SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
\X\ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1993 OR
\ \ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ________________ to
_________________
Commission file number: 0-14972
IDB COMMUNICATIONS GROUP, INC.
(Exact name of Registrant as specified in its charter)
Delaware 93-0933098
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10525 West Washington Boulevard
Culver City, California 90232-1922
(Address of principal executive offices) (Zip code)
(213) 870-9000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of Class)
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) been subject to such filing
requirements for the past 90 days. Yes X No____
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of Registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of March 15, 1994, the aggregate market value of voting
stock held by nonaffiliates of the Registrant was
$1,249,300,356.
As of March 15, 1994, the Registrant had 74,030,982 shares of
Common Stock outstanding.
Documents Incorporated By Reference
None.
INDEX TO ANNUAL REPORT ON FORM 10-K
IDB COMMUNICATIONS GROUP, INC.
Page
PART I
Item 1.Business 3
Item 2.Properties 10
Item 3.Legal Proceedings 10
Item 4.Submission of Matters to a Vote of Security-Holders
10
PART II
Item 5.Market for Registrant's Common Equity and Related
Stockholder Matters 11
Item 6.Selected Financial Data 12
Item 7.Management's Discussion and Analysis of Financial
Condition
and Results of Operations 13
Item 8.Financial Statements and Supplementary Data 16
Item 9.Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures 16
PART III
Item 10.Directors and Executive Officers of the Registrant
17
Item 11.Executive Compensation 20
Item 12.Security Ownership of Certain Beneficial Owners and
Management 24
Item 13.Certain Relationships and Related Transactions
25
PART IV
Item 14.Exhibits, Financial Statement Schedules, and Reports
on
Form 8-K 27
PART I
ITEM 1. BUSINESS.
IDB Communications Group, Inc., a Delaware corporation
(the "Company" or "IDB"), operates a domestic and
international communications network providing international
private line and public switched long distance telephone
services, facsimile and data connections, television and radio
transmission services and mobile satellite communications
capabilities. The Company was established in 1983 by Jeffrey
P. Sudikoff, IDB's Chairman and Chief Executive Officer, to
provide transmission of sporting and music events to radio
stations nationally. Aided by the AT&T divestitures in 1984
and the opening of overseas telecommunications markets, the
Company has become a full service provider of international
telecommunications services as well as specialized
broadcasting services. The Company has expanded rapidly
through the growth of its existing businesses as well as
through the selective acquisition of complementary companies
which have provided strategic facilities, international
operating agreements and customers. The Company operates
through four service units: IDB WorldCom, IDB Broadcast, IDB
Mobile and IDB Systems.
The Company's principal executive offices are located at
10525 West Washington Boulevard, Culver City, California
90232-1922 and its telephone number is (213) 870-9000. "IDB"
or the "Company", unless the context otherwise requires,
refers to IDB Communications Group, Inc. and its subsidiaries.
IDB WorldCom
IDB WorldCom offers international private line and public
switched long distance telephone services to government and
commercial organizations worldwide. IDB WorldCom has private
line operating agreements in over 150 countries and has
significantly expanded the number of countries with which it
has public switched voice operating agreements from one at the
end of 1991 to over 50 at December 31, 1993. The Company
believes it is the fourth largest U.S.-based provider of
international long distance communications services based on
net revenues.
IDB WorldCom provides permanent and temporary domestic
and international private-line services to customers for a
number of applications. These applications generally involve
creating private, international point-to-point communications
links for clients who need special services, such as heavy
data and voice usage, lower cost and greater security. IDB
WorldCom has private line operating agreements with over 150
countries and is the carrier for many of the world's most
critical communications links, including the Washington-Moscow
hotline, the nuclear risk reduction circuit and launch control
circuits for the NASA Space Program. IDB WorldCom also
provides international private-line services for a range of
financial, airline, commercial and governmental communications
networks. Four U.S. Government agencies, eight international
common carriers and over 850 other customers use IDB's network
for private-line services. These customers include such
organizations as ABC, CBS, NBC, CNN, EDS, General Electric,
the Associated Press, Agence France Presse and Intel
Corporation.
IDB WorldCom also offers public switched international
telephone services worldwide and provides direct services to
more than 50 countries. IDB sells telephone services both to
corporate customers and to domestic long distance carriers
that lack transmission facilities to locations served by IDB
or need more transmission capacity. Accessing IDB's
international switching center via permanent domestic
connections or via dial-up access code, customers can make
international telephone calls. IDB's network also receives
inbound calls from foreign countries.
The Company has received permanent authority from the
U.S. Federal Communications Commission ("FCC") to provide
international public switched telephone service to over 150
countries and has entered into direct operating agreements
with over 50 of these countries. IDB is pursuing traffic
agreements with other U.S. and overseas telephone carriers to
provide similar services to additional countries as well as
provide "Phone USA" services and international 800, debit card
and calling card services.
In 1993, the Company significantly expanded its
international private line and public switched long distance
international telecommunications presence and capabilities
through the acquisitions of TRT Communications, Inc., a
Delaware corporation ("TRT"), and TC WorldCom AG, a
Switzerland corporation ("WorldCom Europe"). See "Recent
Events" below.
For the year ended December 31, 1993, revenues generated
from IDB's private line and public switched telephone services
totalled $166,917,000, which represented approximately 54% of
IDB's total 1993 revenues.
IDB Broadcast
IDB Broadcast provides radio and television broadcast
transmission services for major network, cable, syndication,
pay-per-view, sports and special event programmers. Services
are provided domestically and internationally on a full-time
or occasional-use basis using C-band and Ku-band technology,
and include uplink and downlink services, tape playback,
scrambling and resale of satellite transponder time. IDB is
also making increased use of terrestrial fiber transmission to
meet its customers' needs. Based on revenues, the Company
believes it is one of the largest suppliers of domestic
television and radio transmission services.
The Company's communications network provides for the
transmission and distribution of a variety of television
programming. Currently, television networks, cable systems,
producers of syndicated television programming and home
shopping networks use IDB's network for program distribution
or coverage of late-breaking news and special events from
locations throughout the United States and the world.
Customers for IDB Broadcast's services include ABC, CBS, NBC,
ESPN, CNN, Madison Square Garden, USA Network, Lifetime, The
Walt Disney Company, the BBC, Television New Zealand, European
Broadcasting Union and the Tokyo Broadcasting System. IDB is
the principal supplier of transmission services for holders
of television rights for Major League Baseball, National
Basketball Association and National Hockey League teams.
During 1993, IDB provided transmission services for
approximately 7,000 televised sporting events. IDB is also a
major supplier of transmission services for the thoroughbred
horse racing, harness racing and dog racing industries,
providing such services from over 50 race tracks to Las Vegas,
Nevada and other offtrack betting locations.
IDB distributes radio programming for a wide variety of
domestic and international broadcasting applications. During
1993, IDB provided radio transmission services for
approximately 6,000 sporting events, making IDB the leading
supplier of radio satellite communications services to holders
of broadcast rights for Major League Baseball, National
Football League and National Hockey League teams. IDB also
distributes radio programming to more than 3,500 domestic
radio stations affiliated with radio networks such as the
Unistar Radio Network. Radio networks, stations and program
syndicators use IDB's transportable and fly-away earth
stations for special events programming and live coverage of
late-breaking news from around the world, including locations
such as the Persian Gulf and the former Soviet Union.
Customers for IDB's radio services include ABC, CBS, Westwood
One, the BBC, European Broadcasting Union, KDD (Japan's
telecommunications authority), Digital Cable Radio and The
Walt Disney Company.
To support existing customers and attract new customers,
the Company operates a 24-hour Program Booking Center, which
acts as a clearinghouse for customer utilization of the IDB
network. The Program Booking Center is an ordering and
service support organization which provides phone-in, on-
demand scheduling of the full range of services of IDB
Broadcast. IDB's customers are able to place initial orders,
change orders, make special service requests and receive
scheduling updates for on-going services. IDB believes that
this centralized clearinghouse for access to its network
assists the Company in providing flexible and responsive
service to its customers.
For the year ended December 31, 1993, revenues generated
from IDB's television and radio transmission services totalled
$73,723,000, which represented approximately 24% of IDB's
total 1993 revenues.
IDB Mobile
IDB Mobile is a joint venture of IDB and Teleglobe
International (U.S.), Inc. of Canada. IDB Mobile provides
mobile satellite communications services to commercial and
private maritime, aviation and land mobile users, as well as
to AT&T and all other major U.S. telecommunications companies.
IDB Mobile also offers worldwide "turn-key" land mobile
satellite services by packaging portable satellite terminals
with Inmarsat satellite transmission.
IDB Mobile provides satellite communications services to
connect mobile units to the IDB communications network which
in turn allows the mobile units to establish a communications
link to private communications networks and the public
switched telephone networks. The quality of IDB Mobile's
aeronautical service is superior to the quality of traditional
ground mobile and airphone services which rely on ground-based
systems. In 1993, IDB provided satellite communications
services to over 7,500 customers in the shipping, fishing, oil
and cruise ship industries. These services enable ships to
have on-board phone, facsimile and computer connectivity to
home offices and communications systems around the world. IDB
Mobile is one of only two companies currently providing mobile
satellite service within all four oceanic regions. The
Company has also provided satellite communications services
using portable, 80-pound satellite terminals which have been
used by reporters from the front lines of the Bosnian
conflict, as well as in Somalia and in support of expeditions
in Africa, the former Soviet Union and Antarctica.
For the year ended December 31, 1993, revenues generated
from the provision of mobile satellite communication services
totalled $40,931,000, which represented approximately 13% of
IDB's total 1993 revenues.
IDB Systems
Through its IDB Systems unit, the Company designs,
installs and integrates "turn key" transmission facilities and
communications networks primarily for international customers.
Services provided include fixed customer premise earth
stations, network management systems, system integration
consulting and project management. The Company regards these
services as an important part of its business because they
allow IDB to increase its customer base and expand network
connectivity.
The Company also provides diagnostic and maintenance
services for the satellite communications facilities it
constructs. The Company has recently completed major
installations in the People's Republic of China, Azerbaijan,
Eritrea, Iran, India, Somalia, Syria, Mexico and Italy. This
service unit also designs and assembles fixed earth stations
in the IDB satellite communications network.
For the year ended December 31, 1993, revenues generated
from the provision of systems integration services totalled
$20,423,000, which represented approximately 7% of IDB's total
1993 revenues.
The IDB Communications Network
IDB uses its communications network to provide its
customers with international private line and public switched
long distance telephone services, television and radio
transmission services, facsimile and data connections and
mobile satellite communications capabilities. Such services
are provided through the Company's network of domestic
terrestrial and trans-oceanic fiber optic cables, fixed and
transportable satellite earth stations and leased satellite
transponder capacity.
The Company has made considerable investment in
computerized monitoring systems, redundant circuits and back-
up power systems to help ensure reliable and high quality
service to its customers. On December 31, 1993, the Company
employed over 300 engineers and technicians. The Company's
engineers and technicians are based at key locations in the
IDB network to monitor network transmissions and perform earth
station and equipment installations, preventive maintenance
and repairs.
IDB provides network services for a spectrum of
applications by creating several kinds of communications
circuits. These include point-to-point transmissions, such as
phone calls, data and facsimile connections between offices,
and transmission of sporting, news or special events from the
event site to the studios of IDB's radio or television
customers, who then broadcast the event. IDB also provides
point-to-multipoint transmissions, or program distribution, in
which, for example, IDB transmits a data signal to a network
of small antennas or transmits the radio or television
programming of a network or program syndicator to its
affiliated stations. For point-to-multipoint transmission,
satellites generally are superior to other technologies
because they disperse a signal throughout a large geographic
area for cost-effective transmission. Satellites also permit
signal transmission from remote sites where no other
communications facilities are available and are used
particularly for television signals that cannot be transmitted
through conventional phone lines. For point-to-point
applications, the increasing availability of fiber optic
cable, which has sound quality comparable to satellite
circuits without the disadvantage of propagation delay (the
approximately one-quarter second delay between the time a
person speaks and is heard by the other party), has expanded
significantly IDB's routing options and network connectivity.
Facilities
The Company has international teleports in Los Angeles
and New York. These teleports, which include 22 international
gateway earth stations and approximately 50 domestic earth
stations, enable IDB to provide radio, television, private
line and public switched telephone communications to and from
locations throughout the world. The Company believes that
these teleports represent the largest concentration of
satellite transmission equipment in the United States. The
Company also owns fixed earth stations located in 33 other
metropolitan areas, including seven international gateway
earth stations in San Francisco and Washington, D.C., which
serve as central collection points for domestic traffic and
connect the network with international satellites. The
Company owns a number of transportable earth stations (which
are mounted on trucks or trailers) and fly-away earth stations
(which can be air-freighted to an event site and quickly
assembled). These mobile earth stations, most of which were
assembled by IDB, enable the Company to provide transmission
services to and from virtually any location in the world.
The Company owns fiber optic facilities on most major
international cable systems in the Pacific and Atlantic Ocean
regions, providing fiber optic cable connections between the
United States and the Pacific Rim and the United States and
Europe. The Company also owns fiber optic cable for services
to the former Soviet Union and in 1994 will purchase fiber
optic cable facilities to Latin America. Domestically, the
Company leases fiber optic cabling to connect various U.S.
cities, including New York City, Los Angeles, Washington,
D.C., Boston, San Francisco, Philadelphia, and Chicago. These
domestic fiber optic facilities, which are connected to the
fiber networks of GTE and Williams Telecommunications Group,
expand facilities and transmission options available to IDB's
customers.
The Company also has relationships with numerous
suppliers of transmission services who provide television
transmission services to IDB for sports and special events.
Some of these firms are under contract with the Company and
are sometimes used by IDB when such firms have transmission
facilities which can more readily reach the location of a
sporting event.
IDB leases 35 full-time transponders on domestic and
international satellites. To augment its leased time, the
Company also purchases transponder time at discounted rates
under bulk time commitments from satellite owners such as
AT&T, GTE Spacenet, Hughes Communications Galaxy, GE Americom,
Telesat Canada, Inmarsat, PanAmSat, Intelsat and Intersputnik.
Under certain transponder agreements, the Company receives
favorable rates if its purchases of transponder space exceed
certain minimum requirements, subject to retroactive charges
if the minimum levels are not satisfied. In May 1990, IDB
entered into an agreement with Communications Satellite
Corporation under which IDB committed to purchase a minimum of
$35,000,000 in maritime and aeronautical transponder services
over a five-year period that commenced in September 1991. See
"Management's Discussion and Analysis of Financial Condition
and Results of Operations" and Note 7 of Notes to Consolidated
Financial Statements of the Company.
Sales and Marketing
On December 31, 1993, IDB employed over 200 sales and
marketing personnel. The Company's sales and marketing
personnel concentrate their efforts within one of the
Company's four service units. The Company has developed
specific marketing programs and sales commission plans for
each of its units. Commission plans reward sales personnel
for renewal business from existing customers, additional
services for existing customers and business from new
customers. Each salesperson is assigned specific existing
accounts and is responsible for targeting new customers in the
assigned market.
IDB employs several marketing channels. Due to the high
percentage of recurring services provided to its customers,
IDB focuses on maintaining and increasing the usage level of
its current clients. In attracting major new accounts, the
Company benefits from the active involvement of senior
management. Other marketing efforts include focused
telemarketing and attendance at major conventions for targeted
user groups. In all of its marketing efforts, IDB tailors its
activities to the specific market being addressed.
Competition
Historically, the Company has emphasized customized
communications services and applications where the Company
could offer solutions with significant improvements in
transmission quality or ease of use. As the Company's network
has expanded to serve a broader range of users, IDB has
increasingly encountered competition from major domestic and
international communications companies, including AT&T, MCI
Communications Corporation ("MCI") and U.S. Sprint
Communications, Ltd. ("U.S. Sprint"), many of which have
significantly greater resources and more extensive domestic
and international satellite and fiber optic communications
networks than the Company.
For television transmission services, IDB competes with
Keystone Communications, Inc. and Reuters Television. Various
local teleports and small communications companies also
compete with certain of the Company's broadcasting
applications. Many cable networks own their own transmission
facilities. The Company believes that its extensive network
of facilities and its ability to react quickly to customers'
technical requirements and service needs are competitive
advantages in this market.
In providing radio transmission services and transmission
of live and special events radio programming, IDB generally
competes with satellite service companies. In the
distribution of programming to radio stations, IDB competes
primarily with ABC Radio Network and National Public Radio,
which provide satellite distribution of radio programming for
several program producers.
For resale of transponder capacity, the Company primarily
competes with satellite owners such as AT&T, GE Americom, GTE
Spacenet and Hughes Communications, all of which have
significantly greater resources than the Company. The Company
also competes with other resellers of transponder capacity.
For international transponder services, the Company competes
with Comsat, which enjoys a government granted monopoly
controlling access to the Inmarsat and Intelsat international
satellite systems. The Company uses both of these and other
satellite systems to meet its customers' requirements.
In providing mobile satellite services, the Company's
most significant competition is from Comsat, British Telecom,
Inc. and KDD. With respect to the maritime services currently
offered by the Company, price and convenience of service are
the principal competitive factors. In providing private-line
telephone, facsimile and data communications services, the
Company's most significant competition is from AT&T, MCI and
U.S. Sprint.
For most of the Company's communications services, the
factors critical to a customer's choice of a service provider
are cost, ease of use, speed of installation, broadcast
quality, reputation and, in some cases, geography and network
size. The Company has built a reputation as one of the most
responsive service providers, particularly when providing
customized communications services. IDB's array of
communications facilities and international relationships,
together with its extensive engineering and operations
capability, provide the Company with considerable flexibility
in tailoring cost-effective communications services to meet
its customers' requirements. This network allows IDB to
implement complex permanent and temporary communications
circuits to and from virtually any location in the world. The
Company believes that this responsiveness has often been the
determining factor in a customer's selection of IDB. The
Company's size also allows it to provide services more
promptly and conveniently, particularly when customer's needs
require rapid installation of service or unique solutions.
