UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
(Commission File Number 333-40495)
ICG FUNDING, LLC
(Exact name of registrant as specified in its charter)
Delaware 84-1434980
(State or other jurisdiction (I.R.S.Employer Identification No.)
of organization)
161 Inverness Drive West
Englewood, Colorado 80112
(888) 424-1144 or (303) 414-5000
(Address of principal executive offices and registrant's telephone numbers,
including area codes)
ICG Funding, LLC has no securities registered pursuant to Sections 12(b)
or 12(g) of the Act.
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 __
All of the issued and outstanding common securities of ICG Funding, LLC
are owned by ICG Communications, Inc.
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TABLE OF CONTENTS
PART I ...................................................................... 3
ITEM 1. FINANCIAL STATEMENTS ........................................ 3
Balance Sheets as of December 31, 1999 and September 30, 2000
(unaudited)................................................. 3
Statements of Operations for the Three and Nine Months Ended
September 30, 1999 and 2000 (unaudited)..................... 4
Statement of Member's Equity (Deficit) for the Nine Months
Ended September 30, 2000 (unaudited)........................ 5
Statements of Cash Flows for the Nine Months Ended September
30, 1999 and 2000 (unaudited).............................. 6
Notes to Financial Statements (unaudited)................... 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS......................... 9
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.. 15
PART II .................................................................... 16
ITEM 1. LEGAL PROCEEDINGS .......................................... 16
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS .................. 16
ITEM 3. DEFAULTS UPON SENIOR SECURITIES AND USE OF PROCEEDS......... 16
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ........ 16
ITEM 5. OTHER INFORMATION .......................................... 16
ITEM 6. EXHIBIT AND REPORT ON FORM 8-K ............................. 16
Exhibit .................................................... 16
Report on Form 8-K.......................................... 16
2
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ICG FUNDING, LLC
Balance Sheets
December 31, 1999 and September 30, 2000 (unaudited)
December 31, September 30,
1999 2000
------------- -------------
(in thousands)
Assets
Current assets:
Dividends receivable (note 4) $ 927 -
Restricted cash 8,697 2,223
------------- -------------
Total current assets 9,624 2,223
------------- -------------
Investment in ICG Communications Preferred
Stock (note 4) 124,661 -
------------- -------------
Total assets $ 134,285 2,223
============= =============
Liabilities and Member's Equity (Deficit)
Current liability - dividends payable $ 1,116 1,116
Due to ICG Communications 4,699 4,699
------------- -------------
Total liabilities 5,815 5,815
------------- -------------
Redeemable preferred securities ($133.4 million
liquidation value at December 31, 1999 and
September 30, 2000) 128,428 128,719
Member's equity (deficit):
Additional paid-in capital 3,385 3,385
Accumulated deficit (3,343) (135,696)
------------- -------------
Total member's equity (deficit) 42 (132,311)
------------- -------------
Bankruptcy proceedings (note 1)
Total liabilities and member's equity
(deficit) $ 134,285 2,223
============= =============
See accompanying notes to financial statements.
3
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ICG FUNDING, LLC
Statements of Operations
Three and Nine Months Ended September 30, 1999 and 2000 (unaudited)
Three months ended Nine months ended
September 30, September 30,
-------------------- -------------------
1999 2000 1999 2000
--------- ---------- --------- ---------
(in thousands)
Provision for impairment of
long-lived assets (note 4) - (131,281) - (131,281)
--------- ---------- --------- ---------
Operating Loss - (131,281) - (131,281)
--------- ---------- --------- ---------
Interest income 164 44 578 221
Dividend income 1,815 1,925 5,365 5,691
--------- ---------- --------- ---------
Net income (loss) 1,979 (129,312) 5,943 (125,369)
--------- ---------- --------- ---------
Preferred dividends on redeemable
preferred securities, including
accretion of offering costs (2,328) (2,328) (6,984) (6,984)
--------- ---------- --------- ---------
Net loss available to
common member (349) (131,640) (1,041) (132,353)
========= ========== ========= =========
See accompanying notes to financial statements.
