<PAGE> 1
1,086,812 Shares
LDDS COMMUNICATIONS, INC.
Common Stock
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This Prospectus relates to 1,086,812 shares (the "Shares") of common
stock, par value $.01 per share (the "Common Stock"), of LDDS Communications,
Inc., a Georgia corporation (the "Company"). The Shares are held by, or may be
issued to, Corman Foundation, Inc., an Alabama corporation and a former
shareholder (the "Selling Shareholder") of Touch 1, Inc., an Alabama
corporation ("Touch 1"). See "Selling Shareholder."
The Company will not receive any proceeds from the sale of Shares by
the Selling Shareholder. All expenses incurred in connection with this
offering are being borne by the Company, other than any commissions or
discounts paid or allowed by the Selling Shareholder to underwriters, dealers,
brokers or agents.
The Selling Shareholder has not advised the Company of any specific
plans for the distribution of the Shares, but it is anticipated that the Shares
may be sold from time to time in transactions (which may include block
transactions) on The Nasdaq Stock Market at the market prices then prevailing.
Sales of the Shares may also be made through negotiated transactions or
otherwise. The Selling Shareholder and the brokers and dealers through which
the sales of the Shares may be made may be deemed to be "underwriters" within
the meaning set forth in the Securities Act of 1933, as amended, and their
commissions and discounts and other compensation may be regarded as
underwriters' compensation. See "Plan of Distribution."
The Common Stock is traded on The Nasdaq Stock Market under the symbol
"LDDS." The last reported sale price of the Common Stock as reported on The
Nasdaq Stock Market on May 9, 1995, was $25.75 per share.
For a discussion of certain factors relating to an investment in the
Common Stock, see "Investment Considerations."
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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The date of this Prospectus is May 10, 1995.
<PAGE> 2
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). These reports,
proxy statements and other information can be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the Commission's regional offices located
at Seven World Trade Center, Suite 1300, New York, New York 10048 and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials
can also be obtained from the Public Reference Section of the Commission, 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Company has filed with the Commission a Registration Statement on
Form S-3 (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the shares of Common Stock
offered hereby. This Prospectus does not contain all of the information set
forth in the Registration Statement or the exhibits thereto. As permitted by
the rules and regulations of the Commission, this Prospectus omits certain
information contained or incorporated by reference in the Registration
Statement. Statements contained in this Prospectus as to the contents of any
contract or other document filed or incorporated by reference as an exhibit to
the Registration Statement are not necessarily complete, and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement. For further information, reference is
hereby made to the Registration Statement and exhibits thereto, copies of which
may be inspected at the offices of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 or obtained from the Commission at the same address at
prescribed rates.
INCORPORATION BY REFERENCE
The following documents filed with the Commission by the Company
(formerly Resurgens Communications Group, Inc. ("Resurgens")) under File
No. 0-11258 (formerly File No. 1-10415) pursuant to the Exchange Act are
incorporated herein by reference: (1) the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994 (the "1994 Form 10-K"); (2) audited
financial statements as of December 31, 1994 and 1993 and for each of the three
years in the period ended December 31, 1994 of the network services operations
of Williams Telecommunications Group, Inc. ("WilTel"), including WilTel, Inc.,
WilTel Undersea Cable, Inc. and WilTel International Inc., which are wholly
owned subsidiaries of WilTel (collectively "WilTel Network Services"), included
in the Company's Current Report on Form 8-K dated August 22, 1994 (filed
September 8, 1994) (as amended by Current Reports on Form 8-K/A filed
November 17, 1994, November 28, 1994 and April 19, 1995); and (3) the
description of the Company's (formerly Resurgens') Common Stock as contained in
Item 1 of Resurgens' Registration Statement on Form 8-A dated December 12,
1989, as updated by the descriptions contained in Amendment No. 2 of Resurgens'
Registration Statement on Form S-4 (File No. 33-62746), as declared effective
by the Commission on August 11, 1993, which includes the Joint Proxy
Statement/Prospectus (the "1993 Joint Proxy Statement/Prospectus") with respect
to Resurgens' Annual Meeting of Shareholders held on September 14, 1993, under
the following captions: "Proposals No. 1 and 2 -- The Proposed Mergers --
Description of the Series 1 Preferred Stock," "-- Description of the Series 2
Preferred Stock," "-- Special Redemption Provisions," "Information Regarding
Resurgens -- Description of Resurgens Capital Stock," and "-- Amendments to
Resurgens' Restated Articles of Incorporation -- LDDS Merger Agreement."
