DSL.net Reports Q-4, Year-End 2005 Results.NEW HAVEN New Haven, city (1990 pop. 130,474), New Haven co., S Conn., a port of entry where the Quinnipiac and other small rivers enter Long Island Sound; inc. 1784. Firearms and ammunition, clocks and watches, tools, rubber and paper products, and textiles are among the many , Conn. -- 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 .net, Inc. (OTCBB OTCBB See OTC Bulletin Board (OTCBB). : DSLN), a leading nationwide provider of 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). communications services to businesses, today reported fourth-quarter and year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. 2005 financial results. The Company sold its wholly owned, Minneapolis-based subsidiary, VISI VISI Volar Intercalated Segmental Instability VISI Vision Information Systems, Inc. VISI Ventral Intercalated Segmental Instability , on December December: see month. 7, 2005. As a result, the Company has reclassified VISI's operations as discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. and, accordingly, has segregated the assets, liabilities, revenue and expenses of the discontinued operations in its Consolidated Balance Sheets consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. , Statements of Operations and notes thereto there·to adv. 1. To that, this, or it. 2. Archaic In addition to that; furthermore. thereto Adverb Formal 1. to that or it 2. in our Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December 31, 2005, being filed today. The financial results for discontinued operations for the fourth-quarter 2005 and full-year 2005 and 2004 periods, as reported herein (except for Adjusted 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 and free cash flow), conform with this reclassification Reclassification The process of changing the class of mutual funds once certain requirements have been met. These requirements are generally placed on load mutual funds. Reclassification is not considered to be a taxable event. . Revenue from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the for the fourth quarter of 2005 was $10.9 million, compared to revenue from continuing operations of $14.2 million for the fourth quarter of 2004. Revenue from continuing operations for the full year 2005, was $49.0 million, compared to revenue from continuing operations of $60.8 million for 2004. The Company generated gross margin (defined as revenue less network expense) from continuing operations of $2.1 million (19% of revenue) for the fourth quarter of 2005, compared to gross margin from continuing operations of $4.7 million (33% of revenue) for the fourth quarter of 2004. Gross margin from continuing operations for the full year 2005, was $14.0 million (29% of revenue), compared to gross margin from continuing operations of $17.8 million (29% of revenue) for 2004. Income from continuing operations, net of income taxes, for the fourth quarter of 2005 was $8.6 million, compared to a loss from continuing operations, net of income taxes, of $4.4 million for the fourth quarter of 2004. For the full year 2005, loss from continuing operations, net of income taxes, was $2.9 million, compared to a loss from continuing operations, net of income taxes, of $23.3 million for the 2004 period. Significantly contributing to these improvements was a non-recurring gain on extinguishment The destruction or cancellation of a right, a power, a contract, or an estate. Extinguishment is sometimes confused with merger, though there is a clear distinction between them. of debt of $13.4 million during the fourth quarter of 2005. Largely as a result of such non-recurring contribution to income from continuing operations, the Company reported per share net income from continuing operations of $0.05 per share for the fourth quarter of 2005, compared to a net loss from continuing operations of $0.02 per share for the same 2004 period. For the full year of 2005, net income from continuing operations was approximately $0.00 per share, compared to a net loss from continuing operations of $0.20 per share for 2004. "While revenue has declined, primarily as a result of certain former cost-cutting efforts associated with the restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). of our sales program, our fourth-quarter results demonstrate that we are making strides in balancing overall cost containment cost containment, n the features of a dental benefits program or of the administration of the program designed to reduce or eliminate certain charges to the plan. goals with prudent and strategic sales and operational initiatives," said David F. Struwas, president and chief executive officer of DSL.net. "We continue to focus our efforts on leveraging our core assets to position the Company as an attractive player in the broadband data and integrated VoIP (Voice over Internet Protocol See Internet and TCP/IP. (networking) Internet Protocol - (IP) The network layer for the TCP/IP protocol suite widely used on Ethernet networks, defined in STD 5, RFC 791. IP is a connectionless, best-effort packet switching protocol. ) sectors in the Northeast/Mid-Atlantic corridor. Our pilot program for a new integrated VoIP and data offering called Duet(SM), launched in the first quarter of 2006, has been well-received. Further, we recently completed plans to move our corporate headquarters from New Haven to Wallingford Wallingford, town (1990 pop. 40,822), New Haven co., S Conn.; inc. 1670. Its silverware industry dates from c.1835. Fruit growing and the manufacture of plastics, steel, precision instruments, and hardware are among the town's other industries. , CT, and consolidate other operations that will result in annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. office lease savings of approximately $850,000 beginning June June: see month. 