<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q/A
(AMENDMENT NO. 1)
(MARK ONE)
<TABLE>
<C> <S>
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
OR
<TABLE>
<C> <S>
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER 333-56365
------------------------
MJD COMMUNICATIONS, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C>
DELAWARE 13-3725229
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
521 EAST MOREHEAD STREET, SUITE 250 28202
CHARLOTTE, NORTH CAROLINA (Zip Code)
(Address of Principal Executive Offices)
</TABLE>
Registrant's Telephone Number, Including Area Code:
(704) 344-8150
------------------------
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 / /
As of August 13, 1999, the registrant had outstanding 1,810,147 shares of
common stock.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
MJD COMMUNICATIONS, INC.
QUARTERLY REPORT FOR THE PERIOD ENDED JUNE 30, 1999
INDEX
<TABLE>
<CAPTION>
PAGE
--------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements........................................ 3
Condensed Consolidated Balance Sheets as of June 30, 1999
and December 31, 1998..................................... 3
Condensed Consolidated Statements of Operations for the
three months and six months ended June 30, 1999 and
1998...................................................... 4
Condensed Consolidated Statements of Cash Flows for the
six months ended June 30, 1999 and 1998................... 5
Notes to Condensed Consolidated Financial Statements...... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 8
Item 3a. Quantitative and Qualitative Disclosures About Market
Risk...................................................... 15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................... 16
Item 5. Other Information........................................... 16
Item 6. Exhibits and Reports on Form 8-K............................ 17
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MJD COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
----------- ------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSESTS
Current assets:
Cash and cash equivalents................................. $ 10,017 13,241
Accounts receivable and other............................. 25,370 22,395
-------- -------
Total current assets........................................ 35,387 35,636
-------- -------
Property, plant, and equipment, net......................... 147,170 142,321
-------- -------
Other assets:
Investments............................................... 33,589 37,894
Goodwill, net of accumulated amortization................. 214,915 203,867
Deferred charges and other assets......................... 21,151 21,173
-------- -------
Total other assets.......................................... 269,655 262,934
-------- -------
Total assets................................................ $452,212 440,891
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 9,115 10,153
Current portion of long-term debt and other............... 4,955 4,383
Demand notes payable...................................... 752 754
Accrued interest payable.................................. 4,033 3,947
Other accrued liabilities................................. 3,971 6,842
-------- -------
Total current liabilities................................... 22,826 26,079
-------- -------
Long-term liabilities:
Long-term debt, net of current portion.................... 380,165 364,610
Put warrant obligation.................................... 4,948 4,169
Deferred credits and other long-term liabilities.......... 35,583 32,712
-------- -------
Total long-term liabilities................................. 420,696 401,491
-------- -------
Minority interest........................................... 503 435
-------- -------
Common stock subject to put option.......................... 3,000 3,000
-------- -------
Stockholders' equity:
Common stock.............................................. 17 17
Additional paid-in capital................................ 45,835 45,735
Retained deficit.......................................... (40,665) (35,866)
-------- -------
Total stockholders' equity.................................. 5,187 9,886
-------- -------
Total liabilities and stockholders' equity.................. $452,212 440,891
======== =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
MJD COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Operating revenues:
Switched services..................................... $26,543 17,832 51,698 29,485
Resold services....................................... 4,446 1,885 7,929 3,148
Other................................................. 4,507 3,362 8,697 5,001
------- ------ ------- ------
Total operating revenues................................ 35,496 23,079 68,324 37,634
------- ------ ------- ------
Operating expenses:
Plant operations...................................... 4,911 3,322 9,556 5,731
Corporate and customer service........................ 12,394 6,039 21,882 9,632
Depreciation and amortization......................... 7,782 4,668 14,964 7,300
Cost of services resold............................... 3,939 1,350 6,719 2,372
Other................................................. 2,392 2,197 4,753 3,057
------- ------ ------- ------
Total operating expenses................................ 31,418 17,576 57,874 28,092
------- ------ ------- ------
Income from operations.................................. 4,078 5,503 10,450 9,542
------- ------ ------- ------
Other income (expense):
Net gain on sale of investments....................... 20 383 226 390
Interest income....................................... 115 90 280 127
Dividend income....................................... 187 16 592 45
Interest expense...................................... (9,565) (6,847) (18,899) (9,707)
Other, net............................................ 933 201 1,073 198
------- ------ ------- ------
Total other expense..................................... (8,310) (6,157) (16,728) (8,947)
------- ------ ------- ------
Earnings (loss) before income taxes and extraordinary
item.................................................. (4,232) (654) (6,278) 595
Income tax (expense) benefit............................ 1,287 226 1,518 (389)
------- ------ ------- ------
Earnings (loss) before extraordinary item............... (2,945) (428) (4,760) 206
Extraordinary item net of tax........................... -- -- -- (2,521)
------- ------ ------- ------
Loss before minority interest........................... (2,945) (428) (4,760) (2,315)
Minority interest in income of subsidiaries............. (13) (12) (39) (37)
------- ------ ------- ------
Net loss................................................ $(2,958) (440) (4,799) (2,352)
======= ====== ======= ======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
MJD COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------------
1999 1998
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $ (4,799) (2,352)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization............................. 15,936 7,635
Other non cash income..................................... (2,686) (633)
Loss on early retirement of debt.......................... -- 2,897
Changes in assets and liabilities arising from operations,
net of acquisitions:
Accounts receivable..................................... (1,286) (4,351)
Accounts payable and accrued expenses................... (924) 5,568
Minority interest....................................... 39 --
Income taxes recoverable................................ (698) (1,439)
-------- --------
Total adjustments......................................... 10,381 9,677
-------- --------
Net cash provided by operating activities................. 5,582 7,325
-------- --------
Cash flows from investing activities:
Net capital additions..................................... (8,195) (3,285)
Acquisitions of telephone properties...................... (22,932) (171,265)
Other, net................................................ 7,824 227
-------- --------
Net cash used in investing activities..................... (23,303) (174,323)
-------- --------
Cash flows from financing activities:
Loan origination costs.................................... (2) (15,871)
Proceeds from issuance of long-term debt.................. 24,279 451,000
Repayment of long-term debt............................... (9,877) (292,591)
Net proceeds from the issuance of common stock............ -- 31,838
Repurchase of preferred stock and warrants................ -- (130)
Other, net................................................ 97 (25)
-------- --------
Net cash provided by financing activities................. 14,497 174,221
-------- --------
Net increase (decrease) in cash and cash equivalents........ (3,224) 7,223
Cash and cash equivalents, beginning of period.............. 13,241 6,822
-------- --------
Cash and cash equivalents, end of period.................... $ 10,017 14,045
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
MJD COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF FINANCIAL REPORTING
In the opinion of the management, the accompanying financial statements
reflect all adjustments, consisting of normal recurring adjustments, necessary
for a fair presentation of results of operations, financial position, and cash
flows. The results of operations for the interim periods are not necessarily
indicative of the results of operations which might be expected for the entire
year. The condensed consolidated financial statements should be read in
conjunction with the Company's 1998 annual report on Form 10-K, which was filed
on March 29, 1999. Certain amounts from 1998 have been reclassified to conform
to the current period presentation.
