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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
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Date of Report (Date of earliest event reported): September 11, 2000
TIME WARNER TELECOM INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 000-30218 84-1500624
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification Number)
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10475 Park Meadows Drive
Littleton, Colorado
80124
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (303) 566-1000
5700 S. Quebec Street
Greenwood Village, Colorado
80111
(Former name or former address, if changed since last report)
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Time Warner Telecom Inc. ("Time Warner Telecom") hereby amends the
Current Report on Form 8-K filed by it on September 18, 2000, to provide
supplemental information relating to the proposed acquisition of substantially
all the assets of GST Telecommunications, Inc. ("GST"), including (i) historical
financial statements of GST and (ii) pro forma financial statements that give
effect to the acquisition by Time Warner Telecom of substantially all of the
assets of GST.
Item 5. Other Events
On September 11, 2000, Time Warner Telecom executed a definitive
purchase agreement (the "Purchase Agreement") to acquire substantially all of
the assets of GST out of bankruptcy (the "Acquisition"). GST is a
facilities-based integrated communications provider offering voice, data and
internet services primarily to business customers throughout the western United
States. The Purchase Agreement provides for the purchase of substantially all of
the GST assets for cash consideration of $640 million, plus the assumption of
certain liabilities and fees, for a total purchase price of $690 million subject
to certain purchase price adjustments. On September 21, 2000, Time Warner
Telecom received approval for the Acquisition from the U.S. District Court for
the District of Delaware. The completion of the Acquisition is subject to
obtaining regulatory approvals and certain other closing conditions. Although
there can be no assurance that the approvals will be obtained or that the
Acquisition will be completed, Time Warner Telecom currently expects to complete
the Acquisition by the end of 2000 or the first quarter of 2001.
Time Warner Telecom operates networks in 22 metropolitan markets and
expects to activate networks in seven additional markets by the end of 2001,
bringing the total to 29. In addition, the Acquisition, if completed, will
expand Time Warner Telecom into 15 additional markets in the western United
States. As of June 30, 2000, Time Warner Telecom's networks covered 9,271 route
miles, contained 344,377 fiber miles and offered service to 6,708 on-net and
off-net buildings. The Acquisition, if completed, will add to Time Warner
Telecom's network 4,210 route miles, 227,674 fiber miles and service to 339
on-net buildings. The Acquisition also will provide Time Warner Telecom with a
second network operations center, in Vancouver, Washington.
The following table illustrates Time Warner Telecom's network pro forma
for the Acquisition based on information for the first six months of 2000:
<TABLE>
<CAPTION>
TOTAL MSA
SWITCHED AND
DEDICATED NETWORK SWITCH
TIME WARNER TELECOM CITIES REVENUES OPERATIONAL OPERATIONAL
-------------------------- -------------- ----------- -----------
(in thousands)
<S> <C> <C> <C>
Albany .................................. $ 319,344 Jul-95 Sep-99
Austin .................................. 376,310 Sep-94 Apr-97
Binghamton .............................. 86,969 Jan-95 Aug-00
Charlotte ............................... 640,761 Sep-94 Dec-97
Cincinnati .............................. 417,051 Jul-95 Nov-97
Columbus ................................ 360,104 Mar-91 July-97
Dallas .................................. 1,057,239 Sep-99 Sep-99
Fayetteville ............................ 57,989 Apr-00 --
Greensboro .............................. 407,645 Jan-96 Sep-99
Honolulu ................................ 200,737 Jun-94 Jan-98
