##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM
10-K/A(Amendment No. 1)
  þ
    
    Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the fiscal year ended December 31, 2007
 or
 o
    
    Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from                    to
 
 Commission file number 1-16805
 
 
 RCN Corporation
 (Exact name of registrant as specified in charter)
 Delaware
    
    22-3498533(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 196 Van Buren Street, Herndon, VA
    
    20170(Address of principal executive offices)
    
    (Zip Code)
 Registrants telephone number, including area code: (703) 434-8200
 Securities Registered Pursuant to Section 12(b) of the Act: None
 Securities Registered Pursuant to Section 12(g) of the Act:
Common stock, par value $0.01 per share
(Title of Classes)
 
  o þ
   ̈ þ
  þ o
 o
  o Large accelerated filer
    
    þ Accelerated filer
    

o Non-accelerated filer
    
    o Smaller reporting company
 o þ
  þ o
 DOCUMENTS INCORPORATED BY REFERENCE
  EXPLANATORY
NOTE




---



##### 



PART II
 ITEM 8.      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  PART IV
 
 ITEM 15.      EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 (a) The following
documents are filed as part of this Amendment No. 1 to Annual Report on Form 10-K:(1)
    
    Financial StatementsSee the Index to Financial Statements on page F-1 of this Filing.(2)
    
    Financial Statement SchedulesSee Schedule IIValuation and Qualifying
Accounts on page F-29 of this Filing.(3)
    
    ExhibitsSee Exhibit Index on page E-1.
  1




---



##### 



SIGNATURES
  Date: March 26, 2008
    RCN CorporationBy:
    /s/ Peter D. AquinoPeter D. Aquino  2




---



##### 



Index to Financial Statements
    
    PageReport of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Statements of Operations for the years ended December 31, 2007, 2006 and 2005
    
    
    F-3Consolidated Balance Sheets as of December 31, 2007 and December 31, 2006
    
    
    F-4Consolidated Statements of Cash Flows for the years ended December 31, 2007, 2006 and 2005
    
    
    F-5Consolidated Statements of Changes in Common Stockholders Equity (Deficit) for the years
ended December 31, 2007, 2006 and 2005
    
    
    F-6Notes to Consolidated Financial Statements
    
    
    F-7Schedule IIValuation
and Qualifying Accounts
    
    
    F-29
  F-1




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
        
  F-2




---



##### 



RCN CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except share and per share data)
 Year ended December 31,2007
    
    
    2006
    
    
    2005Revenues
    
    $
    636,097
    
    
    $
    585,476
    
    
    $
    530,412Costs and expenses:Direct expenses
    
    
    224,770
    
    
    
    201,370
    
    
    
    188,950Selling, general and administrative (including stock-based
compensation of $33,206, $18,162, and $8,913)
    
    
    288,426
    
    
    
    276,471
    
    
    
    268,236Impairments, exit costs and restructuring charges
    
    
    8,194
    
    
    
    6,702
    
    
    
    5,130Depreciation and amortization
    
    
    195,239
    
    
    
    192,964
    
    
    
    184,568Operating loss
    
    
    (80,532
    )
    
    
    (92,031
    )
    
    
    (116,472
    )Investment income
    
    
    9,424
    
    
    
    5,983
    
    
    
    5,648Interest expense
    
    
    (34,510
    )
    
    
    (24,659
    )
    
    
    (42,333
    )Gain on sale of investment in unconsolidated entity
    
    
    
    
    
    
    125,370
    
    
    
    (Loss) gain on sale of assets
    
    
    (827
    )
    
    
    (2,119
    )
    
    
    2,536Loss on early extinguishment of debt
    
    
    (63,795
    )
    
    
    (19,287
    )
    
    
    Other (expense) income, net
    
    
    (451
    )
    
    
    35
    
    
    
    1,556Loss from continuing operations before reorganization items and
income taxes
    
    
    (170,691
    )
    
    
    (6,708
    )
    
    
    (149,065
    )Reorganization income, net
    
    
    
    
    
    
    
    
    
    
    11,113Income tax (benefit) expense
    
    
    (1,049
    )
    
    
    7,612
    
    
    
    779Net loss from continuing operations
    
    
    (169,642
    )
    
    
    (14,320
    )
    
    
    (138,731
    )Income from discontinued operations, net of tax
    
    
    1,684
    
    
    
    2,464
    
    
    
    19Gain on sale of discontinued operations, net of tax
    
    
    15,921
    
    
    
    
    
    
    
    Net loss before cumulative effect of change in accounting principle
    
    
    (152,037
    )
    
    
    (11,856
    )
    
    
    (138,712
    )Cumulative effect on prior years of retroactive application of a
change in accounting for legal fees, net of tax
    
    
    
    
    
    
    
    
    
    
    2,600Net loss
    
    $
    (152,037
    )
    
    $
    (11,856
    )
    
    $
    (136,112
    )Net (loss) income per common share:Basic and Diluted:Loss from continuing operations
    
    $
    (4.58
    )
    
    $
    (0.39
    )
    
    $
    (3.85
    )Income from discontinued operations
    
    
    0.05
    
    
    
    0.07
    
    
    
    Gain on sale of discontinued operations
    
    
    0.43
    
    
    
    
    
    
    
    Net loss before cumulative effect of change in accounting principle
    
    $
    (4.11
    )
    
    $
    (0.32
    )
    
    $
    (3.85
    )Cumulative effect of change in accounting for legal fees
    
    
    
    
    
    
    
    
    
    
    0.07Net loss attributable to common stockholders
    
    $
    (4.11
    )
    
    $
    (0.32
    )
    
    $
    (3.78
    )Weighted average shares outstanding, Basic and Diluted
    
    
    37,033,456
    
    
    
    36,756,494
    
    
    
    36,040,165
   F-3




---



##### 



RCN CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
 December 31,2007
    
    
    2006ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    21,793
    
    
    $
    66,342Short-term investments
    
    
    45,899
    
    
    
    58,173Accounts receivable, net of allowance for doubtful accounts of $4,298 and $4,205
    
    
    64,681
    
    
    
    58,483Prepaid expenses and other current assets
    
    
    22,799
    
    
    
    13,025Assets of discontinued operations
    
    
    
    
    
    
    39,573Total current assets
    
    
    155,172
    
    
    
    235,596Property, plant and equipment, net of accumulated depreciation of $502,905 and $339,061
    
    
    793,407
    
    
    
    613,572Intangible assets, net of accumulated amortization of $58,676 and $37,968
    
    
    107,511
    
    
    
    98,264Long-term restricted investments
    
    
    22,767
    
    
    
    16,031Deferred charges and other assets
    
    
    16,920
    
    
    
    11,918Total assets
    
    $
    1,095,777
    
    
    $
    975,381LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    24,021
    
    
    $
    23,089Advance billings and customer deposits
    
    
    41,937
    
    
    
    38,783Accrued expenses and other
    
    
    78,027
    
    
    
    68,342Accrued employee compensation and related expenses
    
    
    17,647
    
    
    
    18,108Accrued exit costs
    
    
    2,618
    
    
    
    2,761Current portion of long-term debt and capital lease obligations
    
    
    7,338
    
    
    
    871Current liabilities of discontinued operations
    
    
    
    
    
    
    10,068Total current liabilities
    
    
    171,588
    
    
    
    162,022Long-term debt and capital lease obligations, net of current maturities
    
    
    737,607
    
    
    
    201,921Other long-term liabilities
    
    
    69,707
    
    
    
    41,502Total liabilities
    
    
    978,902
    
    
    
    405,445Commitments and contingenciesStockholders Equity:Common
stock, par value $0.01 per share, 100,000,000 shares authorized, 37,654,546 and 37,455,912 shares issued and outstanding
    
    
    377
    
    
    
    374Additional paid-in-capital
    
    
    444,738
    
    
    
    722,589Treasury stock, 194,184 and 56,758 shares at cost
    
    
    (4,709
    )
    
    
    (1,388
    )Accumulated deficit
    
    
    (303,693
    )
    
