May 29, 2002 -- Internap Network Services says it will save $18 million over the next 21 months by restructuring its equipment leases, pushing back much of its obligations into 2004 and beyond.
The company also reaffirmed its projection that it would be EBITDA positive in the fourth quarter of this year. .
The agreement with the unnamed equipment vendor includes a one-time payment, and then no further payments until March 2004. Internap said the payment would result in cash use of $21 million to $23 million for the current quarter, an increase of $7 million from an April projection.
Internap did not name the equipment provider. Many major vendors of network gear have encountered problems with leases to telecom providers, many of whom have filed for bankruptcy. That pressure has provided an opportunity for customers with cash to renegotiate leases on favorable terms.
For Internap, the new lease structure allows it to conserve cash as it seeks to become profitable.
"We are managing our cash flows better by financing our long-term assets with long-term obligations," said John Scanlon, Chief Financial Officer of Internap. "We expect to meet these obligations at a time of projected cash flow from operations."
The restructuring of the leases continues an aggressive cost-cutting effort at Internap. Last month the Seattle-based network services provider terminated leases for unneeded data center space by paying fees equivalent to about a year's rent - an average of 14 cents on the dollar compared to the full cost of the 15 to 20 year payouts on the leases.
Founded in 1996, Internap offers services in numerous key markets throughout the United States, Europe and Japan including Amsterdam, Atlanta, Boston, Chicago, London, Los Angeles, New York, San Francisco, San Jose, Seattle, Tokyo and Washington, DC.