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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 29, 1998
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IXC Communications, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 0-20803 75-2644120
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(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
1122 Capital of Texas Highway South, Austin, Texas 78746
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (512) 328-1112
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Not applicable
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
Attached as Exhibit 99.1 is a press release issued by IXC
Communications, Inc. dated October 29, 1998, which is hereby incorporated by
reference herein.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(C) EXHIBITS
99.1 Press Release dated October 29, 1998
2.
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SIGNATURE
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.
Date: October 29, 1998
IXC Communications, Inc.
By: /s/ STUART K. COPPENS
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Stuart K. Coppens
Vice President of Finance and
Chief Accounting Officer
3.
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EXHIBIT INDEX
Exhibit
Number Description
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99.1 Press Release dated October 29, 1998
4.
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EXHIBIT 99.1
IXC COMMUNICATIONS, INC. ANNOUNCES THIRD QUARTER RESULTS
-- Exceeds Analysts' Expectations --
-- Gross Margin Increases to 37.6% from 26.2% --
-- EBITDA up 354.5% --
AUSTIN, TEXAS (BUSINESS WIRE) - Oct. 29, 1998 - IXC Communications, Inc.
(Nasdaq: IIXC) today announced that revenue for the third quarter 1998 increased
35.4% to $185.3 million from $136.8 million in the third quarter 1997. Earnings
before interest, taxes, depreciation and amortization (EBITDA) for the quarter
increased 354.3% to $35.2 million from $7.7 million in the prior year's third
quarter. The net loss for the third quarter was $15.3 million or ($.85) per
share (basic and diluted) compared with a loss of $31.2 million or ($1.09) per
share in the third quarter of 1997. Current and prior year results have been
restated to include the operations of Eclipse (formerly Network Long Distance,
Inc.), which was acquired on June 3, 1998 in a transaction accounted for as a
pooling of interests.
"IXC's operating results are on track with the Company's operating plan, and
exceed the consensus of analysts' estimates for the quarter," said Ben Scott,
chairman and chief executive officer. "As we expected, the Company regained its
momentum in growing both revenue and EBITDA in the period." Mr. Scott also noted
that the integration of Eclipse into IXC is progressing and the Company is
rapidly gearing up its retail sales operations. "We have expanded the sales
force at Eclipse by over 40% to over 200, and are beginning to see significant
improvements in monthly revenue per order generated," said Scott. "Eclipse is
now marketing an expanded integrated service product line, and is moving further
up-market to larger volume customers. We expect the investment we are making in
growing our retail channel to pay important dividends in the future."
Recurring revenue, consisting of the Company's private line and switched long
distance services, increased $39.5 million to $176.3 million, with private line
revenue growing $23.6 million, or 56.2%, and switched long distance revenue
increasing $15.9 million, or 16.7%, over the third quarter 1997. Total revenue
also included $9.0 million of "other revenue" from the sale of usage rights in
fibers that are jointly owned with another carrier. This revenue was recorded
net of its cost, and, although considered nonrecurring, similar sales are
currently expected to continue over the next several quarters.
Gross profit increased 110.3% to $75.3 million, versus $35.8 million in the
third quarter 1997. The $39.5 million improvement included $30.5 million related
to recurring revenue increases and $9.0 million from the nonrecurring other
revenue item. Gross margin related to recurring revenue increased to 37.6% from
26.2% in the third quarter 1997. Transmission lease expense increased only 10.6%
over the prior year's third quarter, as the Company transferred off-net traffic
to its expanding fiber network, and as a greater proportion of new revenue was
generated on-net. Access costs increased 5.6%, declining as a percentage of
switched long distance revenue to 69.6% from 77.0% in the third quarter 1997.
This was the result of FCC-mandated reductions in unitary (per minute) access
costs, partially offset by increased costs related to new tandem trunking
charges which were implemented July 1.