    
    (151,656
    )Accumulated other comprehensive (loss) income
    
    
    (19,838
    )
    
    
    17Total stockholders equity
    
    
    116,875
    
    
    
    569,936Total liabilities and stockholders equity
    
    $
    1,095,777
    
    
    $
    975,381
   F-4




---



##### 



RCN CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
 Year Ended December 31,2007
    
    
    2006
    
    
    2005Cash flows from operating activities:Net loss
    
    $
    (152,037
    )
    
    $
    (11,856
    )
    
    $
    (136,112
    )Income from discontinued operations, net of tax
    
    
    (1,684
    )
    
    
    (2,464
    )
    
    
    (19
    )Gain on sale of discontinued operations
    
    
    (15,921
    )
    
    
    
    
    
    
    Cumulative effect of change in accounting for legal fees
    
    
    
    
    
    
    
    
    
    
    (2,600
    )Net loss from continuing operations
    
    
    (169,642
    )
    
    
    (14,320
    )
    
    
    (138,731
    )Adjustments to reconcile net loss to net cash provided by
operating activities:Accretion of discounted debt
    
    
    
    
    
    
    1,663
    
    
    
    4,680Amortization of financing costs
    
    
    740
    
    
    
    1,304
    
    
    
    2,333Non-cash stock-based compensation
    
    
    33,206
    
    
    
    18,162
    
    
    
    8,913Loss (gain) on sale of assets
    
    
    827
    
    
    
    2,119
    
    
    
    (2,536
    )Loss on early extinguishment of debt
    
    
    63,795
    
    
    
    19,287
    
    
    
    Gain on sale of investment in unconsolidated entity
    
    
    
    
    
    
    (125,370
    )
    
    
    Depreciation and amortization
    
    
    195,239
    
    
    
    192,964
    
    
    
    184,568Deferred income taxes, net
    
    
    (1,049
    )
    
    
    145
    
    
    
    Provision for doubtful accounts
    
    
    10,880
    
    
    
    11,039
    
    
    
    9,088Non-cash impairments, exit costs and restructuring charges
    
    
    2,460
    
    
    
    4,402
    
    
    
    8,264Net change in certain assets and liabilities, net of
business acquisitions:Accounts receivable and unbilled revenues
    
    
    (10,448
    )
    
    
    (15,642
    )
    
    
    (5,445
    )Accounts payable
    
    
    (1,231
    )
    
    
    1,437
    
    
    
    (4,732
    )Accrued expenses
    
    
    (14,885
    )
    
    
    (8,721
    )
    
    
    11,254Advanced billing and customer deposits
    
    
    338
    
    
    
    4,512
    
    
    
    (825
    )Payment of deferred reorganization costs
    
    
    
    
    
    
    
    
    
    
    (21,644
    )Other assets and liabilities
    
    
    (1,542
    )
    
    
    (1,464
    )
    
    
    7,924Net cash provided by continuing operations
    
    
    108,688
    
    
    
    91,517
    
    
    
    63,111Cash provided by (used in) discontinued operations
    
    
    476
    
    
    
    3,498
    
    
    
    (2,685
    )Net cash provided by operating activities
    
    
    109,164
    
    
    
    95,015
    
    
    
    60,426Cash flows from investing activities:Additions to property, plant and equipment
    
    
    (115,510
    )
    
    
    (86,195
    )
    
    
    (85,028
    )Investment in acquisitions and intangibles, net of cash
acquired
    
    
    (261,843
    )
    
    
    (40,854
    )
    
    
    (2,244
    )Net proceeds from sale of discontinued operations and
other assets
    
    
    46,877
    
    
    
    
    
    
    
    Decrease (increase) in short-term investments
    
    
    12,268
    
    
    
    13,828
    
    
    
    (21,559
    )Proceeds from sale of assets
    
    
    1,955
    
    
    
    999
    
    
    
    6,259Proceeds from sale of investment in unconsolidated entity
    
    
    
    
    
    
    307,467
    
    
    
    Decrease in restricted investments
    
    
    754
    
    
    
    1,537
    
    
    
    Decrease in investments restricted for debt service
    
    
    
    
    
    
    
    
    
    
    9,020Net cash (used in) provided by continuing operations
    
    
    (315,499
    )
    
    
    196,782
    
    
    
    (93,552
    )Cash used in discontinued operations
    
    
    (243
    )
    
    
    (2,156
    )
    
    
    (4,322
    )Net cash (used in) provided by investing activities
    
    
    (315,742
    )
    
    
    194,626
    
    
    
    (97,874
    )
  F-5




---



##### 



Year
Ended December 31,2007
    
    
    2006
    
    
    2005Cash flows from financing activities:Repayments of long-term debt, including debt premium
    
    
    (219,351
    )
    
    
    (372,160
    )
    
    
    (6,037
    )Payment of debt issuance costs
    
    
    (13,944
    )
    
    
    (4,412
    )
    
    
    Dividends paid
    
    
    (348,380
    )
    
    
    
    
    
    
    Cost of common shares repurchased
    
    
    (6,960
    )
    
    
    (1,388
    )
    
    
    Payments of capital lease obligations
    
    
    (129
    )
    
    
    (372
    )
    
    
    (558
    )Proceeds from the issuance of long-term debt
    
    
    745,000
    
    
    
    75,000
    
    
    
    Proceeds from the exercise of stock options
    
    
    5,793
    
    
    
    9,127
    
    
    
    1,410Net cash provided by (used in) financing activities
    
    
    162,029
    
    
    
    (294,205
    )
    
    
    (5,185
    )Net decrease in cash and cash equivalents
    
    
    (44,549
    )
    
    
    (4,564
    )
    
    
    (42,633
    )Cash and cash equivalents at beginning of period
    
    
    66,342
    
    
    
    70,906
    
    
    
    113,539Cash and cash equivalents at end of period
    
    $
    21,793
    
    
    $
    66,342
    
    
    $
    70,906Supplemental disclosures of cash flow informationCash paid during the periods for:Interest, net of capitalized interest of $0
    
    $
    38,663
    
    
    $
    21,477
    
    
    $
    31,277Income taxes
    
    $
    0
    
    
    $
    7,467
    
    
    $
    0
   F-5




---



##### 



RCN CORPORATION
 
 Consolidated Statements of Stockholders Equity/(Deficit)
(dollars in thousands, except share and per share data)
 CommittedCommon Stock
    
    
    Committed
    
    
    Committed
    
    
    Capital
    
    
    
    
    
    
    
    
    
    Treasury
    
    
    
    
    
    
    Accumulated Other
    
    
    Total CommonCommon Stock
    
    
    Class A
    
    
    Capital
    
    
    Capital
    
    
    in Excess
    
    
    Additional
    
    
    Accumulated
    
    
    Stock
    
    
    Treasury
    
    
    Comprehensive
Income
    
    
    StockholdersClass A Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    of Par
    
    
    Paid in Capital
    
    
    Deficit
    
    
    Shares
    
    
    Stock Amount
    
    

(Loss)
    
    
    Equity (Deficit)Balance December 31, 2004
    
    
    31,919,044
    
    
    $
    319
    
    
    
    4,101,806
    
    
    $
    41
    
    
    $
    131,355
    
    
    $
    576,895
    
    
    $
    (3,688
    )
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    704,922Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (136,112
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (136,112
    )Issuance of committed shares in payment of claims
    
    
    3,303,981
    
    
    
    33
    
    
    
    (3,303,981
    )
    
    
    (33
    )
    
    
    (105,806
    )
    
    
    105,806
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of restricted stock
    
    
    730,086
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercise of warrant
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Return of committed shares
    
    
    
    
    
    
    
    
    
    
    113
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of restricted stock award
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,109
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,109Amortization of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,804
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,804Stock option exercised
    
    
    75,000
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,409
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,410Adjustment to deferred tax valuation allowance
related to indefinite-lived intangible assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23,819
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23,819
    )Warrant issuance
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    565
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    565Foreign currency translation gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,896
    
    
    
    6,896Gain on assets held for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    127
    
    
    