4
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ICG FUNDING, LLC
Statement of Member's Equity (Deficit)
Nine Months Ended September 30, 2000 (unaudited)
Total
Additional member's
paid-in Accumulated equity
capital deficit (deficit)
----------- ------------ -------------
(in thousands)
Balances at January 1, 2000 $ 3,385 (3,343) 42
Net loss - (125,369) (125,369)
Preferred dividends on redeemable
preferred securities, including
accretion of offering costs - (6,984) (6,984)
----------- ------------ -------------
Balances at September 30, 2000 $ 3,385 (135,696) (132,311)
=========== ============ =============
See accompanying notes to financial statements.
5
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ICG FUNDING, LLC
Statements of Cash Flows
Nine Months Ended September 30, 1999 and 2000 (unaudited)
Nine months ended
September 30,
---------------------------
1999 2000
------------- ------------
(in thousands)
Cash flows from operating activities:
Net income (loss) $ 5,943 (125,369)
Adjustment to reconcile net income
to net cash provided by operating
activities:
Provision for impairment of long-lived assets - 131,281
Noncash preferred dividends earned on ICG
Preferred Stock (5,365) (5,691)
------------- ------------
Net cash provided by operating
activities 578 221
------------- ------------
Cash flows from investing activities:
Decrease in restricted cash 6,117 6,474
------------- ------------
Net cash provided by investing activities 6,117 6,474
------------- ------------
Cash flows from financing activities:
Payment of preferred dividends on redeemable
preferred securities (6,695) (6,695)
------------- ------------
Net cash used in financing activities (6,695) (6,695)
------------- ------------
Cash and cash equivalents at December 31, 1999 and
September 30, 2000 $ - -
============= ============
See accompanying notes to financial statements.
6
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ICG FUNDING, LLC
Notes to Financial Statements
December 31, 1999 and September 30, 2000 (unaudited)
(1) Bankruptcy Proceedings
During the quarter ended September 30, 2000 and subsequent to the
quarter-end, a series of financial and operational events materially
impacted ICG Communications, Inc. and its subsidiaries ("ICG"), and
consequently, ICG Funding, LLC (the "Company"). These events reduced ICG's
expected revenue and cash flow generation for the remainder of 2000 and
2001, which in turn jeopardized ICG's ability to comply with its existing
bank credit facility. As a result, on November 14, 2000 (the "Petition
Date"), ICG and most of its subsidiaries, including the Company, filed
voluntary petitions for protection under Chapter 11 of the United States
Bankruptcy Code in the Federal District of Delaware in order to facilitate
the restructuring of ICG's long-term debt, trade liabilities and other
obligations. ICG and its bankruptcy filing subsidiaries (collectively the
"Debtors") are currently operating as debtors-in-possession under the
supervision of the United States District Court for the District of
Delaware. The bankruptcy petitions were filed in order to preserve cash and
to give ICG the opportunity to restructure their debt.
Under the Bankruptcy Code, the rights and treatment of pre-petition
creditors and shareholders are expected to be substantially altered. As a
result of bankruptcy proceedings, substantially all liabilities, litigation
and claims against the Debtors in existence at the Petition Date are stayed
unless the stay is modified or lifted or payment has been otherwise
authorized by the Bankruptcy Court. At this time, it is not possible to
predict the outcome of the Chapter 11 cases in general or the effects of
such cases on ICG's business, or on the interest of creditors and
shareholders. As a result of the bankruptcy filing, all of the Debtor's
liabilities incurred prior to the Petition Date, including certain secured
debt, are subject to compromise. No assurance can be given that ICG will be
successful in reorganizing its affairs within the Chapter 11 bankruptcy
proceedings.
Further, due to the bankruptcy filing and related events, there is no
assurance that the carrying amounts of assets will be realized or that
liabilities will be liquidated or settled for the amounts recorded. In
addition, a plan of reorganization, or rejection thereof, could change the
amounts reported in the financial statements. As a result, there is
substantial doubt about the Company's ability to continue as a going
concern and its ability to pay dividends and redeem the Preferred
Securities. The ability of the Company to continue as a going concern is
dependent upon, but not limited to, formulation, approval, and confirmation
of a plan of reorganization.