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Operating and administrative costs in the quarter increased $12.0 million to
$40.1 million versus $28.0 million in the third quarter 1997, representing 22.7%
of recurring revenues versus 20.5% in the prior year's third quarter. The
increase was due primarily to operating costs related to the expanded fiber
network as well as sales administrative costs related to expanding the sales
force in Eclipse, the Company's retail operation. It is the Company's intention
to continue to expand the Eclipse direct sales force and, therefore, operating
and administrative expenses may continue to increase in future quarters as a
percentage of revenues.
The net loss for the quarter reflected the improvement in EBITDA, offset by
higher depreciation expense related to the Company's fiber expansion program.
Loss per common share for the third quarter 1998 also reflects $15.3 million in
preferred stock dividends versus $6.7 million in the 1997 third quarter.
On a sequential quarter basis, third quarter recurring revenue increased 13.0%
to $176.3 million, compared with $155.9 million in the second quarter 1998,
largely due to a 30.0% improvement in private line revenue. This was primarily
the result of activating circuits during the quarter related to the $265 million
ISP contract announced earlier this year. Switched long distance revenue
increased $5.2 million, or 5.0% over the 1998 second quarter, despite the
expected decline in revenue from Excel Communications arising from the planned
migration of switched traffic to its own network. Earlier this year, the Company
announced a revised 4-year $156 million contract with Excel, the major portion
of which is for higher-margin, private line services. Gross profit, related to
recurring revenue, increased $18.0 million, or 37.1% over the 1998 second
quarter related primarily to the revenue increase against relatively flat cost
of sales. Gross margin related to recurring revenue increased to 37.6% in the
third quarter - 6.6% points above the 31.0% achieved in the second quarter of
1998. Operating and administrative costs increased 33.7% quarter to quarter to
support the Company's expanding fiber network and to expand its retail sales
force. EBITDA from recurring revenue in the third quarter increased 42.8% to
$26.2 million versus $18.4 million in the second quarter, 1998.
YEAR-TO-DATE RESULTS
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For the first three quarters of 1998 revenue increased $141.3 million or 39.5%
to $498.8 million. The increase in recurring revenue was $132.3 million, or
37.0% to $489.8 million in 1998, compared with $357.5 million in the first three
quarters of 1997. Year-to-date private line revenue increased 43.6% or $48.5
million to $159.8 million due to the activation of large-capacity service
contracts. Switched long distance revenue increased 34.0% or $83.8 million to
$330.0 million, despite a $19.4 million decline in switched revenue related to
Excel.
Gross profit in the first three quarters of 1998 increased $92.6 million or
114.9% to $173.3 million versus the 1997 period, including a gross profit of
$164.3 million from recurring revenue. Gross profit as a percentage of recurring
revenue improved to 33.5% for the 1998 period versus 22.5% in 1997. The gross
margin improvement resulted from the realization of economies of IXC's expanded
fiber network, reflecting increased new revenue being generated on-net, as well
as the movement of off-net leased circuits to the new fiber network. Gross
margin also benefited from the impact of the FCC-mandated reductions in access
costs, as well as continuing close management of costs related to traffic mix
and overflow traffic.
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Year-to-date operating and administrative costs increased $25.0 million, or
33.6%, supporting the expanded scope of network operations and the build up of
the Eclipse sales force. Operating and administrative expenses as a percentage
of recurring revenue were essentially flat versus the comparable period last
year at 20.3%.
The net loss for the first three quarters of 1998 increased 66.3% to $135.7
million over the comparable period in 1997, as the $67.6 million EBITDA
improvement was more than offset by the $69.6 million extraordinary charge
associated with the early redemption of debt, increased pooling costs associated
with the acquisition of Eclipse in 1998 ($4.5 million), additional depreciation
related to the fiber network expansion ($24.3 million), and increased equity
losses ($16.7 million) related primarily to the Company's investment in
MarcaTel, a Mexican long distance carrier.
"We've made great strides, both operationally and in the expansion of our
network," said Mr. Scott. "We now have an enormous amount of capacity on line
and available to meet the new high-speed, high-capacity demands we see in the
marketplace."
Mr. Scott noted a number of key events in the third quarter:
. Successful completion of $600 million Senior Secured Credit Facility as
the third step in the Company's planned refinancing program.