(2) ACQUISITIONS
On February 1, 1999, the Company acquired 100% of the outstanding common
stock of Ravenswood Communications, Inc. and its subsidiaries. On February 16,
1999, the Company acquired 98% of the outstanding common stock of Columbus Grove
Telephone Company and its subsidiary. On April 30, 1999, the Company acquired
100% of the outstanding common stock of Union Telephone Company of Hartford,
Armour Independent Telephone Co. and its subsidiaries, Bridgewater-Canistota
Independent Telephone Co. and WMW Cable TV Co. (collectively, "Union"). The
aggregate purchase price for these acquisitions was $31.4 million and
acquisition costs were approximately $910,000.
These acquisitions have been accounted for as purchases and, accordingly,
the acquired assets and liabilities have been recorded at their estimated fair
values at the dates of acquisition, and the results of operations have been
included in the accompanying consolidated financial statements since the dates
of acquisition. Not all purchase price allocations have been finalized because
the Company has not been able to obtain all of the data required to complete the
allocations for recently acquired businesses. Goodwill recognized in connection
with these acquisitions was approximately $11.5 million and will be amortized
over an estimated useful life of 40 years.
The Company has entered into definitive agreements to acquire two other
unrelated rural local exchange carriers ("RLECs"). The acquisitions are expected
to close in the third and fourth quarters of 1999. The aggregate purchase price
is expected to be approximately $44.5 million and will be financed through cash
flow from existing operations or the Company's senior secured credit facility.
The acquisitions will be accounted for using the purchase method of accounting.
The following unaudited pro forma information presents the combined results
of operations of the Company as though the acquisitions in 1999 and 1998
occurred on January 1, 1998. These combined results include certain adjustments,
including amortization of goodwill, increased interest expense on debt related
to the acquisitions and related income tax effects. The pro forma financial
information does not necessarily reflect the results of operations that would
have been achieved had the acquisitions been consummated as of the assumed
dates, nor are the results necessarily indicative of the Company's future
results of operations.
<TABLE>
<CAPTION>
PRO FORMA
SIX MONTHS ENDED
JUNE 30,
-------------------
1999 1998
-------- --------
(UNAUDITED)
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Revenues.................................................... $69,782 63,175
Net loss.................................................... (5,615) (5,280)
</TABLE>
6
<PAGE>
MJD COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(3) REPORTABLE SEGMENTS
The Company has two reportable segments: incumbent local exchange carrier
(ILEC) operations and competitive local exchange carrier (CLEC) operations. The
ILEC operations provide local, long distance and other telecommunications
services to customers in rural communities in which competition is typically
limited or currently does not exist for local telecommunications services. The
CLEC operations provide local, long distance, Internet, and other
telecommunications services to customers in markets outside of the Company's
ILEC markets.
The Company utilizes the following information for purposes of making
decisions about allocating resources to a segment and assessing a segment's
performance:
<TABLE>
<CAPTION>
ILEC CLEC
OPERATIONS OPERATIONS TOTAL
---------- ---------- --------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Six months ended June 30, 1999:
Revenue from external customers........................... $63,775 4,549 68,324
Intersegment revenues..................................... -- 593 593
EBITDA.................................................... 34,067 (6,521) 27,546
</TABLE>
A reconciliation of reportable segment amounts to the Company's consolidated
balances for the six months ended June 30, 1999 is as follows:
<TABLE>
<CAPTION>
(DOLLARS IN
THOUSANDS)
-----------
<S> <C>
EBITDA to net loss:
EBITDA.................................................... $27,546
Other components of EBITDA
Depreciation and amortization........................... (14,964)
Interest expense........................................ (18,899)
Income tax benefit...................................... 1,518
-------
Net loss.............................................. $(4,799)
=======
</TABLE>
Comparative amounts for the six months ended June 30, 1998 are not presented
because the CLEC's results of operations were not material.
(4) STOCK OPTIONS
In June 1999, the Company granted 10,700 options to purchase shares of its
common stock under its Stock Option Plan at an exercise price of $34.25 per
share. In June 1999, FairPoint granted 50,000 options to purchase shares of its
common stock under the FairPoint Communications Corp. Stock Incentive Plan (the
"FairPoint Plan"). All 905,500 options to purchase shares of common stock of
FairPoint granted under the FairPoint Plan are exercisable at an exercise price
of $0.50 per share, which is the estimated value of FairPoint's common stock.
The FairPoint options have a term of ten years.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
THE FOLLOWING DISCUSSION AND ANALYSIS PROVIDES INFORMATION THAT MANAGEMENT
BELIEVES IS RELEVANT TO AN ASSESSMENT AND UNDERSTANDING OF THE CONSOLIDATED
RESULTS OF OPERATIONS AND FINANCIAL CONDITION OF MJD COMMUNICATIONS, INC. AND
ITS SUBSIDIARIES (COLLECTIVELY, THE "COMPANY"). THE DISCUSSION SHOULD BE READ IN
CONJUNCTION WITH THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED DECEMBER 31, 1998, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
MARCH 29, 1999.
