FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
From the transition period from ___________ to __________
Commission file number 333-41723
BTI Telecom Corp.
(Exact name of registrant as specified in its charter)
North Carolina 56-2047220
(State or other jurisdiction (I.R.S.Employer
of incorporation or organization) Identification No.)
4300 Six Forks Road, Suite 500, Raleigh, North Carolina 27609
(Address of principal executive offices) (Zip Code)
(800)849-9100
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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____
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the last practicable date.
No Par Value Common Stock 100,000,000 shares as of May 13, 1998
<PAGE>
BTI Telecom Corp.
Form 10-Q
Index
Page
Number
------
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations for the three
months ended March 31, 1998 and March 31, 1997 3
Consolidated Balance Sheets as of March 31, 1998 and
December 31, 1997 4
Consolidated Statements of Cash Flows for the three
months ended March 31, 1998 and March 31, 1997 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
Signature 14
Index to Exhibits 15
<PAGE>
BTI Telecom Corp.
Consolidated Statements of Operations
(Unaudited)
Three Months
Ended March 31,
------------------------------
(In thousands, except per 1998 1997
share data) ------------- -------------
Revenue $ 55,085 $ 46,772
Cost of services 41,108 32,378
------------- -------------
Gross profit 13,977 14,394
Selling, general and
administrative expenses 15,580 11,994
Depreciation and amortization 2,254 1,590
------------- -------------
Income (loss) from operations (3,857) 810
Other income (expense):
Interest expense (6,396) (505)
Interest income 1,882 --
------------- -------------
Income (loss) before income taxes (8,371) 305
Income taxes -- --
------------- -------------
Net income (loss) $ (8,371) $ 305
============= =============
Basic and diluted earnings (loss) per share $ (0.08) $ --
============= =============
Weighted average shares outstanding 100,000 200,000
============= =============
See accompanying notes.
<PAGE>
BTI Telecom Corp.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31, 1998 December 31,
(Dollars in thousands, except share data) (Unaudited) 1997
------------- -------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 58,880 $ 67,009
Restricted cash 25,824 25,016
Accounts receivable, less allowance
of $5,000 and $4,825, respectively 28,552 22,710
Other current assets 1,952 2,296
------------- -------------
Total current assets 115,208 117,031
Equipment, furniture and fixtures
Equipment, furniture and fixtures 58,179 53,744
Construction in progress 15,544 10,154
Less: accumulated depreciation (21,006) (19,321)
------------- -------------
Total equipment, furniture and fixtures 52,717 44,577
------------- -------------
Other assets, net 11,585 11,916
Restricted cash, non-current 37,815 50,026
------------- -------------
Total assets $ 217,325 $ 223,550
============= =============
Liabilities and shareholder's deficit
Current liabilities:
Accounts payable and accrued expenses $ 38,580 $ 30,466
Accrued interest 1,180 7,232
Other liabilities 2,721 2,491
------------- -------------
Total current liabilities 42,481 40,189
Long-term debt 250,000 250,000
Other long-term liabilities 2,780 2,935
------------- -------------
Total liabilities 295,261 293,124
Shareholder's deficit:
Common stock, no par value, authorized 37 37
500,000,000 shares, issued and outstanding
100,000,000 shares in 1998 and 200,000,000 shares
in 1997
Additional paid-in capital 750 738
Accumulated deficit (78,723) (70,349)
------------- -------------
Total shareholder's deficit (77,936) (69,574)
------------- -------------
Total liabilities & shareholder's deficit $ 217,325 $ 223,550
============= =============
</TABLE>
See accompanying notes.
<PAGE>
BTI Telecom Corp.
