<PAGE>
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K/A
(AMENDMENT NO. 2)
(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 90232-1922
CULVER CITY, CALIFORNIA (Zip code)
(Address of principal
executive offices)
(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.
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
<PAGE>
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>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------
1989 1990 1991 1992 1993
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT DATA:
Revenues:
Transmission services (1)........................ $ 58,254 $ 80,530 $ 94,533 $ 127,399 $ 304,779
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 86,451 104,437 155,344 339,364
---------- ---------- ---------- ---------- ----------
Costs and expenses:
Cost of sales (1)................................ 35,219 53,203 66,514 102,485 233,524
Selling, general and administrative.............. 7,191 12,194 14,688 18,889 37,381
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 expenses....................... 49,348 75,434 91,352 134,468 298,763
---------- ---------- ---------- ---------- ----------
Operating income................................... 11,398 11,017 13,085 20,876 40,601
Interest expense................................... (8,452) (10,912) (8,618) (6,533) (8,525)
Interest income (2)................................ -- -- 179 120 2,175
Income before minority interest and
income taxes...................................... 2,946 105 4,646 14,463 34,251
Minority interest.................................. -- -- -- (135) 174
Provision for income taxes......................... 1,150 40 1,811 5,800 14,286
---------- ---------- ---------- ---------- ----------
Income before extraordinary item................... 1,796 65 2,835 8,528 20,139
Extraordinary item (3)............................. -- -- (1,283) -- (7,949)
---------- ---------- ---------- ---------- ----------
Income before preferred stock dividend............. $ 1,796 $ 65 $ 1,552 $ 8,528 $ 12,190
Preferred stock dividend........................... -- -- -- -- 1,232
---------- ---------- ---------- ---------- ----------
Net income available to common
stockholders...................................... $ 1,796 $ 65 $ 1,552 $ 8,528 $ 10,958
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Primary earnings per share (4):
Income available to common shareholders before
extraordinary item.............................. $0.10 $-- $0.11 $0.24 $0.33
Extraordinary item (3)............................. -- -- (0.05) -- (0.14)
----- ----- ----- ----- -----
Net income available to common
stockholders...................................... $0.10 $-- $0.06 $0.24 $0.19
----- ----- ----- ----- -----
Fully diluted earnings per share (4):
Income before extraordinary item................. $0.10 $-- $0.11 $0.24 $0.32
Extraordinary item (3)........................... -- -- (0.05) -- (0.13)
----- ----- ----- ----- -----
Net income per share............................. $0.10 $-- $0.06 $0.24 $0.19
----- ----- ----- ----- -----
----- ----- ----- ----- -----
CONSOLIDATED BALANCE SHEET DATA:
Net property and equipment......................... $ 77,317 $ 85,278 $ 99,355 $ 213,895 $ 270,065
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
<FN>
- - - --------------------------
(1) 1993 amounts have been reclassified for charges from foreign telephone
companies. See Note 1 "The Company and Summary of Significant Accounting
Policies -- Revenue Recognition."
</TABLE>
1
<PAGE>
<TABLE>
<S> <C>
(2) Interest income for the years ended 1989 and 1990 was not significant and
was netted against interest expense for such years.
(3) 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.
(4) 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.
</TABLE>
2
<PAGE>
PART II
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.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
IDB COMMUNICATIONS GROUP, INC.
Dated: November 28, 1994 By: /s/ RUDY WANN
-----------------------------------
Rudy Wann
VICE PRESIDENT, FINANCE AND
CHIEF FINANCIAL OFFICER
3
<PAGE>
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
March 7, 1994
F-1A
<PAGE>
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
F-1B
<PAGE>
IDB COMMUNICATIONS GROUP, INC.
CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1992 1993
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents......................... $ 1,319,000 $ 54,612,000
Short-term investments............................ -- 12,672,000
Accounts receivable, less allowance for doubtful
accounts of $2,449,000 in 1992 and $5,751,000 in
1993............................................. 43,625,000 108,445,000
Unbilled revenues................................. 10,033,000 13,900,000
Inventory......................................... 5,132,000 1,992,000
Prepaid expenses and other current assets (Note
8)............................................... 8,332,000 21,147,000
------------ ------------
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
amortization................................... 32,273,000 49,251,000
------------ ------------
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
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses............. $ 38,752,000 $ 55,095,000
Other accrued liabilities (Note 3)................ 42,198,000 119,805,000
Current portion of senior debt (Note 4)........... 2,467,000 --
------------ ------------
Total current liabilities....................... 83,417,000 174,900,000
Long-term liabilities (Note 9).................... 16,800,000 38,369,000
Deferred income taxes (Note 6).................... 9,309,000 --
Senior and subordinated debt (Note 4)............. 106,334,000 --
Convertible subordinated debt (Note 4)............ -- 195,500,000
------------ ------------
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, 5,000,000 shares authorized;
34,000 shares issued and outstanding in 1992 and
none outstanding in 1993......................... 17,444,000 --
Common stock, $.01 par value, 200,000,000 shares
authorized; shares issued and outstanding,
14,227,733 in 1992 and 71,713,076 in 1993........ 142,000 717,000
Additional paid-in capital........................ 112,553,000 272,744,000
Retained earnings................................. 5,716,000 16,674,000
------------ ------------
Total shareholders' equity...................... 135,855,000 290,135,000
------------ ------------
Total liabilities and shareholders' equity.... $371,656,000 $722,189,000
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
IDB COMMUNICATIONS GROUP, INC.
