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Press Release -- November 6th, 2013
Source: TW Telecom
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tw telecom Reports Third Quarter 2013 Results

Delivers 6.6% Year over Year Revenue Growth with Continued Investing in Growth Initiatives

Announces Accelerated Market Expansion to Extend its Metro and Regional Fiber Network

Completes $328 million of Share Repurchases Year to Date through October 31

November 06, 2013
4:46pm

LITTLETON, Colo., Nov. 6, 2013 /PRNewswire/ -- tw telecom inc. (NASDAQ:TWTC, news, filings), a leading national provider of managed services, including Business Ethernet, converged and IP VPN solutions to enterprises across the U.S. and to their global locations, today announced its third quarter 2013 financial results, including $393.2 million of revenue, $9.4 million net loss, $138.5 million of Modified EBITDA1("M-EBITDA"), $123.9 million of net cash provided by operating activities and $16.3 million of levered free cash flow3.  Excluding debt extinguishment and executive retirement costs, net income was $16.8 million for the quarter.8

"We achieved strong financial and operational execution, as we grew revenue, delivered healthy margins and generated ongoing cash flow and invested in growth initiatives, launched new products and executed on our share repurchase plan," said Larissa Herda, tw telecom's Chairman, CEO and President.  "We have a comprehensive, balanced approach to win market share and we believe our targeted initiatives, including a new market expansion announced today to enter five new markets and accelerate the expansion of over a third of our existing markets, will  increase our sales momentum and the trajectory of our revenue growth."

Highlights for the Third Quarter 2013

  • Grew total revenue 1.0% sequentially and 6.6% year over year
  • Grew enterprise revenue 1.9% sequentially and 8.5% year over year, and grew data and Internet revenue 3.0% sequentially and 14.1% year over year
  • Completed a successful offering of $800 million of Senior Notes, retired 95% of 8% Senior Notes and fully settled the Company's convertible debt
  • Delivered M-EBITDA of $138.5 million, representing a 35.2% M-EBITDA margin1
  • Delivered $123.9 million of net cash provided by operating activities and $16.3 million of levered free cash flow, representing 4.1% of revenue
  • Executed $106.6 million of share repurchases, including $34.0 million under the $500 million plan announced in August

Subsequent Events

  • Announced an accelerated market expansion on November 6th
  • Completed $16 million of share repurchases in October, for a total of $50 million, or 10% year to date through October 31, of the Company's $500 million share repurchase plan

Business Trends

"We delivered strong comprehensive results, ongoing effective balance sheet optimization and continued progress on our growth initiatives," said Mark Peters, tw telecom's Executive Vice President and Chief Financial Officer.  "Because of our ongoing cash flow generation and strong liquidity, we have the ability with our capital allocation plan to invest in growth initiatives such as our new market expansion, further invest in our success-based capital and execute on our $500 million share repurchase plan, as we continue to maintain our balance sheet flexibility."

Market Expansion

Today the Company separately announced an accelerated market expansion to extend its metro fiber footprint into five new high demand markets and accelerate the density of its metro-fiber footprint in 27 existing markets.  "Expanding our fiber infrastructure will allow us to build on our nationwide network by increasing our addressable market, extending our regional connectivity, and strengthening key corridors of commerce for our existing operations," said John Blount, Chief Operating Officer. "By accelerating the expansion of our existing markets using our established operational teams and infrastructure, as well as entering new cities where our customers already have networking needs, this expansion gives us quick access to current demand and an accelerated path to greater revenue opportunities."

As part of this expansion, the Company entered into several agreements for metro and regional fiber that it expects to recognize as a capital lease obligation of approximately $120 million in the fourth quarter of 2013, which will be paid over the initial 20-year lease term.  In 2014, the Company plans additional capital investments to integrate and connect this expansion into its infrastructure as well as add sales, support and other operational personnel.

Operational Metrics

Revenue churn4 was 1.0% for the third quarter of 2013 up from 0.9% in the prior quarter and 0.8% in the same quarter last year.  The increase in churn was the result of service disconnections from one large carrier.  As a component of revenue churn, revenue lost from customers fully disconnecting service remained low at 0.2% for the third quarter of 2013, which is consistent with the prior quarter and the same quarter last year, and indicative of a loyal customer base, strong customer experience strategy and competitive product portfolio.

