<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
--------------------------------------------------
Commission file number 0-20913
----------------------------------------------------------
TELEPORT COMMUNICATIONS GROUP INC.
- --------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-3173139
- --------------------------------------------------------------------------------
(STATE OF OTHER JURISDICTION OF (I.R.S. EMPLOYER
OR ORGANIZATION) IDENTIFICATION NO.)
ONE TELEPORT DRIVE, STATEN ISLAND, NEW YORK 10311
- --------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(718) 355-2000
- --------------------------------------------------------------------------------
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------- -------
Number of outstanding shares of Registrant's Common Stock as of August 7, 1996:
27,601,263 shares of Class A Common Stock and 131,274,632 shares of Class B
Common Stock.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TELEPORT COMMUNICATIONS GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
JUNE 30, DECEMBER 31,
1996 1995
------------ -------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 46,060 $ 11,862
---------- ----------
Accounts receivable:
Trade--net of allowance for
doubtful accounts ($4,868 in
1996 and $1,161 in 1995) 41,966 26,196
Related parties 2,528 4,640
Miscellaneous--net of
allowance for doubtful
accounts ($1,730 in 1996 and
$543 in 1995) 6,103 2,037
---------- ----------
Accounts receivable--net 50,597 32,873
---------- ----------
Subscription receivable (received
July 2, 1996) 1,357,400 --
---------- ----------
Prepaid expenses 7,821 4,939
---------- ----------
Other current assets 1,657 532
---------- ----------
Total current assets 1,463,535 50,206
---------- ----------
Fixed assets--at cost:
Communications network 997,030 492,858
Other 75,586 52,795
---------- ----------
1,072,616 545,653
Less accumulated depreciation and
amortization (188,064) (113,202)
---------- ----------
Fixed assets--net 884,552 432,451
---------- ----------
Investment in unconsolidated affiliates 16,112 99,299
---------- ----------
Goodwill--net of accumulated
amortization 46,666 27,008
---------- ----------
Other assets 9,551 5,829
---------- ----------
Total assets $2,420,416 $ 614,793
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY AND PARTNERS' DEFICIT
Current liabilities:
Accounts payable and accrued
liabilities $ 191,082 $ 92,104
Current portion of capital lease
obligations ($16,017 in 1996 and
$3,338 in 1995
with related parties) 19,083 4,354
Redemption proceeds due - treasury
stock (paid July 2, 1996) 121,025 --
Short-term bank debt 250,000 --
Other current liabilities 2,035 831
---------- ----------
Total current liabilities 583,225 97,289
---------- ----------
Capital lease obligations ($33,296 in
1996 and $10,017 in 1995 with
related parties) 39,540 11,964
Subordinated note to related party 26,000 --
Subordinated debt to parents -- 269,000
Senior notes 300,000 --
Senior discount notes 625,000 --
Unamortized notes costs (27,017) --
Long-term bank debt -- 87,500
Other liabilities 10,414 19,283
---------- ----------
Total liabilities 1,557,162 485,036
---------- ----------
Minority interest 18,099 4,409
---------- ----------
Stockholders' equity and partners'
deficit:
Common Stock, Class A $.01 par
value:450,000,000 shares
authorized, 27,601,263 shares
issued and outstanding at June
30, 1996; and Common Stock,
$1.00 par value: 3,000 shares
authorized, 1,667 shares issued
and outstanding at December 31,
1995 276 2
Common Stock, Class B $.01 par
value: 300,000,000 shares
authorized, 139,250,370
shares issued and 131,274,632
shares outstanding at June 30,
1996; and zero at December
31, 1995 1,393 --
Additional paid-in capital 1,169,108 195,388
Accumulated deficit (204,597) (65,648)
Partners' deficit -- (4,394)
---------- ----------
966,180 125,348
Less cost of Class B Common Stock held
in treasury, 7,975,738 shares at June
30, 1996 and zero at December 31, 1995 (121,025) --
---------- ----------
Total stockholders' equity and
partners' deficit 845,155 125,348
---------- ----------
Total liabilities and stockholders'
equity and partners' deficit $2,420,416 $ 614,793
========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
2
<PAGE>
TELEPORT COMMUNICATIONS GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------- --------
1996 1995 1996 1995
------------- ----------- ----------- -----------
Revenues:
<S> <C> <C> <C> <C>
Telecommunications services $ 45,164 $ 32,076 $ 84,717 $ 61,931
Management and royalty fees from
affiliates 11,923 6,771 22,805 13,708
----------- ----------- ----------- -----------
Total revenues 57,087 38,847 107,522 75,639
----------- ----------- ----------- -----------
Expenses:
Operating 33,421 21,948 62,336 43,025
Selling, general and administrative 15,578 11,484 29,380 23,603
Depreciation and amortization 14,110 8,178 26,959 15,475
----------- ----------- ----------- -----------
Total expenses 63,109 41,610 118,675 82,103
----------- ----------- ----------- -----------
Operating loss (6,022) (2,763) (11,153) (6,464)
----------- ----------- ----------- -----------
Interest:
Interest income 1,480 919 2,670 2,025
Interest expense ($5,498 and
$4,943 for the three months
ended June 30, 1996 and
1995 and $10,851 and $9,020
for the six months ended
June 30, 1996 and 1995,
respectively, with
related parties) (9,474) (5,535) (17,622) (10,135)
----------- ----------- ----------- -----------
Total interest (7,994) (4,616) (14,952) (8,110)
----------- ----------- ----------- -----------
Loss before minority interest, equity
in losses of unconsolidated
affiliates and income taxes (14,016) (7,379) (26,105) (14,574)
Minority interest 706 161 856 362
Equity in losses of unconsolidated
affiliates (5,866) (4,487) (12,394) (8,698)
----------- ----------- ----------- -----------
Loss before provision for income taxes (19,176) (11,705) (37,643) (22,910)
Provision for income taxes (567) -- (792) (335)
----------- ----------- ----------- -----------
Net loss $ (19,743) $ (11,705) $ (38,435) $ (23,245)
=========== =========== =========== ===========
Loss per common share $ (0.27) $ (0.17) $ (0.54) $ (0.33)
=========== =========== =========== ===========
