SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report February 21, 2001
(Date of earliest event reported) (February 21, 2001)
CTC COMMUNICATIONS GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-27505 04-3469590
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
220 Bear Hill Rd., Waltham, Massachusetts 02451
(Address of principal executive offices) (Zip Code)
(781) 466-8080
(Registrant's telephone number including area code)
(Former name or former address if changed since last report)
Item 5. Other Events
On February 21, 2001, the Registrant issued the following press release:
CTC Communications Group Reports Record Revenue and Operating Results for
the Quarter, the Nine Months and the Pro-forma Year Ended December 31;
Year-End Highlights
WALTHAM, Mass.--Feb. 21, 2000--
--Annualized Revenue of approximately $250 Million
--453,300 Access Lines in Service
--Over 1,750 Customer Locations on the PowerPath(SM) broadband
network
--Local Voice Services Implemented on PowerPath(SM) broadband
network
--Non-recurring charge for consolidation of collocation and branch
sites of $3.1 million.
--Fully-Funded Growth Plan
--Fully-Funded Fiber Build-Out of PowerPath(SM) broadband network
in progress
--50,000 Square Foot Data Center under construction
CTC Communications Group (NASDAQ NNM: CPTL) today reported record results
for the quarter, the nine month period and the pro-forma calendar year
ended December 31, 2000.
As previously announced, the Company has adopted Staff Accounting Bulletin
101 (SAB 101) and changed its year-end from March 31st to December 31st.
Reported results in the Company's Annual Report on Form 10-K will
therefore include the operating results for a nine-month "stub" period for
the transition for which the operating results have been adjusted for the
adoption of SAB 101. For the nine months ended December 31st, 2000, the
Company reported revenues of $170.4 million. Pro-forma revenues for the
calendar year ended December 31, 2000, were $215.3 million a 71% increase
over pro-forma revenues for the calendar year ended December 31, 1999 of
$125.9 million.
For the quarter ended December 31st, the Company reported revenues of
$62.3 million, a 60 % increase over the $38.9 million reported for the
quarter ended December 31, 1999 (restated for SAB 101) and a 9% increase
over the $57.0 million reported for the quarter ended September 30, 2000
(restated for SAB 101). Annualized revenue based on the quarter ended
December 31, 2000 was approximately $250 million. The Company added a
record 46,200 access line equivalents (ALEs), net of churn, in the quarter
bringing total ALEs in service to 453,300 as of December 31, 2000. This
represents an 11 % sequential growth rate in total ALEs in service from
the quarter ended September 30, 2000.
Excluding a non-recurring charge for consolidation of collocation and
branch sites described below, the Company reported an EBITDA loss for the
quarter of $9.6 million. For the nine months ended December 31, 2000,
EBITDA losses, excluding this non-recurring charge and the cumulative
effect of adopting SAB101, were $23.2 million as compared with $16.3
million for the comparable period ending December 31, 1999, excluding the
non-cash compensation.
Including the non-recurring charge for consolidation of collocation and
branch sites of $3.1 million, the Company reported a net loss of $72.2
million for the nine months ended December 31, 2000 compared with a net
loss of $41.6 million in the same period last year. This consolidation
will maximize network efficiency through optimal use of fiber deployment
as part of our previously announced fiber build-out plan. Branch site
consolidation was implemented to realize near term operating efficiencies.
The Company expects to save significant monthly charges for collocation
and branch expenses as a result of these consolidations.
Mr. Robert J. Fabbricatore, Chairman and CEO stated, "2000 has been
another highly productive year of substantial growth, technological
advances and positioning for the future. The Company continued to build
its major customer franchise, enhance its "next generation" network
capabilities and position itself as the low cost network service provider
of the future. The investments the Company made in 2000 in branch office
expansion, network development, fiber transmission facilities and data
center capabilities have positioned it as a technology advantaged
competitor with a single broadband network that handles all of today's
voice and data services efficiently and cost effectively. 2001 will be the
year that the Company captures the benefits of these investments through
packaged services offerings, rapid on-net migration of customers,
increasing margins and the attainment of positive EBITDA. CTC's long
standing marketing and sales expertise coupled with the cost efficiencies
and capabilities of our broadband network technology is a powerful
combination which will fuel significant financial growth and distinguish
the Company both in the marketplace and in the investment community".
Marketing and Sales
Expansion to the Mid-Atlantic States.