The Company had approximately 28,900 customers as of September 30, 2013.  Customer churn4 was 0.8% for the third quarter of 2013 down from 0.9% in both the prior quarter and the same quarter last year.  The Company ended the quarter with nearly 30,000 fiber route miles, of which approximately 23,000 were metro miles.

Capital Investments

Capital investments were $102.0 million for the third quarter of 2013 as compared to $101.0 million for the prior quarter and $83.9 million for the same period last year.  The year over year increase primarily reflects higher building entry and network capacity success-based spending and timing of projects, as well as an increase in investments to support the Company's growth initiatives.

The Company expects capital investments for 2013 to be approximately $380 million, excluding its recently announced market expansion, with the majority to be tied to success-based investments.  Additionally, the Company expects to record approximately $120 million in capital investments in the fourth quarter of 2013 related to capital leases for its accelerated market expansion.

Trends and Other

The Company's bookings7, or sales, continued to grow in both the third quarter and for the first nine months of 2013 compared to the same periods last year, as the Company takes market share and sells more to existing customers, although not yet at a high enough rate to achieve the inflection point to accelerate its revenue growth rate.  The Company continues with its growth initiatives, with the goal to increase sales and accelerate its overall revenue growth rate.  These initiatives, which include both operating expense and capital investments, will temporarily impact M-EBITDA margin and cash flow until growth in recurring revenue absorbs the increased costs and investments.

The Company continues to expect business fluctuations to impact sequential trends in revenue, margins and cash flow.  This includes the timing, as well as any seasonality of sales and installations5, usage, rate changes, disputes, settlements, repricing for contract renewals and fluctuations in revenue churn, expenses, capital expenditures and taxes and fees.

Balance Sheet Activities

On July 3, 2013, the remaining $196.5 million outstanding principal amount of the convertible debt was retired for approximately $296.9 million in cash.

On August 26, 2013, the Company completed a private offering of $450 million principal amount of 5.375% Senior Notes due 2022 at an offering price of 96.250% of the principal amount and a private offering of $350 million principal amount of 6.375% Senior Notes due 2023 at an offering price of 100% of the principal amount.  The net proceeds from the offerings were used to fund the repurchase of $406.5 million principal amount of the Company's $430 million principal amount 8% Senior Notes due 2018 that were tendered for $438.7 million plus accrued and unpaid interest in a concurrent cash tender offer and for general corporate purposes.

The Company executed share repurchases of $106.6 million for the quarter and $312.0 million year to date through September.  Through October, the Company executed $50 million year to date of its $500 million share repurchase plan.

Intercarrier Compensation

Intercarrier compensation revenue represented 2% of total revenue as of the third quarter 2013.  Under a 2011 FCC Order, intercarrier compensation rates are declining over a six-year period that began in July 2012, with the latest rate step down occurring in July 2013.  As a result, the Company expects that this rate decrease will have a $2 million revenue impact in the second half of this year, of which approximately $1 million occurred in the third quarter 2013.

Year over Year Results – Third Quarter 2013 compared to Third Quarter 2012

Revenue for the third quarter of 2013 was $393.2 million compared to $368.9 million for the third quarter last year, representing a year over year increase of $24.3 million, or 6.6%.  Revenue grew primarily due to ongoing enterprise revenue growth.  Key changes in revenue included:

  • $25.0 million increase in revenue from enterprise customers, or 8.5% year over year, driven primarily by data and Internet services
  • $0.5 million decrease in revenue from carriers, primarily due to higher churn and repricing for contract renewals in network services, largely offset by growth in Ethernet services
  • $0.2 million decrease in intercarrier compensation revenue primarily reflecting the impact of a mandatory FCC rate reduction in July 2013, offset by an increase in minutes of use

By product line, the percentage change in revenueyear over year was as follows:

  • 14.1% increase for data and Internet services, primarily driven by an increase in strategic Ethernet and VPN based products and other services, partially offset by churn and repricing. Data and Internet revenue represents 55% of total revenue for the quarter compared to 51% a year ago
  • 3.1% increase in voice services, primarily from converged and other voice solutions and certain taxes and fees, partially offset by churn. Voice services revenue represented 24% of total revenue for the quarter compared to 25% a year ago
  • 6.4% decrease in network services, primarily reflecting the net impact of churn and repricing for contract renewals, largely from carrier customers. Network services revenue represents 19% of total revenue for the quarter compared to 22% a year ago

Operating Costs

Operating costs for the third quarter of 2013 increased year over year, which primarily included increases in network access costs as a result of revenue growth, and an increase in employees and related costs, net of capitalized expenses, and network maintenance costs in support of both ongoing growth and the Company's growth initiatives, partially offset by franchise fee settlements.  Operating costs as a percentage of revenue were 41.8% for the quarter compared to 42.3% for the same period last year.  Modified gross margin6 as a percentage of revenue was 58.4% in the third quarter compared to 57.8% in the same period last year.