Many markets which are important to IDB are not large enough
for a substantially larger competitor to focus the resources
necessary to provide cost competitive and responsive service.
In addition, IDB's understanding of international
telecommunications technical and regulatory issues has often
allowed IDB to provide prompt solutions to the diverse
communications needs of multinational corporations, government
entities and news organizations.
Employees
On December 31, 1993, the Company had approximately 780
full-time employees, of whom approximately 470 provided
operational and technical services. The balance of the
Company's employees are engaged in sales and marketing,
administration and accounting. A majority of the Company's
employees are not represented by any labor union. Certain TRT
employees are covered by a collective bargaining agreement
that expires on April 30, 1994. From time to time, the
Company supplements its labor force with part-time employees
who operate transportable and fly-away earth stations during
periods of heavy demand for these services. The Company
considers its employee relations to be good and has not
experienced any work stoppages or labor difficulties.
Government Regulation
The Company's communications operations and services are
subject to regulation by the FCC. 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 a
license or other authorization granted by the FCC. FCC
licensing decisions or changes in U.S. government policies
increasing or decreasing access to non-Intelsat satellites or
other network components could adversely affect the Company.
No FCC authorization or any consent other than from the owner
of the material received is required for reception via
domestic satellites from points within the United States. The
Company can rely on a third party's license or authorization
when it transmits domestic traffic through earth stations
operated by that third party.
The FCC prescribes technical standards for transmission
equipment which change from time to time. The FCC also
requires a coordination process for earth stations operating
in the frequency band used by some of the satellites on which
the Company provides services to demonstrate that the earth
station will not interfere with land based microwave systems.
This requirement in some cases restricts how close an earth
station can be located to a customer and thus may require a
telephone line or other terrestrial link to be installed
between the customer and the earth station. Transmission
equipment must also be installed and operated in a manner that
avoids exposing humans to harmful levels of radio frequency
radiation.
The services of telecommunications common carriers must
be offered at just and reasonable rates and on a
nondiscriminatory basis, but the FCC does not currently
regulate market entry or exit by competitive domestic carriers
such as the Company. The Company is deemed a common carrier
for many of its services, but even if it were deemed to
be a common carrier for all of its services, the Company does
not believe that there would be any material impact on its
business operations or profitability. The transmission of
international traffic for customers, whether by satellite or
undersea cable, and the operation of satellite earth stations
that communicate with international satellites are subject to
more detailed regulation based upon special statutory
provisions and foreign policy considerations. As a result,
the Company is subject to entry and exit regulations,
restrictions on the number and type of transmissions it may
provide using certain international satellites and various
filing and reporting requirements with respect to its
international operations.
The Company holds numerous FCC licenses and other
authorizations required for the operation of its business.
Earth station and microwave licenses of the type described
below are normally granted for a period of ten years, except
that authorizations for certain transportable earth stations
are granted for a one year period. Generally, authorizations
to provide service are of indefinite duration and are valid
until revoked or surrendered, except that cable landing
license authorizations are issued for a period of twenty-five
years. Under current regulations, the conduct of the
Company's business requires a continuing process of applying
for new, modified and renewed licenses and authorizations from
the FCC. Although the Company has never had a license
application denied, 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.
The Company's rates and practices are subject to review
in the event of a third party complaint to the FCC or on the
FCC's own motion. The Company has been the subject of certain
third party complaints, but none has had or is expected to
have a materially adverse impact on the Company or its
business. To the extent that the Company is a common carrier,
FCC equal employment opportunity requirements apply.
A federal statute prohibits the issuance of the kind of
transmission licenses the Company's operations require to any
corporation with any officer or director who is not a U.S.
citizen or more than 20% of whose stock is owned of record or
voted by noncitizens or a foreign government or its
representatives. The statute would also bar the subsidiaries
from holding licenses if any officer or more than one-fourth
of the Company's directors were noncitizens or more than one-
fourth of the Company's shares of stock were owned of record
or voted by noncitizens or a foreign government or its
representatives and the FCC found that the public interest
would be served by the refusal or revocation of the licenses
under those circumstances. In order to allow foreign
ownership of the Company to exceed 25% without risk of refusal
or revocation of licenses pursuant to the Communications Act,
on December 17, 1992, the Company's subsidiaries that had been
holding the transmission licenses used by the Company, after
seeking and obtaining required approvals from the FCC,
assigned all of their common carrier earth station and
microwave licenses to Southwest Communications, Inc. ("SCI").
Messrs. Jeffrey P. Sudikoff, Edward R. Cheramy and Peter F.
Hartz, the Chief Executive Officer, President and Senior Vice
President, Sales and Marketing of the Company, own 49%, 40%,
and 11%, respectively, of the capital stock of SCI. The
Company entered into Operator Agreements with SCI on December
17, 1992. These Operator Agreements have initial terms of ten
years and provide for SCI to be the operator and FCC licensee
of the satellite earth stations and microwave stations owned
by the Company. After the initial term, the Operator
Agreements will continue on a year to year basis. The
Company's foreign ownership does not currently exceed 25%, but
it has exceeded that level in the past and may do so again in
the future. The Operator Agreements with SCI allow the
Company's Common Stock to be freely traded without the risk
that purchases by foreigners will create a violation of the
statutory restriction on alien ownership.
The placement of earth stations or other antennas is
typically subject to regulation under local zoning ordinances.
The export of certain telecommunications equipment requires
the authorization of the United States Department of Commerce,
the United States Treasury Department or the United States
Department of State. The Company is subject to foreign
regulation in certain countries, particularly those countries
where the Company operates its own facilities. To the extent
required, the Company has obtained the requisite authority to
operate in such countries.
Recent Events
On December 30, 1993, the Company consummated its
acquisition of WorldCom Europe in exchange for $10 million in
cash, plus other consideration. IDB previously held 40% of
the capital stock of WorldCom Europe, which it received in
connection with its acquisition of World Communications, Inc.
("WorldCom") in December 1992. WorldCom Europe, a provider of
international private line and public switched long distance
telephone services, is now part of IDB WorldCom. The
acquisition of WorldCom Europe expanded the Company's domestic
and international private line, public switched long distance
and satellite transmission services. The results of this
acquisition will be reflected in the Company's revenues and
results of operations for fiscal 1994 and are expected to be
positive.
On February 4, 1994, the Company effected a 3.15-to-1
Common Stock split in the form of a 215% Common Stock
dividend, payable on the Common Stock of the Company
outstanding at the close of business on January 21, 1994. The
stockholders received cash in lieu of fractional share
interests.
ITEM 2. PROPERTIES.
The Company owns real property at the Los Angeles
international teleport location consisting of an approximately
15,000 square foot building which houses radio and television
master control centers, an approximately 2,750 square foot
building which houses equipment related to the operation of
earth stations, and space for earth stations and parking
facilities. The Company leases additional space at the Los
Angeles teleport location for earth stations and related
facilities. The Company also leases space through May 2004 at
the New York international teleport location for earth
stations and a television and radio master control facility.
The Company also leases space at the Niles Canyon, California
teleport location for earth stations and related facilities.
The Company leases office and technical operations space in
New York, New York, Rockville, Maryland and Houston, Texas,
and leases office and industrial space in Dallas, Texas, where
its systems integration operations are located. Additionally,
the Company leases fiber optic facilities and transponder
capacity pursuant to long-term agreements. See "Business --
Facilities," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Note 7 of
Notes to Consolidated Financial Statements of the Company.
ITEM 3. LEGAL PROCEEDINGS.
As of March 28, 1994, the Company was involved in certain
legal proceedings, none of which is expected to have a
material adverse impact on the financial condition or business
of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The Company's Common Stock is traded in the NASDAQ
National Market System under the symbol "IDBX." The following
table sets forth the range of high and low closing sales
prices on the NASDAQ National Market System for the indicated
periods:
<TABLE>
<CAPTION>
<S> <C> <C>
High Low
Fiscal Year Ended
December 31, 1992:
First Quarter $ 5.74 $ 3.59
Second Quarter 5.60 4.16
Third Quarter 5.48 4.08
Fourth Quarter 7.14 4.84
Fiscal Year Ended
December 31, 1993:
First Quarter $ 8.57 $ 6.27
Second Quarter 13.10 8.41
Third Quarter 17.26 11.98
Fourth Quarter 18.17 13.57
</TABLE>
As of March 15, 1994, the number of record holders of the
Company's Common Stock was 732.
On November 10, 1992, the Company issued a 5% Common
Stock dividend to the record holders of IDB Common Stock as of
September 30, 1992. The stock prices listed above have been
adjusted to reflect the Common Stock dividend paid on November
10, 1992 and the 3.15-to-one Common Stock split in the form of
a 215% Common Stock dividend paid on February 4, 1994.
The Company has never paid any cash dividends on its
Common Stock. The Company intends to retain earnings for
further business development and does not anticipate paying
any cash dividends on its Common Stock in the foreseeable
future. None of the Company's existing debt agreements
restrict its ability to pay dividends on the Common Stock.
ITEM 6. SELECTED FINANCIAL DATA.
The information below should be read in conjunction with
the Company's Consolidated Financial Statements and related
Notes and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
<TABLE>
<CAPTION>
(Inthousands,exceptpersharedata)
Years Ended December 31,
<S> <C> <C> <C> <C> <C>
1989 1990 1991 1992 1993
Consolidated Income
Statement Data:
Revenues:
Transmission services $58,254 $80,530 $94,533 $127,399 $276,123
Systems integration and
other income 2,492 5,921 9,904 20,245 26,585
Fees earned from
WorldCom and TRT -- -- -- 7,700 8,000
Total revenues 60,746 86,451 104,437 155,344 310,708
Costs and expenses:
Cost of sales 35,219 53,203 66,514 102,485 204,868
Selling, general and 7,191 12,194 14,688 18,889 37,381
administrative
Depreciation 4,252 6,965 7,305 9,587 17,269
Amortization 2,686 3,072 2,845 3,507 4,669
Streamlining charge -- -- -- -- 5,920
Total costs and 49,348 75,434 91,352 134,468 270,107
expenses
Operating income 11,398 11,017 13,085 20,876 40,601
Interest expense, net 8,452 10,912 8,439 6,413 6,350
Income before minority
interest and income 2,946 105 4,646 14,463 34,251
taxes
Minority interest -- -- -- (135) 174
Provision for income 1,150 40 1,811 5,800 14,286
taxes
Income before 1,796 65 2,835 8,528 20,139
extraordinary item
Extraordinary item (1) - - (1,283) - (7,949)
- - -
Income before preferred $ 1,796 $ 65 $ 1,552 $ 8,528 $ 12,190
stock dividend
Preferred stock -- -- -- -- 1,232
dividend
Net income available to
common stockholders $ 1,796 $ 65 $ 1,552 $ 8,528 $ 10,958
Primary earnings per
share (2):
Income available to
common share- $ .10 $ -- $ 0.11 $ .24 $ .33
holders before
extraordinary item
Extraordinary item (1) -- -- (.05) -- (.14)
Net income available to
common stockholders $ .10 $ -- $ .06 $ .24 $ .19
Fully diluted earnings
per share (2):
Income before $ .10 $ -- $ .11 $ .24 $ .32
extraordinary item
Extraordinary item (1) -- -- (.05) -- (.13)
Net income per share $ .10 $ -- $ .06 $ .24 $ .19
Consolidated Balance
Sheet Data:
Net property and $77,317 $85,278 $99,355 $213,895 $270,065
equipment
Total assets 139,514 156,405 179,414 371,656 722,189
Long-term debt 101,479 101,901 85,683 108,801 195,500
Shareholders' equity 20,739 34,827 67,474 135,855 290,135
</TABLE>
(1)Extraordinary item reflects the write-off of the
unamortized portion of costs which had been incurred in
connection with extinguished bank borrowings (net of income
tax benefit) of $820,000 in 1991 and $5,639,000 in 1993.
(2)Earnings per share and the weighted average common shares
outstanding have been adjusted to reflect the payment of a 5%
Common Stock dividend declared and paid by the Company during
each of 1991 and 1992 and the 3.15-to-one Common Stock split
in the form of a 215% Common Stock dividend paid on February
4, 1994.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The following discussion should be read in conjunction
with the Company's Consolidated Financial Statements and
related Notes.
General
The following table shows the percentage relationship to
total revenues of certain items included in Selected Financial
Data for each of the periods indicated:
<TABLE>
<CAPTION>
Years Ended December 31,
1991 1992 1993
<S> <C> <C> <C>
Total revenues 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales 63.7 66.0 65.9
Selling, general and 14.1 12.2 12.0
administrative
Depreciation 7.0 6.2 5.6
Amortization 2.7 2.2 1.5
Streamlining charge -- -- 1.9
Total costs and expenses 87.5 86.6 86.9
Operating income 12.5 13.4 13.1
Interest expense, net 8.1 4.1 2.1
Income before minority interest and
income taxes and 4.4 9.3 11.0
extraordinary item
Minority interest -- (0.1) 0.1
Provision for income taxes 1.7 3.7 4.6
Income before extraordinary item and 2.7 5.5 6.5
preferred stock dividend
Extraordinary item (1.2) -- (2.6)
Preferred stock dividend -- -- 0.4
Net income 1.5% 5.5% 3.5%
</TABLE>
Results of Operations
The Company derived 1993 revenues principally from
international private line and public switched long distance
telephone services, radio and television transmission
services, mobile communications and systems integration
services provided on the Company's domestic and international
communications network. See "Business."
1993 Compared to 1992
Operating results for 1993 resulted in the highest
revenues and income before extraordinary item and preferred
stock dividend in the Company's history. Total revenues and
income before extraordinary item and preferred stock dividend
for 1993 were $310,708,000 and $20,139,000, respectively,
versus $155,344,000 and $8,528,000, respectively, for 1992.
Revenues for 1993 increased $155,364,000 or 100% over
1992 revenue principally from an increase of $130,638,000 in
international private line and international public switched
long distance telephone services resulting from the
acquisitions of WorldCom on December 31, 1992 and TRT on
September 30, 1993 (the "Acquisitions", See Note 9 of
Consolidated Financial Statements of the Company) and the
growth in IDB Mobile's communications services of $19,205,000.
These services comprised 67% of total revenues in 1993
compared to 35% in 1992. Broadcast revenues, which declined
slightly in 1993 compared to 1992 due to the Company's
decision not to renew certain less profitable customer
contracts, comprised 24% of total revenue in 1993 compared to
49% in 1992. The Company also earned fees of $8,000,000 and
$7,700,000 in 1993 and 1992, respectively, from operational
assistance and other consulting services provided to WorldCom
during 1992 and TRT during 1993. The fees earned in
connection with the operational assistance and consulting
services ended upon completion of the acquisition of TRT in
September 1993.
Costs of sales increased $102,383,000 in 1993 or 100%
over 1992 due to higher levels of revenue provided by the
Acquisitions. Cost of sales as a percentage of revenue
improved slightly due to the Company's changing revenue mix.
The fastest growing revenue element, international long
distance services, has lower cost of sales than the private
line and broadcast services historically provided by the
Company. This is somewhat offset by higher cost of sales
related to IDB Mobile and IDB Systems integration activities.
Selling, general and administrative expenses increased to
$37,381,000 in 1993 from $18,889,000 in 1992 principally due
to the Acquisitions. Selling, general and administrative
expenses as a percentage of revenue declined slightly due to
economies of scale resulting from higher revenue levels and
the Company's efforts to control administrative costs during
the integration of the WorldCom and TRT acquisitions offset by
higher selling and marketing costs related to the Company's
efforts to further expand its international private line and
long distance telephone services.
Depreciation expense as a percentage of revenues
decreased to 5.6% in 1993 from 6.2% in 1992 as a result of
increased utilization of the Company's network facilities.
Depreciation expense increased from $9,587,000 in 1992 to
$17,269,000 principally due to the Acquisitions.
Amortization expense increased to $4,669,000 in 1993 from
$3,507,000 in 1992 principally due to the amortization of
additional intangible assets acquired in connection with the
Acquisitions. Amortizable assets consist primarily of
intangibles including goodwill, bank loan fees and satellite
transmission and customer contracts.
Streamlining charge represents $5,920,000 of charges
related to the Company's plans approved in the fourth quarter
of 1993 to reduce the number of employees and dispose of
certain assets.
Interest expense net of interest income for 1993 of
$6,350,000 remained consistent with 1992 due to higher average
outstanding debt ($142,807,000 in 1993 versus $90,542,000 in
1992) offset by a lower effective interest rate (8.1% in 1993
versus 10.9% in 1992) and the Company's ability to invest
excess cash in interest earning investments ($2,055,000
increase in interest income in 1993).
Extraordinary item in 1993 represents a $7,949,000
charge, net of $5,639,000 income tax benefit, redemption
premiums and the unamortized portion of debt issuance costs
associated with the repayment and defeasance of substantially
all of the Company's then existing debt.
The Company's provision for income taxes as a percentage
of income before taxes increased to 41.5% in 1993 from 40.5%
in 1992 primarily as a result of the increase in the federal
statutory income tax rate to 35%.
1992 Compared to 1991
Revenues in 1992 increased $50,907,000, or 48.7%, to
$155,344,000. This increase was primarily attributable to a
$15,964,000 increase in revenues from IDB Mobile, resulting
from its first full year of operations and its success in
capturing a growing share of the maritime communications
market. IDB Systems' revenues increased $11,167,000 in 1992
primarily from increased sales activity in Europe, China and
Africa. Additionally, in it's first year of providing
international long distance telephone services, IDB generated
approximately $8,000,000 in such revenues in 1992. IDB
Broadcast's revenues, which accounted for approximately 49% of
total revenues in 1992 and 66% in 1991, increased $6,500,000
in 1992 principally due to additional fulltime video
transmission services. The Company also earned $5,000,000 in
fees generated from services provided under an operational
assistance agreement with WorldCom and $2,700,000 in fees
earned from sales and engineering support and management
provided to WorldCom during 1992.
