PROSPECTUS
225,000 Shares
U.S. LONG DISTANCE CORP.
Common Stock
The 225,000 shares (the "Shares") of common stock, par value $.01
per share (the "Common Stock"), of U.S. Long Distance Corp. (the
"Company") to which this Prospectus relates are being offered on
behalf of and for the account of certain stockholders (the "Selling
Stockholders") of the Company. The Company anticipates that the
Shares will be offered for sale until the earlier of (i) the sale of
all of the Shares, or (ii) the one-year anniversary of the issuance of
the Shares after the effectiveness of this Registration Statement.
The Company has agreed to pay all expenses of registration in
connection with this offering, but will not receive any of the
proceeds from the sale of the Shares being offered hereby. All fees
and disbursements of counsel for each of the Selling Stockholders, and
all brokerage commissions and other similar expenses incurred by such
Selling Stockholders will be borne by such Selling Stockholders. The
aggregate proceeds to the Selling Stockholders from the sale of the
Shares will be the purchase price of the Shares sold, less the
aggregate brokerage commissions and underwriters' discounts, if any,
and other expenses of issuance and distribution not borne by the
Company. See "Use of Proceeds," "Plan of Distribution" and "Selling
Stockholders."
The Common Stock is included in the Nasdaq Stock Market's
National Market (the "Nasdaq National Market") under the symbol
"USLD." On April 24, 1997, the last reported sales price for the Common
Stock was $12.00 per share.
This offering of the Shares is currently not being underwritten.
However, the Selling Stockholders, brokers, dealers or underwriters
that participate with the Selling Stockholders in the distribution of
the Shares may be deemed "underwriters," as that term is defined in
the Securities Act of 1933, as amended (the "Securities Act"), and any
commissions received by broker-dealers, agents or underwriters and any
profit on the resale of the Shares purchased by them may be deemed to
be underwriting commissions or discounts under the Securities Act.
Although neither the Company nor the Selling Stockholders have entered
into any arrangement or underwriting agreement with any broker-dealer
or agent, the Shares being offered hereby, when sales thereof are
made, may be made in one or more transactions (which may involve one
or more block transactions) through customary brokerage channels,
either through brokers acting as brokers or agents for the sellers, or
through dealers or underwriters acting as principals who may resell
the Shares in the Nasdaq National Market or in privately negotiated
sales, or otherwise, or by a combination of such methods of offering.
Each sale may be made either at market prices prevailing at the time
of the sale or at negotiated prices.
If and to the extent required, the specific number of Shares to
be sold, the names of the Selling Stockholders, the purchase price,
the public offering price, the names of any such agents, dealers or
underwriters and any applicable commissions or discounts with respect
to a particular offer will be set forth in an accompanying Prospectus
Supplement.
See "Risk Factors" on page 5 for a discussion of certain material
factors that should be considered in connection with an investment in
the shares of Common Stock offered hereby.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
April 24, 1997
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AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and,
in accordance therewith, files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy statements and other information filed by the Company
with the Commission may be inspected and copied at the Public Reference
Section of the Commission at Judiciary Plaza, Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the following Regional Offices of the
Commission: Chicago Regional Office, Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661; and New York Regional
Office, Seven World Trade Center, New York, New York 10048. Copies of such
materials also may be obtained by mail at prescribed rates from the Public
Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549. In addition, such materials filed
electronically by the Company with the Commission are available at the
Commission's World Wide Web site at http://www.sec.gov.
The Common Stock is listed on the Nasdaq National Market, and reports
and other information concerning the Company may be inspected and copied at
the offices of the Nasdaq National Market at 1735 K Street, N.W.,
Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on
Form S-3 under the Securities Act with respect to the Shares of Common
Stock offered hereby. As permitted by the rules and regulations of the
Commission, this Prospectus omits certain information contained in that
Registration Statement. For further information with respect to the Company
and the Shares offered hereby, reference is hereby made to the Registration
Statement and its exhibits and schedules. The Registration Statement may be
inspected without charge at the Public Reference Section of the Commission
at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, and copies may be obtained therefrom at prescribed rates. Statements
contained herein concerning provisions of documents are necessarily
summaries of such documents, and each statement is qualified in its
entirety by reference to the copy of the applicable document filed with the
Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission under
the Exchange Act are hereby incorporated by reference in this Prospectus:
(i) the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1996, and (ii) the Company's Quarterly Report on Form 10-Q
for the quarter ended December 31, 1996.