<PAGE> 3
All documents filed by the Company with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date
hereof shall hereby be deemed to be incorporated by reference in this
Prospectus and to be a part hereof from the date of filing of such documents.
See "Available Information." Any statement contained herein or in a document
incorporated or deemed to be incorporated herein by reference shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in any other subsequently filed document
incorporated or deemed to be incorporated herein by reference, which statement
is also incorporated herein by reference, modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
This Prospectus incorporates documents by reference which are not
presented herein or delivered herewith. Copies of these documents (excluding
exhibits unless such exhibits are specifically incorporated by reference into
the information incorporated herein) will be provided by first class mail
without charge to each person to whom this Prospectus is delivered, upon
written or oral request by such person to LDDS Communications, Inc., 515 East
Amite Street, Jackson, Mississippi 39201-2702, Attention: Scott D. Sullivan,
Treasurer and Chief Financial Officer (telephone: (601) 360-8600).
No person has been authorized in connection with this offering to give
any information or to make any representation not contained or incorporated by
reference in this Prospectus and, if given or made, such information or
representation must not be relied upon as having been authorized by the
Company, the Selling Shareholder or any other person. This Prospectus does not
constitute an offer to sell, or a solicitation of an offer to purchase, any
securities other than those to which it relates, nor does it constitute an
offer to sell or a solicitation of an offer to purchase by any person in any
jurisdiction in which it is unlawful for such person to make such an offer or
solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall under any circumstances create any implication that the
information contained herein is correct as of any time subsequent to the date
hereof.
<PAGE> 4
INVESTMENT CONSIDERATIONS
The following factors should be carefully considered in evaluating the
Company and its business before purchasing any of the Shares offered hereby.
Capitalized terms used and not defined herein have the same meanings ascribed
to them in the 1994 Form 10-K.
Risks of Increased Financial Leverage; Debt Service, Interest Rate
Fluctuations, Possible Reduction in Liquidity, Dividend Restrictions,
and Other Restrictive Covenants
As a result of the acquisition of WilTel on January 5, 1995 (the
"WilTel Acquisition"), as referred to below under "Recent Developments," the
Company has, as a result of the financing thereof, a significantly higher
degree of leverage than previously existed. At December 31, 1994, the Company
reported $788.0 million of long-term debt (including capital leases and
excluding current maturities) and a debt to equity ratio of 0.43. Based on the
Company's pro forma balance sheet at December 31, 1994, as a result of the
acquisition of WilTel and the financing of the WilTel Acquisition, the Company
would have long-term debt (including capital leases and excluding current
maturities) of $3.4 billion and a debt to equity ratio of 1.9.
Borrowings under the Company's new bank credit facilities bear
interest at rates that fluctuate with prevailing short-term interest rates.
Increases in interest rates on these obligations would have an adverse effect
upon the Company's reported net income and cash flow. In addition, these
credit facilities restrict the payment of cash dividends and otherwise limit
the Company's financial flexibility. The Company believes that the combined
operations of the Company, IDB Communications Group, Inc. ("IDB") and WilTel
will generate sufficient cash flow to service the Company's debt under the bank
credit facilities; however, economic downturns, increased interest rates and
other adverse developments, including factors beyond the Company's control,
could impair its ability to service its indebtedness. In addition, the cash
flow required to service the Company's debt will reduce its liquidity, which in
turn may reduce its ability to fund internal growth, additional acquisitions
and capital improvements. One facility (the "Term Principal Debt") of the new
bank credit facilities, which totals $1.25 billion, matures in a single
installment on December 31, 1996. The other facility (the "Revolving Facility
Commitment"), which totals $2.16 billion, will be reduced at the end of each
fiscal quarter, commencing on September 30, 1996, in varying amounts, and must
be paid in full on December 31, 2000.