CERTAIN STATEMENTS INCLUDED IN THIS DOCUMENT ARE FORWARD-LOOKING, SUCH AS
STATEMENTS RELATING TO ESTIMATES OF OPERATING AND CAPITAL EXPENDITURE
REQUIREMENTS, FUTURE REVENUE AND OPERATING INCOME, AND CASH FLOW AND LIQUIDITY.
SUCH FORWARD-LOOKING STATEMENTS ARE BASED ON THE COMPANY'S CURRENT EXPECTATIONS
AND ARE SUBJECT TO A NUMBER OF RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL
RESULTS IN THE FUTURE TO DIFFER SIGNIFICANTLY FROM RESULTS EXPRESSED OR IMPLIED
IN ANY FORWARD-LOOKING STATEMENTS MADE BY, OR ON BEHALF OF, THE COMPANY. THESE
RISKS AND UNCERTAINTIES INCLUDE, BUT ARE NOT LIMITED TO, UNCERTAINTIES RELATING
TO ECONOMIC AND BUSINESS CONDITIONS, GOVERNMENTAL AND REGULATORY POLICIES, AND
THE COMPETITIVE ENVIRONMENT IN WHICH THE COMPANY OPERATES. THESE AND OTHER RISKS
ARE DETAILED BELOW AS WELL AS IN OTHER DOCUMENTS FILED BY THE COMPANY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
OVERVIEW
MJD Communications, Inc. ("MJD") is an integrated communications provider
offering bundled services such as local dial tone, intra and inter-state access,
long distance, enhanced services, internet, data and other related communication
services. MJD is pursing this strategy by acquiring and operating rural local
exchange carriers ("RLECs"), the rural segment of the telecommunications
industry and a competitive local exchange carrier ("CLEC") strategy in targeted
ex-urban markets adjacent to markets served by the company's RLEC operations.
During the six months ended June 30, 1999, MJD acquired five RLECs (collectively
the "1999 Acquisitions"), which in the aggregate serve approximately 7,200
access lines. Including the 1999 Acquisitions, the Company owned and operated 22
RLECs which served approximately 140,000 access lines located in twelve states
at June 30, 1999.
In April 1998, MJD launched its CLEC strategy through its wholly owned
subsidiary FairPoint Communications Corp. ("FairPoint"). At June 30, 1999,
FairPoint was providing telecommunications services in 26 markets and had sold
approximately 18,431 access lines of which 16,568 access lines had been
provisioned. With the inclusion of FairPoint, total access lines under
management by the Company was approximately 157,000 at June 30, 1999.
REVENUES: The Company's switched revenues are derived primarily from:
(i) the provision of basic local telephone service revenues; and (ii) the
provision of network access to inter-exchange carriers ("IXCs") for origination
and termination of interstate and intrastate long distance telephone calls.
Resold services revenues includes long distance resale revenue, FairPoint's
revenue and other resold services revenues. Other revenues include ancillary
service revenues such as billing and collection, long distance resale, enhanced
services, Internet and other such ancillary services and FairPoint's revenues.
OPERATING EXPENSES: The Company's operating expenses are categorized as
plant operations, corporate and customer service, depreciation and amortization,
cost of services resold and other general and administrative expenses. Year to
year operating expense changes are influenced by access line growth, the
Company's acquisition activity, general business inflationary adjustments, and
the expenses of the Company's CLEC business.
OTHER (INCOME) EXPENSES: The Company's other income includes interest
income, dividends, gain or loss on sale of assets and other miscellaneous,
non-operating income. The Company's other expenses consist primarily of interest
expense on the Company's debt and other non-operating expenses.
8
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999 COMPARED WITH THREE MONTHS ENDED JUNE 30,
1998
OPERATING REVENUE. Net revenue increased $12.4 million to $35.5 million
from $23.1 million for the three months ended June 30, 1999 and 1998,
respectively. The 1999 Acquisitions and the acquisitions completed after the
first quarter of 1998 accounted for $9.0 million of the revenue increase. For
the RLECs owned and operated for a comparable period in 1999 and 1998, net
revenues increased by $1.4 million to $21.5 million from $20.1 million.
FairPoint's operating revenues increased $1.9 million, from $0.1 million to
$2.0 million for the three months ended June 30, 1999.
Basic local service revenue increased $2.0 million to $6.6 million from
$4.6 million for the three months ended June 30, 1999 and 1998, respectively.
This revenue increase is primarily attributable to an increase in access lines
in conjunction with the 1999 Acquisitions and the acquisitions completed after
the first quarter of 1998. These acquisitions contributed $1.8 million of the
increase in basic local service revenue for the three months ended June 30,
1999. For the RLECs owned and operated for a comparable period, basic local
service revenues increased by $0.2 million to $4.0 million from $3.8 million for
the three months ended June 30, 1999 and 1998, respectively.
Universal Service Support Fund ("USSF") revenue increased $0.4 million to
$1.6 million from $1.2 million for the three months ended June 30, 1999 and
1998, respectively. The 1999 Acquisitions and acquisitions completed after the
first quarter of 1998 contributed $0.2 million of the increase in USSF revenue
for the three months ended June 30, 1999. For the RLECs owned and operated for a
comparable period, USSF revenues increased by $0.2 million to $1.4 million from
$1.2 million for the three months ended June 30, 1999 and 1998, respectively.
Network access revenues increased $6.3 million to $18.3 million from
$12.0 million for the three months ended June 30, 1999 and 1998, respectively.
This revenue increase is attributable to the increase in minutes of use
contributed by the 1999 Acquisitions and acquisitions completed after the first
quarter of 1998. Network access revenues contributed by these acquisitions in
the three months ended June 30, 1999 was $5.4 million. For the RLECs owned and
operated for a comparable period, network access revenues increased by
$0.9 million to $11.1 million from $10.2 million for the three months ended
June 30, 1999 and 1998, respectively.
Resold services revenues increased $2.5 million to $4.4 million in 1999 from
$1.9 million in 1998 for the three months ended June 30. Revenue contributed by
the 1999 acquisitions and the acquisitions completed after the first quarter of
1998 provided $0.4 million. For the RLECs owned and operated for the comparable
period, revenues increased $0.1 million. Long distance service resold
contributed $0.1 million. FairPoint reported $2.0 million in revenues for the
three month period compared to $0.1 million from the prior year period ended
June 30, 1998.
