Exhibit 99.2
PRESS RELEASE
Contacts:
Becky Haight, Investor Relations
1-202-295-3292
Kye Presley-Dowd, Media
1-202-625-7284
PATHNET REPORTS THIRD QUARTER RESULTS
WASHINGTON, DC, NOVEMBER 10, 1998--Pathnet, Inc., a privately-held wholesale
provider of high-quality, low-cost telecommunications capacity to second- and
third-tier markets, today announced its results for the quarter ended September
30, 1998. The company reported revenue of $475,000, earnings before interest,
taxes, depreciation and amortization (EBITDA) losses of $3.8 million, and a net
loss of $11.9 million for the quarter. As a development stage enterprise,
year-over-year comparisons of Pathnet's financials may not serve as a meaningful
indication of the company's progress or future financial performance.
Pathnet is executing its operating plan to build a digital network by upgrading,
integrating and leveraging existing telecommunications assets, sites and rights
of way, including those utilized by railroads, utility and pipeline companies,
and state and local governments (stategic partners). Substantially all of the
company's revenue for the three and nine month periods ended September 30, 1998
is derived from construction management services for strategic partners. With
the recent activation of Pathnet's first customers and the imminent completion
of several additional network routes, the company expects to begin reporting
revenue from the sale of telecommunications services in the fourth quarter.
In addition to third quarter operating expenses of $4.5 million, the company
recorded a one-time charge of $1.4 million in costs related to the company's
postponed initial public offering. As a result of general weakness in the
capital markets, Pathnet elected to postpone its planned IPO in August 1998.
Operating expenses for the third quarter resulted primarily from costs
associated with Pathnet's priority focus on sales and marketing efforts and
network construction management.
During the quarter, Pathnet announced a contract with the Burlington Northern
Santa Fe Railroad (BNSF) to initiate construction to overbuild its private
microwave system from Chicago, Illinois to St. Paul, Minnesota. BNSF owns one of
the largest private networks in the United States.
Commenting on the company's results, Pathnet president and chief executive
officer, Dick Jalkut said, "We're extremely pleased with our progress and
development through all three quarters of this year. Despite our start-up
status, we've succeeded in greatly enhancing our credibility with both our
strategic partners and our targeted carrier market. In addition, we've
solidified our management team, built out our sales and operations
infrastructure, and delivered on our first contract with a major carrier. The
Burlington Northern contract is another significant step along the way and each
of these successes has a measurable impact on our momentum going forward." he
added.
As of September 30, 1998, the company had over $250 million in cash and
marketable securities available for its use. That amount does not include
approximately $81 million in pledged securities set aside to service interest
payments to bondholders through April, 2000. Capital expenditures for the third
quarter were $18.4 million, bringing total plant and equipment deployed to $33.5
million. Capital expenditures are expected to continue to increase as Pathnet
progresses with the build-out of its network.
Company Highlights for the Third Quarter
o Contract with Burlington Northern Santa Fe to over-build its
private network from Chicago, Illinois to St. Paul, Minnesota.
o First order with a major carrier.
o Completed 400 route miles of network, bringing total route
miles completed to 1,200.
o Added 1,400 additional route miles to construction schedule,
bringing total route miles under construction to 5,500.
This press release contains some matters that are forward-looking statements.
The reader is cautioned that these forward-looking statements, such as plans to
sign additional agreements with private network operators; offer services to
telecom service providers; build a digital network; and statements regarding the
development of Pathnet's business, and other statements contained herein
regarding matters that are not historical facts, are only predictions. No
assurance can be given that the future results will be achieved; actual events
may differ materially as a result of risks facing Pathnet. For a discussion of
factors that could affect the forward-looking statements, see Pathnet's public
filings on file with the Securities and Exchange Commission.
PATHNET, INC.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(In thousands except per share data)
.
For the three months For the nine months
ended ended
September 30, September 30,
------------- -------------
1998 1997 1998 1997
---- ---- ---- ----
Revenue $ 475 $ -- $ 1,050 $ 63
-------- -------- -------- --------
Expenses:
Cost of revenue 1,621 -- 5,386 --
Selling, general and administrative 2,695 1,188 6,722 2,538
Depreciation expense 204 11 315 27
-------- -------- -------- --------
Total expenses 4,520 1,199 12,423 2,565
-------- -------- -------- --------
Net operating loss (4,045) (1,199) (11,373) (2,502)
Interest expense (11,151) -- (21,862) --
Interest income 4,729 23 9,574 60
Initial public offering costs (1,355) -- (1,355) --
Other income, net 2 -- 1 --
-------- -------- -------- --------
Net loss $(11,820) $ (1,176) $(25,015 $ (2,442)
======== ======== ======== ========
Basic and diluted loss per
Common share $ (4.07) $ (0.41) $ (8.62) $ (0.84)
======== ======== ======== ========
Weighted average number of
Common shares outstanding 2,902 2,900 2,902 2,900
===== ===== ===== =====
Other Data:
EBITDA (3,841) (1,188) (11,058) (2,475)
====== ====== ======= ======
PATHNET, INC.
(A Development Stage Enterprise)
CONSOLIDATED BALANCE SHEETS
(In thousands)
September 30, December 31,
1998 1997
---- ----
(Unaudited)
ASSETS
Cash and cash equivalents $ 59,559 $ 7,831
Marketable securities available for sale, at market 122,658 --
Other current assets 4,105 49
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Total current assets 186,322 7,880
Property and equipment, net 33,136 7,207
Deferred financing costs, net 10,792 251
Restricted cash 10,647 760
Marketable securities available for sale, at market 69,011 --
Pledged marketable securities held to maturity 83,224 --
------------- -------------
Total assets $ 393,132 $ 16,098
============= =============
LIABILITIES, MANDATORILY REDEEMABLE
PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
Accounts payable $ 14,159 $ 5,593
Accrued interest 20,485 -
Other current liabilities 2,158 300
------------- -------------
Total current liabilities 36,802 5,893
Bonds payable, net of unamortized bond discount of $3,890,250 346,110 -
Total mandatorily redeemable preferred stock 35,970 15,970
Total stockholders' deficit (25,750) (5,765)
------------- -------------
Total liabilities, mandatorily redeemable preferred stock and $ 393,132 $ 16,098
============= =============
stockholders' deficit
Selected statistical data:
Route miles under construction 5,500
Route miles complete 1,200