Houston ................................. 1,192,367 Jan-96 Sep-97
Indianapolis ............................ 370,477 Sep-87 Dec-97
Jersey City ............................. 168,298 Jul-99 Jul-99
Memphis ................................. 304,330 May-95 May-97
Milwaukee ............................... 490,034 Feb-96 Sep-97
Manhattan ............................... 2,855,771 Feb-96 Feb-96
Orlando ................................. 919,754 Jul-95 Jul-97
Raleigh ................................. 362,839 Oct-94 Sep-97
Rochester ............................... 378,097 Dec-94 Feb-95
San Antonio ............................. 396,217 May-93 Nov-97
San Diego ............................... 633,662 Jun-95 Jul-97
Tampa ................................... 1,070,920 Dec-97 Jan-98
SUBTOTAL ................................ $13,066,915
UNDER CONSTRUCTION (AS OF JUNE, 30, 2000)
Dayton .................................. $ 204,013 TBD TBD
Orange County ........................... 746,839 TBD TBD
Chicago ................................. 2,382,495 TBD TBD
Columbia ................................ 138,242 TBD TBD
Atlanta ................................. 1,409,523 TBD TBD
Minneapolis ............................. 508,821 TBD TBD
Denver .................................. 657,692 TBD TBD
</TABLE>
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<TABLE>
<CAPTION>
TOTAL SWITCHED
AND DEDICATED NETWORK SWITCH
TIME WARNER TELECOM CITIES REVENUES OPERATIONAL OPERATIONAL
-------------------------- ------------- ----------- -----------
(in thousands)
<S> <C> <C> <C>
SUBTOTAL ................................ $ 6,047,625
TIME WARNER TELECOM TOTAL .................... $19,114,540
GST CITIES
Albuquerque ............................. $ 154,144 Jan-96 Sep-97
Bakersfield ............................. 124,085 Nov-96 --
Boise ................................... 92,109 May-97 Mar-98
Fresno .................................. 185,346 Nov-96 Mar-98
Houston ................................. -- Mar-98 Mar-98
Los Angeles(1) .......................... 2,110,354 Dec-96 Jul-97
Oakland(2) .............................. 554,598 Sep-97 Nov-97
Phoenix ................................. 731,735 Feb-94 Aug-97
Portland ................................ 486,263 Mar-98 Mar-98
Sacramento .............................. 349,216 Jul-99 --
San Francisco ........................... 556,146 Sep-97 Mar-98
San Luis Obispo ......................... 54,118 Mar-98 Dec-97
Santa Barbara ........................... 93,548 Jun-98 --
Seattle(3) .............................. 735,023 Dec-99 Jan-99
Spokane ................................. 131,672 Sep-96 Dec-97
Tucson .................................. 183,506 Sep-95 Sep-97
GST TOTAL .................................... $ 6,541,863
TOTAL TIME WARNER TELECOM AND GST $25,656,403
</TABLE>
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(1) Includes LA, Riverside and Ventura MSAs
(2) Includes Oakland and Stockton MSAs
(3) Does not include 75 miles of conduit in Seattle
PURCHASE AGREEMENT WITH GST TELECOMMUNICATIONS
Set forth below is a summary of the material terms of the Purchase
Agreement executed by Time Warner Telecom for the Acquisition. The Purchase
Agreement provides that the assets Time Warner Telecom will acquire from GST
include the following:
o furnishings, furniture, fixtures, office supplies, vehicles,
equipment, computers and other tangible property;
o network facilities and customer access rights;
o intellectual property used in the conduct of GST's business
and owned by, licensed to, or otherwise used by GST;
o permits, licenses, franchises, certificates, orders and other
governmental authorizations, consents, waivers and approvals
necessary to conduct GST's business;
o contracts (including customer contracts) and contract rights;
and
o computer software programs and databases.
The Purchase Agreement excludes certain assets and contracts relating
to non-core businesses that Time Warner Telecom did not wish to purchase. Also
excluded were GST's Hawaii operations except for 12 inter-island fibers and
access to certain cable landing sites in Hawaii.