CONSOLIDATED INCOME STATEMENT
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1991 1992 1993
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Transmission services................. $ 94,533,000 $127,399,000 $304,779,000
Systems integration and other
income............................... 9,904,000 20,245,000 26,585,000
Fees earned from WorldCom and TRT
(Note 9)............................. -- 7,700,000 8,000,000
------------ ------------ ------------
Total revenues...................... 104,437,000 155,344,000 339,364,000
------------ ------------ ------------
Costs and expenses:
Cost of sales......................... 66,514,000 102,485,000 233,524,000
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............ 91,352,000 134,468,000 298,763,000
------------ ------------ ------------
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, income
taxes and extraordinary item........... 4,646,000 14,463,000 34,251,000
Minority interest....................... -- (135,000) 174,000
------------ ------------ ------------
Income before income taxes and
extraordinary item..................... 4,646,000 14,328,000 34,425,000
Provision for income taxes (Note 6)..... 1,811,000 5,800,000 14,286,000
------------ ------------ ------------
Income before extraordinary item........ 2,835,000 8,528,000 20,139,000
Extraordinary item (net of income tax
benefit of $820,000 in 1991 and
$5,639,000 in 1993) (Note 4)........... (1,283,000) -- (7,949,000)
------------ ------------ ------------
Net income before preferred stock
dividend............................... 1,552,000 8,528,000 12,190,000
Preferred stock dividend................ -- -- 1,232,000
------------ ------------ ------------
Net income available to common
shareholders........................... $ 1,552,000 $ 8,528,000 $ 10,958,000
------------ ------------ ------------
------------ ------------ ------------
Primary earnings per share:
Income available to common
shareholders before extraordinary
item................................. $0.11 $0.24 $0.33
Extraordinary item (Note 4)........... (0.05) -- (0.14)
----- ---- -----
Net income available to common
shareholders......................... $0.06 $0.24 $0.19
----- ---- -----
----- ---- -----
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
dividend............................. $0.06 $0.24 $0.19
----- ---- -----
----- ---- -----
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.
F-3
<PAGE>
IDB COMMUNICATIONS GROUP, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK
-------------------- ------------------------ ADDITIONAL
NUMBER NUMBER PAID-IN RETAINED
OF SHARES AMOUNT OF SHARES AMOUNT CAPITAL EARNINGS
---------- -------- --------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Balance -- December 31, 1990...................... 6,345,579 $ 63,000 -- -- $ 29,061,000 $ 5,703,000
Issuance of common stock.......................... 2,407,698 25,000 -- -- 31,075,000 --
5% stock dividend................................. 320,990 3,000 -- -- 2,886,000 (2,894,000)
Net income........................................ -- -- -- -- -- 1,552,000
---------- -------- --------- ------------ ------------ -----------
Balance -- December 31, 1991...................... 9,074,267 91,000 -- -- 63,022,000 4,361,000
Issuance of common stock (Note 9)................. 4,634,201 46,000 -- -- 42,363,000 --
Issuance of preferred stock....................... -- -- 34,000 17,444,000 -- --
5% stock dividend................................. 519,265 5,000 -- -- 7,168,000 (7,173,000)
Net income........................................ -- -- -- -- -- 8,528,000
---------- -------- --------- ------------ ------------ -----------
Balance -- December 31, 1992...................... 14,227,733 142,000 34,000 17,444,000 112,553,000 5,716,000
Issuance of common stock (Note 9)................. 6,583,177 66,000 -- -- 143,256,000 --
Conversion of preferred stock..................... 1,955,146 20,000 (34,000) (17,444,000) 17,424,000 --
3.15-to-one stock split (Note 5).................. 48,947,020 489,000 -- -- (489,000) --
Net income before preferred stock dividend........ -- -- -- -- -- 12,190,000
Preferred stock dividend.......................... -- -- -- -- -- (1,232,000)
---------- -------- --------- ------------ ------------ -----------
Balance -- December 31, 1993...................... 71,713,076 $717,000 -0- $ -0- $272,744,000 $16,674,000
---------- -------- --------- ------------ ------------ -----------
---------- -------- --------- ------------ ------------ -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
IDB COMMUNICATIONS GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1991 1992 1993
------------ ------------ ------------
<S> <C> <C> <C>
Cash and cash equivalents at
beginning of year................... $ 1,219,000 $ 2,762,000 $ 1,319,000
------------ ------------ ------------
Cash flows from operating activities:
Net income before preferred stock