The Company utilizes a fully burdened modified gross margin, including network costs, and personnel costs for customer care, provisioning, network maintenance, technical field and network operations, excluding non-cash stock-based compensation expense, net of costs capitalized for labor and overhead on capital projects.

Selling, General and Administrative Costs ("SG&A")

SG&A costs increased year over year, primarily as a result of higher employee-related costs, including commissions, expansion of sales and sales support personnel largely to support ongoing growth and the Company's growth initiatives, non-cash stock-based compensation and annual merit-based salary increases, as well as an increase in other administrative costs. SG&A costs in the third quarter included $5.3 million of executive retirement costs, of which $4.3 million is non-cash stock-based compensation expense.  SG&A costs as a percentage of revenue increased to 26.3% for the quarter from 22.6% for the same period last year, reflecting the higher employee costs described above.

Net Income (Loss)

The Company recorded a net loss of $9.4 million for the third quarter of 2013 compared to net income of $21.0 million from thesame period last year, reflecting the impact of debt extinguishment costs of $38.9 million from the refinancing, executive retirement costs of $5.3 million and higher depreciation expense resulting from net asset additions, offset by lower income tax expense.  Excluding debt extinguishment and executive retirement costs, net income was $16.8 million for the quarter.

Net loss per share was $0.07 for the third quarter as compared to basic earnings per share of $0.14 for the same period last year.  Excluding debt extinguishment and executive retirement costs, net of the related tax impacts, basic earnings per share were $0.12 for the quarter.

M-EBITDA and Margins 

M-EBITDA was $138.5 million for the third quarter of 2013, an increase of 1.4% from the same period last year, primarily as a result of revenue growth that was largely offset by costs associated with both ongoing growth and the Company's growth initiatives.

M-EBITDA margin for the quarter was 35.2% as compared to 37.0% for the same period last year, largely due to spending for growth initiatives in advance of expected future revenue growth.  The vast majority of the decline in margin this quarter as compared to the same quarter last year was due to costs associated with growth initiatives that impact both operating and SG&A costs and the balance reflects higher access costs from growing multi-location customer demand both in and outside of the Company's markets.  Additionally, M-EBITDA in the third quarter of 2013 was impacted by $1.0 million for executive retirement costs.

Sequential Results – Third Quarter 2013 compared to Second Quarter 2013

Revenue for the third quarter of 2013 was $393.2 million, as compared to $389.5 million for the second quarter of 2013, an increase of $3.7 million, or 1.0%, representing the 36th consecutive quarter of sequential growth.   Revenue grew primarily due to ongoing enterprise growth.  Key changes in revenue included:

  • $5.8 million increase in enterprise revenue, driven primarily by data and Internet services
  • $1.1 million decrease in carrier revenue, primarily due to the impact of a disconnection from one carrier of $1.1 million, as well as other churn and repricing for contract renewals, offset by growth in Ethernet services
  • $1.0 million decrease in intercarrier compensation revenue, primarily reflecting the impact of a mandatory FCC rate reduction in July 2013

By product line, the percentage change in revenue sequentially was as follows:

  • 3.0% increase for data and Internet services, primarily driven by an increase in strategic Ethernet and VPN-based products and other services, partially offset by churn, repricing and lower settlement and other revenue
  • 0.9% increase in voice services, primarily reflecting an increase in converged solutions, partially offset by churn
  • 3.0% decrease in network services, primarily reflecting the impact of higher churn, largely from one carrier, and repricing for contract renewals

Operating Costs

Operating costs were relatively unchanged sequentially, reflecting higher network access costs as a result of revenue growth, which were offset by franchise fee settlements.  Operating costs were 41.8% of revenue for the third quarter and 42.1% for the second quarter.  Modified gross margin for the third quarter as a percentage of revenue was 58.4% compared to 58.0% in the second quarter.