In addition to the bankruptcy court approval that was obtained
September 21, 2000, and the waiting period required by the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 that has expired, the completion of the
Acquisition is subject to obtaining regulatory approvals and certain other
closing conditions, including:
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o no challenges or attempts to enjoin the transaction by the
Federal Trade Commission or the Department of Justice may be
under way and no other actions seeking to restrain the
transaction may be in progress in any federal, state, local or
foreign government, agency or court;
o no state regulation, order, or injunction may be enacted that
would prohibit or otherwise restrict the completion of the
transaction;
o approval of all required Federal Communications Commission and
state and local public service and public utility commission
applications must be obtained; and
o all representations and warranties contained in the Purchase
Agreement must be true and correct, including that there has
been no event or condition that has had (or is reasonably
likely to result in) a material adverse effect on the
properties, results of operations or condition of GST's
business, taken as a whole.
Either GST or Time Warner Telecom may terminate the Purchase Agreement
prior to the closing date in the event that a governmental action or ruling
permanently restrains or enjoins the consummation of the transaction or the
closing does not take place on or before December 1, 2000. If the delay in
closing is solely due to a failure to receive regulatory approvals, neither GST
nor Time Warner Telecom may terminate the agreement on or before February 1,
2001.
RISKS RELATING TO TIME WARNER TELECOM'S ACQUISITION OF THE ASSETS OF GST
TIME WARNER TELECOM MAY HAVE DIFFICULTY INTEGRATING THE ACQUIRED
ASSETS AND BUSINESSES OF GST
Time Warner Telecom has entered into the Purchase Agreement with GST
with the expectation that the Acquisition will result in certain benefits,
including expansion of the markets Time Warner Telecom serves and increasing its
operational efficiencies. Achieving the benefits of the Acquisition will depend
upon the integration of the acquired businesses into Time Warner Telecom's
existing operations. Time Warner Telecom cannot assure you that it will be
successful in integrating the acquired GST assets into its current businesses.
The integration risks associated with the acquisition include but are not
limited to:
o the diversion of Time Warner Telecom's management's attention
as integrating the GST operations and assets will require a
substantial amount of Time Warner Telecom's management's
attention;
o difficulties associated in assimilating GST's technology,
including billing and customer information systems; and
o any significant loss of key GST operational personnel
could lead to interruptions in Time Warner Telecom's
billing, accounting and engineering capabilities.
Time Warner Telecom cannot assure you that it will be able to
successfully overcome the risks associated with integrating the assets it
acquires from GST. There is a risk that the costs of integration could have a
material adverse effect on Time Warner Telecom's operating results.
DELAY OR CONDITIONING OF REGULATORY APPROVAL IN CONNECTION WITH THE
ACQUISITION COULD HAVE A MATERIAL ADVERSE EFFECT ON TIME WARNER
TELECOM'S RESULTS OF OPERATIONS
Consummation of the Purchase Agreement is conditioned on the receipt of
regulatory consents and approvals that are required under applicable statutes,
policies and rules governing state utility commissions and the Federal
Communications Commission. Before Time Warner Telecom can complete the
Acquisition, it will need to get regulatory consents for the transfer of GST
licenses and construction permits to it and, in some cases, secure its own
licenses to run the assets and operations that Time Warner Telecom purchases
from GST. There is no assurance that Time Warner Telecom will be able to get
these regulatory approvals on a timely basis or without any material adverse
conditions being imposed on it.
In addition, any delay in the closing of the GST acquisition could
result in the loss of customers and the related revenue, as well as key
personnel at GST. These losses could in turn adversely affect GST's ongoing
business and results of operations for the fourth quarter of 2000 and the first
quarter of 2001, and possibly longer.
TIME WARNER TELECOM MAY NOT BE ABLE TO SECURE THE NECESSARY THIRD-PARTY
CONSENTS TO ASSUME THE CONTRACTS PURCHASED FROM GST
Time Warner Telecom may need third-party consents to assume the rights
conveyed by certain contracts which it is purchasing from GST. Time Warner
Telecom cannot assure you that it will be able to get consents from
third-parties, and the transfer to it of certain contracts on conditions and
terms made available to GST may not be possible.
