RCN Reports Third Quarter 2006 Results.EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become Grows to $35M; Generated $11M in Free Cash Flow Added 6K Customers, 12K RGUs; ARPC ARPC Air Reserve Personnel Center (US DoD) ARPC Australian Reinsurance Pool Corporation ARPC Alliance for the Restoration of Peace and Counterterrorism ARPC Asynchronous Remote Procedure Call and Bundle Rate Remain Strong Commercial Revenue Reaches $22M, +5% Quarter-over-Quarter Strong Execution Drives Increase in Financial Outlook HERNDON, Va. -- RCN Corporation RCN Corporation, (NASDAQ: RCNI), founded in 1993 and based in Herndon, Virginia, is the first American facilities-based competitive provider of bundled telephone, cable television and high speed Internet service delivered over its own fiber-optic local network to consumers in (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : RCNI), a leading provider of triple play communication services, today announced its results for the third quarter 2006. "RCN's impressive customer, EBITDA and free cash flow growth in the third quarter demonstrate continued execution against our balanced strategy," stated James F. Mooney, Chairman of RCN's board of directors. "In a stronger seasonal period, RCN RCN n abbr (= Royal Canadian Navy) → kanadische Marine accelerated subscriber gains, and additional cost savings offset investments in customer acquisition and retention, enabling EBITDA to grow by nearly 40% from last year and leading us to increase our financial outlook. In addition, the announced sale of our San Francisco San Francisco (săn frănsĭs`kō), city (1990 pop. 723,959), coextensive with San Francisco co., W Calif., on the tip of a peninsula between the Pacific Ocean and San Francisco Bay, which are connected by the strait known as the Golden system represents a key milestone in our asset portfolio management strategy. With a state-of-the art network in key strategic markets, industry-leading customer metrics metrics Managed care A popular term for standards by which the quality of a product, service, or outcome of a particular form of Pt management is evaluated. See TQM. , a track record of consistent execution, and a flexible balance sheet, RCN remains well-positioned for success." Third Quarter 2006 Results Due to RCN's intention to sell its California assets, results of operations from RCN's California properties are reflected in "income (loss) from discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. ." For ease of comparison to RCN's previously reported results, both the summary headlines above and the following discussion include results from RCN's California properties as if they were still reflected in continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the . See page 10 for a reconciliation of these adjusted results to RCN's reported results. * Total revenue increased 14% to $158 million compared to $139 million in the third quarter of 2005, and was relatively flat compared to $157 million in the second quarter of 2006. The increase versus the third quarter of 2005 was driven by the acquisition of CEC (Central Electronic Complex) The set of hardware that defines a mainframe, which includes the CPU(s), memory, channels, controllers and power supplies included in the box. Some CECs, such as IBM's Multiprise 2000 and 3000, include data storage devices as well. , and by a 5% increase in core residential revenue, due to an increase in average revenue per customer (ARPC) to $108. Core residential revenue decreased slightly from last quarter due to a $1 sequential decrease in ARPC related to seasonal promotional activity. Commercial revenue was $22 million during the third quarter, compared to $7 million in the third quarter of 2005 and $21 million last quarter. * EBITDA of $35 million increased 49% from $23 million in the third quarter of 2005 and increased 11% from $31 million in the second quarter of 2006, excluding last quarter's $5 million benefit related to the settlement of disputed network charges. Q306 results include a $3 million reduction in accrued programming expenses related to a change in accounting estimate; without this benefit, Q306 EBITDA would have been $32 million, a 37% increase from the third quarter of 2005, and a 2% increase from last quarter, excluding last quarter's $5 million network cost benefit. EBITDA is a non-GAAP financial measure - see "Non-GAAP Measures" below. * Capital expenditures were $26 million compared to $17 million in the third quarter of 2005 and $19 million in the second quarter of 2006. * RCN ended the quarter with $203 million in outstanding debt and $111 million in cash, cash equivalents, and short-term investments. * RCN had approximately 424,000 customers as of September 30, 2006 versus 418,000 as of June 30, 2006. Peter D. Aquino, President and Chief Executive Officer of RCN, stated, "In the third quarter, RCN continued to raise the bar on our performance, accelerating subscriber and RGU RGU The Robert Gordon University (Aberdeen, Scotland) RGU Responsible Governmental Unit RGU Revenue-Generating Unit wins in all markets by delivering customers increased flexibility, customization and content. Our new, innovative Hispanic digital tier, the most comprehensive in the industry, is a significant accomplishment and sets a benchmark for future packages under development. We also expanded our 20mbps broadband service See broadband and broadband service provider. , launched a downloadable music package, and are testing a wireless offering in Boston and a softswitch platform with Cedar Point Cedar Point is a 364 acre (1.5 km²) amusement park located in Sandusky, Ohio, U.S. on a narrow peninsula jutting into Lake Erie. It is one of the world's largest amusement parks (by ride count) with 69 rides and currently holds the world record for most roller coasters with 17, one . Our Commercial business continues to grow revenue and EBITDA, driven in large part by synergies created from our CEC acquisition. Our focus remains on execution and innovation to achieve our objectives for the remainder of the year." Key Third Quarter Accomplishments Revenue Growth * Added approximately 6,000 new customers compared to a loss of 2,000 customers in the third quarter of 2005; customer installs increased 1% from last year and 