- Revenues during the third quarter of 2006 decreased 3.0% from the
second quarter of 2006 due primarily to lower revenues resulting
from lower minutes of use as Internet dial-up ISPs reduced
services. Revenues during the third quarter of 2006 increased 17.0%
from the third quarter of 2005 primarily due to settlements of
approximately $9.5 million, which was 36% of revenues, received in
the third quarter of 2006 compared to settlements of $2.2 million
in 2005, partially offset by lower revenues resulting from lower
minutes of use and a reduction in mature products services.
STOCKTON, Calif., Nov. 21 /PRNewswire-FirstCall/ -- Pac-West
Telecomm, Inc. (OTC:PACW.PK) (BULLETIN BOARD: PACW.PK) , a leading
provider of next generation and traditional voice communications
services, today announced its results for the third quarter of
2006. Hank Carabelli, President and CEO, commented, "It has been a
challenging few quarters for us as revenue from our mature products
continued to decline while progress continued on our planned
national expansion. In addition, we were engaged in a comprehensive
search for financing and a review of restructuring alternatives,
including seeking court protection from creditors. The culmination
of this process was the completion of a financial restructuring
announced on November 15, 2006, which we believe can benefit all of
our stakeholders while providing financing to continue our planned
national expansion." Operating Highlights Third quarter total
minutes of use declined for a fourth consecutive quarter by
decreasing to 6.6 billion compared to 8.8 billion in the second
quarter of 2006 and decreasing from 12.2 billion in the third
quarter of 2005, primarily due to a continuing decline in the
Internet dial-up business as customers transition from dial-up to
broadband in addition to customers moving their traffic onto
competitor networks. Financial Highlights Three Months Ended ($ in
millions, except per Sept. 30, June 30, Sept. 30, share amounts)
2006 2006 2005 Total revenues $26.2 $27.0 $22.4 Net income (loss)
$2.3 ($0.8) ($0.1) Diluted net income (loss) per share $0.06
($0.02) ($0.00) Cash, cash equivalents & short-term investments
$21.7 $20.5 $24.0 Minutes of use (billions) 6.6 8.8 12.2 Revenues -
Third quarter 2006 revenues decreased 3.0% from the second quarter
of 2006 primarily due to lower revenues resulting from lower
minutes of use as Internet dial-up ISPs reduced services. Revenues
during the third quarter of 2006 increased 17.0% from the third
quarter of 2005 primarily due to settlements with a carrier for
previously disputed amounts and a settlement and restructuring
agreement with an ISP of approximately $9.5 million, which was 36%
of revenues, received in the third quarter of 2006 compared to
settlements of $2.2 million in 2005, partially offset by lower
revenues resulting from lower minutes of use and a reduction in
mature products services. Expenses - Third quarter network expenses
decreased 8.3% from the second quarter of 2006 primarily due to a
settlement and restructuring agreement with an ISP in the third
quarter of 2006 partially offset by increased expenses related to
our national expansion. Third quarter 2006 network expenses
increased 3.1% from the third quarter of 2005 due primarily to
increased expenses related to our national expansion, partially
offset by former customers transitioning off our network as a
result of the sale of substantially all of our enterprise customer
base to TelePacific's network in addition to cost reduction
efforts. Third quarter 2006 selling, general and administrative
expenses (SG&A) decreased 22.8% from the second quarter of 2006
due primarily to lower employee related costs, lower contract labor
and reduced professional costs, in addition to savings from other
cost reduction activities. Third quarter 2006 SG&A decreased
11.5% from the third quarter of 2005 primarily due to suspended
compensation associated with company and individual team
performance goals, reduced professional costs and savings from
other cost reduction activities. Reimbursed transition expenses
(RTE) relate to network and administrative services provided by the
company under a Transition Service Agreement (TSA) entered into
with TelePacific Corp. in connection with the sale of the
enterprise customer base that obligated the company to provide
transition services to TelePacific at our estimated cost. The TSA
ended on September 12, 2006. RTE decreased 46.4% from second
quarter 2006 and 66.67% from third quarter 2005 as TelePacific
continues to migrate its customers to their own network.
Depreciation and amortization decreased $0.1 million and $0.4
million from the second quarter of 2006 and the third quarter or
2005, respectively, due primarily to assets becoming fully
depreciated during the period, slightly offset by an increase in
deprecation for new assets acquired in connection with our national
expansion. Net income (loss) - Net income for the third quarter of
2006 was $2.3 million compared to a net loss of $0.8 million in the
second quarter of 2006, and compared to a net loss of $0.1 million
in the third quarter of 2005, due to factors discussed in the
preceding paragraphs. Net income in the third quarter of 2006 was
primarily attributable to the settlements of $9.5 million.
Liquidity - Cash, cash equivalents and short-term investments
increased $1.2 million to $21.7 at the end of the third quarter of
2006 from $20.5 million at the end of the second quarter of 2006.