The Company anticipates it will need to refinance a portion of the
Term Principal Debt thereby requiring the Company 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. The Company 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 any refinancing will be available on
terms acceptable to the Company. See "Pro Forma Combining Financial Statements"
contained in the Company's Current Report on Form 8-K dated August 22, 1994 (as
amended by Current Report on Form 8-K/A filed April 19, 1995).
<PAGE> 5
Acquisition Integration
A major portion of the Company's growth in recent years has resulted
from acquisitions, which involve certain operational and financial risks.
Operational risks include the possibility that an acquisition does not
ultimately provide the benefits originally perceived by management of the
acquiror, while the acquiror continues to incur operating expenses to provide
the services formerly provided by the acquired company. Financial risks
involve the incurrence of indebtedness by the acquiror in order to effect the
acquisition and the consequent need to service that indebtedness. In addition,
the issuance of stock in connection with acquisitions dilutes the voting power
and may dilute certain other interests of existing shareholders. In carrying
out its acquisition strategy, the Company attempts to minimize the risk of
unexpected liabilities and contingencies associated with acquired businesses
through planning, investigation and negotiation, but such unexpected
liabilities may nevertheless accompany acquisitions. There can be no assurance
that the Company will be successful in identifying attractive acquisition
candidates or completing additional acquisitions on favorable terms.
In addition, although the Company believes that it will be able to
integrate successfully the business and operations of IDB and WilTel, there can
be no assurance that the Company will be able to accomplish such integration
with the Company's operations, or that the efficiencies and growth
opportunities anticipated as a result from the combination of the Company, IDB
and WilTel will materialize, or that the Company will be able to integrate any
other acquired businesses into its operations and obtain the desired networking
and operating efficiencies. There can also be no assurance that the
anticipated growth opportunities resulting from the consolidated organization
will materialize.
Contingent Liabilities
The Company is subject to a number of legal and regulatory
proceedings. While the Company believes that the probable outcome of any of
these matters, or all of them combined, will not have a material adverse effect
on the Company's consolidated results of operations or financial position, no
assurance can be given that a contrary result will not be obtained. See Item 3
- - "Legal Proceedings" contained in the 1994 Form 10-K which is hereby
incorporated herein by reference.
In addition to a number of other pending legal proceedings, on May 23,
1994, Deloitte & Touche LLP ("Deloitte") resigned as IDB's independent
auditors. Deloitte has stated it resigned as a result of events surrounding
the release and reporting of IDB's financial results for the first quarter of
1994. In submitting its resignation, Deloitte informed IDB management and the
Audit Committee of the IDB Board of Directors that there had been a serious
breakdown in IDB's process of identifying, analyzing and recording IDB's
business transactions which prohibited Deloitte from the satisfactory
completion of a quarterly review, and that Deloitte was no longer willing to
rely on IDB management's representations regarding IDB's interim financial
statements. IDB announced Deloitte's resignation on May 31, 1994. On June 24,
1994, upon the recommendation of the independent members of IDB's Audit
Committee, IDB retained Arthur Andersen LLP as its new independent auditors.
On August 1, 1994, IDB announced that it would restate its reported financial
results for the quarter ended March 31, 1994 to eliminate approximately $6.0
million of pre-tax income, approximately $5.0 million of which related to a
sale of transponder capacity and approximately $1.0 million of which related to
<PAGE> 6
purchase accounting adjustments and on August 22, 1994, IDB filed Amendment
No. 1 on Form 10-Q/A restating its 1994 first quarter results in order to
eliminate previously recorded items. Certain of these items were among those
as to which Deloitte had expressed disagreement. On November 21, 1994, IDB
filed Form 10-Q/A amendments to its reported first and second quarter financial
results making the previously announced changes and reflecting the effect of
IDB's method of accounting for international long distance traffic, thereby
reducing its first quarter net income from $0.12 per share, as originally
reported, to $0.05 per share and, when combined with adjustments for income tax
effects, increasing its second quarter net loss from $0.20 per share, as
originally reported, to $0.27 per share.
