UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
---------------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 6, 2003
Mpower Holding Corporation
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(Exact name of registrant as specified in its charter)
Delaware 33339884-01 52-2232143
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(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
175 Sully's Trail, Pittsford, NY 14534
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(Address of principal executive offices) (Zip Code)
Registrants' telephone number, including area code: (585) 218-6550
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N/A
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(Former name or former address, if changed since last report.)
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ITEM 12. Results of Operations and Financial Condition.
On November 6, 2003, Mpower Holding Corporation (the "Company") issued the
following press release concerning the Company's results of operations for the
fiscal quarter ended September 30, 2003.
Mpower Holding Announces Adjusted EBITDA Positive Results for
Third Quarter 2003; Net Loss Improves 75% over Second Quarter 2003
ROCHESTER, NY - November 6, 2003 - Mpower Holding Corporation (OTCBB:
MPOW), the parent company of Mpower Communications Corp., a leading provider of
broadband Internet access and telephone services to business customers, today
announced results of its operations for the third quarter ended September 30,
2003.
"Achieving positive Adjusted EBITDA results this quarter is another
important step on our path towards sustainable cash flow growth," said Mpower
Communications Chairman and Chief Executive Officer Rolla P. Huff. "Our
financial and operational progress was recognized during the quarter by a $17.5
million equity investment in our company. We believe this investment reflects
the value in Mpower's facilities-based network and strong debt-free balance
sheet, and directly supports our clear strategy for profitable growth."
Mpower expects to use the new capital to raise its growth profile primarily
by investing in additional sales, installations and product enhancements to
increase its market share in Los Angeles, San Diego, Northern California, Las
Vegas and Chicago.
Mpower's Adjusted EBITDA for the third quarter of 2003 was a positive $1.0
million, a 225% improvement over the Adjusted EBITDA loss of $0.8 million in the
second quarter of 2003 and an $11.7 million improvement over the $10.7 million
Adjusted EBITDA loss in the third quarter of 2002. Adjusted EBITDA represents
earnings from continued operations before interest, taxes, depreciation,
amortization and gains or losses from the sale of assets, and excludes network
optimization costs, reorganization expenses, stock-based compensation and gain
on discharge of debt.
Mpower's loss from continuing operations was reduced to $2.2 million in the
third quarter of 2003, marking a 53% improvement over the second quarter of 2003
and a 99% improvement over the third quarter of 2002. The company's loss per
share before discontinued operations was $0.03 in the third quarter of 2003.
The company reported a net loss of $1.2 million in the third quarter of
2003, a 75% improvement over the second quarter of 2003. Without reorganization
expenses and the gain on the discharge of debt recorded in the third quarter of
last year, Mpower's net loss would have improved by 96% over the third quarter
of 2002. Mpower's net loss per share was $0.02 in the third quarter of 2003.
Revenue from continuing operations was $36.8 million for the third quarter
of 2003, essentially even with the second quarter of 2003 and the third quarter
of 2002. Offsetting the expected decline in switched access revenue, Mpower's
core customer revenue, which includes revenue from the sale of data and voice
services, increased 2% over the second quarter
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of 2003 and 7% over the third quarter of 2002 reaching $32.7 million and
representing 89% of Mpower's total revenue.
"We continue to grow the profitability and quality of our core customer
revenue streams with revenue from our high margin PRI and T1-based data services
increasing 20% over the last quarter," added Huff. "With the recent investment,
we are in the process of implementing a customer acquisition strategy to
accelerate organic growth. At the same time, we have made significant progress
in maintaining customer revenue with monthly customer retention rates averaging
98% for the third quarter."
Mpower's gross margin from continuing operations was $19.1 million or 52%
of revenue in the third quarter of 2003 as compared to $18.8 million or 50% of
revenue in the second quarter of 2003 and marked a 12% increase over the gross
margin reported in the third quarter of 2002.
The company continued to reduce its operating expenses with selling,
general and administrative (SG&A) costs declining to $18.1 million in the third
quarter of 2003, an 8% improvement over second quarter of 2003 and a 35%
improvement over the third quarter of 2002.
The company's capital expenditures were $2.4 million for the third quarter
of 2003. Mpower ended the third quarter of 2003 with $36.6 million in
unrestricted cash, growing its unrestricted cash position 90% over the second
quarter of 2003 and 158% over the third quarter of 2002. The September 30, 2003
unrestricted cash balance includes approximately $17.5 million received in
connection with the company's equity private placement plus $1.9 million that
was returned to certain potential investors in October 2003 due to
over-subscription of the private placement. In October 2003, $1.1 million was
paid as finder fees for the private placement.
Conference Call to Discuss Third Quarter Results
Mpower will host a conference call to discuss its third quarter financial
and operating results.
Date: Thursday, November 6, 2003
Time: 9:00 a.m. (Eastern time)
Dial-in Number: 1-800-683-1585
Audio Webcast: www.mpowercom.com
Replay Number: 1-877-519-4471, PIN #4279528
From November 6 at 11:00 a.m. through
November 13 at 5:00 p.m.