Cost of sales has historically included a relatively high
percentage of fixed costs, consisting primarily of employee
salaries, satellite transponder costs and satellite and
telephone line charges provided through the facilities of
outside vendors. Cost of sales as a percentage of revenues
increased from 63.7% in 1991 to 66.0% in 1992. The increase
reflects a change in the mix of the Company's business during
1992. The Company's systems integration activities, mobile
communications services to the maritime market and certain
fulltime video services carry higher cost of sales than the
services historically provided by the Company. In addition, a
joint venture agreement which had provided for reduced rates
on satellite transponder capacity expired in March 1992.
These factors are partially offset by relatively lower cost of
sales on international long distance services.
Selling, general and administrative expenses increased to
$18,889,000 in 1992 from $14,688,000 in 1991, primarily from
the consolidation of IDB Mobile and Houston International
Teleport, Inc. and the investment the Company made in 1992 in
enhancing its internal systems. However, selling, general and
administrative expenses decreased as a percentage of revenues
from 14.1% in 1991 to 12.2% in 1992 due to economies of scale
from higher revenue levels and improved operating
efficiencies.
Depreciation expense as a percentage of revenues
decreased to 6.2% in 1992 from 7.0% in 1991 as a result of
increased utilization of the Company's network facilities.
Depreciation expense increased from $7,305,000 in 1991 to
$9,587,000 in 1992 principally due to the addition of network
facilities (including undersea fiber optic cable and earth
stations) to support the Company's revenue growth.
Amortization expense increased by $662,000 from 1991 to
1992 primarily as a result of amortization of foreign carrier
license costs incurred by IDB Mobile and public switched long
distance telephone services. Amortizable assets consist
primarily of intangibles, bank loan fees and satellite
transmission and customer contracts. Amortization expense as
a percentage of revenues decreased to 2.2% in 1992 from 2.7%
in 1991 as a result of increased revenues and the fixed nature
of these costs.
Interest expense decreased by $2,026,000 from 1991 to
1992 primarily as a result of lower effective interest rates
(10.9% in 1992 versus 11.5% in 1991) and a decrease in the
average debt outstanding ($90,542,000 in 1992 versus
$93,792,000 in 1991). In addition, capitalized interest
increased in 1992 due to a greater level of construction in
progress on the Company's transmission and related facilities.
The Company's provision for income taxes as a percentage
of income before taxes remained relatively constant at 40.5%
in 1992 as compared to 39.0% in 1991. See Note 6 of Notes to
Consolidated Financial Statements of the Company.
Seasonality and Inflation
Historically, the Company's business has been seasonal
because its transmission services have been purchased in
larger volumes during periods of favorable weather when more
sporting and special events are held. Increases in full-time
radio and television distribution services, private line
telephone and data services, satellite-based mobile services
and international public switched long distance telephone
services have substantially lessened the impact of this
seasonality.
Since its inception, the Company's results of operations
have not been materially affected by inflation.
Liquidity and Capital Resources
The Company has financed growth through borrowings, cash
generated from profitable operations and sales of shares of
its Common Stock and 5% Convertible Subordinated Notes due
2003 (the "Subordinated Notes"). Prior to August 20, 1993,
the Company borrowed funds under a $25,000,000 revolving
credit facility (the "Revolver"), issued $50,000,000 of senior
secured notes (the "Senior Notes") and $26,000,000 principal
amount of 13% Senior Subordinated Notes due 1998 (the "1998
Notes"). On December 21, 1992, the Company also assumed a
$15,000,000 loan payable by WorldCom to TeleColumbus U.S.A.,
Inc (the "Assumed Loan"). Substantially all outstanding
borrowings of the Company were repaid and defeased by
September 1993, using a portion of the proceeds of the public
offering of $195,500,000 in aggregate principal amount of
Subordinated Notes in August 1993 and the public offering of
an aggregate of 4,724,997 shares of Common Stock in May 1993.
The Assumed Loan was repaid by the Company upon the
consummation of the acquisition of WorldCom Europe in December
1993.
The Subordinated Notes issued in August 1993 are
convertible at any time prior to maturity, unless previously
redeemed, into Common Stock of the Company at a conversion
price of $18.15 per share, as adjusted to reflect the 3.15-to-
one Common Stock split in the form of a 215% Common Stock
dividend paid on February 1994 and subject to further
adjustment in certain events. The Subordinated Notes bear
interest at a rate of 5% per annum and interest is payable on
February 15 and August 15 of each year. The Subordinated
Notes are redeemable at any time after August 15, 1996, in
whole or in part, at the option of the Company, at declining
redemption prices plus accrued interest. The Subordinated
Notes are unsecured and subordinated to all existing and
future senior indebtedness of the Company and will be
effectively subordinated to all indebtedness and other
liabilities of subsidiaries of the Company. The Subordinated
Notes contain no limitation on the incurrence of additional
indebtedness by the Company and its subsidiaries.
In November 1993, Bank of America National Trust and
Savings Association agreed to make a $15,000,000 line of
credit available to the Company (the "Line of Credit").
Advances made pursuant to the Line of Credit bear interest at
a floating rate based, at the option of the Company, on a
domestic index or an offshore index. All advances and letters
of credit made under the Line of Credit mature on October 31,
1995 and the Line of Credit expires on such date. The Company
may at any time terminate the Line of Credit by payment of all
outstanding advances and other obligations under
the Line of Credit and cash collateralization of all letters
of credit existing at that time. As of December 31, 1993,
there were no amounts outstanding under the Line of Credit.
In addition, the Company has ongoing discussions with several
financial institutions regarding credit facilities, committed
and uncommitted.
During 1993, the Company's capital expenditures,
including improvements, replacements and additions of
communications equipment and facilities, were approximately
$48,300,000. The Company historically has invested
significantly to build its communications network. See
"Business -- The IDB Communications Network" and "Business --
Facilities."
Net cash provided by operating activities in 1993
decreased to $2,040,000, compared to net cash provided by
operating activities of $27,763,000 in 1992 principally due to
increases in accounts receivables associated with the
Acquisitions. Cash provided by financing activities in 1993
was $129,576,000, as compared to cash provided by financing
activities of $16,694,000 in 1992 and principally relate to
the sale of Subordinated Notes offset by the repayments or
defeasance of substantially all of the Company's then existing
debt. Net cash used in investing activities in 1993 was
$78,323,000, as compared to $45,900,000 in 1992, principally
due to property and equipment expenditures for additional
facilities in the IDB network, the purchase of short-term
investments, and costs incurred in connection with the
Acquisitions.
In May 1990, the Company entered into an agreement with
Comsat, Inc. ("Comsat") under which it may obtain satellite
transponder capacity for maritime and aeronautical services
offered or to be offered by IDB Mobile, at long-term fixed
rates over a five-year period that commenced in September
1991. As of December 31, 1993, IDB's minimum remaining total
commitment under the agreement was to purchase 8 million
minutes of transponder capacity (representing aggregate costs
of approximately $20,400,000, calculated at the rate set forth
in the agreement, which the Company would pay in 1996 to
satisfy any remaining volume commitment under the agreement
that the Company did not purchase by that time). Based on
current and projected usage, the Company believes that it will
meet the minimum purchase commitment under the agreement. If
the Company were to materially breach the agreement (including
provisions relating to interference with the operation of the
satellites), the Company would not be entitled to the rates
set forth in the agreement, but would be required, from the
date of such material breach, to pay higher rates for
satellite transponder capacity for maritime and aeronautical
services. See "Business -- Facilities" and Note 7 of Notes to
Consolidated Financial Statements of the Company.
The Company's capital commitments, as of March 16, 1994,
consisted primarily of outstanding purchase orders (some of
which are cancelable at the Company's option) to acquire
approximately $30,900,000 of equipment, including long term
commitments on undersea fiber optic cables of $20,500,000,
which will be financed by cash from operations and bank
borrowings. It is anticipated that the Company's 1994
expenditures will exceed that amount. The Company expects
that cash flow from operations, its current holdings of cash
and marketable securities and its borrowing capabilities under
its current credit facility will satisfy its projected working
capital and capital expenditure requirements through fiscal
1994. The Company may seek additional debt or equity
financing from time to time to supplement cash generated from
operations and finance future growth opportunities.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Company's financial statements and supplementary
financial information appear in this Annual Report on Form 10-
K beginning on page F-1, immediately after the Signature Page
hereof, and such information is incorporated in this Item 8 by
reference thereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The Company's directors, executive officers and key
employees are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Director
Name Age Position or Office Since
Jeffrey P. Sudikoff 38 Chairman of the Board, 1983
Chief Executive
Officer and Director
Edward R. 50 President and Director 1986
Cheramy(1)(2)
Peter F. Hartz 40 Senior Vice President, 1988
Sales and
Marketing and
Director
Rudy Wann 37 Vice President, --
Finance and Chief
Financial Officer
James E. Kolsrud 49 Vice President, --
Engineering and
Administration
Neil J Wertlieb 35 Vice President, --
General Counsel
and Secretary
Stephen N. Carroll 43 President--IDB --
WorldCom
John A. Tagliaferro 50 President--IDB --
Broadcast
William L. 62 Director 1983
Snelling(1)(3)
Franklin E. 66 Director 1988
Fried(2)(3)
Joseph M. 46 Director 1989
Cohen(1)(2)(3)
</TABLE>
_______________________
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
(3) Member of Stock Option Committee.
Jeffrey P. Sudikoff, a founder of the Company, has been
instrumental in the Company's development. Mr. Sudikoff has
been the Chief Executive Officer and a director of the Company
since its incorporation in September 1983 and has been
Chairman of the Board of Directors since May 1986. He also
served as the Company's President from September 1983 until
March 1989. From 1978 until founding the Company, Mr.
Sudikoff provided consulting services to the radio broadcast
industry in the areas of programming production and
distribution.
Edward R. Cheramy was appointed President of the Company
in March 1989 and has been a director since joining the
Company in May 1986. Mr. Cheramy also served as Chief
Financial Officer of the Company from September 1990 to
November 1992 and from May 1986 to July 1989, and as Executive
Vice President of the Company from May 1986 to March 1989.
From 1978 until joining the Company, Mr. Cheramy was a partner
in the accounting firm of Price Waterhouse.
Peter F. Hartz joined the Company in November 1984 and
has been Senior Vice President, Sales and Marketing since
February 1991 and a director since April 1988. From June 1990
to January 1991, Mr. Hartz served as President of IDB
Broadcast Division, and from September 1985 to February 1991,
he served as Vice President, Sales and Marketing. From
September 1980 to January 1982, Mr. Hartz was Director of
Advertising and Promotion for Watermark, Inc., now ABC
Watermark, a radio programming syndicator. From January 1982
to January 1983, Mr. Hartz served as Director of Marketing for
Diamond P Sports, a television program supplier, and from
January 1983 to November 1984, Mr. Hartz authored a nonfiction
book about the financial community.
Rudy Wann joined the Company in May 1991 and has been
Vice President, Finance since April 1992 and Chief Financial
Officer since November 1992. From August 1990 to April 1991,
Mr. Wann was Vice President, Finance and Chief Financial
Officer of Tiger Media, Inc., a developer of computer
software. From July 1979 to July 1990, Mr. Wann was with the
accounting firm of Price Waterhouse, most recently as a senior
manager, except for eleven months from August 1984 to June
1985 when he held various accounting positions with Inter-Con
Systems, a government contractor.
James E. Kolsrud joined the Company in October 1989 in
connection with the Company's acquisition of CICI, Inc. and
has served as Vice President of Engineering and Administration
since November 1992. From October 1989 to November 1992, Mr.
Kolsrud served as President of the Company's International
division. From March 1989 through October 1989, Mr. Kolsrud
served as President of CICI, Inc. when it was a subsidiary of
Contel ASC. From April 1985 through March 1989, Mr. Kolsrud
served as Vice President of Engineering and Operations at
CICI, Inc. and from 1975 until joining CICI, Inc., Mr. Kolsrud
held several positions for Comsat, Inc. including Senior
Director of Engineering for World Systems Division and United
States Representative to the Intelsat Board of Governors
Technical Advisory Committee.
Neil J Wertlieb joined the Company in August 1992 as a
Vice President. He was promoted to General Counsel in October
1993 and to Secretary in November 1993. From October 1984 to
June 1992, Mr. Wertlieb was an associate at the law firm of
O'Melveny & Myers.
Stephen N. Carroll, a 15-year veteran of the
telecommunications industry, joined the Company in September
1991 as President of IDB WorldCom (formerly IDB&T). Prior to
joining IDB, Mr. Carroll was employed by Comsat, Inc.'s World
Systems Division, where he was Vice President of Sales and
Business Development since 1986 and Director of Carrier Sales
since 1983. During his tenure at Comsat, Inc., Mr. Carroll
represented the services of Intelsat to U.S. long distance
carriers, authorized users, and U.S. and international
broadcasters.
John A. Tagliaferro joined the Company in January 1989 in
connection with the Company's acquisition of the assets of
Hughes Television Network. Mr. Tagliaferro has been President
of IDB Broadcast Group since January 1991, and from January
1989 through January 1991, Mr. Tagliaferro served as President
of the Company's HTN division. From December 1986 through
January 1989, Mr. Tagliaferro served as President and Chief
Operating Officer of Hughes Television Network.
William L. Snelling, a founder of the Company, has been a
director since the Company's incorporation in September 1983.
In addition, Mr. Snelling served as Chairman of the Board and
Chief Financial Officer from the Company's incorporation until
May 1986 and as Secretary from the Company's incorporation
until June 1991. Mr. Snelling is also currently the Secretary
and a director of the Bank of Santa Maria, located in Santa
Maria, California. From June 1991 through November 1992, Mr.
Snelling was a private investor. From November 1992 to
November 1993, Mr. Snelling was a consultant to Southwest
Leasing Corporation. Since November 1993, Mr. Snelling has
been the Chairman of California Commercial Spaceport, Inc., a
company that launches low orbital communications satellites.
Mr. Snelling also provides consulting services to the Company
pursuant to a consulting agreement. See "Executive
Compensation -- Compensation Committee Interlocks and Insider
Participation."
Franklin E. Fried has been a director of the Company
since December 1988. From January 1989 to November 1991, Mr.
Fried was the President of the San Diego-based Fried-Schegan,
which specialized in entertainment and creative developments
in the hospitality field. From 1977 to January 1989, Mr.
Fried was President of Franklin E. Fried Associates, an
entertainment and hospitality services firm. From 1984 to
1988, Mr. Fried was also President of the Delta Queen
Steamboat Company, a firm specializing in the operation of
paddleboats on the Mississippi River. From June 1991 through
November 1992, Mr. Fried was the Chairman of Old New Orleans
Seafood Company, a seafood distributor.
Joseph M. Cohen has been a director of the Company since
June 1989 and also served as a member of the Board of
Directors from March 1988 through November 1988. From 1991 to
January 1994, Mr. Cohen was the President of Spectacor West,
overseeing all West Coast activities of the international
sports and entertainment company Spectacor. Since January
1994, Mr. Cohen has been a consultant to Rainbow Programming
Services for Sports Channel Networks, Inc. and has been
involved in planning the construction of a new sports arena in
Los Angeles. From January 1988 to March 1989, Mr. Cohen
served as President and Chief Executive Officer of Z Channel,
a pay television channel in Santa Monica, California.
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires the Company's directors and certain of its
officers, and persons who own more than 10% of a registered
class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and
Exchange Commission (the "Commission") and the NASDAQ National
Market System. Such directors, officers and stockholders are
required by the Commission's regulations to furnish the
Company with copies of all Section 16(a) reports they file.
Based solely on its review of the copies of such reports
received by it, or written representations from certain
reporting persons that no such reports were required for those
persons, the Company believes that from January 1, 1993 to
December 31, 1993, all filing requirements applicable to such
directors, officers and stockholders were complied with,
except for the following: Each of Messrs. Sudikoff and Cohen
filed Form 4 reports related to sales of shares of Common
Stock in July 1993 more than ten days following the end of the
month in which such transactions occurred. Mr. Fried filed a
Form 4 report related to the exercise of stock options and
subsequent sale of the resulting shares in May 1993 more than
10 days following the end of the month in which such
transactions occurred. David W. Anderson failed to file a
Form 4 report relating to the exercise of stock options and
subsequent sale of the resulting shares of Common Stock;
however, such transactions were reported in a timely filed
Form 5 report.
ITEM 11. EXECUTIVE COMPENSATION.
Summary Compensation Table
The following table sets forth information concerning the
compensation paid by the Company during the last three fiscal
years to the Company's Chief Executive Officer and the four
other most highly compensated executive officers of the
Company.
<TABLE>
<CAPTION>
Annual Compensation
<S> <C> <C> <C> <C> <C>
Other
Annual
Name and Principal Year Salary Bonus (1) Compen-
Position sation
Jeffrey P. Sudikoff 1993 $575,000 $400,000 (4)
Chairman of the Board and 1992 500,000 -- (4)
Chief Executive Officer 1991 480,000 -- (6)
Edward R. Cheramy 1993 460,000 400,000 (4)
President 1992 400,000 -- (4)
1991 390,000 -- (6)
Peter F. Hartz 1993 190,800 25,000 (4)
Senior Vice President, 1992 180,000 53,125 (4)
Sales and Marketing 1991 162,500 25,000 (6)
Rudy Wann(7) 1993 142,500 125,000 (4)
Vice President, Finance 1992 121,667 15,000 (4)
and Chief Financial 1991 74,166 -- (6)
Officer
James E. Kolsrud 1993 170,000 50,000 (4)
Vice President of 1992 140,000 75,000 (4)
Engineering and 1991 134,000 -- (6)
Administration
</TABLE>
<TABLE>
<CAPTION>
Long Term Compensation
<S> <C> <C> <C>
Securities
Underlying All Other
Name and Principal Options (2) Compensation
Position (3)
Jeffrey P. Sudikoff 740,250(5) $4,497
Chairman of the Board and 213,728 4,364
Chief Executive Officer 86,820 (6)
Edward R. Cheramy 740,250(5) 4,497
President 213,727 4,364
86,820 (6)
Peter F. Hartz 157,500 4,497
Senior Vice President, 112,219 4,250
Sales and Marketing 52,095 (6)
Rudy Wann(7) 236,250(5) 3,562
Vice President, Finance 32,288 3,292
and Chief Financial 17,366 (6)
Officer
James E. Kolsrud 63,000 3,212
Vice President of 102,375 3,500
Engineering and 31,500 (6)
Administration
</TABLE>
_______________________
(1)Bonus payments are reported for the year in which they were
earned.