1, 2006." Income from discontinued operations, net of income taxes, for the fourth quarter of 2005 was $304 thousand (which included a $341 thousand gain from the sale of discontinued operations), compared to income from discontinued operations, net of income taxes, of $20 thousand for the fourth quarter of 2004. For the full year 2005, loss from discontinued operations, net of income taxes, was $5.5 million (which included the aforementioned a·fore·men·tioned adj. Mentioned previously. n. The one or ones mentioned previously. aforementioned Adjective mentioned before Adj. 1. gain from the sale of discontinued operations of $341 thousand, and an impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. loss on discontinued operations of $6.0 million), compared to a gain from discontinued operations, net of income taxes, of $120 thousand for the 2004 period. On a per share basis, the Company reported net income from discontinued operations of approximately $0.00 per share for the fourth quarters of 2005 and 2004. For the full year 2005, net loss from discontinued operations was $0.02 per share, compared to net income from discontinued operations of approximately $0.00 per share for 2004. On a consolidated basis (results of continuing and discontinued operations): The Company reported net income of $8.9 million ($0.05 per share) for the fourth quarter of 2005, compared to a net loss of $4.4 million ($0.02 per share) in the fourth quarter of 2004. For the full year 2005, the Company reported a net loss of $8.4 million ($0.02 per share) compared to a net loss of $23.2 million ($0.20 per share) for 2004. Earnings before interest, taxes, depreciation, amortization, other income (expense) and non-cash stock compensation ("Adjusted EBITDA") for the fourth quarter of 2005 was negative $2.0 million, compared to positive $0.5 million for the fourth quarter of 2004. Adjusted EBITDA for the full year 2005, was negative $1.6 million, compared to Adjusted EBITDA of negative $4.9 million for 2004. Free cash flow (defined as Adjusted EBITDA minus capital expenditures) for the fourth quarter of 2005 was negative $2.0 million, compared to free cash flow of positive $0.4 million for the fourth quarter of 2004. For the full year 2005, free cash flow was negative $2.0 million, compared to free cash flow of negative $5.5 million from continuing operations for 2004. At December 31, 2005, the Company had $8.8 million in cash and total assets of $22.8 million compared to cash of $7.0 million and total assets of $40.9 million (including $10.2 million in assets of discontinued operations) at December 31, 2004. "We are actively continuing our efforts to raise additional financing in 2006 in order to repay all of our secured debt obligations which mature in 2006," said Walter Wal·ter , Bruno 1876-1962. German conductor noted for his interpretations of Mozart and Mahler. Noun 1. Walter - German conductor (1876-1962) Bruno Walter Keisch, the Company's chief financial officer. As part of its ongoing cost-cutting initiatives and its move from the American Stock Exchange American Stock Exchange (AMEX) Stock exchange in the U.S. Originally known as “the Curb,” it began as an outdoor marketplace in New York City c. 1850. It moved indoors to its present location in the Wall Street area in 1921. to the OTC Bulletin Board OTC Bulletin Board An electronic quotation listing of the bid and asked prices of OTC stocks that do not meet the requirements to be listed on the NASDAQ stock-listing system. for the trading of the Company's common stock, DSL.net will discontinue dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: hosting quarterly conference calls to discuss its financial results. DSL.net will continue to update shareholders through press releases, postings in the investor relations Investor relations The process by which the corporation communicates with its investors. section of the Company's Web site and through its regular public filings with the Securities and Exchange Commission. About DSL.net DSL.net, Inc. is a leading nationwide provider of broadband communications services to businesses. The Company combines its own facilities, nationwide network infrastructure and Internet Service Provider 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. (ISP (1) See in-system programmable. (2) (Internet Service Provider) An organization that provides access to the Internet. Connection to the user is provided via dial-up, ISDN, cable, DSL and T1/T3 lines. ) capabilities to provide high-speed Internet See broadband. access, private network solutions and value-added services A value-added service (VAS) is a telecommunications industry term for non-core services or, in short, all services beyond standard voice calls and fax transmissions. directly to small- and medium-sized businesses or larger enterprises looking to connect multiple locations. DSL.net product offerings include T-1, DS-3 and business-class DSL services, virtual private networks (VPNs), frame relay A high-speed packet switching protocol used in wide area networks (WANs). Providing a granular service of up to DS3 speed (45 Mbps), it has become popular for LAN to LAN connections across remote distances, and services are offered by most major carriers. , Web hosting Making a Web site available on the Internet. Many ISPs host a few personal Web pages for an individual at no additional cost above the monthly service fee, but the address is subordinate to the ISP; for example, www.friendlyisp.com/pat_smith. , DNS (Domain Name System) A system for converting host names and domain names into IP addresses on the Internet or on local networks that use the TCP/IP protocol. For example, when