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FOCAL COMMUNICATIONS CORPORATION REPORTS SECOND QUARTER RESULTS
CHICAGO, Jul 22, 1999 /PRNewswire via COMTEX/ -- Focal Communications
Corporation (Focal) today announced results for its second quarter ended June 30, 1999. The Company sold 48,207 access lines during the second quarter of 1999 bringing its total access lines sold to 133,536. The Company installed 36,177 access lines during the quarter and ended the quarter with 106,749 total lines in service.
Revenues for the second quarter of 1999 were $30.3 million, an increase of approximately 17% from the first quarter of 1999. Reciprocal compensation revenues represented 71% of total revenues during the second quarter of 1999. EBITDA (earnings before interest, taxes, depreciation and amortization), excluding non-cash compensation
charges, was $8.4 million in the second quarter of 1999 compared to
$10.0 million during the first quarter of 1999. Higher selling, general and administrative expenses resulting from headcount increases related to the build-out of the Company's new markets and a reduction in the reciprocal compensation rate in the state of New York resulted in a decline in EBITDA during the second quarter. Average revenue per line was lower during the second quarter of 1999 than in the first quarter of 1999, primarily due to a majority of the new lines coming into service late in the quarter.
"We continued to execute our expansion plans during the second quarter
by turning up service in the Detroit market while further penetrating
our existing markets. In addition, we announced the expansion of our
business strategy to include the purchase of dark fiber transport
capacity, the extension of our network build-out to four new markets,
development of DSL service and the deployment of a nationwide ATM
network to connect our cities," said Robert Taylor, Focal's president
and chief executive officer.
Recent Developments Focal launched service in the Detroit market at the end of the second quarter. Currently, the Company is operating in 13 markets and expects to rollout seven additional markets by the end of the year 2000.
During the second quarter, the Company signed two agreements to
purchase dark fiber transport capacity. Focal signed a 20-year
agreement with Metromedia Fiber Network, Inc. for the long-term lease
of a minimum of 2,500 fiber miles. Focal also signed an agreement with Level 3 Communications for an indefeasible right of use, or IRU, for a specified number of fibers being constructed or acquired by Level 3. The IRU has a 20-year term and covers approximately 8,300 fiber miles in seven markets.
In addition, to implement Focal's recently announced plans for an
inter-city network, the Company signed agreements during the second
quarter with Level 3 Communications and MCI WorldCom to lease 10,000 DS-3 miles of fiber transport capacity.Focal also recently entered into a five-year joint marketing agreement with Splitrock Services, Inc., one of the Company's largest ISP customers. Under the agreement, Splitrock has agreed to purchase a minimum of 10,000 DSL lines as required by Splitrock to serve its customers in areas where Focal provides DSL service.
Selected Operational Results and Statistics for the Chicago Market To
present the operating results in a more established market, summary
results for the three months ended June 30, 1999 for Focal's Chicago
network are shown in the following table:
Focal Communications Corporation
Summary Results for the Chicago Market
($ in Thousands, except lines installed)
For the three months ended June 30, 1999
EBITDA Lines
Installed
Revenue EBITDA(A) Margin (as of
June 30,
1999)
Chicago $18,628 $12,528 67% 44,851
Other Markets $11,699 $(4,106) (35)% 61,898
Total: $30,327 $8,422 28% 106,749
(A) Excludes non-cash compensation expenses but includes a pro-rata
allocation of corporate expenses.
Selected Statistical Information:
The following table presents selected quarterly statistical
information
for Focal Communications Corporation.
6/30/99 3/31/99 12/31/98
9/30/98
Lines Sold to Date 133,536 85,329 68,184 41,
316
Lines Installed
to Date(A) 106,749 70,572 52,011 33,
188
Estimated Data Lines
(% of Installed lines) 72% 71% 71%
69%
Lines on Switch (%) 100% 100% 100%
100%
ILEC Central Offices
Interconnected 771 443 340
297
ILEC Central Office
Colocations in Service
and Under Development 58 23 --
--
Average Monthly Revenue
Per Line $114 $141 $138
$148
Quarterly Minutes of
Use (mil) 2,657 2,033 1,444 1,
039
Markets in Operation 13 12 10
6
Markets Under Development 7 4 6
10
MSAs Served 34 31 29
13
MSAs Under Development 16 11 13
26
Switches Operational 9 7 6
4
Switches Under Development 6 6 --
--
Focal Customer
Colocation Space in
Service (Sqr. Ft.) 41,081 29,282 23,302 9,
882
Focal Customer
Colocation Space
Under Development
(Sqr. Ft.) 29,024 35,459 --
--
Capital Expenditures
($mil) $57(B) $24 $21
$24
Employees 418 312 233
186
(A) Does not include approximately 17,520 access lines in Boston,
which
are being managed by Focal on behalf of Level 3
Communications, as a
result of the Company's purchase of Level 3's switch in
January of
1999. These lines are expected to eventually migrate to Level
3's
network.
(B) Includes approximately $21 million of assets acquired under a
capital
lease during the second quarter of 1999.
The foregoing discussion regarding Focal Communications Corporation
contains forward-looking statements. Focal's future performance is
subject to numerous risks and uncertainties that could cause actual
results to deviate substantially from those discussed in these
forward-looking statements. Factors that could impact future results
include but are not limited to: the successful execution of Focal's
expansion activities into new geographic markets on a timely and
cost-effective basis; the successful introduction and expansion of
voice and data service offerings on a timely and cost-effective basis;
the pace at which new competitors enter Focal's existing and planned
markets; competitive responses of other carriers; the execution of
interconnection agreements with incumbent local exchange carriers on
terms satisfactory to Focal; acceptance of Focal's services by new and
existing customers; Focal's ability to raise sufficient capital on
acceptable termsand on a timely basis; the outcome of legal and
regulatory proceedings regarding reciprocal compensation for
Internet-related calls; the ability to attract and retain talented
employees; effective management of administrative, technical and
operational issues presented by Focal's expansion plans; Focal's
ability to successfully address Year 2000 remediation issues and
Focal's ability to successfully access markets, install switching
electronics, and obtain the use of fiber transport facilities and any
required governmental authorizations, franchises or permits, all in a
timely manner, at reasonable costs and on satisfactory terms and
conditions, as well as regulatory and judicial developments that could
cause actual results to differ materially from the future results
indicated, expressed or implied, in such forward-looking statements.