(2)Adjusted to reflect the 5% Common Stock dividends paid on
each of October 11, 1991 and November 10, 1992 and the 3.15-
to-one Common Stock split in the form of a 215% Common Stock
dividend paid on February 4, 1994 (the "Common Stock Split").
(3)Represents the dollar value of Company matching
contributions under the Company's 401(k) Savings and
Retirement Plan.
(4)The named individual received certain perquisites and other
personal benefits from the Company; however, the dollar value
of such other annual compensation did not exceed the lesser of
$50,000 or 10% of the total annual salary and bonus for such
individual in each of 1992 and 1993.
(5)Does not include the grant to each of Messrs. Sudikoff and
Cheramy of options to purchase 2,835,000 shares of Common
Stock (as adjusted to reflect the Common Stock Split) and the
grant to Mr. Wann of options to purchase 236,250 shares of
Common Stock (as adjusted to reflect the Common Stock Split).
Such options were granted subject to stockholder approval,
which has not yet been received.
(6)In accordance with the transitional provisions applicable
to the revised rules on executive compensation disclosure
adopted by the Securities and Exchange Commission, information
with respect to Other Annual Compensation and All Other
Compensation for 1991 has been omitted.
(7)Rudy Wann joined the Company in May 1991.
Options Granted in 1993
The following information is furnished for the year ended
December 31, 1993 with respect to the Company's Chief
Executive Officer and each of the four other most highly
compensated executive officers of the Company for stock
options which were granted in 1993.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Number of Percent of
Securities Total Exercise
Underlying Options Price Per
Options Granted to in Share
Granted Employees (3)(5)(6)
(1)(2)(3) in 1993(5)
(4)(5)
Name
Jeffrey P. Sudikoff 425,250 17.6% $11.98
315,000 13.1 14.37
Edward R. Cheramy 425,250 17.6 11.98
315,000 13.1 14.37
Peter F. Hartz 94,500 3.9 11.98
63,000 2.6 14.37
Rudy Wann 157,500 6.5 11.98
78,750 3.3 14.37
James E. Kolsrud 63,000 2.6 11.98
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Potential Potential
Realizable Value Realizable Value
at Assumed at Assumed
Annual Rates Annual Rates of
of Stock Price Stock Price
Expiration Appreciation for Appreciation for
Name Date(4) Option Term (7) Option Term (7)
5% 10%
Jeffrey P. Sudikoff 7/29/2003 $3,203,901 $8,119,313
11/29/2003 2,846,723 7,214,155
Edward R. Cheramy 7/29/2003 3,203,901 8,119,313
11/29/2003 2,846,723 7,214,155
Peter F. Hartz 7/29/2003 711,978 1,804,292
11/29/2003 569,345 1,442,831
Rudy Wann 7/29/2003 1,186,629 3,007,152
11/29/2003 711,681 1,803,538
James E. Kolsrud 7/29/2003 474,652 1,202,861
</TABLE>
_______________________
(1) Adjusted to reflect the Common Stock Split.
(2) Options granted in 1993 vest over a four-year period,
with 25% of the shares covered thereby becoming
exercisable on each anniversary date.
(3) Under the terms of the Company's stock incentive plans,
the Board of Directors or the Stock Option Committee
thereof retains discretion, subject to plan limits, to
modify the terms of outstanding options and to reprice
the options.
(4) The options were granted for a term of ten years, subject
to earlier termination in certain events related to
termination of employment.
(5) Does not include the grant to each of Messrs. Sudikoff
and Cheramy of options to purchase 2,835,000 shares of
Common Stock (as adjusted to reflect the Common Stock
Split) and the grant to Mr. Wann of options to purchase
236,250 shares of Common Stock (as adjusted to reflect
the Common Stock Split). Such options were granted on
November 29, 1993, will expire on November 30, 2003 and
have an exercise price of $14.37 (as adjusted to reflect
the Common Stock Split), the fair market value on the
date that the options were granted (as adjusted to
reflect the Common Stock Split). Such options were
granted subject to stockholder approval, which has not
yet been received.
(6) The exercise price may be paid by delivery of a
promissory note, already owned shares or other lawful
consideration, subject to certain conditions and as
otherwise approved by the Board of Directors or the Stock
Option Committee.
(7) The potential realizable values indicated are based
solely on arbitrarily assumed rates of appreciation
required by applicable regulations of the Securities and
Exchange Commission. The actual value, if any, an
executive may realize will depend upon the excess of the
stock price on the date an option is exercised over the
exercise price. As a result, such assumed values are not
necessarily indicative of the values that can be realized
upon exercise of such options, and use of such rates
should not be viewed in any way as a forecast of the
future performance of the Company's stock.
Aggregated Option Exercises in 1993 and Year-End Value Table
The following information is furnished for the year ended
December 31, 1993 with respect to the Company's Chief
Executive Officer and each of the four other most highly
compensated executive officers of the Company for stock
options exercised during 1993 and for unexercised options held
at year end 1993.
<TABLE>
<CAPTION>
<S> <C> <C>
Shares Acquired Value Realized
on Exercise(1) (2)
Name
Jeffrey P. Sudikoff 266,149 $1,438,674
Edward R. Cheramy 315,000 4,734,000
Peter F. Hartz 333,959 2,083,602
Rudy Wann -- --
James E. Kolsrud 12,600 87,194
</TABLE>
<TABLE>
<CAPTION>
Number of Securities Underlying
Unexercised Options
at December 31, 1993(1)(3)
______________________________________
<S> <C><C> <C> <C>
Name Exercisable Unexercisable
Jeffrey P. Sudikoff 99,844 922,251
Edward R. Cheramy 509,703 922,249
Peter F. Hartz -- 254,686
Rudy Wann 21,097 264,806
James E. Kolsrud 45,793 149,348
</TABLE>
<TABLE>
<CAPTION>
Value of Unexercised
In-the-Money Options
at December 31,1993(3)(4)
____________________________________
<S> <C><C> <C> <C>
Exercisable Unexercisable
Name
Jeffrey P. Sudikoff $1,592,511 $5,783,056
Edward R. Cheramy 7,987,520 5,783,024
Peter F. Hartz -- 2,046,229
Rudy Wann 316,602 1,502,994
James E. Kolsrud 673,780 1,532,826
</TABLE>
_______________________
(1) Adjusted to reflect the Common Stock Split.
(2) This amount is the aggregate
of the market value of the
Common Stock at the time
each stock option was exercised
minus the exercise price for that option.
(3) Does not include the grant
to each of Messrs. Sudikoff
and Cheramy of options to
purchase 2,835,000 shares of
Common Stock (as adjusted
to reflect the Common Stock
Split) and the grant to
Mr. Wann of options to purchase
236,250 shares of Common
Stock (as adjusted to reflect
the Common Stock Split).
Such options are subject to
stockholder approval.
(4) This amount is the
aggregate of the number of
options multiplied by the
difference between the closing
price of the Common Stock
on the NASDAQ National
Market System on December
31, 1993 ($17.46, as
adjusted to reflect the
Common Stock Split)
and the exercise
price for such
options.
Compensation of Directors
No director received any compensation during the
Company's last fiscal year for any service provided as a
director. Beginning in 1994, the Company will compensate each
non-employee director $2,000 for each month of membership on
the Board of Directors and $1,000 for each meeting of the
Board that the director attends.
Nonemployee directors of the Company are entitled to
receive annually a limited number of non-qualified stock
options pursuant to the Company's 1992 Stock Option Plan for
Nonemployee Directors (the "Nonemployee Director Plan"). The
Nonemployee Director Plan provides for the annual automatic
granting of options to purchase 6,615 shares, subject to
adjustment, of IDB Common Stock to each nonemployee director
immediately following the annual meeting of stockholders. The
option exercise price is the fair market value (as defined) of
the Common Stock on the date of grant. The options vest over
a four year period, and expire ten years and one day from the
date of grant, subject to earlier termination in accordance
with the terms of the Nonemployee Director Plan. As of the
date hereof, an aggregate of 33,075 options have been granted
under the Nonemployee Director Plan.
Employment Agreements
The Company entered into employment agreements with
Messrs. Sudikoff, Cheramy and Hartz on January 1, 1992, each
for a five year term, which is automatically renewed each year
thereafter, subject to earlier termination under certain
circumstances. Mr. Sudikoff's employment agreement provides
for a minimum base salary of $500,000 in 1992, $575,000 in
1993, $661,250 in 1994, $760,437 in 1995 and $874,503 in 1996.
Mr. Cheramy's employment agreement provides for a minimum base
salary of $400,000 in 1992, $460,000 in 1993, $529,000 in
1994, $608,350 in 1995 and $699,602 in 1996. Mr. Hartz'
employment agreement provides for a minimum base salary of
$180,000 in 1992, $190,800 in 1993, $202,248 in 1994, $214,383
in 1995 and $227,246 in 1996. Each of Messrs. Sudikoff,
Cheramy and Hartz is entitled to receive an annual bonus in an
amount determined by the Compensation Committee of the Board
of Directors. Messrs. Sudikoff's, Cheramy's and Hartz'
employment agreements also provide for the reimbursement of
business and automobile expenses and certain other benefits,
including an allowance of up to $50,000, $50,000 and $15,000,
respectively, for each contract year for personal accounting,
financial, tax and legal consulting and other similar expenses
for Messrs. Sudikoff, Cheramy and Hartz. In the event of a
change of control of the Company (as defined), amounts payable
through the remaining term of the employment agreements become
payable, with the Company obligated to pay any taxes that are
specifically levied on payments made pursuant to change of
control provisions.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board of Directors
consists of Edward R. Cheramy, William L. Snelling, Joseph M.
Cohen and, prior to his resignation as a member of the Board
of Directors in October 1993, John S. Reiland. Mr. Cheramy
is, and during 1993 was, President of the Company. Until June
1991, Mr. Snelling was an officer of the Company. See
"Directors and Executive Officers of the Registrant." Mr.
Reiland is the Chairman of TeleColumbus USA, Inc., a Delaware
corporation ("TC USA"). TC USA acquired 13,230,000 shares of
Common Stock (as adjusted to reflect the Common Stock Split)
and 34,000 shares of the Company's 4% Cumulative Convertible
Preferred Stock, which was convertible into 6,158,709 shares
of Common Stock (as adjusted to reflect the Common Stock
Split), in connection with the Company's acquisition of World
Communications, Inc. from TC USA in 1992. TC USA sold
18,928,255 shares of Common Stock (as adjusted to reflect the
Common Stock split) in a secondary offering in November 1993.
The Company entered into a consulting agreement with
William L. Snelling as of January 1, 1992. Under the
consulting agreement, Mr. Snelling will be paid an annual fee
over a 15-year period, beginning at $125,000 in 1992, with
cost of living increases each year. See "Certain
Relationships and Related Transactions."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth information regarding the
ownership of the Company's shares of Common Stock as of March
15, 1994 by (a) stockholders known by the Company to own
beneficially more than 5% of the Company's shares of Common
Stock, (b) each director, (c) each executive officer named in
the Summary Compensation Table and (d) all directors and
executive officers as a group. Except as otherwise noted, the
Company knows of no agreements among its stockholders that
relate to voting or investment power of its shares of Common
Stock.
<TABLE>
<CAPTION>
<S> <C> <C>
Number of Percent of
Shares Total
Beneficially Outstanding
Name Owned(1) Shares
Jeffrey P. Sudikoff 4,775,587 6.5%
Edward R. Cheramy(2) 756,889 1.0
Peter F. Hartz(3) 348,279 *
Rudy Wann(4) 28,379 *
James E. Kolsrud(5) 34,631 *
William L. Snelling(6) 26,491 *
Franklin E. Fried(7) 6,406 *
Joseph M. Cohen(8) 64,914 *
All directors and executive
officers as a group 6,048,387 8.1
(9 persons)(9)
FMR Corp.(10) 5,550,930 7.5
82 Devonshire Street
Boston, Massachussets 02109
Metropolitan Life Insurance 4,521,336 6.1
Company(11)
One Madison Avenue
New York, New York 10010
</TABLE>
____________________
* Less than 1%.
(1)Except as indicated in other notes to this table, each such
stockholder listed has sole voting and dispositive power with
respect to the shares beneficially owned, subject to any
limitations on such power arising under community property or
similar laws.
(2)Shares are held by the Edward R. and Shirley J. Cheramy
Trust, of which Mr. Cheramy and his spouse, Shirley J.
Cheramy, are co-trustees. Includes 366,261 shares covered by
outstanding stock options granted to Mr. Cheramy that are
exercisable within 60 days of March 15, 1994.
(3)Includes 10,335 shares covered by outstanding stock options
granted to Mr. Hartz that are exercisable within 60 days of
March 15, 1994.
(4)Includes 25,229 shares covered by outstanding stock options
granted to Mr. Wann that are exercisable within 60 days of
March 15, 1994.
(5)Includes 34,631 shares covered by outstanding stock options
granted to Mr. Kolsrud that are exercisable within 60 days of
March 15, 1994.
(6)Shares are held by the Snelling 1986 Trust, of which Mr.
Snelling and his spouse, Cleora A. Snelling, are co-trustees.
Includes 19,325 shares covered by outstanding stock options
granted to Mr. Snelling that are exercisable within 60 days of
March 15, 1994.
(7)Includes 6,406 shares covered by outstanding stock options
granted to Mr. Fried that are exercisable within 60 days of
March 15, 1994.
(8)Shares are held by Joseph M. Cohen, Inc., a corporation
that is wholly owned by Mr. Cohen.
(9)Includes 474,983 shares covered by outstanding stock
options granted to all directors and executive officers that
are exercisable within 60 days of March 15, 1994.
(10)Fidelity Management & Research Company, a wholly-owned
subsidiary of FMR Corp., is the beneficial owner of 4,916,205
shares of Common Stock, and Fidelity Management Trust Company,
a wholly-owned subsidiary of FMR Corp., is the beneficial
owner of 634,725 shares of Common Stock.
(11)Shares are held by State Street Research & Management
Company, a wholly-owned subsidiary of Metropolitan Life
Insurance Company. Metropolitan Life Insurance Company and
State Street Research & Management Company have disclaimed
beneficial ownership of all of such shares.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In order to allow foreign ownership of the Company to
exceed 25% without risk of refusal or revocation of licenses
pursuant to the Communications Act, on December 17, 1992 the
Company's subsidiaries that had been holding the transmission
licenses used by the Company assigned all of their common
carrier earth station and microwave licenses to Southwest
Communications, Inc. ("SCI") in exchange for SCI's entering
into the Operator Agreements described below. See "Business -
- Government Regulation." Messrs. Jeffrey P. Sudikoff, Edward
R. Cheramy and Peter F. Hartz, the Chairman and Chief
Executive officer, President and Senior Vice President, Sales
and Marketing of the Company, respectively, own 49%, 40% and
11%, respectively, of the capital stock of SCI. See
"Directors and Executive Officers of the Registrant." The
Company entered into Operator Agreements with SCI on December
17, 1992. No monetary compensation has been received by the
Company in connection with such assignments. These Operator
Agreements have initial terms of ten years and provide for SCI
to be the operator and FCC licensee of the satellite earth
stations and microwave stations owned by the Company. In
accordance with the Operator Agreements, the Company paid
$34,200 to SCI during 1993 as an operator fee. Such fees are
subject to adjustment annually.
The Company has entered into employment agreements with
each of Jeffrey P. Sudikoff, Edward R. Cheramy and Peter F.
Hartz. See "Executive Compensation -- Employment Agreements."
In addition, the Company entered into a consulting agreement
with William L. Snelling, a director of the Company, as of
January 1, 1992. Under the consulting agreement, Mr. Snelling
will be paid an annual fee over a 15-year period, beginning at
$125,000 in 1992, with cost of living increases each year. In
1993, the Company paid Mr. Snelling $135,000 pursuant to the
Consulting Agreement.
In December 1993, each of Messrs. Sudikoff and Cheramy
borrowed $1,400,000 from the Company for his own personal use.
Such loans bear interest at an annual rate equal to five
percent. In December 1993 and March 1994, Messrs. Cheramy and
Sudikoff, respectively, repaid all outstanding amounts under
the loans made in 1993. During 1992, each of Messrs. Sudikoff
and Cheramy borrowed an aggregate of $250,000 from the Company
for his own personal use. Such loans are due in equal annual
installments of $50,000, beginning in December 1993, and bear
interest at a rate of five percent per annum. Each of Messrs.
Sudikoff and Cheramy paid the annual installment due in
December 1993.
During 1991, 1992 and 1993, IDB Mobile Communications,
Inc. ("IDB Mobile") made progress payments of $1,750,000,
$1,798,000 and $832,000, respectively, to Aesses Equipment
Corporation ("Aesses"), which is 42.5% owned by Mr. Sudikoff
and 42.5% owned by Mr. Cheramy. These progress payments were
made under an agreement to purchase from Aesses $4,380,000 of
satellite transmission equipment for use on airplanes. Aesses
paid $2,000,000 to a supplier to develop such equipment and
has agreed to purchase minimum quantities of the equipment
from such supplier. A disinterested majority of the Board of
Directors of IDB and IDB Mobile elected not to incur such
development costs and enter Aesses' business. The prices paid
by IDB Mobile for such equipment were no less favorable to IDB
Mobile than the prices payable for such equipment by unrelated
parties. See Note 8 of Notes to Consolidated Financial
Statements of the Company. In November 1993, Aesses agreed to
pay IDB Mobile $3,441,000 in cash consideration to repurchase
all of the equipment, except one unit, previously sold by
Aesses to IDB Mobile. All amounts owed by Aesses to IDB
Mobile pursuant to the agreement to repurchase the equipment
have been paid and all remaining obligations for IDB Mobile to
purchase equipment from Aesses pursuant to the agreement
between Aesses and IDB Mobile have terminated. In February
1993, Aesses borrowed $300,000 from the Company, which amount
bears interest at a rate equal to 5% per annum. In March
1994, Aesses repaid all amounts outstanding under the loan
made by the Company in February 1993.