Eastern
Webcast Replay: Available on Mpower's Web site at: www.mpowercom.com
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Use of Non-GAAP Financial Information
The SEC has adopted rules (Regulation G) regulating the use of non-GAAP
financial measures. Because of Mpower's use of a non-GAAP financial measure,
Adjusted EBITDA, to supplement our consolidated financial statements presented
on a GAAP basis, Regulation G requires us to include in this press release a
presentation of the most directly comparable GAAP measure, which is Net (Loss)
Income, and a reconciliation of the two measures. We have presented a
reconciliation of the two measures for each of the periods presented above. The
non-GAAP measure we utilize (Adjusted EBITDA) provides an enhancement to an
overall understanding of our past financial performance and our prospects for
the future as well as useful information to investors because of (i) the
historical use by Mpower of Adjusted EBITDA as a performance measurement; (ii)
the value of Adjusted EBITDA as a measure of performance before gains, losses or
other charges considered to be outside the company's core business operating
results; and (iii) the use of the Adjusted EBITDA, or a similar term, by almost
all companies in the CLEC sector as a measurement of performance. We have
excluded from our presentation of Adjusted EBITDA network optimization costs
(which are costs resulting principally from the closure of certain of our
markets), stock-based compensation expenses (which are costs related to stock
options issued with an exercise price below fair market value), gains on sales
of assets, reorganization expenses and gain on discharge of debt, because we do
not believe that including such items in Adjusted EBITDA provides investors with
an appropriate measure of determining Mpower's performance in its core business.
Mpower's utilization of non-GAAP measurements is not meant to be considered in
isolation or as a substitute for net loss, loss from continuing operations, cash
flow and other measures of financial performance prepared in accordance with
GAAP. Adjusted EBITDA is not a GAAP measurement and Mpower's use of it may not
be comparable to similarly titled measures employed by other companies in the
telecommunications industry.
About Mpower Holding Corporation
Mpower Holding Corporation (OTCBB: MPOW) is the parent company of Mpower
Communications, a facilities-based broadband communications provider offering a
full range of data, telephony, Internet access and Web hosting services for
small and medium-size business customers. A copy of this press release and
further information about the company can be found at www.mpowercom.com.
Forward-Looking Statements
Under the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995, Mpower Holding Corporation cautions investors that certain
statements contained in this press release that state management's intentions,
hopes, beliefs, expectations or predictions of the future are forward-looking
statements. Management wishes to caution the reader these forward-looking
statements are not historical facts and are only estimates or predictions.
Actual results may differ materially from those projected as a result of risks
and uncertainties including, but not limited to, receipt of all remaining
payments from the previously announced asset sales, future sales growth, market
acceptance of our product offerings, our ability to secure adequate financing or
equity capital to fund our operations, network expansion, our ability to manage
growth and maintain a high level of customer service, the performance of our
network and
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equipment, our ability to enter into strategic alliances or transactions, the
cooperation of incumbent local exchange carriers in provisioning lines and
interconnecting our equipment, regulatory approval processes, changes in
technology, price competition and other market conditions and risks detailed
from time to time in our Securities and Exchange Commission filings. The company
undertakes no obligation to update publicly any forward-looking statements,
whether as a result of future events, new information, or otherwise.
Contacts:
Mpower Communications Investor Contact: Investor Relations Contact:
Gregg Clevenger, Chief Financial Officer Lester Rosenkrantz, Cameron
Telephone: 585-218-6547 Associates
Email: invest@mpowercom.com Telephone: 212-554-5486
Email: Lester@)cameronassoc.com
Mpower Communications Media Contact:
Michele Sadwick, Vice President
Telephone: 585-218-6542
Email: msadwick@mpowercom.com
FINANCIAL STATEMENTS
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Reorganized Reorganized
Mpower Holding Reorganized Mpower Holding
September 30, Mpower Holding December 31,
BALANCE SHEET (amounts in $ thousands) 2003 June 30, 2003 2002
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Current Assets
Cash & Cash Equivalents $36,629 $19,305 $10,773
Restricted Investments 9,765 10,338 13,631
Accounts Receivable, net 22,092 25,477 13,923
Assets Held far Sale -- -- 20,471
Prepaid Expenses and Other Current Assets 5,286 4,800 6,683
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Total Current Assets 73,772 59,920 65,481
Property and Equipment, net 35,597 36,238 38,497
Deferred Financing Costs, net 33 66 16
Intangibles, net 10,094 11,239 13,530