In 2000 the Company doubled its addressable business market by expanding
its operating area from the New England States and New York into the Mid-
Atlantic States. The Company now has branch offices in New Jersey,
Pennsylvania and Maryland. These initial Mid-Atlantic States branch
offices complete coverage in the Washington DC to Boston corridor which
has a $26 Billion business market telecom spend, $16 Billion of which is
in CTC's targeted medium to large business market. In the fourth quarter
of 2000, the Company decided to consolidate four of its Mid-Atlantic
branch offices into two offices, to realize near term operating
efficiencies. The Company does not anticipate expanding beyond its
Northeast and Mid-Atlantic States operating area in 2001. Branch expansion
within the Northeast and Mid-Atlantic states will be predicated on market
penetration and branch office profitability.
Sales Productivity
The Company added 46,200 ALEs lines in the December Quarter and ended the
year with 453,300 ALEs in service. The Company continues to add over
40,000 new ALEs per quarter, net of churn, and maintain a 99% monthly ALE
retention rate. December Quarter new customer acquisitions averaged 45
lines per customer.
CTC ended the year with over 1,750 customer locations on its PowerPath(SM)
broadband network, with 450 of those locations added in the December
Quarter.
December Quarter annualized revenue is over $1.2 million per sales person
and over $350,000 per employee.
Broadband Product Packaging
The Company currently markets and sells converged long distance voice,
data and Internet services on its PowerPath(SM) Network. These services
are provided on a single broadband access facility to its customers. In
the March 2001 Quarter, the Company will be introducing 1.5 mb, 3.0 mb,
10.0 mb and higher broadband access product packages that include all
voice and data services. The Company anticipates that these packages will
simplify the customer decision making process, reduce customer cost by 20-
30%, generate on-net margins for CTC in excess of 50% and fuel accelerated
customer migrations to the network.
Targeted Marketing and Sales
In the December Quarter, the Company further refined its on-net target
marketing approach for medium and larger sized business based on its local
fiber deployment plan. In 2001, CTC's local fiber implementation will be
accompanied by a targeted sales and marketing program to existing and
potential customers within CTC's fiber node serving areas. This targeted
marketing approach will enhance and accelerate the transition of existing
customers to the network and the acquisition of new customers to the
network from a provisioning, service quality and cost perspective.
Targeted marketing and sales to CTC's fiber node serving areas is one of
the foundations of the Company's goal to rapidly increase on-net customer
locations and ALEs in 2001.
PowerPath(SM) Broadband Network
Broadband VoIP+ATM
Packet Network During the year 2000, the Company provided converged long
distance voice, data and Internet services to customers on its
PowerPath(SM) broadband network. In the Spring of 2000, the Company added
a softswitch to its network infrastructure as part of its development
effort to provide local voice services on the network by year end 2000.
The Company accomplished this goal and placed a "first of its kind" local
voice call between a 100% packet based network and the Public Switched
Telephone Network (PSTN) on December 14, 2000.
The network has been Signalling System Seven (SS7) Certified, Operator
Services Certified and E911 Certified for local and long distance voice
services. CTC currently has 6 beta customers in western Massachusetts
using on-net local and long distance voice services on an ongoing basis,
every day. Customers on the PowerPath(SM) Network can place and receive
voice calls to and from any customer, served by any carrier, throughout
the world.
Local and long distance voice services must be implemented on a LATA by
LATA geographical area due to interconnection requirements with the ILEC.
The Company plans to complete beta testing in western Massachusetts by the
end of the first quarter and then progressively implement its local and
long distance voice services in eastern Massachusetts, New Hampshire,
Maine and Rhode Island by this summer. Thirteen additional LATAs
encompassing six additional states will progressively follow the Rhode
Island implementation.
Local Fiber
The Company has signed agreements to purchase local dark fiber in
Massachusetts, New Hampshire, Maine and Rhode Island and will be
"lighting" this fiber using Cisco optronics. The Company will own and
operate this local fiber which has been designed and engineered to mesh
with CTC's long haul fiber network and extend the "fiber reach" of the CTC
network to Verizon local switching offices where customers are located.
Extending CTC fiber to local Verizon switching offices eliminates the
Company's dependency on Verizon inter-office facilities, improves network
quality and reliability and reduces CTC's on-net provisioning interval
from an average of 95 days to 40 Days. Implementation of the local fiber
will also allow the Company to disconnect a significant number of existing
leased inter-office facilities from Verizon thereby significantly
improving on-net margins.
CTC's local fiber will be implemented progressively with the first section
completing in March and the last section completing in September. The
availability of local dark fiber is a relatively recent development in the
New England area. The Company had previously contracted with Verizon for
numerous collocation sites anticipated to be needed for T3 multiplexing
and other alternative inter-office access facility arrangements. Dark
fiber availability has significantly reduced the Company's requirement for
Verizon collocation space and its ongoing expense.
Data Center
The Company is currently constructing a 50,000 square foot Class 5 data
center which is scheduled for completion in June 2001. This data center
will be used to support new product and application development and
introductions in the unified messaging, web-hosting, remote storage and
managed services areas. It will also be utilized as a gateway to portal
partners providing services that CTC chooses not to develop but to provide
under the CTC brand through these partners.