A number of class action complaints (on behalf of persons who
purchased certain IDB securities) and stockholder derivative actions (on behalf
of IDB) were filed against IDB and its former directors and certain former
officers of IDB and other parties. The U.S. District Court for the Central
District of California ordered the class action complaints and one of the
derivative actions consolidated and styled "In re IDB Communications Group,
Inc. Securities Litigation". An amended complaint was filed with the District
Court on November 18, 1994 consolidating all of the class and derivative
actions. IDB, certain of its former directors and officers and other parties
are named as defendants in the consolidated complaint. The class action claims
allege violations of federal and state securities laws and state corporate laws
for disseminating allegedly false and misleading statements concerning IDB's
earnings and accounting practices. The derivative claims allege that IDB's
former officers and directors breached their fiduciary duties to IDB by trading
on inside information, accepting bonuses based on false and inflated IDB
financial results and exposing IDB to liability under the securities laws, and
include claims for gross negligence and violation of state corporate laws.
Plaintiffs sought damages, restitution to IDB, injunctive relief, punitive
damages, and costs and attorneys' fees.
IDB, LDDS and representatives of the plaintiffs in the foregoing
litigation entered into a Stipulation of Settlement (the "Stipulation"). The
Stipulation provides that all claims for the period April 27, 1992 through
August 1, 1994, inclusive, that were or could have been asserted by the
plaintiffs against IDB or any of the other defendants in the consolidated
action, or in any court with respect to the fairness or adequacy of the
consideration paid to IDB stockholders in the IDB Merger and the accuracy of
related disclosures made by the IDB defendants or LDDS, or on behalf of or by
IDB against former IDB directors and officers will, subject to the fulfillment
of certain conditions and the approval of the court, be settled and released
and the litigation dismissed in its entirety with prejudice in exchange for
payments totalling $75.0 million. The settlement and releases do not affect
any claims of persons who purchased IDB securities outside the period April 27,
1992 through August 1, 1994, inclusive, or who timely and validly opt out.
Following a February 27, 1995 hearing to determine whether the
settlement should be finally approved by the District Court, on March 16, 1995,
the court entered a judgment approving the settlement, except as to fee
applications submitted by class and derivative counsel. The settlement is not
contingent on the amount of class and derivative counsel fees and expenses
ultimately approved by the court. On April 5, 1995, the settlement payments
agreed to in the Stipulation were made. Plaintiffs' counsel has indicated that
they will dismiss two related state court actions, as contemplated by the
Stipulation, after the time for appeal from the court's approval of the
settlement expires. The deadline for appeal from the March 16, 1995 court
<PAGE> 7
judgment approving the settlement expired April 17, 1995, and to date no notice
of appeal has been received by IDB's counsel.
IDB is a party to indemnification agreements with certain of the
defendants in the actions described above, including IDB's former officers and
directors, certain selling shareholders and certain underwriters. IDB's former
officers and directors are not covered by any applicable liability insurance.
LDDS has agreed to provide indemnification to IDB's officers and directors
under certain circumstances pursuant to the agreement relating to the IDB
Merger.
On June 9, 1994, the Commission issued a formal order of investigation
concerning certain matters, including IDB's financial position, books and
records and internal controls and trading in IDB securities on the basis of
non-public information. The Commission has issued subpoenas to 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 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 for the Central District of California issued a grand jury subpoena to
the Company arising out of the same investigation seeking certain documents
relating to IDB.
The outcome of any of the foregoing litigation or investigations, or
of other pending legal proceedings, has not been determined. See Item 3 -
"Legal Proceedings" contained in the Company's 1994 Form 10-K for more
information regarding the foregoing litigation and investigations, as well as
other pending legal proceedings.