Other revenues increased $1.1 million to $4.5 million in 1999 from $3.4
million in 1998 for the three months ended June 30. Revenue contributed by the
1999 acquisitions and the acquisitions completed after the first quarter of 1998
provided $1.2 million. For the RLECs owned and operated for the comparable
period, revenues decreased $0.1 million.
OPERATING EXPENSES. Operating expenses, which include plant operations,
corporate and customer service, depreciation and amortization, cost of services
resold and other general and administrative expenses, increased $13.8 million to
$31.4 million from $17.6 million for the three months ended June 30, 1999 and
1998, respectively. The increase was primarily attributed to the operating
expenses associated with the 1999 Acquisitions and the acquisitions completed
after the first quarter 1998, which in the aggregate accounted for $6.5 million
of the increase. For RLECs owned and operated for a comparable period, operating
expenses increased approximately $1.8 million to $17.3 million for the three
months ended June 30, 1999 from $15.5 million for the three months ended
June 30, 1998. The change was primarily attributable to an increase in corporate
and customer service expenses and in cost of services
9
<PAGE>
resold at the Company's long distance subsidiary, ST Long Distance. Corporate
expenses increased primarily due to $1.4 million in one-time charges incurred
during the second quarter of 1999. These charges were due to the buy-out of an
employment contract and the write-off of costs associated with due diligence
expense for acquisitions on which MJD was not the successful bidder. FairPoint's
operating expenses accounted for $5.5 million of the Company's operating expense
increase, increasing from $0.1 million to $5.6 million for the three months
ended June 30, 1999.
INCOME FROM OPERATIONS. As a result of the factors described above, income
from operations decreased $1.4 million to $4.1 million from $5.5 million for the
three months ended June 30, 1999 and 1998, respectively. As a percentage of
revenues, income from operations was 11.5% as compared to 23.8% for the three
months ended June 30, 1999 and 1998, respectively. This income from operations
margin decline for the three months ended June 30, 1999 is primarily
attributable to the expenses associated with FairPoint and an increase in
corporate and customer services expenses. For RLECs owned and operated for a
comparable period, the income from operations decreased $0.4 million to
$4.2 million in 1999 from $4.6 million in 1998 and the income from operations
margin decreased to 19.7% from 23.0%. The decrease was attributable to an
increase in corporate and customer services expenses.
OTHER INCOME (EXPENSE). Total other expense increased $2.1 million to
$8.3 million from $6.2 million for the three months ended June 30, 1999 and
1998, respectively. The increase was primarily attributable to an increase in
interest expense associated with the additional debt incurred to complete the
1999 acquisitions and the acquisitions completed after the first quarter of
1998.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1998
OPERATING REVENUE. Net revenue increased $30.7 million to $68.3 million
from $37.6 million for the six months ended June 30, 1999 and 1998,
respectively. The 1999 Acquisitions and the acquisitions completed by the
Company in 1998 (the "1998 Acquisitions") accounted for $26.6 million of the
revenue increase. For the RLECs owned and operated for a comparable period in
1999 and 1998, net revenues increased by $1.0 million to $30.0 million from
$29.0 million. FairPoint's operating revenues increased $3.1 million from
$0.1 million to $3.2 million for the six months ended June 30, 1999 and 1998,
respectively.
Basic local service revenue increased $5.9 million to $12.7 million from
$6.8 million for the six months ended June 30, 1999 and 1998, respectively. This
revenue increase is primarily attributable to an increase in access lines from
the 1999 Acquisitions and the 1998 Acquisitions. The 1999 Acquisitions and the
1998 Acquisitions accounted for 87,559 access lines, or 62% of total access
lines, operated by the Company at June 30, 1999. For RLECs owned and operated by
the Company for the comparable periods ending June 30, 1999 and 1998, these
RLECs achieved internal growth of 1,931 access lines. The 1999 Acquisitions and
1998 Acquisitions contributed $5.5 million of the increase in basic local
service revenue for the six months ended June 30, 1999. For the RLECs owned and
operated for a comparable period, basic local service revenues increased by
$0.4 million to $5.0 million from $4.6 million for the six months ended
June 30, 1999 and 1998, respectively.
Universal Service Support Fund ("USSF") revenue increased $0.8 million to
$3.2 million from $2.4 million for the six months ended June 30, 1999 and 1998,
respectively. The 1999 Acquisitions and 1998 Acquisitions contributed
$0.5 million in USSF revenue for the six months ended June 30, 1999. For the
RLECs owned and operated for a comparable period, USSF revenues increased by
$0.3 million to $2.6 million from $2.3 million for the six months ended
June 30, 1999 and 1998, respectively.
Network access revenues increased $15.5 million to $35.8 million from
$20.3 million for the six months ended June 30, 1999 and 1998, respectively.
This revenue increase is attributable to the increase in minutes of use
contributed by the 1999 Acquisitions and the 1998 Acquisitions. Network access
revenues contributed by the 1999 Acquisitions and the 1998 Acquisitions in the
six months ended June 30, 1999 was $15.1 million. For the RLECs owned and
operated for a comparable period, network access revenues
10
<PAGE>
increased by $0.4 million to $16.6 million from $16.2 million for the six months
ended June 30, 1999 and 1998, respectively.
Resold services revenues increased $4.8 million to $7.9 million in 1999 from
$3.1 million in 1998 for the six months ended June 30. Revenue contributed by
the 1999 acquisitions and the acquisitions completed after the first quarter of
1998 provided $1.2 million. Long distance services resold contributed $0.5
million. FairPoint reported $3.2 million in revenues for the six month period
compared to $0.1 million from the prior year period ended June 30, 1998.
Other revenues increased $3.7 million to $8.7 million in 1999 from $5.0
million in 1998 for the six months ended June 30. Revenue contributed by the
1999 acquisitions and the acquisitions completed after the first quarter of 1998
provided $4.2 million. For the RLECs owned and operated for the comparable
period, revenues decreased $0.5 million.
