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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to _____________
Commission file number: 0-11258
__________________________
LDDS Communications, Inc.
(Exact name of registrant as specified in its charter)
__________________________
Georgia 58-1521612
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
515 East Amite Street, Jackson, Mississippi 39201-2702
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code : (601) 360-8600
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 by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes X No
--- ---
The number of outstanding shares of the registrant's Common Stock,
par value $.01 per share, was 161,222,368 on April 30, 1995.
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FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of
March 31, 1995 and December 31, 1994 . . . . . . . . . . . . . . 3
Consolidated Statements of Operations
for the three months ended March 31, 1995
and March 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows for
the three months ended March 31, 1995 and
March 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . 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 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . 10
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . 10
Item 3. Defaults upon Senior Securities . . . . . . . . . . . . . . . . 11
Item 4. Submission of Matters to a Vote
of Securities Holders . . . . . . . . . . . . . . . . . . . . . 11
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . 11
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . 11
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
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LDDS COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars, Except Per Share Data)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
---------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 15,275 $ 19,259
Short-term investments - 1,000
Accounts receivable, net of allowance for bad debts of $63,699 in 1995
and $52,949 in 1994 502,884 470,175
Deferred tax asset 92,055 62,687
Other current assets 38,032 36,305
---------- ----------
Total current assets 648,246 589,426
---------- ----------
Property and equipment:
Transmission equipment 1,029,696 388,941
Communications equipment 429,559 371,998
Furniture, fixtures and other 290,085 183,326
---------- ----------
1,749,340 944,265
Less - accumulated depreciation (353,883) (317,598)
---------- ----------
1,395,457 626,667
Excess of cost over net tangible assets acquired, net of accumulated amortization 4,182,154 2,070,709
Line installation costs, net of accumulated amortization 29,369 28,768
Deferred income taxes 14,120 14,120
Other assets 103,654 100,502
---------- ----------
$6,373,000 $3,430,192
========== ==========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities:
Short-term debt and current maturities of long-term debt $ 4,478 $ 5,996
Accounts payable 163,035 138,101
Accrued line costs 319,284 258,053
Accrued restructuring costs 13,816 25,837
Shareholder litigation reserve 75,000 75,000
Income taxes payable 24,612 11,940
Other current liabilities 273,690 195,728
---------- ----------
Total current liabilities 873,915 710,655
---------- ----------
Long-term liabilities, less current portion:
Long-term debt 3,398,049 788,005
Deferred income taxes payable 48,431 -
Other liabilities 159,982 104,362
---------- ----------
Total long-term liabilities 3,606,462 892,367
---------- ----------
Commitments and contingencies
Shareholders' investment:
Series 1 preferred stock, par value $.01 per share; authorized: 10,896,785 shares;
issued and outstanding: 10,896,785 shares in 1995 and 1994 (liquidation
preference of $544,839) 109 109
Series 2 preferred stock, par value $.01 per share; authorized: 2,000,000 shares;
issued and outstanding: 2,000,000 shares in 1995 and 1994 (liquidation
preference of $50,000) 20 20
Preferred stock, 1995 and 1994: par value $.01 per share; authorized: 37,103,215
shares; none issued - -
Common stock, par value $.01 per share; authorized: 500,000,000 shares; issued
and outstanding: 160,957,733 shares in 1995 and 159,643,312 in 1994 1,610 1,596
Additional paid-in capital 1,791,295 1,772,882
Retained earnings 99,589 52,563
---------- ----------
Total shareholders' investment 1,892,623 1,827,170
---------- ----------
$6,373,000 $3,430,192
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
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LDDS COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
---------------------------
1995 1994
--------- ---------
<S> <C> <C>
Revenues $ 865,035 $ 523,895
--------- ---------
Operating expenses:
Line costs 479,835 319,994
Selling, general and administrative 160,248 90,443
Depreciation and amortization 74,414 37,145
--------- ---------
Total 714,497 447,582
--------- ---------
Operating income 150,538 76,313
Other income (expense):
Interest expense (62,308) (9,619)
Miscellaneous 234 2,368
--------- ---------
Income before income taxes 88,464 69,062
Provision for income taxes 34,501 28,971
--------- ---------
Net income 53,963 40,091
Preferred dividend requirement 6,939 6,938
--------- ---------
Net income applicable to common shareholders $ 47,024 $ 33,153
========= =========
Earnings per common share -
Net income:
Primary $ 0.28 $ 0.20
Fully diluted 0.28 0.20
</TABLE>
The accompanying notes are an integral part of these statements.