dividend............................ 1,552,000 8,528,000 12,190,000
------------ ------------ ------------
Adjustments to reconcile net income
to net cash provided by operating
activities:
Extraordinary item, net of income
tax benefit of $820,000 in 1991
and $5,639,000 in 1993............ 1,283,000 -- 7,949,000
Depreciation expense............... 7,305,000 9,587,000 17,269,000
Amortization expense............... 2,417,000 3,005,000 4,158,000
Amortization of loan fees and
discounts......................... 428,000 502,000 512,000
Provision for doubtful accounts
receivable........................ 502,000 364,000 1,725,000
Deferred income taxes.............. 1,356,000 6,672,000 6,869,000
Gain on sale of assets............. (21,000) (477,000) (12,000)
Minority interest.................. -- 135,000 (174,000)
Changes in operating assets and
liabilities, net of acquisitions:
Accounts receivable.............. 1,599,000 (14,624,000) (34,366,000)
Unbilled revenues................ (2,505,000) (1,921,000) (1,163,000)
Inventory........................ (373,000) (2,463,000) 3,237,000
Prepaid expenses and other
assets.......................... (4,313,000) 425,000 (8,969,000)
Accounts payable and accrued
expenses........................ 6,490,000 8,834,000 (1,487,000)
Other liabilities................ (446,000) 9,196,000 (5,698,000)
------------ ------------ ------------
Total adjustments.................... 13,722,000 19,235,000 (10,150,000)
------------ ------------ ------------
Net cash provided by operating
activities.......................... 15,274,000 27,763,000 2,040,000
------------ ------------ ------------
Cash flows provided by financing
activities:
Proceeds from issuance of common
stock............................. 31,095,000 2,281,000 53,994,000
Borrowings of senior debt.......... 5,175,000 62,040,000 10,500,000
Repayments of senior debt.......... (21,589,000) (58,754,000) (83,066,000)
Borrowings of convertible
subordinated debt................. -- -- 189,550,000
Repayments and defeasance of senior
subordinated and subordinated
debt.............................. -- -- (34,580,000)
Payment of debt redemption
premiums.......................... -- -- (9,257,000)
Preferred stock dividend payment... -- -- (1,083,000)
Increase in advance from minority
shareholder
of subsidiary..................... -- 11,127,000 3,518,000
------------ ------------ ------------
Net cash provided by financing
activities.......................... 14,681,000 16,694,000 129,576,000
Cash flows used in investing
activities:
Additions to property and
equipment......................... 20,085,000 26,912,000 48,328,000
Purchases of short-term
investments, net.................. -- -- 12,672,000
Investment in and advances to joint
venture........................... 6,216,000 -- --
Proceeds from disposition of
property.......................... (255,000) -- (584,000)
Increase in other assets........... 2,298,000 10,831,000 7,979,000
Payment for acquisitions, net of
cash acquired..................... -- 2,669,000 9,908,000
Purchase of other intangible
assets............................ 68,000 5,488,000 20,000
------------ ------------ ------------
Net cash used in investing
activities.......................... 28,412,000 45,900,000 78,323,000
------------ ------------ ------------
Increase (decrease) in cash and
cash equivalents.................. 1,543,000 (1,443,000) 53,293,000
------------ ------------ ------------
Cash and cash equivalents at end of
year................................ $ 2,762,000 $ 1,319,000 $ 54,612,000
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
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.
The Company has retroactively reclassified charges in 1993 from foreign
telephone companies to complete calls made from the United States by the
Company's customers. These charges in the amount of $28,656,000, which
previously were classified as direct reductions of transmission services
revenue, are now classified as cost of sales. Operating income, net income
available to common shareholders and the balance sheet are not affected. This
change was made to conform with industry reporting practices.
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
F-6
<PAGE>
IDB COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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>
1992 1993
----------- ------------
<S> <C> <C>
Satellite transmission and customer contracts........ $16,060,000 $ 16,060,000
Goodwill and other intangible assets................. 61,907,000 146,015,000
----------- ------------
Total intangible assets.............................. 77,967,000 162,075,000
Less accumulated amortization........................ 9,391,000 9,289,000
----------- ------------
Total.............................................. $68,576,000 $152,786,000
----------- ------------
----------- ------------
</TABLE>
Fully amortized intangible assets of $3,582,000 were eliminated from the
above balances in 1993.
