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 April 30, 2002
(Date of earliest event reported) (April 30, 2002)
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 April 30, 2002, the Registrant issued the following press release:
CTC Communications Group Reports Record Revenue and Operating Results for
the Quarter Ending March 31, 2002
Quarterly Highlights
Quarterly Revenue of $83.1 million
Seventeenth Consecutive Quarter of Revenue Growth
On-Net Revenue Increased More Than 200% Over the Prior Year
$3.8 Million Sequential EBITDA Improvement
EBITDA positive for the Month of March
370 Basis Point Sequential Margin Improvement to 23.7% of Revenue
Selling, General and Administrative Expenses (exc. Depreciation) at 24.8% of
Revenue
More than 1,100 Customer Locations Added to PowerPath(R) Network
Waltham, MA, April 30, 2002-CTC Communications Group (NASDAQ NM: CPTL)-
today reported record results for the March quarter and reaffirmed the
strength of its business model to expand margins and fuel the Company's
rapid movement towards profitability, which the Company expects to achieve
in 2003.
For the quarter ended March 31, 2002, the Company reported revenues of
$83,085,000, a 23% increase over the $67,621,000 for the quarter ended March
31, 2001 and a 5% increase over the $79,139,000 reported for the quarter
ended December 31, 2001. Revenue from the Company's PowerPath(R) Network
increased 28% sequentially to $13 million in the current quarter. The
Company ended the March 2002 quarter with approximately 607,000 access line
equivalents (ALEs), which represents a 23% increase over the March 2001
quarter end.
For the quarter ended March 31, 2002, the Company reported margin as a
percent of revenue at 23.7% which represents a 370 basis point improvement
from the December 31, 2001 quarter and a 550 basis point improvement from
the quarter ended March 31, 2001.
The Company reported an EBITDA loss of $923,000, a $3.9 million sequential
improvement from the December 31, 2001 quarter, which represents one of the
largest improvements in the history of the Company. The Company was EBITDA
positive for the month of March and expects to be EBITDA positive for the
full June quarter.
The Company reported a net loss to shareholders of $36.4 million ($1.34 per
share) for the quarter ended March 31, 2002, as compared to $42.4 million
($1.57 per share) for the quarter ended December 31, 2001.
Robert Fabbricatore, Chairman and Chief Executive Officer of CTC
Communications Group, commented "CTC continues to achieve solid results in
our first fiscal quarter despite a very challenging operating and economic
environment. We believe that CTC is one of the strongest telecom players in
our marketplace and that strength continues to be evidenced this quarter by
strong top line growth, and more importantly, exceptional margin growth,
most of which falls to the EBITDA line confirming the strength of our
business model."
Fabbricatore continues, "On a sequential basis, CTC's revenue grew by almost
$4 million, which is an outstanding accomplishment in these economic times,
while notably our margin increased significantly by more than $3.8 million.
This was partially fueled by the addition of over 1,100 customer locations
to the PowerPath(R) Network, of which approximately 50% were existing
customers and the balance were new customer relationships for CTC, many of
which are substantially larger organizations. These migrated customers
realize significant reductions in their telecom expenses and at the same
time CTC benefits by realizing incremental margins that more than double to
60% and greater."
"The Company has also been focused on taking advantage of the investment it
has made in its fiber assets. By migrating our customers from expensive
leased circuits to CTC owned fiber facilities, we will ultimately save more
than $1 million per month in operating leases and other expenses currently
included in our cost of sales. This initiative is scheduled to be
substantially complete in June, and while it contributed to our March
quarter margin improvement, the full benefit of the program will not be
realized until the September quarter."