7
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ICG FUNDING, LLC
Notes to Financial Statements, Continued
(2) Organization and Nature of Business
ICG Funding, LLC, a Delaware limited liability company (the "Company"),
was formed on September 17, 1997 as a special purpose limited liability
company existing for the exclusive purposes of: (i) issuing common and
preferred interests in the Company; (ii) using at least 85% of the net
proceeds of such issuances and related capital contributions (the "Net
Proceeds") to purchase shares of preferred stock of ICG Communications,
Inc. ("ICG") ("ICG Preferred Stock") in a private placement; and (iii)
investing a portion of the remaining Net Proceeds in U.S. Treasury
securities, to be held in escrow in an amount sufficient to fund the cash
payments of the first thirteen quarterly dividends on the Company's
preferred interests (the "Redeemable Preferred Securities"). Unless
previously dissolved, the Company's term will continue until December 31,
2050.
ICG is the sole common member of the Company. The business and affairs of
the Company are conducted by ICG and ICG pays all of the Company's
administrative expenses, which are insignificant.
(3) Significant Accounting Policies
Basis of Presentation
These financial statements should be read in conjunction with the
Company's Annual Report on Form 10-K for the year ended December 31, 1999,
as certain information and note disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and
regulations of the United States Securities and Exchange Commission. The
interim financial statements reflect all adjustments which are, in the
opinion of management, necessary for a fair presentation of financial
position, results of operations and cash flows as of and for the interim
periods presented. Such adjustments are of a normal recurring nature.
Operating results for the nine months ended September 30, 2000 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 2000.
(4) Provision for Impairment of Long-Lived Assets
Due to the bankruptcy proceedings discussed in note 1, the Company
determined that the ICG Preferred Securities and dividend receivable were
impaired in accordance with Statement of Financial Accounting Standards
(SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of" and would therefore may not be
recoverable. Accordingly, the Company recorded an impairment charge of
$130.3 million and $1.0 million to write off the ICG Preferred Securities
and the related dividend receivable, respectively. Not withstanding the
accounting treatment, the stock may have some economic value.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion includes certain forward-looking statements and
information that is based on the beliefs of management as well as assumptions
made by management based on information currently available to the Company. When
used in this document, the words "anticipate", "believe", "estimate" and
"expect" and similar expressions, as they relate to the Company or its
management, are intended to identify forward-looking statements. These
forward-looking statements are intended to qualify as safe harbors from
liability as established by the Private Securities Litigation Reform Act of
1995. Such statements reflect the current views of the Company with respect to
future events and are subject to certain risks, uncertainties and assumptions.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those described in this document. These forward-looking statements are affected
by important factors, including, but not limited to the following:
o The uncertainty of the Company's future as a result of filing for
protection under bankruptcy law;
o The redemption of the Redeemable Preferred Securities by ICG as a
result of ICG's filing for protection under bankruptcy law;
o The declaration and payment of preferred stock dividends to the Company
by ICG; and
o The ability of ICG to pay the administrative expenses of the Company.
These forward-looking statements speak only as of the date of this
Quarterly Report. The Company does not undertake any obligation to update or
revise publicly any forward-looking statements, whether as a result of new
information, future events or otherwise. Although the Company believes that its
plans, intentions and expectations reflected in or suggested by the
forward-looking statements made in this Quarterly Report are reasonable, there
is no assurance that such plans, intentions or expectations will be achieved.
The results of operations for the three and nine months ended September
30, 1999 and 2000 represent the consolidated operating results of the Company.
(See the unaudited consolidated financial statements of the Company for the
three and nine months ended September 30, 2000 included elsewhere herein.)
Company Overview
General
The Company was formed on September 17, 1997 as a special purpose limited
liability company existing for the exclusive purposes of: (i) issuing common and
preferred interests in the Company; (ii) using at least 85% of the Net Proceeds
of such issuances and related capital contributions to purchase shares of
preferred stock of ICG ("ICG Preferred Stock") in a private placement; (iii)
investing a portion of the remaining net proceeds in U.S. Treasury securities,
to be held in escrow in an amount sufficient to fund the cash payments of the
first thirteen quarterly dividends on the Company's Redeemable Preferred
Securities and (iv) purchasing U.S. Treasury Securities pending the purchase of
shares of ICG Preferred Stock.