Selling, General and Administrative Costs

SG&A costs increased sequentially primarily reflecting higher employee-related costs, including growth initiatives, commissions and non-cash stock-based compensation.  SG&A costs in the third quarter included $5.3 million of executive retirement costs, of which $4.3 million is non-cash stock-based compensation expense.  SG&A was 26.3% of revenue for the third quarter and 24.8% for the second quarter.

Net Income (Loss)

The Company recorded a net loss of $9.4 million for the third quarter, compared to net income of $17.3 million in the second quarter, primarily reflecting the impact of debt extinguishment costs of $38.9 million from the refinancing, executive retirement costs of $5.3 million and higher depreciation expense resulting from net asset additions, somewhat offset by a reduction in income tax expense.  Excluding debt extinguishment and executive retirement costs, net income was $16.8 million for the quarter.

Net loss per share was $0.07 for the third quarter compared to basic earnings per share of $0.12 in the second quarter.  Excluding debt extinguishment and executive retirement costs, net of the related tax impacts, basic earnings per share were $0.12 for the quarter.

M-EBITDA and Margins 

M-EBITDA was $138.5 million for the third quarter, an increase of 0.9% from the second quarter primarily as a result of revenue growth and franchise fee settlements, which was largely offset by increased employee costs due to both ongoing growth and the Company's growth initiatives.  Additionally, M-EBITDA in the third quarter of 2013 was impacted by $1.0 million of executive retirement costs.  M-EBITDA margin was 35.2% for the third quarter compared to 35.3% for the second quarter.

tw telecom plans to conduct a webcast conference call to discuss its earnings results on November 7, 2013 at 9:00 a.m. MST (11:00 a.m. EST).  To access the webcast and the financial and other information to be discussed in the webcast, visit www.twtelecom.com under "Investors."

(1) Modified EBITDA (or "M-EBITDA") is defined as net income or loss before depreciation, amortization, accretion, impairment charges and other income and losses, interest expense, debt extinguishment costs, interest income, income tax expense or benefit, cumulative effect of change in accounting principle, and non-cash stock-based compensation expense.  The Company defines Modified EBITDA margin as M-EBITDA divided by total revenue.

(2) Unlevered free cash flow is defined as Modified EBITDA less capital expenditures, which is reconciled to Net Cash provided by (used in) operating activities in the supplemental information posted on the Company's website.

(3) Levered free cash flow is defined as Modified EBITDA less capital expenditures and net interest expense from operations (excluding debt extinguishment costs, non-cash interest expense and deferred debt costs), which is reconciled to Net Cash provided by (used in) operating activities in the supplemental information posted on the Company's website.  

 (4) Revenue churn is defined for the period as average lost recurring monthly billing from a customer's partial or complete disconnection of services (excluding repricing impacts and usage) compared to reported revenue.  Customer churn is defined for the period as average monthly customer turnover compared to the average monthly customer count.

(5) Installations reflect services from signed customer sales that are installed and recognized as revenue from the date of installation.

(6) The Company defines modified gross margin as total revenue less operating costs excluding non-cash stock-based compensation expense.  

(7) Bookings, or sales, are defined as signed customer contracts.  The timing of when these sales are installed and recognized into revenue varies based on the underlying contract.

(8) Net Income and Basic and Diluted EPS excluding debt extinguishment and executive retirement costs, net of tax impacts are Non GAAP measures and are reconciled in the supplemental earnings materials to the most comparable GAAP measure.

Financial Measures
The Company provides financial measures using U.S. generally accepted accounting principles ("GAAP") as well as adjustments to GAAP measures to describe its business trends, including Modified EBITDA.  Management believes that its definition of Modified EBITDA (see above) is a standard measure of operating performance and liquidity that is commonly reported and widely used by analysts, investors, and other interested parties in the telecommunications industry because it eliminates many differences in financial, capitalization, and tax structures, as well as non-cash and non-operating income or charges to earnings.  Modified EBITDA is not intended to replace operating income (loss), net income (loss), cash flow, and other measures of financial performance and liquidity reported in accordance with GAAP.  Management uses Modified EBITDA internally to assess on-going operations and it is the basis for various financial covenants contained in the Company's debt agreements and for operating performance and liquidity.  Modified EBITDA is reconciled to Net Income (Loss), the most comparable GAAP measure for operating performance within the Consolidated Operations Highlights and in the supplemental information posted on the Company's website.  Modified EBITDA, as a measure of liquidity, is also reconciled to Net Cash provided by operating activities on the Company's website.