Other Assets 3,744 3,895 9,899
Total Assets $123,240 $111,358 $127,423
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Current Liabilities
Current Maturities of Long-Term Debt and
Capital Leases $1,460 $1,498 $4,638
Line of Credit 3,725 4,124 --
Accounts Payable 18,467 23,917 21,714
Accrued Sales Tax Payable 5,745 5,807 5,753
Accrued Network Optimization Costs 393 1,408 1,480
Accrued Property Taxes Payable 3,527 3,460 3,030
Deferred Revenue 6,763 6,986 4,680
Accrued Other Expenses 16,832 12,748 12,872
Current Liabilities Subject to Compromise -- -- 1,748
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Total Current Liabilities 56,912 59,948 55,915
Capital Lease Obligations 2 59 371
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Total Liabilities 56,914 60,007 56,286
Common stock 78 65 65
Additional Paid-in Capital 103,769 87,618 87,511
Accumulated Deficit (37,521) (36,332) (16,439)
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Total Stockholders' Equity 66,326 51,351 71,137
Total Liabilities and Stockholders' Equity $123,240 $111,358 $127,423
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Reorganized
Mpower Holding Reorganized Reorganized Predecessor
Three Months Mpower Holding Mpower Holding Mpower Holding
Ended Three Months July 31, 2002 to July 1, 2002 to
STATEMENT OF OPERATIONS (amounts in $ thousands, September 30, Ended September 30, July 30,
except share and per share amounts 2003 June 30, 2003 2002 2002
- --------------------------------------------------- ---------------- ---------------- --------------- ----------------
Operating Revenues:
Core Customer $32,708 $32,139 $20,312 $10,196
Switched Access 4,089 5,619 4,550 1,809
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Total Operating Revenues 36,797 37,758 24,862 12,005
Operating Expenses:
Cost of Operating Revenues 17,737 18,953 13,283 6,558
Selling, General and Administrative 18,084 19,587 19,508 8,262
Reorganization Expense -- -- -- 245,681
Stock-Based Compensation Expense 43 29 219 100
Network Optimization Cost (954) -- -- --
Depreciation and Amortization 4,121 3,984 2,989 4,165
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Total Operating Expenses 39,031 42,553 35,999 264,766
Loss from Continuing Operations (2,234) (4,795) (11,137) (252,761)
Gain (Loss) on Sale of Assets, net 185 177 24 (4)
Gain on Discharge of Debt -- -- -- 315,310
Interest Income 40 46 593 304
Interest Expense (102) (184) (1,225) (559)
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(Loss) Income before Discontinued Operations (2,111) (4,756) (11,745) 62,290
Income (Loss) from Discontinued Operations 922 13 (5,076) (4,617)
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Net (Loss) Income (1,189) (4,743) (16,821) 57,673
Accrued Preferred Stock Dividends -- -- -- --
Net (Loss) Income Applicable to Common $(1,189) $(4,743) $(16,821) $57,673
Stockholders
Basic and Diluted Weighted Average Shares 65,762,792 65,022,403 64,999,025 59,465,233
Outstanding
Basic and Diluted (Loss) Income per Share
Applicable to Common Stockholders:
(Loss) Income before Discontinued Operations $(0.03) $(0.07) $(0.18) $1.05
Income (Loss) from Discontinued Operations $0.01 -- $(0.08) $(0.08)
Net (Loss) Income $(0.02) $(0.07) $(0.26) $0.97
Gross Margin $19,060 $18,805 $11,579 $5,447
Gross Margin (% of Revenue) 51.8% 49.8% 46.6% 45.4%
Adjusted EBITDA $976 $(782) $(7,929) $(2,815)
Adjusted EBITDA (% of Revenue) 2.7% -2.1% -31.9% -23.4%
July 31, 2002 to
September 30, September 30, July 1, 2002 to
RECONCILIATION TO GAAP (amounts in $ thousands) 2003 June 30, 2003 2002 July 30, 2002
- --------------------------------------------------- ---------------- ---------------- --------------- ----------------
Adjusted EBITDA $976 $(782) $(7,929) $(2,815)
Depreciation and Amortization (4,121) (3,984) (2,989) (4,165)
Reorganization Expense -- -- -- (245,681)
Network Optimization Cost 954 -- -- --
Stock-Based Compensation Expense (43) (29) (219) (100)
---------------- ---------------- --------------- ----------------
Loss from Continuing Operations (2,234) (4,795) (11,137) (252,761)
Gain (Loss) on Sale of Assets, net 185 177 24 (4)
Gain on Discharge of Debt -- -- -- 315,310
Interest Income 40 46 593 304
Interest Expense (102) (184) (1,225) (559)
---------------- ---------------- --------------- ----------------
(Loss) Income before Discontinued Operations (2,111) (4,756) (11,745) 62,290
Income (Loss) from Discontinued Operations 922 13 (5,076) (4,617)
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Net (Loss) Income (GAAP) $(1,189) $(4,743) $(16,821) $57,673
This information, which is required to be disclosed pursuant to Item 12 of
Form 8-K, is being furnished under Item 12 and this report is not considered
"filed" with the Securities and Exchange Commission. As such, this information
shall not be incorporated by reference into
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any of the Company's reports or other filings made with the Securities and
Exchange Commission.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, Mpower
Holding Corporation has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Date: November 5, 2003 MPOWER HOLDING CORPORATION
By: /s/ Russell I. Zuckerman
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Name: Russell I. Zuckerman
Title: Senior Vice President,
General Counsel and Secretary