<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 29, 2000
ICG COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-11965 84-1342022
(State or other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
161 Inverness Drive West
Englewood, Colorado 80112
(Address of principal executive
offices including Zip Code)
ICG HOLDINGS (CANADA) CO.
(Exact name of registrant as specified in its charter)
Canada 1-11052 Not Applicable
(State or other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
161 Inverness Drive West
Englewood, Colorado 80112
<PAGE>
(Address of principal executive
offices including Zip Code)
ICG HOLDINGS, INC.
(Exact name of registrant as specified in charter)
Colorado 33-96540 84-1158866
(State or other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
161 Inverness Drive West
Englewood, Colorado 80112
(Address of principal executive
offices including Zip Code)
ICG FUNDING, LLC
(Exact name of registrant as specified in charter)
Delaware 333-40495 84-1434980
(State or other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
161 Inverness Drive West
Englewood, Colorado 80112
(Address of principal executive
offices including Zip Code)
(888)424-1144 and (303)414-5000
(Registrants' telephone numbers,
including area code)
N.A.
----------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events
In a press release dated February 29, 2000, ICG
Communications, Inc., a Delaware corporation (the "Company"), announced its
consolidated earnings information and results of operations for the Company's
1999 fourth quarter and year end. A copy of the press release is attached.
Item 7. Exhibit
(c) Exhibit
99.1 Press Release, dated February 29, 2000.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
Dated March 7, 2000 ICG COMMUNICATIONS, INC.
By: /s/ Harry R. Herbst
--------------------------------
Harry R. Herbst
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
ICG HOLDINGS (CANADA) CO.
By: /s/ Harry R. Herbst
--------------------------------
Harry R. Herbst
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
ICG HOLDINGS, INC.
By: /s/ Harry R. Herbst
--------------------------------
Harry R. Herbst
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
ICG FUNDING, LLC
By: /s/ Harry R. Herbst
--------------------------------
Harry R. Herbst
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
99.1 Press Release dated February 29, 2000
<PAGE>
[GRAPHIC OMITTED] FOR IMMEDIATE RELEASE
For more information:
Investor Contact Media Contact
Investor Relations Dept. Silvia McLachlan
(303) 414-5347 (303) 414-5325
[email protected] [email protected]
ICG Reports Fourth Quarter & Year-end 1999 Results
133,000 Lines Installed in 4th Quarter
ENGLEWOOD, COLORADO (February 29, 2000)--ICG Communications, Inc. (NASDAQ: ICGX)
today announced fourth quarter and full-year 1999 results that reflect
significant revenue growth and improved operations. ICG installed a record
133,000 net business access lines and Internet service provider (ISP) ports
during the fourth quarter, bringing the year-end total to 731,000, more than
double the year-end 1998 total. Approximately 80 percent of lines provisioned
during the year are for Internet access ports for ISP customers, where ICG's
national network and excellent customer service have enabled the Company to
capture an increasing share of this new, high growth market. ICG continues as a
leader among competitive local telephone companies, increasing the number of
business lines in service by more than 40 percent during 1999. Further, the
Company recorded full-year revenue of $479.2 million, reflecting 58 percent
growth over 1998 adjusted for discontinued operations, and realized a 50 percent
gross operating margin on revenue versus 38 percent for 1998.
"During 1999, we demonstrated remarkable growth in terms of revenue, lines in
service and network capability," said J. Shelby Bryan, chairman and chief
executive officer of ICG. "We initiated an aggressive plan to expand our
national network, extended our product portfolio through alliances with
broadband and application providers, and added substantial management expertise.
Yesterday, we announced $750 million in equity funding and today additional
vendor financing that brings total capital raised year-to-date to nearly $1.2
billion. These actions clearly position ICG to deliver accelerated growth in
2000 and meet the changing telecommunications needs of our customers."
<PAGE>
Highlights -- Fourth Quarter and 1999 in Review
o Recorded fourth quarter revenue of $142.1 million reflecting 23 percent
sequential and 45 percent year-over-year growth.
o Recorded positive fourth quarter EBITDA of $23.1 million.
o Initiated service in six, new major market areas.
o Provisioned a record 133,000 lines in the fourth quarter, a 48 percent
sequential increase and a 110 percent increase over fourth quarter 1998.
o Entered contracts in 1999 to supply over 700,000 RAS and IRAS (remote
access services) ports to large, established Internet service providers.
o Completed sales in the fourth quarter of the company's FOTI and
Satellite Services divisions for net cash proceeds of $122.0 million,
bringing 1999 total net proceeds from non-core asset sales and related
securities to $404.9 million.