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LDDS COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
<TABLE>
<CAPTION>
For the Three Months Ended
--------------------------
1995 1994
----------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 53,963 $ 40,091
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 44,080 20,834
Amortization 30,334 16,311
Provision for losses on accounts receivable 12,208 9,834
Provision for deferred income taxes 19,063 19,594
Change in assets and liabilities, net of effect of
business combinations:
Accounts receivable 15,434 (43,389)
Income taxes receivable - 8,839
Other current assets 1,636 (2,068)
Accounts payable and other current liabilities (98,738) (52,268)
Other 1,730 820
----------- ------------
Net cash provided by operating activities 79,710 18,598
----------- ------------
Cash flows from investing activities:
Capital expenditures (52,339) (29,001)
Sale of short-term investments, net 1,000 -
Acquisitions and related costs (2,639,179) (17,970)
Increase in intangible assets (3,353) (598)
Increase in other assets (3,280) (4,625)
Decrease in other liabilities (2,886) (1,517)
Payment for line installation costs (4,435) (2,882)
Other 13,611 -
----------- ------------
Net cash used in investing activities (2,690,861) (56,593)
----------- ------------
Cash flows from financing activities:
Borrowings 2,733,050 5,000
Principal payments on debt (124,523) (1,865)
Common stock issuance 5,579 29,619
Dividends paid on preferred stock (6,939) (6,938)
----------- ------------
Net cash provided by financing activities 2,607,167 25,816
----------- ------------
Net decrease in cash and cash equivalents (3,984) (12,179)
Cash and cash equivalents at beginning of period 19,259 60,780
----------- ------------
Cash and cash equivalents at end of period $ 15,275 $ 48,601
=========== ============
</TABLE>
The accompanying notes are an integral part of these statements.
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LDDS COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(A) GENERAL
The financial statements included herein are unaudited and have been prepared
in accordance with generally accepted accounting principles for interim
financial reporting and Securities and Exchange Commission regulations. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles 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 Annual Report of LDDS
Communications, Inc. ("LDDS" or the "Company") on Form 10-K for the year ended
December 31, 1994. The results for the three months ended March 31, 1995, are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1995.
(B) BUSINESS COMBINATIONS
LDDS has continued to acquire other long distance companies offering services
similar or complementary to those offered by the Company. Such acquisitions
have been accomplished through the purchase of the outstanding stock or assets
of the acquired entity for cash, notes, shares of the Company's common stock,
or a combination thereof. The cash portion of acquisition costs has generally
been financed through the Company's bank loan agreements.
On January 5, 1995, LDDS completed the acquisition of Williams
Telecommunications Group, Inc. ("WilTel"), a subsidiary of The Williams
Companies, Inc. ("Williams"), for approximately $2.5 billion in cash (the
"WilTel Acquisition"). Through this purchase, the Company acquired a
nationwide common carrier network of approximately 11,000 miles of fiber optic
cable and digital microwave facilities. The WilTel Acquisition was effected
pursuant to a Stock Purchase Agreement dated as of August 22, 1994, by and
among LDDS, Williams and WTG Holdings, Inc. The WilTel Acquisition is being
accounted for as a purchase for financial reporting purposes. The funds paid
to Williams were obtained by LDDS under a new credit facility entered into on
December 21, 1994.