a Web site address is given to the DNS either by typing a URL in a browser or behind the management, enhanced e-mail, online data backup and recovery services, firewalls and nationwide dial-up services An information service on demand. The term was popular when analog modems were the only way to connect to a remote system. See dial-up. , as well as integrated voice and data offerings in select markets. For more information, visit www.dsl.net or www.getduet.com, e-mail info@dsl.net, or call 1-877-DSL-NET1 (1-877-375-6381). This press release may contain 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. within the meaning of Section 27A of the Securities Act of 1933, as amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. , and Section 21E of the Securities Exchange Act of 1934, as amended, and, to the extent it does, these forward-looking statements are subject to a variety of risks and uncertainties, many of which are beyond DSL.net's control, which could cause actual results to differ materially from those contemplated in these forward-looking statements. In particular, the risks and uncertainties associated with DSL.net's business include, among other things, (i) fluctuations in DSL.net's quarterly operating results, which could adversely affect the price of its common stock; (ii) DSL.net's unproven unproven Dubious, nonscientific, not proven, quack, questionable, unscientific adjective Relating to that which has not been validated by reproducible experiments or other scientific methods for determining effect or efficacy business model, which may not be successful; (iii) DSL.net's ability to raise sufficient additional capital on acceptable terms, or at all, to finance continuing operations and to pay off DSL.net's senior secured debt; (iv) DSL.net's failure to generate sufficient revenue, contain certain discretionary spending, achieve certain other business plan objectives, or obtain additional debt or equity financing Equity Financing The act of raising money for company activities by selling common or preferred stock to individual or institutional investors. In return for the money paid, shareholders receive ownership interests in the corporation. could have a material adverse effect on DSL.net's results of operations or financial position, or cause it to restructure its operations to further reduce operating costs operating costs npl → gastos mpl operacionales or to cease operations or to sell all or a portion of DSL.net's assets; (v) regulatory, legislative and judicial developments, which could adversely affect the way DSL.net operates its business or increase its costs of operations; (vi) competition; (vii) the marketplace's receptiveness re·cep·tive adj. 1. Capable of or qualified for receiving. 2. Ready or willing to receive favorably: receptive to their proposals. 3. to DSL.net's offering of integrated voice and data services; (viii) DSL.net's ability to recruit and retain qualified personnel; and (ix) DSL.net's dependence on third-party providers to supply it with local DSL and T-1 facilities in areas where it has not deployed its own equipment. Existing and prospective investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof here·of adv. Of this. hereof Adverb Formal or law of or concerning this Adv. 1. hereof - of or concerning this; "the twigs hereof are physic" . DSL.net undertakes no obligation, and disclaims any obligation, to update or revise the information contained in this press release, whether as a result of new information, future events or circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or or otherwise. For additional information regarding these and other risks faced by DSL.net, see the disclosure contained under "Risk Factors'' in DSL.net's Annual Report on Form 10-K for the year ended December 31, 2004, which has been filed with the Securities and Exchange Commission. DSL.net is a trademark of DSL.net, Inc. Other company names may be trademarks of their respective owners.
DSL.net, Inc.
Statements of Operations
(dollars in thousands, except per share data)
(unaudited)
Three Months Twelve Months
Ended Ended
Statements of Operations December 31, December 31,
---------------- -----------------
2005 2004 2005 2004
------- ------- ------- --------
Revenue $10,923 $14,228 $49,019 $ 60,755
-------- -------- -------- ---------
Operating expenses:
Network 8,806 9,560 34,972 42,924
Operations 1,134 1,460 5,155 8,212
General and administrative 2,983 2,598 10,364 11,189
Sales and marketing 240 306 815 4,243
Depreciation and amortization 977 2,971 4,990 12,370
-------- -------- -------- ---------
Total operating expenses 14,140 16,895 56,296 78,938
-------- -------- -------- ---------
Operating loss (3,217) (2,666) (7,277) (18,183)
Interest expense, net (1,821) (1,794) (9,322) (5,363)
Gain on extinguishment of debt 13,418 - 13,418 -
Other income , net 65 5 245 135
-------- -------- -------- ---------
Income (loss) before income taxes 8,445 (4,455) (2,936) (23,411)
Income tax benefit 156 11 - 62
-------- -------- -------- ---------
Income (loss), from continuing
operations net of income taxes 8,601 (4,444) (2,936) (23,349)
Income (loss) from discontinued
operations, net of income taxes 304 20 (5,498) 120
-------- -------- -------- ---------
Net income (loss) $ 8,905 $(4,423) $(8,434) $(23,229)
======== ======== ======== =========
Net income (loss) per common
share, basic and diluted from
continuing operations $ 0.05 $ (0.02) $ nil $ (0.20)
======== ======== ======== =========
Net income (loss) per common
share, basic and diluted from
discontinued operations $ nil $ nil $ (0.02) $ nil
======== ======== ======== =========
Net income (loss) per share basic
and diluted $ 0.05 $ (0.02) $ (0.02) $ (0.20)
======== ======== ======== =========
DSL.net, Inc.