    127Balance December 31, 2005
    
    
    36,028,116
    
    
    $
    360
    
    
    
    797,938
    
    
    $
    8
    
    
    $
    25,549
    
    
    $
    669,762
    
    
    $
    (139,800
    )
    
    
    
    
    
    $
    
    
    
    $
    7,023
    
    
    $
    562,902Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,856
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,856
    )Issuance of restricted stock, net of forfeitures
    
    
    168,379
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Return of committed shares
    
    
    (113
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of committed shares in payment of claims
    
    
    797,938
    
    
    
    8
    
    
    
    (797,938
    )
    
    
    (8
    )
    
    
    (25,550
    )
    
    
    25,550
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercise of warrants
    
    
    179
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4
    )Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    56,758
    
    
    
    (1,388
    )
    
    
    
    
    
    
    (1,388
    )Stock options exercised
    
    
    461,413
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,122
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,126Amortization of restricted stock awards
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,791
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,791Amortization of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,371
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,371Foreign currency translation gain (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,896
    )
    
    
    (6,896
    )Unrealized appreciation on investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (110
    )
    
    
    (110
    )Balance December 31, 2006
    
    
    37,455,912
    
    
    $
    374
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    722,589
    
    
    $
    (151,656
    )
    
    
    56,758
    
    
    $
    (1,388
    )
    
    $
    17
    
    
    $
    569,936Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (152,037
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (152,037
    )Issuance of restricted stock, net of forfeitures
    
    
    145,110
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock options exercised
    
    
    315,124
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,818
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,821Issuance of warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38,450
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38,450Repurchase of common stock
    
    
    (261,600
    )
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,639
    )
    
    
    
    
    
    
    137,426
    
    
    
    (3,321
    )
    
    
    
    
    
    
    (6,962
    )Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,206
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,206Dividends declared: $9.33 per common share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (351,684
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (351,684
    )Foreign currency translation loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (73
    )
    
    
    (73
    )Fair market value of interest rate swap
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,817
    )
    
    
    (19,817
    )Unrealized depreciation on investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35
    
    
    
    35Balance December 31, 2007
    
    
    37,654,546
    
    
    $
    377
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    444,738
    
    
    $
    (303,693
    )
    
    
    194,184
    
    
    $
    (4,709
    )
    
    $
    (19,838
    )
    
    $
    116,875
   F-6




---



##### 



RCN CORPORATION
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except share and per share data)
 1. ORGANIZATION AND DESCRIPTION OF BUSINESS
    Dividends and Recapitalization
   2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation
  Use of Estimates and Assumptions
    F-7




---



##### 



Revisions and Reclassifications
   Fresh Start Accounting
 Financial Reporting By Entities in Reorganization Under the
Bankruptcy Code
 Cash and Cash Equivalents
  Short-term Investments
 Accounting for Certain Investments in Debt and Equity
Securities
 2007
    
    
    2006Commercial Paper
    
    $
    29,679
    
    
    $
    11,713Federal Agency
    
    
    16,220
    
    
    
    46,460Total
    
    $
    45,899
    
    
    $
    58,173
 Concentration of Credit Risk
    Accounts Receivable
  Long-Term Restricted Investments
   F-8




---



##### 



Property, Plant and Equipment
   Useful Life
    
    2007
    
    
    2006Telecommunications plant
    
    5-22.5 years
    
    $
    1,027,418
    
    
    $
    711,971Capital leases
    
    5-15 years
    
    
    84,456
    
    
    
    74,800Computer equipment
    
    3-5 years
    
    
    64,316
    
    
    
    55,210Buildings, leasehold improvements and land
    
    5-30 years
    
    
    45,810
    
    
    
    45,835Furniture, fixtures and vehicles
    
    3-10 years
    
    
    28,070
    
    
    
    27,960Construction materials and other
    
    5-10 years
    
    
    46,242
    
    
    
    36,857Total property, plant and equipment
    
    
    
    
    1,296,312
    
    
    
    952,633Less: accumulated depreciation
    
    
    
    
    (502,905
    )
    
    
    (339,061
    )Property, plant and equipment, net
    
    
    
    $
    793,407
    
    
    $
    613,572
   Asset Retirement Obligations
 Accounting for Asset Retirement
Obligations, Accounting for Conditional Asset Retirement Obligations  an
Interpretation of FASB Statement No. 143,
  Intangibles
 Goodwill and Other Intangible Assets
  F-9




---



##### 



Accounting for Costs of Computer
Software Developed or Obtained for Internal Use.
 Valuation
of Indefinite-Lived Intangible Assets and Long-Lived Assets
 Accounting for the
Impairment or Disposal of Long-Lived Assets,
  Legal Contingencies
 Accounting for Contingencies
 Revenue Recognition
   Direct Expenses
   F-10




---



##### 



Selling,
General and Administrative Expenses
  Advertising Expense
  Change in Accounting for Legal Fees
  Non-Cash
Stock-Based Compensation
  Exit Costs and Other Lease Related Costs
 Accounting for Costs Associated with Exit or Disposal Activities
  Debt Issuance Costs
  Income Taxes
 Accounting for Income
Taxes
  F-11




---



##### 



Derivative Instruments and Hedging Activities
 Accounting
for Derivative Instruments and Hedging Activities
 Comprehensive Loss
  Year ended December 31,2007
    
    
    2006
    
    
    2005Net loss
    
    $
    (152,037
    )
    
    $
    (11,856
    )
    
    $
    (136,112
    )Reversal of
accumulated translation gains upon sale of investment in unconsolidated subsidiary
    
    
    
    
    
    
    (6,896
    )
    
    
    Foreign currency translation (loss) gain
    
    
    (73
    )
    
    
    
    
    
    
    6,896Change in fair value of interest rate swaps
    
    
    (19,817
    )
    
    
    
    
    
    
    Unrealized
appreciation (depreciation) on
investments
    
    
    35
    
    
    
    (110
    )
    
    
    127Comprehensive loss
    
    $
    (171,892
    )
    
    $
    (18,862
    )
    
    $
    (129,089
    )
   Segment Reporting
 Disclosures about segments of an enterprise and
related information
 Recently Issued Accounting Pronouncements
 Business Combinations
  F-12




---



##### 



Noncontrolling Interests in Consolidated
Financial Statementsan amendment of Accounting Research Bulletin No. 51
 The Fair Value Option for Financial Assets
and Financial Liabilities-including an Amendment of FASB Statement No. 115
 Fair
Value Measurements
 3. ACQUISITIONS AND DISPOSITIONS
 Acquisition of NEON Communications Group, Inc.
    Current assets
    
    $
    32,288Property and equipment
    
    
    239,637Intangible assets
    
    
    29,000Other non-current assets
    
    
    10,039Total assets acquired
    
    
    310,964Total liabilities assumed
    
    
    29,577Net assets acquired
    
    
    281,387Less: cash acquired
    
    
    21,794Total purchase price, net of cash acquired
    
    $
    259,593
  F-13




---



##### 



2007
    
    

2006Revenues, net *
    
    $
    702,394
    
    
    $
    654,730Operating
loss * (1)
    
    $
    (95,408
    )
    
    $
    (118,467
    )Net loss * (1)
    
    $
    (197,330
    )
    
    $
    (38,414
    )Net loss per common share, basic and diluted *
    
    $
    (5.33
    )
    
    $
    (1.05
    )
 *
    
    from continuing operations(1)
    
    Includes non recurring charges incurred by NEON including deal-related costs and stock-based compensation
expense totaling $5.4 million during 2007. Sale of San Francisco Operations and Exit of Los Angeles Operations
   December 31,2006Current assets
    
    $
    4,568Property, plant and equipment, net
    
    
    33,506Other intangible assets, net
    
    
    1,364Other non current assets
    
    
    135Total assets
    
    $
    39,573Total current liabilities
    
    $
    10,068
  Sale of Megacable, S.A. de C.V.
   F-14




---



##### 



Acquisition of Consolidated Edison Communications Holding Company, Inc.
  4. IMPAIRMENTS, EXIT COSTS AND RESTRUCTURING CHARGES
  Year ended December 31,2007
    