In August 1993, the Company purchased a $1,500,000 loan
evidenced by a note secured by a deed of trust with an
assignment of rents (the "Loan") from William L. Snelling and
Cleora A. Snelling, as trustees of the Snelling 1986 Trust
(the "Trust"). In December 1992, the Trust made the Loan to
the Olympic-Centinela Partnership, a California limited
partnership (the "Partnership"), in connection with the
Partnership's acquisition of certain facilities which the
Company now leases as part of its Los Angeles international
teleport. See "Properties." The loan made by the Trust to
the Partnership bears interest at a rate equal to the prime
rate plus 3% and is due in December 1995. The Company paid
$1,500,000 for the Loan, $500,000 of which was paid at the
time the Company acquired the Loan and the remainder of which
will be paid in equal annual installments of $100,000 or upon
the demand of the Trust. The unpaid balance of the purchase
price bears interest at a rate equal to the prime rate plus
2%.
In connection with three public offerings of securities
of the Company, the acquisition of TRT and certain other
Company business, the Company paid approximately $3,600,000
related to the use during 1993 of aircraft owned by Messrs.
Sudikoff and Cheramy. See Note 8 of Notes to Consolidated
Financial Statements of the Company. The amounts paid by the
Company in connection with the use during 1993 of such
aircraft were commercially competitive and such payments were
approved by the Board of Directors of the Company.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K.
(a) List of documents filed as part of this Annual
Report on Form 10-K:
1. Financial Statements:
Independent Auditors' Report.
Consolidated Balance Sheets as of December 31, 1992 and
1993.
Consolidated Income Statements for the years ended
December 31, 1991, 1992 and 1993.
Consolidated Statement of Shareholders' Equity for the
years ended December 31, 1991, 1992 and 1993.
Consolidated Statements of Cash Flows for the years ended
December 31, 1991, 1992 and 1993.
Notes to the Consolidated Financial Statements.
2. Financial Statement Schedules and Unaudited
Quarterly Financial Data:
Schedules supporting the audited financial statements for
each of the three years in the period ended December 31, 1993.
Schedule II - Related Party Receivables.
Schedule V - Property, Plant and Equipment.
Schedule VI - Schedule of Accumulated Depreciation.
Schedule VIII - Valuation and Qualifying Accounts.
Schedules other than those referred to above have been
omitted because they are not required under the instructions
contained in Regulation S-X or because the information is
included elsewhere in the financial statements or the Notes
thereto.
3. Exhibits:
The exhibits listed on the accompanying Index to Exhibits
are filed as part of this Annual Report. The management
contracts and compensatory plans or arrangements required to
be filed pursuant to Item 14(c) are included as Exhibits
10.1(a) through 10.1(e) and Exhibits 10.2(a) through 10.2(f).
(b) The Registrant filed the following Current Reports
on Form 8-K in the fourth quarter of 1993:
<TABLE>
<CAPTION>
<S> <C> <C>
File Date Event Date Reporting
on:
November 22, November 12, Item 5 event
1993 1993
November 12, October 21, Item 5 event
1993 1993
November 10, November 2, Item 5 event
1993 1993
</TABLE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities and Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
IDB COMMUNICATIONS GROUP, INC.
Dated: March 28, 1994 By: /s/ EDWARD R. CHERAMY
Edward R. Cheramy
President
Pursuant to the requirements of the Securities and
Exchange Act of 1934, this report has been signed by the
following persons on behalf of the Registrant and in the
capacities indicated on the 28th day of March, 1994.
/s/ JEFFREY P. SUDIKOFF Chairman of the
Board, Jeffrey P. Sudikoff Chief Executive Officer and
Director (Principal Executive
Officer)
/s/ EDWARD R. CHERAMY President and
Director
Edward R. Cheramy
/s/ RUDY WANN Vice President,
Finance Rudy Wann and Chief Financial Officer
(Principal Financial and Accounting
Officer)
/s/ PETER F. HARTZ Senior Vice
President, Peter F. Hartz Sales and Marketing and
Director
/s/ WILLIAM L. SNELLING Director
William L. Snelling
/s/ FRANKLIN E. FRIED Director
Franklin E. Fried
/s/ JOSEPH M. COHEN Director
Joseph M. Cohen
INDEPENDENT AUDITORS' REPORT
IDB COMMUNICATIONS GROUP, INC:
We have audited the accompanying consolidated balance sheets
of IDB Communications Group, Inc. and its subsidiaries as of
December 31, 1993 and 1992, and the related consolidated
statements of income, shareholders' equity and cash flows for
each of the three years in the period ended December 31, 1993.
Our audits also included the financial statement schedules
listed at Item 14. These financial statements and financial
statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on
these financial statements and financial statement schedules
based on our audits. We did not audit the balance sheet of
World Communications, Inc. (a consolidated subsidiary) as of
December 31, 1992, which statement reflects total assets
constituting 24% of consolidated total assets as of December
31, 1992. This statement was audited by other auditors whose
report has been furnished to us, and our opinion, insofar as
it relates to the amounts included for World Communications,
Inc. as of December 31, 1992, is based solely on the report of
such other auditors.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management,
as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the report of the
other auditors, such consolidated financial statements present
fairly, in all material respects, the financial position of
IDB Communications Group, Inc. and its subsidiaries at
December 31, 1993 and 1992, and the results of their
operations and their cash flows for each of the three years in
the period ended December 31, 1993 in conformity with
generally accepted accounting principles. Also in our
opinion, based on our audits and the report of the other
auditors, such financial statement schedules, when considered
in relation to the basic consolidated financial statements
taken as a whole, present fairly in all material respects the
information set forth therein.
DELOITTE & TOUCHE
Los Angeles, California
March 7, 1994
Report of Independent Certified Public Accountants
World Communications, Inc.
New York, New York
We have audited the consolidated balance sheet of World
Communications, Inc. (a wholly-owned subsidiary of IDB
Communications Group, Inc.) as of December 31, 1992. This
financial statement, not separately presented herein, is the
responsibility of the Company's management. Our
responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the consolidated balance sheet referred to
above present fairly, in all material respects, the
consolidated financial position of World Communications, Inc.
at December 31, 1992 in conformity with generally accepted
accounting principles.
BDO SEIDMAN
New York, New York
March 17, 1993
IDB COMMUNICATIONS GROUP, INC.
CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
December 31, December 31,
1992 1993
Current assets:
Cash and cash equivalents $ 1,319,000 $ 54,612,000
Short-term investments - 12,672,000
Accounts receivable, less allowance for 43,625,000 108,445,000
doubtful accounts of $2,449,000 in 1992
and $5,751,000 in 1993
Unbilled revenues 10,033,000 13,900,000
Inventory 5,132,000 1,992,000
Prepaid expenses and other current 8,332,000 21,147,000
assets (Note 8)
Total current assets 68,441,000 212,768,000
Property and equipment:
Land 2,489,000 2,489,000
Buildings and improvements 6,757,000 6,567,000
Equipment 212,032,000 270,410,000
Construction in progress 24,890,000 39,850,000
Total property and equipment 246,168,000 319,316,000
Less accumulated depreciation and 32,273,000 49,251,000
amortization
Net property and equipment 213,895,000 270,065,000
Intangible assets-net (Note 2) 68,576,000 152,786,000
Other assets 20,744,000 23,773,000
Deferred income taxes (Note 6) - 62,797,000
Total assets $371,656,000 $722,189,000
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable and $38,752,000 $ 55,095,000
accrued expenses
Other accrued 42,198,000 119,805,000
liabilities (Note 3)
Current portion of 2,467,000 -
senior debt (Note 4)
Total current 83,417,000 174,900,000
liabilities
Long-term 16,800,000 38,369,000
liabilities (Note 9)
Deferred income 9,309,000 -
taxes (Note 6)
Senior and 106,334,000 -
subordinated debt
(Note 4)
Convertible - 195,500,000
subordinated debt
(Note 4)
Total liabilities 215,860,000 408,769,000
Commitments and
contingencies (Note
7)
Minority interest 19,941,000 23,285,000
Shareholders' equity
(Notes 5 and 9):
Preferred stock, 17,444,000 -
5,000,000 shares
authorized; 34,000
shares issued and
outstanding in 1992
and none outstanding
in 1993
Common stock, $.01 142,000 717,000
par value,
200,000,000 shares
authorized; shares
issued and
outstanding,
14,227,733 in 1992
and 71,713,076 in
1993
Additional paid-in 112,553,000 272,744,000
capital
Retained earnings 5,716,000 16,674,000
Total shareholders' 135,855,000 290,135,000
equity
Total liabilities $371,656,000 $722,189,000
and shareholders'
equity
</TABLE>
See accompanying notes to consolidated financial statements.
IDB COMMUNICATIONS GROUP, INC.
CONSOLIDATED INCOME STATEMENT
<TABLE>
<CAPTION>
Years Ended December 31,
<S> <C> <C> <C>
1991 1992 1993
Revenues:
Transmission services $ 94,533,000 $127,399,000 276,123,000
Systems integration and other 9,904,000 20,245,000 26,585,000
income
Fees earned from WorldCom and TRT - 7,700,000 8,000,000
(Note 9)
Total revenues 104,437,000 155,344,000 310,708,000
Costs and expenses:
Cost of sales 66,514,000 102,485,000 204,868,000
Selling, general and
administrative 14,688,000 18,889,000 37,381,000
Depreciation 7,305,000 9,587,000 17,269,000
Amortization 2,845,000 3,507,000 4,669,000
Streamlining charge (Note 11) - - 5,920,000
Total costs and expenses 91,352,000 134,468,000 270,107,000
Operating income 13,085,000 20,876,000 40,601,000
Interest expense (8,618,000) (6,533,000) (8,525,000)
Interest income 179,000 120,000 2,175,000
Income before minority interest, 4,646,000 14,463,000 34,251,000
income taxes and extraordinary item
Minority interest - (135,000) 174,000
Income before income taxes and 4,646,000 14,328,000 34,425,000
extraordinary item
Provision for income 1,811,000 5,800,000 14,286,000
taxes (Note 6)
Income before extraordinary item 2,835,000 8,528,000 20,139,000
Extraordinary item (net of income (1,283,000) - (7,949,000)
tax benefit of $820,000 in 1991
and $5,639,000 in 1993) (Note 4)
Net income before preferred stock 1,552,000 8,528,000 12,190,000
dividend
Preferred stock dividend - - 1,232,000
Net income available to common $1,552,000 $8,528,000 $10,958,000
shareholders
Primary earnings per share:
Income available to common $0.11 $0.24 $0.33
shareholders before extraordinary
item
Extraordinary item (Note 4) (0.05) - (0.14)
Net income available to common $0.06 $0.24 $0.19
shareholders
Fully diluted earnings per share:
Income before extraordinary item $0.11 $0.24 $0.32
Extraordinary item (Note 4) (0.05) - (0.13)
Net income before preferred stock $0.06 $0.24 $0.19
dividend
Weighted average common shares
outstanding:
Primary 24,976,000 35,548,000 57,881,000
Fully diluted 25,540,000 36,162,000 63,652,000
</TABLE>
See accompanying notes to consolidated financial statements.
IDB COMMUNICATIONS GROUP, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
<S> <C> <C>
Number of Shares Amount
Balance--December 31, 6,345,579 $63,000
1990
Issuance of common stock 2,407,698 25,000
5% stock dividend 320,990 3,000
Net income - -
Balance--December 31, 9,074,267 91,000
1991
Issuance of common stock 4,634,201 46,000
(Note 9)
Issuance of preferred - -
stock
5% stock dividend 519,265 5,000
Net income - -
Balance--December 31, 14,227,733 142,000
1992
Issuance of common stock 6,583,177 66,000
(Note 9)
Conversion of preferred 1,955,146 20,000
stock
3.15-to-one stock split 48,947,020 489,000
(Note 5)
Net income before - -
preferred stock dividend
Preferred stock dividend - -
Balance--December 31, 71,713,076 $717,000
1993
</TABLE>
<TABLE>
<CAPTION>
Preferred Stock
<S> <C> <C>
Number
of Shares Amount
Balance--December 31, 1990 - -
Issuance of common stock - -
5% stock dividend - -
Net income - -
Balance--December 31, 1991 - -
Issuance of common stock - -
(Note 9)
Issuance of preferred 34,000 17,444,000
stock
5% stock dividend - -
Net income - -
Balance--December 31, 1992 34,000 17,444,000
Issuance of common stock - -
(Note 9)
Conversion of preferred (34,000) (17,444,000)
stock
3.15-to-one stock split - -
(Note 5)
Net income before - -
preferred stock dividend
Preferred stock dividend - -
Balance--December 31, 1993 -0- $ -0-
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Additional
Paid-In Retained
Capital Earnings
Balance--December 31, $ 29,061,000 $ 5,703,000
1990
Issuance of common stock 31,075,000 -
5% stock dividend 2,886,000 (2,894,000)
Net income - 1,552,000
Balance--December 31, 63,022,000 4,361,000
1991
Issuance of common stock 42,363,000 -
(Note 9)
Issuance of preferred - -
stock
5% stock dividend 7,168,000 (7,173,000)
Net income - 8,528,000
Balance--December 31, 112,553,000 5,716,000
1992
Issuance of common stock 143,256,000 -
(Note 9)
Conversion of preferred 17,424,000 -
stock
3.15-to-one stock split (489,000) -
(Note 5)
Net income before - 12,190,000
preferred stock dividend
Preferred stock dividend - (1,232,000)
Balance--December 31, $272,744,000 $16,674,000
1993
</TABLE>
See accompanying notes to consolidated financial statements.
IDB COMMUNICATIONS GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
<S> <C> <C>
1991 1992
Cash and cash equivalents at $ 1,219,000 $ 2,762,000
beginning of year
Cash flows from operating
activities:
Net income before preferred 1,552,000 8,528,000
stock dividend
Adjustments to reconcile net
income to net cash provided by
operating activities:
Extraordinary item, net of 1,283,000 -
income tax benefit of $820,000
in 1991 and $5,639,000 in 1993
Depreciation expense 7,305,000 9,587,000
Amortization expense 2,417,000 3,005,000
Amortization of loan fees and 428,000 502,000
discounts
Provision for doubtful 502,000 364,000
accounts receivable
Deferred income taxes 1,356,000 6,672,000
Gain on sale of assets (21,000) (477,000)
Minority interest - 135,000
Changes in operating assets
and liabilities, net of
acquisitions:
Accounts receivable 1,599,000 (14,624,000)
Unbilled revenues (2,505,000) (1,921,000)
Inventory (373,000) (2,463,000)
Prepaid expenses and other (4,313,000) 425,000
assets
Accounts payable and accrued 6,490,000 8,834,000
expenses
Other liabilities (446,000) 9,196,000
Total adjustments 13,722,000 19,235,000
Net cash provided by operating 15,274,000 27,763,000
activities
Cash flows provided by
financing activities:
Proceeds from issuance of 31,095,000 2,281,000
common stock
Borrowings of senior debt 5,175,000 62,040,000
Repayments of senior debt (21,589,000) (58,754,000)
Borrowings of convertible - -
subordinated debt
Repayments and defeasance of - -
senior subordinated and
subordinated debt
Payment of debt redemption - -
premiums
Preferred stock dividend - -
payment
Increase in advance from - 11,127,000
minority shareholder of
subsidiary
Net cash provided by financing 14,681,000 16,694,000
activities
Cash flows used in investing
activities:
Additions to property and 20,085,000 26,912,000
equipment
Purchases of short-term - -
investments, net
Investment in and advances to 6,216,000 -
joint venture
Proceeds from disposition of (255,000) -
property
Increase in other assets 2,298,000 10,831,000
Payment for acquisitions, net - 2,669,000
of cash acquired
Purchase of other intangible 68,000 5,488,000
assets
Net cash used in investing 28,412,000 45,900,000
activities
Increase (decrease) in cash 1,543,000 (1,443,000)
and cash equivalents
Cash and cash equivalents at $ 2,762,000 $ 1,319,000
end of year
</TABLE>
<TABLE>
<CAPTION>
Years Ended
December 31,
<S> <C>
1993
Cash and cash equivalents at beginning $ 1,319,000
of year
Cash flows from operating activities:
Net income before preferred stock 12,190,000
dividend
Adjustments to reconcile net income to
net cash provided by operating
activities:
Extraordinary item, net of income tax 7,949,000
benefit of $820,000 in 1991 and
$5,639,000 in 1993
Depreciation expense 17,269,000
Amortization expense 4,158,000
Amortization of loan fees and discounts 512,000
Provision for doubtful accounts 1,725,000
receivable
Deferred income taxes 6,869,000
Gain on sale of assets (12,000)
Minority interest (174,000)
Changes in operating assets and
liabilities, net of acquisitions:
Accounts receivable (34,366,000)
Unbilled revenues (1,163,000)
Inventory 3,237,000
Prepaid expenses and other assets (8,969,000)
Accounts payable and accrued expenses (1,487,000)
Other liabilities (5,698,000)
Total adjustments (10,150,000)
Net cash provided by operating 2,040,000
activities
Cash flows provided by financing
activities:
Proceeds from issuance of common stock 53,994,000
Borrowings of senior debt 10,500,000
Repayments of senior debt (83,066,000)
Borrowings of convertible subordinated 189,550,000
debt
Repayments and defeasance of senior (34,580,000)
subordinated and subordinated debt
Payment of debt redemption premiums (9,257,000)
Preferred stock dividend payment (1,083,000)
Increase in advance from minority 3,518,000
shareholder of subsidiary
Net cash provided by financing 129,576,000
activities
Cash flows used in investing activities:
Additions to property and equipment 48,328,000
Purchases of short-term investments, net 12,672,000
Investment in and advances to joint -
venture
Proceeds from disposition of property (584,000)
Increase in other assets 7,979,000
Payment for acquisitions, net of cash 9,908,000
acquired
Purchase of other intangible assets 20,000
Net cash used in investing activities 78,323,000
Increase (decrease) in cash and cash 53,293,000
equivalents
Cash and cash equivalents at end of year $54,612,000
</TABLE>
See accompanying notes to consolidated financial statements.
