SECURITIES AND EXCHANGE COMMISSION
FORM 8-K
Current Report
Pursuant to Section 13 or 15 (d) of the
Securities Exchanges Act of 1934
Date of Report April 28, 1998
Teleport Communications Group Inc.
(Exact Name of Registrant as specified in its Charter)
Delaware 0-20913 13-3173139
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(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
437 Ridge Road, Executive Building 3, Dayton, New Jersey 08810
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (732) 392-2000
<PAGE>
Item 5. Other Events
The Registrant issued the following Press Release on April 28, 1998:
TELEPORT COMMUNICATIONS GROUP INC. (TCG) REPORTED FIRST QUARTER 1998 REVENUES OF
$160.1 MILLION AND EBITDA (BEFORE MERGER COSTS) OF $22.2 MILLION.
For Immediate Release:
Dayton, N.J. April 28, 1998
Teleport Communications Group Inc. (Nasdaq/NM:TCGI) reported revenues for the
first quarter ended March 31, 1998 of $160.1 million, a growth rate of 65%
compared to the same period in 1997.
First quarter 1998 EBITDA (before merger costs) was $22.2 million, an increase
of 264% from the first quarter 1997 and a 21% improvement from the 1997 fourth
quarter EBITDA (excluding a $22 million one-time charge for in-process research
and development). As a percentage of revenues, EBITDA (before the merger costs)
was 13.9% which was more than double the 6.3% EBITDA margin a year ago.
The non-recurring merger costs of $9.3 million included professional fees and
other expenses related to the pending AT&T merger.
Annualized monthly recurring revenue for March 1998 was $632 million, an
increase of 53% over the same period in 1997.
"First quarter 1998 results demonstrate our commitment and ability to focus on
the business fundamentals and growing revenues and EBITDA (before merger costs)
to record levels while preparing for the pending merger with AT&T," said Bob
Annunziata, TCG's Chairman, President and CEO. "We are pleased to report that
EBITDA (before merger costs) grew at a rate four times faster than revenues."
Three months ended
($ in millions) 3/31/98 3/31/97 % increase
--------- -------- ----------
Revenues $ 160.1 $ 96.8 65%
EBITDA before merger costs $ 22.2 $ 6.1 264%
* EBITDA is defined as earnings before interest, taxes, depreciation,
amortization, and equity in losses of unconsolidated affiliates.
<PAGE>
First Quarter 1998 Highlights:
Revenues:
Compared to fourth quarter 1997, total revenues for the first quarter 1998
increased by $9.7 million or 6.4%. Switched access lines added in the first
quarter 1998 were 43,173 and total access lines in service at the end of the
first quarter 1998 were 325,874. Switched services revenues grew 17.3% from the
fourth quarter 1997. Internet and high speed data services grew 22% compared to
the fourth quarter 1997.
Compared to first quarter 1997, switched service revenues grew 86% and dedicated
service revenues grew 44%. For the first time in TCG's history, switched
services constituted the largest proportion of total revenues. In the first
quarter 1998, switched services were 47% of revenues while dedicated services
were 46% of total revenues. A year ago, switched revenues were 42% of revenues
and dedicated services were 53% of total revenues. Internet and high speed data
grew by over 152% from the first quarter 1997 and are now 5.6% of total
revenues.
The strong growth in switched service revenues was a result of strong growth in
existing cities and switch service revenues recorded for the first time in
Chattanooga, Nashville and Atlanta. During the first quarter 1998, new switches
were installed in Salt Lake City, Charlotte, and Knoxville.
During the first quarter 1998, TCG added 101 sales employees to reach a total of
790. The alternate sales channel, agents and resellers increased to over 3,000
from the 2,182 at year end 1997.
Operating results:
The significant EBITDA (before merger costs) growth from $18.3 million
(excluding a $22 million one-time charge for in-process research and
development) in the fourth quarter 1997 to $22.2 million in the first quarter
1998 was a result of lower growth in Selling, General & Administrative (SG&A)
expenses relative to revenues. SG&A was 29% of revenues compared to 32% of
revenues in the fourth quarter 1997.
