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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 3, 1999
REGISTRATION NO. 333-76349
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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IXC COMMUNICATIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 74-2644120
(STATE OR OTHER JURISDICTION OF INCORPORATION OR (IRS EMPLOYER IDENTIFICATION NO.)
ORGANIZATION)
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1122 CAPITAL OF TEXAS HIGHWAY SOUTH, AUSTIN, TEXAS 78746-6426
(512) 328-1112
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
JEFFREY C. SMITH
IXC COMMUNICATIONS, INC.
1122 CAPITAL OF TEXAS HIGHWAY SOUTH
AUSTIN, TEXAS 78746-6426
(512) 328-1112
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
MICHAEL P. WHALEN, ESQ.
KAREN C. GOODIN, ESQ.
RIORDAN & MCKINZIE
695 TOWN CENTER DRIVE, SUITE 1500
COSTA MESA, CA 92626
(714) 433-2900
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
At such time or times after the effective date of this Registration Statement
as the selling stockholders shall determine.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
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If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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PROSPECTUS
IXC COMMUNICATIONS, INC.
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698,985 SHARES 75,000 SHARES OF COMMON
OF COMMON STOCK STOCK UNDERLYING WARRANTS
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Our common stock, $.01 par value, is traded on the Nasdaq National Market
The closing price on June 2, 1999: $35 1/16 per share.
Trading Symbol: IIXC
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All of the shares of common stock offered in this prospectus are being sold
by the selling stockholders named on page 20 of this prospectus. This prospectus
covers the resale of 698,985 shares of our common stock issued to the selling
stockholders and 75,000 shares of our common stock underlying warrants issued to
the selling stockholders. Each of the selling stockholders is a former owner of
one or more of the companies doing business as the Coastal Telephone Company and
acquired the shares of common stock and warrants in connection with our
acquisition of Coastal. We completed our acquisition of Coastal on May 10, 1999.
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THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. PLEASE CAREFULLY CONSIDER
THE "RISK FACTORS" BEGINNING ON PAGE 3 OF THIS PROSPECTUS.
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The shares of common stock offered in this prospectus will be sold through
public or private transactions, on or off the Nasdaq National Market, at
prevailing market prices, or at privately negotiated prices. We will not receive
any of the proceeds from the sale of these shares.
Our principal executive offices are located at 1122 Capital of Texas
Highway South, Austin, Texas 78746-6426, and our telephone number is (512)
328-1112. Our web site is located at www.ixc-comm.com. Information contained in
our web site is not part of this prospectus.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this Prospectus is June 3, 1999
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TABLE OF CONTENTS
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Risk Factors................................................ 3
The Company................................................. 19
Use of Proceeds............................................. 19
Selling Stockholders........................................ 19
Plan of Distribution........................................ 21
Legal Matters............................................... 23
Experts..................................................... 23
Where You Can Find More Information......................... 24
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RISK FACTORS
An investment in the shares of common stock offered by this prospectus
involves a high degree of risk. You should carefully review the following risk
factors as well as the other information set forth in this prospectus before
making an investment.
Some of the information in this prospectus or incorporated by reference in
this prospectus contains forward-looking statements that involve substantial
risks and uncertainties. You can identify these statements by forward-looking
words such as "may," "will," "expect," "anticipate," "believe," "estimate" and
"continue" or similar words. You should read statements that contain these words
carefully because they:
- discuss our future expectations;
- contain projections of our future operating results or of our future
financial condition; and/or
- state other "forward-looking" information.
We believe it is important to communicate our expectations to our
investors. There may be events in the future, however, that we are not
accurately able to predict or over which we have no control. The risk factors
listed in this section, as well as any cautionary language in this prospectus,
provide examples of risks, uncertainties and events that may cause our actual
results to differ materially from the expectations we describe in our
forward-looking statements. Before you invest in our common stock, you should be
aware that the occurrence of any of the events described in these risk factors
and elsewhere in this prospectus could have a material adverse effect on our
business, financial condition and operating results and that upon the occurrence
of any of these events, the trading price of our common stock could decline and
you could lose all or part of your investment.
NEGATIVE CASH FLOW AND CAPITAL REQUIREMENTS
Significant Amount of Capital Expenditures Required in our Business
Our capital expenditures were $476.4 million and our interest cost
including capitalized interest was $47.9 million in 1998. In the three months
ended March 31, 1999, our capital expenditures were $108.1 million and our
interest cost including capitalized interest was $15.7 million. Our earnings
before interest, taxes, depreciation and amortization, or EBITDA, were $90.7
million in 1998 and $4.7 million in the three months ended March 31, 1999. Our
cash flow from operating activities was $202.3 million in 1998 and $114.5
million in the three months ended March 31, 1999 and our net loss was $162.5
million in 1998 and $42.2 million in the three months ended March 31, 1999. We
expect to make capital expenditures of over $600 million during 1999 and
substantial amounts thereafter. We expect to meet the cash requirements of our
capital expenditures from:
- cash on hand;
- cash flow from fiber sales and operations;
- borrowings under our $600 million credit facility;
- additional equity issuances and/or debt financings; and
- vendor financing, if available.
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We expect to incur significant additional debt to fund our capital
expenditures and expand our business. In addition, we have the ability to sell
or borrow against our marketable securities, including our investment in the
common stock of PSINet, Inc. Among other factors, cost-saving arrangements,
increases or decreases in traffic on our network, and unexpected costs, delays
or advances in the timing of capital expenditures may cause capital expenditures
to vary materially from what we expect.
Our ability to make capital expenditures depends in part on:
- completing our network expansion as scheduled;
- satisfying our fiber sale obligations;
- entering into cost-saving arrangements with carriers or other large users
of fiber capacity;
- meeting financial covenants to allow borrowing under our bank credit
line;
- otherwise raising significant capital; and/or
- increasing cash flow.
Our failure to accomplish any of these may significantly delay or prevent
capital expenditures. If we are unable to make our capital expenditures as
planned, our business may grow slower than expected. This would have a material
adverse effect on our business, financial condition and results of operations
and the value of our common stock.
Insufficient Cash Flow from Operations
We need cash to meet the operating expenses of our long distance switched
services and data/Internet businesses. These services are processed through
digital switches and delivered over long-haul circuits and other transmission
facilities. To offer long distance switched services, we installed switches and
connected them to our network and to the local exchange carriers or LECs, who
provide local telephone services. We acquired new software and hired personnel
to establish a national switched network. Our long distance switched services
business did not generate sufficient gross margins to cover the operating
expenses required to support this business. Our goals for continued gross margin
improvement include:
- obtaining traffic that meets our profitability requirements and aligns
with our current and planned network;
- identifying new high-value products and customers with large capacity
requirements;
- identifying Internet, intranet and data traffic opportunities; and
- identifying joint venture and acquisition candidates to increase the flow
and mix of traffic on our network and increase our global reach.
We cannot guarantee that we will be able to generate sufficient gross
margins in the long distance switched services business in the future. For a
discussion of important factors that could cause the failure of our long
distance switched services business to generate sufficient gross margin, see
"-- Development Risks and Dependence on Long Distance Switched Services
Business."
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Significant Amount of Interest and Dividend Payments
We currently make interest payments on our 9% Senior Subordinated Notes of
which there is $450 million in principal outstanding. We also make interest and
principal payments under a $28 million secured equipment financing facility with
NTFC Capital Corporation and Export Development Corporation of which $22.4
million was outstanding at March 31, 1999. We also make interest payments on a
$600 million credit agreement with institutional lenders of which $200 million
was borrowed at March 31, 1999. In addition, we must make payments under a new
$30 million credit facility with Nationsbank, N.A. obtained by Eclipse
Telecommunications, Inc. on May 10, 1999 under which $27 million was borrowed on
such date. We will also have payments due for other debts we may incur.
Dividends on our 7 1/4% Convertible Preferred Stock are payable quarterly in
cash, except that such dividends may be paid in additional shares of the same
stock in certain limited instances. Dividends on our 12 1/2% Exchangeable
Preferred Stock are payable in cash except that such dividends may be paid in
additional shares of the same stock on or before February 15, 2001. Dividends on
our 6 3/4% Convertible Preferred Stock are payable quarterly in cash, except
that we may pay dividends using shares of common stock if we are prohibited from
paying dividends in cash under the terms of our debt agreements. Our ability to
meet our debt and dividend obligations and to obtain additional funding could be
impaired by the following factors:
- delays in our network expansion;
- larger than anticipated capital expenditures for our network; and
- continued negative cash flow from the long distance switched services
business.
Any of these factors would have a material adverse effect on our business,
financial condition and results of operations since we might not have sufficient
cash to make these payments when required. See "-- Risks Relating to the Network
Expansion and Acquiring Rights-of-Way and Permits," and "-- Development Risks
and Dependence on Long Distance Switched Services Business."
We may have to curtail or delay our planned network expansion if we are
unable to obtain financing on acceptable terms, complete our existing fiber
sales, or sell additional equity and/or debt securities. Furthermore, we may be
required to obtain the consent of, or repay, our debtholders before acquiring
additional debt. Our failure to obtain additional financing or the decision to
cut back or delay our network expansion could have a material adverse effect on
our business, financial condition and results of operations and the value of our
common stock.
The cash requirements described above do not include any cash that may be
required for acquisitions we may make. See "-- Growth Through Acquisitions;
Integration of Acquired Businesses."
SUBSTANTIAL INDEBTEDNESS AND ABILITY TO SERVICE DEBT
We have a substantial amount of debt. As of March 31, 1999, we had
approximately $689.6 million of long-term debt and capital lease obligations
(including current portion) principally consisting of the 9% Senior Subordinated
Notes and $200 million borrowed under our $600 million credit agreement.
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In addition, Eclipse entered into a $30 million credit facility on May 10,
1999 under which $27 million was borrowed on such date.