IDB COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
IDB Communications Group, Inc., a Delaware corporation,
and its subsidiaries (together referred to herein as the
"Company"), operate a domestic and international
communications network which provides their customers with
international private-line and switched long distance
telephone services, radio and television transmission
services, facsimile and data connections and mobile satellite
communications capabilities.
Consolidation - The consolidated financial statements
include the accounts of IDB Communications Group, Inc. and its
subsidiaries. Effective December 31, 1992, the Company
acquired WorldCom (see Note 9). As a result, the balance
sheet of WorldCom has been consolidated as of December 31,
1992 and the operations of WorldCom were consolidated
beginning January 1, 1993. Effective September 30, 1993, the
Company acquired TRT (see Note 9). The operations of TRT were
consolidated beginning October 1, 1993. All significant
intercompany balances and transactions have been eliminated in
consolidation.
Revenue Recognition - The Company generally recognizes
revenues when transmission and distribution services are
provided. For switched long distance telephone services,
revenues are recorded on the basis of minutes of traffic
processed and contracted fees. The Company also performs
systems integration services consisting of design and
installation of transmission equipment and systems for its
customers. Revenues and the related costs for these services
are recorded under the percentage of completion method.
Unbilled revenues under customer contracts represent revenues
earned under the percentage of completion method but not yet
billable under the terms of the contract.
Cash Equivalents and Short-Term Investments - The
Company considers all highly liquid investments purchased with
a maturity of ninety days or less to be cash equivalents.
Similar investments with original maturities beyond ninety
days are considered short-term investments and carried at
cost, which approximates market value. Short-term investments
principally consist of tax exempt municipal bonds and
corporate bonds. The Company believes that the carrying
amount of this category is a reasonable estimate of its fair
value.
Inventory - Consists principally of equipment used in the
Company's systems integration services group in the assembly
of earth station equipment for customers. Inventories are
stated at the lower of cost or market; cost is determined
using the specific identification method.
Property and Equipment - Property and equipment are
stated at cost. Depreciation and amortization are calculated
using the straight-line method over the estimated useful lives
of the assets. The estimated useful lives of the assets are 5
to 25 years for equipment and cable and 10 to 25 years for
buildings and improvements. In 1991, the Company revised its
estimates of the depreciable lives of certain assets resulting
in additional income before income taxes of approximately
$359,000 and net income before extraordinary items of
approximately $213,000 ($.01 earnings per share for the year
ended December 31, 1991).
Construction in Progress - The Company constructs certain
of its own transmission systems and related facilities. All
internal costs directly related to the construction of such
facilities, including interest and salaries of certain
employees, are capitalized. Such costs were $5,320,000
($2,347,000 in interest), $7,656,000 ($3,490,000 in interest)
and $8,271,000 ($3,126,000 in interest) in 1991, 1992 and
1993, respectively.
Deferred Financing Costs - The Company defers all direct
costs incurred in obtaining long term financing and amortizes
these costs over the term of the related debt.
Intangible Assets - These assets consist principally of
intangible assets acquired in acquisitions accounted for by
the purchase method and are being amortized using the
straight-line method over the lives of the related assets,
which vary from 6 to 40 years.
Minority Interest - In 1990, the Company and Teleglobe
International (U.S.), Inc. ("Teleglobe"), a wholly-owned
subsidiary of Teleglobe, Inc., a Canadian data communications
products, systems integration and telecommunications company,
formed IDB Mobile Communications, Inc. ("IDB Mobile"), a
provider of mobile satellite voice and data communication
services to the maritime and aeronautical markets. The
Company and Teleglobe each have a 50% equity interest in IDB
Mobile. Effective January 1, 1992, the assets and liabilities
of IDB Mobile were consolidated with those of the Company and
Teleglobe's interest is included in the Company's consolidated
financial statements as minority interest.
Income Taxes - Effective January 1, 1992, the Company
adopted Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes. The cumulative effect of the
change was insignificant. Deferred income taxes represent the
amounts which will be paid or received in future periods based
on the income tax rates that are expected to be in effect when
the temporary differences are scheduled to reverse.
Earnings Per Share - Earnings per share is based upon the
weighted average number of common shares and common stock
equivalents (common stock options, when dilutive) outstanding
during each year. Fully diluted earnings per share assumes
the conversion of the preferred stock into common stock and
also reflects additional dilution related to common stock
options when the use of the market price at the end of the
period is higher than the average price for the period. The
effect on earnings per share of the conversion of the
convertible subordinated debt is antidilutive. Earnings per
share for the years ended December 31, 1991, 1992 and 1993
have been adjusted to reflect 5% stock dividends declared and
paid in each of 1991 and 1992 and the 3.15-to-one common stock
split of February 4, 1994 (Note 5).
Reclassifications - Certain reclassifications have been
made to the prior years' financial statements to conform to
the current year's classifications.
2. INTANGIBLE ASSETS
Intangible assets at December 31, 1992 and 1993 consist of the
following:
<TABLE>
<CAPTION>
<S> <C> <C>
1992 1993
Satellite transmission $16,060,000 $ 16,060,000
and customer contracts
Goodwill and other 61,907,000 146,015,000
intangible assets
Total intangible assets 77,967,000 162,075,000
Less accumulated 9,391,000 9,289,000
amortization
Total $68,576,000 $152,786,000
</TABLE>
Fully amortized intangible assets of $3,582,000 were
eliminated from the above balances in 1993.
3. OTHER ACCRUED LIABILITIES
Other accrued liabilities at December 31, 1992 and 1993
consist of the following:
<TABLE>
<CAPTION>
<S> <C> <C>
1992 1993
Settlements with $14,642,000 $ 62,140,000
domestic and foreign
carriers
Acquisition 10,696,000 23,494,000
allowances, current
Other 16,860,000 34,171,000
Total $42,198,000 $119,805,000
</TABLE>
Acquisition allowances relate principally to duplicate
facility and severance costs related to acquired operations
(See Note 9).
4. LONG TERM DEBT
On August 20, 1993, the Company issued $195,500,000 of
convertible subordinated notes (the "Notes"), proceeds of
which were approximately $189,550,000 net of direct fees and
expenses. Interest on the Notes is payable semiannually on
February 15 and August 15 of each year at an interest rate of
5% per annum. The Notes are convertible at the option of the
holder at anytime prior to maturity into Common Stock of the
Company at $18.15 per share. The Notes include certain
antidilution rights and rights with regard to changes in
control. At its option, the Company may redeem the Notes at
any time after August 1996, but will incur a redemption
premium. The Notes mature and are due in full on August 15,
2003.
The Company used the proceeds of this issue, together with the
proceeds of a May 1993 common stock issuance (see Note 5) to
repay and defease substantially all of its then existing debt.
Total debt repayments in 1993 were approximately $89,000,000
while $18,000,000 of debt was defeased. The repayment and
defeasance of this debt resulted in an extraordinary charge of
$7,949,000, net of income tax benefit of $5,639,000, which
represents payment of debt redemption premiums and the write-
off of unamortized debt issuance costs.
In connection with the debt repayment, the Company canceled
its revolving line of credit. In November, 1993, the Company
established a new $15,000,000 line of credit ("Line of
Credit"). The Line of Credit bears interest at a floating
rate based, at the option of the Company, on a domestic index
or offshore index. The Line of Credit expires October 31,
1995. As of December 31, 1993, there were no amounts
outstanding under the Line of Credit.
The fair values of financial instruments, other than the
Notes, closely approximate their carrying value. At December
31, 1993, the estimated fair value of the Notes, based on
reference to quoted market prices, exceeded the carrying value
by $31,000,000.
In connection with the acquisition of WorldCom (see Note 9),
the Company assumed a $15 million loan payable by WorldCom to
TeleColumbus USA, Inc. This debt was unsecured and
subordinated to all of the Company's senior debt. No interest
accrued for two years from the date of each advance and any
interest accruing was payable quarterly in arrears, at LIBOR
plus 2% per annum, beginning June 30, 1994. The principal was
repayable in five equal annual installments beginning June 30,
1995. In order to reflect the effect of the non-interest
bearing period, the Company discounted the note to $13,400,000
at December 31, 1992. In December 1993, the Company repaid
the $15 million subordinated debt owed to TeleColumbus at its
carrying value of $14,030,000.
Senior and subordinated debt at December 31, 1992 consisted of
the following:
<TABLE>
<CAPTION>
<S> <C>
Notes payable to banks $ 14,500,000
Senior notes, net of unamortized 47,804,000
issuance costs of $2,196,000
Subordinated debt 38,090,000
Other 8,407,000
Total senior and subordinated debt 108,801,000
Less current portion of senior
debt (2,467,000)
Long-term portion of senior and $106,334,000
subordinated debt
</TABLE>
5. SHAREHOLDERS' EQUITY
The Company has established three stock option plans, the 1986
Incentive Stock Plan, the 1992 Incentive Stock Plan and the
1992 Nonemployee Director Plan (the "Plans"). The exercise
price of all options and purchase price for restricted stock
under the Plans is equal to or greater than 100% of the fair
market of the Company's common stock on the date of the grant.
The Company also may grant stock options outside of the Plans.
The following summarizes all stock option activity for the
three years ended December 31, 1993:
<TABLE>
<CAPTION>
<S> <C> <C>
Number of Option Price
Options Per Share
Outstanding at 3,190,248 $ .14 - 2.52
December 31,
1990
Granted 1,041,377 1.51 - 4.69
Exercised (354,009) .14 - 2.02
Canceled (16,503) 1.51
Outstanding, 3,861,113 1.51 - 4.69
December 31,
1991
Granted 1,144,379 1.51 - 4.38
Exercised (1,318,420) 1.51 - 3.59
Canceled (59,598) 1.51
Outstanding, 3,627,474 1.51 - 4.69
December 31,
1992
Granted 2,442,825 11.98 - 14.37
Exercised (1,502,301) 1.51 - 4.69
Canceled (25,011) .14 - 12.62
Outstanding, 4,542,987 $ 1.51 - 14.37
December 31,
1993
</TABLE>
Options to purchase 3,806,725 shares under the Plans were
outstanding at December 31, 1993, of which options to purchase
116,642 were fully exercisable. At December 31, 1993, 307,651
options were available to be issued under the Plans. The
total number of options outstanding outside the Plans as of
December 31, 1993 were 736,262, of which options to purchase
383,424 shares were fully exercisable.
In November, 1993, certain officers of the Company were
granted options to purchase 5,906,250 shares of the Company's
common stock at an exercise price of $14.37 per share, subject
to shareholder approval which has not yet been received. The
exercise price of the options is at the fair market value of
the common stock on the date of grant.
In connection with a secondary offering of stock, TeleColumbus
U.S.A., Inc. ("TC USA") converted 31,458 shares of its
preferred stock into 5,698,256 shares of common stock. In
December 1993, TC USA converted the remaining 2,542 shares of
preferred stock into 460,454 shares of common stock.
In May 1993, the Company sold 4,724,997 shares of Common
Stock, of which proceeds were approximately $51,000,000. In
November 1991, the Company sold 7,607,250 shares of Common
Stock, the net proceeds of which were $30,598,000.
All share amounts and per share prices have been adjusted to
reflect the 5% stock dividends paid in each of 1991 and 1992
and the 3.15-to-one common stock split effective on February
4, 1994.
6.INCOME TAXES
As described in Note 1, the Company changed its method of
accounting for income taxes in 1992 from the deferred method
to the asset and liability method.
The provision for income taxes is comprised of the following:
<TABLE>
<CAPTION>
Years Ended December 31,
<S> <C> <C> <C>
1991 1992 1993
Current:
Federal $ 325,000 $1,097,000 $ 5,304,000
State 130,000 49,000 2,113,000
455,000 1,146,000 7,417,000
Deferred:
Federal 1,130,000 3,599,000 6,150,000
State 226,000 1,055,000 719,000
1,356,000 4,654,000 6,869,000
Total $1,811,000 $5,800,000 $14,286,000
</TABLE>
Deferred income tax assets and (liabilities) resulting from
temporary differences between accounting for financial
reporting and tax purposes and the benefit of net operating
loss carryforwards included in the Company's balance sheet are
as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
<S> <C> <C>
1992 1993
Deferred tax liabilities:
Depreciation and ($18,186,000) ($20,900,000)
amortization
Other liabilities (543,000) (634,000)
(18,729,000) (21,534,000)
Deferred tax assets:
Acquisition basis - 64,570,000
differences
State income taxes 553,000 307,000
Federal and state net 6,453,000 18,323,000
operating loss carryforward
Alternative minimum tax 1,639,000 -
credit carryforward
Other assets 775,000 1,131,000
9,420,000 84,331,000
Total ($9,309,000) $ 62,797,000
</TABLE>
The acquisition adjustment relates principally to the
difference between the financial statement and income tax
basis of the assets and liabilities acquired in connection
with the WorldCom, HIT and TRT acquisitions (see Note 9). The
deferred tax asset has been recorded upon the Company's
belief, based upon available evidence, that the income tax
benefit will be realized.
The Company's effective income tax rate differs from the
Federal statutory income tax rate due to the
following:
<TABLE>
<CAPTION>
Years Ended December 31,
<S> <C> <C>
1991 1992 1993
Federal statutory income tax 34.0% 34.0% 35.0%
rate
State taxes, net of federal 5.0 5.0 5.3
benefit
Amortization of goodwill 1.6 .5 1.5
Other, net (1.6) 1.0 (0.3)
Effective tax rate 39.0% 40.5% 41.5%
</TABLE>
The Company has a net operating
loss carryforward for Federal
income tax purposes of $47,366,000
which begin to expire in
varying amounts between 2002 and 2008.
7.COMMITMENTS AND CONTINGENCIES AND OTHER
The Company has entered into
leases for office space, certain
of its ground facilities,
fiber lines and equipment. Rental
expense under operating leases
was $3,309,000, $4,227,000, and
$15,048,000 for 1991, 1992 and
1993, respectively. Future
minimum lease payments under
long-term operating leases and
commitments as of December 31,
1993 are as follows: 1994,
$17,369,000; 1995, $15,968,000; 1996, $15,697,000; 1997,
$14,869,000; 1998, $8,913,000; thereafter, $54,127,000.
Certain of the Company's facility leases include renewal
options, and all leases include provisions for rent escalation
to reflect increased operating costs and/or require the
Company to pay certain maintenance and utility costs.
Under certain transponder agreements, the Company receives
favorable rates if its purchases of transponder space exceed
certain minimum requirements. The Company is charged, and
accrues expenses, for transponder space at a price computed
based upon the assumption that its purchases will exceed the
minimum levels. If the Company's subsequent use of
transponder space falls below the minimum levels, the Company
will be subject to retroactive charges for the transponder
space. To date, the Company has met all minimum usage
requirements.
In May 1990, the Company entered into an agreement under which
it may obtain satellite transponder capacity for maritime and
aeronautical services offered by IDB Mobile at long-term fixed
rates over a five-year period which commenced on September 9,
1991. The minimum remaining total commitment, at December 31,
1993, of approximately $20,400,000 is subject to increase if
the Company does not perform certain obligations under the
agreement.
At December 31, 1993, the Company had outstanding purchase
orders and agreements (some of which are cancelable) to
acquire approximately $30,900,000 of equipment, including
$20,500,000 in long term commitments for undersea fiber optic
cable.
8.RELATED PARTY TRANSACTIONS
The Company paid approximately $1,000,000 and $3,600,000
related to the use of aircraft owned by two officers in 1992
and 1993, respectively. The use of the aircraft was approved
by the Board of Directors in both years. During 1991, 1992
and 1993, IDB Mobile made progress payments of $1,750,000,
$1,798,000 and $832,000, respectively, to an entity controlled
by two officers of the Company. The progress payments were
made under an agreement, which ended December 31, 1993, to
purchase $4,380,000 of satellite transmission equipment for
use on airplanes. In November 1993, the entity paid IDB
Mobile $3,441,000 to repurchase the remaining equipment
inventory. Included in prepaid expenses and other current
assets at December 31, 1993, is a $1,400,000 receivable from
an officer of the Company. The receivable bears interest at
5% per annum and was repaid in March, 1994. Also included in
prepaid expenses and other current assets is a $300,000
receivable from an entity controlled by two officers of the
Company. The amount is due within one year and bears interest
at 5% per annum. In 1992, two officers of the Company
borrowed $250,000 each. The loans are due in equal annual
installments of $50,000 each, beginning in December 1993, and
bear interest at 5% per annum.
In August 1993, the Company purchased a $1,500,000 note
receivable from a director of the Company. The note is
secured by a deed of trust related to a facility the Company
currently leases. The note receivable bears interest at a
rate of prime plus 3% and is due in December 1995. The
Company purchased the loan for $500,000 in cash and issued a
note payable to the director for $1,000,000. The note payable
is due in equal annual installments of $100,000 or upon
demand, and bears interest at a rate of prime plus 2%.
9.ACQUISITIONS
TRT Communications Inc.
In 1993, the Company entered into an Exchange Agreement (the
"Exchange Agreement") with Pacific Telecom, Inc. ("PTI"), and
two of its subsidiaries, International Communications
Holdings, Inc. ("ICHI") and PTI Harbor Bay, Inc. ("Harbor
Bay"), to acquire all of the outstanding capital stock of TRT
Communications, Inc., a subsidiary of ICHI ("TRT"), and Niles
Canyon Earth Station, Inc. ("Niles Canyon"), a subsidiary of
Harbor Bay. Pursuant to the first phase of the Exchange
Agreement, effective January 22, 1993, the Company issued to
ICHI and Harbor Bay a total of 4,095,000 shares of Common
Stock (adjusted for the Stock Split, see Note 5) and acquired
all of the outstanding common stock of Niles Canyon. On
September 23, 1993, the Company completed the second phase of
the Exchange Agreement, and issued and paid to ICHI and Harbor
Bay a total of 10,080,000 shares of Common Stock and
$1,000,000 in cash in exchange for all of the outstanding
stock of TRT.