All reports and other documents filed by the Company with the
Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange
Act after the date of this Prospectus and prior to the termination of the
offering of the Shares made hereby shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of filing of such
reports and documents. Any statement contained in a document incorporated
by reference herein shall be deemed to be modified or superseded for
purposes of this Prospectus and the Registration Statement of which it is a
part to the extent that a statement contained herein or in a subsequently
filed document modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus or the Registration
Statement.
Upon written or oral request, the Company will provide without charge
to each person to whom a copy of this Prospectus is delivered, a copy of
any and all of the documents incorporated herein by reference (other than
exhibits to such documents, unless such exhibits are specifically
incorporated by reference into such documents). Requests should be directed
to U.S. Long Distance Corp., 9311 San Pedro, Suite 100, San Antonio, Texas
78216, Attention: Investor Relations (210) 525-9009.
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PROSPECTUS SUMMARY
The following Summary is qualified in its entirety by the
more detailed information appearing elsewhere in this Prospectus
or in the documents incorporated by reference.
THE COMPANY
GENERAL
U.S. Long Distance Corp. (the "Company") is a fully-
integrated long distance communications company offering an
integrated group of communication services including direct dial
long distance, prepaid calling cards, travel cards, data
transmission and calling center services.
On July 10, 1996, the Company's Board of Directors approved
a plan to spin off the Company's commercial billing clearinghouse
and information management services business ("Billing Group
Business") as a separate public company (the "Distribution"). To
effect the spinoff, the Board approved the distribution of the
outstanding shares of common stock of its wholly owned subsidiary
that owned and operated the Billing Group Business, Billing
Information Concepts Corp. ("Billing"), to its stockholders. The
Distribution was tax-free for federal income tax purposes to the
stockholders of the Company, and the Company will not recognize
income, gain or loss as a result of the Distribution, except for
direct spinoff costs. The Distribution was completed on August
2, 1996.
DIRECT DIAL LONG DISTANCE SERVICES
The Company is a full-service long distance carrier
currently providing direct dial long distance services to small
and medium-sized commercial customers and, to a lesser extent,
residential customer accounts. The Company began offering direct
dial long distance services following its entry into the direct
dial long distance business in August 1991 through the
acquisition of three related direct dial long distance companies
in Texas. The Company focuses its direct sales efforts in the
West Coast, Pacific Northwest, Southwest and Southeast regions of
the United States to take advantage of network efficiencies. In
addition to its basic "one-plus" service, the Company provides
inbound 800/888 service, travel and prepaid calling card
services, private line services, data transmission services,
wholesale carrier services and other customer-specific products.
OPERATOR SERVICES
The Company provides operator assisted services for private
pay telephones, hotels, motels, university dormitories and
hospitals. The Company's operator services are accessed when
calls requiring operator assistance and/or alternate billing
options are placed from customer locations. Such services
involve the use of live and automated operators to receive,
validate and complete the calls. The Company processes collect,
third-party, person-to-person and calling card calls and,
generally, shares a percentage of call revenues with its
customers.
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The Offering
Common Stock Offered by the Selling Stockholders..... 225,000 shares
Percent of Outstanding Common Stock of the
Company held by the Selling Stockholders............. 1.4%(1)
Nasdaq National Market Symbol........................ USLD
Use of Proceeds...................................... The Company will not
receive any of the
proceeds from the sale
of the Shares being
offered hereby
_______________
(1) Percentage indicated is based upon 15,401,576 shares of
Common Stock outstanding as of April 24, 1997.
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RISK FACTORS
OTHER THAN HISTORICAL AND FACTUAL STATEMENTS, THE MATTERS
AND ITEMS DISCUSSED IN THIS PROSPECTUS ARE FORWARD-LOOKING
STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S
ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THE RESULTS DISCUSSED
IN THE FORWARD-LOOKING STATEMENTS. IN ADDITION TO OTHER
INFORMATION CONTAINED IN THIS PROSPECTUS, THE FOLLOWING FACTORS
COULD CONTRIBUTE TO SUCH DIFFERENCES. PROSPECTIVE INVESTORS
SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS AND CAUTIONARY
STATEMENTS IN DETERMINING WHETHER TO PURCHASE SHARES OF COMMON
STOCK IN THE OFFERING MADE HEREBY. ALL FACTORS SHOULD BE
CONSIDERED IN CONJUNCTION WITH THE OTHER INFORMATION AND
FINANCIAL DATA APPEARING ELSEWHERE IN THIS PROSPECTUS AND IN THE
DOCUMENTS INCORPORATED HEREIN BY REFERENCE. SEE "DISCLOSURE
REGARDING FORWARD-LOOKING STATEMENTS."