OPERATING EXPENSES. Operating expenses, which include plant operations,
corporate and customer service, depreciation and amortization, cost of services
resold and other general and administrative expenses, increased $29.8 million to
$57.9 million from $28.1 million for the six months ended June 30, 1999 and
1998, respectively. The increase was primarily attributable to the operating
expenses associated with the 1999 Acquisitions and the 1998 Acquisitions, which
in the aggregate accounted for $18.2 million of the increase. For RLECs owned
and operated for a comparable period, operating expenses increased approximately
$2.5 million, or 11.5%, to $24.2 million for the six months ended June 30, 1999
from $21.7 million for the six months ended June 30, 1998. The change was
primarily attributable to an increase in corporate and customer service expenses
and in cost of services resold at the Company's long distance subsidiary, ST
Long Distance. Corporate expenses increased primarily due to the $1.4 million in
one-time charges incurred during the second quarter of 1999. These charges were
due to the buy-out of an employment contract and the write-off of costs
associated with due diligence expense for acquisitions on which MJD was not the
successful bidder. FairPoint's operating expenses increased $9.1 million from
$0.2 million to $9.3 million, for the six months ended June 30, 1999.
INCOME FROM OPERATIONS. As a result of the factors described above, income
from operations increased $0.9 million to $10.4 million from $9.5 million for
the six months ended June 30, 1999 and 1998, respectively. As a percentage of
revenues, income from operations was 15.3% as compared to 25.4% for the six
months ended June 30, 1999 and 1998, respectively. This income from operations
margin decline for the six months ended June 30, 1999 is primarily attributable
to the expenses associated with FairPoint and an increase in corporate and
customer services expenses. For RLECs owned and operated for a comparable
period, the income from operations decreased $1.5 million to $5.7 million in the
six months ended 1999 from $7.2 million in 1998 and the income from operations
margin decreased to 19.2% from 25.0%. The decrease was attributable to an
increase in corporate and customer services expenses.
OTHER INCOME (EXPENSE). Net other expense increased $7.8 million to
$16.7 million from $8.9 million for the six months ended June 30, 1999 and 1998,
respectively. The increase was primarily attributable to an increase in interest
expense associated with the additional debt incurred to complete the 1999
Acquisitions and 1998 Acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
The Company's acquisition strategy has required a significant amount of the
Company's capital resources. The Company historically has used the proceeds of
institutional and bank debt, private equity offerings, and the Company's
available cash flow, to fund the Company's acquisition strategy.
The Company maintains a senior secured credit facility (the "Credit
Facility"). Within the Credit Facility there is an $85 million reducing
revolving term facility with a remaining term of five and one-quarter years.
This facility is available for general corporate purposes, capital expenditures
and acquisitions. At June 30, 1999, there was an outstanding balance of
$17,496,972 under this revolving term facility.
11
<PAGE>
Borrowings under the Credit Facility are guaranteed by the Company's four
mid-tier subsidiary companies and secured by certain subsidiaries' pledge of
stock. Pursuant to the Credit Facility, the Company is required to comply with
certain financial covenants. For the six months ended June 30, 1999, the Company
was in compliance with such covenants.
On May 5, 1998, the Company completed a public offering of debt consisting
of $125 million in aggregate principal amount of 9 1/2% Senior Subordinated
Notes (the "Fixed Rate Note") and $75 million in aggregate principal amount of
Floating Rate Callable Securities (the "Floating Rate Note"), each due in 2008
(collectively the "Notes"). The Notes are general unsecured obligations of the
Company, subordinated in right of payment to all existing and future senior debt
of the Company, and effectively subordinated to all existing and future debt and
other liabilities of the Company's subsidiaries. Interest on the Notes is
payable semi-annually.
Besides debt service, the Company's primary liquidity requirements are
expected to be for general corporate purposes, capital expenditures and to
finance the Company's pending or future acquisition activities. The Company
believes that proceeds from the Credit Facility and the sale of non-core assets
during 1999 will be sufficient to fund the Company's pending acquisitions. The
Company has historically generated sufficient cash flow from operations to meet
all of its capital expenditure requirements. During the first six months of 1999
and 1998, the Company spent approximately $8.2 million and $3.3 million,
respectively, on capital expenditures. The Company expects capital expenditures
in 1999 for all existing operations to be approximately $26.7 million, and are
expected to be funded through existing operations. Approximately $19.0 million
of the $26.7 million will be incurred at MJD's RLEC properties and the
difference of $7.7 million at FairPoint.
The Company's entry into additional markets as a CLEC is expected to result
in initial operating losses in its CLEC business. The Company invested
approximately $5.0 million in FairPoint in 1998 and expects to invest
approximately $15.0 million in 1999, in order to enable FairPoint to expand into
16 additional markets and increase its total number of CLEC markets served to
approximately 26. In addition, FairPoint plans to build telecommunications
facilities to migrate its customers to the Company's existing networks, which
will require substantial capital expenditures in 1999 and 2000. The Credit
Facility limits the Company's investment in its CLEC business to
(i) $5.0 million per year so long as the senior debt leverage ratio (as
calculated under the Credit Facility) exceeds 4.0x and (ii) $15.0 million per
year whenever such leverage ratio is under 4.0x. Currently, FairPoint is seeking
a senior secured credit facility of approximately $100 million from a group of
banks that if obtained is expected to fund FairPoint's business plan through
2002.
Net cash provided by operating activities was $5.6 million and $7.3 million
for the six months ended June 30, 1999 and 1998, respectively. Net cash used in
investing activities was $23.3 million and $174.3 million for the six months
ended June 30, 1999 and 1998, respectively. These cash flows primarily reflect
expenditures relating to acquisitions of RLECs of $22.9 million and
$171.3 million for the six months ended June 30, 1999 and 1998, respectively,
and capital expenditures of $8.2 million and $3.3 million for the six months
ended June 30, 1999 and 1998, respectively. Net cash provided by financing
activities was $14.5 and $174.2 million for the six months ended June 30, 1999
and 1998, respectively. These cash flows primarily represent borrowings of
long-term debt. A majority of the proceeds were utilized to repay long-term debt
and to complete acquisitions.
Adjusted EBITDA is not a measure of performance under generally accepted
accounting principles and should not be construed as a substitute for
consolidated net earnings (loss) as a measure of performance or as a substitute
for cash flow as a measure of liquidity. Adjusted EBITDA presented herein
differs from the definition of EBITDA in the indenture relating to the Notes.