    
    2006
    
    
    2005Exit costs for excess facilities
    
    $
    7,875
    
    
    $
    4,402
    
    
    $
    8,743Restructuring charges
    
    
    3,443
    
    
    
    2,300
    
    
    
    3,011Recoveries, net
    
    
    (3,124
    )
    
    
    
    
    
    
    Reversal of deferred rent
    
    
    
    
    
    
    
    
    
    
    (6,903
    )Asset impairment
    
    
    
    
    
    
    
    
    
    
    279Total
    
    $
    8,194
    
    
    $
    6,702
    
    
    $
    5,130
   Lease FairValue
    
    
    Exit Costs
    
    
    TotalBalance, December 31, 2005
    
    $
    4,554
    
    
    $
    8,018
    
    
    $
    12,572Additional accrued costs
    
    
    
    
    
    
    2,779
    
    
    
    2,779Acquisition of CEC
    
    
    1,400
    
    
    
    
    
    
    
    1,400Amortization
    
    
    (875
    )
    
    
    (1,447
    )
    
    
    (2,322
    )Reversals/Settlements
    
    
    (153
    )
    
    
    
    
    
    
    (153
    )Balance, December 31, 2006
    
    
    4,926
    
    
    
    9,350
    
    
    
    14,276Additional accrued costs
    
    
    
    
    
    
    2,731
    
    
    
    2,731Amortization
    
    
    (773
    )
    
    
    (2,344
    )
    
    
    (3,117
    )Reversals/Settlements
    
    
    (808
    )
    
    
    
    
    
    
    (808
    )Balance, December 31, 2007
    
    
    3,345
    
    
    
    9,737
    
    
    
    13,082Less current portion
    
    
    655
    
    
    
    1,962
    
    
    
    2,617Long-term portion December 31, 2007
    
    $
    2,690
    
    
    $
    7,775
    
    
    $
    10,465
     F-15




---



##### 



5. FAIR VALUE OF FINANCIAL INSTRUMENTS
  Carrying
    
    
    FairAmount
    
    
    ValueCash and cash equivalents
    
    $
    21,793
    
    
    $
    21,793Short-term investments
    
    
    45,899
    
    
    
    45,899Floating rate long-term debt:First-Lien Term Loan
    
    
    716,899
    
    
    
    677,921Revolving credit facility
    
    
    25,000
    
    
    
    25,000Interest rate swaps liability
    
    
    19,817
    
    
    
    19,817Unrecognized financial instrumentsLetters of credit
    
    
    46,973
    
    
    
    46,973
 6. INVESTMENTS IN JOINT VENTURES
 Megacable
 Criteria for Applying the Equity Method of Accounting
for Investments in Common Stock
  F-16




---



##### 



7. INTANGIBLE ASSETS
  2007
    
    
    2006Gross Carrying
    
    
    Accumulated
    
    
    Gross Carrying
    
    
    AccumulatedUseful Life
    
    Amount
    
    
    Amortization
    
    
    Amount
    
    
    AmortizationCustomer relationships
    
    4 years
    
    $
    97,472
    
    
    $
    (50,160
    )
    
    $
    66,221
    
    
    $
    (32,246
    )Trademarks/tradenames
    
    5 years
    
    
    13,573
    
    
    
    (8,263
    )
    
    
    13,753
    
    
    
    (5,568
    )Software
    
    3 years
    
    
    300
    
    
    
    (253
    )
    
    
    120
    
    
    
    (154
    )Sub-total
    
    
    
    $
    111,345
    
    
    $
    (58,676
    )
    
    $
    80,094
    
    
    $
    (37,968
    )Franchises
    
    Indefinite life
    
    
    54,842
    
    
    
    
    
    
    
    56,138
    
    
    
    Total
    
    
    
    $
    166,187
    
    
    $
    (58,676
    )
    
    $
    136,232
    
    
    $
    (37,968
    )
   Year ended December 31,2008
    
    $
    28,5982009
    
    
    13,6892010
    
    
    9,1862011
    
    
    2812012
    
    
    281Thereafter
    
    
    633
 8. DEFERRED CHARGES AND OTHER ASSETS
  2007
    
    
    2006Debt issuance cost, net of accumulated amortization
    
    $
    10,722
    
    
    $
    5,443Security deposits
    
    
    3,558
    
    
    
    1,817Other long-term assets
    
    
    2,640
    
    
    
    4,658Total deferred charges and other assets
    
    $
    16,920
    
    
    $
    11,918
   F-17




---



##### 



9. OTHER LONG-TERM LIABILITIES
  2007
    
    
    2006Deferred taxes
    
    $
    22,763
    
    
    $
    23,812Lease cost/fair value reserve
    
    
    2,690
    
    
    
    4,063Unearned revenue
    
    
    12,398
    
    
    
    3,886Lease exit costs
    
    
    7,775
    
    
    
    7,452Other deferred credits
    
    
    2,716
    
    
    
    2,289Dividend payable
    
    
    1,548
    
    
    
    Interest rate swaps
    
    
    19,817
    
    
    
    Total other long-term liabilities
    
    $
    69,707
    
    
    $
    41,502
   10. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
  2007
    
    
    2006First-Lien Term Loan
    
    $
    716,899
    
    
    $
    74,625Revolving Line of Credit
    
    
    25,000
    
    
    
    Second-Lien Convertible Notes
    
    
    
    
    
    
    125,000Capital Leases
    
    
    3,046
    
    
    
    3,167Total
    
    
    744,945
    
    
    
    202,792Due within one year
    
    
    7,338
    
    
    
    871Total long-term debt
    
    $
    737,607
    
    
    $
    201,921
  Contractual MaturitiesFor the year ending December 31,2008
    
    $
    7,3382009
    
    
    7,3522010
    
    
    7,3682011
    
    
    7,3852012
    
    
    7,404Thereafter
    
    
    708,098Total
    
    $
    744,945
  Former First-Lien Credit Agreement
   F-18




---



##### 



First-Lien Credit Agreement
      Second-Lien Convertible Notes
   2006
Activity
  11. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
   F-19




---



##### 



12. STOCKHOLDERS EQUITY AND STOCK PLANS
 Income (Loss) Per Share
    2007
    
    
    2006Options
    
    
    3,884,652
    
    
    
    2,963,674Warrants
    
    
    8,018,276
    
    
    
    Shares issuable upon conversion of convertible debt
    
    
    
    
    
    
    4,968,204Unvested restricted stock
    
    
    437,482
    
    
    
    655,103Total
    
    
    12,340,410
    
    
    
    8,586,981
 RCN Common Stock and Dividends
     Stock Repurchase Program
   F-20




---



##### 



RCN Stock-Based Compensation
    Year ended December 31,2007
    
    
    2006
    
    
    2005Restricted stock awards
    
    $
    9.9
    
    
    $
    5.8
    
    
    $
    4.0Stock options
    
    
    23.3
    
    
    
    12.4
    
    
    
    4.9Total
stock-based compensation expense
    
    $
    33.2
    
    
    $
    18.2
    
    
    $
    8.9
  Stock Options
   2007
    
    
    2006
    
    
    2005WeightedWeighted
    
    
    average
    
    
    Aggregate
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    remaining
    
    
    intrinsic
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageNumber
    
    
    Exercise
    
    
    contractual life
    
    
    value
    
    
    Number of
    
    
    Exercise
    
    
    Number
    
    
    Exerciseof Shares
    
    
    Price
    
    
    (in years)
    
    
    (in millions)
    
    
    Shares
    
    
    Price
    
    
    of Shares
    
    
    PriceAwards Outstanding
at January 1
    
    
    2,963,674
    
    
    $
    23.37
    
    
    
    
    
    
    
    
    
    
    
    3,433,951
    
    
    $
    21.64
    
    
    
    
    
    
    $
    Granted
    
    
    330,677
    
    
    
    14.39
    
    
    
    
    
    
    
    
    
    
    
    674,900
    
    
    
