RCN Reports First Quarter 2010 ResultsRevenue Reaches $190 Million; EBITDA Reaches $53 Million, Including Deal Costs of $1.3 Million; Free Cash Flow Steady at $7 MillionHERNDON, VA, May 06, 2010 (MARKETWIRE via COMTEX News Network) — RCN Corporation (NASDAQ: RCNI) today announced first quarter 2010 results. RCN Corporation is a leading provider of all-digital and high-definition video, high-speed internet, and premium voice services to residential and small-medium business customers, in Philadelphia, Lehigh Valley (PA), New York, Boston, Chicago and Washington, D.C., as well as high-capacity transport services to carrier and large enterprise customers. "RCN's reported first quarter results demonstrated continued consistency in revenue, EBITDA, and free cash flow generation, including $1.3 million of deal costs absorbed to date," stated Peter D. Aquino, President and Chief Executive Officer. "During Q1, we continued to drive our key initiatives, including the testing, and now launch, of our industry leading TiVo(R) Premiere from RCN HD DVR. We began rolling this platform out in DC and NY, and will move to the rest of our markets by the summer. In addition, RCN Metro has launched its Xtreme Network in the New York/New Jersey market, providing financial institutions and other enterprises with an ultra low latency network to meet their requirements for speed and execution. Operationally, we are focused on continued execution as we work through the process to close our merger with an affiliate of ABRY Partners." First Quarter Review Following are highlights of first quarter 2010 results for consolidated RCN and for the company's two reporting segments: Residential/Small-Medium Business, comprised of the RCN and RCN Business Services business units; and RCN Metro Optical Networks. Consolidated Results
Residential/Small-Medium Business Segment
RCN Metro Optical Networks Segment
Reported Results Revenue was $190 million in the first quarter of 2010, compared to $189 million in the first quarter of 2009 and $190 million in the fourth quarter of 2009. Net income was $5 million in the first quarter of 2010, compared to a net loss of $10 million in the first quarter of 2009 and a net loss of $4 million in the fourth quarter of 2009. The swing from net loss to net income is due primarily to lower depreciation expense, as certain assets became fully depreciated during 2009. Michael T. Sicoli, Chief Financial Officer, stated, "In the first quarter of 2010, RCN continued to generate solid levels of free cash flow, inclusive of deal-related costs. In April 2010, pursuant to the excess cash flow sweep provision in our credit facility, we applied approximately half of our 2009 free cash flow, or $19 million, to debt reduction. We are also extremely pleased to report positive net income, another key milestone for RCN." Non-GAAP Measures In addition to the results presented in accordance with Generally Accepted Accounting Principles ("GAAP") throughout this press release, RCN has presented non-GAAP financial measures, such as EBITDA, EBITDA Margin, Free Cash Flow and ARPC. RCN believes that these non-GAAP measures, viewed in addition to and not in lieu of its reported GAAP results, provide useful information to investors because they are an integral part of RCN's internal evaluation of operating performance. In addition, they are measures that RCN uses to evaluate management's effectiveness. Reconciliations to comparable GAAP measures as well as definitions begin on page 8. RCN's non-GAAP financial measures may not be comparable to similarly titled measures presented by other companies. About RCN Corporation RCN Corporation (NASDAQ: RCNI), www.rcn.com, is a competitive broadband services provider delivering all-digital and high-definition video, high-speed internet and premium voice services to residential and small-medium business customers under the brand names of RCN and RCN Business Services, respectively. In addition, through its RCN Metro Optical Networks business unit, RCN delivers fiber-based high-capacity transport services to large commercial customers, primarily large enterprises and carriers, targeting the metropolitan central business districts in the company's geographic markets. RCN's primary service areas include Washington, D.C., Philadelphia, Lehigh Valley (PA), New York City, Boston and Chicago. (RCNI-Q) RCN Forward-Looking Statements This press release contains forward-looking statements regarding future events and future performance of RCN that involve risks and uncertainties that could materially affect actual results. This information is qualified in its entirety by cautionary statements and risk factors disclosure contained in certain of RCN's Securities and Exchange Commission filings. For a description of certain factors that could cause actual results to vary from current expectations and forward-looking statements contained in this press release, refer to documents that RCN files from time to time with the Securities and Exchange Commission. (Tables follow) RCN CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in millions)
