<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) October 14, 1999
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MGC Communications, Inc.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Nevada 0-24059 88-0360042
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(STATE OR OTHER (COMMISSION (I.R.S. EMPLOYER
JURISDICTION FILE NUMBER) IDENTIFICATION NO.)
OF INCORPORATION)
3301 N. Buffalo Drive, Las Vegas, Nevada 89129
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (702) 310-1000
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(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT.)
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<PAGE> 2
ITEM 5. OTHER EVENTS.
On October 14, 1999, MGC Communications, Inc. (the "Company")
announced that Rolla P. Huff will join the Company as President and
Chief Executive Officer and that Providence Equity Partners, Inc.
(through affiliated entities) and JK&B Capital III, L.P. agreed to
purchase $35,000,000 of a newly issued series of convertible
preferred stock at $28.00 per share. A copy of the press release is
filed as an Exhibit to this report on Form 8-K.
On October 25, 1999, the Company announced its results for third
quarter 1999. A copy of the press release is filed as an Exhibit to
this report on Form 8-K.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits. The following exhibits are furnished as a part of this
Report. Exhibit numbers refer to Item 601 of Regulation S-K.
99(a) - October 14, 1999 Press Release
99(b) - October 25, 1999 Press Release
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MGC COMMUNICATIONS, INC.
October 28, 1999 By: /s/ Linda M. Sunbury
------------------------------
Linda M. Sunbury
Senior Vice President and
Chief Financial Officer
<PAGE> 1
MGC COMMUNICATIONS NAMES ROLLA HUFF PRESIDENT AND CHIEF
EXECUTIVE OFFICER
LAS VEGAS, Oct. 14 /PRNewswire/ -- MGC Communications (Nasdaq: MGCX), a leading
facilities-based integrated communications service provider, today announced
that Rolla P. Huff, 43, has been named President and Chief Executive Officer,
succeeding Nield J. Montgomery, who will become Vice Chairman.
MGC also announced that Providence Equity Partners Inc., a private investment
firm that specializes in telecommunications investments, and which is already
MGC's largest shareholder, has agreed to invest through an affiliate an
additional $25 million in the company, which will increase its ownership in MGC
to approximately 17%. In addition, JK&B Capital has agreed to invest an
additional $10 million, which will increase its ownership to approximately 7%.
MGC has begun to roll out what it believes to be the nation's first low-cost
bundled voice and high-speed data telephony solution for medium and small
businesses. Through its innovative voice-over-DSL (VoDSL) "Total Solution"
package, MGC offers voice lines, unlimited custom calling features, MGC long
distance, MGCi.com Internet service, and "always-on" high-speed Internet access
at a price comparable to what many small businesses are currently paying for
voice-only services.
Huff brings more than 20 years of operating experience in technology companies
and a history of generating superior shareholder returns. Most recently, Huff
served as President and Chief Operating Officer at Frontier Corporation, where
he played a critical role in the rapid growth of the company over the past two
years, during which time the market value of the company more than tripled. He
also was a key figure in negotiations that resulted in the recent sale of
Frontier to Global Crossing Ltd. (Nasdaq: GBLX ). Prior to being recruited to
Frontier in 1998, Huff served as President of AT&T Wireless' Central U.S.
division, responsible for 1.6 million customers across 15 states.
"Rolla possesses tremendous operating skills with an intimate working knowledge
of a wide range of advanced telecom services and has a proven record of creating
value for shareholders," said Maurice J. Gallagher Jr., MGC's Chairman. "MGC is
at a pivotal juncture in its development as we focus on national deployment of
our unique bundled voice and data services to the underserved medium and small
business market. We believe Rolla is an exceptional choice to lead our
management team."
Huff said, "With one of the most exciting new advanced telephony solutions,
high-quality investors and a true end-user focus, MGC has tremendous upside and
offers a compelling opportunity for me. I look forward to working with the MGC
team to help the company rapidly expand its footprint and services to achieve
its exceptional potential and create value for shareholders."
Noting Providence Equity and JK&B's additional $35 million investment in the
company, Huff said, "We greatly appreciate the increased support of these
bellwether investors. Having briefed them on our broad-based strategic vision
for MGC, we believe their additional commitment underscores our strong market
position and growth potential." MGC plans to use the proceeds of the investment
to accelerate the nationwide rollout of its "Total Solution" VoDSL product
platform.
Providence Equity Partners Inc. and JK&B have agreed to purchase $35.0 million
of convertible preferred stock at $28 per share. In May 1999, Providence made an
initial $37.5 million purchase of convertible preferred stock at $9.00 per share
and JK&B purchased $5 million of the same issue.