Under our credit facility with several institutional lenders, we may, if
certain conditions are met, borrow up to $600 million of which $200 million has
been borrowed as of March 31, 1999. We are in discussions with various
investment bankers, vendors and lending institutions regarding additional debt
financing transactions. If we complete additional debt financing transactions,
or if we exchange our 12 1/2% Exchangeable Preferred Stock for 12 1/2%
Subordinated Exchange Debentures, as allowed under our charter documents, our
level of debt will increase even further.
Our large amount of indebtedness could significantly impact the holders of
our common stock and our other securities, due to the following:
- All or most of our cash flow from operations could be needed to meet our
debt obligations and would not be available for use in our business.
- We could be more vulnerable if there is a downturn in our business or in
general economic conditions or if interest rates increase.
- Our ability to obtain additional financing for working capital, capital
expenditures or other reasons may be limited.
- We may be at a competitive disadvantage with our competitors who are not
as highly leveraged.
Our ability to satisfy our debt obligations depends on our future operating
performance and our ability to obtain additional debt or equity financing.
Economic conditions and financial, business and other factors, many of which are
beyond our control, will affect our ability to make these payments. If we are
unable to generate sufficient cash from operations to make the scheduled
payments on our 9% Senior Subordinated Notes or meet our other obligations, we
will need to refinance or obtain additional financing. We cannot assure you that
our cash flow from operations will be sufficient to meet our debt obligations as
they become due or that we will be able to satisfy the dividend and redemption
requirements of our preferred stock for the next several years. If we do not
substantially improve our operating results, we could face significant liquidity
problems which would require us to raise additional capital by issuing debt or
equity securities. We cannot assure you that we will be successful in obtaining
such financing.
RECENT AND EXPECTED LOSSES
We reported a net loss of $99.2 million for the year ended December 31,
1997, a net loss of $162.5 million for the year ended December 31, 1998 and a
net loss of $42.2 million in the three months ended March 31, 1999. These net
losses may continue. During the remainder of 1999 and thereafter, our ability to
generate operating income, EBITDA and net income will depend largely on demand
for, and our ability to sell, the private line circuits constructed in our
network expansion and the success of our long distance switched services and
data services. We cannot assure you that we will be profitable in the future.
Failure to accomplish these goals will impair our ability to:
- meet our obligations under the 9% Senior Subordinated Notes, our $600
million credit facility, or other indebtedness;
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- pay dividends on our preferred stock; or
- raise additional equity or debt financing needed to expand our network or
for other reasons.
These events could have a material adverse effect on our business,
financial condition and results of operations and the value of our common stock.
RISKS RELATING TO THE NETWORK EXPANSION AND ACQUIRING RIGHTS-OF-WAY AND PERMITS
Our continuing network expansion is an essential element of our future
success. In the past, we have experienced delays in constructing our network and
may experience similar delays in the future. These delays have prevented us from
transferring long distance traffic from leased facilities to our facilities. We
have substantial existing commitments to purchase materials and labor for
expanding our network. In addition, we will need to obtain additional materials
and labor that may cost more than anticipated. Some sections of our network are
constructed by other carriers or their contractors pursuant to cost-saving
arrangements. One type of cost-saving arrangement is where another carrier
constructs a route and includes additional fibers for our use. We cannot
guarantee that these third parties will complete their work according to
schedule. If any delays prevent or slow down our network expansion our financial
results and the value of our securities would be materially and adversely
effected.
The expansion of our network depends, among other things, on acquiring
rights-of-way and required permits from railroads, utilities and governmental
authorities on satisfactory terms and conditions and on financing such
expansion, acquisition and construction. In addition, after our network is
completed and required rights and permits are obtained, we cannot guarantee that
we will be able to maintain all of the existing rights and permits. If we fail
to obtain rights and permits or we lose a substantial number of rights and
permits our financial results would suffer which could have a material adverse
effect on our business, financial condition and results of operation and the
value of our common stock.
RISK OF NETWORK FAILURE
To successfully market our services to business and government users, our
network must have sufficient capacity and be reliable and secure. Our network
and other companies' networks that we use can sometimes experience physical
damage, power loss, capacity limitations, software defects, breaches of security
(by computer virus, break-ins or otherwise) and other disruptions. All of these
hazards may cause interruptions in service or reduced capacity for customers.
Poor service due to interruptions or reduced capacity could negatively impact
our business, financial condition and results of operations and the value of our
common stock.
PRICING PRESSURES DUE TO INDUSTRY OVER-CAPACITY
The long distance transmission industry has generally been characterized by
over-capacity and declining prices since shortly after the AT&T break-up in
1984. We believe that in the last several years, increased demand has somewhat
reduced the excess capacity and as a result, reduced competition in pricing.
However, we anticipate that our prices will continue to decline over the next
several years because of new competition. Other long distance carriers (new and
existing) are expanding their capacity and may construct new
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fiber optic and other long distance transmission networks. As a result of the
recent mergers, companies such as MCIWorldCom, Inc. and Qwest Communications
International Inc. have become stronger competitors with larger networks and
greater capacity. In addition, the Williams Companies, Inc. has announced that
it is accelerating the expansion of its national fiber optic network with a $2.7
billion investment to create a 32,000 mile system by the end of 2000. There can
be significant barriers to building a fiber optic network for companies entering
the long distance business, including substantial construction costs, the
difficulty and expense of securing rights-of-way, establishing and maintaining a
sufficient customer base, recruiting and retaining personnel and maintaining a
reliable network. We believe that although some new entrants face these
barriers, others (such as Qwest, utility companies or railroads which already
have significant rights-of-way) may not experience some or any of these
difficulties. For example, Level 3 Communications, Inc. has announced it is
constructing a 15,000 mile fiber optic communications network using Internet
technology, with completion expected in the first quarter of 2001.
Not only are our competitors expanding existing networks and building new
networks, these networks will have greater capacity. Because the cost of fiber
is a relatively small portion of the cost of building new transmission lines,
companies building such lines are likely to install fiber that provides far more
transmission capacity than will be needed over the short or medium term.
Further, recent technological advances have shown the potential to greatly
expand the capacity of existing and new fiber optic cable. Although such
technological advances may enable us to increase our network's capacity, an
increase in our competitors' capacity could adversely affect our business. If
overall capacity in the industry exceeds demand in general or along any of our
routes, severe additional pricing pressure could develop. Certain industry
observers have predicted that, within a few years, there may be dramatic and
substantial price reductions and that long distance calls will not be much more
expensive than local calls. In addition, several companies (including AT&T and
ICG Communications, Inc.) have announced plans to offer long distance voice
telephony over the Internet at substantially reduced prices. Price reductions
could have a negative and material impact on our business and the value of our
common stock.
DEVELOPMENT RISKS AND DEPENDENCE ON LONG DISTANCE SWITCHED SERVICES BUSINESS
Our success in the long distance switched services business depends on
generating significant customer traffic, managing an efficient switched long
distance network, providing reliable customer service and completing our network
expansion on schedule. We have only been managing a switched long distance
network since 1996 and we cannot assure you that this segment of our business
can generate significant gross profits. Our failure to accomplish any of our
objectives would have a material adverse effect on our results of operations.
Our long distance switched services business requires cash to meet its operating
expenses and has generated low gross margins since 1998 due to access costs and
uneven traffic patterns creating high network overflow costs. These gross
margins are too low to fund the operating costs supporting the switched services
business.
Access charges are the fees paid by long distance carriers to LECs for
originating and terminating long distance calls on their local networks. In
1998, the Federal Communications Commission or the FCC mandated a new rate
structure for access charges in which a fixed charge was instituted for
connections to the LECs' serving wire centers (direct trunk transport charge).
This charge was in addition to the existing unitary charge assessed on a minutes
of use basis. Large carriers who connect directly to the LECs' local end office
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facilities are able to avoid a large portion of the direct trunk transport
charge, and therefore, benefit from the new access structure. Connection to
local end office facilities is economically justifiable only where there are
large minute of use volumes. Because our volumes do not justify as many direct
local office connections as do the volumes of larger carriers, we may be at a
cost disadvantage, versus our larger competitors.
We seek to improve the gross margins generated by our long distance
switched services business by expanding our network, by increasing the number of
our end-user customers who are medium size businesses, and by increasing the
number of higher-value services we offer. Important factors, some of which are
beyond our control, which could cause the failure of our long distance switched
services business to generate higher gross margins include:
- changes in reseller customers' businesses;
- an inability to attract new customers or problems with transferring them
to our network;
- loss of existing customers;
- problems operating the switched network;
- customer billing issues;
- credit and collection issues;
- delays in expanding our network; and
- increased expenses related to access charges and network overflow.
Our long distance switched services business credit risk is substantially
greater than that for our private line business. This is because long distance
switched services customers are billed at the end of the month on the basis of
minutes of use and because many long distance switched services customers are
not as well capitalized as most of our private line customers.
RISKS INHERENT IN RAPID GROWTH
Part of our business strategy is to grow quickly by expanding our long
distance switched services and data/Internet businesses through selective
acquisitions and expanding our network. In addition, we may grow by acquiring
resellers of long distance services, such as Coastal, Eclipse and Telecom One,
which we believe provide a strategic fit with our business and network. See
"-- Growth Through Acquisitions; Integration of Acquired Businesses." Rapid
growth has placed, and will continue to place, a significant and increasing
strain on our financial, management, technical, information and accounting
resources. See "-- Dependence on Billing, Customer Services and Information
Systems." Our continued rapid growth requires:
- hiring and training new personnel;
- satisfactory performance by our customer interface and billing systems;
- developing and introducing new products; and
- controlling our expenses.
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If we fail to satisfy these requirements, or otherwise manage our growth
effectively, our business and the value of our common stock would be materially
and adversely effected.
DEPENDENCE ON BILLING, CUSTOMER SERVICES AND INFORMATION SYSTEMS
Sophisticated information and processing systems are vital to our growth
and our ability to monitor costs, bill customers, fill customer orders and
efficiently operate our business. In the past, we have produced billing and
information systems in-house with partial reliance on third-party vendors. These
systems have generally met our needs due in part to the low volume of customer
billing. As our long distance operation grows, the need for sophisticated
billing and information systems will significantly increase. As we integrated
Eclipse's operations, some billing system issues arose which increased our
customer turnover. These issues are being addressed and corrected. No assurance
can be given that these difficulties will be solved quickly or completely.