Weighted average number of shares
outstanding 72,930,110 70,000,140 71,465,125 70,000,140
=========== =========== =========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
3
<PAGE>
TELEPORT COMMUNICATIONS GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY AND PARTNERS' DEFICIT
FOR THE SIX MONTHS ENDED JUNE 30,1996
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON
COMMON STOCK STOCK ADDITIONAL ACCUMULATED PARTNERS' TREASURY
CLASS A CLASS B PAID-IN-CAPITAL DEFICIT DEFICIT STOCK TOTAL
----------- ---------- --------------- --------------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996 $ 2 -- $ 195,388 $ (65,648) $(4,394) -- $125,348
Issuance of 27,025,000
shares of Class A
Common Stock, net of
issuance costs of
$24.8 million 270 -- 407,374 -- -- -- 407,644
Conversion of and 42,000
to 1 stock split of
$1.00 par value
Common Stock to
139,250,370 shares of
Class B Common Stock
as part of the
Reorganization (2) $1,393 296,245 (100,514) 4,394 -- 201,516
Purchase of 7,975,738
shares of Class B
Common Stock from
Continental
Cablevision, Inc. -- -- -- -- -- $ (121,025) (121,025)
Conversion of Parental
Subordinated Debt plus
accrued interest of
$20.6 million to equity -- -- 263,602 -- -- -- 263,602
Issuance of 576,263 shares
of Class A Common Stock
to purchase the minority
interests in a Local
Market Partnership 6 -- 6,499 -- -- -- 6,505
Net loss -- -- -- (38,435) -- -- (38,435)
----------- ---------- --------------- --------------- ------------ ------------ ----------
Balance at June 30, 1996 $276 $1,393 $1,169,108 $(204,597) $ -- $(121,025) $845,155
=========== ========== =============== =============== ============ ============ ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
4
<PAGE>
TELEPORT COMMUNICATIONS GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
SIX MONTHS ENDED
JUNE 30,
-------
1996 1995
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (38,435) $ (23,245)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation and amortization 26,959 15,475
Equity in losses of
unconsolidated affiliates 12,394 8,698
Amortization of deferred
credits (1,183) (1,153)
Provision for losses on
accounts receivable 1,143 359
Minority interest (856) (362)
(Increase) decrease in operating
assets and increase (decrease) in
operating liabilities, net of the
effects from the purchase of the
Local Market Partnerships:
Accounts receivable (5,314) (2,554)
Other assets 434 (667)
Accounts payable and accrued
liabilities 14,004 22,758
Deferred credits 931 4,024
--------- ---------
Net cash provided by
operating activities 10,077 23,333
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures for
communications network (75,436) (83,098)
Investment in unconsolidated
affiliates - cash component -- (33,910)
Due from related parties (23,037) --
Purchase of a Local Market
Partnership interest (11,618) --
Investment in unconsolidated (10,057) --
affiliate
Capital contributions to Local
Market Partnerships prior to (16,435) --
Reorganization
--------- ---------
Net cash used for
investing activities (136,583) (117,008)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term
debt 162,500 101,500
Principal payments on capital leases (1,796) (1,168)
Capital contributions from minority
partners -- 1,777
--------- ---------
Net cash provided by
financing activities 160,704 102,109
--------- ---------
NET INCREASE IN CASH AND CASH
EQUIVALENTS 34,198 8,434
CASH AND CASH EQUIVALENTS, BEGINNING
OF THE PERIOD 11,862 26,000
--------- ---------
CASH AND CASH EQUIVALENTS, END OF THE
PERIOD $ 46,060 $ 34,434
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION-
Cash paid during the period for
interest $ 4,508 $ 5,916
========= =========
NON CASH TRANSACTIONS
Fixed assets acquired under capital
leases $ 60 $ 1,163
========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
5
<PAGE>
TELEPORT COMMUNICATIONS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
1. BASIS OF PRESENTATION
In the opinion of Teleport Communications Group Inc. (together with
its wholly owned subsidiaries and its majority owned subsidiaries "TCGI" or the
"Company"), the accompanying consolidated financial statements contain all
adjustments, consisting of only normal recurring adjustments, necessary to
present fairly the Company's financial position as of June 30, 1996 and the
Company's results of operations and cash flows for the six months then ended.
The results of operations for the six months ended June 30, 1996 are not
necessarily indicative of the results expected for the full year.
2. SIGNIFICANT ACCOUNTING POLICIES
Consolidation
The consolidated balance sheet includes the accounts of TCGI's wholly owned
and majority owned subsidiaries at June 30, 1996. Minority interest represents
other partners' interest in TCG Seattle and TCG San Francisco as of June 30,
1996. The statements of operations and of cash flows include equity in losses
of unconsolidated affiliates for all the Local Market Partnerships except for
TCG St. Louis. As of and for the period ended December 31, 1995, the balance
sheet, statements of operations and of cash flows include the combined accounts
of TCGI and TCG Partners. Minority interest represents another partner's equity
in TCG St. Louis at December 31, 1995. Investments in which TCGI held less than
a 50 percent interest are accounted for under the equity method. (See Note 4 -
Reorganization)
The accompanying financial statements include the accounts of TCGI and its
wholly owned subsidiaries. All material intercompany transactions and balances
have been eliminated in consolidation. Certain information and footnote
disclosure normally included in financial statements prepared in accordance with
generally accepted accounting principles has been condensed or omitted. These
consolidated financial statements and notes should be read in conjunction with
the combined financial statements of Teleport Communications Group Inc. and
Subsidiaries and TCG Partners and the combined financial statements of the Local
Market Partnerships to be acquired by Teleport Communications Group Inc.,
included as part of TCGI's Prospectus, dated June 27, 1996, with respect to its
Class A Common Stock and filed with TCGI's Registration Statement on Form S-1
(File No. 333-3850).