Risks of International Business
As a result of the IDB Merger, the Company derives substantial
revenues by providing international communication services primarily to
customers headquartered in the United States. Such operations are subject to
certain risks such as changes in foreign government regulations and
telecommunication standards, licensing requirements, tariffs or taxes and other
trade barriers and political and economic instability. In addition, such
revenues and cost of sales are sensitive to changes in international settlement
rates. International rates may decrease in the future due to aggressiveness on
the part of existing carriers, aggressiveness on the part of new entrants into
niche markets, the widespread resale of international private lines, the
consummation of joint ventures among large international carriers that
facilitate targeted pricing and cost reductions, and the rapid growth of
international circuit capacity due to the deployment of new transatlantic and
transpacific fiber optic cables. The traffic volumes and cost reductions
related to the IDB Merger may not offset any resulting rate decreases.
<PAGE> 8
Dependence on Availability of Transmission Facilities
The future profitability of the Company will be dependent in part on
its ability to utilize transmission facilities leased from others on a cost-
effective basis. Due to the possibility of unforeseen changes in industry
conditions, the continued availability of leased transmission facilities at
historical rates cannot be assured. See Item 1 - "Business -- Transmission
Facilities" contained in the 1994 Form 10-K which is hereby incorporated herein
by reference.
Regulation Risks
The Company is subject to extensive regulation at the federal and
state levels, as well as in various foreign countries in connection with
certain overseas business activities. The regulatory environment varies
substantially by jurisdiction.
The regulation of the telecommunications industry is changing rapidly,
and the regulatory environment varies substantially from state to state. There
can be no assurance that future regulatory changes will not have a material
adverse impact on the Company. Recent developments include, without
limitation, consideration by Congress of legislation that would modify the 1982
AT&T divestiture decree's (the "AT&T Divestiture Decree") restrictions on the
provision of long distance services between local access and transport areas
("LATAs"), as defined in the AT&T Divestiture Decree, by the Bell Operating
Companies ("BOCs"); consideration by the Justice Department and courts of
related BOC requests for waiver of the AT&T Divestiture Decree to permit them
to provide significant interLATA services (such as service outside their
respective regions, to mobile customers, and in other circumstances) or for the
elimination of the AT&T Divestiture Decree altogether; action by the Federal
Communications Commission (the "FCC") or state public utility or service
agencies ("PUCs") changing access rates charged by local exchange carriers
("LECs") and making other related changes to access and interconnection
policies, certain of which could have adverse consequences for the Company;
related FCC and state regulatory proceedings considering additional
deregulation of LEC access pricing; a pending FCC rulemaking on "billed party
preference" that could affect the Company's provision of operator services; and
various legislative and regulatory proceedings that would result in new local
exchange competition.
Transmissions from earth stations to all satellites, transmissions
from microwave and other transmitters, reception from international satellites,
and transmission of international traffic by any means, including satellite and
undersea cable, must be pursuant to license or other authorizations issued by
the FCC. The Company has operating authority or has made other suitable
arrangements to transmit and/or receive signals from all locations where it
currently offers satellite transmission and/or reception service. Although the
Company has never had a license application denied by the FCC, there can be no
assurance that the Company will receive all authorizations or licenses
necessary for new communications services or that delays in the licensing
process will not adversely affect the Company's business. Most of the
Company's services are deemed common carriage and as such must be provided at
just and reasonable rates and free of all unlawful discrimination. The Company
monitors compliance with federal, state and local regulations governing the
discharge and disposal of hazardous and environmentally sensitive materials,
including the emission of electromagnetic radiation. Although the Company
believes that it is in compliance with such regulations, there can be no
<PAGE> 9
assurance that any such discharge, disposal or emission might not expose the
Company to claims or actions that could have a material adverse effect on
financial results. See Item 1 - "Business -- Regulation" contained in the 1994
Form 10-K which is hereby incorporated herein by reference.