The definition of EBITDA in such indenture is designed to determine EBITDA for
the purposes of contractually limiting the amount of debt which the Company may
incur. Adjusted EBITDA as calculated by the Company is not necessarily
comparable to similarly captioned amounts of other companies.
12
<PAGE>
Management believes adjusted EBITDA provides useful information regarding
the Company's ability to incur and/or service debt. Increases or decreases in
Adjusted EBITDA may indicate improvements or decreases, respectively, in the
Company's free cash flows available to incur and/or service debt and cover fixed
charges. Management expects that, because Adjusted EBITDA is commonly used in
the telecommunications industry as a measure of performance, investors may use
this data to analyze and compare other telecommunications companies with the
Company in terms of operating performance, leverage and liquidity.
Adjusted EBITDA represents net earnings (loss) plus interest expense, income
taxes, depreciation, amortization, and extraordinary items.
Adjusted EBITDA increased 56.8% to $27.5 million for the six months ended
June 30, 1999 from $17.6 million for the six months ended June 30, 1998.
Adjusted EBITDA reported by the RLECs was $34.0 million and by FairPoint was
$(6.5) million for the six months ended June 30, 1999.
The Company may secure additional funding through the sale of public or
private debt and/or equity securities or enter into another bank credit facility
to fund future acquisitions and operations. If the Company's growth occurs more
rapidly than is currently anticipated or if its operating results are below
expectations, there can be no assurance that the Company will be successful in
raising sufficient additional capital on terms that it will consider acceptable,
or that the Company's operations will produce positive cash flow in sufficient
amounts to meet its debt obligations. The Company's failure to raise and
generate sufficient funds may require it to delay or abandon some of its planned
future growth or expenditures, which could have a material adverse effect on the
Company's growth and its ability to compete in the telecommunications industry.
NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities"
("SFAS 133"), which establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. SFAS 137
"Accounting for Derivative Investments and Hedging Activities--Deferral of the
Effective Date of FASB Statement No. 133", delays the effective date of this
statement to all fiscal quarters of fiscal years beginning after June 15, 2000.
The Company anticipates adopting this accounting pronouncement in 2001; however,
management believes it will not have a significant impact on the Company's
consolidated financial statements.
YEAR 2000
The Year 2000 issue concerns the inability of computer systems and certain
other equipment to properly recognize and process data that uses two digits
rather than four to designate particular years. The Company has initiated a Year
2000 Project Plan ("the Plan") to assess whether its systems that process date
sensitive information will perform satisfactorily leading up to and beyond
January 1, 2000. The goal of the Plan is to correct, prior to January 1, 2000,
any Year 2000-related problem with critical systems, the failure of which could
have a material adverse effect on the Company's operations. The Plan includes
steps to (i) identify each critical system element that requires date code
remediation, (ii) establish a plan to remediate such systems, (iii) implement
all required remediations and (iv) selectively test the remediated systems.
Thus far, the identification phase has identified Year 2000 issues in the
following critical Company-owned systems; (i) switching and transmission
hardware and software used by the Company to route and deliver telephone calls;
(ii) network support systems, including customer services systems and
(iii) billing and collection systems used by the Company to invoice and process
most of its customer payments. In
13
<PAGE>
addition, the Company (i) receives critical services from providers of utilities
and other services to facilities that house employees and switching,
transmission and other equipment and (ii) is dependent upon outside vendors for,
among other things, the provision of critical network components. The Company is
also critically reliant upon the systems of other telecommunication carriers
with which the Company's systems interconnect for the routing and delivery of
telephone calls. The Company has also identified potential Year 2000 related
liability with respect to the telephone equipment manufactured by unaffiliated
parties that the Company has sold or leased to its customers. The
identification, planning and remediation phases of the Plan are materially
complete as they relate to Company-owned systems.
Based on work completed under the Plan to date, the Company currently
intends to take the following additional steps under its Plan with respect to
Company-owned systems, third-party vendors and other telecommunications
carriers:
- The Company generally plans to remediate Company-owned switching,
transmission, billing and collection and other critical systems through
the revision or replacement of current system components. Necessary
changes to Company-owned systems are in process and are 90% complete with
total completion expected by the end of the third quarter of 1999. The
selective testing and verification of such changes are expected to be
completed during 1999. Due to the large number of system components
requiring remediation, the Company does not intend to test every
remediated system but will rely upon the results of selective testing to
determine the effectiveness of remediation efforts.
- With respect to critical services provided by utilities and other third
parties, the Company has contacted all such suppliers and is now following
up on responses. Thus far, a majority of those suppliers contacted have
responded that their systems and service delivery mechanisms are Year 2000
compliant or can be made so through currently available modifications. The
Company plans to continue monitoring all third-party remediation efforts
and to make contingency plans for the delivery of such services as
necessary.
- The Year 2000 compliance status of other telecommunications carriers with
which the Company's switching systems interconnect is not yet known. The
Company is making inquiries with these carriers to determine their
compliance status and expects to obtain the results of compliance tests
during the third quarter of 1999, although there can be no assurance that
carriers will supply this information.
While the Company currently believes that it will be able to remediate and
selectively test Company-owned systems in time to minimize any detrimental
effect on its operations, there can be no assurance that such steps will be
successful. Failure by the Company to timely and effectively remediate its
systems, or the failure of critical vendors and suppliers and other
telecommunications carriers to remediate affected systems, could have a material
adverse impact on the Company's business, financial condition, results of
operations and prospects. Because the impact of Year 2000 issues on the Company
is materially dependent on the mitigation efforts of parties outside the
Company's control, the Company cannot assess with certainty the magnitude of any
such potential adverse impact. However, based upon risk assessment work
conducted thus far, the Company believes that the most reasonably likely worst
case scenario of the failure by the Company, its suppliers or other
telecommunications carriers with which the Company interconnects to resolve Year
2000 issues would be an inability by the Company (i) to provide
telecommunications services to the Company's customers, (ii) to route and
deliver telephone calls originating from or terminating with other
telecommunications carriers, (iii) to timely and accurately process service
requests and (iv) to timely and accurately bill its customers. In addition to
lost earnings, these failures could also result in a loss of customers due to
service interruptions and billing errors, substantial claims by customers and
increased expenses associated with Year 2000 litigation, stabilization of
operations and executing mitigation and contingency plans.