Net Loss Per Share
Net loss per common share was determined by dividing net loss by the weighted
average number of common shares outstanding for the period. The computation of
fully diluted net loss per share was antidilutive in each of the periods
presented; therefore, the amounts reported as primary and fully diluted are the
same.
As part of the Reorganization, TCGI declared a 42,000 to 1 stock split. All
per share amounts and numbers of shares have been restated to reflect the stock
split retroactive for the periods presented.
Reclassification
Certain 1995 amounts have been reclassified to conform with the 1996
presentation.
3. OFFERINGS
On June 27, 1996, TCGI issued 27,025,000 shares of Class A Common Stock
which resulted in gross proceeds of approximately $432.1 million (the "Stock
Offering"), and $300 million of Senior Notes and $1,073 million of Senior
Discount Notes as part of an initial public offering (the "Offerings"). The
Offerings of the Senior Notes and the Senior Discount Notes resulted in
aggregate gross proceeds of $925 million. The gross proceeds of
6
<PAGE>
TELEPORT COMMUNICATIONS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 - CONTINUED
(UNAUDITED)
the Offerings (approximately $1.3 billion) were received by TCGI on July 2,
1996, and are classified as a subscription receivable on the June 30, 1996
consolidated balance sheet. TCGI also recognized a liability of approximately
$46.8 million which was paid to the underwriters on July 2, 1996. In July, 1996,
TCGI utilized a portion of the net proceeds of the Offerings to (i) repay $250
million of bank indebtedness plus accrued interest and (ii) purchase 7,975,738
shares of Class B Common Stock owned by Continental Cablevision, Inc. for $16.00
per share less related expenses for a net cost of $121 million. The remaining
funds will be used to expand and develop existing and new networks and for
general corporate and working capital purposes.
4. REORGANIZATION
Prior to the Offerings, TCGI was owned by subsidiaries of Cox
Communications, Inc. ("Cox") (approximately 30%), TCI Communications, Inc.
("TCI") (approximately 30%), Comcast Corporation ("Comcast") (approximately 20%)
and Continental Cablevision, Inc. ("Continental") (approximately 20%)
(collectively the "Cable Stockholders"). The business was operated through TCGI
and, beginning in 1992, TCG Partners, which is a New York general partnership
owned prior to the Reorganization (as hereinafter defined) by the Cable
Stockholders in the same percentages as TCGI. TCG Partners was formed to
invest, with TCGI, the Cable Stockholders and other cable operators, in 14
partnerships (the "Local Market Partnerships") to develop and operate local
telecommunications networks. The Local Market Partnerships were owned by TCGI,
and/or TCG Partners, and certain of the Cable Stockholders which have cable
operations in the particular market addressed by the Local Market Partnerships
and, in some cases, other cable operators in such market. To simplify this
complex ownership structure, TCGI and the Cable Stockholders agreed to
consolidate the ownership of TCG Partners and of the Local Market Partnerships
as wholly owned subsidiaries of TCGI. As part of this process, certain of the
other cable operators agreed to sell their interests in the Local Market
Partnerships to TCGI directly or through a Cable Stockholder.
Reorganization Transactions Consummated Prior to or in Connection
with the Offerings.
In connection with the Offerings, TCGI and the Cable Stockholders
entered into a reorganization agreement (the "Reorganization Agreement")
pursuant to which TCGI, TCG Partners and the Local Market Partnerships were or
are expected to be reorganized (the "Reorganization"). The principal
transactions comprising the Reorganization that have occurred are:
. The acquisition by TCGI of TCG Partners in exchange for Class B Common
Stock issued to the Cable Stockholders.
. The acquisition by TCGI of all of the interests in 12 of the 14 Local
Market Partnerships in exchange for Class B Common Stock issued to the
Cable Stockholders and Class A Common Stock issued to other cable
operators.
. The contribution to TCGI of $269.0 million in aggregate principal
amount of indebtedness, plus accrued interest from May 1995, owed by
TCGI to the Cable Stockholders (except that TCI retained a $26 million
subordinated note of TCGI) in exchange for Class B Common Stock issued
to the Cable Stockholders.
. In connection with Continental's announced proposed merger with US
West, Inc., the purchase by TCGI of 7,975,738 shares (out of 25,761,330
shares) of Class B Common Stock owned by Continental at a price per
share equal to $16.00 per share of the Class A Common Stock offered in
the Stock Offering, less the applicable underwriting discount and a pro
rata portion of the registration fees, representing an aggregate
purchase price of $121 million.
In consideration of the transfer by each of the Cable Stockholders of its
respective interests in TCG Partners and the Local Market Partnerships and the
contribution to TCGI of the indebtedness described above, the Company issued
immediately prior to the Offerings 69,250,230 additional shares of Class B
Common Stock to the Cable Stockholders.
7
<PAGE>
TELEPORT COMMUNICATIONS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 - CONTINUED
(UNAUDITED)
Reorganization Transactions After the Offerings.
Pursuant to the Reorganization, TCG Partners and 12 of the 14 Local Market
Partnerships have become wholly owned subsidiaries of TCGI. In addition, TCI
has agreed to transfer its interests in TCG Seattle and TCG San Francisco to the
Company at the earliest time such transactions can be accomplished.
Furthermore, TCI has acquired the 22.9% and 22.2% minority partnership interests
in TCG San Francisco and TCG Seattle, respectively, formerly held by Viacom
Telecom, Inc., which interests TCI is required to transfer to TCGI. The issuance
of shares of Class B Common Stock to TCI assumes that, subsequent to the
Offerings, TCI will contribute its current partnership interests in TCG Seattle
and TCG San Francisco, and that TCI will acquire and contribute to TCGI the
partnership interests of Viacom Telecom, Inc. in TCG Seattle and TCG San
Francisco.