The development and implementation of our future billing systems relies,
for the most part, on third party vendors delivering products and services. The
following could have a material adverse effect on our business, financial
condition and results of operations:
- vendors failing to deliver proposed products and services in a timely and
effective manner and at acceptable costs;
- our failure to adequately identify all of our information and processing
needs;
- the failure of our related processing or information systems, including a
failure to solve current difficulties; or
- our failure to upgrade systems as necessary.
YEAR 2000 RISKS
Some of our older computer programs identify years with two digits instead
of four. It is possible that some of our programs may recognize the Year 2000 as
the year 1900. These Year 2000 problems could result in a system failure or
miscalculations that disrupt operations, including a temporary inability to
process transactions, send invoices or engage in similar normal business
activities. We have identified the programs that will have to be modified or
replaced in order to function properly in the Year 2000 and thereafter. We
believe that the cost of modifying those systems that were not already scheduled
for replacement for business reasons before 2000 is immaterial. Updating the
current software to be Year 2000-compliant is scheduled to be completed by
mid-1999, before any anticipated impact on operating systems. We do not expect
Year 2000 problems to have a material adverse effect on our internal operations,
but it is possible that they could have a material adverse effect on our
customers, suppliers and other business partners and their ability to provide
service or accurate invoices for services and to accurately process payments. It
is also possible that Year 2000 problems could have a material adverse effect on
our customers and their ability to continue using our services, to collect from
their customers and to pay us for services. The cumulative effect of such
problems, if they occur, could negatively impact our business, financial
condition and results of operations and the value of our common stock.
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GROWTH THROUGH ACQUISITIONS; INTEGRATION OF ACQUIRED BUSINESSES
Part of our growth strategy includes the possible acquisition of
businesses, assets or securities of companies that we believe provide a
strategic fit with our business and our network. The success of our strategy is
dependent on our ability to identify suitable acquisition candidates, acquire
such companies on suitable terms and integrate their operations with our
operations. We may be unable to acquire other companies on suitable terms or
otherwise successfully expand our business and product offerings through
acquisitions. Moreover, other telecommunications companies are actively
competing for acquisition candidates, which may result in an increase in the
price of acquisition candidates. Risks commonly associated with acquisitions
include:
- potential exposure to unknown liabilities of acquired companies;
- difficulty and expense of integrating the operations, personnel, and
billing systems of the companies;
- potential disruption to our business;
- potential diversion of management time and attention;
- strained relationships with, and the possible loss of, key employees and
customers of the acquired business;
- increased amortization expense if an acquisition is accounted for as a
purchase; and
- dilution to our stockholders if the acquisition is made for stock.
We continually review and evaluate acquisition candidates to complement and
expand our business, and are at various stages of evaluation and discussion with
a number of such candidates. We have not entered into a definitive purchase or
acquisition agreement for any acquisition candidate and there is no assurance
that we will complete a transaction with any of the candidates with whom we are
currently in negotiations. In addition, it is possible that a substantial number
of shares of our common stock or a significant amount of cash could be used for
one or more acquisitions. We intend, when possible, to use our common stock to
pay for all or a portion of the purchase price for future acquisitions. Our
ability to use our common stock could be adversely affected if our common stock
does not maintain sufficient value, potential acquisition candidates are
unwilling to accept our common stock as consideration for the sale of their
businesses, or we do not have a sufficient number of authorized shares of common
stock to effect such acquisition.
Any acquired businesses will need to be integrated with our existing
operations. This will entail, among other things, integration of switching,
transmission, technical, sales, marketing, billing, accounting, quality control,
management, personnel, payroll, regulatory compliance and other systems and
operating hardware and software, some or all of which may be incompatible with
our existing systems. We have limited expertise dealing with these problems. We
cannot assure you that services, technologies or businesses of acquired
companies will be effectively assimilated into our business or product offerings
or that they will contribute materially to our revenues or earnings. In
particular, transferring substantial amounts of additional traffic to our
network can cause service interruptions and integration problems. The risks
associated with acquisitions could have a material adverse effect on our
business, financial condition and results of operations and the value of our
securities.
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RELIANCE ON MAJOR CUSTOMERS
A relatively small number of customers account for a significant amount of
our total revenues. Our 10 largest customers in 1998 accounted for approximately
46.7% of our revenues. Our 10 largest customers in 1997 accounted for
approximately 49.2% of our revenues.
Most of our arrangements with large customers do not provide any guarantees
that they will continue using our services at current levels. In addition, if
our customers build their own facilities, our competitors build additional
facilities or there are further consolidations in the telecommunications
industry involving our customers, then our customers could reduce or stop their
use of our services which could have a material adverse effect on our business,
financial condition, results of operations and the value of our common stock.
DEPENDENCE UPON SOLE AND LIMITED SOURCES OF SUPPLY
We rely on other companies to supply key components of our network
infrastructure, including telecommunications services, network capacity and
switching and networking equipment. These components are available only from
sole or limited sources in the quantity and quality that we demand. We also
depend on LECs to provide telecommunications services and facilities. In the
past, we have experienced delays in receiving telecommunications services and
facilities, and we cannot be certain that we will be able to obtain such
services or facilities at an affordable cost, or at all in the future. If we can
not obtain such services or additional capacity on a timely basis or at an
affordable cost, our business, financial condition and results of operations
would be materially and adversely effected. We also depend on our suppliers for
products that comply with various Internet and telecommunications standards,
work with products from other vendors and correctly function in our network. If
our suppliers failed to provide such products, our business, financial condition
and results of operations would be materially and adversely affected.
COMPETITION
The telecommunications industry is highly competitive. Many of our
competitors and potential competitors have far greater financial, personnel,
technical, marketing and other resources than we do. Many also have a more
extensive transmission network. These competitors may build additional fiber
capacity in the geographic areas that our network serves or in which we plan to
expand. Qwest, for example, is building a new nationwide long distance fiber
optic network and Frontier Corporation has agreed to pay $500 million to obtain
fibers in Qwest's network. In addition, MCIWorldCom and Qwest have each become
larger competitors of ours in connection with recent mergers. Furthermore,
Williams' announced network expansion and Level 3's proposed new network will
provide additional competition. Many telecommunications companies are acquiring
switches and our reseller customers will have more alternatives for meeting
their switched long distance services needs. We compete primarily on the basis
of pricing, availability, transmission quality, customer service (including the
capability of making rapid additions to add end users and access to end-user
traffic records) and variety of services. Our ability to compete effectively
depends on our ability to maintain high-quality services at prices generally
equal to or lower than those of our competitors.
An alternative method of transmitting telecommunications traffic is through
satellite transmission. Satellite transmission is superior to fiber optic
transmission for distribution
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<PAGE> 14
communications, like video broadcasting. Although satellite transmission is not
preferred to fiber optic transmission for voice traffic in most parts of the
United States because it exhibits an approximately one-quarter-second delay,
this slight time delay is unimportant for many data-oriented uses. If the market
for data transmission grows, we will compete with satellite carriers in that
market. Also, at least one satellite company has announced its intention to
provide Internet access services to businesses through satellite technology.
We compete with large and small facilities-based interexchange carriers as
well as with other coast-to-coast and regional fiber optic network providers. We
also sell long distance switched services to both facilities-based carriers and
non-facilities-based carriers (switchless resellers), competing with
facilities-based carriers such as AT&T, MCIWorldCom and Sprint, and certain
regional carriers. Our competition is based on such factors as price,
transmission quality, network reliability and customer service and support. Our
ability to compete effectively in our markets depends upon our ability to
maintain high quality services at prices equal to or less than those of our
competitors, many of whom have extensive experience in the long distance market.
In addition, the federal government enacted the Telecom Act, which allows the
regional Bell operating companies or RBOCs and others to enter the long distance
market. When RBOCs enter the long distance market, they may acquire, or take
substantial business from, our customers or us. We cannot assure you that we
will be able to compete successfully with existing competitors or new entrants
in our markets. Our failure to do so would have a material adverse effect on our
business, financial condition and results of operations and the value of our
common stock. See "-- Risks Related to Technological Change."
On February 15, 1997, the United States Trade Representative designate
announced that an agreement had been reached with World Trade Organization
countries to open world telecommunications markets to competition. The
agreement, known as the WTO Basic Telecommunications Services Agreement or the
WTO Agreement, became effective on February 5, 1998. The WTO Agreement provides
U.S. companies with foreign market access for local, long distance, and
international services, either on a facilities basis or through resale of
existing network capacity. The WTO Agreement also provides that U.S. companies
can acquire, establish or hold a significant stake in telecommunications
companies around the world. Conversely, foreign companies will be permitted to
enter domestic U.S. telecommunications markets and acquire ownership interest in
U.S. companies. On June 4, 1997, the FCC initiated a rulemaking proceeding to
bring FCC policies and procedures into conformance with the WTO Agreement. On
November 26, 1997, the FCC released an order on foreign entry, although a
petition for reconsideration of the order is pending. While the outcome of the
petition for reconsideration cannot be predicted, foreign telecommunications
companies could also be significant new competitors to our customers or us.
DEVELOPMENT RISKS OF THE ATM-FRAME RELAY TRANSMISSION BUSINESS
We began offering asynchronous transfer mode-frame relay or ATM-Frame Relay
and other data transmission services during the first quarter of 1997. Although
we have not yet generated significant revenues from this business, we believe
that Internet related services and data transmission services present a
promising opportunity for us. To succeed in providing these services, we must
compete with AT&T, Sprint, MCIWorldCom and other large competitors. In addition,
we expect that we will need to continue to upgrade our network (in advance of
related revenues) to be competitive. Providing Internet and data transmission
services involves technical issues with which we have limited experience. In
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<PAGE> 15
addition, these services must be successfully integrated with our existing
businesses. Unless we are able to successfully compete in providing these
services, we will not realize a return on our investment in data switches and
other equipment and we will not benefit from the growth, if any, in demand for
these services. A failure to successfully compete in Internet related services
and data transmission services could have a material adverse effect on our
business, financial condition and results of operations and the value of our
common stock.