In addition, management uses unlevered and levered free cash flow, which measure the ability of M-EBITDA to cover capital expenditures.  The Company uses these cash flow definitions to eliminate certain non-cash costs.  Levered and unlevered free cash flow are reconciled to Net Cash provided by operating activities and also to Modified EBITDA in the supplemental information posted on the Company's website.  The Company also provides an adjustment to the measure gross margin by eliminating the impact of non-cash stock-based compensation expense.  Management uses modified gross margin internally to assess on-going operations.  Modified gross margin is reconciled to gross margin in the financial tables. The Company also provides Net Income and Basic and Diluted EPS excluding debt extinguishment and executive retirement costs, which management believes is useful to analysts and investors to enhance comparability to prior periods and help identify operating trends.  The supplemental information posted to the Company's website reconciles net income and Basic and Diluted EPS excluding debt extinguishment and executive retirement costs to the most comparable GAAP measure.

Forward Looking Statements
The statements in this press release and related conference call concerning the outlook for 2013 and beyond, including statements regarding product and platform plans, growth prospects, market opportunities, market expansion, sales growth, cash flow and cash balances, growth initiatives, sales force, customer opportunities, network capabilities, sales and installations timing, demand, revenue growth, margins, expense trends, service disconnections, business trends and fluctuations, future share repurchases and expected capital expenditures are forward-looking statements that reflect management's views with respect to future events and financial performance.  These statements are based on management's current expectations and are subject to risks and uncertainties.  Important factors that could cause actual results to differ materially from those in the forward looking statements include the risks disclosed in the Company's SEC filings, especially the section entitled "Risk Factors" in its 2012 Annual Report on Form 10-K and in "Risk Factors" and elsewhere in its subsequent quarterly reports on Form 10-Q and its quarterly report on Form 10-Q for the quarter ended September 30, 2013 to be filed shortly hereafter.  tw telecom undertakes no obligations to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

About tw telecom
tw telecom, headquartered in Littleton, Colo., is a leading national provider of managed services, including Business Ethernet, converged and IP VPN solutions for enterprises throughout the U.S. and globally. tw telecom also delivers secure, scalable private connections for transport data networking, Internet access, voice, VPN, VoIP and security to large organizations and communications services companies. Employing a resilient fiber network infrastructure, robust product portfolio and its own Intelligent Network capabilities, tw telecom delivers customers overall economic value, an industry-leading quality service experience, and improved business productivity. Please visit www.twtelecom.com for more information.