During the first phase of the Exchange Agreement, ICHI made
loans totalling $4.4 million to TRT which were repaid by the
Company at the closing of the second phase. Also as part of
the Exchange Agreement, the Company agreed to assist in
operations of, and provide certain support services to, TRT
and ICHI for aggregate monthly fees of approximately
$1,000,000 per month through the completion of the second
phase of the acquisition. The Company earned approximately
$8,000,000 in such fees in 1993 and in addition charged TRT
$1,088,000 in costs incurred on their behalf.
The purchase price of $80,000,000 represents the $1,000,000
cash plus the estimated fair market value of the Common Stock
of the Company. Additionally, $27,500,000 in other accrued
liabilities and long-term liabilities have been recorded to
reflect direct acquisition costs, estimated costs related to
closing duplicate facilities, employee severance costs and
other nonrecurring duplicative costs expected to be incurred
in the integration of TRT into the operations of the Company.
In addition, TRT had a retirement plan and provided health
care and life insurance benefits to eligible retired employees
under a defined post retirement benefit plan. Included in
long term liabilities is $19 million which is an estimate of
the excess of the accumulated post retirement benefit
obligation over the fair value of the plan assets and other
pension obligations. The Company is in the process of
resolving the final status of the plan and of obtaining an
actuarial determination of the ultimate liability. The
acquisition, which was accounted for under the purchase method
of accounting, resulted in a preliminary allocation of
approximately $39,000,000 (net of tax benefits of $41,047,000)
to intangible assets, which will be amortized over periods up
to 40 years.
WorldCom Communications, Inc.
In 1992, the Company acquired all of the outstanding stock of
World Communications, Inc. ("WorldCom") and Houston
International Teleport ("HIT") from TeleColumbus USA, Inc.
("TC USA"), a subsidiary of TeleColumbus AG, a Swiss based
telecommunications company, in a two-tiered, stock-for-stock
transaction. Pursuant to the first phase of the acquisition,
the Company issued to TC USA 3,181,500 shares of Common Stock
(adjusted for the Stock Split, see Note 5) in exchange for
52.02% of the issued and outstanding shares of HIT common
stock. In December 1992, the Company completed the second
phase of the acquisition and acquired the remaining 47.98% of
HIT common stock and all of the issued and outstanding common
stock of WorldCom from TC USA in exchange for 9,889,425 shares
of Common Stock (adjusted for the Stock Split, see Note 5) and
34,000 shares of the Company's convertible preferred stock
("Preferred Stock"), having an aggregate liquidation
preference of $34,000,000 and an annual cash dividend yield of
4%. In November 1993, the Common Stock and 31,458 shares of
Preferred Stock (subsequently converted to Common Stock)
issued in connection with the acquisition of WorldCom and HIT
were sold by TC USA in a secondary public offering.
Also as part of the first phase of the acquisition of
WorldCom, the Company agreed to assist in operations of, and
provide certain support services to, TC USA and WorldCom for
aggregate monthly fees of approximately $500,000 per month
through the completion of the second phase of the acquisition.
The Company earned approximately $5,000,000 in such fees in
1992. The Company also earned $2,700,000 in fees for sales
and engineering management and support, sold $327,000 in
services to WorldCom and purchased $1,401,000 in transmission
services from WorldCom in 1992.
The purchase price of $59,300,000 represents the fair market
value of the Common Stock and Preferred Stock of the Company
discounted to reflect restrictions on the sale of such stock
and acquisition expenses. Additionally, $26,700,000 in
accrued expenses and long-term liabilities have been included
to reflect direct acquisition costs and estimated costs
related to closing duplicate facilities, employee severance
costs and other nonrecurring duplicative costs expected to be
incurred in the integration of WorldCom and HIT into the
operations of the Company. The acquisition, which was
accounted for under the purchase method, resulted in an
allocation of $38,600,000 (net of tax benefits of $34,897,000)
to intangible assets, which are being amortized over periods
up to 40 years.
The following unaudited pro forma results of continuing
operations assume TRT, HIT and WorldCom were acquired as of
the beginning of the respective years presented after giving
effect to certain adjustments including the elimination of
intercompany revenues and expenses among the Company, TRT,
Worldcom and HIT, and certain historical operating and
selling, general and administrative expenses representing
duplicate costs to be eliminated upon the integration of TRT,
WorldCom and HIT.
<TABLE>
<CAPTION>
<S> <C> <C>
1992 1993
Revenue $301,669,000 $370,995,000
Income (loss) available to (8,341,000) 21,985,000
common shareholders before
extraordinary item
Net income (loss) before (8,341,000) 15,268,000
preferred stock dividend
Net income (loss) available to (8,341,000) 14,036,000
common shareholders
Primary earnings (loss) per ($0.13) $0.34
share before extraordinary item
Fully diluted earnings (loss) ($0.13) $0.33
per share before extraordinary
item
Primary earnings (loss) per ($0.13) $0.21
share
Fully diluted earnings (loss) ($0.13) $0.21
per share
</TABLE>
The pro forma financial information does not purport to be
indicative of the results of operations that would have
occurred had the transactions taken place at the beginning of
the periods presented or of future results of operations.
TC WorldCom AG
On December 31, 1993, the Company acquired the remaining 60%
interest in TC WorldCom AG ("WorldCom Europe"), a company that
provides public switched and private line telephone services
in Europe, for $10,517,000 in cash. The acquisition was
accounted for under the purchase method. Pro forma
information for this acquisition is not presented as its
effect is not significant.
10. SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental cash flow information is as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
<S> <C> <C> <C>
1991 1992 1993
Cash paid for:
Interest expense $8,757,000 $9,114,000 $8,272,000
Income taxes 72,000 739,000 1,326,000
</TABLE>
In 1993, the Company issued
14,175,000 shares of Common Stock
to acquire 100% of the issued
and outstanding Common Stock of
TRT.
In 1993, 34,000 shares of preferred
stock were converted into
6,158,710 shares of common stock (Note 5).
In 1993, the Company purchased
the remaining 60% interest in
TC WorldCom AG for $10,517,000.
In conjunction with the
acquisition, liabilities were assumed as follows:
<TABLE>
<CAPTION>
<S> <C>
Fair value of $17,907,000
assets acquired
Cash paid (10,517,000)
Liabilities $ 7,390,000
assumed
</TABLE>
In 1992, the Company issued
13,070,925 shares of Common Stock
and 34,000 shares of Preferred
Stock to acquire 100% of the
issued and outstanding common
stock of World Communications,
Inc. and Houston International Teleport.
In 1992, the Company entered
into capital leases for equipment
totalling $2,350,000. The
Company, in turn, sold the
equipment through sales type
leases recording receivables of
$3,497,000, unearned interest of
$670,000 and a gain on sale
of $477,000.
11.STREAMLINING CHARGE
During 1993, plans were approved
to reduce the Company's cost
structure and to improve productivity.
Such plan includes a
reduction in the number of
employees and the disposition of
certain assets. The consolidated
statement of income for 1993
includes a charge of $5,920,000 relating to this program.
IDB COMMUNICATIONS GROUP, INC.
SCHEDULE II - RELATED PARTY RECEIVABLES
<TABLE>
<CAPTION>
<S> <C> <C>
Balance at
December 31,
Name of Debtor 1992 Additions
Accounts Receivable from
officers (1)
Jeffrey P. Sudikoff - 1,400,000
Edward R. Cheramy - 1,400,000
Accounts Receivable from - 300,000
company owned by officers
(2)
Notes Receivable from
officers (3)
Jeffrey P. Sudikoff $250,000 -
Edward R. Cheramy $250,000 -
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Deductions Deductions Balance at Balance at
__________ __________ December December
Name of Debtor 31, 31,
Amounts Amounts 1993 1993
Collected Written __________ __________
Off
Current Non-
Current
Accounts
Receivable from
officers (1)
Jeffrey P. - - 1,400,000 -
Sudikoff
Edward R. Cheramy (1,400,000) - - -
Accounts - - 300,000 -
Receivable from
company owned by
officers (2)
Notes Receivable
from officers (3)
Jeffrey P. - ($50,000) $50,000 $150,000
Sudikoff
Edward R. Cheramy - ($50,000) $50,000 $150,000
</TABLE>
(1) The amounts receivable accrue interest at 5% per year.
The amount due from Mr. Sudikoff was repaid in March,
1994.
(2) The receivable accrues interest at 5% per year and is
payable in full in 1994.
(3) The Notes accrue interest at a rate of 5% per year. The
principal balances are due in five equal annual
installments of $50,000 beginning in December, 1993.
IDB COMMUNICATIONS GROUP, INC.
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Balance at Other Balance at
Classifi- December 31, Additions Changes December 31,
cation 1990 at cost Retirements Add (Deduct) 1991
Land $2,430,000 - - - $ 2,430,000
Building 4,521,000 385,000 - $ 457,000(1) 5,363,000
and
Improve-
ments
Equipment 83,875,000 3,554,000 $269,000 8,044,000(1) 95,204,000
Construc- 9,811,000 16,146,000 - (6,970,000)(1) 18,987,000
tion in
Progress
Total $100,637,000 $20,085,000 $269,000 $1,531,000(2) $121,984,000
Balance at Other Balance at
December 31, Additions Changes December 31,
Classifi- 1991 at cost Retirements Add (Deduct) 1992
cation
Land $ 2,430,000 - - $ 59,000 $2,489,000
Building 5,363,000 $ 425,000 - 969,000(1) 6,757,000
and
Improve-
ments
Equipment 95,204,000 7,654,000 $ 934,000 110,108,000(1) 212,032,000
Construc- 18,987,000 18,833,000 - (12,930,000)(1) 24,890,000
tion in
Progress
Total $121,984,000 $26,912,000 $ 934,000 $ 98,206,000(3) $246,168,000
Balance at Other Balance at
December 31, Additions Changes December 31,
Classifi- 1992 at cost Retirements Add (Deduct) 1993
cation
Land $ 2,489,000 - - - $ 2,489,000
Building 6,757,000 $ 958,000 - ($1,148,000) 6,567,000
and (1)
Improve-
ments
Equipment 212,032,000 14,640,000 $ 1,435,000 45,173,000(1) 270,410,000
Construc- 24,890,000 32,730,000 - (17,770,000) 39,850,000
tion in (1)
Progress
Total $246,168,000 $48,328,000 $ 1,435,000 $26,255,000(4) $319,316,000
</TABLE>
(1)Includes transfer of net assets from construction in
progress to equipment and buildings and improvements.
(2)Amount represents transfers from other assets to property
and equipment related to assets held for sale.
(3)Amount represents consolidation of IDB Mobile on January 1,
1992 and the acquisition of WorldCom and HIT.
(4)Amount represents the acquisition of TRT and WorldCom
Europe.
IDB COMMUNICATIONS GROUP, INC.
SCHEDULE VI - SCHEDULE OF ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Additions Other Balance at
Balance at Charged to Changes December
Classi- December 31,Cost and Retire- Add 31,
fication 1990 Expenses ments (Deduct) 1991
____________ ___________ __________ _______ __________ ___________
Building and $ 523,000$ 197,000 - - $ 720,000
Improvements
Equipment 14,836,000 7,108,000 $35,000 - 21,909,000
Total $15,359,000 $7,305,000 $35,000 - $22,629,000
Additions Other
Balance at Charged to Changes Balance at
Classifi- December 31,Cost and Retire- Add December
cation 1991 Expenses ments (Deduct) 31, 1992
____________ ______________________ _______ _________ ___________
Buildings $ 720,000$ 237,000 - - $ 957,000
and
Improvements
Equipment 21,909,000 9,350,000 $41,000 $98,000(1) 31,316,000
Total $22,629,000 $9,587,000 $41,000 $98,000 $32,273,000
</TABLE>
(1) Amount represents consolidation of IDB Mobile on
January 1, 1992.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Additions
Balance at Charged to
December 31, Cost and
Classification 1992 Expenses Retirements
_______________ __________ ___________ _________
Buildings and $ 957,000 $ 379,000 -
Improvements
Equipment 31,316,000 16,890,000 $ 231,000
Total $32,273,000 $17,269,000 $ 231,000
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Other Balance at
Changes December 31,
Classification Add (Deduct) 1993
______________ __________ _____________
Buildings and ($180,000)(2) $ 1,156,000
Improvements
Equipment 120,000 48,095,000
Total ($60,000) $49,251,000
</TABLE>
(2) Amount represents reclass of
assets between buildings and
improvements and equipment.
IDB COMMUNICATIONS GROUP, INC.
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Additions Additions
Balance at Charged to Charged to
Beginning Costs and Other
Description Period Expenses Accounts
Allowance for
losses on accounts
receivable:
For the year ended $ 597,000 502,000 -
December 31, 1991
For the year ended $ 706,000 364,000 1,811,000(1)
December 31, 1992
For the year ended $2,449,000 1,725,000 3,911,000(2)
December 31, 1993
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Balance
at end of
Description Deductions Period
Allowance for losses
on accounts receiv-
able:
For the year ended (393,000)(3) $ 706,000
December 31, 1991
For the year ended (432,000)(3) $2,449,000
December 31, 1992
For the year ended (2,334,000)(3) $5,751,000
December 31, 1993
</TABLE>
(1) Addition is due to the acquisition of WorldCom on
December 31, 1992.
(2) Addition is due to the acquisition of TRT on September
30, 1993.
(3) Deductions represent the write-off of accounts receivable
balances to the allowance, net of recoveries.
IDB COMMUNICATIONS GROUP, INC.
Unaudited Selected Quarterly Financial Data
<TABLE>
<CAPTION>
Three months ended
(In thousands except per share data)
<S> <C> <C>
Dec. 31, Sept. 30,
1993 (1) 1993 (2)
(Unaudited) (Unaudited)
Revenues $101,595 $73,357
Costs and expenses:
Cost of sales 68,593 47,739
Selling, general & adminis- 13,238 8,205
trative
Depreciation and amortiza- 4,835 5,721
tion
Streamlining charge 5,920 0
Total costs and expenses 92,586 61,665
Operating income 9,009 11,692
Income before extra- $ 4,333 $ 6,003
ordinary item and preferred
stock dividend
Fully diluted earnings per $ 0.06 $ 0.09
share before extraordinary
item
Net income (loss) available $ 4,159 ($2,286)
to common shareholders
</TABLE>
<TABLE>
<CAPTION>
Three months ended
(In thousands except per share data)
<S> <C> <C>
Jun. 30, Mar. 31,
1993 1993 (3)
(Unaudited) (Unaudited)
Revenues $71,335 $64,421
Costs and expenses:
Cost of sales 46,781 41,755
Selling, general & 8,258 7,680
administrative
Depreciation and 5,784 5,598
amortization
Streamlining charge 0 0
Total costs and expenses 60,823 55,033
Operating income 10,512 9,388
Income before extra- $ 5,359 $ 4,444
ordinary item and
preferred stock dividend
Fully diluted earnings $ 0.09 $ 0.08
per share before extra-
ordinary item
Net income (loss) $ 5,019 $ 4,066
available to common
shareholders
</TABLE>
<TABLE>
<CAPTION>
Three months ended
(In thousands except per share data)
<S> <C> <C>
Dec. 31, Sep. 30,
1992 1992
(Unaudited) (Unaudited)
Revenues $47,335 $42,697
Costs and expenses:
Cost of sales 32,826 27,684
Selling, general & 4,580 4,885
administration
Depreciation and 3,917 3,580
amortization
Total costs and expenses 41,323 36,149
Operating income 6,012 6,548
Income before extra- $ 2,666 $ 2,625
ordinary item and
preferred stock dividend
Fully diluted earnings $ 0.07 $ 0.07
per share before extra-
ordinary item
Net income (loss) $ 2,666 $ 2,625
available to common
share-holders
Three months ended
(In thousands except per share data)
<S> <C> <C>
Jun. 30, Mar. 31,
1992 1992
(Unaudited) (Unaudited)
Revenues $36,228 $29,084
Costs and expenses:
Cost of sales 23,557 18,418
Selling, general & 5,066 4,358
administration
Depreciation and 2,778 2,819
amortization
Total costs and expenses 31,401 25,595
Operating income 4,827 3,489
Income before extra- $ 1,919 $ 1,318
ordinary item and
preferred stock dividend
Fully diluted earnings $ 0.05 $ 0.04
per share before extra-
ordinary item
Net income (loss) $ 1,919 $ 1,318
available to common
shareholders
</TABLE>
Since there are changes in the
weighted average number of
common shares outstanding each quarter,
the sum of fully diluted earnings
per share before extraordinary item by
quarter may not equal the fully diluted
earnings per share
before extraordinary item for the year.
(1) The three months ended December 31,
1993 include the results of operations of
TRT Communications, Inc. which was acquired
on September 23, 1993. This quarter also
includes a streamlining charge related
to reductions in the number of employees
and the disposition of certain
assets.
(2) The three months ended September
30, 1993 includes an extraordinary charge
of $7,949,000, net of income tax
benefit of $5,639,000, which represents
the payment of debt redemption premiums
and the write-off of unamortized debt
issuance costs associated with the early
extinguishment of debt.
(3) The three months ended March 31,
1993 include the results of World Communications,
Inc. which was acquired on
December 31, 1992.
IDB COMMUNICATIONS GROUP, INC.