RECENT LEGISLATION AND REGULATORY UNCERTAINTY
Some of our operations are regulated by the FCC under the Communications
Act of 1934. In addition, some of our businesses are regulated by state public
utility or public service commissions. Regulatory or interpretive changes in
existing legislation or new legislation that affects our operations could have a
material adverse effect on our business, financial condition and results of
operations. In 1996 the federal government enacted the Telecommunications Act of
1996 or the Telecom Act, which, among other things, allows the RBOCs and others
to enter the long distance business. Entry of the RBOCs or other entities such
as electric utilities and cable television companies into the long distance
business may have a negative impact on our customers or us. We anticipate that
some entrants will be strong competitors because, among other reasons, they may:
- be well capitalized;
- already have substantial end-user customer bases; and/or
- enjoy cost advantages relating to local loops and access charges.
The addition of strong competitors into the switched long distance business
could have a material adverse effect on our business, financial condition,
results of operations and the value of our common stock.
In July 1997, the United States Court of Appeals for the Eighth Circuit
invalidated key portions of the FCC's interconnection order, which the FCC
adopted to facilitate local exchange competition. On January 25, 1999, the
Supreme Court overturned the Eighth Circuit's ruling and reinstated most aspects
of the FCC's interconnection rules. The Supreme Court remanded to the FCC one
issue relating to interconnection, which will likely delay the further emergence
and development of local exchange competition. Consequently, neither our
customers nor we may benefit as quickly from the lower access costs that might
have resulted if competition in providing local access services was not delayed.
Further, the FCC issued orders relating to universal service funding by
interstate telecommunications carriers, and to the access charges we and our
customers are required to pay to LECs. The FCC's access charge reform order was
recently affirmed after a lengthy appeal. The FCC has since sought additional
comments on access charge reform, but the outcome of this and any future FCC
proceedings are impossible to predict. In addition, the Telecom Act provides
that state proceedings may, in certain instances, determine access charges that
our customers and we are required to pay to the LECs. These proceedings could
result in rate increases that could have a material adverse effect on our
customers and us.
Some members of Congress are dissatisfied with the Telecom Act, and in
particular with the development of local exchange competition, RBOC re-entry
into in-region long distance markets and universal service funding. It is
possible that additional legislation will also be introduced to further amend
the Telecom Act. However, it is impossible to predict
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<PAGE> 16
the scope or likelihood of success of any possible further legislation, or the
potential impact of any possible further legislation.
RISKS RELATING TO MARCA-TEL
Grupo Marca-Tel S.A. de C.V. or Marca-Tel has put further investment in new
fiber routes on hold and reduced its scope of operations, awaiting more suitable
regulatory and market conditions. At the present time, we do not anticipate
significant additional funding to Progress International, LLC or Progress for
investment in Marca-Tel until the regulatory and market conditions in Mexico
improve. We are not obligated to continue to fund Progress or Marca-Tel. Our
existing indentures and our $600 million credit facility contain significant
limitations on the amount we may invest in Marca-Tel and other non-majority
owned entities. Although Marca-Tel amended its credit agreement in February 1999
allowing it to defer certain payments until June 1999, we cannot assure you that
Marca-Tel will be able to make payments at that time or at any time in the
future. A default such as this could result in the foreclosure of the creditor's
security interest in all of Marca-Tel's assets. If that occurs, our investment
in Marca-Tel could be further diluted or entirely lost.
POTENTIAL LIABILITY OF INTERNET ACCESS PROVIDERS
We provide services to on-line service providers and Internet access
providers. We also own approximately 10.2 million shares of common stock of
PSINet, Inc., an Internet access provider. The law governing the liability of
on-line services providers and Internet access providers for information carried
on or disseminated through their networks is unsettled. Under the Telecom Act,
both civil and criminal penalties can be imposed for the use of interactive
computer services for the transmission of certain indecent or obscene
communications. However, some of these provisions were recently held
unconstitutional by the Supreme Court. Other provisions of the Communications
Decency Act have been challenged in court proceedings which are ongoing. In
addition, Congress recently passed the Child Online Protection Act, which
currently is subject to a temporary injunction. Nonetheless, many states have
adopted or are considering adopting similar requirements, and the
constitutionality of these state requirements remains unsettled. In addition,
several private lawsuits have been filed seeking to hold Internet access
providers accountable for information which they transmit. In one case, the
court ruled that an Internet access provider is not directly liable for copies
that are made and stored on its computer but may be held liable as a
contributing infringer where, with knowledge of the infringing activity, the
Internet access provider induces, causes or materially contributes to another
person's infringing conduct. As the law in this area develops, potential
imposition of liability on Internet access providers for information carried on
or disseminated through their networks could materially change the way they
conduct business. To avoid undue exposure to liability, Internet access
providers could be compelled to engage in burdensome investigation of subscriber
materials or even discontinue offering the service altogether.
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<PAGE> 17
RISKS RELATING TO SWITCHED SERVICES
Switched services resellers account for a substantial portion of our long
distance switched services revenue. A substantial portion of revenue is derived
from a limited number of switched services resellers. Sales to switched services
resellers generate low margins for us. In addition, these customers frequently
choose to move their business to other carriers based solely on small price
changes and generally are perceived to have a high risk of payment delinquency
or non-payments. Our service credits and bad debt in the past have been as
follows:
<TABLE>
<CAPTION>
SERVICE CREDIT PERCENT
AND OF
BAD DEBT GROSS
PERIOD (IN MILLIONS) REVENUE
------ -------------- -------
<S> <C> <C>
Year Ended 1996................................. $ 6.3 2.2%
Year Ended 1997................................. $20.8 3.8%
Year Ended 1998................................. $55.1 7.6%
Three Months Ended March 31, 1999............... $16.3 9.2%
</TABLE>
We seek to control service credits and bad debts by implementing procedures
to improve our billing accuracy and control our credit exposure. Any significant
increase in service credit and bad debt expense as a percentage of revenues
could have a material adverse effect on our business, financial condition and
results of operations.
RISKS RELATED TO TECHNOLOGICAL CHANGE
The market for our telecommunications services is characterized by rapidly
changing technology, evolving industry standards, emerging competition and
frequent new product and service introductions. We cannot guarantee that we will
successfully identify new service opportunities and develop and bring new
services to market. There is also a risk that fundamental changes in the way
telecommunications services are marketed and delivered will occur. We assume
that technology such as ATM-Frame Relay protocols and using fiber optic or
copper-based telecommunications infrastructures will continue to be the primary
protocols and transport infrastructure for data communications services. Future
technological changes, including changes related to the emerging wireline and
wireless transmission and switching technologies, could have a material adverse
effect on our business, results of operations, and financial condition. Our
pursuit of necessary technological advances may require substantial time and
expense. We cannot be certain that we will succeed in adapting our
telecommunications services business to alternate access devices, conduits and
protocols.
In addition, recent technological advances with the potential to greatly
expand the capacity of existing and new fiber optic cable, which could greatly
increase supply, could have a material adverse effect on our business, financial
condition, and results of operations and the value of our common stock.
STOCKHOLDER RIGHTS PLAN AND OTHER CHANGE IN CONTROL IMPEDIMENTS
In September 1998, we adopted a stockholder rights agreement that permits
owners of our common stock to purchase shares of common stock at one-half of its
fair market value in limited instances. Each share of common stock is entitled
to one right. These rights are exercisable if a person or group acquires 20% or
more of our common stock or announces a tender offer for 20% or more of our
common stock. The rights are also exercisable if a
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<PAGE> 18
stockholder currently holding more than 20% of our outstanding stock acquires
any additional shares of our common stock. Our stockholder rights agreement may
prevent or deter acquisitions of more than 20% of our common stock and
ultimately an acquisition of IXC. In addition, certain covenants in our debt and
preferred securities may require us to offer to repurchase or adjust the
conversion price of such securities in the event of a change in control of IXC.
These covenants may prevent, deter or adversely affect the value of our common
stock in connection with an acquisition of IXC involving a change in control.
CONCENTRATED OWNERSHIP OF CONTROL GROUP
At December 31, 1998, Trustees of General Electric Pension Trust
beneficially owned approximately 26.5% of our outstanding common stock, Grumman
Hill Investments, L.P., Richard D. Irwin and their affiliates together
beneficially owned approximately 9% of our outstanding common stock, and one
director, one executive officer and their affiliates beneficially owned
approximately 10.8% of our outstanding common stock. As a result, certain of
these stockholders, if they act with others so as to constitute a majority,
generally would be able to elect a majority of directors elected by the holders
of our common stock and exercise control over our business, policies and
affairs, and would have the power to approve or disapprove most actions
requiring stockholder approval without the approval of minority stockholders.
POSSIBLE VOLATILITY OF STOCK PRICE
The market price of our common stock has fluctuated over a broad range
since the completion of our initial public offering in July 1996. The trading
price of our common stock is subject to wide fluctuations in response to
numerous factors including:
- quarterly variations in our operating results or the operating results of
our principal customers;
- competition;
- announcements of technological innovations or new products or pricing by
us or our competitors;
- product enhancements by us or our competitors;
- regulatory changes;
- any difference between actual results and results expected by investors
and analysts; and
- changes in financial estimates by securities analysts.
In addition, the stock market has experienced volatility that has affected
the market prices of equity securities of many companies and that often has been
unrelated to the operating performance of such companies. These broad market
fluctuations may adversely affect the market price of our common stock.
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<PAGE> 19
FUTURE SALE OF OUR COMMON STOCK
Future sales of our common stock could negatively impact the market price
of our common stock. Shares of our common stock that have not been previously
traded in the public market but may at some time be sold in the public market
include:
- shares held by affiliates;
- shares issued or to be issued in acquisitions;
- shares issuable upon conversion of convertible preferred stock, including
convertible preferred stock to be issued in the future; and
- shares to be issued pursuant to stock options.
