RCN Reports Second Quarter 2010 ResultsRevenue Reaches $195 Million; EBITDA Reaches $53 Million, Including Deal Costs of $3 Million; Free Cash Flow Reaches $10 MillionHERNDON, VA, Aug 10, 2010 (MARKETWIRE via COMTEX News Network) — RCN Corporation (NASDAQ: RCNI) today announced second 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. "During the second quarter, RCN generated solid, consistent levels of Revenue, EBITDA and Free Cash Flow," stated Peter D. Aquino, President and Chief Executive Officer. "We continued to make progress in our key customer-facing initiatives, rolling out TiVo(R) Premiere from RCN HD DVR and DOCSIS 3.0, and RCN Metro successfully launched its Xtreme Network in New York and New Jersey. We remain focused on continued execution while we finalize the process of closing our merger with an affiliate of ABRY Partners." Second Quarter Review Following are highlights of second 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 $195 million in the second quarter of 2010, compared to $192 million in the second quarter of 2009 and $190 million in the first quarter of 2010. Net income was $3 million in the second quarter of 2010, compared to a net loss of $9 million in the second quarter of 2009 and net income of $5 million in the first quarter of 2010. As reported previously, the swing to net income from net loss is due primarily to lower depreciation expense, as certain assets became fully depreciated during 2009. Michael T. Sicoli, Chief Financial Officer, stated, "In the second quarter, RCN generated strong levels of free cash flow despite the inclusion of deal-related costs and increased investments in capital expenditures. We are pleased with the results to date of our decision to tighten up-front customer credit standards in certain markets within our Residential/Small-Medium Business segment, and we will expand the program to additional markets during the third quarter to support our long-term profitability." 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)
Three months ended Six months ended
June 30, June 30,
------------------- -------------------
2010 2009 2010 2009
--------- --------- --------- ---------
Revenues $ 194.6 $ 192.3 $ 384.7 $ 381.6
Costs and expenses:
Direct expenses 71.3 69.3 143.5 139.6
Selling, general and
administrative (including
stock-based compensation
expense) 72.6 69.6 140.5 138.7
Exit costs and restructuring
charges, net (0.2) -- (0.1) 0.3
Depreciation and amortization 37.8 50.9 74.7 99.6
--------- --------- --------- ---------
Operating income 13.2 2.5 26.2 3.4
Investment income -- 0.1 -- 0.3
Interest expense (9.7) (11.0) (19.4) (22.0)
Other (expense) income, net -- (0.2) 2.0 --
--------- --------- --------- ---------
Income (loss) from continuing
operations before income taxes 3.5 (8.6) 8.7 (18.3)
Income tax expense 0.1 0.8 0.4 0.8
--------- --------- --------- ---------
Net income (loss) $ 3.5 $ (9.4) $ 8.4 $ (19.0)
========= ========= ========= =========
RCN CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in millions)
June 30, December 31,
2010 2009
------------- -------------
ASSETS
Current Assets:
Cash and cash equivalents $ 37.4 $ 71.8
Short-term investments 43.0 15.1
Accounts receivable, net of allowance
for doubtful accounts 63.4 65.7
Prepayments and other current assets 16.9 14.7
------------- -------------
Total current assets 160.7 167.4
Property, plant and equipment, net of
accumulated depreciation 640.2 654.7
Goodwill 15.5 15.5
Intangible assets, net of accumulated
amortization 105.9 106.2
Long-term restricted investments 9.6 11.7
Deferred charges and other assets 14.3 15.1
------------- -------------
Total assets $ 946.0 $ 970.5
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses
related to trade creditors $ 64.3 $ 66.2
Accrued expenses and other liabilities 60.5 70.3
Current portion of long-term debt and
capital lease obligations 7.2 25.9
------------- -------------
Total current liabilities 132.0 162.4
Long-term debt and capital lease obligations,
net of current maturities 705.9 709.3
Other long-term liabilities 98.3 90.6
------------- -------------
Total liabilities 936.2 962.3
------------- -------------
Commitments and contingencies
Stockholders' Equity:
Common stock, par value $0.01 per share 0.4 0.4
Additional paid-in-capital 460.7 454.2
Treasury stock (10.3) (6.4)
Accumulated deficit (394.7) (403.0)
Accumulated other comprehensive loss (46.3) (37.0)
------------- -------------
Total stockholders' equity 9.8 8.1
------------- -------------
Total liabilities and stockholders'
equity $ 946.0 $ 970.5
============= =============
RCN CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in millions)
For the six months ended
----------------------------
June 30, 2010 June 30, 2009
------------- -------------
Cash flows from operating activities:
Net income (loss) $ 8.4 $ (19.0)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Non-cash stock-based compensation 5.7 4.5
Depreciation and amortization 74.7 99.6
Other, net 1.5 0.6
Net change in certain assets and
liabilities (7.8) (19.3)
------------- -------------
Net cash provided by operating
activities 82.3 66.3
Cash flows from (used in) investing
activities:
