<PAGE>
SECURITIES AND EXCHANGE COMMISSION
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: July 29, 1997
TELEPORT COMMUNICATIONS GROUP INC.
0-20913
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(Commission File Number)
13-3173139
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(IRS Employer Identification Number)
Delaware
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State of Incorporation
437 Ridge Road, Executive Building 3, Dayton, New Jersey, 08810
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(Address of principal executive offices)
(908) 392-2000
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(Registrant's telephone number, including area code)
<PAGE>
ITEM 5. OTHER EVENTS
THE REGISTRANT ISSUED THE FOLLOWING PRESS RELEASE ON JULY 29, 1997
TELEPORT COMMUNICATIONS GROUP INC. (TCG) REPORTED SECOND QUARTER 1997
RESULTS: A RECORD 78% GROWTH RATE FOR REVENUES POSTED AT $115.7 MILLION.
EBITDA GREW 269% TO $8.7 MILLION.
For Immediate Release:
NEW YORK, N.Y. JULY 29, 1997
TCG (Nasdaq/NM:TCGI) reported revenues for the second quarter ended June 30,
1997 of $115.7 million, a record growth rate of 78% compared to the same
period in 1996. Second quarter 1997 EBITDA (earnings before interest, taxes,
depreciation, and amortization) was $8.7 million, an increase of 269% from
$2.3 million for the second quarter 1996. EBITDA margin was 7.5% of
revenues, which was more than double the 3.6% for the same period in 1996.
"TCG's excellent performance in the second quarter, which produced the highest
year over year revenue growth in TCG's history, is attributable to the
continuation of the robust growth in switched services, Internet and high speed
data and the smooth integration of the CERFnet and the Eastern TeleLogic
acquisitions. The second quarter was the seventh consecutive quarter of record
revenues and EBITDA growth. Our excellent results reflect the expansion of TCG
CERFnet Internet services to major TCG markets combined with robust internal
growth across all of our product lines. Our performance to date has exceeded our
internal expectations and gives us a solid base in meeting our 1997 business
plan objectives." said Bob Annunziata, TCG's Chairman and CEO.
Year to date June 30, 1997 revenues were $212.5 million, a 72% increase from the
same period in 1996. EBITDA for year to date June 30, 1997 was $14.8 million, a
345% increase over the same period in 1996.
<TABLE>
<CAPTION>
Quarter ended Year to date ended
($ in millions) 6/30/97 6/30/96 6/30/97 6/30/96
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $ 115.7 $ 65.1 $ 212.5 $ 123.2
% Change 78% 72%
EBITDA $ 8.7 $ 2.3 $ 14.8 $ 3.3
% Change 269% 345%
</TABLE>
At the end of the second quarter 1997, annualized monthly recurring revenue
was $444.8 million, an increase of 81% over the same period in 1996.
Note: All results (financial and operational) presented in this release for 1996
are on a pro forma basis to reflect the Reorganization, described in TCG's SEC
Registration Statements.
<PAGE>
REVENUE MIX:
- ------------
TCG's sales force produced a 91% increase in switched services revenues in the
1997 June quarter compared to the same period in 1996. This was TCG's highest
year over year growth and correlated with the growth in access lines served,
which increased 99,748 or 97% from the June quarter 1996 to 202,642 lines at the
end of the June quarter 1997. On a sequential quarterly basis, access lines
increased 31,867 lines, a 19% growth from first quarter 1997 access lines of
170,775. Switched services revenues grew 22% from the first quarter in 1997. The
strong growth in switched services is exceeding our objectives of increasing the
proportion of switched services in our total revenue mix. Switched services are
now 43% of total revenues compared to 40% a year ago.
Internet and enhanced data service revenues continue to grow at triple digit
rates, with year over year growth at 357% and sequential quarterly growth at
43%. Internet and enhanced data are now 4.4% of total revenues for the quarter
ended June 30, 1997 compared to 1.7% for the same period in 1996. The roll-out
of Internet services is proceeding on schedule with TCG CERFnet currently
offered in 22 cities.
During the second quarter of 1997, TCG added 101 high speed data circuits for a
total of 605 high speed data circuits. TCG now services nearly three times as
many high speed data circuits versus a year ago. High speed data customers
served in the second quarter of 1997 were 117 compared to 52 customers in the
second quarter of 1996.