o Centralized the corporate structure to drive economies of scale and opened
two new provisioning centers, streamlining operations from 30 locations.
o Signed a Memorandum of Understanding with Covad Communications to jointly
develop voice over digital subscriber line (VoDSL) technology to integrate
voice and broadband data capability.
o Collected $29.1 million in the fourth quarter for reciprocal compensation
revenue and a total of $86.3 million for the year.
o Completed an aggressive full-year capital program with cash expenditures and
capital leases totaling $735.2 million that added significant long haul
capacity, new voice and data switches, optical transmission equipment and new
collocation sites.
o Initiated the upgrade of the Company's operating support systems with the
installation of a state-of-the-art billing system and the beginning phases of
the deployment of a new end-to-end Telcordia OSS platform.
Operations Review
During 1999, ICG added 376,000 business lines and access ports and had contracts
in place to provision approximately one-half million more in 2000. At year-end
1999, ICG's network served approximately 10 percent of U.S. Internet users, with
market share expected to increase in 2000. In addition, total network minutes of
use increased from approximately 6 to over 11 billion per quarter, from fourth
quarter 1998 to fourth quarter 1999. Year-end 1999 total lines in service of
731,000 include fourth quarter net installations of 133,000 plus a year-end
adjustment that added net 13,000. In addition, ICG increased the percent of
lines "on switch" to over 90, up from approximately 75 percent at year-end 1998.
New infrastructure and capacity added during 1999 included:
o 2,861 new building connections;
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o 18,000 miles of high capacity long-haul service;
o 26 voice and data switches;
o 88 new collocation sites with regional incumbent telephone
companies;
New infrastructure and capacity added during 1999 include (continued):
o 23 ICG collocation sites for ISP customer equipment;
o Approximately 70,000 square feet of ICG collocation space;
o 181 OC48 and 3 new OC192 Sonet transmission equipment systems;
In 1999, ICG launched a network expansion program to add 22 major
metropolitan areas by year-end 2000. By year-end 1999, services were being
offered in six of these markets: Boston, New York, Washington, D.C., Miami,
Chicago and Seattle.
Long-term contracts signed with major Internet companies such as The Microsoft
Network, L.L.C., Spinway.com (in collaboration with its e-commerce partner Kmart
Corporation), NetZero, Inc. and several others, illustrate ICG's leadership
among Internet infrastructure providers. Through the year, sales to ISPs
transitioned from basic Internet access services to remote access services,
which better employ the capabilities at the ICG hub to manage and route Internet
traffic. By providing more advanced network services for its ISP customers, ICG
increases revenue per line, minimizes the ISP's capital outlay and improves the
quality of service to the end-user.
Outlook
By year-end 2000, ICG has a target to increase lines in service to over 1.5
million, again more than doubling year-over-year totals. Network build-out plans
into new, major metropolitan areas are driven by existing ISP contracts yet
engineered to readily meet expected increases in demand. This "smart-build"
design will enable the company to quickly deliver the infrastructure
requirements associated with growth in ISP business as well as open new markets
for accelerated growth in sales to local businesses planned for 2001. Beyond
network expansion, ICG is focused on delivering value-added services and
continues to introduce products and services that complement its existing
portfolio to meet the changing and growing demands of both its ISP and business
customers.
The company recently completed restructuring of its management team with the
addition of two experienced industry leaders to head up network services and
sales and marketing. In addition, over 350 talented new employees have been
hired over the past six months, including experienced marketing, sales and
product development leaders.
Funding raised over the last 60 days of nearly $1.2 billion will fund ICG's
business plan into 2001. Completion of the 2000 business plan will position
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ICG for even more aggressive line growth, revenue growth and EBITDA growth in
2001. The new employees, in combination with the company's increased funding,
are key elements to ensure delivery of ICG's business plan for 2000 and beyond.
Financial Review
Revenue
Fourth quarter revenue of $142.1 million reflects 23 percent sequential growth
over third quarter revenue of $115.2 million. Revenue for the year totaled
$479.2 million, a 58 percent increase over 1998, adjusted for discontinued
operations. Local services revenue of $299.9 million for 1999 accounts for 63
percent of total revenue and includes revenue from ISP customers, business
customers for local services and reciprocal compensation charges for call
termination. Special access revenue increased during the fourth quarter to $38.5
million from $29.3 million in the third quarter, including recognition of $13.0
million of revenue related to the June 1999 fiber optic lease agreement with a
long-haul carrier. Annual special access revenue of $113.9 million was up 53
percent over 1998. Long distance revenue was $4.0 million for the fourth quarter
and $18.7 million for the year. Switched termination revenue was $13.3 million
for the quarter and modestly decreased year over year to $46.7 million.