Consolidated Statements of Cash Flow
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
----------------------------
(Dollars in thousands) 1998 1997
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (8,371) $ 305
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 2,254 1,590
Deferred interest expense on shareholder note 0 44
Non-cash compensation related to stock options 12 --
Changes in operating assets and liabilities:
Accounts receivable, net (5,842) (2,257)
Other current assets (53) (114)
Accounts payable and accrued expenses 7,949 1,905
Accrued interest (5,657) 16
Other liabilities 493 7
------------ ------------
Net cash (used in) provided by operating activities (9,215) 1,496
INVESTING ACTIVITIES:
Change in restricted cash 11,403 --
Purchases of equipment, furniture and fixtures, net (9,826) (1,695)
Line access fees (102) (255)
------------ ------------
Net cash provided by (used in) investing activities 1,475 (1,950)
FINANCING ACTIVITIES:
Net proceeds of long-term debt -- 1,394
Decrease in other long-term liabilities (254) (167)
Increase in deferred financing costs and other assets (135) --
Dividends paid -- (370)
------------ ------------
Net cash (used in) provided by financing activities (389) 857
------------ ------------
(Decrease) increase in cash and cash equivalents (8,129) 403
Cash and cash equivalents at beginning of period 67,009 963
------------ ------------
Cash and cash equivalents at end of period $ 58,880 $ 1,366
============ ============
Supplemental disclosure of cash flow information:
Cash paid for interest $ 12,733 $ 489
Supplemental schedule of non-cash investing and financing activities:
Transfer of paging equipment from inventory to equipment $ -- $ 74
============ ============
</TABLE>
See accompanying notes.
<PAGE>
BTI Telecom Corp.
Notes to Consolidated Financial Statements
Note 1: The Company and Significant Accounting Policies
Basis of Presentation
The "Company" refers to BTI Telecom Corp. ("BTITC") and its wholly owned
subsidiary, Business Telecom, Inc. ("BTI"). The consolidated interim financial
statements of BTITC included herein are unaudited and have been prepared in
accordance with generally accepted accounting principles ("GAAP") for interim
financial reporting and Securities and Exchange Commission ("SEC") regulations.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with GAAP have been condensed or omitted
pursuant to such rules and regulations. In the opinion of management, the
financial statements reflect all adjustments (of a normal and recurring nature)
which are necessary to present fairly the financial position, results of
operations and cash flows for the interim periods. These financial statements
should be read in conjunction with the Company's Annual Report on Form 10-K for
the year ended December 31, 1997.
Preparation of the financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Equipment, Furniture and Fixtures
During the fourth quarter of 1997, the Company commenced construction on
certain capital projects, including its longhaul fiber optic network. Interest
costs associated with the construction of capital assets are capitalized. The
total amount capitalized for the three month period ending March 31, 1998 was
$0.3 million. Interest costs were not capitalized in prior periods because the
amounts were not material to the Company's results of operations or financial
position.
Note 2: Long-Term Debt
In 1997, the Company amended and restated its existing credit facility to
provide a $60.0 million revolving credit facility to be used for working capital
and other purposes. The loan document contains various financial covenants with
which the Company must comply on a quarterly basis. As of March 31, 1998, the
Company was not in compliance with certain covenants, however, the lender has
granted waivers of such noncompliance through March 31, 1998. There were no
amounts outstanding under this credit facility as of March 31, 1998.
Note 3: New Accounting Pronouncement
As of January 1, 1998, the Company implemented Financial Accounting
Standards Board ("FASB") Statement No. 130 ("SFAS 130"), "Reporting
Comprehensive Income." SFAS 130 establishes new rules for the reporting and
display of comprehensive income and its components; however, the adoption of
this statement had no impact on the Company's net income or shareholder's
equity. SFAS 130 requires
<PAGE>
BTI Telecom Corp.
Notes to Consolidated Financial Statements
unrealized gains or losses on available-for-sale securities, which prior to
adoption were reported separately in shareholder's equity, to be included in
comprehensive income. There are no material differences between net income and
comprehensive income as defined by SFAS 130 for the periods presented.
The FASB has issued SFAS 131, "Disclosures about Segments of an Enterprise
and Related Information," effective for financial statements for periods
beginning after December 15, 1997. This statement requires that public companies
report certain information about operating segments in complete sets of
financial statements of the company and in condensed financial statements of
interim periods issued to shareholders. It also requires that public companies
report certain information about their products and services, the geographic
areas in which they operate, and their major customers. In the initial year of
application, comparative information for earlier years is to be restated.
Note 4: Commitments and Contingencies
During 1997 the Company signed a contract for the irrevocable right to use
certain optical fibers in a communication system. Commitments under this
contract will total approximately $50 million over the next 18 month period,
$12.5 million of which was fulfilled through March 31, 1998. Payments under the
agreement have been capitalized and included in the "Construction in Progress"
caption in the consolidated balance sheets. In addition, certain other
commitments have been made for the purchase of equipment in connection with the
Company's capital program.