Jonathan M. Nelson, President of Providence Equity Partners Inc., said, "MGC
reflects the opportunities and qualities we seek in companies. MGC has a
compelling business plan and is well positioned to rapidly scale its business
and generate attractive long-term growth and returns. We are excited about Rolla
Huff joining MGC as CEO and believe he is the right leader to capitalize on
MGC's exceptional market opportunities."
Bear, Stearns & Co. Inc. acted as financial advisor to MGC on the transaction.
About Rolla Huff Huff most recently served as President and COO of Frontier
Corporation, where his responsibilities included strategic planning,
operations, sales and marketing. He joined the company in May 1998 as Executive
Vice President and Chief Financial Officer and was named President and COO in
March 1999.
<PAGE> 2
Prior to joining Frontier, Huff worked for five years at AT&T Corporation and
AT&T Wireless, where he held increasingly senior executive positions, most
recently serving as President of the Central U.S. operations. During his tenure
with AT&T Wireless, Huff also served as Senior Vice President and CFO from 1995
to 1997. As CFO, he was the key interface with the investment community,
financial analysts, and rating agencies for the wireless business. Prior to his
appointment as CFO, he was the Financial Vice President of AT&T's Mergers and
Acquisitions Group.
Huff previously spent 10 years with NCR Corporation where he held a variety of
management positions in its domestic and international business units.
Huff has a bachelor's degree in management from Purdue University.
About MGC
MGC provides local phone service, custom calling features, long distance and
Internet services to small business and residential customers in selected areas
of southern California including the Los Angeles basin, San Diego and Orange
County, Chicago, Atlanta, southern Florida, and Las Vegas. MGC currently intends
to open 20 additional markets in its existing states and five new states during
2000. MGC was recently ranked 12th in the Bloomberg Tech 100 listing of the
fastest growing technology companies in the United States based on sales growth
for the last fiscal year. Further information about the Company can be found at
www.mgci.com About Providence Equity Partners
Providence Equity Partners Inc. is a private investment firm specializing in
telecommunications, internet and media investments in the U.S. and abroad. The
principals of Providence currently manage over $1.8 billion of private equity
capital. Major investments since 1985 include: MetroNet Communications Corp.,
the first national competitive local exchange telephone company (CLEC) in Canada
(now AT&T Canada); Brooks Fiber Properties Inc., one of the largest CLEC
providers in the U.S. (now part of WorldCom Inc.); Verio Inc., a leading
national provider of Internet connectivity and web hosting services; VoiceStream
Wireless Corp., a PCS operator serving much of the U.S.; Western Wireless
Corporation, a cellular telephone company serving the Western U.S.; and
Carrier1, a European long distance telecommunications carrier. The firm has
offices in Providence, Rhode Island and London, England. About JK&B
JK&B Capital is a $300 million venture capital firm based in Chicago. Charles
Wang, Chairman and Founder of Computer Associates International Inc., is a
founding limited partner in JK&B Capital, and Soros Group is a special limited
partner, making its organization and resources available to the venture firm.
JK&B Capital specializes in telecommunications, media and Internet investments.
Founded in 1995, JK&B has major investments in: Exodus Communications, Inc.;
phone.com, inc.; 21st Century Telecom Group Inc.; Commerce One, Inc.; and
Interwoven Inc.
/CONTACT: David Clark of MGC Communications, Inc., 212-687-8080, on Oct. 14, or
702-310-1000, or [email protected]; or David Reno or Andrew Cole,
212-687-8080, both of Sard Verbinnen & Co., for MGC Communications, Inc./
<PAGE> 1
MGC ANNOUNCES THIRD QUARTER RESULTS
HUFF NAMED PRESIDENT AND CHIEF EXECUTIVE OFFICER
REVENUE INCREASED 30%
LINES PROVISIONED INCREASED 31%
VOICE OVER DSL (VoDSL) LAUNCHED IN LAS VEGAS
LAS VEGAS, NV (OCTOBER 25, 1999) - MGC Communications, Inc. ("MGC" or the
"Company"), (NASDAQ: MGCX), a leading facilities-based integrated communications
services provider, today announced the results of its operations for the third
quarter 1999. MGC reported revenues for the third quarter ended September 30,
1999 of $15.0 million, a 30% increase over second quarter 1999 revenues of $11.5
million. Access lines sold as of the end of the third quarter increased by 26%
over June 30, 1999 to 138,400. Net installations for the third quarter were
27,675, for a total installed base of lines at September 30, 1999 of 117,210, a
31% increase over June 30, 1999. As a result of continued network expansion,
earnings before interest, taxes, depreciation and amortization (EBITDA) were a
loss of $8.0 million for the three months ended September 30, 1999. Gross profit
for the third quarter was $2.6 million, a 160% increase over second quarter
gross profit of $1.0 million.