tw telecom inc.
Consolidated Operations Highlights
(Dollars in thousands)
Unaudited (1)
Three Months Ended Nine Months Ended
September 30, September 30,
2013 2012 Growth % 2013 2012 Growth %
Revenue
Data and Internet services $215,876 $189,164 14.1% $627,592 $548,495 14.4%
Voice services 93,913 91,052 3.1% 279,348 271,681 2.8%
Network services 76,100 81,261 -6.4% 233,450 249,074 -6.3%
Service Revenue 385,889 361,477 6.8% 1,140,390 1,069,250 6.7%
Intercarrier compensation 7,301 7,457 -2.1% 23,492 23,112 1.6%
Total Revenue 393,190 368,934 6.6% 1,163,882 1,092,362 6.5%
Expenses
Operating costs 164,254 156,195 489,467 458,374
Gross Margin 228,936 212,739 674,415 633,988
Selling, general and administrative costs 103,438 83,341 293,438 254,011
Depreciation, amortization and accretion 78,566 70,726 228,613 209,589
Operating Income  46,932 58,672 -20.0% 152,364 170,388 -10.6%
Interest expense (20,270) (15,495) (62,303) (46,551)
Non-cash interest expense and deferred debt costs (1,255) (6,330) (9,106) (18,715)
Debt extinguishment costs (38,915) (77) (39,314) (77)
Interest income 98 84 548 281
Income (Loss) before income taxes (13,410) 36,854 -136.4% 42,189 105,326 -59.9%
Income tax expense (benefit) (3,976) 15,885 21,132 45,706
Net Income (Loss) ($9,434) $20,969 -145.0% $21,057 $59,620 -64.7%
SUPPLEMENTAL INFORMATION TO RECONCILE MODIFIED GROSS MARGIN AND MODIFIED EBITDA
Gross Margin $228,936 $212,739 $674,415 $633,988
Add back non-cash stock-based compensation expense 528 473 1,656 1,428
Modified Gross Margin 229,464 213,212 7.6% 676,071 635,416 6.4%
Selling, general and administrative costs 103,438 83,341 293,438 254,011
Add back non-cash stock-based compensation expense 12,475 6,667 29,223 20,889
Modified EBITDA 138,501 136,538 1.4% 411,856 402,294 2.4%
Non-cash stock-based compensation expense 13,003 7,140 30,879 22,317
Depreciation, amortization and accretion 78,566 70,726 228,613 209,589
Net interest expense 20,172 15,411 61,755 46,270
Non-cash interest expense and deferred debt costs 1,255 6,330 9,106 18,715
Debt extinguishment costs 38,915 77 39,314 77
Income tax expense (benefit) (3,976) 15,885 21,132 45,706
Net Income (Loss) ($9,434) $20,969 $21,057 $59,620
Modified Gross Margin % 58.4% 57.8% 58.1% 58.2%
Modified EBITDA Margin % 35.2% 37.0% 35.4% 36.8%
Free Cash Flow
Modified EBITDA $138,501 $136,538 1.4% $411,856 $402,294 2.4%
Less: Capital Expenditures 102,037 83,900 21.6% 293,848 243,801 20.5%
Unlevered Free Cash Flow 36,464 52,638 -30.7% 118,008 158,493 -25.5%
Less: Net interest expense 20,172 15,411 30.9% 61,755 46,270 33.5%
Levered Free Cash Flow  $16,292 $37,227 -56.2% $56,253 $112,223 -49.9%
(1) For complete financials and related footnotes, please refer to the Company's SEC filings.
tw telecom inc.
Consolidated Operations Highlights
(Dollars in thousands)
Unaudited (1)
Three Months Ended
Sept 30 June 30
2013 2013 Growth %
Revenue
Data and Internet services $215,876 $209,634 3.0%
Voice services 93,913 93,080 0.9%
Network services 76,100 78,487 -3.0%
Service Revenue 385,889 381,201 1.2%
Intercarrier compensation 7,301 8,282 -11.8%
Total Revenue 393,190 389,483 1.0%
Expenses
Operating costs 164,254 164,131
Gross Margin 228,936 225,352
Selling, general and administrative costs 103,438 96,438
Depreciation, amortization and accretion 78,566 75,652
Operating Income  46,932 53,262 -11.9%
Interest expense (20,270) (20,487)
Non-cash interest expense and deferred debt costs (1,255) (1,057)
Debt extinguishment costs (38,915) (399)
Interest income 98 173
Income (Loss) before income taxes (13,410) 31,492 -142.6%
Income tax expense (benefit) (3,976) 14,145
Net Income (Loss) ($9,434) $17,347 -154.4%
SUPPLEMENTAL INFORMATION TO RECONCILE MODIFIED GROSS MARGIN AND MODIFIED EBITDA
Gross Margin $228,936 $225,352
Add back non-cash stock-based compensation expense 528 545
Modified Gross Margin 229,464 225,897 1.6%
Selling, general and administrative costs 103,438 96,438
Add back non-cash stock-based compensation expense 12,475 7,869
Modified EBITDA 138,501 137,328 0.9%
Non-cash stock-based compensation expense 13,003 8,414
Depreciation, amortization and accretion 78,566 75,652
Net interest expense 20,172 20,314
Non-cash interest expense and deferred debt costs 1,255 1,057
Debt extinguishment costs 38,915 399
Income tax expense (benefit) (3,976) 14,145
Net Income (Loss) ($9,434) $17,347
Modified Gross Margin % 58.4% 58.0%
Modified EBITDA Margin % 35.2% 35.3%
Free Cash Flow
Modified EBITDA $138,501 $137,328 0.9%
Less: Capital Expenditures 102,037 100,958 1.1%
Unlevered Free Cash Flow 36,464 36,370 0.3%
Less: Net interest expense 20,172 20,314 -0.7%
Levered Free Cash Flow $16,292 $16,056 1.5%
(1) For complete financials and related footnotes, please refer to the Company's SEC filings.
tw telecom inc.
Highlights of Results Per Share
Unaudited (1) (2) 
Three Months Ended
Sept. 30 Jun. 30 Sept. 30
2013 2013 2012
Weighted Average Shares Outstanding (thousands)
Basic 142,920 147,071 147,973
Diluted (2) 142,920 148,342 150,359
Basic Income (Loss) per Common Share
