Issued in February.Business Editors/High-Tech Writers SAN JOSE San Jose, city, United States San Jose (sănəzā`, săn hōzā`), city (1990 pop. 782,248), seat of Santa Clara co., W central Calif.; founded 1777, inc. 1850. , Calif.--(BUSINESS WIRE)--May 11, 2004 Covad Communications Group, Inc. (OTCBB OTCBB See OTC Bulletin Board (OTCBB). :COVD COVD College of Optometrists in Vision Development COVD Covad Communications Group (stock symbol) ), a leading national broadband service provider An ISP, telephone company, cable company or other carrier that offers high-speed communications to homes and businesses, typically for Internet access. Cable modems, DSL and T1 lines are the common technologies. See broadband, cable modem, DSL and T1. of high-speed Internet See broadband. and network access, announced that it will file today for a five-day extension with the Securities and Exchange Commission to submit its Form 10-Q Form 10-Q See 10-Q. for the first quarter of 2004. The delay is being requested because of a lone accounting issue regarding treatment of stock issued to Covad employees under its 2003 Employee Stock Purchase Plan (ESPP See Employee Stock Purchase Plan. ). The company is still in the process of determining the full extent of the non-cash compensation expense adjustments, if any, that will be required and the period or periods in which the expense will be recorded. However, Covad notes that any compensation charge that it is required to record will have no impact on future cash flow. Covad is able to report cash usage for the first quarter of 2004 of $11 million, including cash equivalents, short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. investments, restricted cash and investments, but excluding net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). associated with its issuance of $125 million of convertible debentures Convertible Debenture Any type of debenture that can be converted into some other security. Notes: For example, a convertible bond can be converted into stock. and retirement of $50 million in notes payable. For the first quarter, digital subscriber lines See DSL. (communications, protocol) Digital Subscriber Line - (DSL, or Digital Subscriber Loop, xDSL - see below) A family of digital telecommunications protocols designed to allow high speed data communication over the existing copper telephone lines between end-users and decreased by 1,200 from the fourth quarter 2003 primarily because of shifting partner sales strategies. Covad also reconfirms the guidance for the first quarter 2004 that was provided in February February: see month. . For the first quarter of 2004 revenue is expected to be $106 - 109 million, broadband broadband Term describing the radiation from a source that produces a broad, continuous spectrum of frequencies (contrasted with a laser, which produces a single frequency or very narrow range of frequencies). subscription billings $88 - 91 million, net loss $13 - 17 million, and EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become profit to be $3 - 6 million. Please refer to the attached table for additional information, including a reconciliation of the non-GAAP financial performance measures to the most comparable GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). measures. Covad will issue first quarter results and conduct a conference call for investors as soon as the analysis is complete. About Covad Communications Covad is a leading national broadband service provider of high-speed Internet and network access utilizing Digital Subscriber Line (DSL DSL in full Digital Subscriber Line Broadband digital communications connection that operates over standard copper telephone wires. It requires a DSL modem, which splits transmissions into two frequency bands: the lower frequencies for voice (ordinary ) technology. It offers DSL, T1, hosting, managed security, IP and dial-up, and bundled voice and data services directly through Covad's network and through Internet Service Providers Internet service provider (ISP) Company that provides Internet connections and services to individuals and organizations. For a monthly fee, ISPs provide computer users with a connection to their site (see data transmission), as well as a log-in name and password. , value-added resellers A value-added reseller (VAR) is a company that adds some feature(s) to an existing product(s), then resells it (usually to end-users) as an integrated product or complete "turn-key" solution. , telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. carriers and affinity groups A special interest group. This is a marketing term for a group of people with similar interests. to small and medium-sized businesses and home users. Covad services are currently available across the nation in 44 states and 235 Metropolitan Statistical Areas (MSAs) and can be purchased by more than 57 million homes and businesses, which represent over 50 percent of all US homes and businesses. Corporate headquarters is located at 110 Rio Robles Robles is a common surname in the Spanish language meaning oaks, and may refer to:
Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Statement under the Private Securities Litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. Reform Act of 1995: The foregoing contains "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " which are based on management's current information and beliefs as well as on a number of assumptions concerning future events made by management. Readers are cautioned not to put undue reliance on such forward-looking statements, which are not a guarantee of performance and are subject to a number of uncertainties and other factors, many of which are outside Covad's control that could cause actual results to differ materially from such statements. These risk factors include the impact of increasing competition, pricing pressures, consolidation in the telecommunications industry, and uncertainty in telecommunications regulations and changes in technologies, among other risks. For a more detailed description of the risk factors that could cause such a difference, please see Covad's 10-K, 10-Q, 8-K and other filings with the Securities and Exchange Commission. Covad disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. This information is presented solely to provide additional information to further understand the results of Covad.