The following unaudited pro forma combined results of operations for the
Company assume that the WilTel Acquisition was completed on January 1, 1994 (in
thousands, except per share data):
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED
MARCH 31, 1994
---------------
<S> <C>
Revenues $702,695
Income applicable to common shareholders 11,867
Earnings per common share 0.07
</TABLE>
These pro forma amounts represent the historical operating results of WilTel
combined with those of the Company with appropriate adjustments which give
effect to interest expense and amortization. These pro forma amounts are not
necessarily indicative of operating results which would have occurred if the
WilTel Acquisition had been operated by current management during the periods
presented because these amounts do not reflect full network optimization and
the synergistic effect on operating, selling, general and administrative
expenses.
(C) EARNINGS PER COMMON SHARE
Earnings per share were calculated based on the following number of common
shares and common equivalent shares outstanding: 166,773,000 and 163,701,000
for the three months ended March 31, 1995 and 1994, respectively.
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(D) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid by the Company during the three months ended March 31, 1995 and
1994 amounted to $49.7 million and $10.5 million, respectively. Income taxes
paid during the three months ended March 31, 1995 and 1994 were $2.8 million
and $1.2 million, respectively. In conjunction with business combinations
during the three months ended March 31, 1995 and 1994 (see Note B), assumed
assets and liabilities were as follows (in thousands):
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
----------------------------------
1995 1994
----------- ------------
<S> <C> <C>
Fair value of assets acquired $ 838,646 $ -
Excess of cost over net tangible assets acquired 2,137,865 19,355
Liabilities assumed (324,482) (849)
Common stock issued (12,850) (536)
---------- ------------
$2,639,179 $ 17,970
========== ============
</TABLE>
Acquisition and related costs for the three months ended March 31, 1994 reflect
additional costs related to the 1993 acquisitions.
(E) CONTINGENCIES
IDB RELATED INVESTIGATIONS. On June 9, 1994, the SEC issued a formal order of
investigation concerning certain matters, including IDB Communications Group,
Inc.'s ("IDB") financial position, books and records and internal controls and
trading in IDB securities on the basis of non-public information. The SEC has
issued subpoenas to LDDS, IDB and others, including certain former officers of
IDB, in connection with its investigation. The NASD and other self-regulatory
bodies have also made inquiries of IDB concerning similar matters.
In October and November 1994, the U.S. Attorney's Office for the Central
District of California issued grand jury subpoenas to IDB seeking documents
relating to IDB's first quarter results, the Deloitte & Touche LLP resignation,
trading in IDB securities and other matters, including information concerning
certain entities in which certain former officers of IDB are personal investors
and transactions between such entities and IDB. IDB has been informed that a
criminal investigation has commenced. In early 1995, the U.S. Attorney's
Office issued a grand jury subpoena to LDDS arising out of the same
investigation seeking certain documents relating to IDB.
AT&T PATENTS. AT&T has written the Company claiming that certain of the
Company's long distance services (including certain 800 services, operator
services and calling card services) make unauthorized use of AT&T patents.
Similar claims have been asserted against other long distance carriers. AT&T
has stated that it will enforce its patent rights and requested that the
Company and other carriers enter into patent license agreements. The Company
has had discussions with AT&T and is currently evaluating AT&T's claims. The
Company is not yet in a position to predict whether this matter will lead to
litigation. In a related development, MCI has brought suit against AT&T
alleging that certain of these same patents are invalid under the patent laws
or unenforceable due to representations made by AT&T to the District Court at
the time of the AT&T Divestiture Decree. AT&T has counterclaimed against MCI
alleging patent infringement. The Company could be adversely affected if, as a
result of litigation or otherwise, it was required to pay substantial patent
royalties to AT&T. However, the ultimate outcome of this issue, or the amount
of any such patent royalties which might be required, cannot be determined at
this time.
