RCN Reports First Quarter 2000 Strong Sequential Increases in Value Drivers
Growth in Homes Passed, On-Net Connections and On-Net Revenues
ResiLink Launched in All New Markets as Result of IT and Training/Development Progress
PRINCETON, N.J., May 5 /PRNewswire/ -- RCN Corporation (Nasdaq: RCNC - news) today reported results for the quarter ended March 31, 2000, showing strong increases in the Company's key drivers of growth -- homes passed, on-net connections and on-net revenue.
Homes passed, an important measure of RCN's construction progress, increased by 94,200 in the first quarter to 808,023, while marketable homes, or those homes ready for immediate sale of all its services, increased to 601,745. On-net connections increased by 32,949, a 15% increase, as the company continues to expand its brand-new fiber optic network to serve its customer base.
``RCN made substantial progress this quarter in building our Megaband(TM) Network and improving our back office operations. We added two major markets -- Queens and Philadelphia, and are building in a total of 62 towns across the country with 13 added in this quarter alone. We have also constructed over 1,000 route miles of local fiber-optic plant in the first three months of this year,'' said David C. McCourt, RCN's Chairman and CEO. ``In addition, we closed the $1.65 billion Paul Allen investment, completed the acquisition of 21st Century in Chicago, formed an alliance with Southern California Edison and officially launched our ResiLink bundled packages beyond the initial 20,000 homes in the test market to 90,000 homes. In this quarter, half of the increases in on-net connections resulted from ResiLink sales, showing the early success of our bundled offering. Not only are customers taking over three services, the revenue per subscriber is $125-$130 as compared to $80 on an a-la-carte basis. More importantly, by the end of the year, we expect to roll out ResiLink to at least 300,000 homes.''
For the quarter ended March 31, 2000, Pro Forma Total RCN revenues were $88.1 million, as compared to $89.5 million in the previous quarter. A strong 21% increase in on-net revenues offset the decline in off-net dial up subscribers resulting from increased competition from free Internet and broadband services. RCN's Pro Forma Total consolidated quarterly EBITDA in the quarter ended March 2000 was a loss of $69.9 million as compared to a loss of $54.3 million in the previous quarter. This was the result of increased operational costs associated with employee growth and the expansion in new and existing markets. RCN reported a first quarter net loss to common shareholders of $153.6 million, or $(1.95) per common share, compared to a loss of $67.7 million or $(1.03) in the previous quarter.
``The recent turbulence in the market does not reflect the fact that we are building a valuable asset for the residential market -- a network that remains unmatched in capacity and functionality. In addition to the many strategic investors in RCN, our senior management team is substantially invested and continues to purchase shares. In the first quarter alone, our management team purchased several million dollars of stock, and not as a result of the exercise of options,'' said McCourt.
In February, Paul G. Allen's Vulcan Ventures closed its $1.65 billion investment in RCN, representing Vulcan's largest investment in a company in which it does not have a controlling interest. At the end of the quarter, RCN commenced its tender offer to acquire the outstanding debt securities of 21st Century Telecom, an acquisition which was originally announced in December, 1999. In those transactions, RCN received tenders and consents from the holders of 100% of the outstanding Notes and over 99% of the outstanding Debentures.
``One of our core values is to never enter a new market unless it is pre-funded to profitability. With $3.6 billion of available cash on hand, RCN is fully funded to 5 million homes passed,'' added Tim Stoklosa, Chief Financial Officer.
In addition, RCN formed an alliance with Southern California Edison (SCE) to assist with the construction of its fiber-optic network in the greater Los Angeles area. This alliance provides RCN with the ability to accelerate its entry into this market to deliver bundled phone, cable and high-speed Internet services to Southern California residents.
RCN has now received Federal Open Video System (OVS) approval for over 13 million homes, and 4.6 million homes with local OVS approval. The company's experience in working through the regulatory process on a local level has allowed the company to gain access to an increasing number of densely populated communities in the major markets where RCN currently operates. Once regulatory approvals are received, design and construction of the network begins and the market is ready to serve customers in 12 to 18 months. In the first quarter, RCN ramped up construction of its high-capacity Megaband(TM) Network to 62 towns in 11 major markets from 49 towns in 9 major markets last quarter. RCN's has constructed a total of 4,696 fiber-optic route miles of its fiber-optic network. This quarter, RCN built over 1,000 route miles, representing the largest quarterly increase in the company's history, indicating a substantial ramp in a quarter normally impacted by seasonal factors.