TIME WARNER TELECOM'S QUARTERLY OPERATING RESULTS WILL FLUCTUATE
As a result of the limited revenue and significant expenses associated
with the expansion and development of Time Warner Telecom's networks and
services and the inherent risks in integrating a large acquisition such as GST,
Time Warner Telecom anticipates that its operating results could vary
significantly from quarter to quarter. Changes in the usage or payment patterns
of significant customers may also cause operating results to vary.
AMENDED AND RESTATED BANK FACILITY
On September 11, 2000, Time Warner Telecom entered into a commitment
letter with The Chase Manhattan Bank ("Chase") and Morgan Stanley Senior Funding
("Morgan Stanley") to amend and restate its existing $475 million revolving
credit agreement. The proposed restated facility would supersede Time Warner
Telecom's current facility. Under the terms of the proposed restated facility,
Chase and Morgan Stanley, together with a syndicate of banks and other
institutions, will provide up to $525 million of senior secured term loan
facilities and a $475 million senior secured revolving credit facility. Time
Warner Telecom also will have the option to increase the size of the revolving
facility by up to $250 million with the consent of the participating banks. As
with the existing facility, borrowings under the restated facilities will be
made by Time Warner Telecom Holdings Inc., a wholly owned subsidiary of Time
Warner Telecom.
Time Warner Telecom currently expects the amount borrowed under the
term loan facilities at the time of the closing of the Acquisition to be used
either toward the purchase price of the GST assets and Acquisition-related
expenses or for capital expenditures, working capital or other general corporate
purposes. The revolving credit facility and any remaining amounts available
under the term loan facilities will be available for capital expenditures,
working capital and other general corporate purposes.
Chase's and Morgan Stanley's commitments to provide the restated
facility are contingent upon, among other things, a successful syndication
effort, completion of a definitive credit agreement and other documentation by
December 15, 2000, the satisfaction of all closing conditions to the Purchase
Agreement, and the availability of $700 million of bridge or other financing.
Time Warner Telecom expects that the initial funding under the restated facility
will coincide with the GST closing.
The term loan portion of the proposed restated facility will consist of
a delayed-draw term facility and a tranche B term facility. Under the
delayed-draw facility, Time Warner Telecom expects to have the ability to make
multiple borrowings (up to a maximum number of drawings to be agreed upon) for
up to 24 months after the initial funding date for the proposed restated
facility, which will coincide with the closing date for the Acquisition.
Borrowings under the delayed-draw facility will not be available after the
expiration of the 24 month period. Amounts borrowed under the delayed-draw
facility will be repaid in quarterly installments beginning in 2003, with the
final installment due on December 31, 2007. The entire amount of the tranche B
facility must be borrowed on the initial funding date. Tranche B loans will be
repaid in nominal amounts beginning in 2003, with the final installment due on
March 31, 2008.
Interest rate margins and other terms and conditions will be reflected
in the definitive documentation. Also, Chase and Morgan Stanley will have the
ability to change the allocation of amounts among the delayed-draw, tranche B
and revolving credit facilities if syndication market conditions so require.
Time Warner Telecom expects to be required to pay commitment fees on a
quarterly basis ranging from 1.00% to .50% on the undrawn available commitments
as well as certain underwriting and arrangement fees payable on the initial
funding date.
As with Time Warner Telecom's existing facility, Time Warner Telecom's
obligations under the restated facility will be secured by substantially all of
the assets of its subsidiaries together with any assets that may be acquired in
the future, including the GST assets, as well as the capital stock of all of its
subsidiaries.
The restated facilities will contain prepayment provisions, financial
and other restrictive covenants and events of default similar to those set forth
in Time Warner Telecom's existing facility, although Time Warner Telecom
anticipates that certain modifications will be made to reflect, among other
things, the increase in the facility size.