In addition, TCI will be issued 638,862 shares of Class A Common Stock in
consideration for the transfer to TCGI of the partnership interest which TCI
acquired from MicroNet, Inc. in TCG San Francisco. TCI also has an agreement to
acquire a 4.2% partnership interest in TCG San Francisco from InterMedia
Partners. TCI has informed TCGI that it expects to acquire such partnership
interest by the end of August 1996, subject to normal closing conditions and the
consent of local franchising authorities. At such time as TCI acquires such
partnership interest, TCI is required to transfer such interest to TCGI in
consideration of the issuance to TCI of 372,666 shares of Class A Common Stock
upon such transfer.
As of June 30, 1996, TCI, Cox, Comcast and Continental owned 37.2%, 29.8%
19.5% and 13.6%, respectively, of the Company's Class B Common Stock,
representing 36.4%, 29.2%, 19.1% and 13.3%, respectively, of the combined voting
power of the Company's Common Stock.
Unaudited pro forma financial information for the three-month and six-
month periods ended June 30, 1996 and 1995, as if the Reorganization had
occurred at the beginning of each of the respective periods but without giving
pro forma effect to the Offerings, is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- ----------------------------
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues $ 65,114 $ 43,227 $ 123,236 $ 82,928
------------- ------------- ------------- -------------
Expenses:
Operating 40,647 26,583 77,118 51,314
Selling, general and administrative 22,119 16,458 42,792 33,129
Depreciation and amortization 22,601 13,215 43,883 24,666
------------- ------------- ------------- -------------
Total expenses 85,367 56,256 163,793 109,109
------------- ------------- ------------- -------------
Operating loss (20,253) (13,029) (40,557) (26,181)
Interest:
Interest income 633 1,387 1,614 2,556
Interest expense (5,446) (2,692) (10,935) (4,456)
------------- ------------- ------------- -------------
Total interest (4,813) (1,305) (9,321) (1,900)
------------- ------------- ------------- -------------
Loss before minority interest, equity
in losses of unconsolidated
affiliates and income taxes (25,066) (14,334) (49,878) (28,081)
Minority interest 1,034 742 2,049 1,413
Equity in losses of unconsolidated
affiliates (340) (349) (645) (799)
------------- ------------- ------------- -------------
Loss before provision for income taxes (24,372) (13,941) (48,474) (27,467)
Provision for income taxes (567) -- (792) (335)
------------- ------------- ------------- -------------
Net loss $ (24,939) $ (13,941) $ (49,266) $ (27,802)
============= ============= ============= =============
Loss per common share $(0.19) $(0.11) $(0.37) $(0.21)
============= ============= ============= =============
Weighted average number of shares
outstanding 131,850,895 131,850,895 131,850,895 131,850,895
============= ============= ============= =============
</TABLE>
8
<PAGE>
TELEPORT COMMUNICATIONS GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 - CONTINUED
(UNAUDITED)
The weighted number of shares are calculated as if the Cable Stockholders
had converted their shares to Class B Common Stock, from the beginning of each
of the periods presented. Also included is the Class A Common Stock issued to
purchase the minority interests in a Local Market Partnership.
After giving effect on a pro forma basis to both the Reorganization and the
Stock Offering, as if they had taken place on January 1, 1995, loss per common
share would have been $0.16 and $0.31 for the three and six months ended June
30, 1996, respectively, and $0.09 and $0.17 for the three and six months ended
June 30, 1995, respectively, using a weighted average number of shares of
158,875,895.
After giving effect on a pro forma basis to both the Reorganization and the
Offerings, as if they had taken place on January 1, 1995, loss per common share
would have been $0.32 and $0.63 for the three and six months ended June 30,
1996, respectively, and $0.25 and $0.49 for the three and six months ended June
30, 1995, respectively, using a weighted average number of shares of
158,875,895.
5. SUBSEQUENT EVENTS
TCGI owns 49% of the outstanding stock of Comcast CAP of Philadelphia, Inc.
("Comcast CAP"), which owns, on a fully diluted basis, 51% of the outstanding
stock of Eastern TeleLogic Corporation ("ETC"), a competitive access provider in
the Philadelphia metropolitan area. The minority shareholders of ETC have the
right to require ETC to buy their shares at a price based on the fair market
value of such shares, on a fully diluted basis, as determined by agreement among
the parties or, in the absence of such agreement, by the determination of
independent investment banking firms. If ETC does not make the required payment
after the exercise of this put right, the minority shareholders have the right
to force a sale of the stock or assets of ETC and may gain voting control of
ETC. Comcast CAP and the minority shareholders of ETC have agreed to permit the
minority shareholders to accelerate their put rights and to initiate the
appraisal process in connection with the exercise of such put rights by the
minority shareholders.
In April 1996, TCGI and Comcast entered into an agreement pursuant to which
TCGI agreed that, upon exercise of put rights by the minority shareholders of
ETC, or in the event of any other sale by the minority shareholders of ETC to
Comcast, TCGI would acquire, on terms and for a price yet to be negotiated, all
of the direct and indirect interests in ETC not currently owned by TCGI, subject
to regulatory approval. Any agreement between Comcast CAP or Comcast and the
minority shareholders of ETC regarding the acquisition of their shares must be
on terms and conditions acceptable to TCGI. Because the appraisal process to
determine the value of the interests of the minority shareholders of ETC has not
been completed, the Company cannot predict what value would be determined for
purposes of the put payments by ETC. While the Company cannot predict whether
it will acquire such interests or the price of such interests, the Company
estimates that the cost of acquiring all of the interests in ETC not currently
owned by it would exceed $100 million.
During July 1996, TCGI repaid $250 million of bank indebtedness with the
proceeds of the Offerings. Due to this repayment, TCGI is not currently required
under its Revolving Credit Agreement to enter into interest rate swap
arrangements. Accordingly, TCGI terminated four interest rate swap
arrangements, which were due to mature in 1997, for a gain of approximately $1.5
million.