Prior to impacts of debt extinguishment and retirement compensation costs $0.12 $0.12 $0.14
Debt extinguishment and retirement compensation costs, net of tax effects ($0.19) - -
Total ($0.07) $0.12 $0.14
Diluted Income (Loss) per Common Share
Prior to impacts of debt extinguishment and retirement compensation costs $0.11 $0.11 $0.14
Debt extinguishment and retirement compensation costs, net of tax effects ($0.18) - -
Total ($0.07) $0.11 $0.14
As of
Sept. 30 Jun. 30 Sept. 30
2013 2013 2012
Common shares (thousands)
Actual Shares Outstanding 144,463 147,618 151,271
Unvested Restricted Stock Units and Restricted Stock Awards (thousands) 4,003 4,199 4,598
Options (thousands)
Options Outstanding 1,256 1,762 5,065
Options Exercisable 1,112 1,606 4,369
Options Exercisable and In-the-Money 1,112 1,606 4,369
(1) For complete financials and related footnotes, please refer to the Company's SEC filings.
(2) Stock options, restricted stock units/awards and convertible debt subject to conversion, are excluded from the computation of diluted weighted average shares outstanding if inclusion would be anti-dilutive. See the Company's SEC filings for more details.
tw telecom inc.
Condensed Consolidated Balance Sheet Highlights
(Dollars in thousands)
Unaudited (1)
Sept. 30 Jun. 30 Sept. 30
2013 2013 2012
ASSETS
Cash, equivalents, and short term investments $569,521 $614,420 $459,397
Receivables 110,589 116,470 114,407
Less: allowance (6,899) (6,705) (7,693)
Net receivables 103,690 109,765 106,714
Prepaid expenses and other current assets 25,199 28,817 19,475
Deferred income taxes 76,160 76,160 65,008
Total other current assets 101,359 104,977 84,483
Property, plant and equipment 4,495,600 4,421,375 4,186,321
Less:  accumulated depreciation (2,921,701) (2,874,081) (2,721,086)
Net property, plant and equipment  1,573,899 1,547,294 1,465,235
Deferred income taxes 81,718 77,582 123,063
Goodwill 412,694 412,694 412,694
Intangible assets, net of accumulated amortization 13,056 14,557 19,362
Other assets, net 45,368 33,897 22,736
Total other non-current assets 552,836 538,730 577,855
Total $2,901,305 $2,915,186 $2,693,684
LIABILITIES AND STOCKHOLDERS' EQUITY 
Current Liabilities
Accounts payable $62,681 $61,321 $61,819
Deferred revenue 47,016 47,501 44,413
Accrued taxes, franchise and other fees 56,259 57,747 65,975
Accrued interest 27,480 19,408 7,653
Accrued payroll and benefits 48,554 47,174 40,840
Accrued carrier costs 16,330 24,327 23,988
Current portion of debt and lease obligations 7,954 203,902 369,404
Other current liabilities 35,148 37,571 29,227
Total current liabilities 301,422 498,951 643,319
Long-Term Debt and Capital Lease Obligations 
2 3/8% convertible senior debentures, due 4/1/2026 - 196,497 373,743
Unamortized Discount - - (11,168)
Net - 196,497 362,575
Floating rate senior secured debt - Term Loan B, due 12/30/2016 - - 464,250
8% senior unsecured notes, due 3/1/2018, net of unamortized discount 23,386 428,195 427,905
Floating rate senior secured debt - Term Loan B, due 4/17/2020, net of unamortized discount 516,270 517,477 -
5 3/8% senior unsecured notes, due 10/1/2022 issued Oct 2012 480,000 480,000 -
5 3/8% senior unsecured notes, due 10/1/2022 issued Aug 2013, net of unamortized discount 433,280 - -
6 3/8% senior unsecured notes, due 9/1/2023 350,000 - -
Capital lease obligations 27,835 23,536 17,917
Less: current portion (7,954) (203,902) (369,404)
Total long-term debt and capital lease obligations 1,822,817 1,441,803 903,243
Long-Term Deferred Revenue 20,851 21,615 24,031
Other Long-Term Liabilities  44,577 44,203 36,840
Stockholders' Equity  711,638 908,614 1,086,251
Total $2,901,305 $2,915,186 $2,693,684
(1) For complete financials and related footnotes, please refer to the Company's SEC filings.
tw telecom inc.
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
Unaudited (1)
Three Months Ended
Sept. 30, Jun. 30, Sept. 30,
2013 2013 2012
Cash flows from operating activities:
Net Income (Loss) ($9,434) $17,347 $20,969
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion 78,566 75,652 70,726
Deferred income taxes (4,186) 13,672 15,329
Stock-based compensation expense 13,003 8,414 7,140
Loss on debt extinguishment 38,916 399 77
Amortization of discount on debt and deferred debt costs 1,256 1,055 6,330
Changes in operating assets and liabilities:
Accounts receivable, net 6,075 (5,335) (5,806)
Prepaid expenses and other current and noncurrent assets (766) (1,759) 1,226
Accounts payable 3,033 (1,155) 3,172
Accrued interest 8,255 (1,078) (6,239)
Accrued payroll and benefits 1,483 13,457 165
Deferred revenue, current and noncurrent (1,249) (96) (41)
Other current and noncurrent liabilities (11,046) 4,387 (1,863)
Net cash provided by operating activities 123,906 124,960 111,185
Cash flows from investing activities:
Capital expenditures (97,550) (99,709) (83,474)
Purchase of investments (49,686) (106,591) (19,927)
Proceeds from sale of investments 90,250 91,051 20,828
Other investing activities, net (2,090) 1,775 (1,178)
Net cash used in investing activities (59,076) (113,474) (83,751)
Cash flows from financing activities:
 