Commenting on the Company's third quarter results, Maurice J. Gallagher, Jr.,
chairman of the board stated, "The third quarter was obviously a milestone
period for MGC, while executing against our current business plan, we named
Rolla Huff as our new president and chief executive officer, secured an
additional $35 million equity infusion, announced our DSL equipment vendors,
commenced the deployment of the technology into our existing network, and
launched VoDSL service in Las Vegas. With these cornerstone achievements behind
us, we will concentrate on the further deployment of our VoDSL platform and the
introduction of our 'Total Solution' package in all of our markets prior to
year-end. All of the key objectives we laid out earlier this year are now in
place, on schedule and we are focused on aggressive growth for 2000."
ROLLA P. HUFF NAMED PRESIDENT AND CHIEF EXECUTIVE OFFICER
On November 1, 1999, Rolla P. Huff will assume his duties as president and chief
executive officer of MGC. Formerly the president and chief operating officer of
Frontier Corporation, Huff brings to MGC an extensive background in strategic
planning, operations, sales, marketing and involvement with the financial
community.
Commented Gallagher, "Rolla has a proven record of creating value for
shareholders and at this pivotal juncture in our development and with the
implementation of our VoDSL product platform, we believe Rolla is an exceptional
choice to lead our management team."
-MORE-
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MGC ANNOUNCES THIRD QUARTER 1999 RESULTS PAGE 2
October 25, 1999
LINE GROWTH
Of the 27,675 net line additions for the third quarter, 19,834 (more than 70%)
were business lines as the Company continues to increase its focus on selling to
small and medium sized business customers within in its existing network
footprint. The direct sales staff covering MGC's expanded network footprint
increased to 120 from 85 at the end of the second quarter, a 41% increase.
NETWORK EXPANSION
By September 30, 1999, the Company had established 288 central office
collocations, up from 248 at the end of the second quarter. MGC's expanded
footprint gives the Company an addressable market of approximately 16 million
lines. The Company anticipates having in excess of 300 collocation sites
established before year-end, of which approximately 200 will be DSL capable.
VOICE OVER DSL
During the third quarter of 1999, the Company introduced its 'Total Solution'
VoDSL package to small business customers in the Las Vegas market. The 'Total
Solution' package bundles eight voice lines, unlimited custom calling features,
MGC long distance, MGCi.com and 'always-on' high-speed Internet access up to 1.5
mbps. By delivering its 'Total Solution' package over one copper loop via DSL,
MGC is able to price its VoDSL offering at what it believes to be a compelling
value proposition for small business customers.
PROVIDENCE AND JK&B COMMIT TO $35 MILLION INVESTMENT
Concurrent with the appointment of Huff, the Company announced that an affiliate
of Providence Equity Partners Inc. and JK&B Capital have committed to invest an
additional $35 million in MGC. Providence Equity Partners Inc., a private
investment firm that specializes in telecommunications investments, and which is
already MGC's largest shareholder, has committed to invest an additional $25
million in the company, which will increase its ownership in MGC to
approximately 17%. JK&B Capital has committed to invest an additional $10
million, which will increase its ownership to approximately 7%. The aggregate
$35 million investment will be in the form of convertible preferred stock at $28
per share.
Noting the additional investment in MGC, Rolla Huff commented, "We greatly
appreciate the increased support of these bellwether investors. Having briefed
them on our broad-based strategic vision for MGC, we believe their additional
commitment underscores our strong market position and growth potential." MGC
plans to use the proceeds of the investment to accelerate the nationwide rollout
of its VoDSL product platform.
-MORE-
<PAGE> 3
MGC ANNOUNCES THIRD QUARTER 1999 RESULTS PAGE 3
October 25, 1999
ABOUT MGC
MGC provides local phone service, custom calling features, long distance and
Internet services to small and medium size businesses in Southern California
including Los Angeles, San Diego and Orange County, Chicago, Atlanta, southern
Florida and Las Vegas. MGC currently plans to open an additional 20 markets in
its existing states and five new states during 2000. MGC was recently ranked
12th in the Bloomberg Tech 100 listing of the fastest growing technology
companies in the United States based on sales growth for the last fiscal year.
Further information about the Company can be found at www.MGCi.com.
THIRD QUARTER CONFERENCE CALL
A conference call will be held on Tuesday, October 26, 1999 at 11:00a.m.
(Eastern Standard Time), 8:00a.m. (Pacific Standard Time) at which time the
Company's senior management will discuss the results of its operations for third
quarter in more detail. To access the conference call, dial (800) 779-6152 - the
pass code is "MGC Third Quarter." A replay of the conference call will be
available through Thursday, October 28, 1999 until 9:00p.m. (Eastern Standard
Time), 6:00p.m. (Pacific Standard Time) by calling (888) 566-0119.