Investors are directed to examine Focal's SEC filings, whichmore fully
describe the risks and uncertainties associated with Focal's business.
Focal Communications Corporation, headquartered in Chicago, is a
facilities-based provider that offers data, voice and colocation
services to large corporations, Internet service providers and
value-added resellers. Focal currently services 13 large, metropolitan
markets and has announced plans to deploy service to a total of 20
markets nationwide by the end ofthe year 2000, encompassing 50
metropolitan statistical areas. Additional information is available on
Focal's Web site at www.focal.com .
Focal Communications Corporation
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999 AND 1998
Three months
Ended June 30
1999
1998
(unaudited)
(unaudited)
REVENUES $30,326,843 $8,078,
043
EXPENSES:
Customer service and network
operations 14,985,677 2,787,
055
Selling, general and administrative 6,918,976 1,964,
160
Depreciation and amortization expense 4,937,767 1,115,
398
Non-cash compensation expense 811,471 325,
000
Total Operating Expenses 27,653,891 6,191,
613
Operating Income 2,672,952 1,886,
430
OTHER INCOME (EXPENSE):
Interest income 1,213,681 2,064,
813
Interest expense (5,880,845) (4,534,
642)
Total Other Expense (4,667,164) (2,469,
829)
Loss before income taxes (1,994,212) (583,
399)
Provision for income taxes (307,685)
--
NET LOSS ($2,301,897) ($583,
399)
EBITDA $8,422,190 $3,326,
828
Basic and diluted net loss per
share of common stock ($0.05)
($0.01)
Basic and diluted weighted average
number of shares of common stock
outstanding 44,111,000 44,153,
500
Notes: EBITDA excludes non-cash compensation expense. Earnings
Per
Share calculation has been adjusted to reflect a 500-for-1 stock
split
that will take place in connection with the Company's initial
public
offering.
Focal Communications Corporation
CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
Six months
Ended June 30
1999 1998
(unaudited)
(unaudited)
REVENUES $56,330,740 $13,180,
491
EXPENSES:
Customer service and network
operations 25,354,996 4,613,
948
Selling, general and administrative 12,584,872 3,271,
785
Depreciation and amortization expense 8,964,517 2,006,
269
Non-cash compensation expense 2,371,047 650,
000
Total Operating Expenses 49,275,432 10,542,
002
Operating Income 7,055,308 2,638,
489
OTHER INCOME (EXPENSE):
Interest income 2,519,763 3,080,
715
Interest expense (11,284,429) (6,643,
794)
Total Other Expense (8,764,666) (3,563,
079)
Loss before income taxes (1,709,358) (924,
590)
Provision for income taxes (307,685)
--
NET LOSS ($2,017,043) ($924,
590)
EBITDA $18,390,872 $5,294,
758
Basic and diluted net loss per share
of common stock ($0.05)
($0.02)
Basic and diluted weighted average
number of shares of common stock
outstanding 44,037,515 44,153,
500
Notes: EBITDA excludes non-cash compensation expense. Earnings
Per
Share calculation has been adjusted to reflect a 500-for-1 stock
split
that will take place in connection with the Company's initial
public
offering.
Focal Communications Corporation
CONSOLIDATED BALANCE SHEET
June 30, 1999 December
31, 1998
ASSETS
CURRENT ASSETS:
Cash, cash equivalents, and
short-term investments $104,811,039 $134,000,
941
Accounts receivable, net 20,253,166 9,792,
532
Other current assets 2,736,849 843,
793
Total Current Assets 127,801,054 144,637,
266
FIXED ASSETS, at cost: 157,393,924 76,119,
650
Less: accumulated depreciation
and amortization (14,504,605) (6,146,
530)
Fixed assets, net 142,889,319 69,973,
120
Other Non-Current Assets 4,874,623 4,963,
894
TOTAL ASSETS $275,564,996 $219,574,
280
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $14,088,218 $12,420,
470
Accrued liabilities 4,819,599 1,941,
377
Current maturities of long-term debt 6,358,392 2,887,
036
Total current liabilities 25,266,209 17,248,
883
LONG-TERM DEBT, net of current
maturities 227,833,131 182,408,
757
OTHER NONCURRENT LIABILITIES 1,835,344 588,
228
STOCKHOLDERS' EQUITY
Common stock, Class A 762
753
Common stock, Class B 220
220
Additional paid-in capital 37,937,459 35,413,
345
Deferred compensation (3,941,612) (4,736,
432)
Accumulated deficit (13,366,517) (11,349,
474)
Total stockholders' equity 20,630,312 19,328,
412
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $275,564,996 $219,574,
280
SOURCE Focal Communications Corporation
(C) 1999 PR Newswire. All rights reserved.
http://www.prnewswire.com -0-
CONTACT: Investor, Debra O'Shea, Director of Investor Relations,
312-895-8427, or Media, Arianne Venuso, Senior Manager
of Public Relations,
312-895-8274, both of Focal Communications Corporations
WEB PAGE: focal.com
GEOGRAPHY: Illinois
INDUSTRY CODE: TLS
SUBJECT CODE: ERN
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