F-7
<PAGE>
IDB COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. OTHER ACCRUED LIABILITIES
Other accrued liabilities at December 31, 1992 and 1993 consist of the
following:
<TABLE>
<CAPTION>
1992 1993
----------- ------------
<S> <C> <C>
Settlements with domestic and foreign carriers....... $14,642,000 $ 62,140,000
Acquisition allowances, current...................... 10,696,000 23,494,000
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.
F-8
<PAGE>
IDB COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. LONG TERM DEBT (CONTINUED)
Senior and subordinated debt at December 31, 1992 consisted of the
following:
<TABLE>
<S> <C>
Notes payable to banks.......................................... $ 14,500,000
Senior notes, net of unamortized issuance costs of $2,196,000... 47,804,000
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 subordinated debt............... $106,334,000
------------
------------
</TABLE>
On March 2, 1992, the Company completed the private placement of $50,000,000
of senior secured notes ("Senior Notes") and a $15,000,000 revolving line of
credit ("Revolver"). A portion of the proceeds was used to repay all amounts
outstanding under the Company's previous credit facility, including a term loan
of $43,000,000 and a revolving facility of $15,000,000. Repayment of the
revolving facility and term loan resulted in an extraordinary charge of
$1,283,000 in 1991, net of $820,000 of income tax benefit, which represented the
unamortized portion of costs incurred in connection with borrowings under the
credit facility.
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>
NUMBER OPTION PRICE
OF OPTIONS PER SHARE
---------- -------------
<S> <C> <C>
Outstanding at December 31, 1990..................... 3,190,248 $ .14-2.52
Granted.............................................. 1,041,377 1.51-4.69
Exercised............................................ (354,009) .14-2.02
Canceled............................................. (16,503) 1.51
---------- -------------
Outstanding, December 31, 1991....................... 3,861,113 1.51-4.69
Granted.............................................. 1,144,379 1.51-4.38
Exercised............................................ (1,318,420) 1.51-3.59
Canceled............................................. (59,598) 1.51
---------- -------------
Outstanding, December 31, 1992....................... 3,627,474 1.51-4.69
Granted.............................................. 2,442,825 11.98-14.37
Exercised............................................ (1,502,301) 1.51-4.69
Canceled............................................. (25,011) .14-12.62
---------- -------------
Outstanding, December 31, 1993....................... 4,542,987 $ 1.51-14.37
---------- -------------
---------- -------------
</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.
F-9
<PAGE>
IDB COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. SHAREHOLDERS' EQUITY (CONTINUED)
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,
-----------------------------------
1991 1992 1993
---------- ---------- -----------
<S> <C> <C> <C>
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>
F-10
<PAGE>
IDB COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. INCOME TAXES (CONTINUED)
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,
--------------------------
1992 1993
------------ ------------
<S> <C> <C>
Deferred tax liabilities:
Depreciation and amortization.................... $(18,186,000) $(20,900,000)
Other liabilities................................ (543,000) (634,000)
------------ ------------
(18,729,000) (21,534,000)
------------ ------------
Deferred tax assets:
Acquisition basis differences.................... -- 64,570,000
State income taxes............................... 553,000 307,000
Federal and state net operating loss
carryforward.................................... 6,453,000 18,323,000
Alternative minimum tax credit carryforward...... 1,639,000 --
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,
--------------------------
1991 1992 1993
------ ------ ------
<S> <C> <C> <C>
Federal statutory income tax rate.................. 34.0% 34.0% 35.0%
State taxes, net of federal benefit................ 5.0 5.0 5.3
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.
F-11
<PAGE>
IDB COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. COMMITMENTS AND CONTINGENCIES AND OTHER (CONTINUED)
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
F-12
<PAGE>
IDB COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. ACQUISITIONS (CONTINUED)
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
F-13
<PAGE>
IDB COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. ACQUISITIONS (CONTINUED)
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>
1992 1993
------------ ------------
<S> <C> <C>
Revenue............................................. $301,669,000 $457,341,000
Income (loss) available to common shareholders
before extraordinary item.......................... (8,341,000) 17,295,000
Net income (loss) before preferred stock dividend... (8,341,000) 10,578,000
Net income (loss) available to common
shareholders....................................... (8,341,000) 9,346,000
Primary earnings (loss) per share before
extraordinary item................................. ($0.13) $0.26
Fully diluted earnings (loss) per share before
extraordinary item................................. ($0.13) $0.26
Primary earnings (loss) per share................... ($0.13) $0.14
Fully diluted earnings (loss) per share............. ($0.13) $0.14
</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,
----------------------------------
1991 1992 1993
---------- ---------- ----------
<S> <C> <C> <C>
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).
F-14
<PAGE>
IDB COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. SUPPLEMENTAL CASH FLOW INFORMATION (CONTINUED)
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>
<S> <C>
Fair value of assets acquired.................................... $ 17,907,000
Cash paid........................................................ (10,517,000)
------------
Liabilities assumed.............................................. $ 7,390,000
------------
------------
</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.
F-15