Data center enabled services and portal partner offerings are centrally
developed and immediately available to all customers on the network. The
Company anticipates that data center based applications will begin to
generate significant new revenue in the second half of 2001.
Quarter ending December 31, 2000 Revenue and EBITDA Analysis--
During the quarter ended December 31, 2000, the Company increased its
local service revenues from $32.9 million in the September 2000 Quarter
(restated for SAB101) to $36.9 million in the December 2000 Quarter, or
12% sequentially, due primarily to the addition of 46,200 new ALEs.
Toll revenues for the quarter remained constant at $14.4 million in the
September 2000 and December 2000 Quarters. An increase in long distance
minutes of use was offset by rate decreases due to competitive market
conditions.
Data revenues for the quarter increased from $9.7 million in the September
2000 Quarter (restated for SAB101) to $11.0 million in the December 2000
Quarter or 13% sequentially, due primarily to continued strong demand for
the Company's PowerPath(SM) broadband network.
Margin for the quarter decreased from 22.1% in the September 2000 Quarter
(restated for SAB101) to 20.3% in the December Quarter. Margins for off-
net services were approximately 24%. The overall decline is primarily due
to additional fixed expenses incurred as a result of the PowerPath(SM)
broadband network expansion and lower margins on toll revenue due to rate
decreases.
Selling, general and administrative expenses (SG&A), excluding
depreciation and amortization, increased from $20.4million in the
September 2000 Quarter to $22.3 million in the December 2000 Quarter.
EBITDA losses, excluding the non-recurring charge for consolidation of
collocation and branch sites increased from $7.8 million in the September
2000 Quarter to $9.6 million in the December 2000 Quarter due to the
expansion of the Company's network infrastructure and increased SG&A
expenses.
Net losses increased from $21.9 million ($1.01 per share) in the September
2000 Quarter (restated for SAB101) to $29.2 million ($1.28 per share) in
the December 2000 Quarter, due primarily to the expansion of the Company's
network infrastructure, an additional $2.0 million in depreciation expense
associated with continued infrastructure deployment and the non-recurring
charge for consolidation of collocation and branch sites.
Investor Conference Call Schedule
The Company will host an investor conference call on Wednesday February
21, 2000 at 1:15 PM Eastern time. There will be an initial presentation by
management and then the lines will be opened for questions and answers.
Topics will include operating results for the December Quarter and fiscal
year 2000 as well as other appropriate subjects.
In addition to the standard call in procedure, this Investor Conference
Call will be audio broadcast live over the Internet for those who would
like to participate via this medium. It should be noted that the Internet
audio broadcast is listen only and there is no capability to ask
questions.
To participate via the traditional dial in conference call, please call
877-797-1768 and ask for the CTC Communications Group Conference call. The
call will start promptly at 1:15 PM Eastern Time. To participate via the
audio broadcast on the Internet, please access www.ctcnet.com, follow the
link on the home page and register using the password: ctc022101. The call
will start promptly at 1:15 PM Eastern Time.
For those unable to participate, the conference call will be replayed
through February 28, 2001. Please call 877-519-4471 and use PIN# 2426463
for the replay. Replay will also be available through February 28, 2001
under the Investor Relations section of CTC's website at www.ctcnet.com.
Please register using the password: ctc022101.
About CTC Communications
CTC is a rapidly growing "next generation" Integrated Communications
Carrier utilizing next generation technology and providing its customers
with converged voice, data, Internet and video services on a broadband,
packet-based network. The Company serves medium and larger business
customers from Virginia to Maine, which includes the most robust
telecommunications region in the world--the Washington D.C. to Boston
corridor. CTC was managing more than 453,300 access lines as of December
31, 2000.
The Company's Cisco Powered IP+ATM packet network and its 435 member sales
and service teams, provide contiguous marketing and technology coverage
throughout the Northeast and Mid-Atlantic States. The Company, through its
dedicated commitment to exceptional customer service, has achieved an
industry-leading market share in the Northeast and an industry-leading
line retention rate in excess of 99 percent. CTC can be found on the
worldwide web at www.ctcnet.com.
The statements in this press release that relate to future plans, events
or performance are forward-looking statements that involve risk and
uncertainties that could cause actual results to differ materially from
those reflected in the forward-looking statements including increased
revenue, migration of customers, improved margins, attainment of positive
EBITDA and introduction of new products. Readers are, accordingly,
cautioned not to place undue reliance on these forward-looking statements,
which speak only as to the date hereof. Additional information about these
risks and uncertainties is set forth in the Company's most recent report
on Form 10-Q. CTC undertakes no obligation to release publicly the results
of any revisions to these forward-looking statements that may be made to
reflect results, events or circumstances after the date hereof.