GOVERNMENT REGULATION; PROPOSED ACTIONS. The Company's
activities are subject to the regulations of the Federal
Communications Commission (the "FCC") and the public utility
commissions of the various states in which the Company operates.
These regulatory agencies are governed by respective federal or
state legislation, and therefore, any change or modification to
such regulation or legislation can result in positive or negative
effects upon the Company. State and federal regulatory actions
have had, and are expected to continue to have, both positive and
negative effects upon the Company. Decisions by the state or
federal legislative or regulatory bodies with respect to the
permissible business activities or pricing practices of the
Company's dominant competitors, such as American Telephone and
Telegraph Company ("AT&T") and the seven Regional Bell Operating
Companies ("RBOCs"), also may have an adverse impact on the
Company's operations. Moreover, any significant change in
regulations by federal or state governmental agencies could
significantly increase the Company's costs or otherwise have an
adverse effect on the Company's activities and on its expansion
efforts.
ACQUISITION PROGRAM. The Company is actively engaged in an
acquisition program, focusing primarily on acquisitions in the
direct dial long distance industry. One or more of such
acquisitions could result in a substantial change in the
Company's operations and financial condition. The success of the
Company's acquisition program will depend upon, among other
things, the availability of acquisition candidates, the
availability of funds to finance acquisitions and the
availability of management resources to oversee the operation of
acquired businesses. No assurance can be given that the Company
will succeed in consummating any additional acquisitions or that
the Company will be able to successfully integrate and manage any
acquisitions. While the Company has, from time to time, had
discussions with direct dial long distance companies, other than
as described in the documents incorporated herein by reference,
the Company has no pending negotiations or agreements for any
acquisitions at the date of this Prospectus.
As consideration for any acquisitions, in addition to or in
lieu of the payment of cash, the Company may issue Common Stock,
preferred stock, convertible debt or other securities that could
result in substantial dilution of the percentage ownership of
public stockholders. The Company does not intend to seek
stockholder approval for any such acquisitions or security
issuances unless required by applicable law or regulations. See
"Description of Capital Stock."
TECHNOLOGICAL CHANGE AND NEW SERVICES. The
telecommunications industry has been characterized by steady
technological change, frequent new service introductions and
evolving industry standards. The Company believes that its
future success will depend on its ability to anticipate such
changes and to offer on a timely basis market responsive services
that meet these evolving industry standards. There can be no
assurance that the Company will have sufficient resources to make
the investments necessary to acquire new technology or to
introduce new services that would satisfy an expanded range of
customer needs.
DEPENDENCE UPON THIRD PARTY TRANSMISSION FACILITIES. The
Company currently owns only a portion of the transmission
facilities needed to complete long distance telephone calls.
Therefore, the Company's operator services and direct dial long
distance telephone businesses are dependent upon contractual
arrangements, both long and short-term, with facilities-based
carriers for the transmission of calls. While the Company
believes that it has ample access to transmission facilities
at competitive rates and expects to continue to have such
access in the foreseeable future, this ongoing availability
cannot be assured.
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SERVICE INTERRUPTIONS; EQUIPMENT FAILURES. The Company's
business requires that transmission and switching facilities and
other equipment be operational 24 hours per day, 365 days per
year. Long distance telephone companies such as the Company on
occasion may experience temporary service interruptions or
equipment failures, in some cases resulting from causes beyond
their control. Any such event experienced by the Company would
impair the Company's ability to service its customers and could
have a material adverse effect on the Company's business.
INCREASED EXPENDITURES FOR ANTICIPATED EXPANSION. To
facilitate and support the growth anticipated in its business,
the Company is significantly expanding its level of operations,
and thus increasing its investments in personnel and facilities.
Due to the increases in the Company's overhead and operating
expenses resulting from this expansion, the Company's operating
results may be adversely affected if its revenues remain flat or
do not increase to the extent expected.