COVAD COMMUNICATIONS GROUP, INC.
SELECTED FINANCIAL DATA
(in thousands)
Three Months Ending March 31, 2004
- Business Outlook
----------------------------------
EBITDA Calculation (Note 1) Three Months Ending
Mar 31, 2004
---------------------------------
Projected Range of Results
---------------------------------
Net Loss $ (17,000) to $ (13,000)
Plus: Other (income) expense, net - to (500)
Depreciation and
amortization of property
and equipment 16,500 to 16,000
Amortization of collocation
fees and other intangible
assets 3,500 to 3,500
---------- ----------
EBITDA (Note 1) $ 3,000 to $ 6,000
========== ==========
Consolidated Revenue Data Three Months Ending
Mar 31, 2004
---------------------------------
Projected Range of Results
---------------------------------
Broadband subscription billings
(Note 2) $ 88,000 to $ 91,000
High-capacity circuit billings 4,500 to 5,500
Dial-up billings 1,100 to 1,300
---------- ----------
Total Billings, net $ 93,600 to $ 97,800
Financially distressed partners
(Note 3) (100) to (1,500)
Customer rebates and incentives
not subject to deferral
(Note 4) (1,500) to (3,000)
Other revenues, net (Note 5) 14,000 to 15,700
---------- ----------
Revenues, net $ 106,000 to $ 109,000
========== ==========
Notes to Unaudited Selected Financial Data
1. Management believes that Earnings Before Interest, Taxes,
Depreciation and Amortization ("EBITDA"), defined as net loss
prior to (i) depreciation and amortization of property and
equipment, (ii) amortization of intangible assets and (iii)
other income (expense), net, is a useful measure because it
provides additional information about the Company's ability to
meet future capital expenditures and working capital
requirements and fund continued growth. Management also uses
EBITDA to evaluate the performance of its business segments
and as a factor in its employee bonus program. EBITDA may be
defined differently by other companies and should not be used
as an alternative to our operating and other financial
information as determined under accounting principles
generally accepted in the United States. EBITDA is not a
prescribed term under accounting principles generally accepted
in the United States, does not directly correlate to cash
provided by or used in operating activities and should not be
considered in isolation, nor as an alternative to more
meaningful measures of performance determined in accordance
with accounting principles generally accepted in the United
States. EBITDA generally excludes the effect of capital costs.
2. Broadband subscription billings is defined as customer bills
issued within the period for services provided during such
period (or to be provided in future periods). Broadband
subscription billings exclude charges for Federal Universal
Service Fund ("FUSF") assessments, dial-up services, and high-
capacity circuits. Broadband subscription billings include
bills issued to customers that are classified as financially
distressed and whose revenue is only recognized if cash is
received (refer to Note 4 below for a more detailed discussion
on accounting for financially distressed partners). Management
believes broadband subscription billings is a useful measure
for investors as it represents a key indicator of the growth
of the Company's core business. Management uses broadband
subscription billings to evaluate the performance of its
business segments.
3. When the Company determines that (i) the collectibility of a
bill issued to a customer is not reasonably assured or (ii)
its ability to retain some or all of the payments received
from a customer that has filed for bankruptcy protection is
not reasonably assured, the customer is classified as
"financially distressed" for revenue recognition purposes. A
bill issued to a financially distressed customer is recognized
as revenue when services are rendered and cash for those
services is received, assuming all other criteria for revenue
recognition have been met, and only after the collection of
all previous outstanding accounts receivable balances.
Consequently, significant timing differences may occur from
the time a bill is issued, the time the services are provided
and the time that cash is received and revenue is recognized.
4. Customer rebates and incentives not subject to deferral
consist of amounts paid or accrued under marketing, promotion
and rebate incentive programs with certain customers. Rebates
and incentives paid or accrued under these programs are not
accompanied by any up-front charges billed to customers.
Therefore, these charges are accounted for as reductions of
revenue as incurred.
5. Other revenues consist primarily of revenue recognized from
amortization of prior period SAB 101 deferrals (refer to Note
7 below for a discussion of SAB 101), FUSF and dial-up charges
billed to our customers and other revenues not subject to SAB
101 deferral because they do not relate to an on-going
customer relationship or performance of future services.
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