Covad posts profit on strength of massive debt reduction

Covad Communications posted net income of $344. 8 million for fiscal 2001 on revenues of $332.6 million thanks in large part to an extraordinary item of $1 billion posted in the fourth quarter, representing a gain on the elimination of long-term debt. At the end of the year, Covad’s long-term debt obligations stood at $50 million, compared to $1.32 billion at the end the previous year.

The company also reduced its cost structure during 2001, decreasing its cash usage from more than $200 million in the first quarter to less than $60 million in the fourth quarter. Network and production costs increased by 6% for the year. The company attributed the increase to growth in its subscriber base. Subscriber lines in service at the end of 2001 stood at 351,000, a 28% increase year over year.

Covad incurred an operations loss for 2001 of $536.9 million, a 60% improvement compared with the $1.35 billion operations loss suffered in fiscal 2000.

Expenses related to sales, marketing, and G&A decreased by 30% in 2001 compared year over year.

Cash on hand at the end of fiscal 2001 stood at $293 million, including $9.2 million of restricted cash. The company expects to achieve cash flow-positive status by the second half of 2003, according to Covad CEO and president Charles Hoffman.

--Glenn Bischoff, Senior News Writer