SEASONAL VARIATIONS IN REVENUES. Approximately 95% of the
Company's direct dial long distance revenues are generated by
commercial customers, and accordingly, the Company experiences
general decreases in long distance revenues around national
holidays when commercial traffic is reduced. The Company
typically experiences decreases in operator services revenues in
the fall and winter months as pay telephone usage declines due to
cold and inclement weather in many parts of the United States.
As a result of the seasonal variations discussed above, revenue
reported in the Company's first fiscal quarter ending December 31
(which includes Thanksgiving, Christmas and New Year's holidays)
historically has been the lowest level of any quarter of the
year. Conversely, due to increased traffic from pay telephones
during the spring and summer months and a lower concentration of
national holidays, the Company historically has experienced its
highest revenue levels in the third and fourth quarters of the
fiscal year. Because the Company's fixed operating expenses do
not decrease during the first quarter, the Company's
profitability is also, generally, at its lowest level for any
quarter of the year.
CUSTOMER ATTRITION. The Company believes that a high level
of customer attrition is common in the direct dial long distance
and operator services industries. Although the Company has not
experienced significant attrition in its various businesses, the
Company's historical levels of customer attrition may not be
indicative of future attrition levels, and there can be no
assurance that any steps taken by the Company to counter
increased customer attrition would accomplish the Company's
objectives. In addition, recent acquisitions and consolidations
in the telecommunications industry have resulted in, and may in
the future result in, the loss of customers by the Company
because of the acquisition of these customers by large companies
that have existing contractual relationships with the Company's
competitors.
COMPETITION. The long distance telecommunications industry
is intensely competitive and is significantly affected by new
service introductions and the market activities of major industry
participants. Competition in the operator services and direct
dial long distance businesses is based upon pricing, customer
service, network quality and value-added services. In operator
services, the Company competes with AT&T, MCI Telecommunications
Corporation ("MCI"), Sprint Incorporated ("Sprint") and
approximately 125 other operator services companies across the
continental United States. AT&T continues to dominate
competition in the direct dial long distance telecommunications
market, with other competitors in this business being MCI and
Sprint as well as a large number of regional and local providers
of long distance services. Additionally, the Telecommunications
Act of 1996 allows the RBOCs to compete in the long distance
industry. Some of the Company's competitors have greater name
recognition, more extensive transmission networks and greater
engineering and marketing capabilities than the Company and have,
or have access to, substantially greater financial and personnel
resources than those available to the Company. The ability of
the Company to compete effectively in the telecommunications
industry will depend upon its continued ability to maintain high
quality, market driven services at prices generally equal to or
below those charged by its competitors. There can be no
assurance that the Company will be able to compete successfully
with existing or future competitors.
SHARES ELIGIBLE FOR FUTURE SALE. Upon the sale of all of
the Shares of Common Stock offered hereby, and assuming no
further issuance of shares of Common Stock by the Company,
15,626,576 shares of Common Stock will be outstanding,
substantially all of which will be freely tradeable without
restriction (except to the extent owned by affiliates of the
Company). In addition to the foregoing, at April 24, 1997,
2,253,575 shares of Common Stock were
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<PAGE>
issuable upon the exercise of outstanding employee and director
stock options (of which 985,091 were exercisable on such date)
and options exercisable for 1,309,577 shares of Common Stock
and grants for 312,000 shares of Common Stock remained available
for grant under the Company's employee and non-employee director
stock option plans and restricted stock plans, respectively.
Any shares issued upon the exercise of stock options may be
freely sold in the public market (except to the extent issued
to affiliates of the Company).
Pursuant to certain telecommunications service agreements,
the Company agreed, among other things, to grant certain
warrants, exercisable for a period of seven years, to purchase up
to an aggregate of 225,000 shares of the Company's Common Stock
at an exercise price of $3.24 per share. One half of the shares
underlying the warrants (112,500 shares) are vested, and the
remaining one half of such shares (112,500 shares) vest on
January 15, 1998. The Company has filed a registration statement
(of which this prospectus forms a part) to register for sale with
the Commission the number of shares that may be sold by the
Selling Stockholders upon the exercise of the contingent
warrants.