Competition Risks
The Company faces intense competition in providing long distance
telecommunications services. Domestically, the Company competes for interLATA
services with other national and regional IXCs, including AT&T, MCI and Sprint;
with respect to interLATA long distance services, with AT&T, MCI, Sprint, the
LECs and other IXCs, where permissible; and with respect to operator service,
with AT&T and other operator service providers. Internationally, the Company
competes for services with other IXCs, including AT&T, MCI and Sprint. Certain
of these companies have substantially greater market share and financial
resources than the Company, and some of them are the source of communications
capacity used by the Company to provide its own respective services. The
Company expects to encounter increasing competition from major domestic and
international communications companies, including AT&T, MCI and Sprint. In
addition, in the future, the Company may be subject to additional competition
due to the development of new technologies. For example, even though fiber-
optic networks, such as that of WilTel, for long distance transmission are now
widely used, it is possible that the desirability of such networks could be
adversely affected by changing technology. The telecommunications industry is
in a period of rapid technological evolution, marked by the introduction of new
product and service offerings. The Company cannot predict which of many
possible future product and service offerings will be important to maintain its
competitive position or what expenditures will be required to develop and
provide such products and services. See Item 1 - "Business -- Competition"
contained in the 1994 Form 10-K which is hereby incorporated herein by
reference.
Management Control
As of April 6, 1995, the current directors and executive officers of
the Company and their affiliates beneficially owned approximately 30% of the
outstanding shares of Common Stock, including shares which may be acquired upon
exercise of options and warrants and conversion of Preferred Stock. Metromedia
Company alone was the beneficial owner of approximately 16% of such shares,
including approximately 21.9 million shares of Common Stock issuable upon
conversion of Series 1 Preferred Stock. This level of stock ownership by
management could result in its ability to substantially influence the outcome
of voting on proposals submitted to a vote of shareholders, such as the
election of directors, amendments to the Amended and Restated Articles of
Incorporation of the Company, and potential acquisitions of the Company by
other companies.
Anti-Takeover Provisions
The Amended and Restated Articles of Incorporation of the Company
contain provisions (a) requiring a 70% vote for approval of certain business
combinations with certain 10% shareholders unless approved by a majority of the
continuing Board of Directors or unless certain minimum price, procedural and
other requirements are met; (b) restricting aggregate beneficial ownership of
the capital stock of the Company by foreign shareholders to 20% of the total
<PAGE> 10
outstanding capital stock, and subjecting excess shares to redemption; and
(c) requiring a two-thirds vote of the holders of the Series 2 Preferred Stock
to approve certain extraordinary transactions or, alternatively, redemption of
such stock at a specified premium. In addition, the Bylaws of the Company (a)
contain requirements regarding advance notice of nomination of directors by
shareholders, and (b) restrict the calling of special meetings by shareholders
to those owning shares representing not less than 40% of the votes to be cast.
These provisions may have an "anti-takeover" effect. See "Information
Regarding Resurgens -- Amendments to Resurgens' Restated Articles of
Incorporation -- LDDS Merger Agreement," "Proposals No. 1 and 2 - The Proposed
Mergers -- Description of the Series 2 Preferred Stock" and "-- Special
Redemption Provisions" contained in the 1993 Joint Proxy Statement/Prospectus,
which are hereby incorporated herein by reference.
RECENT DEVELOPMENTS
On December 30, 1994, the Company acquired IDB pursuant to the merger
(previously defined as the "IDB Merger") of a wholly owned subsidiary with and
into IDB. Upon effectiveness of the IDB Merger, each outstanding share of IDB
common stock, $.01 par value per share (the "IDB Common Stock"), was converted
into the right to receive 0.476879 of a share of common stock, $.01 par value
per share, of the Company (the "LDDS Common Stock") resulting in the issuance
of a total of approximately 35,881,000 shares of LDDS Common Stock. In
addition, the Company assumed, on a subordinated basis, jointly and severally
with IDB, the obligations of IDB to pay the principal of and interest on $195.5
million 5% convertible subordinated notes due 2003, issued by IDB. The IDB
Merger was accounted for as a "pooling of interests" for financial reporting
purposes and accordingly, the Company's financial statements for the periods
prior to the IDB Merger have been restated to include the results of IDB for
all periods presented.