Note 5: Subsequent Events
Stock Split - In April 1998, the Board of Directors approved a 10-for-1
split of the outstanding common stock of the Company in the form of a stock
dividend with no change in the par value of common stock authorized and
outstanding, and increased the number of common shares authorized from 100
million to 500 million. Historical share and per share data have been
retroactively adjusted to reflect these changes where appropriate.
Stock Option Repurchase- In 1994 the Company entered into agreements with
certain former employees to repurchase stock options that had been granted under
the Company's 1994 Stock Plan. The measurement date for compensation relating to
the stock options did not occur until September 1997, at which time an estimate
for this liability was recorded. In addition, the Company assumed certain stock
repurchase obligations in connection with its acquisition of the fiber optic
assets of FiberSouth, Inc. ("FiberSouth") in 1997. In May 1998, the Company
satisfied these obligations to a former employee in accordance with the
repurchase agreements. As a result of this transaction, the Company will record
a $1.5 million adjustment to equity in the second quarter of 1998 for the
difference between the estimated liability and the actual settlement amount.
This adjustment represents a reallocation of the original FiberSouth purchase
price.
<PAGE>
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
For the Three Months Ended March 31, 1998 and 1997
The matters discussed throughout this Form 10-Q, except for historical
financial results contained herein, may be forward-looking in nature, or
"forward-looking statements." Actual results may differ materially from the
forecasts or projections presented. Forward-looking statements are identified by
such words as "expects," "anticipates," "believes," "intends," "plans" and
variations of such words and similar expressions. The Company believes that its
primary risk factors include but are not limited to: high leverage; the ability
to service debt; significant capital requirements; ability to manage growth;
business development and expansion risks; competition; and changes in laws and
regulatory policies. Any forward-looking statements in the March 31, 1998 Form
10-Q should be evaluated in light of these important risk factors. For
additional disclosure regarding risk factors refer to the Company's Registration
Statement on Form S-4 as filed with the Securities and Exchange Commission (File
No. 333-41723).
Business of the Company
The Company ("BTITC" or the "Company"), which began operations in 1984 as
Business Telecom, Inc., provides integrated telecommunications services
primarily to small-to-medium sized business customers, concentrated in the
southeastern United States. During 1997, Business Telecom, Inc. ("BTI") was
reorganized into a new corporate structure comprised of BTI Telecom Corp. as the
parent company and Business Telecom, Inc. as a wholly owned subsidiary. The
Company provides a broad array of services, including local, long distance,
Internet access, frame relay, high-speed data transmission, data network
management and paging.
Results of Operations
Revenue
Revenue was $55.1 million for the first quarter of 1998, representing an
$8.3 million or 17.8% increase over the first quarter of 1997. The growth in
revenue was primarily driven by an increase in wholesale revenue. Wholesale
revenue increased $7.2 million over the same quarter in the prior year,
comprising 44.3% and 36.8% of total revenue for the first quarter of 1998 and
1997, respectively. Also contributing to this increase was the effect of the
Company's acquisition of the fiber optic assets of FiberSouth, Inc.
("FiberSouth") in September 1997. Revenue for the first three months of 1998
includes $1.7 million from business acquired in this purchase. These increases
in revenue were partially offset by a decline in integrated services revenue due
primarily
<PAGE>
to retail long distance rate decreases and increasing competitive pressures. As
the Company anticipated, integrated services revenue continues to be impacted by
the implementation of its new sales compensation structure. However, the Company
experienced improvement in new integrated services sales during the first
quarter of 1998 as compared to the same period of 1997. Although there can be no
assurances, management believes that this trend will continue.
Cost of Services
Cost of services was $41.1 million and $32.4 million in the first three
months of 1998 and 1997, respectively. As a percentage of revenue, costs of
services increased from 69.2% in the first quarter of 1997 to 74.6% in the first
quarter of 1998. The increase in this percentage resulted primarily from a shift
in the Company's revenue mix to a higher proportion of wholesale traffic. In
addition, a larger percentage of the Company's wholesale revenue was from
international traffic, which yields a lower margin percentage than domestic
wholesale traffic. The effect of spreading fixed network costs over a smaller
integrated services revenue base also contributed to the increase in cost of
services as a percentage of revenue in the first quarter of 1998. Additionally,
the introduction of Competitive Local Exchange Carrier ("CLEC") services
contributed to lower gross margins because these services are initially being
offered on a resale basis. The Company expects that the margins for local
services will improve as it begins to offer these services using its own local
switching facilities.