For the three months ended
------------------------
March 31, March 31,
2010 2009
----------- -----------
Revenues $ 190.1 $ 189.2
Costs and expenses:
Direct expenses 72.2 70.3
Selling, general and administrative (including
stock-based compensation expense) 68.0 69.1
Exit costs and restructuring charges, net - 0.3
Depreciation and amortization 36.9 48.5
----------- -----------
Operating income 13.0 1.1
Investment income - 0.3
Interest expense (9.7) (11.0)
Other income, net 2.0 -
----------- -----------
Net income (loss), before income tax expense 5.2 (9.6)
Income tax expense 0.3 -
----------- -----------
Net income (loss) $ 4.9 $ (9.6)
=========== ===========
RCN CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in millions)
March 31, December 31,
2010 2009
----------- -----------
ASSETS
Current Assets:
Cash and cash equivalents $ 51.9 $ 71.8
Short-term investments 40.0 15.1
Accounts receivable, net of allowance for
doubtful accounts 59.1 65.7
Prepayments and other current assets 17.4 14.7
----------- -----------
Total current assets 168.4 167.4
Property, plant and equipment, net of accumulated
depreciation 646.3 654.7
Goodwill 15.5 15.5
Intangible assets, net of accumulated amortization 105.3 106.2
Long-term restricted investments 10.9 11.7
Deferred charges and other assets 14.5 15.1
----------- -----------
Total assets $ 960.9 $ 970.5
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses related
to trade creditors $ 61.4 $ 66.2
Accrued expenses and other liabilities 60.3 70.3
Current portion of long-term debt and capital
lease obligations 25.8 25.9
----------- -----------
Total current liabilities 147.4 162.4
Long-term debt and capital lease obligations, net
of current maturities 707.7 709.3
Other long-term liabilities 92.9 90.6
----------- -----------
Total liabilities 947.9 962.3
----------- -----------
Commitments and contingencies
Stockholders' Equity:
Common stock, par value $0.01 per share 0.4 0.4
Additional paid-in-capital 457.8 454.2
Treasury stock (7.0) (6.4)
Accumulated deficit (398.1) (403.0)
Accumulated other comprehensive loss (40.1) (37.0)
----------- -----------
Total stockholders' equity 13.0 8.1
----------- -----------
Total liabilities and stockholders' equity $ 960.9 $ 970.5
=========== ===========
RCN CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in millions)
For the three months ended
------------------------
March 31, March 31,
2010 2009
----------- -----------
Cash flows from operating activities:
Net income (loss) $ 4.9 $ (9.6)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Non-cash stock-based compensation 3.1 2.4
Depreciation and amortization 36.9 48.5
Other, net 0.7 0.2
Net change in certain assets and liabilities (4.6) (11.7)
----------- -----------
Net cash provided by operating activities 41.0 29.8
Cash flows from investing activities:
Additions to property, plant and equipment (35.0) (22.5)
Increase in short-term investments (24.9) (0.1)
Proceeds from sale of assets 0.7 0.5
Decrease in restricted investments 0.8 3.7
----------- -----------
Net cash used in investing activities (58.4) (18.4)
Cash flows from financing activities:
Payments of long-term debt, including capital
leases (1.8) (1.8)
Dividend payments (0.5) (0.6)
Cost of common shares repurchased - (1.5)
Proceeds from the exercise of stock options 0.4 -
Purchase of treasury stock (0.6) -
----------- -----------
Net cash used in financing activities (2.5) (4.0)
Net (decrease) increase in cash and cash
equivalents (19.9) 7.4
Cash and cash equivalents at beginning of the
period 71.8 10.8
----------- -----------
Cash and cash equivalents at end of the period $ 51.9 $ 18.1
=========== ===========
OPERATING RESULTS
RESIDENTIAL / SMALL BUSINESS SEGMENT
(unaudited)
---------------------------------
Three months ended
---------------------------------
(dollars in millions) March 31, December 31, March 31,
2010 2009 2009
--------- --------- ---------
Video $ 78.0 $ 78.1 $ 76.7
Data 34.5 34.3 36.1
Voice 25.3 25.8 27.3
Recip Comp/Other 3.2 3.1 3.7
--------- --------- ---------
Total Revenue 140.9 141.3 143.7
Direct expenses 54.0 51.2 53.5
Selling, general and administrative (1) 50.6 52.4 52.4
--------- --------- ---------
EBITDA $ 36.3 $ 37.7 $ 37.8