9
<PAGE>
TELEPORT COMMUNICATIONS GROUP INC. AND SUBSIDIARIES
ITEM 2: MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
Revenue
Total revenues increased to $57.1 million and $107.5 million for the three and
six months ended June 30, 1996 from $38.8 million and $75.6 million,
representing increases of $18.3 million and $31.9 million, or 47% and 42%,
respectively. Telecommunications services revenue increased to $45.2 million
and $84.7 million for the three and six months ended June 30, 1996, from $32.1
million and $61.9 million, for the three and six months ended June 30, 1995,
representing increases of $13.1 million and $22.8 million, or 41% and 37%,
respectively. Revenue increases occurred in every revenue category, most
significantly in switched services. These increases in revenues are a result of
increased market penetration primarily in TCGI's existing markets as well as
expansion into new markets.
Management and royalty fees from the Local Market Partnerships increased to
$11.9 million and $22.8 million for the three and six months ended June 30,
1996, from $6.8 million and $13.7 million for the three and six months ended
June 30, 1995, representing increases of $5.1 million and $9.1 million, or 75%
and 66%, respectively. The fees are directly related to operating and
administrative support services provided by TCGI to unconsolidated Local Market
Partnerships. The increases in management fees revenue for the three and six
months ended June 30, 1996, as compared to the similar periods in 1995, are due
to the continuing support provided to TCGI's unconsolidated Local Market
Partnerships. As of July 1, 1996, these fees are no longer reflected as revenue
due to the consolidation of these Local Market Partnerships as a result of the
Reorganization.
On a pro forma basis, had telecommunications services revenue generated by
unconsolidated Local Market Partnerships been included in the prior periods'
financial statements, total revenues would have increased to $65.1 million and
$123.2 million for the three and six months ended June 30, 1996 from $43.2
million and $82.9 million for the three and six months ended June 30, 1995,
reflecting increases of $21.9 million and $40.3 million, or 51% and 49%,
respectively. This revenue growth is a direct result of increased market
penetration of all telecommunications service offerings in existing markets and
the addition of new markets. On a pro forma basis, annualized monthly recurring
revenue increased to approximately $245.9 million for the month of June 30,
1996, from $159.7 million for the comparable period in 1995, an increase of
$86.2 million, or 54%. Monthly recurring revenue represents monthly service
charges billable to telecommunications services customers for the month
indicated, but excluding non-recurring revenues for certain one-time services,
such as installation fees or equipment charges.
On a pro forma basis, switched service revenue increased 82% and 74%, for the
three and six months ended June 30, 1996, respectively, from the similar periods
in 1995 and represented 40% and 33% of total revenue as of June 30, 1996 and
1995. Increased monthly dedicated services revenue, as well as sales growth in
enhanced switched services products to new customers, also contributed to
overall switched services revenue growth. On a pro forma basis, dedicated
services revenue increased 35% and 36% for the three and six months ended June
30, 1996, respectively.
Operating Expenses
TCGI, in order to be consistent with industry standards, has reclassified
certain compensation and overhead expenses, related to engineering, customer
service and new technology, from selling, general and administrative to
operating expense. Operating expenses increased to $33.4 million and $62.3
million for the three and six months ended June 30, 1996, from $21.9 million and
$43.0 million for the three and six months ended June 30, 1995, increases of
$11.5 million and $19.3 million, or 53% and 45%, respectively. These increases
are directly related to the costs associated with the expansion of TCGI's
networks. These expenses include costs specifically associated with network
operations including compensation costs for technical personnel, access, rights-
of-way, node, rent and maintenance expenses. On a pro forma basis, operating
expenses increased to $40.6 million and $77.1 million for the three and six
months ended June 30, 1996, from $26.6 million and $51.3 million for the three
and six months ended June 30, 1995, increases of $14.0 million and $25.8
million, or 53% and 50%, respectively. On a pro forma
10
<PAGE>
TELEPORT COMMUNICATIONS GROUP INC. AND SUBSIDIARIES
ITEM 2: MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
basis, operating expenses are approximately 62% of revenue for the three and six
months ended June 30, 1996 and 1995.
Selling, General and Administrative
TCGI, in order to be consistent with industry standards, has reclassified
certain compensation and overhead expenses related to engineering, customer
service and new technology, from selling, general and administrative to
operating expense. Selling, general and administrative expenses increased to
$15.6 million and $29.4 million for the three and six months ended June 30,
1996, from $11.5 million and $23.6 million for the three and six months ended
June 30, 1995, an increase of $4.1 million and $5.8 million, or 36% and 25%,
respectively. These increases are attributable to the costs required to
maintain an infrastructure which supports the continued expansion of the
Company's networks, the introduction of new services and the delivery of high
levels of customer service. These costs include compensation, occupancy,
insurance, professional fees, and sales and marketing expenses. On a pro forma
basis, selling, general and administrative expenses increased to $22.1 million
and $42.8 million for the three and six months ended June 30, 1996, from $16.5
and $33.1 million for the three and six months ended June 30, 1995, an increase
of $5.6 million and $9.7 million, or 34% or 29%, respectively.
EBITDA
EBITDA (earnings (loss) before interest, taxes, depreciation, amortization,
minority interest and equity in losses of unconsolidated affiliates) increased
to $8.1 million and $15.8 million for the three and six months ended June 30,
1996, from $5.4 million and $9.0 million for the three and six months ended June
30, 1995, an increase of $2.7 million and $6.8 million, or 50% and 76%,
respectively. These increases are primarily attributable to increases in
dedicated and switched services revenues as well as increased management fee
revenue from Local Market Partnerships for support services. Furthermore, TCGI
has obtained increased efficiencies through greater automation and through lower
access costs. On a pro forma basis, EBITDA increased to $2.3 million and $3.3
million for the three and six months ended June 30, 1996, from $.2 million and
($1.5) million for the three and six months ended June 30, 1995, increases of
$2.1 million and $4.8 million, respectively. The Local Market Partnerships,
included in the pro forma financial data to reflect the Reorganization, have
negative EBITDA due to the start-up or rapid expansion of the networks of such
Local Market Partnerships.