Operating Costs and Gross Operating Margin
Fourth quarter operating costs of $59.5 million resulted in full year operating
costs of $238.9 million. The 1999 gross operating margin of 50 percent favorably
compares to 1998 of 38 percent. The higher gross operating margin is due to
increased volume on ICG's network that greatly improved network efficiency, and
higher margin revenue per line/port from remote access services and special
access services. Fourth quarter operating costs were lower than the third
quarter primarily due to a fourth quarter 1999 in-depth management review of
network costs that was conducted following the centralization of network
functions. The analysis identified $9.5 million in costs from the first nine
months of 1999 that related to capital activities under the existing ICG policy.
Selling, general and administrative (SG&A) expenses
SG&A expenses of $59.4 million for the fourth quarter are up approximately $10.0
million over the prior quarter (excluding the one-time third quarter provision
for doubtful accounts of $45.2 million) as a result of costs associated with
increased fourth quarter revenue and an acceleration of the company's expansion
plan. In addition, fourth quarter SG&A included approximately $3.5 million
4
<PAGE>
for one-time charges primarily related to Y2K initiatives and organizational
changes.
Earnings
The fourth quarter loss from continuing operations of $100.0 million, or $2.10
per share, resulted in a full-year loss from continuing operations of $466.5
million or $9.90 per share. Income from discontinued operations for 1999 was
$36.8 million. This includes the 1999 results of operations from the company's
FOTI and Satellite Services divisions that were sold in October and December, as
well as the gains and losses recorded on the disposals of these divisions.
Additionally, the company recorded an extraordinary gain on the sale of NETCOM
On-Line Communication Services, Inc. of $195.5 million for 1999. Including these
non-recurring items, the loss for the quarter was $52.7 million, or $1.11 per
share, and for the year totaled $234.2 million or $4.97 per share.
Reciprocal Compensation
During the fourth quarter, the company received $29.1 million in reciprocal
compensation payments from incumbent local exchange carriers, for a total of
$86.3 million collected for the year. In the third quarter, the company recorded
an allowance of $45.2 million for potentially non-collectible accounts
receivable related to tandem and transport elements of reciprocal compensation
recorded through June 30, 1999, and the company suspended revenue recognition
for these services subsequent to June 30, 1999. However, the company continues
to bill and pursue collection for these services.
Capital Expenditures and Liquidity
Fourth quarter capital expenditures, including capital leases, were $360.9
million and the full-year capital expenditures totaled $735.2 million. The
fourth quarter includes a $135.3 million capital lease that will expand the
company's long-haul network capacity.
Subsequent to Year-end
The company entered a multi-year contract to lease local network capacity to a
long-haul carrier for $126.5 million and expects to recognize revenue for this
transaction over a six-year period beginning in the second half of 2000.
The company collected an additional $29 million in reciprocal compensation.
In January 2000, ICG signed a vendor financing commitment letter with Cisco
Systems Capital Corporation, the financing arm of Cisco Systems Inc., for up to
$180 million. Purchases are for equipment that will expand access and
5
<PAGE>
transport capacity, as well as provide greater capability and reliability for
broadband deliveries.
In February 2000, ICG announced that it is raising $750 million in equity
funding from investors that included affiliates of Liberty Media Corporation,
Hicks, Muse, Tate & Furst Incorporated and Gleacher Capital Partners. The
investment will be in the form of 8% convertible preferred stock and warrants.
In February 2000, ICG agreed to a common stock share exchange with Teligent, Inc
and signed a memorandum of understanding with Teligent to foster a relationship
that will identify and implement operating efficiencies between the two
companies networks and services.
In February 2000, ICG entered into an agreement with Lucent Technologies for a
up to $250 million in vendor financing. The commitment is subject to
finalization of legal documentation and the satisfaction of certain conditions.
Equipment purchases are expected to include Lucent switches and accompanying
hardware and software that will allow ICG to deliver advanced voice and data
products.
Forward Looking Statement Disclosure
Information and statements presented in this press release may contain forward
looking disclosures, expressed or implied, that are based on the beliefs of
management as well as assumptions made based on information currently available
to management. These forward looking statements and information involve risks
and uncertainties including, but not limited to, future demand for the company's
services, general economic conditions, government regulations, competition and
customer strategies, capital deployment, the impact of pricing and other risks
and uncertainties. Should one or more of these risks materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those described in this press release as anticipated, believed, estimated or
expected. These risks are detailed from time to time in various reports filed by
ICG with the Securities and Exchange Commission, including Forms 10-K (filed for
the year-ended December 31, 1998 and to be filed for the
6
<PAGE>
year-ended December 31, 1999) and Forms 10-Q filed quarterly subsequent to March
31, June 30 and September 30, 1999.