Any future sales of substantial amounts of Common Stock in
the open market by the Selling Stockholders, by employees or
directors exercising stock options, by stockholders or
warrantholders whose shares have been registered with the
Commission by the Company or by other stockholders may adversely
impact the market price of the Common Stock.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus contains certain "forward-looking
statements" within the meaning of the Section 27A of the
Securities Act and Section 21E of the Exchange Act.
Specifically, all statements other than statements of historical
facts included in this report regarding the Company's financial
position, business strategy and plans and objectives of
management of the Company for future operations are forward-
looking statements. These forward-looking statements are based
on the beliefs of the Company's management, as well as
assumptions made by and information currently available to the
Company's management. When used in this report, the words
"anticipate," "believe," "estimate," "expect" and "intend" and
words or phrases of similar import, as they relate to the Company
or Company management, are intended to identify forward-looking
statements. Such statements reflect the current view of the
Company with respect to future events and are subject to certain
risks, uncertainties and assumptions related to certain factors
including, without limitation, competitive factors, general
economic conditions, customer relations, relationships with
vendors, the interest rate environment, governmental regulation
and supervision, seasonality, the operation of the Company's
networks, transmission costs, product introductions and
acceptance, technological change, changes in industry practices,
one-time events and other factors described herein ("cautionary
statements"). Although the Company believes that the
expectations are reasonable, it can give no assurance that such
expectations will prove to be correct. Based upon changing
conditions, should any one or more of these risks or
uncertainties materialize, or should any underlying assumptions
prove incorrect, actual results may vary materially from those
described herein as anticipated, believed, estimated, expected or
intended. All subsequent written and oral forward-looking
statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by the
applicable cautionary statements.
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THE COMPANY
OTHER THAN HISTORICAL AND FACTUAL STATEMENTS, THE MATTERS
AND ITEMS DISCUSSED HEREIN ARE FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES. ACTUAL RESULTS OF THE COMPANY
MAY DIFFER MATERIALLY FROM THE RESULTS DISCUSSED IN THE FORWARD-
LOOKING STATEMENTS. CERTAIN FACTORS THAT COULD CONTRIBUTE TO
SUCH DIFFERENCES ARE DISCUSSED IN "RISK FACTORS, WITH THE FORWARD-
LOOKING STATEMENTS THROUGHOUT THIS PROSPECTUS AND IN "DISCLOSURE'S
REGARDING FORWARD-LOOKING STATEMENTS."
GENERAL
The Company is a fully-integrated long distance
communications company. From fiscal 1991 through fiscal 1996,
the Company's revenues increased at a compounded annual rate of
60%, totaling $180.3 million for fiscal 1996. The Company offers
an integrated group of communication services including direct
dial long distance, prepaid calling cards, data transmission and
calling center services.
The long distance telephone industry has changed
significantly since the mandated divestiture by AT&T of its 22
local telephone companies in 1984. Regulations mandating equal
access to the existing telecommunications network led to the
creation of hundreds of new long distance companies. Competition
now pervades across all categories of long distance telephone
services, including both domestic and international direct dial
long distance telephone services, operator assisted and calling
card services and 800/888 specialized in-bound long distance
telephone services. While AT&T and, to a lesser extent, MCI and
Sprint, together dominate the estimated $78 billion long distance
telecommunications industry, management believes that a growing
share of the market is serviced by smaller long distance
companies such as the Company. Industry sources estimate that
approximately 80% of the long distance market is shared among
AT&T, MCI and Sprint.
The Telecommunications Act of 1996, which was signed into
law on February 8, 1996, is the first major overhaul of the
telecommunications law since the divestiture of AT&T. This act
allows telecommunications providers such as the Company to
provide local telephone services. The local telephone service
industry is estimated to be a $95 billion industry and is
dominated by the RBOCs. The Company is actively pursuing its
entrance into the local service industry. The Company is
currently certified to offer local service in four states and has
certification pending in four other states. The Company has
signed an interconnection agreement with Southwestern Bell
enabling the Company to provide local telephone service to
business and residential customers in Southwestern Bell's five-
state service area. The Company also has entered into a local
resale agreement with BellSouth Telecommunications for their nine-
state service territory. Additionally, the Telecommunications Act
of 1996 allows the RBOCs to compete in the long distance
industry. However, the applicant RBOC must first satisfy a
legislative "checklist" that outlines the steps required for an
RBOC to open its network to competition on a local basis.