Depreciation and Amortization Expense
Depreciation and amortization expense increased to $14.1 million and $27.0
million for the three and six months ended June 30, 1996, from $8.2 million and
$15.5 million for the three and six months ended June 30, 1995, increases of
$5.9 million and $11.5 million, or 73% or 74%, respectively. These increases
are primarily attributable to increased depreciation related to the expansion of
the Company's local telecommunications networks nationally and to changes in the
estimated useful lives of certain electronics equipment, which were made during
1995 in order to conform with industry standards. On a pro forma basis,
depreciation and amortization expense increased to $22.6 million and $43.9
million for the three and six months ended June 30, 1996 from $13.2 million and
$24.7 million for the three and six months ended June 30, 1995, increases of
$9.4 million and $19.2 million, or 71% and 78%, respectively.
Interest Income
Interest income increased to $1.5 million and $2.7 million for the three and
six months ended June 30, 1996, from $0.9 million and $2.0 million for the three
and six months ended June 30, 1995, increases of $0.6 million and $0.7 million,
or 67% and 35%, respectively.
11
<PAGE>
TELEPORT COMMUNICATIONS GROUP INC. AND SUBSIDIARIES
ITEM 2: MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
Interest Expense
Interest expense increased to $9.5 million and $17.6 million for the three and
six months ended June 30, 1996, from $5.5 million and $10.1 million for the
three and six months ended June 30, 1995, increases of $4.0 million and $7.5
million, or 73% and 74%, respectively. These increases resulted from borrowings
under the Revolving Credit Agreement and increased borrowings under the
Stockholders Loan Agreement, as well as increased capitalized lease obligations.
Equity in Losses of Unconsolidated Affiliates
Equity in losses of unconsolidated affiliates increased to $5.9 million and
$12.4 million for the three and six months ended June 30, 1996 from $4.5 million
and $8.7 million for the three and six months ended June 30, 1995, increases of
$1.4 million and $3.7 million, or 31% and 42%, respectively. These increases
are directly attributable to the development and operation of 13 Local Market
Partnerships and TCGI's equity share in the losses of ETC.
Net Losses
Net losses were $19.7 million and $38.4 million for the three and six months
ended June 30, 1996, respectively. These are increases of $8.0 million and
$15.2 million from net losses of $11.7 million and $23.2 million for the three
and six months ended June 30, 1995, respectively. The increases in net losses
are attributable to the factors discussed previously. On a pro forma basis, net
losses increased to $24.9 million and $49.3 million for the three and six months
ended June 30, 1996, from $13.9 million and $27.8 million for the three and six
months ended June 30, 1995.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1996, TCGI had total assets of approximately $2.4 billion, an
increase of approximately $1.8 billion from $615 million as of December 31,
1995. This growth is primarily attributable to the Offerings which occurred on
June 27, 1996, whereby TCGI issued 27,025,000 shares of Class A Common Stock,
$300 million Senior Notes and $1,073 million of Senior Discount Notes for
aggregate gross proceeds of approximately $1.3 billion. These proceeds were
received by TCGI on July 2, 1996 and are classified as a subscription receivable
on the June 30, 1996, balance sheet. The Company's current assets of
approximately $1.5 billion exceed current liabilities of $583 million,
providing working capital of approximately $881 million. Network and equipment,
net of depreciation aggregates $885 million. These assets include $470 million
of assets of the Local Market Partnerships which TCGI acquired from the Cable
Stockholders pursuant to the Reorganization (See Note 4 - Reorganization).
Prior to the Offerings, growth had been funded primarily by the Cable
Stockholders through equity contributions, and through a loan facility
aggregating $269 million borrowed by TCGI under the Stockholders Loan Agreement,
as well as through $250 million in borrowings under the Revolving Credit
Agreement. Pursuant to the Reorganization, the $269 million of aggregate
principal amount of indebtedness (plus $20.6 million of accrued interest as of
June 27, 1996) was contributed by the Cable Stockholders to capital in exchange
for Class B Common Stock. Additionally, the $250 million of indebtedness under
the Revolving Credit Agreement was repaid in July 1996 from the proceeds of the
Offerings. TCGI plans to utilize the credit facility under the Revolving Credit
Agreement, of which $250 million is currently available, to supplement TCGI's
funding requirements related to its network expansion.
The Company has incurred significant net operating losses resulting from the
development and operation of new networks. TCGI expects that such losses may
continue to increase as TCGI emphasizes the development, construction and
expansion of its networks and builds its customer base and that while cash
provided by operations
12
<PAGE>
TELEPORT COMMUNICATIONS GROUP INC. AND SUBSIDIARIES
ITEM 2: MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
may be sufficient to fund modest incremental growth it may not be sufficient to
fund the extensive expansion and development of networks as currently planned.
Net cash provided by financing activities for the six months ended June 30,
1996 and 1995 was $160.7 million and $102.1 million, respectively, comprised
primarily of borrowings under the Revolving Credit Agreement and the
Stockholder Loan Agreement. Net cash provided by operating activities was $10.1
million and $23.3 million for the six months ended June 30, 1996 and 1995,
respectively. Net cash used for investing activities was $136.6 million and
$117.0 million for the six months ended June 30, 1996 and 1995, respectively.
As of June 30, 1996, cash and cash equivalents were $46.1 million and the
Revolving Line of Credit was fully utilized for $250 million (subsequently
repaid in full in July 1996).
On a pro forma basis, TCGI made capital expenditures of $127 million and
$133.9 million for the six months ended June 30, 1996 and 1995, respectively.
The Company anticipates that capital expenditures will be approximately $375
million in the aggregate in 1996 and $450 million in the aggregate in 1997,
primarily for the expansion, development and construction of its networks, the
acquisition and deployment of switches and expansion of operating support
systems.
For the six months ended June 30, 1996, TCGI has expanded its route and fiber
miles 6% and 13%, respectively. The Company has also increased the metropolitan
areas and the buildings its serves by 6% and 27%, respectively, for the six
months ended June 30, 1996.
The Company believes that the net proceeds from the Offerings and the amount of
credit available under the Revolving Credit Agreement will be adequate for its
1996 and 1997 funding requirements. However, the Company's financing strategy
is to remain financially flexible to market opportunities which are consistent
with the Company's long range growth plans.