Additions to property, plant and equipment (65.1) (49.4)
Investment in intangibles (1.2) --
Increase in short-term investments (27.8) (0.1)
Proceeds from sale of assets 1.0 0.6
Decrease in restricted investments 2.1 3.7
------------- -------------
Net cash used in investing activities (91.0) (45.3)
Cash flows from (used in) financing
activities:
Payments of long-term debt, including
capital leases (22.2) (3.7)
Dividend payments (0.5) (0.6)
Cost of common shares repurchased (3.9) (5.7)
Proceeds from the exercise of stock options 0.9 --
------------- -------------
Net cash used in financing activities (25.7) (10.0)
Net (decrease) increase in cash and cash
equivalents (34.4) 11.0
Cash and cash equivalents at beginning of
the period 71.8 10.8
------------- -------------
Cash and cash equivalents at end of the
period $ 37.4 $ 21.8
============= =============
OPERATING RESULTS
RESIDENTIAL / SMALL BUSINESS SEGMENT
(unaudited)
-------------------------------------
Three months ended
-------------------------------------
June 30, March 31, June 30,
2010 2010 2009
(dollars in millions) ----------- ----------- -----------
Video $ 80.3 $ 78.0 $ 78.5
Data 36.7 34.5 35.8
Voice 24.7 25.3 27.4
Recip Comp/Other 3.3 3.2 3.5
----------- ----------- -----------
Total Revenue 145.0 140.9 145.1
Direct expenses 52.9 54.0 52.1
Selling, general and
administrative (1) 54.8 50.6 53.1
----------- ----------- -----------
EBITDA $ 37.4 $ 36.3 $ 39.9
EBITDA Margin 25.8% 25.8% 27.5%
Capital Expenditures $ 21.1 $ 12.2 $ 15.8
Key Metrics
(customers & RGUs in
thousands)
Video RGUs 356 361 368
Data RGUs 316 315 307
Voice RGUs 214 220 236
----------- ----------- -----------
Total RGUs 886 896 911
Customers 422 426 430
Average Revenue Per Customer $ 113 $ 109 $ 111
Digital Penetration 100% 100% 91%
OPERATING RESULTS
RCN METRO OPTICAL NETWORKS SEGMENT
(unaudited)
-------------------------------------
Three months ended
-------------------------------------
June 30, March 31, June 30,
2010 2010 2009
(dollars in millions) ----------- ----------- -----------
Transport Services $ 37.8 $ 37.6 $ 36.0
Data and Internet Services 1.9 1.8 1.1
Co-location 3.1 3.0 2.9
Leased Services 5.0 5.0 5.2
Installation and other 1.8 1.7 1.9
----------- ----------- -----------
Total Revenue 49.6 49.2 47.2
Direct expenses 18.4 18.2 17.1
Selling, general and
administrative (1) 15.2 14.4 14.5
----------- ----------- -----------
EBITDA $ 16.0 $ 16.7 $ 15.6
EBITDA Margin 32.2% 33.9% 33.0%
Capital Expenditures $ 9.2 $ 9.5 $ 9.2
(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
----------------------------------
June 30, March 31, June 30,
(dollars in millions) 2010 2010 2009
---------- ---------- ----------
Net income/(loss) $ 3.5 $ 4.9 $ (9.4)
Income tax expense 0.1 0.3 0.8
Other (income)/expense, net -- (2.0) 0.2
Interest expense 9.7 9.7 11.0
Investment income -- -- (0.1)
Depreciation and amortization 37.8 36.9 50.9
Non-cash stock-based compensation
expense 2.6 3.1 2.1
Exit costs & restructuring charges, net (0.2) -- --
---------- ---------- ----------
EBITDA $ 53.4 $ 53.0 $ 55.5
EBITDA Margin 27.4% 27.9% 28.9%
(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
----------------------------------
June 30, March 31, June 30,
(dollars in millions) 2010 2010 2009
---------- ---------- ----------
Operating income (loss) $ 6.9 $ 6.1 $ (4.0)
Exit costs and restructuring charges,
net (0.2) -- --
Depreciation and amortization 28.7 27.9 42.3
Non-cash stock-based compensation
expense 1.9 2.3 1.6
---------- ---------- ----------
EBITDA $ 37.4 $ 36.3 $ 39.9
EBITDA Margin 25.8% 25.8% 27.5%
RCN METRO OPTICAL NETWORKS SEGMENT
----------------------------------
For the three months ended
----------------------------------
June 30, March 31, June 30,
(dollars in millions) 2010 2010 2009
---------- ---------- ----------
Operating income $ 6.3 $ 6.9 $ 6.5
Depreciation and amortization 9.0 9.0 8.5
Non-cash stock-based compensation
expense 0.7 0.8 0.5
---------- ---------- ----------
EBITDA $ 16.0 $ 16.7 $ 15.6
EBITDA Margin 32.2% 33.9% 33.0%
(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
----------------------------------
June 30, March 31, June 30,
(dollars in millions) 2010 2010 2009
---------- ---------- ----------
Total Revenues $ 194.6 $ 190.1 $ 192.3
Less: Commercial Revenue (49.6) (49.2) (47.2)
Less: Other Residential Revenue (1.5) (1.7) (1.9)
---------- ---------- ----------
Customer Revenues 143.5 139.2 143.2
ARPC $ 113 $ 109 $ 111
(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
----------------------------------
June 30, March 31, June 30,
(dollars in millions) 2010 2010 2009
---------- ---------- ----------
Net cash provided by operating
activities $ 41.3 $ 41.0 $ 36.5
Change in accrued interest on
short-term investments -- -- 0.1
Net cash used in investing
activities (32.6) (58.4) (26.8)
Increase in short-term investments 3.0 24.9 --
Decrease in restricted investments (1.3) (0.8) --
---------- ---------- ----------
Free Cash Flow $ 10.4 $ 6.6 $ 9.9
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=B24F7A3A95047335 Copyright 2010 Marketwire, Inc., All rights reserved. News Provided by COMTEX |
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