REGULATORY MATTERS. By virtue of a decision of the U. S. Court of Appeals for
the D. C. Circuit released November 13, 1992, concerning the Federal
Communications Commission's ("FCC") policy of forebearing from tariff
regulation of non- dominant interexchange carriers, could subject the Company
to complaints seeking damages, assessment of monetary forfeitures and/or
injunctive relief filed by any party claiming to be injured by the Company's
past failure to file tariffs in reliance on the FCC's forebearance policy. The
Court decision does not, however, require the FCC to assess forfeitures or
damages or take any other specific enforcement action against those carriers
who relied upon its former policy, although it does direct the FCC to give
further consideration to the issue of damages. At this time, the Company
cannot predict either
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the likelihood of the filing of such complaints or the likelihood that such
complainants would prevail in any complaint proceedings. WorldCom Network
Services, Inc., formerly WilTel, Inc., a subsidiary of the Company, is the
defendant in such a complaint filed by AT&T. The financial responsibility for
the actions of WorldCom Network Services, Inc. in regard to this complaint has
been assumed by Williams.
OTHER. The Company is involved in other legal and regulatory proceedings
generally incidental to its business. In some instances, rulings by regulatory
authorities in some states may result in increased operating costs to the
Company.
While the results of these various legal and regulatory matters contain an
element of uncertainty, LDDS believes that the probable outcome of any of the
legal or regulatory matters, or all of them combined, will not have a material
adverse effect on the Company's consolidated results of operations or financial
position.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis relates to the financial condition and
results of operations of the Company for the three months ended March 31, 1995
and 1994 after giving effect to the Company's merger with IDB Communications
Group, Inc. ("IDB") on December 30, 1994, which was accounted for as a
pooling-of-interests.
GENERAL
The Company's continued emphasis on acquisitions has taken the Company from a
small regional long distance carrier to one of the largest long distance
telecommunications companies in the industry, serving customers domestically
and internationally. The Company's operations have grown significantly in each
year of its operations as a result of internal growth, the selective
acquisition of smaller long distance companies with limited geographic service
areas and market shares, the consolidation of certain third tier long distance
carriers with larger market shares and international expansion.
On January 5, 1995, LDDS completed the acquisition of WilTel for approximately
$2.5 billion in cash. Through this purchase, the Company acquired a nationwide
common carrier network of approximately 11,000 miles of fiber optic cable and
digital microwave facilities.
The Company's long distance revenues are derived principally from the number of
minutes of use billed by the Company. Minutes billed are those conversation
minutes during which a call is actually connected at the Company's switch
(except for minutes during which the customer receives a busy signal or the
call is unanswered at its destination). The Company's profitability is
dependent upon, among other things, its ability to achieve line costs that are
less than its revenues. The principal components of line costs are access
charges and transport charges. Access charges are expenses incurred by all
interexchange carriers ("IXCs") for accessing the local networks of the local
exchange carriers ("LECs") in order to originate and terminate calls and
payments made to foreign telephone companies to complete calls made from the
U.S. by the Company's customers. Transport charges are the expenses incurred
in transmitting calls between or within local access and transport areas.
The most significant portion of the Company's line costs is access charges
which are highly regulated. The FCC regulates international communications
services and interstate telephone service and certain states, through the
appropriate regulatory agency, regulate intrastate telephone service.
Accordingly, the Company cannot predict what effect continued regulation and
increased competition between LECs and other IXCs will have on future access
charges. However, the Company believes that it will be able to continue to
reduce transport costs through effective utilization of its network, favorable
contracts with carriers and network efficiencies made possible as a result of
expansion of the Company's customer base by acquisitions and internal growth.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1995 vs.
Three Months Ended March 31, 1994:
Revenues for the three months ended March 31, 1995 were $865.0 million on 4.57
billion revenue minutes as compared to $523.9 million on 2.56 billion revenue
minutes for the three months ended March 31, 1994. The increase in total
revenues of 65.1% was primarily due to the inclusion of revenues from the
WilTel Acquisition and internal growth.
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Line costs as a percentage of revenues decreased to 55.5% during the first
quarter of 1995 as compared to 61.1% for the same period in the prior year.
This decrease is attributable to synergies and economies of scale resulting from
network efficiencies achieved following the WilTel Acquisition and the IDB
Merger, and rate reductions resulting from favorable contract negotiations.
Additionally, line costs as a percentage of revenues has decreased as the
result of the Company owning its own network as well as changes in the product
mix to include more private line revenues which carry lower line costs.