The incurrence of long term indebtedness by TCGI in an amount in excess of $1
billion is subject to certain state regulatory approvals in New York and New
Jersey. The Company has filed petitions for orders from such state regulatory
authorities that will permit TCGI to expand TCGI's borrowing authority to $2
billion. The Company expects that the proceeds of the Offerings and internally
generated cash flow will be sufficient to meet its capital needs until such
state regulatory approvals have been obtained. While all past petitions by TCGI
to the relevant New York and New Jersey state regulatory authorities to incur
indebtedness have been approved routinely, there can be no assurances that the
Company's current petitions before such authorities will be similarly approved.
Senior Discount Notes aggregating up to $253 million in accreted value will be
subject to mandatory redemption at a redemption price of 101% of the accreted
value thereof as of the redemption date in the event that such state regulatory
approvals are not obtained by March 29, 1997 or petitions for such approvals are
denied.
The Company from time to time evaluates acquisitions and investments in light
of the Company's long range plans. The Company may have future opportunities
with certain of its Cable Stockholders to invest in additional markets as a
minority partner or shareholder as well as opportunities as a managing partner
or controlling shareholder in new or existing telecommunications ventures which
are consistent with the Company's business plans (See Note 4 - Reorganization).
The Company expects to continue to build on its existing relationships with
cable television providers and other strategic customers, suppliers and
telecommunications carriers. Such acquisitions, investments and strategic
arrangements, if available, could use a material portion of the Company's
financial resources following the Offerings and may accelerate the need for
raising additional capital in the future.
Earnings before fixed charges were insufficient to cover fixed charges for the
six months ended June 30, 1996 and 1995, by $38.5 million and $23.3 million,
respectively. On a pro forma basis, the Company's earnings would have been
insufficient to cover fixed charges for the six months ended June 30, 1996 and
1995, by $50.5 million and $28.9 million, respectively.
13
<PAGE>
TELEPORT COMMUNICATIONS GROUP INC. AND SUBSIDIARIES
ITEM 2: MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
For a period of time, the Company will have excess liquidity as a result of the
Offerings. The Company has invested these funds in short term, interest bearing
money market funds until such funds are used to fund the capital investments and
operating needs of the Company's business.
On August 1, 1996, the Federal Communications Commission (the "FCC") voted to
adopt an order and associated rules to implement Sections 251 and 252 of the
Telecommunications Act of 1996 which govern the interconnection of competitive
local exchange carriers ("CLECs"), such as TCGI, and the incumbent local
exchange carriers ("ILECs"). The full text of the FCC's order was published on
August 8, 1996; but as of the date of this filing the Company has not had
sufficient time to analyze the order and determine if it could have a material
effect on the Company. Additionally, it is not possible to predict whether the
Company or any other party will petition the FCC for reconsideration or appeal,
or if such actions would materially change the order or associated rules. These
rules will govern the arbitration actions to be conducted by state public
utility commissions in the event that a CLEC and ILEC cannot voluntarily
negotiate an interconnection arrangement. TCGI has negotiated interconnection
arrangements with BellSouth Corp. (covering nine states) and Pacific Bell
(covering California), continues to negotiate with GTE Corp., Southern New
England Telecommunications Corp. and five Regional Bell Operating Companies, and
has filed petitions in 22 states seeking public utility commission arbitration.
However, until the negotiations or arbitrations are concluded, it is not
possible to determine whether and to what degree the FCC's rules and their
implementation by state public utility commissions may have a material effect on
TCGI.
This report contains forward-looking statements, within the meaning of Section
27A of the Securities Act of 1993, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, which are inherently uncertain. Actual
results and events may differ significantly from those discussed in such
forward-looking statements. In addition to other information discussed herein,
factors that might cause or contribute to such differences include the risks and
uncertainties set forth under the caption "Risk Factors" in the Prospectuses,
dated as of June 27, 1996, relating to the Company's Class A Common Stock and to
the Company's Senior Notes and Senior Discount Notes, included in the Company's
Registration Statements on Form S-1 (File Nos. 333 - 3850 and 333 - 3984).
14
<PAGE>
PART II
- OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
None
ITEM 2: CHANGES IN SECURITIES
Prior to the consummation of the Offerings, TCGI amended its Amended and
Restated Certificate of Incorporation to change its authorized capital stock to
900 million shares, including 450 million shares of Class A Common Stock, $.01
par value per share, 300 million shares of Class B Common Stock, $.01 par value
per share and 150 million shares of preferred stock, $.01 par value per share.
As of June 30, 1996, there was no preferred stock outstanding and TCI, Cox,
Continental and Comcast owned of record all of the outstanding shares of Class B
Common Stock of 131,274,632. TCGI has issued and outstanding 27,601,263 shares
of Class A Common Stock.
Each share of Class A Common Stock entitles the holder to one vote and each
share of Class B common stock entitles the holder to 10 votes on each matter to
be voted upon by the holders of the Common Stock.
ITEM 3: DEFAULTS UPON SENIOR SECURITY
None
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5: OTHER INFORMATION
None
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
Exhibit No.
- -----------
*2.1 Reorganization Agreement, dated as of April 18, 1996
*3.6 Amended and Restated Certificates of Incorporation of TCGI, as
revised
*3.7 Amended and Restated By-laws of TCGI, as revised
*4.2 Form of Amended and Restated Stockholders' Agreement
(incorporated by reference to Exhibit E of Exhibit 2.1 hereof)
*4.3 Form of Indenture between TCGI and United States Trust Company
of New York, as Trustee, relating to the 11 1/8% Senior Discount
Notes due 2007 of TCGI
*4.4 Form of Indenture between TCGI and United States Trust Company
of New York, as Trustee, relating to 9 7/8% Senior Notes due 2006 of
TCGI
*4.5 Form of Stock Certificate for Teleport Communications Group,
Inc.