CTC Communications Group
Statements of Operations
Three months ended December 31,
2000 1999 1999
(as (Adjusted
reported) SAB101)
Total revenues $62,305,870 $40,369,021 $38,911,960
Costs and expenses:
Cost of
telecommunication revenue
(excluding depreciation) 49,631,465 30,409,039 29,625,345
Selling, general
and administrative 22,322,864 14,277,715 14,184,418
Depreciation and
amortization 13,978,528 5,924,366 5,924,366
Consolidation of
collocation and
branch sites 3,110,300 -- --
Total costs and expenses 89,043,157 50,611,120 49,734,129
Loss from operations (26,737,287) (10,242,099) (10,822,169)
Interest expense, net (2,510,706) (3,871,436) (3,871,436)
Other expense -- (102,996) (102,996)
Total other expense (2,510,706) (3,974,432) (3,974,432)
Net loss ($29,247,993) ($14,216,531) ($14,796,601)
Preferred stock dividends
and accretion 4,709,420 351,148 351,148
Net loss applicable to
common stockholders ($33,957,413) ($14,567,679) ($15,147,749)
EBITDA excluding
consolidation
of collocation ($9,648,459) ($4,420,729) ($5,000,799)
and branch sites
EBITDA ($12,758,759) ($4,420,729) ($5,000,799)
Loss per common share
excluding
consolidation of
collocation and branch
sites:
Basic and diluted ($1.16) ($0.67) ($0.69)
Loss per common share:
Basic and diluted ($1.28) ($0.67) ($0.69)
Shares in computing Loss
per common share:
Basic and diluted 26,512,528 21,863,025 21,863,025
CTC Communications Group
Statements of Operations
Nine months ended December 31,
2000 1999
Total revenues $170,352,695 $106,525,027
Costs and expenses:
Cost of telecommunication revenue
(excluding depreciation) 133,196,099 83,896,482
Selling, general and administrative 60,310,722 38,957,873
Depreciation and amortization 34,916,209 11,680,675
Consolidation of collocation
and branch sites 3,110,300 --
Noncash compensation -- 2,238,281
Total costs and expenses 231,533,330 136,773,311
Loss from operations (61,180,635) (30,248,284)
Interest expense, net (8,145,495) (11,389,082)
Other expense -- 8,518
Total other expense (8,145,495) (11,380,564)
Cumulative effect of change in
accounting principle (2,878,949) --
Net loss $(72,205,079) $(41,628,848)
Preferred stock dividends
and accretion 11,517,000 1,040,532
Net loss applicable to common
stockholders $(83,722,079) $(42,669,380)
stockholders $(83,722,079) $(42,669,380)
EBITDA excluding consolidation
of collocation and $(23,154,126) $(16,320,810)
branch sites , noncash compensation
and cumulative
effect of change in accounting principle
EBITDA $(29,143,375) $(18,559,091)
Loss per common share:
Basic and diluted ($3.19) ($2.21)
Loss per common share excluding cumulative
effect of accounting
change and consolidation of collocation
and branch sites:
Basic and diluted ($2.96) ($2.21)
Shares in computing Loss per common share:
Basic and diluted 26,249,173 19,337,940
CTC Communications Group
Balance Sheet
December 31, March 31,
2000 2000
Assets
Cash and cash equivalents $80,029,442 $20,093,156
Accounts receivable, net 43,137,423 39,965,335
Other current assets 3,761,902 3,576,033
Total current assets 126,928,767 63,634,524
Property and equipment (net) 195,741,815 91,235,460
Other assets 15,082,876 7,363,368
Total Assets $337,753,458 $162,233,352
Liabilities and Stockholders' Deficit
Capital leases/ notespayable $29,039,834 $10,162,756
Accounts payable and accrued expenses 52,743,629 48,811,557
Total current liabilities 81,783,463 58,974,313
Capital leases long term 52,763,576 15,031,108
Notes payable long term 103,018,589 103,928,207
Total long term debt 155,782,165 118,959,315
Series B Preferred Stock 203,249,272 --
Stockholders' deficit (103,061,442) (15,700,276)
Total Liabilities and
Stockholders' Deficit $337,753,458 $162,233,352
CONTACT: FELDMAN COMMUNICATIONS INC.
John Dinsmore
410-571-8900
JDFelCom@aol.com
www.FeldmanCommunications.com
or
CTC COMMUNICATIONS
John Pittenger
781-466-1302
Pitt@ctcnet.com
www.ctcnet.com
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CTC COMMUNICATIONS GROUP, INC.
By: /s/ John D. Pittenger
John D. Pittenger,
Executive Vice President, Finance and Administration
Dated: February 21, 2001