    27.16
    
    
    
    3,610,759
    
    
    
    21.53Exercised
    
    
    (315,130
    )
    
    
    18.38
    
    
    
    
    
    
    
    
    
    
    
    (461,413
    )
    
    
    19.78
    
    
    
    (75,000
    )
    
    
    18.80Forfeitures
    
    
    (422,368
    )
    
    
    18.76
    
    
    
    
    
    
    
    
    
    
    
    (683,764
    )
    
    
    20.86
    
    
    
    (101,808
    )
    
    
    19.77Special
Dividend
Adjustment
    
    
    1,327,799
    
    
    
    15.57Awards Outstanding
at December 31
    
    
    3,884,652
    
    
    $
    15.49
    
    
    
    4.72
    
    
    $
    0.2
    
    
    
    2,963,674
    
    
    $
    23.37
    
    
    
    3,433,951
    
    
    $
    21.64Awards Exercisable
at December 31
    
    
    2,283,819
    
    
    $
    15.77
    
    
    
    4.47
    
    
    $
    (0.4
    )
    
    
    670,249
    
    
    $
    23.16
    
    
    
    
    
    
    $
    
   F-21




---



##### 



Options Outstanding
    
    
    Options ExercisableWeightedNumber
    
    
    average
    
    
    Weighted
    
    
    
    
    
    
    WeightedExercise price
    
    
    outstanding
    
    
    remaining
    
    
    average
    
    
    
    
    
    
    averageof
    
    
    at
    
    
    contractual
    
    
    exercise
    
    
    As of
    
    
    exercise priceoptions
    
    
    12/31/2007
    
    
    life (years)
    
    
    price
    
    
    12/31/2007
    
    
    per option$
    12.36
    
    
    
    543,858
    
    
    
    4.40
    
    
    $
    12.36
    
    
    
    237,171
    
    
    $
    12.36$
    13.79
    
    
    
    1,448,708
    
    
    
    4.40
    
    
    $
    13.79
    
    
    
    1,065,491
    
    
    $
    13.79$
    14.29
    
    
    
    279,239
    
    
    
    4.91
    
    
    $
    14.29
    
    
    
    173,188
    
    
    $
    14.29$
    14.39
    
    
    
    254,076
    
    
    
    6.67
    
    
    $
    14.39
    
    
    
    
    
    
    $
    14.39$
    16.63
    
    
    
    121,739
    
    
    
    5.24
    
    
    $
    16.63
    
    
    
    40,578
    
    
    $
    16.63$
    17.42
    
    
    
    463,826
    
    
    
    5.43
    
    
    $
    17.42
    
    
    
    178,458
    
    
    $
    17.42$
    19.78
    
    
    
    138,274
    
    
    
    5.93
    
    
    $
    19.78
    
    
    
    48,065
    
    
    $
    19.78$
    20.68
    
    
    
    634,932
    
    
    
    4.00
    
    
    $
    20.68
    
    
    
    540,868
    
    
    $
    20.68$
    12.36    $20.68
    
    
    
    3,884,652
    
    
    
    4.72
    
    
    $
    15.53
    
    
    
    2,283,819
    
    
    $
    15.77
   (weighted average)
    
    2007
    
    
    2006
    
    
    2005Fair Value
    
    $
    
    
    
    $
    10.99
    
    
    $
    11.49Dividend yield
    
    
    
    
    
    
    0
    %
    
    
    0
    %Expected volatility
    
    
    
    
    
    
    58
    %
    
    
    58
    %Risk-free interest rate
    
    
    
    
    
    
    3.72
    %
    
    
    3.96
    %Expected life (in years)
    
    
    
    
    
    
    4.67
    
    
    
    4.01
  (weighted average)
    
    2007
    
    
    2006
    
    
    2005Fair Value
    
    $
    5.87
    
    
    $
    9.60
    
    
    $
    10.61Dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Expected volatility
    
    
    53
    %
    
    
    46
    %
    
    
    58
    %Risk-free interest rate
    
    
    4.31
    %
    
    
    4.98
    %
    
    
    3.76
    %Expected life (in years)
    
    
    4.08
    
    
    
    4.28
    
    
    
    4.11
   F-22




---



##### 



Restricted Stock
   2007
    
    
    2006
    
    
    2005WeightedWeighted
    
    
    
    
    
    
    average
    
    
    
    
    
    
    WeightedNumber
    
    
    average
    
    
    Number
    
    
    grant
    
    
    Number
    
    
    averageof Shares
    
    
    grant price
    
    
    of Shares
    
    
    price
    
    
    of Shares
    
    
    grant priceNonvested, January 1
    
    
    599,159
    
    
    $
    25.25
    
    
    
    730,086
    
    
    $
    23.96
    
    
    
    
    
    
    
    Granted
    
    
    220,000
    
    
    
    27.27
    
    
    
    168,379
    
    
    
    28.58
    
    
    
    730,086
    
    
    $
    23.96Vested
    
    
    (362,731
    )
    
    
    24.71
    
    
    
    (243,362
    )
    
    
    23.96
    
    
    
    
    
    
    
    Forfeited
    
    
    (18,946
    )
    
    
    30.10
    
    
    
    (55,944
    )
    
    
    24.01
    
    
    
    
    
    
    
    Nonvested,
December 31
    
    
    437,482
    
    
    $
    26.50
    
    
    
    599,159
    
    
    $
    25.25
    
    
    
    730,086
    
    
    $
    23.96
  13. INCOME TAXES
  Year ended December 31,2007
    
    
    2006
    
    
    2005Current:Federal
    
    $
    
    
    
    $
    
    
    
    $
    State
    
    
    
    
    
    
    
    
    
    
    (30
    )Foreign
    
    
    
    
    
    
    7,467
    
    
    
    
    
    
    
    7,467
    
    
    
    (30
    )Deferred:Federal
    
    
    (408
    )
    
    
    (1,267
    )
    
    
    State
    
    
    (641
    )
    
    
    1,412
    
    
    
    809(1,049
    )
    
    
    145
    
    
    
    809Total
    
    $
    (1,049
    )
    
    $
    7,612
    
    
    $
    779
  2007
    
    
    2006
    
    
    2005Net operating loss carryforwards
    
    $
    552,924
    
    
    $
    429,338
    
    
    $
    350,500Capital loss
carryforwards
    
    
    7,283
    
    
    
    7,166
    
    
    
    Employee benefit plan
    
    
    2,786
    
    
    
    3,075
    
    
    
    5,452Allowance
for doubtful accounts
    
    
    1,754
    
    
    
    1,767
    
    
    
    1,553Stock-based compensation
    
    
    13,087
    
    
    
    5,776
    
    
    
    3,105Investment in unconsolidated entity
    
    
    
    
    
    
    
    
    
    
    43,507Unearned revenue
    
    
    5,166
    
    
    
    1,597
    
    
    
    1,955Deferred rent
    
    
    2,376
    
    
    
    4,965
    
    
    
    3,397Reserve for obsolete inventory
    
    
    557
    
    
    
    409
    
    
    
    10,818
  F-23




---



##### 



2007
    
    
    2006
    
    
    2005Accruals for non-recurring charges
and contract settlements
    
    
    5,951
    
    
    
    4,270
    
    
    
    4,554Property, plant, and equipment
    
    
    (54,481
    )
    
    
    60,767
    
    
    
    85,992Other, net
    
    
    3,071
    
    
    
    4,753
    
    
    
    3,342Total deferred tax assets
    
    
    540,474
    
    
    
    523,883
    
    
    
    514,175Intangibles
    
    
    (31,923
    )
    
    
    (26,956
    )
    
    
    (32,068
    )Total deferred tax liabilities
    
    
    (31,923
    )
    
    
    (26,956
    )
    
    
    (32,068
    )Net deferred tax assets
    
    
    508,551
    
    
    
    496,927
    
    
    
    482,107Valuation allowance
    
    
    (531,314
    )
    
    
    (520,739
    )
    
    
    (505,926
    )Net deferred tax liabilities
    
    $
    (22,763
    )
    