On July 10, 1996, the Company's Board of Directors approved
a plan to spin off the Company's Billing Group Business as a
separate public company. To effect the Distribution, the Board
approved the distribution of the outstanding shares of common
stock of Billing to its stockholders. The Distribution was tax-
free for federal income tax purposes to the stockholders of the
Company, and the Company will not recognize income, gain or loss
as a result of the Distribution, except for direct spinoff costs.
The Distribution was completed on August 2, 1996.
DIRECT DIAL LONG DISTANCE SERVICES
The Company is a full-service long distance carrier
currently providing direct dial long distance services to small
and medium-sized commercial customers and, to a lesser extent,
residential customer accounts. The Company was authorized to
provide direct dial long distance services to customers in 47
states at December 31, 1996. However, the Company focuses its
direct sales efforts in the West Coast, Pacific Northwest,
Southwest and Southeast regions of the United States to take
advantage of network efficiencies. In addition to its basic "one-
plus" service, the Company provides inbound 800/888 service,
travel and prepaid calling card services, private line services,
data transmission services, wholesale carrier services and other
customer-specific products.
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The Company began offering direct dial long distance
services following its entry into the direct dial long distance
business in August 1991 through the acquisition of three related
direct dial long distance companies in Texas. At December 31, 1996,
the Company serviced approximately 47,000 commercial and residential
customer accounts. The Company carried an average of 106.5 million
minutes per month of long distance traffic during the fiscal quarter
ended September 30, 1996, as compared to 62.6 million and 44.7
million during the fiscal quarters ended September 30, 1995 and
1994, respectively. In fiscal year 1996, 1995 and 1994, the Company
had $119.4 million, $84.5 million and $62.8 million, respectively, in
direct dial long distance revenues, comprising 66%, 59% and 53% of
total operating revenues in each period, respectively.
INDUSTRY OVERVIEW
Direct dial long distance revenues industrywide are
estimated to be approximately $78 billion in 1996, up from
approximately $73 billion in 1995. AT&T, MCI and Sprint dominate
the long distance industry. Industry sources estimate that these
companies control a combined market share of approximately 80%.
These companies offer comprehensive communications services in a
wider array of products than other long distance companies and
typically target national, multi-state business customers and
millions of residential long distance users through national
television and media advertising. The Company believes that over
500 smaller long distance companies account for the remaining 20%
of the market. These companies typically concentrate on smaller
regional and local business customers. Competition in the direct
dial long distance industry has historically been based upon
price. More recently, the focus has been moving towards customer
service, product design and innovation, customized billing
capabilities, transmission quality and availability of service.
SALES AND MARKETING
The Company's direct dial long distance personnel are
located throughout the Company's service area and are responsible
for marketing to commercial accounts. The Company supervises
sales and marketing efforts from its corporate headquarters and
utilizes various advertising media to enhance its commercial
marketing efforts and to attract and retain residential
customers. The Company examines the calling profiles of target
markets and designs long distance services that specifically fill
certain demands. For example, the Company issues long distance
calling cards customized to include a customer's corporate logo
and also has customized prepaid calling cards to be used as
promotional marketing tools. The Company also markets directly
to employees of commercial customers for their residential
service. In addition to its own sales force, the Company markets
its direct dial long distance services through authorized agents,
other carriers and affinity organizations (strategic
partnerships).
The Company currently has an exclusive marketing agreement
with Nolan Ryan, formerly a player with the Texas Rangers[REGISTERED]
professional baseball team and a potential hall of fame
candidate, who acts as the Company's spokesman for its direct
dial long distance services and whose picture appears in the
Company's advertisements and product literature, including
prepaid calling cards.
OPERATIONS
The Company completes calls that are originated when a pre-
subscriber customer dials "1" plus the area code and number or
when a customer selects the Company's network through dial-up
access to reach any domestic or international destination. All
long distance calls placed over the Company's network are
directed to call designation points by computerized digital
network switching equipment operating at one of the Company's
switching centers. The switching equipment receives a customer's
direct dial call, verifies the caller's billing status and
authorization codes, routes the call to the dialed destination,
monitors the call's duration and collects other information for
billing purposes. The Company's switching equipment selects the
most cost-efficient transmission circuit or path available prior
to switching and completing each call. The Company employs
state-of-the-art digital switching equipment at the Company's
switching centers in Houston, Texas; Waco, Texas; Seattle, Washington;
and Los Angeles, California. The Company has also purchased a
digital switch in Atlanta, Georgia, which it took possession of
in January 1997.