Calls Per Connection Decreased by 15%
Operational initiatives showed substantial progress. In the first quarter, RCN continued its back office improvement to accelerate its development and support its rapid growth. Over 40% of the company's technicians have now been trained on all three services. The Information Technology group developed a tracking and billing system to support its ResiLink bundled services, and hired 60 IT professionals, including two senior executives. The Customer Care area increased the number of Customer Service Representatives (CSR's), added 200 provisioners and initiated a ``Warm Call'' program, which contacts customers within 48 hours after initiating services. Partly as a result of these initiatives, the number of calls per connection decreased by 15%.
``Our improvements in Customer Care and IT have helped accelerate our growth initiatives,'' said Mike Adams, President and Chief Operating Officer. ``The fact that our construction and operations metrics improved over the last three months, reinforce that our core values and the execution of our long-term plan are beginning to show results. We expect to continue to show continued, tangible improvements in the coming quarters.''
About The RCN Network
RCN's Megaband(TM) Network is a unique broadband fiber-optic platform capable of offering a full suite of communications services -- including fully featured voice, video and high-speed Internet -- to residential customers. The network employs SONET ring backbone architecture, and localized nodes built to ensure RCN's state-of-the-art fiber optics travel to within 900 feet of RCN customers, with fewer electronics and lower maintenance costs than existing local networks.
RCN's high-capacity local fiber-optic networks target densely populated areas comprising 44% of the US residential communications market spread over just 6% of its geography.
About RCN Corporation
RCN Corporation is the nation's first and largest single-source facilities-based provider of bundled local and long distance phone, cable television and high-speed Internet services to the densest residential markets in the country. RCN is currently delivering broadband services over its Megaband(TM) Network or designing and building its network on both the East and West coasts as well as in the Midwest. In addition, RCN is a leading Internet Service Provider in its markets. Additional information can be found at: www.rcn.com .
Some of the statements made by RCN in this press release are forward-looking in nature. Actual results may differ materially from those projected in forward-looking statements as a result of a number of factors. RCN believes that the primary factors include, but are not limited to uncertainties relating to economic conditions, acquisitions and divestitures, government and regulatory policies, the pricing and availability of equipment, materials, inventory and programming, RCN's ability to develop and penetrate existing and new markets, technological developments and changes in the competitive environment in which RCN operates. Additional information concerning these and other important factors can be found in RCN's filings with the Securities and Exchange Commission. Statements in this release should be evaluated in light of these important factors.
Total Service Connections
Quarterly Yearly
1Q99 2Q99 3Q99 4Q99 1Q00 Change Change
On-Net
Voice 40,215 49,539 56,209 62,733 68,550
Video 99,098 110,565 120,353 138,577 160,665
Data 9,922 13,024 17,985 21,654 26,698
Subtotal
On-Net 149,235 173,128 194,547 222,964 255,913 15% 71%
Off-Net
Voice 60,004 54,917 49,271 46,986 45,262
Video 170,323 165,523 164,859 153,627 139,383
Data 506,180 508,992 535,107 523,728 500,495
Subtotal
Off-Net 736,507 729,432 749,237 724,341 685,140
Total
Service
Connect-
ions 885,742 902,560 943,784 947,305 941,053
Advanced
Fiber
Homes
Passed 350,733 427,843 550,771 713,823 808,023 13% 130%
Marketable
Homes 301,546 361,015 440,112 551,006 601,745 9% 100%
PRO FORMA TOTAL RCN(a)
RCN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in Thousands, Except Per Share Data)
(Unaudited)
QUARTER ENDED
March 31, December 31, March 31,
2000 1999 1999
SALES:
VOICE $ 15,465 $ 15,200 $ 14,820
VIDEO 34,084 33,237 30,501
DATA 27,386 30,106 27,058
OTHER 11,204 10,998 7,362
TOTAL SALES 88,139 89,541 79,741
COSTS & EXPENSES, EXCLUDING
DEPRECIATION AND AMORTIZATION:
DIRECT EXPENSES 42,087 39,530 38,235
OPERATING AND SG&A 116,022 104,315 62,993
EBITDA (69,970) (54,304) (21,487)
DEPRECIATION AND AMORTIZATION 50,321 52,375 39,412
OPERATING (LOSS) (120,291) (106,679) (60,899)
INTEREST INCOME 36,460 20,669 13,526
INTEREST EXPENSE (53,336) (45,854) (31,790)
OTHER INCOME (LOSS), NET (1,130) (3,100) 707
(LOSS) BEFORE INCOME TAXES (138,297) (134,964) (78,456)
(BENEFIT) FOR INCOME TAXES (796) (1,123) (1,014)
(LOSS) BEFORE EQUITY IN
UNCONSOLIDATED
ENTITIES AND MINORITY
INTEREST (137,501) (133,841) (77,442)
EQUITY IN (LOSS) OF
UNCONSOLIDATED ENTITIES (9,107) (9,768) (376)
MINORITY INTEREST IN LOSS OF
CONSOLIDATED ENTITIES 8,487 11,891 10,064
NET (LOSS) (138,121) (131,718) (67,754)
PREFERRED DIVIDEND AND
ACCRETION REQUIREMENTS 15,462 5,013 --
NET (LOSS) TO COMMON
SHAREHOLDERS $(153,583) $(136,731) $(67,754)
(a) The Pro Forma Total RCN results reflect the consolidation of all
domestic joint ventures and show the ownership share of its
joint venture partners as minority interests.