The aggregate number of such shares is much greater than the number of shares of
our common stock which have previously traded on the public market.
DILUTION
Dilution refers to a decrease in the percentage ownership of interest of a
company that a share represents. Our stockholders may incur substantial dilution
of their holdings of our common stock as a result of the exercise of options or
conversion of preferred stock, including the following:
- As of December 31, 1998, there were outstanding approximately 5.4 million
shares of our common stock reserved for issuance pursuant to options
granted under our stock plans, at a weighted average exercise price of
$22.71 per share, subject to various vesting schedules;
- Our 7 1/4% Convertible Preferred Stock is convertible into approximately
4.6 million shares of our common stock as of March 31, 1999; and
- Our 6 3/4% Convertible Preferred Stock is convertible into approximately
2.1 million shares of our common stock as of March 31, 1999.
Any exercise of options or conversion of our preferred stock may take place
at a time when we would be able to obtain funds from the sale of our common
stock at prices higher than the exercise price of the options or the conversion
price of our preferred stock, resulting in substantial dilution of our common
stock. See "-- Possible Volatility of Stock Price."
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<PAGE> 20
THE COMPANY
We are a leading provider of data and voice telecommunications transmission
services. We own and operate an advanced coast-to-coast digital communications
network that includes 9,300 fiber route miles of fiber optic transmission
facilities. Substantial additions to our network are under construction, and we
project our network to include approximately 16,400 fiber route miles by the end
of 1999. Our facilities also include nine long distance switches and 26
ATM-Frame Relay switches, which we are using to capitalize on the growing demand
for Internet and electronic data transfer services. Through a combination of our
facilities and the facilities of other carriers, we originate and terminate long
distance traffic in all 50 U.S. states, and terminate long distance traffic in
over 200 foreign countries. Revenue has grown rapidly, from $154.7 million in
1995 to $668.6 million in 1998.
We have three principal segments of business. First, we lease dedicated
circuits, or private lines, to other companies for the transmission of voice and
data. Second, we provide long distance switched services by transmitting long
distance traffic through our switches. Finally, we are an Internet services and
backbone provider that also provides ATM-Frame Relay-based switched data
services.
IXC Communications, Inc. was incorporated in the State of Delaware on July
27, 1992. Our principal executive offices are located at 1122 Capital of Texas
Highway South, Austin, Texas 78746-6426 and our telephone number is (512)
427-3700.
USE OF PROCEEDS
All net proceeds from the sale of the shares of common stock covered by
this prospectus will go to the selling stockholders. We will not receive any
proceeds from the sale of common stock by the selling stockholders.
SELLING STOCKHOLDERS
Each of the selling stockholders has acquired shares of our common stock
and warrants to purchase additional shares of our common stock, as indicated in
the table below, in connection with our acquisition of the limited liability
companies doing business as the Coastal Telephone Company, which closed on May
10, 1999. Each of the selling stockholders was an owner of one or more of the
Coastal limited liability companies. Lawrence Bursten previously served as
Chairman of the Board and Andrew M. Bursten previously served as President of
Coastal. Upon completion of the acquisition, Andrew Bursten became an executive
officer of Eclipse Telecommunications, Inc., one of our subsidiaries.
The warrants acquired by the selling stockholders are exercisable during
the three year period following May 10, 1999 at an exercise price of $45.00 per
share. The warrants provide no voting rights and contain provisions for
adjustment upon the occurrence of stock dividends, stock splits or other similar
events. Under the terms of the acquisition agreement, we agreed to register for
resale the shares of our common stock issued in connection with the acquisition
of Coastal and the shares of our common stock issuable upon exercise of the
warrants acquired by the selling stockholders.
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<PAGE> 21
The following table sets forth information with respect to the selling
stockholders and the shares of common stock that they may offer pursuant to this
prospectus. The selling stockholders may from time to time offer and sell any or
all of the shares pursuant to this prospectus. Some or all of the shares covered
by this prospectus may be offered from time to time on a delayed or continuing
basis by a selling stockholder. The selling stockholders include pledgees,
transferees, donees and others who may later hold the named selling
stockholders' shares. We may update, amend or supplement this prospectus from
time to time to update the disclosure set forth in this prospectus.
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF
NUMBER OF SHARES OF COMMON STOCK PERCENTAGE OF SHARES OF PERCENTAGE OF
OF COMMON UNDERLYING COMMON STOCK COMMON COMMON
STOCK WARRANTS OFFERED OWNED PRIOR TO STOCK STOCK OWNED
OFFERED PURSUANT PURSUANT TO ANY SALES PURSUANT OWNED AFTER AFTER THE
SELLING STOCKHOLDER TO THIS PROSPECTUS THIS PROSPECTUS TO THIS OFFERING(1) THE OFFERING(2) OFFERING
------------------- ------------------- ----------------- ------------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Lawrence Bursten
Irrevocable Trust,
u/a/d March 25,
1975.................. 333,673 35,803 1.0% 0 *
Riva Bursten 1994 Trust,
u/a/d September 19,
1994.................. 140,947 15,123 * 0 *
Andrew M. Bursten 1994
Trust, u/a/d September
19, 1994.............. 140,947 15,123 * 0 *
Andrew M. Bursten....... 83,418 8,951 * 0 *
--------------- ------
Total.......... 698,985 75,000
</TABLE>
- -------------------------
* Represents less than 1% of the outstanding shares of our common stock.
(1) This percentage includes shares issuable upon exercise of warrants and is
based upon the number of shares of our common stock outstanding as of June
2, 1999.
(2) Assuming all shares of common stock offered by the selling stockholders are
sold pursuant to this prospectus.
20
<PAGE> 22
PLAN OF DISTRIBUTION
We are registering the resale of the shares of our common stock on behalf
of the selling stockholders. As used herein, a selling stockholder includes
donees, transferees and pledgees selling shares received from a named selling
stockholder after the date of this prospectus. This prospectus may also be used
by transferees of the selling stockholders or by other persons acquiring shares,
including brokers who borrow the shares to settle short sales of shares of our
common stock. If any of the selling stockholders transfer any of their shares,
each transferee must agree to be bound by the same restrictions and limitations
that apply to the selling stockholders as described in this prospectus. We will
bear all costs, expenses and fees in connection with the registration of the
shares offered hereby. The selling stockholders will bear brokerage commissions
and any similar selling expenses associated with the sale of shares.
The selling stockholders may offer their shares of our common stock at
various times in one or more of the following transactions:
- on the Nasdaq National Market;
- in the over-the-counter market;
- in transactions other than on the Nasdaq National Market or in the
over-the-counter market;
- in connection with short sales of the shares of our common stock;
- by pledge to secure debts and other obligations;
- in a block trade in which a broker-dealer may resell a portion of the
block, as principal, in order to facilitate the transaction;
- in a purchase by a broker-dealer, as principal, and resale by the
broker-dealer for its account;
- in ordinary brokerage transactions and transactions in which a broker
solicits purchasers;
- in connection with the writing of non-traded and exchange-traded call
options, in hedge transactions and in settlement of other transactions in
standardized or over-the-counter options; or
- in any combination of any of the above transactions.
The selling stockholders have agreed not to sell, together and not
individually, on any given day without our consent more than 15% of the average
daily trading volume of our common stock during the most recently completed
calendar week prior to the date of sale unless they:
- provide us with written notice prior to the sale; and
- effectuate the sale using one or more of the following brokerage firms:
Credit Suisse First Boston Corporation, Goldman Sachs & Co., Morgan
Stanley & Co. Incorporated and/or Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
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<PAGE> 23
In connection with hedging transactions, the selling stockholders may:
- enter into transactions in which broker-dealers or other financial
institutions may engage in short sales of our common stock in the course
of hedging the positions they assume with the selling stockholders;
- sell shares short themselves and redeliver such stock to close out their
short positions;
- loan or pledge the shares to a broker-dealer, who may sell the loaned
stock or, in the event of default, sell the pledged stock; or
- enter into options or other transactions with broker-dealers or other
financial institutions, which require the delivery to such broker-dealer
or other financial institution of the shares offered by this prospectus,
which shares may be resold pursuant to this prospectus (as supplemented
or amended to reflect such transaction).
The selling stockholders may sell their shares at market prices prevailing
at the time of sale, at prices related to such prevailing market prices, at
negotiated prices or at fixed prices. Subject to the limitations described
above, the selling stockholders may use broker-dealers to sell their shares. If
this happens, broker-dealers will either receive discounts, commissions or
concessions from purchasers of shares for whom they acted as agents.
Broker-dealers engaged by the selling stockholders may allow other
broker-dealers to participate in resales.
In connection with our acquisition of Coastal, we agreed to indemnify each
selling stockholder against certain liabilities, including liabilities arising
under the Securities Act and the selling stockholders agreed to indemnify us
against certain liabilities, including liabilities arising under the Securities
Act.
The selling stockholders and any broker-dealers that act in connection with
the sale of shares might be deemed to be underwriters within the meaning of
Section 2(11) of the Securities Act of 1933 or Securities Act, and any
commissions received by such broker-dealers and any profit on the resale of the
shares sold by them while acting as principals might be deemed to be
underwriting discounts or commissions under the Securities Act. Because the
selling stockholders may be deemed to be underwriters within the meaning of
Section 2(11) of the Securities Act, the selling stockholders will be subject to
the prospectus delivery requirements of the Securities Act. We have informed the
selling stockholders that the anti-manipulative provisions of Regulation M
promulgated under the Securities Exchange Act of 1934, as amended or Exchange
Act may apply to their sales in the market.
In addition to selling shares of our common stock under this prospectus,
the selling stockholders may:
- resell all or a portion of their shares in open market transactions in
reliance upon Rule 144 under the Securities Act, provided they meet the
criteria and conform to the requirements of Rule 144;
- agree to indemnify any broker-dealer or agent against certain liabilities
related to the selling of the common stock, including liabilities arising
under the Securities Act; or
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<PAGE> 24
- transfer their common stock in other ways not involving market makers or
established trading markets, including directly by gift, distribution, or
other transfer.