Selling, general and administrative expenses increased to $160.2 million in the
first quarter of 1995 from $90.4 million in the first quarter of 1994; and as a
percentage of revenues, these expenses increased to 18.5% in 1995 from 17.3% in
1994. The increase in selling, general and administrative expenses results
from the Company's expanding operations, primarily through the WilTel
Acquisition and internal growth. Also, such costs as a percentage of revenues
has increased due to the additional engineering and information services
required to support the Company's nationwide common carrier network.
Depreciation and amortization expense increased to $74.4 million in the first
quarter of 1995 from $37.1 million in the first quarter of 1994. Such expense
as a percentage of revenues increased to 8.6% in the 1995 period from 7.1% in
the 1994 period. This increase reflects depreciation and amortization of the
additional property and equipment and goodwill from the WilTel Acquisition.
Interest expense in the first quarter of 1995 was $62.3 million (7.2% of
revenues), as compared to $9.6 million (1.8% of revenues) in 1994. The
increase in the absolute level of interest expense was due primarily to an
increase in the average debt outstanding by the Company to finance the WilTel
Acquisition. Also, higher interest rates were in effect on the Company's
long-term debt, reflecting higher prevailing interest rates in the market
generally.
Miscellaneous income decreased to $0.2 million in the first quarter of 1995
from $2.4 million in the first quarter of 1994 primarily due to fees incurred
in connection with the WilTel and LDDS sales of receivables.
Net income increased 34.6% to $54.0 million in the first quarter of 1995 from
$40.1 million in the comparable period in 1994. Earnings per common share
increased 40% to $0.28 from $0.20 in 1994.
LIQUIDITY AND CAPITAL RESOURCES
On January 5, 1995, in conjunction with the WilTel Acquisition, the Company
utilized its $3.41 billion long-term credit facility and all debt under LDDS'
previous credit facilities and the $123.0 million in senior notes was repaid.
Total additional borrowings for the three months ended March 31, 1995 were $2.7
billion. At March 31, 1995, the Company had access to an additional $206.9
million under its long-term credit facility.
On February 24, 1995, the Company entered into financial hedging agreements
with various financial institutions, in connection with the credit facility.
The hedging agreements establish fixed rates of interest ranging from 8.25% to
8.3125% on an aggregate notional value of $1.7 billion. These contracts range
in duration from one to two years with $845.4 million maturing in each of the
years ending 1996 and 1997.
LDDS believes that the combined operations of LDDS, IDB and WilTel will
generate sufficient cash flow to service LDDS' debt under the new credit
facility; however, economic downturns, increased interest rates and other
adverse developments, including factors beyond LDDS' control, could impair its
ability to service its indebtedness. In addition, the cash flow required to
service LDDS' debt will reduce its liquidity, which in turn may reduce its
ability to fund internal growth, additional acquisitions and capital
improvements.
LDDS anticipates it will need to refinance a portion of the $1.25 billion term
principal debt under the credit facility prior to December 1996, thereby
requiring LDDS to seek financing alternatives such as public or private debt or
equity offerings, or refinancing with the existing or new lenders. The Company
is committed to a priority plan of accelerating operating cash flow to reduce
debt. LDDS anticipates that the remaining debt balances will be refinanced
with a combination of commercial bank debt and public market debt. Successful
execution of this priority plan would provide continued compliance with
required operating ratio covenants and would eliminate any type of equity
financing other than equity issued in connection with acquisitions. No
assurance can be given that the Company will achieve its priority plan or that
any refinancing will be available on terms acceptable to LDDS.
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LDDS has historically utilized cash flow from operations to finance capital
expenditures and a mixture of cash flow, debt and stock to finance
acquisitions. LDDS will continue to analyze potential acquisitions utilizing
primarily equity financing until the additional leverage from the WilTel
Acquisition is reduced.
For the three months ended March 31, 1995, the Company's cash flow from
operations was $79.7 million, increasing from $18.6 million in the comparable
period for 1994. The increase in cash flow from operations was primarily
attributable to cash flow from acquired operations and internal growth.