Cash, cash equivalents and short-term investments remained
relatively stable between the second and third quarters of 2006
primarily due to settlements of $9.4 million in the second quarter
and $9.5 million in the third quarter. Supplemental Financial and
Operational Data Additional supplemental financial and operational
data can be accessed in a summary that is posted on Pac-West's
website at http://www.pacwest.com/investor/supplemental .
Pac-West's filings with the SEC are also available online at
http://www.pacwest.com/investor . About Pac-West Telecomm, Inc.
Pac-West is a provider of advanced communications services that
enable traditional and next-generation providers, carriers, and
service providers to efficiently design, deploy, and deliver
integrated communication solutions. Currently, Pac-West has
operations in California, Nevada, Washington, Arizona, Utah,
Oregon, Idaho, Washington D.C., Colorado, Pennsylvania, Florida,
Maryland, New Jersey, North Carolina, South Carolina, New York and
Alabama. Founded in 1980, Pac-West Telecomm, Inc. has been offering
communication services to its customers since 1982 and has been a
leading provider of wholesale services to Internet Service
Providers. For more information, visit http://www.pacwest.com/.
Forward-Looking Statements In this press release, our use of the
words "outlook," "expect," "anticipate," "estimate," "forecast,"
"project," "likely," "objective," "plan," "designed," "goal,"
"target," and similar expressions is intended to identify
forward-looking statements. While these statements represent our
current judgment on what the future may hold, and we believe these
judgments are reasonable, actual results may differ materially due
to numerous important risk factors, including risk factors that are
described in our Annual Report on Form 10-K for the period ended
December 31, 2005, as filed with the SEC on March 29, 2006, which
may be revised or supplemented in subsequent reports filed by us
with the SEC. Such risk factors include, but are not limited to:
our level of indebtedness; our inability to comply with the
covenants contained in, or the possibility of triggering a default
under, our borrowing arrangements, our inability to execute our
business plans and objectives, regulatory and legal uncertainty
with respect to intercarrier compensation payments received by us;
declines in liquidity and/or increases in volatility in the markets
for securities; the migration to broadband Internet access
affecting dial-up Internet access; the loss of key executive
officers that could negatively impact our business prospects; an
increase in our network expenses; our principal competitors for
local services and potential additional competitors, which may have
advantages that may adversely affect our ability to compete with
them. Pac-West Telecomm, Inc. Condensed Consolidated Statements of
Operations (In thousands except per share amounts) Three Months
Ended Nine Months Ended Sept. 30, Sept. 30, (unaudited) (unaudited)
2006 2005 2006 2005 Revenues $26,171 $22,383 $72,827 $72,383 Costs
and expenses: Network expenses (exclusive of depreciation shown
separately below) 9,906 9,628 29,711 29,901 Selling, general and
administrative 11,465 13,006 39,987 40,127 Reimbursed transition
expenses (1,501) (4,470) (7,171) (7,318) Depreciation and
amortization 2,980 3,365 8,925 10,349 Restructuring charges, net of
reversals (11) 24 254 630 Total operating expenses 22,839 21,553
71,706 73,689 Income (loss) from operations 3,332 830 1,121 (1,306)
Interest expense, net 1,424 1,091 4,328 5,198 Other (income), net
(298) (51) (314) (21,840) Income (loss) before income taxes 2,206
(210) (2,893) 15,336 Income tax (benefit) expense (118) (84) (118)
438 Net income (loss) $2,324 $(126) $(2,775) $14,898 Basic weighted
average number of shares outstanding 37,268 37,132 37,230 36,958
Diluted weighted average number of shares outstanding 37,293 37,132
37,230 38,718 Basic net income (loss) per share $0.06 ($0.00)
($0.07) $0.40 Diluted net income (loss) per share $0.06 ($0.00)
($0.07) $0.38 Condensed Consolidated Balance Sheets (In thousands)
Sept. 30, 2006 (unaudited) Dec. 31, 2005 Cash and cash equivalents
$21,738 $26,681 Trade accounts receivable, net 13,770 7,806 Prepaid
expenses and other current assets 3,289 4,299 Total current assets
38,797 38,786 Property and equipment, net 43,068 39,458 Other
assets, net 787 1,079 Total assets $82,652 $79,323 Accounts payable
and accrued liabilities $15,576 $12,931 Other current liabilities
8,314 9,563 Total current liabilities 23,890 22,494 Long-term debt
47,512 43,350 Other liabilities, net 293 242 Total liabilities
71,695 66,086 Stockholders' equity 10,957 13,237 Total liabilities
and stockholders' equity $82,652 $79,323 DATASOURCE: Pac-West
Telecomm, Inc. CONTACT: investors, Reid Cox of Pac-West,
+1-209-926-3417, or Web site: http://www.pacwest.com/
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