EBITDA Margin 25.8% 26.7% 26.3%
Capital Expenditures $ 12.2 $ 32.6 $ 18.7
Key Metrics
(customers & RGUs in thousands)
Video RGUs 361 364 366
Data RGUs 315 312 306
Voice RGUs 220 223 242
--------- --------- ---------
Total RGUs 896 899 914
Customers 426 429 429
Average Revenue Per Customer $ 109 $ 108 $ 110
Digital Penetration 100% 100% 91%
OPERATING RESULTS
RCN METRO OPTICAL NETWORKS SEGMENT
(unaudited)
---------------------------------
Three months ended
---------------------------------
(dollars in millions) March 31, December 31, March 31,
2010 2009 2009
--------- --------- ---------
Transport Services $ 37.6 $ 37.4 $ 34.9
Data and Internet Services 1.8 1.7 0.9
Colocation 3.0 3.1 2.9
Leased Services 5.0 5.1 5.0
Installation & Other 1.7 1.8 1.8
--------- --------- ---------
Total Revenue 49.2 49.0 45.5
Direct expenses 18.2 17.8 16.8
Selling, general and administrative (1) 14.4 14.2 14.3
--------- --------- ---------
EBITDA $ 16.7 $ 16.9 $ 14.5
EBITDA Margin 33.9% 34.6% 31.8%
Capital Expenditures $ 9.5 $ 8.8 $ 7.6
(1) Excludes stock-based compensation expense
RCN Corporation
Non-GAAP Reconciliation
(1) EBITDA is defined as net income (loss) plus income tax benefit
(expense), other (expense) income net, (loss) gain on sale of assets,
interest expense, investment income, depreciation and amortization,
non-cash stock-based compensation expense and other special items
including impairments, exit costs and other charges. EBITDA margin
represents EBITDA divided by total revenues. We believe that EBITDA
provides useful information to investors because it is an indicator of
the strength and performance of our ongoing business operations,
including our ability to fund discretionary spending such as capital
expenditures and other investments and our ability to incur and
service debt. While depreciation and amortization are considered
operating costs under generally accepted accounting principles, these
expenses represent non-cash current period allocation of costs
associated with long-lived assets acquired or constructed in prior
periods. EBITDA is a calculation commonly used as a basis for
investors, analysts and credit rating agencies to evaluate and compare
the periodic and future operating performance and value of companies
within the cable industry. EBITDA, as defined above, may not be
similar to EBITDA measures of other companies, is not a measurement
under accounting principles generally accepted in the United States
and should be considered in addition to, but not as a substitute for,
the information contained in our statements of operations.
--------------------------------------------
For the three months ended
--------------------------------------------
March 31, December 31, March 31,
(dollars in millions) 2010 2009 2009
------------ ------------ ------------
Net income/(loss) $ 4.9 $ (3.9) $ (9.6)
Income tax expense 0.3 0.3 --
Other income, net (2.0) -- --
Interest expense 9.7 10.0 11.0
Investment income -- -- (0.3)
Depreciation and
amortization 36.9 44.6 48.5
Non-cash stock-based
compensation expense 3.1 3.6 2.4
Exit costs &
restructuring charges -- -- 0.3
------------ ------------ ------------
EBITDA $ 53.0 $ 54.6 $ 52.3
EBITDA Margin 27.9% 28.7% 27.6%
(2) Segment EBITDA is defined as operating income before depreciation and
amortization, non-cash stock-based compensation expense, exit costs
and restructuring charges. This measure eliminates the significant
level of non-cash depreciation and amortization expense that results
from the capital-intensive nature of our businesses and from
intangible assets recognized in business combinations, as well as
non-cash stock-based compensation and other special items such as exit
costs and other restructuring charges. We use this measure to evaluate
our consolidated operating performance and the performance of our
operating segments, and to allocate resources and capital. It is also
a significant performance measure in our annual incentive compensation
programs. We believe that this measure is useful to investors because
it is one of the bases for comparing our operating performance with
that of other companies in our industries, although our measure may
not be directly comparable to similar measures used by other
companies. Because we use this metric to measure our segment profit or
loss, we reconcile it to operating income, the most directly
comparable financial measure calculated and presented in accordance
with GAAP. Segment EBITDA should not be considered as a substitute for
operating income (loss), net income (loss), net cash provided by
operating activities, or other measures of performance or liquidity we
have reported in accordance with GAAP.