*10.1 New York Franchise Agreement, dated May 2, 1994, as amended
*10.2 Participation Agreement, dated May 15, 1984
*10.3 Agreement of Lease, dated May 15, 1984, as amended
*10.4 Keepwell Agreement, dated June 7, 1984, as amended
*10.5 Agreement of Lease with Teleport Associates, dated November 10,
1987
*10.6 Agreement of Sublease between Merrill Lynch/WFC/L, Inc. and TC
Systems, Inc. dated January 30, 1990
*10.7 Loan Agreement, dated May 5, 1993
*10.8 Amendment No. 1 to Loan Agreement, dated March 1, 1994
*10.9 Amendment No. 2 to Loan Agreement, dated October 23, 1994
15
<PAGE>
*10.10 Amendment No. 3 to Loan Agreement, dated February 15, 1995
*10.11 Loan Agreement, dated May 22, 1995 and related documents
*10.12 Amendment No. 1 to Loan Agreement, dated May 31, 1996
*10.13 Teleport Communications Group Inc. 1992 Unit Appreciation Plan
*10.14 Teleport Communications Group Inc. 1993 Unit Appreciation Plan
*10.15 Teleport Communications Group Inc. 1993 Stock Option Plan, as
amended
*10.16 Form of Teleport Communications Group Inc. Employee Stock
Purchase Plan
*10.17 Deferred Compensation Plan of Teleport Communications Group Inc.
*10.18 Make-up Plan of Teleport Communications Group Inc. for the
Retirement Savings Plan
*10.19 Teleport Communications Group Inc. 1996 Equity Incentive Plan
*10.20 Robert Annunziata Employment Agreement, dated December 18,
1992, as amended
*10.21 John A. Scarpati Employment Agreement, dated July 12, 1994, as
amended
*10.22 Robert C. Atkinson Employment Agreement, dated July 12, 1994,
as amended
*10.23 Stuart A. Mencher Employment Agreement, dated July 12, 1994, as
amended
*10.24 Alf T. Hansen Employment Agreement, dated July 12, 1994, as
amended
*10.25 Partnership Agreement of TCG Detroit, dated as of November 1,
1993
*10.26 Amended and Restated Partnership Agreement of TCG Los Angeles,
dated as of March 1, 1994
*10.27 Partnership Agreement of TCG Pittsburgh, dated as of March 1,
1994
*10.28 Partnership Agreement of TCG San Diego, dated as of June 1, 1994
*10.29 Partnership Agreement of TCG San Francisco, dated as of January
1, 1994, as amended
*10.30 Partnership Agreement of TCG Seattle, dated as of January 1,
1994, as amended
*10.31 Agreement among Teleport Communications Group Inc. and Comcast
Corporation, dated April 18, 1996
*10.32 First Amendment to the Teleport Communications Group Inc. 1993
Stock Option Plan
*10.33 Second Amendment to the Teleport Communications Group Inc. 1993
Stock Option Plan
*10.34 Letter of Intent between Viacom Telecom, Inc. and Teleport
Communications Group Inc., dated as of
May 30, 1996.
*10.35 Letter of Intent between Viacom Telecom, Inc. and Teleport
Communications Group Inc., dated as of May 30, 1996
*10.36 First Amendment to the Teleport Communications Group Inc. 1996
Equity Incentive Plan
*10.37 Stockholders' Agreement of Comcast CAP of Philadelphia, Inc.
dated as of June 30, 1993
11.00 Computation of Loss Per Common Share
27.00 Financial Data Schedule
*Incorporated by reference to the corresponding exhibit of TCGI's Registration
Statements on Form S-1 (File Nos. 333-3850 and 333-3985)
b. None
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf of the
undersigned, thereunto duly authorized.
TELEPORT COMMUNICATIONS GROUP INC.
Dated: August 12, 1996
By: /s/ John A. Scarpati
--------------------------
Name: John A. Scarpati
Title: Senior Vice President and Chief
Financial Officer
Dated: August 12, 1996 By: /s/ Maria Terranova-Evans
--------------------------
Name: Maria Terranova-Evans
Title: Vice President and Controller
(Principal Accounting Officer)
<PAGE>
EXHIBIT 11
TELEPORT COMMUNICATIONS GROUP INC.
COMPUTATION OF LOSS PER COMMON SHARE
THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------- --------
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net Loss $(19,743,000) $(11,705,000) $(38,435,000) $(23,245,000)
============= ============= ============= =============
Primary loss per common share:
Weighted average number of shares
outstanding 72,930,110 70,000,140 71,465,125 70,000,140
============= ============= ============= =============
Loss per share $ (0.27) $ (0.17) $ (0.54) $ (0.33)
============= ============= ============= =============
Fully diluted loss per share:
Weighted average number of shares
outstanding 72,930,110 70,000,140 71,465,125 70,000,140
============= ============= ============= =============
Loss per share $ (0.27) $ (0.17) $ (0.54) $ (0.33)
============= ============= ============= =============
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
FINANCIAL STATEMENT DATA
As of and For the Period Ended June 30, 1996
(In Thousands, Except Share Data)
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 46,060
<SECURITIES> 0
<RECEIVABLES> 41,966
<ALLOWANCES> 4,868
<INVENTORY> 0
<CURRENT-ASSETS> 1,463,535
<PP&E> 1,072,616
<DEPRECIATION> 188,064
<TOTAL-ASSETS> 2,420,416
<CURRENT-LIABILITIES> 583,225
<BONDS> 1,232,606
0
0
<COMMON> 1,669
<OTHER-SE> 964,511
<TOTAL-LIABILITY-AND-EQUITY> 2,420,416
<SALES> 0
<TOTAL-REVENUES> 57,087
<CGS> 0
<TOTAL-COSTS> 33,421
<OTHER-EXPENSES> 14,110
<LOSS-PROVISION> 475
<INTEREST-EXPENSE> 9,474
<INCOME-PRETAX> (19,176)
<INCOME-TAX> 567
<INCOME-CONTINUING> (19,743)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (19,743)
<EPS-PRIMARY> (0.27)
<EPS-DILUTED> (0.27)
</TABLE>