Steve Milton, President and Chief Operating Officer stated, "Due to the
outstanding efforts of our 700 employees, CTC's operating metrics continue
to be exceptional. We now average over $2 million of annualized revenue per
Account Executive and more than $470,000 per employee. When you combine this
exceptional production with the systems and processes developed by CTC over
the 17 years that we have operated in the local telecom environment, the end
result is an SG & A expense that is less than 25% of revenue. These
efficiencies are also reflected on our balance sheet, where our accounts
receivable stands at 50 Days Sales Outstanding (DSO). These are important
aspects of running an efficient business and why we turned EBITDA positive
on margins of 25% for the month of March."
Fabbricatore concluded, "It was a substantial achievement to reach EBITDA
positive during the March quarter and it is not a one time achievement. The
basis for these results are recurring revenues and margins that will
continue to increase by the positive steps the Company is taking in 2002.
CTC is in the early stages of migrating our customers to the PowerPath(R)
Network, with approximately 16% of our access lines on net today. We have
validated the scalability of our technology with our recent milestone of
over one million minutes of daily voice traffic passing through our
softswitch technology. During the balance of 2002, we will continue to add
local dial tone to more regions in our existing footprint, giving the
Company the opportunity to add and migrate larger numbers of customers and
revenue dollars to the PowerPath(R) Network. Over the course of 2002, CTC
will initiate projects that include increasing margins on our off-net
products through the utilization of more advantageous tariffs and pricing.
In addition, CTC will introduce technology to substantially reduce the
capital required by our core switching elements while simplifying network
operations. This network is more labor and capital efficient than networks
utilizing legacy circuit switches, and we are only beginning to see those
efficiencies. In March, we announced new and restructured vendor financing
as well as amended bank covenant levels that will allow CTC to execute its
strategy. During the past four years CTC has focused on achieving three
major objectives: providing exceptional customer service, preserving and
expanding CTC's customer base of medium to larger sized businesses and
utilize the best available technology to provide products and services for
those customers. Throughout the balance of 2002, CTC will continue to
focus its financial, capital and human resources on improving revenues,
margins and operating results. The continued focus on executing our
business plan will further CTC's position as the preeminent integrated
communications carrier in the Northeast."
- -- March 31, 2002 Revenue and EBITDA Analysis --
For the quarter ended March 31, 2002 total revenue increased approximately
$3.9 million sequentially. On-net revenue increased $2.9 million to $13
million for the quarter, reflecting the Company's focus towards on-net
revenue growth through the acquisition of new customers and the migration of
existing customers to the Company's PowerPath(R) Network.
Revenues from local services were $45.9 million, which represents a $1.6
million sequential increase. The Company continued to offset negative
economic pressures on its account base with the generation of new business
relationships. In addition, revenue per line increased marginally from the
December quarter.
Toll revenues for the quarter decreased approximately $375,000 sequentially
to $17.6 million for March 2002 quarter. While revenues decreased slightly,
actual usage minutes increased, reflecting the continued migration of
customers to our network, where customer cost per minute declines, but
Company margins improve.
Data revenues for the quarter increased from $16.9 million in the December
quarter to $19.6 million in the March 2002 quarter, or 16% sequentially, due
to continued strong demand for Internet and Frame Relay services available
from the Company's PowerPath(R) Network.
Margin for the quarter increased from 20.0% in the December quarter to 23.7%
in the March 2002 quarter, representing a 370 basis point increase. This
increase is due primarily to the continued migration of customers onto our
PowerPath(R) Network, the roll out of local dial tone services to more of
the existing Company footprint, the early effects of the Company's
initiative to migrate existing customers onto its owned fiber facilities,
and the increase in revenue per access line.
Selling, general and administrative expenses (SG&A), excluding depreciation
and amortization, increased from $20.3 million (which included a $700,000
charge for consolidation of collocation sites) in the December quarter to
$20.6 million in the March quarter. The Company's SG&A was 24.8% of
revenue, which we believe is the lowest in the telecom sector.
EBITDA losses decreased from $4.8 million in the December quarter to
$923,000 in the March quarter, primarily due to the increases in revenue and
margin mentioned above.