Costs of services has also been adversely impacted by regulatory matters,
including increased costs related to the public payphone compensation order. A
Federal Communications Commission ("FCC") ruling established, effective October
1997, a "per call compensation plan" that provides payphone service providers
with compensation for calls completed using their payphones. During the first
quarter of 1998, the Company began assessing a surcharge to these payphone users
in order to recover the amount of compensation and related costs ordered by the
FCC.
Construction of the longhaul fiber optic network and the continuing effect
of access charge reform is expected to reduce the Company's network costs in the
future. Management anticipates that its longhaul fiber optic network will be
substantially operational by mid-1999. In addition, the Company continues to
evaluate strategies to reduce its cost of services and improve the reliability
and efficiency of the network.
Selling, General and Administrative Expenses
Selling, general and administrative ("SG&A") expenses were $15.6 million or
28.3% of revenue in the first quarter of 1998 as compared to $12.0 million or
25.6% of revenue in the same period in 1997. The increase in SG&A as a
percentage of revenue is largely attributable to the introduction of the
Company's integrated CLEC services in the fourth quarter of 1997. The Company
has made significant investments in human resources and increased marketing and
advertising efforts relating to these new CLEC services. These investments are
intended to provide the Company with the
<PAGE>
ability to continue to expand into new markets, maximize customer retention and
provide for growth in 1998 and beyond. In addition, the Company is investing
resources to facilitate the deployment of its fiber optic network.
Depreciation and amortization increased $0.7 million or 41.7% in the first
quarter of 1998 as compared to the first quarter of 1997. This increase is
primarily due to capital expenditures which are related to the expansion of its
existing operations centers and support infrastructure to handle increased
traffic volume and expanded service offerings.
Other Income (Expense)
Interest expense was $6.4 million in the first quarter of 1998 as compared
to $0.5 million in the same period in the prior year. This increase is primarily
attributable to the Company's issuance in September 1997 of $250.0 million 10
1/2% Senior Notes due in 2007. The additional borrowings were obtained to
finance capital expenditures and operational expansion primarily related to the
longhaul fiber optic network and the Company's migration to a facilities-based
CLEC.
Interest income increased to $1.9 million in 1998 due to the investment of
a portion of the proceeds of the September 1997 Senior Note offering.
Income Taxes
The Company generated a net loss for the year ended December 31, 1997 and
during the quarter ended March 31, 1998. Based upon management's plans to expand
the business through the construction and expansion of its networks, customer
base and product offerings, this trend is expected to continue for the
foreseeable future. Given these circumstances and the level of taxable income
expected to be generated from reversing temporary differences, the Company has
established a valuation allowance for the deferred tax assets associated with
these net operating losses. The Company will reduce the valuation allowance
when, based on the weight of available evidence, it is more likely than not that
some portion or all of the deferred tax assets will be realized.
Prior to the Company's reorganization during 1997, BTI elected to be taxed
for federal and state income tax purposes as an S corporation under the
provisions of the Internal Revenue Code, accordingly, income, losses and credits
were passed through directly to the shareholders rather than being taxed at the
corporate level. Throughout the period of time that BTI was an S Corporation,
shareholders were provided the funds necessary to meet tax obligations arising
from income earned by BTI in the form of a dividend. The Company will continue
to reimburse shareholders for any tax obligations arising from the income earned
by BTI while it was an S Corporation. The Company believes that any such
reimbursements will not
<PAGE>
have a material effect on the Company's financial condition or results of
operations.
EBITDA
Earnings before interest, taxes, depreciation and amortization and other
non-cash charges (EBITDA) is a common measurement of a company's ability to
generate cash flow from operations. EBITDA is not a measure of financial
performance under generally accepted accounting principles and should not be
considered an alternative to net income as a measure of performance or to cash
flows as a measure of liquidity. The Company experienced negative EBITDA of $1.6
million and $2.1 million for the three-month periods ending March 31, 1998 and
December 31, 1997, respectively, and positive EBITDA of $2.4 million in the
first three months of 1997. It is anticipated that this trend will continue for
the near future as the Company expands its CLEC service offerings. The EBITDA
losses the Company has experienced for the last two consecutive quarters are
primarily attributable to the increases in cost of services resulting from the
change in revenue composition and the additional SG&A expenses associated with
the Company's migration to a facilities-based CLEC.