Upon being notified by a selling stockholder that any material arrangement
has been entered into with a broker-dealer for the sale of shares through a
block trade, special offering, exchange distribution or secondary distribution
or a purchase by a broker or dealer, we will file a supplement to this
prospectus, if required, pursuant to Rule 424(b) under the Securities Act,
disclosing (i) the name of each such selling stockholder and of the
participating broker-dealer(s), (ii) the number of shares involved, (iii) the
price at which such shares were sold, (iv) the commissions paid or discounts or
concessions allowed to such broker-dealer(s), where applicable, and (v) other
facts material to the transaction. In addition, upon being notified by a selling
stockholder that a donee or pledgee intends to sell more than 500 shares, we
will file a supplement to this prospectus.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed on for us by
Riordan & McKinzie, a Professional Corporation, Costa Mesa, California. Carl W.
McKinzie, one of our directors and stockholders, is also a stockholder of
Riordan & McKinzie. We have granted an option covering shares of our common
stock to another stockholder of Riordan & McKinzie. Also, other attorneys of
Riordan & McKinzie beneficially own additional shares of our common stock.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our 1998 Annual Report on Form 10-K, as set
forth in their report, which is incorporated by reference in this registration
statement and is based in part on the report of other independent auditors. Our
financial statements are incorporated by reference in reliance on Ernst & Young
LLP's report, given on their authority as experts in accounting and auditing.
The consolidated financial statements of Network Long Distance, Inc. to the
extent and for the periods indicated in their report, have been audited by
Arthur Andersen LLP, independent public accountants. In their report, such firm
states that with respect to certain acquired entities, its opinion is based on
the reports of other independent accountants. The report has been incorporated
by reference herein in reliance upon the authority of such firm as experts in
accounting and auditing.
The consolidated financial statements of National Teleservice, Inc., to the
extent and for the periods indicated in their report, have been audited by
Deloitte & Touche LLP, independent public accountants, as set forth in their
report, which is incorporated by reference herein. The report has been
incorporated by reference herein in reliance upon the authority of such firm as
experts in accounting and auditing.
The consolidated financial statements of Marca-Tel to the extent and for
the periods indicated in their report have been audited by Arthur Andersen LLP,
independent public accountants. Their report has been incorporated by reference
in this registration statement in reliance upon the authority of such firm as
experts in accounting and auditing. Reference is made to their report, which
includes an explanatory paragraph with respect to the uncertainty regarding
Marca-Tel's ability to continue as a going concern.
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<PAGE> 25
WHERE YOU CAN FIND MORE INFORMATION
Government Filings. We file annual, quarterly and special reports and other
information with the Securities and Exchange Commission. You may read and copy
any document we file at the SEC's public reference room at 450 Fifth Street,
N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. Our SEC filings are also available to
you free of charge at the SEC's web site at http://www.sec.gov. Our web site can
be found at http://www.ixc-comm.com. Information contained in our web site is
not part of this prospectus.
Stock Market. The common shares are traded on the Nasdaq National Market.
Materials filed by us can be inspected at the offices of the National
Association of Securities Dealers, Inc., Reports Section, 1735 K Street, N.W.,
Washington, D.C. 20006.
Information Incorporated by Reference. The SEC allows us to "incorporate by
reference" the information we file with them, which means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is considered to be part of this
prospectus, and information that we file later with the SEC will automatically
update and supersede previously filed information, including information
contained in this prospectus.
We incorporate by reference the documents listed below and any future
filings we will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934 until this offering has been completed:
- our Annual Report on Form 10-K for the year ended December 31, 1998;
- our Quarterly Report on Form 10-Q for the period ended March 31, 1999;
- our Current Reports on Form 8-K dated January 11, 1999, February 4, 1999,
April 12, 1999, May 10, 1999, May 11, 1999 and May 28, 1999;
- our Definitive Proxy Statement, as filed with the Commission on April 30,
1999;
- the description of our common stock, which is contained in our
registration statement filed on Form 8-A filed on June 3, 1996 as amended
by Form 8-A/A filed on June 26, 1996.
You may request free copies of these filings by writing or telephoning us
at the following address:
Investor Relations Department
IXC Communications, Inc.
1122 Capital of Texas Highway South
Austin, Texas 78746-6426
(512) 328-1604
email: [email protected]
This prospectus is part of a registration statement we filed with the SEC.
You should rely only on the information or representations provided in this
prospectus. We have authorized no one to provide you with different information.
We are not making an offer of these securities in any state where the offer is
not permitted. You should not assume that the information in this prospectus is
accurate as of any date other than the date on the front of the document.
24
<PAGE> 26
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is a statement of estimated expenses we will pay in
connection with the issuance and distribution of the securities being
registered.
<TABLE>
<CAPTION>
ITEM AMOUNT
---- -------
<S> <C>
SEC registration fee................................ $13,038
Printing fees....................................... 10,000
Legal fees.......................................... 20,000
Accountants' fees................................... 35,000
Transfer agent fees................................. 1,000
Miscellaneous....................................... 5,962
-------
Total..................................... $85,000
=======
</TABLE>
All of the above amounts, except for the SEC registration fee, have been
estimates.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law provides that a
Delaware corporation may indemnify any person against expenses, judgments, fines
and settlements actually and reasonably incurred by any such person in
connection with a threatened, pending or completed action, suit or proceeding in
which he is involved by reason of the fact that he is or was director, officer,
employee or agent of such corporation, provided that (i) he acted in good faith
and in a manner reasonably believed to be in or not opposed to the best
interests of the corporation and (ii) with respect to any criminal action or
proceeding, he had no reasonable cause to believe his conduct was unlawful. If
the action or suit is by or in the name of the corporation, the corporation may
indemnify any such person against expense actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, except that no indemnification
may be made in respect to any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation for negligence or
misconduct in the performance of his duty to the corporation, unless and only to
the extent that the Delaware Court of Chancery or the court in which the action
or suit is brought determines upon application that, despite the adjudication of
liability but in view of all of the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expense as the court deems
proper.
Our By-Laws provide for indemnification of our officers, directors,
employees and agents to the fullest extent permitted by the Delaware General
Corporation Law.
In accordance with the Delaware General Corporation Law, our certificate of
incorporation, as amended and restated, limits the personal liability of our
directors for violations of their fiduciary duty. Our certificate of
incorporation eliminates each director's liability to us or to our stockholders
for monetary damages except (i) for any breach of the director's duty of loyalty
to us or to our stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
the
II-1
<PAGE> 27
section of the Delaware law providing for liability of directors for unlawful
payment of dividends or unlawful stock purchases or redemptions, or (iv) for any
transaction from which a director derived any improper personal benefit. The
effect of this provision is to eliminate the personal liability of directors for
monetary damages for actions involving a breach of their fiduciary duty of care,
including any such actions involving gross negligence. This provision will not,
however, limit in any way the liability of directors for violations of the
Federal securities laws.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
4.1 Indenture dated as of October 5, 1995, by and among IXC
Communications, Inc., on its behalf and as
successor-in-interest to I-Link Holdings, Inc. and IXC
Carrier Group, Inc., each of IXC Carrier, Inc., on its
behalf and as successor-in-interest to I-Link, Inc., CTI
Investments, Inc., Texas Microwave Inc. and WTM Microwave
Inc., Atlantic States Microwave Transmission Company,
Central States Microwave Transmission Company, Telcom
Engineering, Inc., on its behalf and as
successor-in-interest to SWTT Company and Microwave Network,
Inc., Tower Communication Systems Corp., West Texas
Microwave Company, Western States Microwave Transmission
Company, Rio Grande Transmission, Inc., IXC Long Distance,
Inc., Link Net International, Inc. (collectively, the
"Guarantors"), and IBJ Schroder Bank & Trust Company, as
Trustee (the "Trustee"), with respect to the 12 1/2% Series
A and Series B Senior Notes due 2005 (incorporated by
reference to Exhibit 4.1 of IXC Communications, Inc.'s and
each of the Guarantor's Registration Statement on Form S-4
filed with the Commission on April 1, 1996 (File No.
333-2936) (the "S-4")).
4.2 Form of 12 1/2% Series A Senior Notes due 2005 (incorporated
by reference to Exhibit 4.6 of the S-4).
4.3 Form of 12 1/2% Series B Senior Notes due 2005 and
Subsidiary Guarantee (incorporated by reference to Exhibit
4.8 of IXC Communications, Inc.'s Amendment No. 1 to
Registration Statement on Form S-1 filed with the Commission
on June 13, 1996 (File No. 333-4061) (the "S-1 Amendment")).
4.4 Amendment No. 1 to Indenture and Subsidiary Guarantee dated
as of June 4, 1996, by and among IXC Communications, Inc.,
the Guarantors and the Trustee (incorporated by reference to
Exhibit 4.11 of the S-1 Amendment).
4.5 Purchase Agreement dated as of March 25, 1997, by and among
IXC Communications, Inc., Credit Suisse First Boston
Corporation ("CS First Boston") and Dillon Read & Co. Inc.
("Dillon Read") (incorporated by reference to Exhibit 4.12
of IXC Communications, Inc.'s Quarterly Report on Form 10-Q
for the quarter ended March 31, 1997, filed with the
Commission on May 15, 1997 (the "March 31, 1997 10-Q")).
4.6 Registration Rights Agreement dated as of March 25, 1997, by
and among IXC Communications, Inc., CS First Boston and
Dillon Read (incorporated by reference to Exhibit 4.13 of
the March 31, 1997 10-Q).
4.7 Amendment to Registration Rights Agreement dated as of March
25, 1997, by and between IXC Communications, Inc. and
Trustees of General Electric Pension Trust (incorporated by
reference to Exhibit 4.14 of the March 31, 1997 10-Q).
