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SECURITIES AND EXCHANGE COMMISSION
8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Date of Report
(Date of earliest event reported) February 26, 1997
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TELEPORT COMMUNICATIONS GROUP INC.
(Exact Name of Registrant as specified in its Charter)
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<CAPTION>
<S> <C> <C>
Delaware 0-20913 13-3173139
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(State or Other jurisdiction of (Commission (IRS Employer of
Incorporation) File Number) Identification No.)
One Teleport Drive, Staten Island, New York 10311
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number including area code (718) 355-2000
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ITEM 5. OTHER EVENTS
THE REGISTRANT ISSUED THE FOLLOWING PRESS RELEASE ON FEBRUARY 26, 1997:
TELEPORT COMMUNICATIONS GROUP INC. (TCG) REPORTED DECEMBER QUARTER 1996
RESULTS: RECORD QUARTERLY REVENUES OF $87.4 MILLION GENERATED EBITDA OF $6.2
MILLION.
For Immediate Release:
NEW YORK, N.Y. FEBRUARY 26 , 1997
TCG (Nasdaq/NM:TCGI) reported record fourth quarter 1996 revenues of $87.4
million, a 61% increase over $54.4 million for the same period in 1995. Fourth
quarter 1996 EBITDA increased by $4.1 million or 189% over the same period in
1995.
Results were especially strong for the fourth quarter and revenues and EBITDA
were further boosted by a $1.8 million non-recurring benefit from an
interconnection rate adjustment. Prior to the one time year end benefit,
quarterly revenues were $85.6 million, an increase of 18% over third quarter's
$72.7 million. This represented TCG's highest sequential quarterly revenue
growth rate in the last two years. Prior to the non-recurring benefit, fourth
quarter 1996 EBITDA was $4.4 million, a 43% sequential quarterly growth rate
from a sequential 18% growth in revenues. December quarter, 1996 was the fifth
consecutive quarter of positive EBITDA for TCG.
------- Quarter ------- For the Year Ended
December 31,
($ in millions) 4Q96 4Q95 1996 1995
---- ---- ---- ----
Revenues $87.4 $54.4 $283.4 $184.9
% Increase 61 % 53 %
EBITDA $ 6.2 $ 2.1 $ 12.6 $ 0.6
For the year 1996, revenues totaled $283.4 million, an increase of $98.5 million
or 53% over the year 1995. EBITDA for the year 1996 was $12.6 million or over 20
times 1995's total year EBITDA of $589,000.
"Fourth quarter was an exceptionally strong quarter in terms of revenues and
EBITDA. In the fourth quarter, we saw some of the benefits from the expanding
sales force and programs in new products and services as well as in new
geographic markets. By simultaneously improving our sales productivity and
adding to our sales force, I am confident that we will continue to leverage our
network and generate growth in both revenues and EBITDA." said Bob Annunziata,
TCG's Chairman and CEO.
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NOTE: All results (financial and operational) presented in this release for
periods prior to July 1, 1996 are on a pro forma basis to reflect the
Reorganization, described in TCG's SEC Registration Statements.
Revenue Growth:
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In the fourth quarter, TCG continued to grow switched revenues at a higher rate
than dedicated service revenues. Switched service revenues (prior to the non-
recurring benefit) grew 18% from the third quarter 1996 and 75% from the same
period in 1995 while dedicated service revenues grew 48% over the fourth quarter
1995. Access lines at year-end 1996 totaled 138,555, an increase of 82% over
76,124 lines at year-end 1995.
Growth in switched revenues was due to higher sales in our existing 16 cities
providing switched services and new switched service revenues from the
activation of two new switches, one in Phoenix and one in Denver. A third switch
in Indianapolis became operational near year end 1996 and initial switched
service revenues are anticipated for that city in first quarter 1997. For the
year ended December 31, 1996, switched services revenues were 40% of total
revenues compared to 34% for the year 1995.
In 1996, high speed data services were introduced in 19 cities compared to 10
cities in 1995. Data is 2% of total revenues for the year 1996; however, this
line of business continues to be a high growth opportunity for TCG. Data
revenues grew 134% in the fourth quarter 1996 from the same period in 1995. Data
circuits in use at year-end 1996 were 414, up 36% sequentially and 280% from
year-end 1995.
Annualized monthly recurring revenue in December 1996 was $329.0 million, a 56%
increase from $211.1 million in December 1995, providing a strong foundation for
1997.
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Network Expansion:
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12/31/96 12/31/95 Increase
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Route Miles 6,744 5,428 1,316
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Fiber Miles 346,039 253,285 92,754
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Tel. Switches 25 21 4
ATM circuits 414 109 305
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MSAs 57* 48 9
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Voice Grade Equiv 4,428,770 2,871,000 1,557,770
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Buildings (on net) 3,074 2,185 889
(off net) 4,916 2,551 2,365
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7,990 4,736 3,254
Total Bldgs
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*Includes 2 MSAs from Eastern TeleLogic, Inc. acquisition, which is anticipated
to close shortly.
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In the fourth quarter, capital expenditures were $126.6 million. For the year
ended December 31, 1996, capital expenditures totaled $358.2 million. Use of
funds was primarily for expansion of the network by an additional 1,316 route
miles and locations in 889 additional on-net buildings.