Other Data
(dollars in thousands, except per share data)
(unaudited)
Three Months Twelve Months
Ended Ended
December 31, December 31,
----------------- ------------------
2005 2004 2005 2004
-------- ------- -------- --------
Other data:
Reconciliation of net income
(loss) to adjusted EBITDA &
free cash flow:
Net income (loss) $ 8,905 $(4,423) $ (8,434) $(23,229)
Less: (gain) on extinguishment
of debt (13,418) - (13,418) -
Less: other (income) expense,
net (406) (20) (585) (135)
Plus: impairment loss on
discontinued operations - - 6,033 -
Plus: interest expense, net 1,821 1,794 9,322 5,363
Plus: depreciation and
amortization 1,082 3,174 5,522 13,132
-------- ------- -------- --------
Adjusted EBITDA (2,016) 525 (1,560) (4,869)
Less: capital expenditures (30) (131) (392) (651)
-------- ------- -------- --------
Free cash flow $ (2,046) $ 394 $ (1,952) $ (5,520)
======== ======= ======== ========
DSL.net, Inc.
Calculation of Earnings Per Share
(dollars in thousands, except per share data)
Calculation of Earnings Per Share:
(unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
----------------------- -----------------------
2005 2004 2005 2004
----------- ----------- ----------- -----------
Net income (loss)
applicable to common
stockholders from
continuing operations:
Net income (loss)$ 8,601 $ (4,444) $ (2,936) $ (23,349)
Dividends on
preferred stock - - - (950)
Accretion of
preferred stock - - - (8,852)
Fair value
of Series Z
preferred stock - - - (2,630)
Cancellation
of Series Z
preferred stock 2,630 - 2,630 -
----------- ----------- ----------- -----------
Net income (loss)
applicable to common
stockholders from
continuing operations $ 11,231 $ (4,444) $ (306) $ (35,781)
=========== =========== =========== ===========
Net income (loss)
applicable to common
stockholders from
discontinued
operations $ 304 $ 20 $ (5,498) $ 120
=========== =========== =========== ===========
Net income (loss)
applicable to
common stockholders:
Net gain (loss ) $ 8,905 $ (4,423) $ (8,434) $ (23,229)
Dividends on
preferred stock - - - (950)
Accretion of
preferred stock - - - (8,852)
Fair value
of Series Z
preferred stock - - - (2,630)
Cancellation
of Series Z
preferred stock 2,630 - 2,630 -
----------- ----------- ----------- -----------
Net income (loss)
applicable to
common stockholders $ 11,535 $ (4,423) $ (5,804) $ (35,661)
=========== =========== =========== ===========
Net income (loss)
per common share,
basic and diluted
from continuing
operations $ 0.05 $ (0.02) $ nil $ (0.20)
=========== =========== =========== ===========
Net income (loss)
per common share,
basic and diluted
from discontinued
operations $ nil $ nil $ (0.02) $ nil
=========== =========== =========== ===========
Net income (loss)
per share basic
and diluted $ 0.05 $ (0.02) $ (0.02) $ (0.20)
=========== =========== =========== ===========
Shares used in
computing net
income (loss)
per share, basic
and diluted 233,620,817 233,619,817 233,620,653 181,831,059
=========== =========== =========== ===========
DSL.net, Inc.
Condensed Balance Sheets
(dollars in thousands)
Condensed Balance Sheets: December 31,
-----------------
2005 2004
-------- --------
Cash and cash equivalents $ 8,765 $ 7,029
Accounts receivable, net of allowances 4,210 5,932
Inventory 215 377
Deferred costs 110 424
Prepaid expenses and other current assets 2,009 3,766
Assets of discontinued operations - 10,202
-------- --------
Total current assets 15,309 27,730
Fixed assets, net 6,859 11,678
Other intangible assets, net - 47
Other assets 674 1,407
-------- --------
Total assets $22,842 $40,862
======== ========
Notes payable, net of discount $10,289 $ -
Other current liabilities 8,838 13,039
Financial instrument derivatives, current portion 6 -
Liabilities of discontinued operations - 887
-------- --------
Total current liabilities 19,133 13,926
Notes payable, less current portion, net of discount - 14,544
Financial instrument derivatives, less current
portion 37 286
Stockholders' equity 3,672 12,106
-------- --------
Total liabilities and stockholders' equity $22,842 $40,862
======== ========
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