</TABLE>
II-2
<PAGE> 28
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
4.8 Registration Rights Agreement dated as of July 8, 1997,
among IXC Communications, Inc. and each of William G. Rodi,
Gordon Hutchins, Jr. and William F. Linsmeier (incorporated
by reference to Exhibit 4.15 of IXC Communications, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended June 30,
1997, as filed with the Commission on August 6, 1997 (the
"June 30, 1997 10-Q")).
4.9 Registration Rights Agreement dated as of July 8, 1997,
among IXC Communications, Inc. and each of William G. Rodi,
Gordon Hutchins, Jr. and William F. Linsmeier (incorporated
by reference to Exhibit 4.16 of the June 30, 1997 10-Q).
4.10 Indenture dated as of August 15, 1997, between IXC
Communications, Inc. and The Bank of New York (incorporated
by reference to Exhibit 4.2 of IXC Communications, Inc.'s
Current Report on Form 8-K dated August 20, 1997, and filed
with the Commission on August 28, 1997 (the "8-K")).
4.11 First Supplemental Indenture dated as of October 23, 1997,
among IXC Communications, Inc., the Guarantors, IXC
International, Inc. and IBJ Schroder Bank & Trust Company
(incorporated by reference to Exhibit 4.13 of IXC
Communications, Inc.'s Annual Report on Form 10-K for the
year ended December 31, 1997, and filed with the Commission
on March 16, 1998 (the "1997 10-K")).
4.12 Second Supplemental Indenture dated as of December 22, 1997,
among IXC Communications, Inc., the Guarantors, IXC Internet
Services, Inc., IXC International, Inc. and IBJ Schroder
Bank & Trust Company (incorporated by reference to Exhibit
4.14 of the 1997 10-K).
4.13 Third Supplemental Indenture dated as of January 6, 1998,
among IXC Communications, Inc., the Guarantors, IXC Internet
Services, Inc., IXC International, Inc. and IBJ Schroder
Bank & Trust Company (incorporated by reference to Exhibit
4.15 of the 1997 10-K).
4.14 Fourth Supplemental Indenture dated as of April 3, 1998,
among IXC Communications, Inc., the Guarantors, IXC Internet
Services, Inc., IXC International, Inc., and IBJ Schroder
Bank & Trust Company (incorporated by reference to Exhibit
4.15 of IXC Communications, Inc.'s Registration Statement on
Form S-3 filed with the Commission on May 12, 1998 (File No.
333-52433)).
4.15 Purchase Agreement dated as of March 25, 1998, among IXC
Communications, Inc., Goldman Sachs & Co. ("Goldman"), CS
First Boston, Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill") and Morgan Stanley & Co.
Incorporated ("Morgan Stanley") (incorporated by reference
to Exhibit 4.1 IXC Communications, Inc.'s Current Report on
Form 8-K dated March 30, 1998, and filed with the Commission
on April 7, 1998 (the "April 7, 1998 8-K")).
4.16 Registration Rights Agreement dated as of March 30, 1998,
among IXC Communications, Inc., Goldman, CS First Boston,
Merrill and Morgan Stanley (incorporated by reference to
Exhibit 4.2 of the April 7, 1998 8-K).
4.17 Deposit Agreement dated as of March 30, 1998, between IXC
Communications, Inc. and BankBoston N.A. (incorporated by
reference from Exhibit 4.3 of the April 7, 1998 8-K).
</TABLE>
II-3
<PAGE> 29
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
4.18 Purchase Agreement dated as of April 16, 1998, by and among
IXC Communications, Inc., CS First Boston, Merrill, Morgan
Stanley and Nationsbanc Montgomery Securities LLC
(incorporated by reference to Exhibit 4.1 of IXC
Communications, Inc.'s Current Report on Form 8-K dated
April 21, 1998, and filed with the Commission on April 22,
1998 (the "April 22, 1998 8-K").
4.19 Registration Rights Agreement dated as of April 16, 1998, by
and among IXC Communications, Inc., Credit Suisse First
Boston Corporation, Merrill, Morgan Stanley and Nationsbanc
Montgomery Securities LLC (incorporated by reference to
Exhibit 4.2 of the April 22, 1998 8-K).
4.20 Indenture dated as of April 21, 1998, between IXC
Communications, Inc. and IBJ Schroder Bank & Trust Company,
as Trustee (incorporated by reference to Exhibit 4.3 of the
April 22, 1998 8-K).
4.21 Rights Agreement dated as of September 9, 1998, between IXC
Communications, Inc. and U.S. Stock Transfer Corporation
(incorporated by reference to Exhibit 4.1 of IXC
Communications, Inc.'s Form 8-K dated September 8, 1998 and
filed with Commission on September 11, 1998).
4.22* Form of Registration Rights Agreement among IXC
Communications, Inc. and the selling stockholders.
4.23* Form of Warrant for each of the selling stockholders.
4.24 Restated Certificate of Incorporation of IXC Communications,
Inc., as amended (incorporated by reference to Exhibit 3.1
of the IXC Communications, Inc.'s Quarterly Report Form 10-Q
for the quarter ended September 30, 1998 filed with the
Commission on November 16, 1998).
4.25 Bylaws of IXC Communications, Inc., as amended (incorporated
by reference to Exhibit 3.2 of the IXC Communications,
Inc.'s Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997 filed with the Commission on November 14,
1997).
5.1+ Opinion of Riordan & McKinzie, a Professional Law
Corporation.
23.1+ Consent of Ernst & Young LLP.
23.2+ Consent of Arthur Andersen LLP.
23.3+ Consent of Deloitte & Touche LLP.
23.4+ Consent of Arthur Andersen LLP.
23.5+ Consent of Riordan & McKinzie (included in Exhibit 5.1).
24.1* Powers of Attorney.
</TABLE>
- -------------------------
* Previously filed.
+ Filed herewith.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment
II-4
<PAGE> 30
thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration
statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act, each filing of the registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer, or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-5
<PAGE> 31
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this amendment to the
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Austin, State of Texas on June 2, 1999.
IXC COMMUNICATIONS, INC.
By: /s/ JAMES F. GUTHRIE
-----------------------------------
James F. Guthrie
Executive Vice President and
Chief Financial Officer
Dated: June 2, 1999
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ JOHN M. ZRNO President, Chief Executive June 2, 1999
- --------------------------------------------- Officer and Director
John M. Zrno (Principal Executive Officer)
/s/ JAMES F. GUTHRIE Executive Vice President and June 2, 1999
- --------------------------------------------- Chief Financial Officer
James F. Guthrie (Principal Financial and
Accounting Officer)
* Chairman of the Board and June 2, 1999
- --------------------------------------------- Director
Benjamin C. Scott
* Director June 2, 1999
- ---------------------------------------------
Ralph J. Swett
* Director June 2, 1999
- ---------------------------------------------
Richard D. Irwin
* Director June 2, 1999
- ---------------------------------------------
Wolfe H. Bragin
* Director June 2, 1999
- ---------------------------------------------
Carl W. McKinzie
</TABLE>
II-6
<PAGE> 32
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Director June 2, 1999
- ---------------------------------------------
Phillip L. Williams
* Director June 2, 1999
- ---------------------------------------------
Joe C. Culp
*By: /s/ JEFFREY C. SMITH
- ---------------------------------------------
Jeffrey C. Smith
Attorney-in-Fact
</TABLE>
II-7
<PAGE> 33
EXHIBIT INDEX
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
4.1 Indenture dated as of October 5, 1995, by and among IXC
Communications, Inc., on its behalf and as
successor-in-interest to I-Link Holdings, Inc. and IXC
Carrier Group, Inc., each of IXC Carrier, Inc., on its
behalf and as successor-in-interest to I-Link, Inc., CTI
Investments, Inc., Texas Microwave Inc. and WTM Microwave
Inc., Atlantic States Microwave Transmission Company,
Central States Microwave Transmission Company, Telcom
Engineering, Inc., on its behalf and as
successor-in-interest to SWTT Company and Microwave Network,
Inc., Tower Communication Systems Corp., West Texas
Microwave Company, Western States Microwave Transmission
Company, Rio Grande Transmission, Inc., IXC Long Distance,
Inc., Link Net International, Inc. (collectively, the
"Guarantors"), and IBJ Schroder Bank & Trust Company, as
Trustee (the "Trustee"), with respect to the 12 1/2% Series
A and Series B Senior Notes due 2005 (incorporated by
reference to Exhibit 4.1 of IXC Communications, Inc.'s and
each of the Guarantor's Registration Statement on Form S-4
filed with the Commission on April 1, 1996 (File No.
333-2936) (the "S-4")).
4.2 Form of 12 1/2% Series A Senior Notes due 2005 (incorporated
by reference to Exhibit 4.6 of the S-4).
4.3 Form of 12 1/2% Series B Senior Notes due 2005 and
Subsidiary Guarantee (incorporated by reference to Exhibit
4.8 of IXC Communications, Inc.'s Amendment No. 1 to
Registration Statement on Form S-1 filed with the Commission
on June 13, 1996 (File No. 333-4061) (the "S-1 Amendment")).
4.4 Amendment No. 1 to Indenture and Subsidiary Guarantee dated
as of June 4, 1996, by and among IXC Communications, Inc.,
the Guarantors and the Trustee (incorporated by reference to
Exhibit 4.11 of the S-1 Amendment).
4.5 Purchase Agreement dated as of March 25, 1997, by and among
IXC Communications, Inc., Credit Suisse First Boston
Corporation ("CS First Boston") and Dillon Read & Co. Inc.
("Dillon Read") (incorporated by reference to Exhibit 4.12
of IXC Communications, Inc.'s Quarterly Report on Form 10-Q
for the quarter ended March 31, 1997, filed with the
Commission on May 15, 1997 (the "March 31, 1997 10-Q")).
4.6 Registration Rights Agreement dated as of March 25, 1997, by
and among IXC Communications, Inc., CS First Boston and
Dillon Read (incorporated by reference to Exhibit 4.13 of
the March 31, 1997 10-Q).