9
<PAGE>
Bankruptcy Proceedings
During the quarter ended September 30, 2000 and subsequent to the
quarter-end, a series of financial and operational events materially impacted
ICG Communications, Inc. and its subsidiaries ("ICG"), and consequently, ICG
Funding, LLC (the "Company"). These events reduced ICG's expected revenue and
cash flow generation for the remainder of 2000 and 2001, which in turn
jeopardized ICG's ability to comply with its existing bank credit facility. As a
result, on November 14, 2000 (the "Petition Date"), ICG and most of its
subsidiaries, including the Company, filed voluntary petitions for protection
under Chapter 11 of the United States Bankruptcy Code in the Federal District of
Delaware in order to facilitate the restructuring of ICG's long-term debt, trade
liabilities and other obligations. ICG and its bankruptcy filing subsidiaries
(collectively the "Debtors") are currently operating as debtors-in-possession
under the supervision of the United States District Court for the District of
Delaware. The bankruptcy petitions were filed in order to preserve cash and to
give ICG the opportunity to restructure their debt.
Under the Bankruptcy Code, the rights and treatment of pre-petition
creditors and shareholders may be substantially altered. As a result of these
bankruptcy proceedings, substantially all liabilities, litigation and claims
against the Debtors in existence at the Petition Date are stayed unless the stay
is modified or lifted or payment has been otherwise authorized by the Bankruptcy
Court. At this time, it is not possible to predict the outcome of the Chapter 11
cases in general or the effects of such cases on ICG's business, or on the
interest of creditors and shareholders. As a result of the bankruptcy filing,
all of the Debtor's liabilities incurred prior to the Petition Date, including
certain secured debt, are subject to compromise. No assurance can be given that
ICG will be successful in reorganizing its affairs within the Chapter 11
bankruptcy proceedings.
Further, due to the bankruptcy filing and related events, there is no
assurance that the carrying amounts of assets will be realized or that
liabilities will be liquidated or settled for the amounts recorded. In addition,
a plan of reorganization, or rejection thereof, could change the amounts
reported in the financial statements. As a result, there is substantial doubt
about the Company's ability to continue as a going concern and its ability to
pay dividends and redeem the Preferred Securities. The ability of the Company to
continue as a going concern is dependent upon, but not limited to, formulation,
approval, and confirmation of a plan of reorganization, adequate sources of
capital, customer and employee retention, the ability to provide high quality
services and the ability to sustain positive results of operations and cash
flows sufficient to continue to operate.
10
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Significant Transactions
On September 24 and October 3, 1997, the Company completed a private
placement of 6 3/4% Exchangeable Limited Liability Company Preferred Securities
Mandatorily Redeemable 2009 (the "Redeemable Preferred Securities") for gross
proceeds of $132.25 million. Net proceeds from the private placement, after
offering costs of approximately $4.7 million advanced by ICG, were approximately
$127.6 million. Restricted cash at September 30, 2000 of $2.2 million consists
of the remaining proceeds from the private placement which are designated for
the payment of cash dividends on the Redeemable Preferred Securities through
November 15, 2000. However, ICG's directors did not declare or pay the dividend
that was otherwise payable on November 15, 2000.