. Three-year, $12 million contract with Adelphia Communications
Corporation to provide switched services to their cable and business
customers.
. Introduction of new turn-key, branded suite of Internet wholesale
services nationwide.
. Completion of 2,400 fiber route miles, including the route segment
between New York, Washington D.C., Atlanta, Houston and Dallas, and the
route segment between Los Angeles and San Francisco - bringing IXC's
network to approximately 9,300 fiber route miles.
. Launch of Storm Communications, Ltd., IXC's joint venture, offering
switched voice services in Europe.
. Three contracts totaling more than $33 million to provide fiber optic
network to Digital Teleport, Inc.
. Implementation of the first OC-192 fiber optic transmission system
supporting up to 80 gigabits per second of capacity - the longest
eight-wavelength OC-192 system deployed anywhere in the world.
. An agreement with Time Warner Telecommunications to offer long distance
services to Time Warner business customers nationwide.
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IXC's network-based delivery solutions are designed to address the speed and
capacity requirements of the global communications market. Having completed the
first new coast-to-coast fiber optic network in the United States in more than a
decade, IXC Communications, Inc. is at the forefront of the industry's new class
of emerging domestic and international carriers. IXC offerings include private
line, broadband, Internet and long distance switched and dedicated services. IXC
is a publicly traded company listed on Nasdaq under the symbol IIXC. IXC's Web
site is at www.ixc-comm.com.
Certain of the above statements set forth management's expectations or
predictions of the future based on current facts and analyses. Actual results
may differ materially from those indicated in such statements due to unavoidable
construction delays, increases in expenses, and other factors. Additional
information on factors that may affect the business and financial results of IXC
can be found in IXC's filings with the Securities and Exchange Commission.
# # #
Media Contact: Investor Contact:
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Melissa Jackson Greta Wiechman
Manager of Public Relations Senior Manager, Investor Relations
(512) 231-5247 (888) 267-9478
[email protected] [email protected]
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IXC COMMUNICATIONS, INC.
SUMMARY OF OPERATING RESULTS
($000'S EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended Year To Date
September 30, September 30,
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1998 1997 1998 1997
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<S> <C> <C> <C> <C>
Revenues:
Private line $ 65,539 $ 41,948 $ 159,788 $ 111,311
Long distance switched services 110,741 94,881 330,010 246,212
Other 8,989 -- 8,989 --
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Total operating revenue 185,269 136,829 498,787 357,523
Gross margin 75,285 35,794 173,261 80,615
% 40.6% 26.2% 34.7% 22.5%
EBITDA 35,191 7,747 73,839 6,205
% 19.0% 5.7% 14.8% 1.7%
Depreciation and amortization 34,801 22,866 77,589 48,339
Pooling costs 444 302 8,089 3,627
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OPERATING LOSS (54) (15,421) (11,839) (45,761)
Interest expense, net 5,421 5,795 15,341 19,415
Equity in net loss of unconsolidated subsidiaries 8,307 7,317 30,326 13,668
Other, net 35 1,943 284 2,234
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LOSS BEFORE INCOME TAXES AND EXTRAORDINARY LOSS (13,817) (30,476) (57,790) (81,078)
Income tax provision 1,647 696 8,266 506
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LOSS BEFORE EXTRAORDINARY LOSS (15,464) (31,172) (66,056) (81,584)
Extraordinary loss on early extinguishment
of debt 163 -- (69,647) --
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NET LOSS $ (15,301) $ (31,172) $(135,703) $ (81,584)
========= ========= ========= =========
Dividends applicable to preferred stock (15,341) (6,727) (42,548) (9,485)
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Net loss applicable to common stockholders $ (30,642) $ (37,899) $(178,251) $ (91,069)
========= ========= ========= =========
Loss per share before extraordinary item $ (0.86) $ (1.09) $ (3.04) $ (2.63)
Loss per share from extraordinary item 0.01 -- (1.95) --
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Basic and diluted loss per share $ (0.85) $ (1.09) $ (4.98) $ (2.63)
========= ========= ========= =========
Weighted average common shares outstanding 36,014 34,791 35,774 34,623
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