Net proceeds (tax withholdings) from issuance of common stock upon exercise of stock options and vesting of restricted stock awards and units

6,340 26,401 4,307
Purchases of treasury stock (108,701) (142,683) -
Excess tax benefits (shortfalls) from stock-based compensation (251) 343 500
Proceeds from modification of debt, net of financing costs - 49,684 -
Proceeds from issuance of debt, net of financing costs 766,155 - -
Retirement of debt obligations (735,630) (256,289) (101,518)
Payment of debt and capital lease obligations (1,671) (387) (1,601)
Net cash used in financing activities (73,758) (322,931) (98,312)
Decrease in cash and cash equivalents (8,928) (311,445) (70,878)
Cash and cash equivalents at the beginning of the period 420,265 731,710 387,678
Cash and cash equivalents at the end of the period $411,337 $420,265 $316,800
Supplemental disclosures cash, equivalents and short term investments
Cash and cash equivalents at the end of the period $411,337 $420,265 $316,800
Short term investments 158,184 194,155 142,597
Total of cash, equivalents and short term investments $569,521 $614,420 $459,397
Supplemental disclosures of cash flow information:
Cash paid for interest $22,252 $21,909 $22,009
Cash paid for income taxes, net of refunds $52 $4,537 $1,508
Cash paid for debt extinguishment costs $32,193 $469 $0
Addition of capital lease obligation $4,487 $1,249 $426
Supplemental information to reconcile capital expenditures:
Capital expenditures per cash flow statement $97,550 $99,709 $83,474
Addition of capital lease obligation 4,487 1,249 426
Total capital expenditures $102,037 $100,958 $83,900
(1) For complete financials and related footnotes, please refer to the Company's SEC filings.
tw telecom inc.
Selected Operating Statistics
Unaudited (1)
Three Months Ended
2012 2013
Mar. 31 Jun. 30 Sept. 30 Dec. 31 Mar. 31 Jun. 30 Sept. 30
Operating Metrics:
Buildings  (2)  15,905 16,367 16,919 17,948 18,466 19,082 19,648
Headcount 
Total Headcount 3,059 3,089 3,087 3,147 3,191 3,287 3,327
Sales Associates 551 546 543 574 578 612 633
Customers 
Total Customers 27,495 27,569 27,699 27,966 28,292 28,526 28,855
(1) For complete financials and related footnotes, please refer to the Company's SEC filings.
(2) Reflects on-net buildings and ILEC Local Serving Offices (LSOs) directly served by the Company's fiber network.

SOURCE tw telecom inc.

For further information: Investor Relations: Carole Curtin, 303 566-1000, carole.curtin@twtelecom.com, or Media Relations: Bob Meldrum, 303 566-1354, bob.meldrum@twtelecom.com

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