Forward Looking Statements. Certain statements contained in this Press Release
that state the Company's or management's intentions, hopes, beliefs,
expectations or predictions of the future are forward-looking statements.
Management wishes to caution the reader these forward-looking statements such as
statements regarding the Company's ability to deploy voice over DSL within a
certain period of time and in the Company's markets and the Company's ability to
enter new markets and establish additional collocation sites within a certain
period of time, that are not historical facts, are only estimates or
predictions. Actual results may differ materially as a result of risks facing
the Company or actual results differing from assumptions underlying such
statements. Such risks and assumptions include, but are not limited to, the
Company's ability to successfully market its existing and proposed services to
current and new customers in existing and planned markets, successfully develop
commercially viable data and Internet offerings, access markets, install
switches and obtain suitable locations for its switches, negotiate suitable
interconnection agreements with the ILECs, obtain an acceptable level of
cooperation from the ILECs, all in a timely manner, at reasonable cost and on
satisfactory terms and conditions, as well as competitive, regulatory,
legislative and judicial developments that could materially affect the Company's
future results. Additional information concerning factors that could cause
actual results to differ materially from those expressed or implied in the
forward-looking statements is contained from time to time in the Company's SEC
filings, including but not limited to the Company's report on Form 10-K for the
year ended December 31, 1998. Copies of this filing may be obtained by
contacting the Company or the SEC.
MGC CONTACT:
David S. Clark
Senior Vice President
(702) 310-1000
[email protected]
-MORE-
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MGC ANNOUNCES THIRD QUARTER 1999 RESULTS PAGE 4
October 25, 1999
<TABLE>
<CAPTION>
(in thousands, except per share data) THREE MONTHS ENDED SEPTEMBER 30 NINE MONTHS ENDED SEPTEMBER 30
------------------------------------- ---------------------------------------
STATEMENTS OF OPERATIONS: 1999 1998 1999 1998
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Revenues $ 15,036 $ 4,908 $ 34,922 $ 11,772
Cost of operating revenues 12,460 4,789 31,449 10,575
----------------- ----------------- ----------------- -----------------
Gross profit 2,576 119 3,473 1,197
Selling, general & administrative 10,544 5,364 27,469 11,250
Depreciation & amortization 4,740 1,158 12,406 3,149
----------------- ----------------- ----------------- -----------------
Operating loss (12,708) (6,403) (36,402) (13,202)
Non-operating income (expense) (2,287) (2,689) (8,342) (9,091)
----------------- ----------------- ----------------- -----------------
Net loss before preferred dividends (14,995) (9,092) (44,744) (22,293)
Preferred dividends (1,197) - (1,926) -
----------------- ----------------- ----------------- -----------------
Net loss applicable to common stockholders $ (16,192) $ (9,092) $ (46,670) $ (22,293)
================= ================= ================= =================
Basic and diluted loss per share of
common stock $ (0.76) $ (0.53) $ (2.50) $ (1.69)
================= ================= ================= =================
Basic and diluted weighted average shares
outstanding 21,283 17,154 18,671 13,172
EBITDA (1) $ (7,968) $ (5,245) $ (23,996) $ (10,053)
</TABLE>
<TABLE>
<CAPTION>
(in thousands) AS OF AS OF
SELECTED BALANCE SHEET DATA: SEPTEMBER 30, 1999 DECEMBER 31, 1998
-------------------------- ------------------------------
<S> <C> <C>
Cash, cash equiv. & investments $ 178,961 $ 84,949
Restricted cash 30,375 39,379
Property & equipment, net 151,159 116,380
Long-term debt 157,677 157,295
Series B Convertible Preferred Stock 46,663 -
Stockholders' equity 134,394 63,260
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF
SELECTED OPERATIONAL STATISTICS: SEPTEMBER 30, 1999 DECEMBER 31, 1998
-------------------------- ----------------------
<S> <C> <C>
Switches installed 7 7
Markets served 13 7
Collocated facilities built 288 207
Addressable lines (000's) 16,039 11,362
Lines in service:
Business 60,271 20,442
Pay phone 15,711 7,290
Residential 41,228 20,012
-------------------------- -----------------------
Total lines in service 117,210 47,744
========================== =======================
Total lines sold and installed 138,400 61,205
========================== =======================
</TABLE>
(1) Earnings before interest, taxes, depreciation and amortization (EBITDA)
is a measure commonly used in the communications industry to analyze
operating performance, leverage and liquidity.
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