16% sequentially * Launched 20mbps down/2mbps up Internet service in New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of and Lehigh Valley The Lehigh Valley or the Allentown-Bethlehem-Easton, PA-NJ metropolitan area is a metropolitan region in eastern Pennsylvania and western New Jersey, in the United States. It is the third-most populated metropolitan region in Pennsylvania, after Philadelphia and Pittsburgh. markets, as well as digital phone service in the Lehigh Valley market * Added/upgraded approximately 14,000 homes, bringing year-to-date total to approximately 41,000 new/rebuilt homes * Launched MiVisiE[thorn]n, an innovative, industry-leading Hispanic cable programming tier designed to increase flexibility and choice for Hispanic customers - offers high-quality, content-rich Hispanic programming through 36 distinctive channels, in four themed Ea la carte packages * Enhanced music subscription offering with launch of MusicToGo, a service featuring unlimited downloads to portable music devices of 2 million+ songs available through monthly subscription * Launched RCN QuickConnect product suite, providing automated activation and self-support for Internet products and services - designed to increase customer satisfaction, reduce trouble calls and lower service costs * Won 2 Lehigh Valley market awards: the 2006 Reader's Choice Award as the best cable/phone company; and the "Best in the Valley" award sponsored by Lehigh Valley Magazine Cost Reductions * Reduced general and administrative costs administrative costs, n.pl the overhead expenses incurred in the operation of a dental benefits program, excluding costs of dental services provided. as a percent of revenue by over 400 basis points year-over-year through headcount reductions, as well as lower property taxes and corporate support costs Asset Portfolio * Reached definitive agreement to sell San Francisco assets to Astound Broadband Astound Broadband is a corporation providing broadband internet, telephone, and cable TV service in Walnut Creek, California and Concord, California. Astound is a subsidiary of WaveDivision Holdings based in Kirkland, Washington. for $45 million in cash, or approximately $2,500 per customer; the transaction is expected to close in early 2007 pending customary regulatory and other approvals Reported Results Revenue from continuing operations increased to $150 million in the third quarter of 2006, compared to $131 million in the third quarter of 2005 and $149 million in the second quarter of 2006. Net loss from continuing operations improved to $23 million in the third quarter of 2006, compared to $42 million in the third quarter of 2005 and $26 million in the second quarter of 2006. 2006 Financial Outlook RCN is adjusting its full-year 2006 Outlook as follows: * Revenue of approximately $616-618 million (including $31-32 million from California) * EBITDA of approximately $130-132 million (including $5-6 million from California) * Capital expenditures of approximately $88-90 million (including $2-3 million from California) Michael T. Sicoli, Chief Financial Officer of RCN, stated, "RCN's third quarter performance showed a continuation of the strong momentum built up during the first half of the year, which we have reflected in our updated full-year outlook. In addition, during the third quarter we generated $11 million of free cash flow, an important milestone for RCN, positioning us to achieve our goal of generating positive free cash flow for the second half of 2006." Non-GAAP Measures In addition to the results presented in accordance with Generally Accepted Accounting Principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting throughout this press release, RCN has presented non-GAAP financial measures, such as EBITDA, EBITDA Margin, and ARPC. RCN believes that these non-GAAP measures, viewed in addition to and not in lieu of its reported GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (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. A reconciliation schedule to the comparable GAAP measures is available on pages 10-12. RCN's non-GAAP financial measures may not be comparable to similarly titled measures presented by other companies. Third Quarter Conference Call Management will conduct a conference call to discuss third quarter results and its strategic outlook today at 8:30 AM Eastern time. Be sure to dial into the call 10 to 15 minutes before start time. The dial in number for the call is 888-529-1782, conference ID: 7210609. The call is also being webcast with an accompanying slide presentation, which can be accessed at http://investor.rcn.com/calendar.cfm. A replay of this conference call will be available from 11:30 AM today until 11:59 PM Eastern time on November 16, 2006. The dial in number for the replay is 706-645-9291; the conference ID is the same as above. The webcast and slides will also be archived on RCN's website. About RCN Corporation RCN Corporation, http://www.rcn.com, is one of the largest facilities-based competitive providers of bundled cable, high-speed internet See broadband. and phone services delivered over its own fiber-optic local network to residential and small business customers in some of the most densely populated pop·u·late tr.v. pop·u·lat·ed, pop·u·lat·ing, pop·u·lates 1. To supply with inhabitants, as by colonization; people. 2. markets in the U.S. RCN Business Solutions also provides high-capacity data, video and voice services to a growing number of business customers. RCN provides service in the Boston, New York Boston is a town in Erie County, New York, United States. The population was 7,897 at the 2000 census. The town is named after Boston, Massachusetts. The Town of Boston is an interior town of the county and one of the county's "Southtowns. , Eastern Pennsylvania, Washington, D.C., and Chicago metropolitan markets; its San Francisco and Los Angeles Los Angeles (lôs ăn`jələs, lŏs, ăn`jəlēz'), city (1990 pop. 3,485,398), seat of Los Angeles co., S Calif.; inc. 1850. assets have been classified as discontinued pending sale. (RCNI-Q) RCN Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. 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) [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
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