14
<PAGE>
Contingency planning to maintain and restore services in the event of
natural disasters, power failures and systems-related problems is a routine part
of the Company's operations. The Company believes that such contingency plans
will assist the Company in responding to the failure by outside service
providers to successfully address Year 2000 issues. In addition, the Company is
currently identifying and considering various Year 2000-specific contingency
plans, including identification of alternate vendors and service providers and
manual alternatives to system operations. These Year 2000-specific contingency
plans are materially complete, but their review and development will continue
throughout 1999.
Although the total costs to implement the Plan cannot be precisely
estimated, the Company anticipates spending approximately $1.0 million. The
costs incurred to date and estimated remaining costs are for outside
consultants, software and hardware applications. These costs will be expensed as
incurred, unless new systems are purchased that should be capitalized in
accordance with generally accepted accounting principles. The Company does not
separately track the internal costs incurred for the Year 2000 project, and such
cost are principally the related payroll costs for its information systems
group. Some of the costs represent ongoing investment in systems upgrades, the
timing of which is being accelerated in order to facilitate Year 2000
compliance. In some instances, such upgrades will position the Company to
provide more and better-quality services to its customers than they currently
receive. The Company expects to fund these costs with cash provided by
operations. Cost estimates and statements of the Company's plans discussed above
are forward-looking statements that are derived using numerous assumptions of
future events, many of which are outside the Company's control, including the
availability and future cost of trained personnel and various other resources,
third party modification plans, the absence of systems requiring remediation
that have not yet been discovered, and other factors.
ITEM 3A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is not exposed to material future earnings or cash flow
exposures from changes in interest rates on long-term debt as approximately 82%
of the Company's debt is at fixed rates or effectively at fixed rates through
the use of interest rate swaps. At June 30, 1999, the fair value of the
Company's long-term debt is estimated by discounting the future cash flows of
each instrument at rates currently offered to the Company for similar debt
instruments of comparable maturities. At June 30, 1999, the Company had
long-term debt of approximately $383.8 million and estimated fair value of
approximately $379.0 million. The market risk is estimated as the potential
decrease in fair value of the Company's long-term debt resulting from a
hypothetical increase of 91.9 basis points in interest rates (ten percent of the
rates currently offered to the Company). An increase of 10% in interest rates
would result in approximately a $0.7 million decrease in fair value of the
Company's long-term debt.
The Company has entered into interest rate swaps to manage its exposure to
fluctuations in interest rates of its variable rate debt. The fair value of
these swaps was approximately $0.2 million at June 30, 1999. The positive fair
value indicates an estimated amount the Company would be paid to cancel the
contracts or transfer them to other parties. Pertaining to the Credit Facility,
the Company used an interest rate swap agreement with a notional amount of
$25 million to effectively convert a portion of its variable interest rate
exposure to a fixed rate of 9.91%. The swap agreement expires on September 29,
2000. As to its Floating Rate Notes, the Company used two interest rate swap
agreements, with notational amounts of $50 million and $25 million,
respectively, to effectively convert its variable interest rate exposure to a
fixed rate of 10.01% and 9.95%, respectively. Both swap agreements expire on
November 1, 2001.
15
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company currently and from time to time is involved in litigation and
regulatory proceedings incidental to the conduct of its business, but the
Company is not a party to any lawsuit or proceeding which, in the opinion of the
Company, is likely to have a material adverse effect on the Company.
On April 6, 1998, Latin World Communications, Inc. ("LWC") and Debra A.
Boudrot, LWC's principal (collectively, "Plaintiffs") sued B. Stephen May
("May"), who is a former officer of ST Long Distance (a subsidiary of the
Company), Siesta Telecom, Inc. ("Siesta"), which is a company controlled by May,
and ST Long Distance in the Circuit Court for the Twelfth Judicial Circuit,
Sarasota County, Florida. From March 1997 through early 1998, ST Long Distance
provided long distance services to Plaintiffs in connection with the Plaintiffs'
prepaid telephone card distribution business. On June 26, 1998, Plaintiffs filed
an Amended Complaint. Plaintiffs assert claims against May, Siesta and ST Long
Distance for breach of contract, fraud, misappropriation of trade secrets,
overpayments to May, interference with business relationships, deceptive trade
practices and trade slander. Plaintiffs seek approximately $1 million in damages
plus an unspecified amount of punitive damages related to these claims as well
as injunctive relief relating to certain other matters. The Company timely
answered the Plaintiffs' Complaint and Amended Complaint, denied Plaintiffs'
claims, asserted counterclaims against Plaintiffs, asserted cross- claims
against May, and filed a Third Party Complaint against David Dwiggins
("Dwiggins"), a business partner of May. The Company intends to vigorously
contest all of the Plaintiffs' claims, believes that it has no liability to the
Plaintiffs and will actively pursue its claims against Plaintiffs, May and
Dwiggins. While the outcome of such litigation cannot be predicted, the Company
does not believe that such litigation, even if determined adversely to the
Company, would have a material adverse effect on its financial condition or
results of operations.
ITEM 5. OTHER INFORMATION
RECENT AND PENDING ACQUISITIONS
The Company has entered into agreements to acquire two other unrelated rural
local exchange carriers. The acquisitions are expected to close in the third and
fourth quarters of 1999. The aggregate purchase price is expected to be
approximately $44.5 million and will be financed through existing operations and
the Company's senior secured credit facility.
Each of the above-referenced acquisitions will be accounted for using the
purchase method of accounting.
16
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------------------- ------------------------------------------------------------
<C> <S>
2.1 Stock Purchase Agreement, dated March 6, 1997 among the
Company, MJD Partners, L.P. Carousel Capital Partners, L.P.,
Kelso Investment Associates V, L.P. and
Kelso Equity Partners, V, L.P., as amended*
2.2 Stock Purchase Agreement dated as of March 28, 1996 among
MJD Services Corp., Rick A. Moore, Tom D. Moore,
Penta-Gen Investments, Inc., and Odin Telephone
Exchange, Inc.*
2.3 Agreement and Plan of Merger dated as of March 27, 1998 by
and among MJD Ventures, Inc., Utilities Acquisition Corp.
and Utilities, Inc.*
2.4 Agreement and Plan of Merger, dated as of August 6, 1996
among MJD Holdings Corp., C&E Acquisitions Corp. and
Chatauqua and Erie Telephone Corporation*
2.5 Stock Purchase Agreement, dated as of September 24, 1996
among MJD Holdings Corp., Kadoka Telephone Co., Bruce G.