    $
    (23,812
    )
    
    $
    (23,819
    )
  Year ended December 31,2007
    
    
    2006
    
    
    2005Net loss before cumulative effect of a
change in accounting principle
    
    $
    (152,037
    )
    
    $
    (11,856
    )
    
    $
    (138,712
    )Cumulative effect on prior years of
retroactive application of a change in
accounting for legal fees, net of tax of $0
    
    
    
    
    
    
    
    
    
    
    2,600Total (benefit) provision for income taxes
    
    
    (1,049
    )
    
    
    7,612
    
    
    
    779Loss before provision for income taxes
    
    $
    (153,086
    )
    
    $
    (4,244
    )
    
    $
    (135,333
    )Federal income tax benefit at statutory rate
    
    $
    (53,580
    )
    
    $
    (1,485
    )
    
    $
    (47,366
    )State income taxes, net of federal income
tax provision
    
    
    (8,864
    )
    
    
    918
    
    
    
    507Valuation allowance
    
    
    44,927
    
    
    
    2,642
    
    
    
    47,230Restructuring costs
    
    
    15,282
    
    
    
    
    
    
    
    Nondeductible expenses
    
    
    746
    
    
    
    359
    
    
    
    13Reversal of stock-based compensation
    
    
    440
    
    
    
    324
    
    
    
    395Foreign income tax, net of federal income
tax provision
    
    
    
    
    
    
    4,854
    
    
    
    Total (benefit) provision for income taxes
    
    $
    (1,049
    )
    
    $
    7,612
    
    
    $
    779
    F-24




---



##### 



Accounting for Uncertainty
in Income Taxes  an interpretation of FASB Statement
No. 109
 14. EMPLOYEE BENEFIT PLANS
 401(k)
 15. COMMITMENTS AND CONTINGENCIES
 Rent Expense
   AggregateYear
    
    Amounts2008
    
    $
    18,1112009
    
    
    16,9332010
    
    
    14,1642011
    
    
    11,5732012
    
    
    9,280Thereafter
    
    
    22,028
 Unused Letters of Credit
  Guarantees
   F-25




---



##### 



Litigation
 ERISA Class Action
     Centre Street Realty
  City of Chicago Franchise Fee
 
    F-26




---



##### 



16. SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
    17. SELECTED FINANCIAL DATA
  20071st Quarter
    
    
    2nd Quarter
    
    
    3rd Quarter
    
    
    4th Quarter
    
    
    TotalRevenues
    
    $
    153,337
    
    
    $
    159,153
    
    
    $
    155,701
    
    
    $
    167,906
    
    
    $
    636,097Operating loss
    
    
    (20,506
    )
    
    
    (10,229
    )
    
    
    (26,702
    )
    
    
    (23,095
    )
    
    
    (80,532
    )Net loss from continuing operations
    
    
    (22,439
    )
    
    
    (79,505
    )
    
    
    (34,933
    )
    
    
    (32,765
    )
    
    
    (169,642
    )Net income (loss) from discontinued operations
    
    
    2,047
    
    
    
    (260
    )
    
    
    (305
    )
    
    
    202
    
    
    
    1,684Gain on sale
of discontinued operations
    
    
    15,744
    
    
    
    
    
    
    
    45
    
    
    
    132
    
    
    
    15,921Net loss
    
    $
    (4,648
    )
    
    $
    (79,765
    )
    
    $
    (35,193
    )
    
    $
    (32,431
    )
    
    $
    (152,037
    )Basic and Diluted:Net loss from continuing operations per share (1)
    
    $
    (0.62
    )
    
    $
    (2.15
    )
    
    $
    (0.93
    )
    
    $
    (0.89
    )
    
    $
    (4.58
    )Net income (loss) from discontinued operations
per share (1)
    
    
    0.06
    
    
    
    (0.01
    )
    
    
    (0.01
    )
    
    
    0.01
    
    
    
    0.05Gain on sale
of discontinued operations per share
    
    
    0.43
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.43Net loss per share (1)
    
    $
    (0.13
    )
    
    $
    (2.16
    )
    
    $
    (0.94
    )
    
    $
    (0.88
    )
    
    $
    (4.11
    )
  F-27




---



##### 



20061st Quarter (2)
    
    
    2nd Quarter (2)
    
    
    3rd Quarter
    
    
    4th Quarter
    
    
    TotalRevenues
    
    $
    135,823
    
    
    $
    149,352
    
    
    $
    149,688
    
    
    $
    150,613
    
    
    $
    585,476Operating loss
    
    
    (30,114
    )
    
    
    (19,066
    )
    
    
    (19,980
    )
    
    
    (22,871
    )
    
    
    (92,031
    )Net income (loss) from continuing operations
    
    
    60,942
    
    
    
    (26,259
    )
    
    
    (22,972
    )
    
    
    (26,031
    )
    
    
    (14,320
    )Net income from discontinued operations
    
    
    19
    
    
    
    952
    
    
    
    141
    
    
    
    1,352
    
    
    
    2,464Net income (loss)
    
    $
    60,961
    
    
    $
    (25,307
    )
    
    $
    (22,831
    )
    
    $
    (24,679
    )
    
    $
    (11,856
    )Basic:Net income (loss) from continuing
operations per share (1)
    
    $
    1.68
    
    
    $
    (0.72
    )
    
    $
    (0.63
    )
    
    $
    (0.71
    )
    
    $
    (0.39
    )Net income from discontinued operations
per share
    
    
    
    
    
    
    0.03
    
    
    
    
    
    
    
    0.04
    
    
    
    0.07Net income (loss) per share (1)
    
    $
    1.68
    
    
    $
    (0.69
    )
    
    $
    (0.63
    )
    
    $
    (0.67
    )
    
    $
    (0.32
    )Diluted:Net income (loss) from continuing
operations per share (1)
    
    $
    1.52
    
    
    $
    (0.72
    )
    
    $
    (0.63
    )
    
    $
    (0.71
    )
    
    $
    (0.39
    )Net income from discontinued operations
per share
    
    
    
    
    
    
    0.03
    
    
    
    
    
    
    
    0.04
    
    
    
    0.07Net income (loss) per share (1)
    
    $
    1.52
    
    
    $
    (0.69
    )
    
    $
    (0.63
    )
    
    $
    (0.67
    )
    
    $
    (0.32
    )
 (1)
    
    As a result of rounding, the total of the four quarters earnings per share does not
equal the earnings per share for the year. In addition, in the first quarter of 2006, the
diluted earnings per share calculation includes the interest expense on the convertible
notes of approximately $2.3 million.(2)
    
    Certain amounts differ from amounts previously reported on
various Form 10-Qs due to the
reclassification of discontinued operations.  F-28




---



##### 



SCHEDULE II
 RCN
CORPORATION
 
 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
 FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
(DOLLARS IN THOUSANDS)
 AdditionsBalance at
    
    
    Charged
    
    
    Charged
    
    
    Accounts
    
    
    Balance atBeginning of
    
    
    to Cost and
    
    
    to Other
    
    
    Written
    
    
    End ofDescription
    
    Period
    
    
    Expense
    
    
    Accounts (2)
    
    
    Off (1)
    
    
    PeriodAllowance for Doubtful AccountsDeducted from Accounts
Receivable in the
Consolidated Balance SheetsDecember 31, 2007
    
    $
    4,205
    
    
    $
    10,880
    
    
    $
    396
    
    
    $
    11,183
    
    
    $
    4,298December 31, 2006
    
    $
    3,535
    
    
    $
    11,039
    
    
    $
    1,126
    
    
    $
    11,495
    
    
    $
    4,205December 31, 2005
    
    $
    4,448
    
    
    $
    9,088
    
    
    $
    
    
    
    $
    10,001
    
    
    $
    3,535
 (1)
    
    Consists of write-offs, net of recoveries and collection fees in each year.(2)
    
    Includes additions for acquisitions.  F-29




---



##### 



EXHIBITS INDEX
 (Exhibits are listed by numbers corresponding to the Exhibit Table of Item 601 in Regulation S-K).
 Exhibit No.
    