As a result of the acceleration of the network buildout to facilitate the
expected traffic from AT&T, operating expenses grew in the areas of fixed and
semi-variable operating expenses such as costs associated with costs related to
nodes, provisioning and maintenance expenses. Expenses for TCG's contribution to
the FCC mandated Universal Service Fund were recorded for the first time in the
March quarter 1998. In the first quarter 1998, operating expenses were 57% of
revenues compared with 55% in the fourth quarter 1997. However, operating
expenses still improved from the 59% of revenues in the first quarter 1997.
The net loss for the first quarter 1998 was $62.2 million or $0.36 per share.
The merger related costs of $9.3 million resulted in an impact of a loss of
$0.05 per share. Prior to the merger costs, TCG's loss per share for the core
business was $0.31 per share.
<PAGE>
Network Expansion:
For the 1998 first quarter, capital expenditures totaled $218.5 million versus
the $70.7 million during the first quarter 1997. A portion of the additional
capital expenditures were for the buildout of TCG's network in current cities to
accommodate the additional traffic that will result from the merger with AT&T.
With the completion of the ACC Corp. acquisition, TCG serves 82 Metropolitan
Statistical Areas (MSAs) compared to the 65 at year end 1997. TCG's total MSAs
served will increase to 83 MSAs after the completion of the KC FiberNet
transaction.
On-net buildings increased by 146 buildings to 4,784 at the end of the first
quarter 1998 and 1,251 off-net buildings were added to total 10,127 buildings.
Total buildings served were 14,911 an increase of 5,340 buildings or 56% from
first quarter 1997.
The following is a comparison of TCG's network statistics at the end of the
first quarter 1998 versus year end 1997.
3/31/98 12/31/97 Increase
--------- --------- ---------
Route Miles 9,625 9,474 151
Fiber Miles 493,680 491,097 2,583
Voice-Grade Equivalents 7,985,225 7,350,527 634,698
Buildings: On-net 4,784 4,638 146
Off-net 10,127 8,876 1,251
--------- -------- -------- -----
Total Buildings 14,911 13,514 1,397
Local Serving Offices 185 152 33
Digital Voice Switches Installed 38 35 3
Mergers:
On April 22, 1998, TCG completed the merger of ACC Corp. in a stock-for-stock
transaction. The exchange ratio was .90909 share of TCG stock for each share of
ACC stock. The transaction was valued at approximately $1.1 billion.
On January 8, 1998, TCG and AT&T announced a definitive agreement for the merger
of TCG with AT&T in a stock-for-stock transaction at an exchange rate of .943
shares of AT&T for every share of TCG. Requests for regulatory approvals have
been filed. To date, the Hart Scott Rodino commentary period has expired for the
proposed merger and 17 states have given regulatory approval. The transaction
will be completed upon receipt of the FCC and other state regulatory approvals.
This press release, other than historical financial information contains
forward-looking statements that involve risks and uncertainties detailed in the
Company's SEC reports and registration statements. Actual results may vary
materially.
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TELEPORT COMMUNICATIONS GROUP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
($ in millions, except EPS)
Three Months Ended
March 31
<CAPTION>
1998 1997
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<S> <C> <C>
Revenue $160.1 $96.8
Expenses:
Operating 90.8 57.3
Selling, Gen, & Admin. 47.1 33.4
Merger related expense 9.3 0.0
Depreciation/Amort. 49.1 29.7
------- -------
Operating Loss (36.2) (23.6)
Interest Income 5.9 11.3
Interest Expense (31.5) (29.5)
Equity in Losses of Unconsol. Affiliates 0.0 (2.6)
------- -------
Loss Before Taxes (61.8) (44.4)
Income Tax Provision ( 0.4) (0.6)
------- -------
Net Loss $(62.2) $(45.0)
======= =======
EBITDA before merger related expense $ 22.2 $ 6.1
EBITDA $ 12.9 $ 6.1
EPS $(0.36) $ (0.28)
Weighted Avg. Shares (millions) 174.9 161.7
</TABLE>
EBITDA is defined as earnings before interest, taxes, depreciation,
amortization, and equity in losses of unconsolidated affiliates.
.
<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: May 6, 1998 By: Maria Terranova-Evans
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Name: Maria Terranova-Evans
Title: Vice President and Controller
(Principal Accounting Officer)