NETWORK EXPANSION:
- ------------------
For the second quarter of 1997, capital expenditures were $146.9 million and
year to date capital expenditures totaled $217.6 million. Capital expenditures
continue to be a mix of success-based spending and geographic expansion. Route
miles have increased over 1,100 miles or 17% from year end 1996, and utilization
of TCG's capacity, as measured by voice-grade equivalent circuits served have
increased by 1.19 million or 27%. Equally important, the number of on-net
buildings has increased by 1,074 buildings or 38% from year end 1996, and
carrying more of the call on-net has contributed to greater EBITDA. Total
buildings served were 10,949, an increase of 41% in six months. The following is
a comparison of TCG's network statistics at the end of the second quarter 1997
versus year-end 1996.
<PAGE>
<TABLE>
<CAPTION>
6/30/97 12/31/96 Increase
--------- --------- --------
<S> <C> <C> <C>
Route Miles 7,870 6,744 1,126
Fiber Miles 398,774 346,039 52,735
Voice-Grade Equivalents 5,621,950 4,428,770 1,193,180
Buildings: On-net 3,923 2,849 1,074
Off-net 7,026 4,896 2,130
- ---------------------- ------ --------- ---------
Total Buildings 10,949 7,745 3,204
Local Serving Offices 127 102 25
Switches Installed 30 25 5
High Speed Data circuits 605 414 191
</TABLE>
OPERATING RESULTS:
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EBITDA margin was 7.5% in the second quarter 1997 compared to 3.6% in the second
quarter 1996. The excellent performance in EBITDA was primarily attributable to
improvements in operating expenses. As more services are deployed over TCG's own
networks, the economics of the business continues to improve in the operating
expense category. Operating expenses were 58.5% of revenues in the second
quarter 1997 compared to 62.4% for the same period in 1996.
TCG continued to invest in sales and marketing to capture new customers and sell
more integrated services during the second quarter; however SG&A (selling,
general and administrative) expenses as a percentage of revenues were controlled
to 34% of revenues.
At the end of the second quarter 1997, total employees were 2,673, an increase
of 59% from a year ago. Sales employees at June 30, 1997 totaled 595, a 71%
increase from a year ago and agents and resellers now total 1,951.
The net loss for the second quarter of 1997 was $51.3 million or $0.31 per share
versus $25.2 million or $0.19 per share in the second quarter of 1996. Second
quarter 1997 EBITDA increased by $6.3 million over the same period in 1996 but
was more than offset by the increase of $14.4 million of non-cash expenses,
depreciation and amortization. Additionally, net interest expense increased
$17.2 million from the second quarter 1996.
ACQUISITIONS, FINANCINGS AND NEW PRODUCT OFFERINGS:
- ----------------------------------------------------
On July 28, 1997, TCG completed the amendment of the $250 million revolving
credit facility for TCG New York with 20 banks to $400 million. The agreement
also provides an additional $100 million of credit available in 1998. The
availability of these funds significantly increases TCG's financial flexibility.
At the end of June 30, 1997, TCG's cash and marketable securities position was
$470 million, which more than adequately provides for TCG's capital expenditures
for 1997.
<PAGE>
On July 28, 1997, TCG exercised the option to acquire the remaining 50.1%
interest in BizTel Communications, Inc., a holder of 38 GigaHertz (GHz)
licenses in 206 geographic areas. The completion of the transaction is
subject to regulatory approval. The expanded use of 38 GHz facilities will
increase TCG's independence from having to lease services from our main
competitors for lower volume customers and concurrently deploy capital more
efficiently and lower operating costs. BizTel's 38 GHz technology is a
natural complement to TCG's extensive fiber based network.
On July 16, 1997, TCG announced the introduction of "TCG Prime Card", TCG's
calling card for our business customers. This addition to TCG's robust line
of product and services is expected to begin on August 1st and will be
offered on a national basis.
This press release, other than historical financial information, contains
forward - looking statements that involve risks and uncertainties detailed in
the company's SEC reports and registration statements. Actual results may vary
materially.
<PAGE>
TELEPORT COMMUNICATIONS GROUP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited with pro forma 1996)
<TABLE>
<CAPTION>
($ in millions, except EPS)
Three Months Ended
June 30
1997 1996*
------ ------
<S> <C> <C>
Revenue $115.7 $ 65.1
Expenses:
Operating 67.6 40.7
Selling, Gen, & Admin. 39.4 22.1
Depreciation/Amort. 37.3 22.8
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Operating Loss (28.6) (20.5)
Interest Income 6.8 0.6
Interest Expense (28.7) ( 5.4)
Minority Interest 0.0 1.0
Equity of Unconsol. Affiliates ( 0.3) (0.3)
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Loss Before Taxes (50.8) (24.6)
Income Tax Provision ( .5) (0.6)
------ ------
Net Loss $(51.3) $(25.2)
====== ======
EBITDA $ 8.7 $ 2.3
EPS $( .31) $( .19)
Weighted Avg. Shares (millions) 164.9 131.9
</TABLE>
*Second Quarter 1996 is shown on a pro forma basis to reflect the
Reorganization, described in TCG's SEC Registration Statements.