    Description2.1
    
    Joint Plan of Reorganization of RCN Corporation and Certain
Subsidiaries, dated as of December 21, 2004 (incorporated by reference
to Exhibit 2.1 of RCNs Current Report on Form 8-K filed on December
14, 2004).2.2
    
    Order Confirming the Joint Plan of Reorganization of RCN Corporation
and Certain Subsidiaries, dated as of December 8, 2004 (incorporated
by reference to Exhibit 2.2 of RCNs Current Report on Form 8-K filed
on December 14, 2004).3.1
    
    Amended and Restated Certificate of Incorporation of RCN Corporation,
dated as of December 21, 2004 (incorporated by reference to Exhibit
3.1 of RCNs Current Report on Form 8-K filed on December 27, 2004).3.2
    
    Amended and Restated Bylaws of RCN Corporation (incorporated by
reference to Exhibit 3.2 of RCNs Current Report on Form 8-K filed on
December 27, 2004).4.1
    
    Registration Rights Agreement, dated as of December 21, 2004, by and
between RCN Corporation and the Stockholders listed on the signature
pages thereto (incorporated by reference to Exhibit 4.2 of RCNs
Current Report on Form 8-K filed on December 27, 2004).4.2
    
    Warrant Agreement, dated as of May 25, 2007, by and RCN Corporation
and HSBC Bank USA, National Association, in its capacity as Warrant Agent (incorporated by reference to
Exhibit 4.1 of RCNs Current Report on Form 8-K filed on May 25, 2007).4.3
    
    Registration Rights Agreement, dated as of May 25, 2007, by and among
RCN Corporation and the Holders, as defined therein (incorporated by
reference to Exhibit 4.2 of RCNs Current Report on Form 8-K filed on
May 25, 2007).10.1
    
    Dark Fiber IRU Agreement dated as of May 8, 1997 among Metropolitan
Fiber Systems/McCourt, Inc. and RCN Telecom Services of Massachusetts,
Inc. (incorporated by reference to Exhibit 10.2 to RCNs Amendment
No. 2 to Form 10/A filed on September 5, 1997 (Commission File No. 0-22825)).10.2 (**)
    
    First Amendment dated as of November 28, 2006 between MCImetro Access
Transmission Services of Massachusetts, as successor-in-interest to
Metropolitan Fiber Systems McCourt, Inc. and RCN Telecom Services,
Inc. as successor-in-interest to RCN Telecom Services of
Massachusetts, Inc. amending the Dark Fiber IRU Agreement dated as of
May 8, 1997 among Metropolitan Fiber Systems/McCourt, Inc. and RCN
Telecom Services of Massachusetts, Inc. (incorporated by reference to
Exhibit 10.20 of RCNs Annual Report on Form 10-K filed on March 15, 2007).10.3
    
    Dark Fiber IRU Agreement dated as of May 8, 1997 among Metropolitan
Fiber Systems of New York, Inc. and RCN Telecom Services of New York,
Inc. (incorporated by reference to Exhibit 10.3 to RCNs Amendment
No. 2 to Form 10/A filed on September 5, 1997 (Commission File No. 0-22825)).10.4 (*) (**)
    
    First Amendment to Dark Fiber IRU Agreement between Metropolitan Fiber
Systems of New York, Inc. and RCN Telecom Services, Inc. dated as of
December 5, 2007, amending the May 8, 1997 Dark Fiber IRU Agreement
between Metropolitan Fiber Systems of New York, Inc. and RCN Telecom Services, Inc.10.5
    
    Second Amended and Restated Operating Agreement of RCN-Becocom, LLC
made and effective as of June 19, 2002 (incorporated by reference to
Exhibit 10.01 of RCNs Current Report on Form 8-K filed on June 21, 2002).10.6
    
    Management Agreement dated as of June 17, 1997 among RCN Operating
Services, Inc. and RCN-Becocom, Inc. (incorporated herein by
reference to Exhibit 10.9 to RCNs Amendment No. 2 to Form 10/A filed
September 5, 1997 (Commission File No. 0-22825)).10.7
    
    Construction and Indefeasible Right of Use
Agreement dated as of June 17, 1997 between RCN-Becocom, Inc. and RCN-Becocom, LLC
(incorporated by reference to Exhibit 10.10 to RCNs Amendment
No. 2 to Form 10/A filed September 5, 1997 (Commission File No. 0-22825)).
  E-1




---



##### 



Exhibit No.
    
    Description10.8
    
    License Agreement dated as of June 17, 1997 between Boston Edison
Company and RCN-Becocom, Inc. (incorporated by reference to Exhibit
10.11 to RCNs Amendment No. 2 to Form 10/A filed September 5, 1997
(Commission File No. 0-22825)).10.9
    
    Joint Investment and Non-Competition Agreement dated as of June 17,
1997 among RCN Telecom Services of Massachusetts, Inc., RCN-Becocom,
Inc. and RCN-BecoCom, LLC (incorporated by reference to Exhibit
10.12 to RCNs Amendment No. 2 to Form 10/A filed September 5, 1997
(Commission File No. 0-22825)).10.10
    
    Amended and Restated Operating Agreement of Starpower Communications,
L.L.C. by and between Pepco Communications, L.L.C. and RCN Telecom
Services of Washington, D.C. Inc. dated October 28, 1997 (incorporated by reference to Exhibit 10.13 to RCNs Annual Report on
Form 10-K for the year ended December 31, 1997 (Commission File No. 0-22825)).10.11 (*)
    
    Second Amended and Restated Agreement for the Provision of
Fiber Optic Facilities and Services between Northeast Utilities
Service Company, The Connecticut Light & Power Company, Western
Massachusetts Electric Company, Public Service Company of New
Hampshire, and Neon Optica, Inc. as Successor in Interest to Necom LLC
as of December 23, 2002 - Phase One.10.12 (*)
    
    Second Amended and Restated Agreement for the Provision of
Fiber Optic Facilities and Services between Northeast Utilities
Service Company, The Connecticut Light & Power Company, Western
Massachusetts Electric Company, Public Service Company of New
Hampshire, and Neon Optica, Inc. as Successor in Interest to Necom LLC
as of December 23, 2002 - Phase Two.10.13 (*)
    
    Agreement Concerning the Reimbursement of Fees Among The
Connecticut Light & Power Company Western Massachusetts Electric
Company, Public Service Company of New Hampshire and Mode
1 Communications, Inc. and Neon Optica, Inc. dated as of November 5, 2004.10.14 (**)
    
    Master Service Agreement, dated as of September 27, 2007, by and
between RCN Telecom Services and Sitel Operating Corporation
(incorporated by reference to Exhibit 10.1 of RCNs Quarterly Report
on Form 10-Q filed on November 8, 2007).10.15
    
    Credit Agreement, dated as of May 25, 2007, by and among RCN
Corporation, the various lenders party to the Credit Agreement, and
Deutsche Bank Trust Company Americas, as Administrative Agent
(incorporated by reference to Exhibit 10.1 of RCNs Current Report on
Form 8-K filed on May 25, 2007).10.16
    
    Incremental Commitment Agreement, dated as of November 13, 2007, by
and among RCN Corporation, the various lenders party to the Credit
Agreement, and Deutsche Bank Trust Company Americas, as Administrative
Agent (incorporated by reference to Exhibit 10.1 of RCNs Current
Report on Form 8-K filed on November 13, 2007).10.17
    
    Security Agreement, dated as of May 25, 2007, by and among RCN
Corporation, certain subsidiaries of RCN Corporation, and Deutsche
Bank Trust Company Americas, as First-Lien Collateral Agent (incorporated by reference to
Exhibit 10.2 of RCNs Current Report on
Form 8-K filed on May 25, 2007).10.18
    
    Pledge Agreement, dated as of May 25, 2007, by and among RCN
Corporation, certain subsidiaries of RCN Corporation, and Deutsche
Bank Trust Company Americas, as First-Lien Collateral Agent (incorporated by reference to
Exhibit 10.3 of RCNs Current Report on
Form 8-K filed on May 25, 2007).10.19
    
