Washington Post

Primus Reports Its First Profit

Va. Telecom's Moves to Buy Back Debt Cut Key Interest Payments

The company, which previously told Wall Street it would become profitable later this year, now expects to turn a profit all year, he said.

By Yuki Noguchi
Washington Post Staff Writer
Friday, May 2, 2003; Page E05

Primus Telecommunications Group Inc. of McLean reported its first profitable quarter in its nine years of existence, a result of increasing sales and dramatic reduction of interest payments on its debt.

Primus, which is a brand of voice and Internet services better known outside of the United States, posted a profit of $11.2 million (13 cents per share) on revenue of $300.4 million. During the same period of last year, the company earned $9.8 million (15 cents) on revenue of $244.7 million, but that was primarily the result of a $27.3 million gain from the discounted buyback of its debt. Without that one-time gain, Primus would have lost money in last year's first quarter.

"There are not too many telecom companies talking about top-line growth," said John F. DePodesta, executive vice president of Primus.

The company, which previously told Wall Street it would become profitable later this year, now expects to turn a profit all year, he said.

Primus's revenue gains came in the form of better-than-expected sales from the business customers it acquired from Cable & Wireless PLC earlier this year, as well as strong Internet sales in Australia, DePodesta said. Also, because most of Primus's revenue comes from outside the United States, its revenue was boosted by the relative weakness of the dollar, he said.

"They're profitable. That's a huge thing," said Vik Grover, an analyst with Kaufman Bros. L.P. "Most companies have taken the easy route and filed for bankruptcy; these guys did it the hard way and cleaned up themselves."

Profitability also tends to attract more investors to the stock, Grover said. Shears of Primus immediately jumped on the company's announcement, which came after markets closed.

In another sign that Primus has been able to make its mark on the industry, it won a Best Business Turnaround award at the American Business Awards, which were sponsored by a variety of business media outlets, Wednesday in New York. Primus was chosen from among 500 business nominees in 40 award categories.

The company's biggest benefit by far comes from the debt it has been repurchasing in blocks on the open market. Since January 2001, the company has gone from $1.3 billion in long-term debt to $561 million at the end of March. Since then, it has repurchased an additional $25 million on the open market, DePodesta said.

Primus executives said the decision to buy back debt at a discount rates saved the company from having to make crushing interest payments. Primus's interest declined from $140 million a year to about $55 million, DePodesta said.

 

View the article in the Washington Post

For more information on Primus, view the latest press releases.