4.7 Amendment to Registration Rights Agreement dated as of March
25, 1997, by and between IXC Communications, Inc. and
Trustees of General Electric Pension Trust (incorporated by
reference to Exhibit 4.14 of the March 31, 1997 10-Q).
4.8 Registration Rights Agreement dated as of July 8, 1997,
among IXC Communications, Inc. and each of William G. Rodi,
Gordon Hutchins, Jr. and William F. Linsmeier (incorporated
by reference to Exhibit 4.15 of IXC Communications, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended June 30,
1997, as filed with the Commission on August 6, 1997 (the
"June 30, 1997 10-Q")).
</TABLE>
<PAGE> 34
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
4.9 Registration Rights Agreement dated as of July 8, 1997,
among IXC Communications, Inc. and each of William G. Rodi,
Gordon Hutchins, Jr. and William F. Linsmeier (incorporated
by reference to Exhibit 4.16 of the June 30, 1997 10-Q).
4.10 Indenture dated as of August 15, 1997, between IXC
Communications, Inc. and The Bank of New York (incorporated
by reference to Exhibit 4.2 of IXC Communications, Inc.'s
Current Report on Form 8-K dated August 20, 1997, and filed
with the Commission on August 28, 1997 (the "8-K")).
4.11 First Supplemental Indenture dated as of October 23, 1997,
among IXC Communications, Inc., the Guarantors, IXC
International, Inc. and IBJ Schroder Bank & Trust Company
(incorporated by reference to Exhibit 4.13 of IXC
Communications, Inc.'s Annual Report on Form 10-K for the
year ended December 31, 1997, and filed with the Commission
on March 16, 1998 (the "1997 10-K")).
4.12 Second Supplemental Indenture dated as of December 22, 1997,
among IXC Communications, Inc., the Guarantors, IXC Internet
Services, Inc., IXC International, Inc. and IBJ Schroder
Bank & Trust Company (incorporated by reference to Exhibit
4.14 of the 1997 10-K).
4.13 Third Supplemental Indenture dated as of January 6, 1998,
among IXC Communications, Inc., the Guarantors, IXC Internet
Services, Inc., IXC International, Inc. and IBJ Schroder
Bank & Trust Company (incorporated by reference to Exhibit
4.15 of the 1997 10-K).
4.14 Fourth Supplemental Indenture dated as of April 3, 1998,
among IXC Communications, Inc., the Guarantors, IXC Internet
Services, Inc., IXC International, Inc., and IBJ Schroder
Bank & Trust Company (incorporated by reference to Exhibit
4.15 of IXC Communications, Inc.'s Registration Statement on
Form S-3 filed with the Commission on May 12, 1998 (File No.
333-52433)).
4.15 Purchase Agreement dated as of March 25, 1998, among IXC
Communications, Inc., Goldman Sachs & Co. ("Goldman"), CS
First Boston, Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill") and Morgan Stanley & Co.
Incorporated ("Morgan Stanley") (incorporated by reference
to Exhibit 4.1 IXC Communications, Inc.'s Current Report on
Form 8-K dated March 30, 1998, and filed with the Commission
on April 7, 1998 (the "April 7, 1998 8-K")).
4.16 Registration Rights Agreement dated as of March 30, 1998,
among IXC Communications, Inc., Goldman, CS First Boston,
Merrill and Morgan Stanley (incorporated by reference to
Exhibit 4.2 of the April 7, 1998 8-K).
4.17 Deposit Agreement dated as of March 30, 1998, between IXC
Communications, Inc. and BankBoston N.A. (incorporated by
reference from Exhibit 4.3 of the April 7, 1998 8-K).
4.18 Purchase Agreement dated as of April 16, 1998, by and among
IXC Communications, Inc., CS First Boston, Merrill, Morgan
Stanley and Nationsbanc Montgomery Securities LLC
(incorporated by reference to Exhibit 4.1 of IXC
Communications, Inc.'s Current Report on Form 8-K dated
April 21, 1998, and filed with the Commission on April 22,
1998 (the "April 22, 1998 8-K").
</TABLE>
<PAGE> 35
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
4.19 Registration Rights Agreement dated as of April 16, 1998, by
and among IXC Communications, Inc., Credit Suisse First
Boston Corporation, Merrill, Morgan Stanley and Nationsbanc
Montgomery Securities LLC (incorporated by reference to
Exhibit 4.2 of the April 22, 1998 8-K).
4.20 Indenture dated as of April 21, 1998, between IXC
Communications, Inc. and IBJ Schroder Bank & Trust Company,
as Trustee (incorporated by reference to Exhibit 4.3 of the
April 22, 1998 8-K).
4.21 Rights Agreement dated as of September 9, 1998, between IXC
Communications, Inc. and U.S. Stock Transfer Corporation
(incorporated by reference to Exhibit 4.1 of IXC
Communications, Inc.'s Form 8-K dated September 8, 1998 and
filed with Commission on September 11, 1998).
4.22* Form of Registration Rights Agreement among IXC
Communications, Inc. and the selling stockholders.
4.23* Form of Warrant for each of the selling stockholders.
4.24 Restated Certificate of Incorporation of IXC Communications,
Inc., as amended (incorporated by reference to Exhibit 3.1
of the IXC Communications, Inc.'s Quarterly Report Form 10-Q
for the quarter ended September 30, 1998 filed with the
Commission on November 16, 1998).
4.25 Bylaws of IXC Communications, Inc., as amended (incorporated
by reference to Exhibit 3.2 of the IXC Communications,
Inc.'s Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997 filed with the Commission on November 14,
1997).
5.1+ Opinion of Riordan & McKinzie, a Professional Law
Corporation.
23.1+ Consent of Ernst & Young LLP.
23.2+ Consent of Arthur Andersen LLP.
23.3+ Consent of Deloitte & Touche LLP.
23.4+ Consent of Arthur Andersen.
23.5+ Consent of Riordan & McKinzie (included in Exhibit 5.1).
24.1* Powers of Attorney.
</TABLE>
- -------------------------
* Previously filed.
+ Filed herewith.
<PAGE> 1
Exhibit 5.1
RIORDAN & McKINZIE
A Professional Law Corporation
695 TOWN CENTER DRIVE, SUITE 1500
COSTA MESA, CALIFORNIA 92626
9-098-001
June 3, 1999
IXC Communications, Inc.
1122 Capital of Texas Highway South
Austin, Texas 78746-6426
Dear Ladies and Gentlemen:
We have acted as counsel to IXC Communications, Inc., a Delaware
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended (the "1933 Act"), of 698,985 shares of the
Company's common stock, $.01 par value per share (the "Acquisition Shares"),
issued by the Company in accordance with the terms of the Purchase Agreement
dated January 11, 1999, as amended (the "Acquisition Agreement") in connection
with the acquisition of the limited liability companies doing business as the
Coastal Telephone Company (the "Coastal Acquisition") and to up to 75,000 shares
of the Company's common stock, $.01 par value per share (the "Warrant Shares")
to be issued from time to time upon exercise of warrants issued under the
warrant agreements (the "Warrant Agreements") issued in connection with the
Coastal Acquisition. This opinion is delivered to you in accordance with the
requirements of Item 601(b)(5) of Regulation S-K under the 1933 Act in
connection with the Registration Statement on Form S-3, Registration No.
333-76349, including all pre-effective and post-effective amendments thereto
(the "Registration Statement"), for resale of the Acquisition Shares and the
Warrant Shares, filed with the Securities and Exchange Commission (the
"Commission") under the 1933 Act.
In rendering the opinions set forth herein, we have made such
investigations of fact and law, and examined such documents and instruments, or
copies thereof established to our satisfaction to be true and correct copies
thereof, as we have deemed necessary under the circumstances.
Based upon the foregoing and such other examination of law and fact as
we have deemed necessary and in reliance thereon, we are of the opinion that:
<PAGE> 2
IXC Communications, Inc.
June 3, 1999
Page 2
1. The Acquisition Shares have been duly authorized and are
validly issued, fully paid and non-assessable.
2. The Warrant Shares have been duly authorized and, upon
exercise of the Warrants and payment of the exercise
price in accordance with the terms of the Warrant
Agreements, the Warrant Shares will be validly issued,
fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the Prospectus which is a part of the Registration Statement.
In giving such consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the 1933 Act or the rules
and regulations of the Commission thereunder.
Very truly yours,
/s/ Riordan & McKinzie
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 1 to the Registration Statement on Form S-3 (No. 333-76349) of
IXC Communications, Inc. for the registration of 698,985 shares of its common
stock and 75,000 shares of its common stock reserved for the exercise of
warrants and to the incorporation by reference therein of our report dated
February 28, 1999 (except for Note 20, as to which the date is March 10, 1999),
with respect to the consolidated financial statements of IXC Communications,
Inc. included in its Annual Report on Form 10-K for the year ended December 31,
1998, filed with the Securities and Exchange Commission
/s/ ERNST & YOUNG LLP
Austin Texas
June 1, 1999
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we herby consent to the incorporation by
reference in this registration statement of our report dated May 18, 1998
included in IXC Communications, Inc.'s Form 10-K for the year ended
December 31, 1998 and to all references to our Firm included in this
registration statement.
/s/ ARTHUR ANDERSEN
Jackson, Mississippi
June 3, 1999.
<PAGE> 1
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement No. 333-76349 on Form S-3 of IXC Communications, Inc. of
our report on National Teleservice, Inc. dated July 28, 1997, appearing in the
Annual Report on Form 10-K of IXC Communications, Inc. for the year ended
December 31, 1998. We also consent to the reference to us under the heading
"Experts" in this Registration Statement.
/s/ DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
June 1, 1999
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report on the financial
statements of Grupo Marca Tel, S.A. de C.V. and subsidiaries dated February 28,
1999 incorporated by reference in IXC Communications, Inc.'s Form 10-K for the
year ended December 31, 1998 and to all references to our Firm included in this
registration statement.
/s/ ARTHUR ANDERSEN
Monterrey, Nuevo Leon
June 2, 1999