Cash used in investing activities in the first quarter of 1995 totaled $2.69
billion and included $2.64 billion for acquisitions and related costs and $56.8
million for capital expenditures (including payments for line installation
costs). Primary capital expenditures include purchases of switching,
transmission, communication and other equipment. Capital expenditures for the
remainder of 1995 are anticipated to total approximately $240.0 million.
Included in cash flows from financing activities are payments of $6.9 million
for preferred dividend requirements. The Series 1 Preferred Stock has a total
annual dividend requirement of $6.1 million payable quarterly. The Series 2
Preferred Stock has an annual dividend requirement of $0.8 million payable at
the end of each calendar quarter. The Company believes that no event will
occur during the remainder of 1995 to interfere with its ability to satisfy
these dividend requirements.
In March 1995, LDDS amended WilTel's existing $80.0 million receivables
purchase agreement to include certain LDDS receivables and received additional
proceeds of $120.0 million. The Company used these proceeds to reduce the
outstanding debt under the Company's credit facility and provide additional
working capital. As of that date, the purchaser owned a 99.35% undivided
interest in a $385.0 million pool of receivables which includes the $200.0
million sold. The aggregate purchase limit under this agreement is $200.0
million at March 31, 1995 to be increased to $280.0 million by June 30, 1995.
In April 1995, an additional $75.0 million was borrowed against the Company's
long-term credit facility to pay the IDB Shareholder Litigation Settlement
Liability which was recognized by the Company during the third quarter of
1994.
Additionally, in May 1995, Metromedia Company exercised its right to purchase
3.1 million shares of the Company's common stock under purchase warrants.
Proceeds from this exercise of $30.7 million were used to reduce the
outstanding debt under the Company's credit facility.
Absent significant capital requirements for other acquisitions, the Company
believes that cash flow from operations and funds available under the credit
facility will be adequate to meet the Company's capital needs for the remainder
of 1995.
RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of." This Statement requires that certain long-lived
assets and certain identifiable intangibles to be disposed of be reported at
the lower of carrying amount or fair value less cost to sell. This Statement
is effective for financial statements for fiscal years beginning after December
15, 1995. LDDS has not determined what effect this statement will have on the
Company's consolidated results of operations or financial position.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
There have been no material changes in the litigation reported in the
Company's Annual Report on Form 10-K for the year ended December 31,
1994, filed on March 30, 1995 except as reflected in the discussion
under Note E of the Notes to Consolidated Financial Statements in
Part I, Item 1, above.
Item 2. Changes in Securities.
None
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Item 3. Defaults upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
A. Exhibits
See Exhibit Index
B. Reports on Form 8-K
During the first quarter of 1995, the Company filed the following
reports on Form 8-K:
(i) Current Report on Form 8-K dated December 30, 1994 (filed
January 13, 1995) reporting under Item 2, among other
things, the Company's acquisitions of IDB and WilTel.
(ii) Current Report on Form 8-K/A dated December 15, 1994 (filed
February 1, 1995) reporting information required to be
reported under Item 7(a), Financial Statements of businesses
to be acquired, the following financial statements of TRT
Communications Inc., a subsidiary of IDB:
Independent Auditors' Report
Consolidated Balance Sheets - December 31, 1991 and
1992
Consolidated Statements of Operations for the three
years ended December 31, 1992
Consolidated Statements of Stockholders' Equity for
the three years ended December 31, 1992
Consolidated Statements of Cash Flows for the three
years ended December 31, 1992
Notes to Consolidated Financial Statements
(iii) Current Report on Form 8-K dated January 25, 1995 (filed
January 27, 1995), reporting the following supplemental
consolidated financial statements for LDDS to reflect the
business combination between LDDS and IDB effective December
30, 1994 and accounted for under the pooling-of-interests
method:
Reports of independent public accountants
Supplemental Consolidated financial statements -
Consolidated balance sheets - December 31, 1993 and
1992 and unaudited September 30, 1994
Consolidated statements of operations for the three
years ended December 31, 1993 and unaudited for the
nine months ended September 30, 1993 and 1994
Consolidated statements of shareholders' investment
for the three years ended December 31, 1993 and
unaudited for the nine months ended September 30,
1994
Consolidated statements of cash flows for the three
years ended December 31, 1993 and unaudited for the
nine months ended September 30, 1993 and 1994
Notes to supplemental consolidated financial statements
Financial Statement Schedule:
VIII. Valuation and qualifying accounts
Page 11
<PAGE> 12
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report on Form 10-Q to be signed on its
behalf by Scott D. Sullivan, thereunto duly authorized to sign on behalf of the
registrant and as the principal financial officer thereof.