7
<PAGE>
Key Operating Statistics
- --------------------------------------------------------------------------------
As of, Dec. 31, Sep. 30, June 30, Mar. 31, Dec. 31,
1999 1999 1999 1999 1998
- --------------------------------------------------------------------------------
Access lines/ports in 730,975 584,827 494,405 418,610 354,482
service
- --------------------------------------------------------------------------------
Total port capacity* 932,143 -- -- -- 584,047
- --------------------------------------------------------------------------------
Fiber route miles
Operational 4,596 4,449 4,406 4,351 4,255
Under construction 531 -- -- -- --
- --------------------------------------------------------------------------------
Fiber strand miles
Operational 174,644 167,067 164,416 155,788 134,152
Under construction 18,564 -- -- -- --
- --------------------------------------------------------------------------------
Buildings connected
On network 963 939 874 789 777
Hybrid 7,115 6,476 5,915 5,337 4,620
----------------------------------------------------
Total buildings connected 8,078 7,415 6,789 6,126 5,397
- --------------------------------------------------------------------------------
Switches
Circuit 31 29 29 29 29
Data - Frame relay 16 16 16 17 16
------------------------------------------------
Data - ATM 24
Total switches 71 45 45 46 45
- ----------------------------------------------------------------------------
Collocations with ILECs 147 139 126 111 59
- ----------------------------------------------------------------------------
* Customer port equivalent
Additional Year-End 1999 Statistics:
o Long-haul capacity under long-term leases: 18,000 miles
o ICG customer collocations: 145
o VoIP Gateways: 140
o SS7 ports: 388
<PAGE>
[LOGO]
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
($ in thousands, except per share data)
<TABLE>
<CAPTION>
Comparative periods
-------------------------------------------------
Sequential Year-over-year
Three months --------------------- -------------------
ended, Three months ended, Three months ended,
12/31/99 9/30/99 % Change 12/31/98 % Change
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue:
Local services $ 86,318 $ 69,454 24% $ 60,457 43%
Long distance 3,968 4,541 (13%) 5,160 (23%)
Special access 38,524 29,328 31% 20,606 87%
Switched terminating access 13,265 11,843 12% 11,825 12%
- --------------------------------------------------------------------------------------------------------------------------------
Total revenue 142,075 115,166 23% 98,048 45%
- --------------------------------------------------------------------------------------------------------------------------------
Operating costs (59,536) (66,284) (10%) (50,147) 19%
Selling, general and administrative (59,415) (94,558) (37%) (45,454) 31%
- --------------------------------------------------------------------------------------------------------------------------------
EBITDA (before nonrecurring and
noncash charges) 23,124 (45,676) NA 2,447 845%
- --------------------------------------------------------------------------------------------------------------------------------
Depreciation and amortization (48,102) (45,079) 7% (37,617) 28%
Provision for impairment of long-lived assets (2,515) - NA (4,379) (43%)
Other, net (296) (626) (53%) (1,786) (83%)
- --------------------------------------------------------------------------------------------------------------------------------
Operating loss (27,789) (91,381) (70%) (41,335) (33%)
- --------------------------------------------------------------------------------------------------------------------------------
Interest expense (60,783) (52,891) 15% (48,153) 26%
Interest income 4,631 3,772 23% 6,226 (26%)
Other, net 154 (333) NA (156) (199%)
- --------------------------------------------------------------------------------------------------------------------------------
Loss from continuing operations before income
taxes, preferred dividends and extraordinary gain (83,787) (140,833) (41%) (83,418) 0%
- --------------------------------------------------------------------------------------------------------------------------------
Income tax expense (25) - NA (45) (44%)
Accretion and preferred dividends on preferred
securities of subsidiaries (16,158) (15,694) 3% (14,409) 12%
Loss from continuing operations before extraordinary gain (99,970) (156,527) (36%) (97,872) 2%
Discontinued operations:
(Loss) income from discontinued operations (981) 748 (231%) (20,342) (95%)
(Loss) gain on disposal of discontinued operations 45,784 - NA (576) NA
- --------------------------------------------------------------------------------------------------------------------------------
44,803 748 5890% (20,918) (314%)
- --------------------------------------------------------------------------------------------------------------------------------
Extraordinary gain on sales of operations
of NETCOM, net of income taxes 2,482 - NA - NA
================================================================================================================================
Net loss $ (52,685) $ (155,779) 66% $ (118,790) (56%)
Net loss per share - basic and diluted:
Loss from continuing operations $ (2.10) $ (3.31) 37% $ (2.13) (1%)
Income (loss) from discontinued operations 0.94 0.02 (5852%) (0.45) (307%)
Extraordinary gain 0.05 - NA - NA
- --------------------------------------------------------------------------------------------------------------------------------