Liquidity and Capital Resources
The Company has funded its operations and growth primarily from operating
cash flows, capital leases and borrowings. During the first three months of 1998
the Company used $9.2 million for operating activities as compared to generating
$1.5 million of cash from operations during the same period in 1997. The primary
driver of this change is the net loss of $8.4 million experienced during the
first three months of 1998, of which $6.4 million is attributable to interest
expense related to the issuance of the $250.0 million 10 1/2% Senior Notes in
September 1997.
Cash provided by investing activities during the first three months of 1998
amounted to $1.5 million. This results primarily from the Company's utilization
of its restricted cash to fund the March 1998 interest obligation on the Senior
Notes. The restricted cash balance as of the end of the first quarter 1998
includes proceeds from the Senior Note offering placed in escrow to secure the
next five scheduled interest payments. In the first three months of 1997, the
Company used $2.0 million for investing activities. The primary use of cash for
both periods was for capital expenditures. The increase in capital expenditures
from $1.7 million in the first quarter of 1997 to $9.8 million in the first
quarter of 1998 was primarily due to construction of the longhaul fiber optic
network and purchases of equipment for the development of the Company's
facilities-based local service business. In addition, cash used for investing
activities includes the capitalization of line access fees, which represent
installation charges paid primarily to the incumbent local exchange carriers
("ILECs") for securing additional leased fiber optic facilities.
<PAGE>
Cash used for financing was $0.4 million for the first quarter of 1998,
primarily due to payments made on the note payable to shareholder and payments
on capital leases. During the first quarter of 1997, financing activities
provided the Company with $0.9 million of cash, primarily as a result of net
borrowings on working capital and long-term credit facilities. The dividends
paid during the first quarter of 1997 were in accordance with the terms of a
shareholders agreement that terminated in September 1997 in conjunction with the
Company's reorganization.
In September 1997, the Company issued $250.0 million 10 1/2% Senior Notes
due 2007. The Indenture governing the Senior Notes requires the Company to
comply with certain financial covenants, including restrictions on the Company's
ability to pay dividends. As of March 31, 1998, the Company was in compliance
with all such covenants.
As of March 31, 1998, the Company had a $60.0 million Revolving Credit
Facility ("Credit Facility") available to be used for working capital or other
purposes based upon the Company's EBITDA. Borrowings under the Credit Facility
bear interest at the 30, 60, or 90 day London Interbank Offered Rate ("LIBOR")
or prime rate, plus an applicable spread which varies based upon the Company's
financial position. At March 31, 1998, no amounts were outstanding under the
Credit Facility. The Credit Facility requires the Company's compliance with
various financial and administrative covenants, including among others,
covenants limiting the ability of BTITC to incur debt, create liens, make
distributions or stock repurchases, make capital expenditures, engage in
transactions with affiliates, sell assets and engage in mergers and
acquisitions. In addition, the Credit Facility contains affirmative covenants,
including, among others, covenants requiring maintenance of corporate existence,
licenses and insurance, payments of taxes and the delivery of financial and
other information. As of March 31, 1998, the Company was not in compliance with
certain of these covenants. The lender has waived the covenant violations
through March 31, 1998. Based upon current estimates, management anticipates
that the Company may not be in compliance with all covenants at June 30, 1998.
The Company is currently in the process of negotiating an amendment to the
Credit Facility with the lender to ensure that it has access to funds under the
facility to the extent necessary to meet the Company's needs. Although the
Company anticipates that an amendment to the existing Credit Facility will be
successfully negotiated, there can be no assurance that there will be
availability for borrowing. Consequently, the Company's liquidity will be
dependent upon the results of future operations, the ability to modify its
existing business plan, as well as available sources of financing, including
potential future private or public debt or equity financings. There can be no
assurance that the Company will be able to meet its loan covenants, achieve its
operating plan or, if required, obtain additional financing on acceptable terms,
and the failure to do so may have a material adverse impact on the Company's
business and operations.