The Redeemable Preferred Securities consist of 2,645,000 exchangeable
preferred securities of the Company that bear a cumulative dividend at the rate
of 6 3/4% per annum. The dividend is paid quarterly in arrears each February 15,
May 15, August 15 and November 15, and commenced November 15, 1997. The dividend
is payable in cash through November 15, 2000 and, thereafter, in cash or shares
of common stock of ICG, $0.01 par value ("ICG Common Stock"), at the option of
the Company. As a result of filing for protection under bankruptcy law, the
Company believes it is not currently permitted to pay any of the dividends that
are outstanding as of November 14, 2000. The Redeemable Preferred Securities are
exchangeable, at the option of the holder, at any time prior to November 15,
2009 into shares of ICG Common Stock at a rate of 2.0812 shares of ICG Common
Stock per preferred security, or $24.025 per share, subject to adjustment. The
Company may, at its option, redeem the Redeemable Preferred Securities at any
time on or after November 18, 2000. Prior to that time, the Company may redeem
the Redeemable Preferred Securities if the current market value of ICG Common
Stock equals or exceeds the exchange price by 150% for at least 20 days of any
consecutive 30-day trading period through November 15, 2000. The Redeemable
Preferred Securities are subject to mandatory redemption on November 15, 2009.
On February 13, 1998, ICG made a contribution of 126,750 shares of ICG
Common Stock to the Company. Immediately thereafter, the Company sold the
contributed shares to unrelated third parties for proceeds of approximately $3.4
million. The Company recorded the contribution of the ICG Common Stock as
additional paid-in capital at the then fair market value and, consequently, no
gain or loss was recorded by the Company on the subsequent sale of those shares.
Also, on February 13, 1998, the Company used the remaining proceeds from
the private placement of the Redeemable Preferred Securities, which were not
restricted for the payment of cash dividends, along with the proceeds from the
sale of the contributed ICG Common Stock to purchase approximately $112.4
million of ICG Preferred Stock which pays dividends each February 15, May 15,
August 15 and November 15 in additional shares of ICG Preferred Stock through
November 15, 2000. Subsequent to November 15, 2000, dividends on the ICG
Preferred Stock are payable in cash or shares of ICG Common Stock, at the option
of ICG. For the November 15, 2000 dividend payment date ICG has not declared or
paid a dividend in either cash or stock. The ICG Preferred Stock is
exchangeable, at the option of the Company, at any time prior to November 15,
2009 into shares of ICG Common Stock at an exchange rate based on the exchange
rate of the Redeemable Preferred
11
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Securities. The ICG Preferred Stock is subject to mandatory redemption on
November 15, 2009.
Results of Operations
The following table provides the components of the Company's net income
and net loss available to common member for each of the periods presented.
Three months ended Nine months ended
September 30, September 30,
-------------------- -------------------
1999 2000 1999 2000
--------- ---------- --------- ---------
(in thousands)
Provision for impairment of
long-lived assets $ - (131,281) - (131,281)
--------- ---------- --------- ---------
Operating Loss - (131,281) - (131,281)
--------- ---------- --------- ---------
Interest income 164 44 578 221
Dividend income 1,815 1,925 5,365 5,691
--------- ---------- --------- ---------
Net income (loss) 1,979 (129,312) 5,943 (125,369)
--------- ---------- --------- ---------
Preferred dividends on redeemable
preferred securities, including
accretion of offering costs (2,328) (2,328) (6,984) (6,984)
--------- ---------- --------- ---------
Net loss available to
common member $ (349) (131,640) (1,041) (132,353)
========= ========== ========= =========
Other Data:
Net cash provided by operating
activities $ 164 44 578 221
Net cash provided by investing
activities 2,067 2,187 6,117 6,474
Net cash used in financing
activities (2,231) (2,231) (6,695) (6,695)
Three Months Ended September 30, 2000 Compared to Three Months Ended September
30, 1999
Provision for impairment of long-lived assets. Provision for impairment of
long-lived assets of $131.3 million for the three months ended September 30,
2000 consists of the write-off of the investment in ICG Preferred Stock of
$130.3 million and the dividends receivable of $1.0 million, due to the
bankruptcy proceedings of ICG and its filing subsidiaries.
Interest income. Interest income of $0.2 million and $0.1 million for the
three months ended September 30, 1999 and 2000, respectively, consists of income
earned on restricted cash. Interest income has decreased due to the decrease in
the restricted cash balance.
Dividend income. Dividend income of $1.8 million and $1.9 million for the
three months ended September 30, 1999 and 2000, respectively, consists of
preferred dividends earned on the ICG Preferred Stock, which dividends were paid
with additional shares of ICG Preferred Stock.