Operating Results:
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While TCG continues to expand geographically, the benchmark of success for the
company is clearly in terms of leveraging the expanding network. Fourth quarter
1996 EBITDA margin was reported at 7.1% of revenues and prior to the non-
recurring benefits, the EBITDA margin was 5.1%. This was a continuation of the
steady quarterly margin improvements from 4.2%, 3.6%, and 1.7% for the third,
second and first quarters, respectively in 1996.
For the year 1996, the EBITDA margin was 4.4% of revenues compared to 0.3% for
the year 1995. The solid margin expansion for the year was due to sales, general
and administrative (SG&A) expenses growing at 37% while revenues grew at 53%. As
a percentage of revenues, SG&A improved from 38.7% in 1995 to 34.7% in 1996.
At year-end 1996, TCG had 2,050 employees compared to 1,499 at year-end 1995.
Productivity per employee in terms of revenues and EBITDA improved. Revenues per
employee increased by 14% from an average of $141,000 per employee in 1995 to an
average of $160,000 per employee in 1996. Average EBITDA for the year improved
over 15 fold from $450 per employee in 1995 to $7,080 per employee in 1996.
The net loss for the fourth quarter of 1996 was $43.5 million or $0.27 per share
compared with $24.1 million for the same period in 1995. The additional net loss
was due primarily to an increase of $3.6 million in depreciation and
amortization associated with network and product expansion, $13.1 million in net
interest expense and $6.5 million in additional losses for unconsolidated
affiliates. For the year 1996, net loss was $126.6 million compared to $67.6
million in 1995. The $12 million improvement in EBITDA for the year 1996 was
offset by an incremental $33.4 million for additional depreciation expense,
$30.9 million for net interest expense and $6.3 million for additional losses in
consolidated affiliates.
Acquisitions:
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On February 4, 1997, TCG completed the transaction to acquire CERFnet Services,
Inc., a tier one Internet Service Provider for 2.1 million shares of Class A
common stock. In 1996, CERFnet generated over $9 million in annual revenues from
more than 6,000 business customers and professional dial-up users. In 1997, TCG
will begin to realize some of the sales synergies between CERFnet and TCG's
sales force and begin the implementation program to template CERFnet's
infrastructure in 7
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additional cities; Chicago, Denver, Boston, New Washington D.C., Dallas and
Houston.
On January 31, 1997, TCG received the last regulatory approval needed to acquire
the remaining interest in Eastern TeleLogic, Inc. , a leading competitive local
exchange carrier with networks in Philadelphia; Camden, New Jersey and
Wilmington, Delaware. TCG anticipates the transaction will close shortly and
looks forward to the ability to offer wholesale long distance along the Eastern
Corridor from New Hampshire to Virginia.
This press release, other than historical financial information, contains
forward - looking statements that involve risks and uncertainties detailed in
the company's SEC reports and registration statements. Actual results may vary
materially.
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TABLE 1
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TELEPORT COMMUNICATIONS GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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($ in millions)
Three Months Ended
December 31
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1996 1995*
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Revenue $ 87.4 $ 54.4
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Expenses:
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Operating 51.5 31.3
Selling, Gen, & Admin.
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29.7 21.0
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Depreciation/Amort. 27.3 23.7
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Operating loss (21.1) (21.6)
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Interest Income 12.9 1.0
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Interest Expense (29.2) (4.2)
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Minority Interest 1.3 0.9
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Equity of Unconsol. Affiliates (6.7) (0.2)
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Loss Before Taxes (42.8) (24.1)
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Income Tax Provision (.7) --
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Net Loss $(43.5) $(24.1)
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EBITDA $ 6.2 $ 2.1
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EPS* $ (.27) $ (.18)
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Weighted Ave. Shares* (millions) 159.9 132.9
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*1995 results, including EPS are pro forma for the Reorganizations which
occurred in 1996.
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TABLE 2
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TELEPORT COMMUNICATIONS GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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<CAPTION>
($ in millions)
For the Year Ended
December 31
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1996* 1995*
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Revenues $ 283.4 $ 184.9
Expenses:
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Operating 172.4 112.6
Selling, Gen, & Admin. 98.4 71.7
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Depreciation/Amort 96.2 62.8
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Operating loss (83.6) (62.2)
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Interest Income 29.2 4.8
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Interest Expense (66.9) (11.6)
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Minority Interest 4.7 3.2
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Equity of Unconsol. Affiliates (7.7) (1.4)
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Loss Before Taxes (124.3) (67.2)
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Income Tax Provision (2.3) (.4)
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Net Loss $ (126.6) $ (67.6)
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EBITDA $ 12.6 $ 0.6
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EPS* $ (0.86) $ (.51)
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Weighted Ave. Shares (in millions) 146.4 132.9
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</TABLE>
*1995 and YTD 1996 results are pro forma for the Reorganization which occurred
in 1996.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf of the undersigned,
thereunto authorized.
TELEPORT COMMUNICATIONS GROUP, INC.
Dated: March 5, 1997 By: ______________________________
Name: Maria Terranova-Evans
Title: Vice President and Controller
(Principal Accounting Officer)