    Subsidiary Guaranty, dated as of May 25, 2007, by and among certain
subsidiaries of RCN Corporation and Deutsche Bank Trust Company
Americas, as Collateral Agent (incorporated by reference to Exhibit
10.4 of RCNs Current Report on Form 8-K filed on May 25, 2007).10.20+
    
    RCN Corporation Senior Executive Annual Bonus Plan (incorporated by
reference to Exhibit 99.1 of RCNs Current Report on Form 8-K filed
on July 26, 2005).10.21+
    
    RCN Corporation 2005 Stock Compensation Plan, as amended
(incorporated by reference to Annex A to RCNs Definitive Proxy
Statement for the 2007 Annual Meeting of Stockholders filed on April 27, 2007).10.22+
    
    RCN Corporation Change of Control Severance Plan dated April 7, 2006
(incorporated by reference to Exhibit 10.37 to RCNs Amendment No. 1
to its Annual Report on Form 10-K filed on April 10, 2006).10.23+
    
    RCN Corporation 2007 Short-Term Incentive Plan (incorporated by
reference to Exhibit 10.28 of RCNs Amended Quarterly Report on Form
10-Q/A filed on May 14, 2007).
  E-2




---



##### 



Exhibit No.
    
    Description10.24+
    
    Amended Form Non-Qualified Option Agreement (incorporated by reference
to Exhibit 10.29 to RCNs Amendment No. 1 to its
Annual Report on Form 10-K as filed on April 10, 2006).10.25+
    
    Amended Form Incentive Stock Option Agreement (incorporated by
reference to Exhibit 10.30 to RCNs Amendment No. 1 to its Annual
Report on Form 10-K as filed on April 10, 2006).10.26+
    
    Form Director Restricted Stock Agreement (incorporated by reference to
Exhibit 10.3 of RCNs Current Report on Form 8-K, filed on January 6,
2006).10.27+
    
    Amended Form Executive Restricted Stock Agreement (incorporated by
reference to Exhibit 10.32 of RCNs Annual Report on Form 10-K filed
on March 15, 2007).10.28+
    
    Form of Director Restricted Stock Unit Agreement (incorporated by
reference to Exhibit 10.1 of RCNs Current Report on Form 8-K filed on
February 7, 2008).10.29+
    
    Form of Deferral Election Form (incorporated by reference to Exhibit
10.2 of RCNs Current Report on Form 8-K filed on February 7, 2008).10.30(*) +
    
    Form of
Executive Restricted Stock Unit Agreement.10.31+
    
    Amended and Restated Employment Agreement, effective as of December
21, 2007, by and between RCN Corporation and Peter D. Aquino
(incorporated by reference to Exhibit 10.1 of RCNs Current Report on
Form 8-K filed on December 27, 2007).10.32+
    
    Employment Letter by and between RCN Corporation and Michael Sicoli,
dated May 12, 2005 (incorporated by reference to Exhibit 99.2 of RCNs
Current Report on Form 8-K, filed on May 12, 2005).10.33+
    
    Restricted Stock Agreement dated May 25, 2006 by and between RCN
Corporation and Michael E. Katzenstein (incorporated by reference to
Exhibit 10.1 of RCNs Current Report on Form 8-K, filed on May 31,
2006).10.34+
    
    Restricted Stock Agreement dated May 25, 2006 by and between RCN
Corporation and Theodore H. Schell (incorporated by reference to
Exhibit 10.2 of RCNs Current Report on Form 8-K, filed on May 31,
2006).10.35+
    
    Restricted Stock Agreement dated May 25, 2006 by and between RCN
Corporation and Benjamin C. Duster, IV (incorporated by reference to
Exhibit 10.3 of RCNs Current Report on Form 8-K, filed on May 31,
2006).10.36+
    
    Restricted Stock Agreement dated May 25, 2006 by and between RCN
Corporation and Lee S. Hillman (incorporated by reference to Exhibit
10.4 of RCNs Current Report on Form 8-K, filed on May 31, 2006).10.37 +
    
    Restricted Stock Agreement dated May 25, 2006 by and between RCN
Corporation and Daniel Tseung (incorporated by reference to Exhibit
10.5 of RCNs Current Report on Form 8-K, filed on May 31, 2006).10.38 +
    
    Restricted Stock Agreement by and between RCN Corporation and Peter D.
Aquino (incorporated by reference to Exhibit 10.3 of RCNs Current
Report on Form 8-K filed June 6, 2006).10.39 +
    
    Restricted Stock Agreement by and between RCN Corporation and Michael
T. Sicoli (incorporated by reference to Exhibit 10.4 of RCNs Current
Report of Form 8-K filed on June 6, 2006).
  E-3




---



##### 



Exhibit No.
    
    Description10.40 +
    
    Employment Letter by and between RCN Corporation and Benjamin R.
Preston dated April 5, 2006 (incorporated by reference to Exhibit 99.2
of RCNs Current Report on Form 8-K, filed on April 5, 2006).10.41 +
    
    Severance Agreement and Release, dated as of February 4, 2008, by and
between RCN Corporation and James F. Mooney (incorporated by reference
to Exhibit 10.3 of RCNs Current Report on Form 8-K filed on February
7, 2008).10.42
    
    Stock Purchase Agreement between RCN Corporation and Consolidated
Edison, Inc., dated as of December 5, 2005 (incorporated by reference
to Exhibit 10.33 to RCNs Amendment No. 1 to its Annual Report on Form
10-K as filed on April 10, 2006).10.43
    
    Stock Purchase Agreement, dated March 6, 2006, entered into by and
among RCN International Holdings, Inc, Teleholding, S.A. de C.V., Mega
Cable, S.A. de C.V. and MCM Holding, S.A. de C.V. (incorporated by
reference to Exhibit 99.2 of RCNs Current Report on Form 8-K, filed
on March 8, 2006).10.44
    
    Settlement Agreement, dated March 6, 2006, entered into by and among
RCN International Holdings, Inc., Teleholding, S.A. de C.V., Mega
Cable, S.A. de C.V., MCM Holding, S.A. de C.V. and the Private
Shareholders listed therein (incorporated by reference to Exhibit
10.35 to RCNs Amendment No. 1 to its Annual Report on Form 10-K as
filed on April 10, 2006).10.45
    
    Asset Purchase Agreement by and among RCN Telecom Services, Inc. , RCN
Corporation and Astound Broadband, LLC (incorporated by reference to
Exhibit 99.2 of RCNs Current Report on Form 8-K filed on August 18,
2006).10.46
    
    Agreement and Plan of Merger, dated as of June 24, 2007, by and among
RCN Corporation, Raven Acquisition Corporation, and NEON
Communications Group, Inc. (incorporated by reference to Exhibit 2.1
of RCNs Current Report on Form 8-K filed on June 25, 2007).21.1 (*)
    
    Subsidiaries
of Registrant.23.2 (#)
    
    Consent of Friedman LLP, Independent Registered Public Accounting Firm.31.1 (#)
    
    Certification of Chief Executive Officer pursuant to Rules 13a-14 and
15d-14 promulgated under the Securities and Exchange Act of 1934, as
amended, as adopted pursuant to section 302 of the Sarbanes-Oxley Act
of 2002.31.2 (#)
    
    Certification of the Executive Vice President and Chief Financial
Officer pursuant to Rules 13a-14 and 15d-14 promulgated under the
Securities and Exchange Act of 1934, as amended, as adopted pursuant
to section 302 of the Sarbanes-Oxley Act of 2002.32.1 (#)(***)
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section
1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.32.2 (#)(***)
    
    Certification of Executive Vice President and Chief Financial Officer
pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
 *
    
    Filed with the Original Filing.**
    
    Confidential treatment requested as to certain portions of the document, which portions have
been omitted and filed separately with the Securities and Exchange Commission.***
    
    This certification accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not,
except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended.+
    
    Management compensatory plan or arrangement.#
    
    Filed with this Amendment.  E-4