Net loss per share - basic and diluted $ (1.11) $ (3.29) 66% $ (2.58) (57%)
================================================================================================================================
Weighted average number of shares outstanding
- basic and diluted 47,618 47,320 46,010
================================================================================================================================
</TABLE>
<PAGE>
[logo]
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
($ in thousands, except per share data)
<TABLE>
<CAPTION>
Years ended,
-----------------------------
12/31/99 12/31/98 % Change
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue:
Local services $ 299,941 159,197 88%
Long distance 18,733 20,591 (9%)
Special access 113,852 74,489 53%
Switched terminatAng access 46,700 49,040 (5%)
- -----------------------------------------------------------------------------------------------
Total revenue 479,226 303,317 58%
- -----------------------------------------------------------------------------------------------
Operating costs (238,927) (187,260) 28%
Selling, general and administrative (239,756) (158,153) 52%
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
EBITDA (before nonrecurring and noncash charges) 543 (42,096) NA
- -----------------------------------------------------------------------------------------------
Depreciation and amortization (174,239) (91,927) 90%
Provision for impairment of long-lived assets (31,815) (4,877) 552%
Other, net (387) (1,786) (78%)
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Operating loss (205,898) (140,686) 46%
- -----------------------------------------------------------------------------------------------
Interest expense (212,420) (170,015) 25%
Interest income 16,300 28,401 (43%)
Other, net (2,522) (1,118) 126%
- -----------------------------------------------------------------------------------------------
Loss from continuing operations before income taxes,
preferred dividends and extraordinary gain (404,540) (283,418) 43%
- -----------------------------------------------------------------------------------------------
Income tax expense (25) (90) (72%)
Accretion and preferred dividends on
preferred securities of subsidiaries (61,897) (55,183) 12%
- -----------------------------------------------------------------------------------------------
Loss from continuing operations before extraordinary (466,462) (338,691) 38%
- -----------------------------------------------------------------------------------------------
Discontinued operations:
Loss from discontinued operations (1,036) (77,577) (99%)
Gain (loss) on disposal of discontinued operations 37,825 (1,777) NA
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
36,789 (79,354) (146%)
- -----------------------------------------------------------------------------------------------
Extraordinary gain on sales of operations
of NETCOM, net of income taxes 195,511 - NA
- -----------------------------------------------------------------------------------------------
Net loss $ (234,162) (418,045) 44%
===============================================================================================
Net loss per share - basic and diluted:
Loss from continuing operations $ (9.90) (7.49) (32%)
Income (loss) from discontinued operations 0.78 (1.76) 144%
Extraordinary gain 4.15 - NA
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Net loss per share - basic and diluted $ (4.97) (9.25) 46%
===============================================================================================
Weighted average number of shares outstanding
- basic and diluted 47,116 45,194
===============================================================================================
</TABLE>
<PAGE>
[logo]
CONSOLIDATED CONDENSED BALANCE SHEETS (unaudited)
($ in thousands)
<TABLE>
<CAPTION>
December 31,
-----------------------------
1999 1998
- ---------------------------------------------------------------------------------------------
Assets:
<S> <C> <C>
Cash, cash equivalents and short-term investments $ 125,507 262,307
Receivables, net 168,731 113,559
Property and equipment, net 1,525,680 908,058
Other assets, net 200,703 202,883
Net assets of discontinued operations - 102,840
- ---------------------------------------------------------------------------------------------
Total assets $ 2,020,621 1,589,647
=============================================================================================
Liabilities and Stockholders' Deficit:
Accounts payable and accrued liabilities $ 198,000 81,989
Capital leases 206,760 67,792
Debt 1,906,697 1,599,044
Other liabilities 33,705 5,647
- ---------------------------------------------------------------------------------------------
Total liabilities 2,345,162 1,754,472
- ---------------------------------------------------------------------------------------------
Redeemable preferred securities of subsidiaries 519,323 466,352
Stockholders' deficit:
Common stock 478 464
Additional paid-in capital 599,282 577,940
Accumulated deficit (1,443,624) (1,209,462)
Accumulated other comprehensive loss - (119)
- ---------------------------------------------------------------------------------------------
Total stockholders' deficit (843,864) (631,177)
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Total liabilities and stockholders' deficit $ 2,020,621 1,589,647
=============================================================================================
Diluted shares (in thousands) 50,217 56,183
</TABLE>