On January 5, 1995, the Company completed the acquisition of WilTel
for approximately $2.5 billion in cash (previously defined as the "WilTel
Acquisition"). The WilTel Acquisition was effected pursuant to a Stock
Purchase Agreement dated as of August 22, 1994, as amended, by and among the
Company, The Williams Companies, Inc. ("Williams") and WTG Holdings, Inc. The
WilTel Acquisition is being accounted for as a purchase for financial reporting
purposes. WilTel, through its subsidiaries, is a full service
telecommunications company providing data and voice transmission services
worldwide. WilTel operates approximately 11,000 miles of fiber optic cable and
digital microwave facilities and has access to approximately 40,000 miles of
additional digital transmission network facilities through network sharing and
lease agreements with other carriers. Operations of WilTel also include
domestic and international private line and switched long distance services.
Certain historical financial information concerning IDB is included in
the Company's Current Report on Form 8-K dated December 15, 1994 (filed
December 19, 1994). Certain historical financial information concerning the
WilTel Network Services operations of WilTel, and certain pro forma financial
information regarding the Company (with and without WilTel), are included in
the Company's Current Report on Form 8-K dated August 22, 1994 (as amended by
the Company's Current Report on Form 8-K/A filed April 19, 1995). See
"Available Information" and "Incorporation by Reference."
<PAGE> 11
THE COMPANY
The Company is one of the four largest long distance
telecommunications companies in the United States, based on 1993 revenues. The
Company provides long distance telecommunications services through its network
of fiber optic cables, digital microwave and fixed and transportable satellite
earth stations to business and residential customers, with service to points
throughout the nation and is a full service provider of international
telecommunications services as well as specialized broadcasting services. The
products and services provided by the Company include: switched and dedicated
long distance products, 800 services, calling cards, operator services, private
lines, frame relays, debit cards, conference calling, advanced billing systems,
facsimile and data connections, television and radio transmission and mobile
satellite communications.
The Company was organized in 1983. Its operations have grown as a
result of management's emphasis on a four-point growth strategy, which includes
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 September 15, 1993, a three-way merger occurred
whereby (i) Metromedia Communications Corporation ("MCC") merged with and into
Resurgens, and (ii) LDDS Communications, Inc., a Tennessee corporation ("LDDS-
TN"), merged with and into Resurgens (the "Prior Mergers").
At the time of the Prior Mergers, the name of Resurgens, the legal
survivor, was changed to LDDS Communications, Inc. and the separate corporate
existences of LDDS-TN and MCC terminated. For accounting purposes, however,
LDDS-TN was the survivor because the former shareholders of LDDS-TN acquired
majority ownership of the Company.
The Company's principal executive offices are located at 515 East
Amite Street, Jackson, Mississippi 39201-2702 and its telephone number is
(601) 360-8600.
SELLING SHAREHOLDER
In connection with the acquisition by the Company of Touch 1 on
January 31, 1995 (the "Acquisition"), 639,833 Shares (the "Existing Shares")
were issued to the Selling Shareholder. In addition, up to an aggregate of
446,979 Shares (the "Additional Shares") are issuable to the Selling
Shareholder on each of the first three anniversaries of the closing date of the
Acquisition, subject to a revenue-based formula described in a certain
Management and Consulting Agreement between a subsidiary of the Company and
Touch 1 Communications, Inc., an Alabama corporation. In no event will more
than one-third of the Additional Shares be issued to the Selling Shareholder on
any one anniversary of the closing date of the Acquisition.
Neither the Selling Shareholder nor any of its directors or officers
is an affiliate of the Company, and the Selling Shareholder presently owns
beneficially less than one percent of the outstanding Common Stock.
As of the close of business on April 18, 1995, the Selling Shareholder
beneficially owned 639,833 Shares, which were the only shares of Common Stock
held by the Selling Shareholder. The Selling Shareholder has sole voting and
investment power with respect to the Existing Shares. In addition, the Selling
<PAGE> 12
Shareholder may be issued 446,979 Additional Shares, as described above. All
such shares may be offered from time to time hereunder.