12
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Net income (loss). The Company's net loss of $129.3 million for the three
months ended September 30, 2000 is primarily due to the impairment of our
investment in the ICG Preferred Securities.
Preferred dividends on redeemable preferred securities, including accretion
of offering costs. Preferred dividends on redeemable preferred securities,
including accretion of offering costs was $2.3 million for both the three months
ended September 30, 1999 and 2000 and includes approximately $2.2 million of
preferred security dividends paid and accrued during both periods, and the
accretion of offering costs from the private placement of the Redeemable
Preferred Securities of approximately $0.1 million for both periods.
Nine Months Ended September 30, 2000 Compared To Nine Months Ended September 30,
1999
Provision for impairment of long-lived assets. Provision for impairment of
long-lived assets of $131.3 million for the nine months ended September 30, 2000
consists of the write-off of the investment in ICG Preferred Stock of $130.3
million and the dividends receivable of $1.0 million, due to the bankruptcy
proceedings of ICG and its subsidiaries.
Interest income. Interest income of $0.6 million and $0.2 million for the
nine months ended September 30, 1999 and 2000, respectively, consists of income
earned on restricted cash.. Interest income has decreased due to the decrease in
the restricted cash balance.
Dividend income. Dividend income of $5.4 million and $5.7 million for the
nine months ended September 30, 1999 and 2000, respectively, consists of
preferred dividends earned on the ICG Preferred Stock, which dividends were paid
with additional shares of ICG Preferred Stock.
Net income (loss). The Company's net loss of $125.4 million for the nine
months ended September 30, 2000 is substantially due to the impairment of our
investment in the ICG Preferred Securities.
Preferred dividends on redeemable preferred securities, including accretion
of offering costs. Preferred dividends on redeemable preferred securities,
including accretion of offering costs was $7.0 million for both the nine months
ended September 30, 1999 and 2000, and includes approximately $6.7 million of
preferred security dividends paid and accrued during both periods and the
accretion of offering costs from the private placement of the Redeemable
Preferred Securities of approximately $0.3 million for both periods.
Liquidity and Capital Resources
The Company's operations consist entirely of effecting the transactions
required by the terms of the Redeemable Preferred Securities issued in September
and October 1997. To date, the Company's operations have been funded through the
proceeds from the issuance of the Redeemable Preferred Securities and the sale
of ICG Common Stock which was contributed to the Company by ICG. As of September
30, 2000, the Company has assets of approximately $2.2 million which consist of
the Company's restricted cash invested in U.S. Treasury securities. The
13
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Company's liabilities at September 30, 2000 include approximately $1.1 million
in preferred dividends accrued on the Redeemable Preferred Securities and
approximately $4.7 million due to ICG for advances for the offering costs
associated with the issuance of the Redeemable Preferred Securities.
As a result of ICG's and the Company's Chapter 11 bankruptcy filings
described in the "Company Overview", the Company does not expect to receive any
dividend income on the ICG Preferred Stock.
At September 30, 2000, the Company had approximately $128.7 million of
mandatorily redeemable preferred securities. The Redeemable Preferred Securities
require payments of dividends to be made in cash. At September 30, 2000, the
Company has cash dividend obligations on the Redeemable Preferred Securities of
approximately $2.2 million remaining in 2000. The Redeemable Preferred
Securities have a liquidation preference of $50 per security, plus accrued and
unpaid dividends, and are mandatorily redeemable in 2009.
As a result of filing for protection under bankruptcy law, the Company has
not declared or paid the cash dividend which was otherwise payable on November
15, 2000. In addition, future payments are subject to court approval and may be
discharged in whole or in part in bankruptcy with proceeds from the court
approved plan of reorganization or liquidation of the Company. There can be no
assurance that any amounts owed to unsecured creditors will be paid or that
secured creditors will be paid in full.
ICG has obtained a commitment letter which will provide ICG
debtor-in-possession financing which for a minimum of $200 million and the
potential for an additional $150 million if certain criteria are met. This
debtor-in-possession financing is subject to customary pre-closing conditions
and is contingent upon Bankruptcy Court approval. As of mid November 2000, ICG
is continuing operations and developing a formal plan of reorganization.
