Exhibit 99.1
Davel Communications, Inc. Reports Second Quarter 2004 Financial Results
CLEVELAND--(BUSINESS WIRE)--Aug. 13, 2004--Davel Communications, Inc.
(OTCBB:DAVL) today announced financial results for the quarter ended June 30,
2004.
The net loss for the quarter was $2.9 million, or $0.01 per common share,
compared to a net loss of $33.7 million, or $0.05 per common share, in 2003. The
reported net loss includes adjustments to dial-around revenues of $1.2 million
in the quarter ended June 30, 2004 and asset impairment charges of $27.1 million
in the second quarter of 2003 to write-down the carrying value of the Company's
payphone assets and goodwill to their fair values. The dial-around adjustment in
2004 is principally due to the recovery of prior years' dial-around compensation
relating to a mandatory industry-wide reconciliation among long-distance
carriers and payphone providers resulting from retroactive rate changes ordered
by the FCC. Without these adjustments, the Company's net loss would have
declined by $2.5 million, or 37.9%.
Total revenues for the second quarter of 2004, which includes the $1.2
million dial-around compensation adjustment described above, were $14.1 million
compared to $19.7 million in the same period of 2003. Without the dial-around
adjustment, total revenues decreased $6.8 million, or 34.5%, primarily due to a
reduction in the average number of payphones in service as well as a 5.4%
decline in average revenues per phone. The decline in revenues per phone is
attributable to the decline in payphone usage arising from the impact of
wireless communications, which prompted the Company to aggressively pursue its
previously announced strategy to remove low revenue payphones during 2003 and
2004.
On August 12, 2004, the FCC released an order to increase the dial-around
compensation rate from $0.24 per call to $0.494 per call (the "2004 Order"). The
new rate will become effective 30 days after publication in the Federal Register
and may be subject to appeal by long-distance carriers or other parties.
Although the Company expects the 2004 Order to be in effect during the fourth
quarter of 2004, the Company is unable to determine the potential increase in
revenues due to the uncertainty regarding the effect of the rate increase, if
any, on the volume of dial-around calls.
Total operating expenses for the second quarter of 2004 declined by $9.2
million, or 37.2%, due to a decrease in the average number of payphones in
service during the second quarter of 2004 and cost saving measures initiated by
the Company during 2003 and 2004. The Company expects further cost savings
during 2004 as a result of its efforts to reduce telephone charges by utilizing
competitive local exchange and alternate carriers, by outsourcing certain
payphone collection and maintenance activities and other operating expense
reductions.
The Company's second quarter losses from operations, which include the
dial-around compensation adjustments and asset impairment charges described
above, decreased from $32.1 million in 2003 to $1.4 million in 2004. Without
these adjustments, the Company's loss from operations would have declined by
$2.4 million, or 48.0%.
Total revenues in the first half of 2004 were $27.3 million compared to
$42.6 million in the first half of 2003. Total revenues include $2.4 million and
$3.9 million of net revenues from dial-around compensation adjustments in the
first half of 2004 and 2003, respectively. Without these adjustments, total
revenues decreased by $13.8 million, or 35.7%, primarily due to the decrease in
the average number of payphones in service and the decrease in revenues per
phone as discussed above. Operating expenses declined by $18.6 million, or
36.6%, from $50.8 million in the first half of 2003 to $32.2 million in the
first half of 2004. This decrease is primarily due to the reduction in pay
telephones and the cost savings initiatives described above. The Company's
operating loss, decreased from $35.3 million in the first six months of 2003 to
$4.9 million in 2004 primarily as a result of the second quarter 2003 asset
impairment charges. The net loss for the six months ended June 30, 2004 was $7.9
million, or $0.01 per common share, compared to a net loss of $38.5 million, or
$0.06 per common share in 2003. Without the asset impairment charges, the
Company's net loss would have declined by $3.5 million, or 30.7%.
At June 30, 2004, the Company was not in compliance with certain financial
covenants and did not make a $1.4 million debt payment due under its secured
credit agreement. The Company has executed an amendment to its secured credit
agreement that provides for the deferral of the required payment and waives
compliance with the applicable financial covenants. The Company has also had
discussions with its lenders regarding the possible restructuring of its $126.5
million secured debt. Any such restructuring could potentially include a
debt-for-equity exchange that may substantially dilute the interests of the
Company's existing non-lender shareholders. There can be no assurance that the
Company's lenders, who own more than 95% of the Company's common stock, will be
willing to negotiate a reduction in the outstanding balance due under the
secured credit agreement.
Founded in 1979, Davel is the largest independent provider of pay
telephones and related services in the United States with operations in 46
states and the District of Columbia. Davel serves a wide array of customers
operating principally in the shopping center, hospitality, health care,
convenience store, university, service station, retail and restaurant
industries.
Forward-Looking Statements
Certain of the statements contained herein may be, within the meaning of
the federal securities laws, "forward-looking statements" that are subject to
risks and uncertainties that could cause actual results to differ materially
from those described in the forward-looking statements. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of the Company
to be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. See the Company's Form
10-K for the year ended December 31, 2003 and its Form 10-Q for the quarter
ended June 30, 2004 for a discussion of such risks, uncertainties, and other
factors. These forward-looking statements are based on management's expectations
as of the date hereof, and the Company does not undertake any responsibility to
update any of these statements in the future.
DAVEL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except for share and per share amounts)
- ----------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
(Unaudited) (Unaudited)
--------------------------- ---------------------------
2004 2003 2004 2003
------------- ------------- ------------- -------------
Revenues:
Coin calls $ 8,919 $ 13,520 $ 17,750 $ 26,699
Non-coin
calls 4,013 6,202 7,149 12,013
Dial-around
compensation
adjustments 1,206 - 2,422 3,928
------------ ------------ ------------ ------------
14,138 19,722 27,321 42,640
Operating expenses:
Operating
expenses 15,508 24,700 32,189 50,820
Asset
impairment
charges - 27,141 - 27,141
------------ ------------ ------------ ------------
15,508 51,841 32,189 77,961
------------ ------------ ------------ ------------
Loss from
operations (1,370) (32,119) (4,868) (35,321)
Interest
expense, net (1,669) (1,663) (3,281) (3,249)
Other income 158 66 236 112
------------ ------------ ------------ ------------
Net loss $ (2,881) $ (33,716) $ (7,913) $ (38,458)
============ ============ ============ ============
Net loss per
common share,
basic and
diluted ($0.01) ($0.05) ($0.01) ($0.06)
============ ============ ============ ============
Weighted
average shares
outstanding,
basic and
diluted 615,018,963 615,018,963 615,018,963 615,018,963
============ ============ ============ ============
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
- ----------------------------------------------------------------------
June 30
2004 December 31
(Unaudited) 2003
------------ -----------
Assets
Total current assets $ 11,991 $ 18,672
Property and equipment, net 18,004 22,878
Intangible assets, net 5,198 6,746
Other assets 1,888 2,026
----------- ----------
Total assets $ 37,081 $ 50,322
=========== ==========
Liabilities and shareholders' deficit
Current liabilities $ 22,057 $ 26,861
Long-term debt 125,438 125,962
Shareholders' deficit (110,414) (102,501)
----------- ----------
Total liabilities and shareholders' deficit $ 37,081 $ 50,322
=========== ==========
CONTACT: Davel Communications, Inc.
Woody McGee or Donald L. Paliwoda, 216-241-2555