PLAN OF DISTRIBUTION
The Shares offered hereby may be sold by the Selling Shareholder or by
pledgees, donees, transferees or other successors in interest (collectively
with the Selling Shareholder, the "Sellers") acting as principals for their own
accounts. The Company will not receive any of the proceeds of this offering.
The Sellers, directly or through brokers, dealers, underwriters,
agents or market makers, may sell some or all of the Shares. Any broker,
dealer, underwriter, agent or market maker participating in a transaction
involving the Shares may receive a commission from the Sellers. Usual and
customary commissions may be paid by the Sellers. The broker, dealer,
underwriter or market maker may agree to sell a specified number of the Shares
at a stipulated price per Share and, to the extent that such person is unable
to do so acting as an agent for the Sellers, to purchase as principal any of
the Shares remaining unsold at a price per Share required to fulfill the
person's commitment to the Sellers.
A broker, dealer, underwriter or market maker who acquires the Shares
from the Sellers as a principal for its own account may thereafter resell such
Shares from time to time in transactions (which may involve block or cross
transactions and which may also involve sales to or through another broker,
dealer, underwriter, agent or market maker, including transactions of the
nature described above) on The Nasdaq Stock Market, in negotiated transactions
or otherwise, at market prices prevailing at the time of the sale or at
negotiated prices. In connection with such resales, the broker, dealer,
underwriter, agent or market maker may pay commissions to or receive
commissions from the purchasers of the Shares. The Sellers also may sell some
or all of the Shares directly to purchasers without the assistance of a broker,
dealer, underwriter, agent or market maker and without the payment of any
commissions.
The Company is bearing all of the costs relating to the registration
of the Shares (other than fees and expenses of counsel for the Selling
Shareholder). Any commissions, discounts or other fees payable to a broker,
dealer, underwriter, agent or market maker in connection with the sale of any
of the Shares will be borne by the Sellers.
Pursuant to the registration rights granted to the Selling Shareholder
in connection with the Acquisition, the Company has agreed to indemnify the
Selling Shareholder and any person who controls a Selling Shareholder against
certain liabilities and expenses arising out of or based upon the information
set forth or incorporated by reference in this Prospectus, and the Registration
Statement of which this Prospectus is a part, including liabilities under the
Securities Act. Any commissions paid or any discounts or concessions allowed
to any broker, dealer, underwriter, agent or market maker and, if any such
broker, dealer, underwriter, agent or market maker purchases any of the Shares
as principal, any profits received on the resale of such Shares, may be deemed
to be underwriting commissions or discounts under the Securities Act.
<PAGE> 13
LEGAL MATTERS
The legality of the shares of Common Stock offered hereby has been
passed upon for the Company by Bryan Cave, St. Louis, Missouri.
EXPERTS
The consolidated financial statements and schedule of the Company as
of December 31, 1994 and 1993, and for each of the years in the three-year
period ended December 31, 1994, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are included in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994, and are incorporated herein by reference,
in reliance upon the authority of such firm as experts in accounting and
auditing in giving said reports.
The combined financial statements of WilTel Network Services as of
December 31, 1994 and 1993 and for each of the three years in the period ended
December 31, 1994, incorporated by reference in this Prospectus and
Registration Statement, have been audited by Ernst & Young LLP, independent
auditors, to the extent indicated in their reports thereon, also incorporated
by reference in the Registration Statement. Such combined financial statements
are incorporated by reference herein in reliance upon such reports given upon
the authority of such firm as experts in accounting and auditing.
The consolidated balance sheet of IDB Communications Group, Inc. and
its subsidiaries as of December 31, 1993 and the consolidated statements of
operations, cash flows and stockholders' equity for the years ended
December 31, 1993 and 1992 and the related financial statement schedule for the
years then ended (such financial statements and the financial statement
schedule have not been separately included herein or incorporated by reference
in this prospectus) have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, which has been incorporated herein by
reference from the LDDS Communications, Inc. Annual Report on Form 10-K, and
has been so incorporated in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