Conlee and Virginia L. Conlee*
2.6 Stock Purchase Agreement, dated as of June 24, 1997 among
MJD Ventures, Inc., Gary Porter, Virginia M. Porter, Renee
Porter, C-R Communications, Inc., C-R Telephone Company and
certain stockholders*
2.7 Agreement and Plan of Merger, dated as of September 2, 1997
among MJD Holdings Corp., Taconic Acquisition Corp. and
Taconic Telephone Corp.*
2.8 Agreement and Plan of Merger, dated December 31, 1997 among
MJD Ventures, Inc., Ellensburg Acquisition Corp. and
Ellensburg Telephone Company*
2.9 Agreement and Plan of Merger, dated as of March 12, 1998
among MJD Communications, Inc., Chouteau Acquisitions Corp.,
Chouteau Telephone Company and certain shareholders of
Chouteau Telephone Company*
2.10 Stock Purchase Agreement, dated as of October 16, 1998 among
MJD Service Corp., Carla J. Brownlee and
Ravenswood Communications, Inc.*
3.1 Amended and Restated Certificate of Incorporation of the
Company*
3.2 Amended and Restated By-Laws of the Company*
4.1 Indenture, dated as of May 5, 1998, between the Company and
United States Trust Company of New York, as trustee,
relating to the Company's $125,000,000 9 1/2% Senior
Subordinated Notes due 2008 and $75,000,000 Floating Rate
Callable Securities due 2008*
4.2 Form of Initial Fixed Rate Security*
4.3 Form of Initial Floating Rate Security*
4.4 Form of Exchange Fixed Rate Security*
4.5 Form of Exchange Floating Rate Security*
4.6 Form of Purchase Agreement dated as of April 30, 1998
between the Company and the Initial Purchasers named
therein*
4.7 Registration Agreement dated as of April 30, 1998 between
the Company and the Initial Purchasers named therein*
10.1 Credit Agreement dated as of March 30, 1998 among the
Company, various lending institutions, NationsBanc of Texas,
N.A. and Bankers Trust Company*
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------------------- ------------------------------------------------------------
<C> <S>
10.2 Form of B Term Note*
10.3 Form of C Term Note--Floating Rate*
10.4 Form of C Term Note--Fixed Rate*
10.5 Form of RF Note*
10.6 Form of AF Note*
10.7 Subsidiary Guarantee, dated as of March 30, 1998, by MJD
Holdings Corp., MJD Ventures, Inc., MJD Services Corp., ST
Enterprises, Ltd. for the benefit of Bankers Trust Company*
10.8 Pledge Agreement, dated as of March 30, 1998 among MJD
Communications, Inc., ST Enterprises, Ltd., MJD Holdings
Corp., MJD Services Corp., MJD Ventures, Inc.,
C-R Communications, Inc., as pledgors, and Bankers Trust
Company, as collateral agent and pledgee*
10.9 Capital Contribution Agreement, dated as of March 27, 1998
among Kelso Investment Associates V, L.P., Kelso Equity
Partners V, L.P., Carousel Capital Partners, L.P.,
MJD Communications, Inc. and Bankers Trust Company*
10.10 Stockholder's Agreement, dated as of July 31, 1997 among
Kelso Investment Associates V, L.P., Kelso Equity Partners
V, L.P., Carousel Capital Partners V, L.P., the Company and
MJD Partners, L.P.*
10.11 Registration Rights Agreement, dated as of July 31, 1997
among Kelso Investment Associates V, L.P., Kelso Equity
Partners, L.P., the Company and MJD Partners, L.P.*
10.12 Financial Advisory Agreements, dated as of July 31, 1997
among the Company, MJD Holdings Corp. and affiliates of each
of Kelso Investment Associates V, L.P., Kelso Equity
Partners, L.P. and Carousel Capital Partners, L.P.*
10.13 Share Exchange Agreement, dated as of July 31, 1997 between
the Company and MJD Partners, L.P.*
10.14 Contribution Agreement, dated as of July 31, 1997 between
Meyer Haberman, Jack H. Thomas, Eugene B. Johnson and Bugger
Associates, Inc. and MJD Partners, L.P.*
10.15 Contribution Agreement, dated as of July 31, 1997 between
MJD Partners, L.P. and the Company*
10.16 Amended and Restated Class A Voting Common Stock Purchase
Warrants of the Company*
10.17 Consulting Agreement, dated as of July 31, 1997 between MJD
Partners, Inc. and Bugger Associates, Inc.*
10.18 Severance Agreement, dated as of July 31, 1997 between
ST Enterprises, LTD and John P. Duda*
10.19 Severance Agreement, dated as of July 31, 1997 among the
Company, MJD Partners, Inc. and Eugene B. Johnson*
10.20 Severance Agreement, dated as of July 31, 1997 between the
Company and Walter E. Leach, Jr.*
10.21 Severance Agreement, dated as of July 31, 1997 among the
Company, MJD Partners, Inc. and Jack H. Thomas*
10.22 Amendment to Credit Agreement dated as of July 30, 1998,
among the Company, various lending institutions, NationsBanc
of Texas, N.A. and Bankers Trust Company*
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------------------- ------------------------------------------------------------
<C> <S>
10.23 Form of Purchase Agreement and Subordination Agreement
between Bankers Trust Company and the Company*
21 Subsidiaries of the Company*
27 Financial Data Schedule
</TABLE>
- ------------------------
* Previously filed.
(b) Reports on Form 8-K
The Company did not file any current reports on Form 8-K during the quarter
ended June 30, 1999
19
<PAGE>
SIGNATURES
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.
<TABLE>
<S> <C> <C>
MJD COMMUNICATIONS, INC.
By: /s/ WALTER E. LEACH, JR.
----------------------------------------
Walter E. Leach, Jr.
SENIOR VICE PRESIDENT
CHIEF FINANCIAL OFFICER AND SECRETARY
</TABLE>
Dated: November 15, 1999
20