GAAP BASIS
RCN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in Thousands, Except Per Share Data)
(Unaudited)
QUARTER ENDED
March 31, December 31, March 31,
2000 1999 1999
SALES $ 71,257 $ 72,054 $ 67,388
COSTS & EXPENSES, EXCLUDING
DEPRECIATION AND AMORTIZATION:
DIRECT EXPENSES 38,081 34,786 34,762
OPERATING AND SG&A 100,726 89,793 54,075
EBITDA (67,550) (52,525) (21,449)
DEPRECIATION AND AMORTIZATION 44,412 47,095 32,274
OPERATING (LOSS) (111,962) (99,620) (53,723)
INTEREST INCOME 36,320 20,564 13,403
INTEREST EXPENSE (53,337) (45,854) (31,790)
OTHER INCOME (LOSS), NET (1,130) (3,100) 707
(LOSS) BEFORE INCOME TAXES (130,109) (128,010) (71,403)
(BENEFIT) FOR INCOME TAXES (796) (1,123) (1,014)
(LOSS) BEFORE EQUITY IN
UNCONSOLIDATED
ENTITIES AND MINORITY
INTEREST (129,313) (126,887) (70,389)
EQUITY IN (LOSS) OF
UNCONSOLIDATED ENTITIES (13,201) (13,246) (3,903)
MINORITY INTEREST IN LOSS OF
CONSOLIDATED ENTITIES 4,393 8,415 6,538
NET (LOSS) (138,121) (131,718) (67,754)
PREFERRED DIVIDEND AND
ACCRETION REQUIREMENTS 15,462 5,013 --
NET (LOSS) TO COMMON
SHAREHOLDERS $(153,583) $(136,731) $(67,754)
BASIC AND DILUTED (LOSS)
PER AVERAGE COMMON SHARE:
NET (LOSS) TO COMMON
SHAREHOLDERS $(1.95) $(1.78) $(1.03)
WEIGHTED AVERAGE SHARES
OUTSTANDING 78,921,825 76,736,915 65,629,601
GAAP BASIS
RCN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
March 31, December 31,
2000 1999
ASSETS
Current assets
Cash, temporary cash
investments and
short-term
investments $3,111,037 $1,793,289
Accounts receivable
from related parties 15,915 8,015
Accounts receivable,
net of reserve for
doubtful accounts of
$12,389 at March 31,
2000 and $12,258 at
December 31, 1999 31,349 30,558
Interest and dividends
receivable 29,594 15,049
Material and supply
inventory, at average cost 41,159 21,064
Prepayments and other 20,013 13,853
Investments restricted
for debt service 23,471 23,111
Total current assets 3,272,538 1,904,939
Property, plant and
equipment, net of
accumulated depreciation
of $259,346 at
March 31, 2000 and
$230,581 at
December 31, 1999 1,024,625 893,179
Investments restricted
for debt service 48 48
Investments 229,711 190,571
Intangible assets, net
of accumulated
amortization of $173,849
at March 31, 2000 and
$158,384 at December 31,
1999 159,764 138,491
Deferred charges and
other assets 70,853 64,886
Total assets $4,757,539 $3,192,114
GAAP BASIS
RCN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
March 31, December 31,
2000 1999
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities
Current maturities of
long-term debt and
capital lease
obligations $856 $1,225
Accounts payable to
related parties 17,166 35,809
Accounts payable 77,357 92,785
Advance billings
and customer deposits 18,209 16,901
Deferred income taxes 1,474 1,464
Accrued expenses 113,626 101,261
Total current liabilities 228,688 249,445
Long-term debt 2,170,063 2,143,096
Other deferred credits 22,448 24,598
Minority interest 95,354 129,234
Redeemable preferred stock 1,883,328 253,438
Common shareholders' equity 357,658 392,303
Total liabilities and
shareholders' equity $4,757,539 $3,192,114
SOURCE: RCN Corporation |