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BRIDGE LOAN FACILITY
On September 11, 2000, Time Warner Telecom entered into a commitment
letter with Morgan Stanley, Lehman Commercial Paper Inc. ("Lehman") and Chase
for a senior unsecured bridge loan facility. The proposed bridge facility will
give Time Warner Telecom the ability to obtain up to $700 million to finance the
Acquisition in the event that Time Warner Telecom's primary capital raising
efforts have not been completed by the closing date under the Purchase
Agreement. The commitments of Morgan Stanley, Lehman and Chase to provide the
bridge facility are contingent upon, among other things, the completion of a
definitive bridge loan agreement by December 15, 2000, satisfaction of all
closing conditions to the Acquisition and the availability of term loan
borrowings under the proposed restated facility. In contrast to Time Warner
Telecom's bank facility, a borrowing under the bridge facility would be made by
Time Warner Telecom.
Time Warner Telecom expects to borrow the entire $700 million on the
closing date of the Acquisition and to use the proceeds to purchase the GST
assets and to pay related costs and expenses. Borrowings will not be available
under the bridge facility after the closing of the Acquisition.
Any notes issued under the proposed bridge facility will be repayable
one year from the date of the issuance under the bridge facility and will bear
interest quarterly at the LIBOR rate plus a specified margin that increases over
time. The specified margin may be increased if Time Warner Telecom's credit
rating deteriorates. Time Warner Telecom will have the ability to repay the
bridge facility at any time prior to the maturity date upon 10 days' written
notice. In addition, the bridge notes must be repaid with the proceeds of any
debt or equity financings, as well as certain other events, that occur prior to
the maturity date. Time Warner Telecom also expects to pay customary commitment
and other fees in connection with the bridge facility.
In the event that Time Warner Telecom is not able to repay the bridge
notes within one year, it will be obligated to issue new notes in exchange for
the bridge notes. Any such exchange notes would have the same principal amount
as the bridge notes and mature 10 years from the date of issuance. In addition,
Time Warner Telecom would be required to pay customary fees under the bridge
notes upon issuance of any exchange notes. Interest on the exchange notes would
be payable quarterly at a specified interest rate.
In addition, Time Warner Telecom's obligations under the bridge
facility and under any exchange notes will be subject to various covenants that
will limit its ability to:
o borrow and incur liens on its property;
o pay dividends and make other distributions; and
o make capital expenditures.
Time Warner Telecom also will be subject to various financial covenants
and customary events of default, including cross default provisions.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
Financial statements of GST are attached hereto as Exhibit 99.2 and are
hereby incorporated herein by reference.
(b) Pro forma financial information.
Pro forma financial statements for Time Warner Telecom giving effect to
the acquisition of substantially all of the assets of GST are attached
hereto as Exhibit 99.3 and are hereby incorporated herein by reference.
(c) Exhibits.
2.1 Asset Purchase Agreement*
99.1 Press Release dated September 11, 2000 of Time Warner Telecom*
99.2 Financial Statements of GST Telecommunications, Inc.
99.3 Pro Forma Financial Statements of Time Warner Telecom
99.4 Consent of KPMG LLP, Independent Auditors for GST
Telecommunications, Inc.
* Previously filed with Form 8-K dated September 18, 2000.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
TIME WARNER TELECOM INC.
Date: November 8, 2000 By: /s/ JILL R. STUART
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Name: Jill R. Stuart
Title: Vice President,
Accounting and Finance
and Chief Accounting
Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<S> <C>
2.1 Asset Purchase Agreement*
99.1 Press Release dated September 11, 2000 of Time Warner Telecom*
99.2 Financial Statements of GST Telecommunications, Inc.
99.3 Pro Forma Financial Statements of Time Warner Telecom
99.4 Consent of KPMG LLP, Independent Auditors for GST
Telecommunications, Inc.
</TABLE>
* Previously filed with Form 8-K dated September 18, 2000.