LDDS COMMUNICATIONS, INC.
By: /s/ Scott D. Sullivan
Scott D. Sullivan, Treasurer
and Chief Financial Officer
Dated: May 15, 1995
Page 12
<PAGE> 13
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
- ------ -----------
<S> <C>
3(i) Amended and Restated Articles of Incorporation of LDDS (including
preferred stock designations) as of September 15, 1993 (incorporated
herein by reference to Exhibit 3(i) to Amendment No. 1 to LDDS'
Registration Statement on Form S-3 (File No. 33-67340)), as amended
by Articles of Amendment dated May 26, 1994 (incorporated herein
by reference to Exhibit 3.1 to the Quarterly Report on Form 10-Q
filed by LDDS (File No. 1-10415) for the quarter ended June 30, 1994)
3(ii) Bylaws of LDDS (incorporated herein by reference to Exhibit 3(ii) to
Amendment No. 1 to LDDS' Registration Statement on Form S-3
(File No. 33-67340))
11.1 Computation of Per Share Earnings
27.1 Financial Data Schedule
</TABLE>
Page 13
<PAGE> 1
Exhibit 11.1
LDDS COMMUNICATIONS, INC. AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share data)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
-----------------------------------------
1995 1994
------------- ------------
<S> <C> <C>
Primary:
Weighted average shares outstanding 160,396 155,166
Common stock equivalents 6,377 8,535
--------------- ------------
166,773 163,701
=============== ============
Fully Diluted:
Weighted average shares outstanding 160,396 155,166
Common stock equivalents 6,636 8,536
Common stock issuable upon conversion of:
5% convertible notes 5,135 N/A
Series 1 preferred stock 21,877 N/A
Series 2 preferred stock 4,233 N/A
--------------- ------------
198,277 163,702
=============== ============
Income applicable to common shareholders $ 47,024 $ 33,153
Add back:
Interest on 5% convertible notes, net of taxes 1,491 N/A
Series 1 preferred dividend requirement 6,126 N/A
Series 2 preferred dividend requirement 813 N/A
--------------- ------------
Net income applicable to common shareholders $ 55,454 $ 33,153
=============== ============
Earnings per share:
Primary $ 0.28 $ 0.20
Fully Diluted 0.28 0.20
</TABLE>
Note: For the three months ended March 31, 1994, conversion of the convertible
notes and convertible preferred stock was not assumed because the effect is
anti-dilutive.
Page 14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF LDDS COMMUNICATIONS, INC. AND IS QUALIFIED IN ITS
ENITRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 15,275
<SECURITIES> 0
<RECEIVABLES> 566,583
<ALLOWANCES> 63,699
<INVENTORY> 0
<CURRENT-ASSETS> 648,246
<PP&E> 1,749,340
<DEPRECIATION> (353,883)
<TOTAL-ASSETS> 6,373,000
<CURRENT-LIABILITIES> 873,915
<BONDS> 3,398,049
<COMMON> 1,610
0
129
<OTHER-SE> 1,890,884
<TOTAL-LIABILITY-AND-EQUITY> 6,373,000
<SALES> 865,035
<TOTAL-REVENUES> 865,035
<CGS> 479,835
<TOTAL-COSTS> 714,497
<OTHER-EXPENSES> (234)
<LOSS-PROVISION> 12,208
<INTEREST-EXPENSE> 62,308
<INCOME-PRETAX> 88,464
<INCOME-TAX> 34,501
<INCOME-CONTINUING> 53,963
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 47,024
<EPS-PRIMARY> 0.28
<EPS-DILUTED> 0.28
</TABLE>