<PAGE>
Capital Spending
Through March 1998, capital expenditures were approximately $9.8 million as
compared to $1.7 million in the prior year. Capital expenditures during the
first quarter of 1998 included $5.4 million related to the longhaul fiber optic
network and $2.8 million in switching and related equipment primarily for the
Company's CLEC operations. The Company expects to require significant capital
for its future capital expenditure and working capital requirements. The Company
plans to spend a total of approximately $200 million (with respect to which it
has commitments for $50 million) on its capital program through the year 2002. A
substantial portion of these planned capital expenditures will be related to the
longhaul fiber optic network and purchases of switches and related equipment to
facilitate the offering of local services. The actual amount and timing of the
Company's capital requirements may differ materially from the foregoing estimate
as a result of regulatory, technological or competitive developments (including
market developments and new opportunities) in the Company's industry. Although
there can be no assurance, management believes that cash on hand, borrowings
expected to be available under the Credit Facility and cash flow from operations
will be sufficient to expand the Company's business as currently planned for the
next 12 months. The Company also may require additional capital in the future
(or sooner than currently anticipated) for new business activities related to
its current and planned businesses, or in the event it decides to make
additional acquisitions or enter into joint ventures and strategic alliances.
Sources of additional capital may include cash flow from operations and public
and private debt and equity offerings, which would be subject to provisions in
the Indenture requiring the Company to maintain certain financial ratios in
order to incur additional indebtedness.
Year 2000 Issues
The Company has developed a plan designed to ensure that its key computer
systems will be Year 2000 compliant in advance of December 31, 1999. The plan
includes review and revision, where necessary, of computer applications that
directly connect elements of the Company's business with customers, major
suppliers and third party network service providers. Any failure by such vendors
or third party network service providers to resolve Year 2000 issues on a timely
basis, or in a manner that is compatible with the Company's systems, could have
a material adverse effect on the Company.
Implementation of the plan began in 1997 and will continue through 1999. It
involves capital expenditures for new software and hardware and modification of
existing software. In most cases these modifications will not only provide for
Year 2000 compliance, but will also otherwise enhance the Company's operations.
In many cases, these changes will merely be an acceleration of previously
planned improvements.
<PAGE>
Based upon its initial evaluation, the Company does not expect it will
encounter Year 2000 systems problems or compliance costs that could materially
impact operations or financial results. There can be no assurance, however, that
there will not be a delay in, or increased costs associated with, the
implementation of changes as the program progresses. Failure to implement such
changes could have an adverse effect on future results of operations.
New Accounting Standards
As of January 1, 1998, the Company implemented Financial Accounting
Standards Board ("FASB") Statement No. 130 ("SFAS 130"), "Reporting
Comprehensive Income." SFAS 130 establishes new rules for the reporting and
display of comprehensive income and its components; however, the adoption of
this statement had no impact on the Company's net income or shareholder's
equity. SFAS 130 requires unrealized gains or losses on available-for-sale
securities, which prior to adoption were reported separately in shareholder's
equity, to be included in comprehensive income. There are no material
differences between net income and comprehensive income as defined by SFAS 130
for the periods presented.
The FASB has issued Statement No. 131 ("SFAS 131"), "Disclosures about
Segments of an Enterprise and Related Information," effective for financial
statements for periods beginning after December 15, 1997. This statement
requires that public companies report certain information about operating
segments in complete sets of financial statements of the company and in
condensed financial statements of interim periods issued to shareholders. It
also requires that public companies report certain information about their
products and services, the geographic areas in which they operate, and their
major customers. In the initial year of application, comparative information for
earlier years is to be restated.
<PAGE>
Part II - Other Information
Item 6 - Exhibits and Reports on Form 8-K
(a) See Exhibit Index
(b) Reports on Form 8-K filed during the quarter: None
<PAGE>
SIGNATURES
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 thereunto duly authorized.
BTI Telecom Corp.
----------------------------------------------
(Registrant)
Dated: May 15, 1998 /s/Brian Branson
By: --------------------------------
Brian Branson
Chief Financial Officer
(Principal Financial and Accounting Officer)
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
- ------ -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from BTI Telecom
Corp.'s financial statements for the quarter ended March 31, 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1998
<CASH> 58,880
<SECURITIES> 0
<RECEIVABLES> 33,552
<ALLOWANCES> 5,000
<INVENTORY> 297
<CURRENT-ASSETS> 115,208
<PP&E> 73,723
<DEPRECIATION> (21,006)
<TOTAL-ASSETS> 217,325
<CURRENT-LIABILITIES> 42,481
<BONDS> 250,000
0
0
<COMMON> 37
<OTHER-SE> (77,973)
<TOTAL-LIABILITY-AND-EQUITY> 217,325
<SALES> 0
<TOTAL-REVENUES> 55,085
<CGS> 0
<TOTAL-COSTS> 58,942
<OTHER-EXPENSES> (1,882)
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