RESIDENTIAL / SMALL BUSINESS SEGMENT
--------------------------------------------
For the three months ended
--------------------------------------------
March 31, December 31, March 31,
(dollars in millions) 2010 2009 2009
------------ ------------ ------------
Operating income (loss) $ 6.1 $ (0.7) $ (4.0)
Exit costs and
restructuring charges,
net -- -- 0.4
Depreciation and
amortization 27.9 35.6 39.6
Non-cash stock-based
compensation expense 2.3 2.7 1.8
------------ ------------ ------------
EBITDA $ 36.3 $ 37.7 $ 37.8
EBITDA Margin 25.8% 26.7% 26.3%
RCN METRO OPTICAL NETWORKS SEGMENT
--------------------------------------------
For the three months ended
--------------------------------------------
March 31, December 31, March 31,
(dollars in millions) 2010 2009 2009
------------ ------------ ------------
Operating income $ 6.9 $ 7.0 $ 5.1
Exit costs and
restructuring charges,
net -- -- (0.1)
Depreciation and
amortization 9.0 9.0 8.9
Non-cash stock-based
compensation expense 0.8 0.9 0.6
------------ ------------ ------------
EBITDA $ 16.7 $ 16.9 $ 14.5
EBITDA Margin 33.9% 34.6% 31.8%
(3) Average monthly revenue per customer, or ARPC, is an industry metric
that measures revenues, excluding commercial and other residential
revenue (consisting of dial-up and reciprocal compensation) per period
divided by the average number of customers during that period. We
believe that ARPC provides useful information concerning the appeal of
our service offerings and our rate plans. ARPC, as defined above, may
not be similar to ARPC measures of other companies, is not a
measurement under accounting principles generally accepted in the
United States and should be considered in addition to, but not as a
substitute for, the information contained in our statements of
operations.
--------------------------------------------
For the three months ended
--------------------------------------------
March 31, December 31, March 31,
(dollars in millions) 2010 2009 2009
------------ ------------ ------------
Total Revenues $ 190.1 $ 190.3 $ 189.2
Less: Commercial
Revenue (49.2) (49.0) (45.5)
Less: Other
Residential Revenue (1.7) (1.7) (2.2)
------------ ------------ ------------
Customer Revenues 139.2 139.6 141.5
------------ ------------ ------------
ARPC $ 109 $ 108 $ 110
(4) Free cash flow is defined as net cash from operating activities, plus
net cash from investing activities, activity in short-term investments
and restricted investments. We believe that free cash flow provides
useful information to investors, analysts and our management about the
cash generated by our core operations after interest and our ability
to fund scheduled debt maturities and other financing activities. Free
cash flow, as defined above, may not be comparable to free cash flow
measures of other companies, is not a measurement under accounting
principles generally accepted in the United States and should be
considered in addition to, but not as a substitute for, the
information contained in our statements of cash flows.
--------------------------------------------
For the three months ended
--------------------------------------------
March 31, December 31, March 31,
(dollars in millions) 2010 2009 2009
------------ ------------ ------------
Net cash provided by
operating activities $ 41.0 $ 37.6 $ 29.8
Net cash (used in)
provided by investing
activities (58.4) 0.3 (18.4)
Increase (decrease) in
short-term investments 24.9 (30.7) 0.1
Decrease in restricted
investments (0.8) -- (3.7)
------------ ------------ ------------
Free Cash Flow $ 6.6 $ 7.1 $ 7.7
Contact: RCN Richard Ramlall SVP Strategic External Affairs and Programming (703) 434-8430 Lippert/Heilshorn & Associates Carolyn Capaccio (212) 838-3777 Email Contact SOURCE: RCN http://www2.marketwire.com/mw/emailprcntct?id=7AC4C261905D22EB © 2010 Marketwire, Inc., All rights reserved. News Provided by COMTEX |
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