In the event that plans or assumptions change or prove to be inaccurate,
significant unexpected expenses are incurred, or cash resources, together with
borrowings under the debtor-in-possession financing arrangement, prove to be
insufficient to fund operations, ICG may be required to seek additional sources
of capital (or seek additional capital sooner than currently anticipated). There
can be no guarantee, however, that additional capital will be available on
reasonable terms, or at all.
ICG is a Delaware corporation that files annual, quarterly and current
reports with the Securities and Exchange Commission. Its Commission File Number
is 1-11965.
Net Cash Provided By Operating Activities
Net cash provided by operating activities was approximately $0.6 million
and $0.2 million for the nine months ended September 30, 1999 and 2000,
respectively, and consists of the provision for impairment of long-lived assets,
partially offset by noncash preferred dividends earned on ICG Preferred Stock.
14
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Net Cash Provided By Investing Activities
The Company's investing activities provided approximately $6.1 million and
$6.5 million for the nine months ended September 30, 1999 and 2000,
respectively. Cash provided by investing activities for both the nine months
ended September 30, 1999 and 2000 consists of the decrease in restricted cash.
Net Cash Used In Financing Activities
Financing activities used approximately $6.7 million for both the nine
months ended September 30, 1999 and 2000. Cash used in financing activities for
both periods consists of payments of cash dividends on the Redeemable Preferred
Securities. The Company expects cash used by financing activities in future
periods to include only payments of cash dividends on, and the redemption price
of, the Redeemable Preferred Securities.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's restricted cash balances are invested in fixed income U.S.
Treasury securities with staggered maturities matching the dividend payment
dates of the Redeemable Preferred Securities. Accordingly, changes in market
interest rates have no effect on the Company's liquidity, financial condition or
results of operations.
15
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PART II
ITEM 1. LEGAL PROCEEDINGS
On November 14, 2000 the Company filed a voluntary petition for
protection under Chapter 11 of the United States Bankruptcy Code in
the Federal District of Delaware. The Company is currently operating
as debtors-in-possession under the supervision of the Bankruptcy
Court. The bankruptcy petition was filed in order to preserve cash and
give the Company the opportunity to restructure its debt.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES AND USE OF PROCEEDS
Due to the bankruptcy proceedings discussed in note 1 to the Company's
unaudited consolidated financial statements for the nine months ended
September 30, 2000, the Company is currently in default under the 6
3/4% Redeemable Preferred Securities.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Effective August 3, 2000, ICG, Sole Common Member and Manager of the
Company, caused the Company to declare a cash dividend in the amount
of $0.84 per Redeemable Preferred Security to holders of record at the
close of business on August 1, 2000, which was paid on August 15,
2000.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBIT AND REPORT ON FORM 8-K
(A) Exhibit.
(27) Financial Data Schedule.
27.1: Financial Data Schedule of ICG Funding, LLC for the
Nine Months Ended September 30, 2000.
(B) Report on Form 8-K.
(i) Current Report on Form 8-K dated September 18, 2000,
regarding the announcement of a revised business plan.
(ii) Current Report on Form 8-K dated September 19, 2000,
announcing the resignation of James Washington as Executive
Vice President of Network Services effective September 13,
2000.
16
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(iii) Current Report on Form 8-K dated September 19, 2000,
announcing the resignation of Carl E. Vogel as Chairman of
the Board of Directors and Chief Executive Officer on
September 18, 2000.
17
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INDEX TO EXHIBITS SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.20549
<PAGE>
EXHIBIT
27.1: Financial Data Schedule of ICG Funding, LLC for the Nine Months Ended
September 30, 2000.
<PAGE>
EXHIBIT 27.1
Financial Data Schedule of ICG Funding, LLC for the Nine Months Ended
September 30, 2000.
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on November 20, 2000.
ICG Funding, LLC
By: ICG Communications, Inc.
Common Member and Manager
By: /s/ Randall Curran
-------------------------
Randall Curran
Chief Executive Officer