1993 Annual Report on Form 10-K
File Number: 0-14972
INDEX TO EXHIBITS
Item
Number Description
3.1(a) Restated Certificate of Incorporation of the Company,
as filed with the Secretary of State of the State of
Delaware on July 23, 1987. (1)
3.1(b) Designation of Preferences of the Company, as filed
with the Secretary of State of the State of Delaware
on December 16, 1992. (1)
3.1(c) Certificate of Amendment of Restated Certificate of
Incorporation of the Company, as filed with the
Secretary of State of the State of Delaware on
September 23, 1993. (2)
3.2 Bylaws of the Company, as amended to date. (1)
10.1(a) IDB Communications Group, Inc. 1986 Incentive Stock
Plan dated July 11, 1986, as amended. (3)(4)
10.1(b) IDB Communications Group, Inc. 1992 Incentive Stock
Plan dated September 1, 1992. (4)(5)
10.1(c) IDB Communications Group, Inc. 1992 Stock Option Plan
for Nonemployee Directors dated September 1, 1992.
(4)(5)
10.1(d) Form of Non-Plan Nonqualified Stock Option Agreement
executed by the Company and each of the following
individuals: Jeffrey P. Sudikoff, William L. Snelling,
Edward R. Cheramy and Franklin Fried. (4)(6)
10.1(e) IDB Communications Group, Inc. 401(k) Savings and
Retirement Plan. (4)(7)
10.2(a) Form of Indemnity Agreement executed by the Company
and each of the following individuals: Jeffrey P.
Sudikoff, William L. Snelling, Edward R. Cheramy, Rudy
Wann, Peter F. Hartz, Franklin Fried, Joseph M.
Cohen, James E. Kolsrud and Neil J Wertlieb. (4)(8)
10.2(b) Consulting Agreement dated as of January 1, 1992
between the Company and William L. Snelling. (4)(9)
10.2(c) Employment Agreement dated as of January 1, 1992
between the Company and Jeffrey P. Sudikoff. (1)(4)
10.2(d) Employment Agreement dated as of January 1, 1992
between the Company and Edward R. Cheramy. (1)(4)
10.2(e) Employment Agreement dated as of January 1, 1992
between the Company and Peter F. Hartz. (1)(4)
10.2(f) Severance Agreement dated as of August 3, 1992 between
the Company and Neil J Wertlieb. (4)
10.3 Agreement dated as of May 25, 1990 between Comsat,
Inc. and the Company. (10)
10.6 Joint Venture and Shareholder Agreement dated February
12, 1990 between IDB Mobile Holdings, Inc., formerly
known as IDB Aeronautical Holdings, Inc., and TII
Aeronautical Corporation. (6)
10.7(a) Operator Agreement dated December 17, 1992 among the
Company, CICI, Inc. and Southwest Communications, Inc.
(1)
10.7(b) Operator Agreement dated December 17, 1992 among the
Company, IDB Communications Corporation and Southwest
Communications, Inc. (1)
10.8 Lease dated as of December 14, 1992 between the
Company and Olympic-Centinela Partnership, Ltd. (1)
10.9(a) Antenna Slip Lease Agreement dated April 14, 1986
between Teleport Communications and The IDB
Communications Group, Ltd. (11)
10.9(b) Amendment to Antenna Slip Lease Agreement dated April
28, 1988 between the Company and Teleport
Communications. (12)
11.1 Statement re: computation of per share earnings.
22.1 List of Subsidiaries of the Company.
24.1 Consent of Deloitte & Touche.
_______________________________
(1) Filed as an exhibit to the Company's Annual Report on Form
10-K (File No. 0-14972) for the fiscal year ended December
31, 1992, and incorporated herein by reference.
(2) Filed as an exhibit to the Company's Registration Statement
on Form S-3 (File No. 33-70024) dated October 6, 1993, and
incorporated herein by reference.
(3) Filed as an exhibit to the Company's Registration Statement
on Form S-8 (File Number 33-38738), and incorporated herein
by reference.
(4) Management contract or compensatory plan or arrangement
required to be filed as an exhibit pursuant to Item 14(c)
of Form 10-K.
(5) Filed as an exhibit to the Company's Proxy Statement dated
July 17, 1992 (File Number 0-14972), and incorporated
herein by reference.
(6) Filed as an exhibit to the Company's Annual Report on Form
10-K (File Number 0-14972) for the fiscal year ended
December 31, 1989, and incorporated herein by reference.
(7) Filed as an exhibit to the Company's Registration Statement
on Form S-8 (Registration Number 33-38739), and
incorporated herein by reference.
(8) Filed as an exhibit to the Company's Registration Statement
on Form S-1 (Registration Number 33-16488), and
incorporated herein by reference.
(9) Filed as an exhibit to the Company's Annual Report on Form
10-K (File Number 0-14972) for the fiscal year ended
December 31, 1991, and incorporated herein by reference.
(10)Filed as an exhibit to the Company's Current Report on Form
8-K (File Number 0-14972) dated January 31, 1989, and
incorporated herein by reference.
(11)Filed as an exhibit to the Company's Post-Effective
Amendment No. 2 to Registration Statement on Form S-1
(Registration Number 33-28366), and incorporated herein by
reference.
(12)Filed as an exhibit to the Company's Quarterly Report on
Form 10-Q (File Number 0-14972) for the fiscal quarter
ended March 31, 1988, and incorporated herein by reference.
SEVERANCE AGREEMENT
This Severance Agreement (the "Agreement") is dated as of
August 3, 1992, and is entered into by and between Neil J
Wertlieb ("Employee") and IDB Communications Group, Inc., a
Delaware corporation (the "Company"). Employee and the
Company hereby agree to the following terms and conditions:
1.Purpose of Agreement. The purpose of this Agreement is to
provide that, in the event of a Change in Control (as defined
in Section 2 of this Agreement), Employee may become entitled
to receive additional benefits in the event of his
termination. It is believed that the existence of these
potential benefits will benefit the Company by discouraging
turnover among executives with Agreements and causing such
executives to be more able to respond to the possibility of a
Change in Control without being influenced by the potential
effect of a Change in Control on their job security.
2.Change in Control. As used in this Agreement, the phrase
"Change in Control" shall mean any event that causes or
results in (a) Jeffrey P. Sudikoff and Edward R. Cheramy
(collectively, the "Executive Shareholders") owning,
collectively, fewer than 1,391,748 shares of the Company's
common stock (adjusted to give proportionate effect to any
increase or decrease in the Company's outstanding shares of
common stock by reason of a stock dividend, stock split or
similar recapitalization), (b) any person or group of persons
(within the meaning of Section 13 or 14 of the Securities and
Exchange Act of 1934, as amended) other than the Executive
Shareholders acquiring or holding beneficial ownership of 30%
or more of the outstanding shares of common stock of the
Company, without a binding agreement from such person or group
to restrict its beneficial ownership of such outstanding
shares to not more than 40%, or acquiring or holding
beneficial ownership of 40% or more of such stock, (c) a
majority of the Company's directors to consist of individuals
initially nominated by any person other than the executive
Shareholders, or (d) the failure of the Executive
Shareholders, for any reason except death or disability, to
hold the offices of, or to perform the responsibilities of,
Chairman of the Board, Chief Executive Officer and President
of the Company.
3.Rights and Obligations Prior to a Change in Control. Prior
to a Change in Control, the rights and obligations of Employee
with respect to his employment by the Company shall be
whatever rights and obligations are negotiated between the
Company and Employee from time to time. The existence of this
Agreement, which deals only with such rights and obligations
subsequent to a Change in Control, shall not be treated as
raising any inference with respect to what rights and
obligations exist prior to a Change in Control.
4.Effect of a Change in Control. In the event of a Change in
Control, Sections 6 through 8 of this Agreement shall become
applicable to Employee if his Qualifying Termination (as
defined in Section 5) occurs on or prior to the second
anniversary of the date of this Agreement. If a Qualifying
Termination has occurred by that date, this Agreement shall
remain in effect until Employee receives the various benefits
to which he has become entitled under the terms of this
Agreement; otherwise, upon such date this Agreement shall be
of no further force or effect.
5.Qualifying Termination. If, subsequent to a Change in
Control and during the period described in Section 4,
Employee's employment terminates, such termination shall be
considered a Qualifying Termination if either of the following
events occurs:
(a)Employee voluntarily terminates employment for any reason
whatsoever.
(b)Employee is involuntarily terminated other than for Cause.
For purposes of this Section, "Cause" shall mean:
(1)an act or acts of dishonesty or moral turpitude (including
but not limited to conviction of a felony) taken by Employee
which materially injures or damages the Company; or
(2)Employee's willful failure to substantially perform
Employee's duties where such willful failure results in
demonstrable material injury and damage to the Company.
6.Severance Payment. In the event of a Qualifying
Termination, the Company shall pay Employee within 30 days of
the Qualifying Termination a cash lump sum equal to the Unpaid
Two Year Compensation as a severance payment. For purposes of
this Section, the "Unpaid Two Year Compensation" shall be an
amount equal to the sum of all cash compensation (including
bonuses) that Employee would accrue or otherwise be entitled
to receive (were it not for the Qualifying Termination) from
the date hereof to the second anniversary of the date of this
Agreement less the amount of all such cash compensation paid
to Employee on or before the Qualifying Termination; provided,
however, that for purposes of determining the Unpaid Two Year
Compensation, (i) the Unpaid Two Year Compensation shall not
be a negative amount, and (ii) Employee's annual base salary
and bonus rate from the date of Change in Control to the
second anniversary of the date of this Agreement shall not be
less than Employee's annual base salary and bonus rate as in
effect immediately prior to such Change in Control.
7.Additional Benefits. In the event of a Qualifying
Termination, Employee shall be entitled to continue to
participate in the group medical insurance and group dental
insurance programs of the Company which had been made
available to Employee before the Qualifying Termination. In
order to so participate, Employee must pay the monthly premium
applicable to all terminated employees of the Company in order
to purchase medial continuation coverage under Sections 6001
et. seq. of ERISA ("COBRA"). In order to elect such coverage,
such Employee must elect coverage and make payments during the
time periods required by COBRA. The programs shall continue
for one year after the Qualifying Termination.
8.Vesting of Options and Other Benefits. In the event of a
Qualifying Termination, all stock options and similar benefits
granted by the Company shall immediately become fully vested
and exercisable in accordance with their terms.
9.Waiver of Invalidity. Inasmuch as the injury caused to
Employee in the event his employment is terminated after a
Change in Control is difficult or incapable of accurate
estimation at the date of this Agreement, the amounts provided
to be paid hereunder are intended to be severance compensation
and not a penalty, and therefore constitute a good faith
forecast of the harm which might be expected to be caused to
Employee. Accordingly, the Company waives any right to assert
against Employee the invalidity of any payment hereunder by
reason of Employee's failure to seek other employment or
otherwise, nor shall the amount of any payment hereunder to
reduced by reason of any compensation earned or not earned by
Employee as the result of employment by another employer after
the date of termination or otherwise.
10.Miscellaneous Provisions.
(a)Amendment. This Agreement may not be amended to terminated
except pursuant to an instrument in writing executed by both
of the parties hereto.
(b)Successors. The rights and obligations of the Company
under this Agreement shall inure to the benefit of and shall
be binding upon the successors and assigns of the Company.
(c)Governing Law. Except to the extent that federal law is
applicable, this Agreement is made and entered into in the
State of California, and the laws of California shall govern
its validity and interpretation in the performance by the
parties hereto of their respective duties and obligations
hereunder.
(d)Entire Agreement. This Agreement constitutes the entire
agreement between the parties respecting the benefits due to
Employee in the event of a Change in Control followed by a
Qualifying Termination, and there are no representations,
warranties or commitments, other than those set forth herein,
which relate to such benefits.
(e)Notices. Any notice or communications required or
permitted to be given to the parties hereto shall be delivered
personally or be sent by United States registered or certified
mail, postage prepaid and return receipt requested, and
addressed or delivered as follows, or to such other addressees
the party addressed may have substituted by notice pursuant to
this paragraph:
If to the Company:
IDB Communications Group, Inc.
10525 West Washington Boulevard
Culver City, California 90232-1922
Attention: Edward R. Cheramy
If to Employee:
Neil J Wertlieb
821 Bay Street, #C-1
Santa Monica, California 90405
(f)Captions. The captions of this Agreement are inserted for
convenience and do not constitute a part hereof.
(g)Severability. In case any one or more of the provisions
contained in this Agreement shall for any reason be held to be
invalid, illegal or enforceable in any respect, such
invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement, but this Agreement
shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein and
there shall be deemed substituted for such other provision as
will most nearly accomplish the intent of the parties to the
extent permitted by the applicable law. In case this
Agreement, or any one or more of the provisions hereof, shall
be held to be invalid, illegal or unenforceable within any
governmental jurisdiction or subdivision thereof, this
Agreement or any such provision thereof shall not as a
consequence thereof be deemed to be invalid, illegal or
unenforceable in any other governmental jurisdiction or
subdivision thereof.
(h)Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same
Agreement.
IN WITNESS HEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the day and
year first written above in Culver City, California.
IDB COMMUNICATIONS GROUP, INC.
By: /s/ EDWARD R. CHERAMY
Edward R. Cheramy
President
NEIL J WERTLIEB
/s/ NEIL J WERTLIEB
Neil J Wertlieb
IDB COMMUNICATIONS GROUP, INC.
COMPUTATION OF NET INCOME PER SHARE
FOR THE YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
<S> <C>
Primary earnings per share:
Common shares outstanding at 44,817,000
January 1, 1993
Common stock issuances in 1993:
TRT acquisition phase I - 3,821,000
4,095,000 shares in January
TRT acquisition phase II - 2,548,000
10,080,000 shares in September
May equity offering of 4,724,997 2,886,000
shares
Other 230,000
Preferred stock converted to 747,000
common stock in 1993
Average dilutive common stock 4,009,000
options outstanding
Shares assumed to be repurchased (1,177,000)
under treasury stock method using
average market price of $11.84
Total weighted average shares 57,881,000
outstanding
Income before preferred stock $20,139,000
dividend and extraordinary item
Preferred stock dividend (1,232,000)
Income available to common 18,907,000
shareholders before extraordinary
item
Extraordinary item net of tax of (7,949,000)
$5,639,000
Net income available to common
shareholders $10,958,000
Primary earnings per share:
Income available to common $0.33
shareholders before extraordinary
item
Extraordinary item (0.14)
Net income available to common $0.19
shareholders
</TABLE>
IDB COMMUNICATIONS GROUP, INC.
COMPUTATION OF NET INCOME PER SHARE
FOR THE YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
<S> <C>
Fully diluted earnings per share:
Common shares outstanding at January 1, 44,817,000
1993
Common stock issuances in 1993:
TRT acquisition phase I - 4,095,000 shares 3,821,000
in January
TRT acquisition phase II - 10,080,000 2,548,000
shares in September
May equity offering of 4,724,997 shares 2,886,000
Other 230,000
Convertible preferred stock assumed to be 6,159,000
converted as of January 1, 1993
Average dilutive common stock options 4,009,000
outstanding
Shares assumed to be repurchased under (818,000)
treasury stock method using the higher of
the average market price or ending market
price of $17.46
Total weighted average shares outstanding 63,652,000
Income before extraordinary item $20,139,000
Extraordinary item net of tax of (7,949,000)
$5,639,000
Net income before preferred stock dividend $12,190,000
Fully diluted earnings per share:
Income before extraordinary item $0.32
Extraordinary item (0.13)
Net income before preferred stock dividend $0.19
</TABLE>
SUBSIDIARIES OF
IDB COMMUNICATIONS GROUP, INC.
CICI, Inc., a Delaware corporation
Houston International Teleport, Inc., a Delaware corporation
Satellite Transmission and
Reception Specialist Company,
a Delaware corporation
TV Reception Specialists, Inc.,
a Texas corporation
Satellite Transmission
and Reception Specialist
(Barbados) Ltd., a Barbados corporation
STARS International, Inc., a Delaware corporation
IDB Communications Corporation, a Delaware corporation
IDB Communications Group, Limited, a U.K. corporation
IDB London Gateway Limited, a U.K. corporation [50%]
IDB Media Group, Inc., a Delaware corporation
IDB Mobile Holdings, Inc., a Delaware corporation
IDB Mobile Communications,
Inc., a Delaware corporation [50%]
Ocean Satellite Television,
Inc., a Florida corporation
OCEANSAT, Inc., a Florida corporation
IDB Systems, Inc., a Delaware corporation
IDB Teleport Holdings, Inc., a Delaware corporation
IDB WorldCom, Inc., a Delaware corporation
Communications USA, Inc., a Nevada corporation [20%]
Niles Canyon Earth Station, Inc., a Delaware corporation
RSTV, Inc., a Delaware corporation
TRT Communications, Inc., a Delaware corporation
IDB WorldCom Services,
Inc., a Delaware corporation
formerly known as TRT/FTC Communications, Inc.
Adval, Inc., an Oregon corporation [20%]
TRT/FTC Communications Limited, a U.K. corporation
TRT Data Products, Inc., a Delaware corporation
TRT Earth Stations, Inc., a Delaware corporation
TRT/FTC International, Inc., a Delaware corporation
PSI Holdings Ltd. [25%]
Pacific Satellite, Inc. [43%]
World Communications, Inc., a New York corporation
WorldCom, Inc., a New York corporation
TC WorldCom AG, a Switzerland corporation*
WorldCom Telecommunications Services, GmbH, a
Germany corporation
WorldCom International, Inc., a Delaware corporation
____________________________
* Sixty percent of the capital stock of TC WorldCom AG is
held by IDB Communications Group, Inc. and the remaining
forty percent is held by World Communications, Inc.
INDEPENDENT AUDITORS' CONSENT
IDB COMMUNICATIONS GROUP, INC.
We consent to the incorporation by reference in Registration
Statements Nos. 33-38738, 33-38739, 33-51066, 33-67072 and 33-
67074 on Form S-8 and in Registration Statements Nos. 33-70024
and 33-52037 on Form S-3, of our report dated March 7, 1994,
appearing in this Annual Report on Form 10-K of IDB
Communications Group, Inc. for the year ended December 31,
1993.
DELOITTE & TOUCHE
Los Angeles, California
March 28, 1994