Net losses, including preferred stock dividends and accretion costs,
decreased from $42.4 million ($1.57 per share) in the December 2001 quarter
to $36.4 million ($1.34 per share) in the March 2002 quarter, primarily
through reduced EBITDA losses and lower interest expenses, off set by
slightly higher depreciation.
Investor Conference Call
The Company will host its March 2002 Quarter investor conference call on
Tuesday April 30, 2002 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 quarter 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 for the call.
For those unable to participate, the conference call will be replayed
through May 7, 2002. Please call 877-519-4471 and use PIN# 3240496 for the
replay. Replay will also be available under the Investor Relations section
of CTC's website at www.ctcnet.com.
About CTC Communications
CTC is a rapidly growing "next generation" Integrated Communications Carrier
utilizing advanced technology and providing its customers with converged
voice, data, Internet and video services on a broadband, packet-based
network, called the PowerPath(R) 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's Cisco Powered IP+ATM packet network and its 450 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. 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 the attainment
of EBITDA positive, free cash flow and net income positive results, improved
margins, network and fiber deployment plans and schedules, revenue growth,
resale customer movement to the network, network applications and services
development and deployment, financial results, operating metrics
expectations, reduced operating costs, and the effects of the current
economic conditions. Readers are, accordingly, cautioned not to place undue
reliance on these forward-looking statements. Additional information about
these risks and uncertainties is set forth in the Company's most recent
report on Form 10-K. 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.
# # #
Finance Contact: John Pittenger Media Contact: Alan Russell
CTC Communications CTC Communications
781-466-1302 (t) 781-522-8731 (t)
pitt@ctcnet.com arussell@ctcnet.com
www.ctcnet.com www.ctcnet.com
CTC Communications Group, Inc.
Statements of Operations
Three months ended March 31,
2002 2001
<c> <c>
Revenues: $ 83,084,944 $ 67,621,144
Costs and expenses:
Cost of telecommunication revenue 63,410,727 55,344,185
(excluding depreciation)
Selling, general and administrative 20,597,167 21,199,766
Depreciation and amortization 24,042,371 16,634,236
Total costs and expenses 108,050,265 93,178,187
Loss from operations (24,965,321) (25,557,043)
Interest income/(expense), net (6,222,409) (3,391,610)
Net loss (31,187,730) (28,948,653)
Preferred stock dividends and accretion 5,223,994 4,754,609
Net loss applicable to common stockholders ($36,411,724) ($33,703,262)
EBITDA (922,950) (8,922,807)
Loss per common share:
Basic and diluted ($1.34) ($1.26)
Shares in computing loss per common share
Basic and diluted 27,187,334 26,660,889
<caption>
CTC Communications Group, Inc.
Balance Sheet
March 31, December 31,
2002 2001
Assets
Cash and cash equivalents $49,578,554 $66,289,140
Restricted cash - current 375,000 550,000
Accounts receivable, net 45,113,664 47,059,065
Other current assets 6,582,426 4,762,692
Total current assets 101,649,644 118,660,897
Property and equipment, net 220,523,981 230,325,297
Other assets 13,990,081 11,502,131
Restricted cash - noncurrent 7,125,000 6,950,000
Total assets $343,288,706 $367,438,325
Liabilities and Stockholders' Deficit
Capital leases/ notes payable $29,479,457 $36,390,724
Accounts payable and accrued expenses 72,717,878 61,294,062
Total current liabilities 102,197,335 97,684,786
Capital leases long term 61,388,676 60,324,538
Notes payable long term 225,000,000 225,000,000
Other 871,096 2,665,710
Total long term liabilities 287,259,772 287,990,248
Series B preferred stock 228,036,354 222,812,360
Stockholders' deficit (274,204,755) (241,049,069)
Total liabilities and stockholders'
deficit $343,288,706 $367,438,325
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 on April 30, 2002.
CTC COMMUNICATIONS GROUP, INC.
By: /s/ John D. Pittenger
John D. Pittenger,
Executive Vice President, Finance and Administration