<PAGE>
TELEPORT COMMUNICATIONS GROUP INC.
STATEMENTS OF OPERATIONS
(Unaudited with GAAP 1996)
<TABLE>
<CAPTION>
($ in millions, except EPS)
Three Months Ended
June 30
Consolidated Combined
1997 1996*
------ -------
<S> <C> <C>
Revenue $115.7 $ 57.1
Expenses:
Operating 67.6 33.4
Selling, Gen, & Admin. 39.4 15.6
Depreciation/Amort. 37.3 14.1
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Operating Loss (28.6) ( 6.0)
Interest Income 6.8 1.5
Interest Expense (28.7) ( 9.5)
Minority Interest 0.0 0.7
Equity of Unconsol. Affiliates ( 0.3) ( 5.9)
------ -------
Loss Before Taxes (50.8) (19.2)
Income Tax Provision ( 0.5) ( 0.5)
------ -------
Net Loss (51.3) (19.7)
====== =======
EPS ( .31) ( .27)
Weighted Avg. Shares 164.9 72.9
(millions)
</TABLE>
*Second Quarter 1996 is shown on a GAAP basis to reflect the Company prior to
the Reorganization, described in TCG's SEC Registration Statements.
<PAGE>
TELEPORT COMMUNICATIONS GROUP INC.
STATEMENTS OF OPERATIONS
(Unaudited with Pro forma 1996)
<TABLE>
<CAPTION>
($ in millions, except EPS)
Six Months Ended
June 30
1997 1996*
------ -------
<S> <C> <C>
Revenue $212.5 $ 123.2
Expenses:
Operating 125.0 77.1
Selling, Gen, & Admin. 72.7 42.8
Depreciation/Amort. 67.0 44.1
------ -------
Operating Loss (52.2) ( 40.8)
Interest Income 18.0 1.6
Interest Expense (58.3) ( 10.9)
Minority Interest 0.0 2.0
Equity of Unconsol. Affiliates ( 2.8) ( 0.6)
------ -------
Loss Before Taxes (95.3) ( 48.7)
Income Tax Provision ( 1.1) ( 0.8)
------ -------
Net Loss $(96.4) $( 49.5)
====== =======
EBITDA $ 14.8 $ 3.3
EPS $( .59) $ ( .37)
Weighted Avg. Shares 163.3 131.9
(millions)
</TABLE>
* Year to date ended June 30, 1996 is shown on a pro forma basis to reflect the
Company prior to the Reorganization, described in TCG's SEC Registration
Statements.
<PAGE>
TELEPORT COMMUNICATIONS GROUP INC.
STATEMENTS OF OPERATIONS
( Unaudited with GAAP 1996)
<TABLE>
<CAPTION>
($ in millions, except EPS)
Six Months Ended
June 30
Consolidated Combined
1997 1996*
------ -------
<S> <C> <C>
Revenue $212.5 $ 107.5
Expenses:
Operating 125.0 62.3
Selling, Gen, & Admin. 72.7 29.4
Depreciation/Amort. 67.0 27.0
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Operating Loss (52.2) (11.2)
Interest Income 18.0 2.7
Interest Expense (58.3) (17.6)
Minority Interest 0.0 0.9
Equity of Unconsol. Affiliates ( 2.8) (12.4)
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Loss Before Taxes (95.3) ( 37.6)
Income Tax Provision ( 1.1) ( 0.8)
------ -------
Net Loss $(96.4) $( 38.4)
====== ========
EPS $( .59) $( .54)
Weighted Avg. Shares 163.3 71.5
(millions)
</TABLE>
* Year to date ended June 30, 1996 is shown on a GAAP basis to reflect the
Company prior to the Reorganization, described in TCG's SEC Registration
Statements.
<PAGE>
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: July 31, 1997 By: /s/ Maria Terranova-Evans
__________________________
Name: Maria Terranova-Evans
Title: Vice President and Controller
(Principal Accounting Officer)