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To satisfy increasing or anticipated usage of its long
distance network and to ensure that its network is optimally
accessible when network demand is heavy, the Company, from time
to time, adds circuit capacity at each existing switching center
by increasing the number of telecommunications ports and access
lines. The Company utilizes state of the art Common Channel
Signaling System 7, which is currently operational for virtually
all originating and terminating traffic within the Company's
markets. This network protocol significantly reduces connect
time delays and provides additional technical capabilities and
efficiencies for the routing of calls.
COMPETITIVE ADVANTAGES
The Company competes with AT&T, MCI and Sprint and numerous
local, regional and national carriers on the basis of its
products and services, competitive pricing and local identity.
The Company generally prices its services up to 20% below AT&T,
MCI and Sprint comparable service offerings. In addition, by
designing long distance products and services that fill specific
market needs, the Company enhances its ability to compete with
AT&T, MCI and Sprint and others.
The Company believes that its emphasis on customer service
distinguishes the Company from many of its competitors. The
Company has taken an integrated team approach to sales and
service by increasing the number of sales support representatives
in its field offices to maintain responsive service after the
sale. The Company recently issued notebook computers to the
sales force to enhance marketing presentations and automate the
customer order entry function. Additionally, the Company
implemented a computerized bulletin board service called
Advantage Direct, which is similar to the remote access service
offered to its operator services customers. This service allows
customers to monitor and evaluate calling patterns and volume by
department or location. Moreover, in competing with certain
regional and local long distance carriers, the Company believes
it holds a competitive advantage within its territory because the
Company's regional concentration of traffic over its network
facilities allows for certain cost efficiencies of a national
carrier. In addition, the Company believes that its local
identity in the markets it serves provides an advantage in
marketing its services and competing with long distance carriers
based outside of the target regions. Management believes that
the Company has developed the expertise in information systems
necessary to meet the needs of its direct dial long distance
customers. For instance, the Company provides an invoice
indicating call detail in a form that assists customers in
controlling and monitoring communications costs for various
projects or departments.
The Company employs digital switching equipment utilizing a
network comprised largely of high quality fiber-optic circuitry
to maximize communications quality. The Company believes that
its use of a digital network is particularly advantageous in
marketing both its voice and data transmission services. The
Company also designs redundant and diverse routes to each major
service area to ensure service availability.
The communications industry is ever-changing, and the
recently passed Telecommunications Act of 1996 is expected to
have a major impact on the industry's competitive environment.
In essence, the RBOCs will be competing with long distance
carriers for both domestic and international long distance
customers. The Company believes it is prepared to meet this
challenge by capitalizing on its experienced management team and
sales force, personalized customer service, quality products and
services and competitive pricing structures.
STRATEGY AND GROWTH OPPORTUNITIES
The Company's strategic focus in the direct dial long
distance industry is to compete with AT&T, MCI and Sprint
primarily on the basis of competitive pricing, while offering a
comparable or higher level of service. Moreover, the Company
intends to remain focused on small and medium-sized commercial
customers and will continue its efforts to develop innovative
and cost-efficient services that meet the needs of its customers.
The Company intends to introduce new communications products,
such as local service, Internet access, paging, frame relay/ISDN
and cellular service, over the next 12 to 18 months. The
introduction of the local service product provides the Company
the largest opportunity for growth. The local services industry
is estimated to be a $95 billion market. Each of the Company's
existing 47,000 customer accounts is already utilizing this
service from the local exchange carrier in each locality. The
Company believes that it has the potential to capitalize on its
relationship with existing customers to bundle the local product
with its existing products and services. The bundling of these
services with long distance service will enhance
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<PAGE>
the Company's product offerings and provide new and existing
customers with the integrated communication services they desire.
To a lesser extent, the Company also continues to market to
residential customers.
The Company expects to look for opportunities to expand its
long distance business, both by internal growth and through
acquisitions. The primary focus of the Company's acquisition
activities is to make additional acquisitions that will grow the
Company's direct dial long distance business. The Company
believes its operator services business affords it the
opportunity to expand its direct dial long distance business on a
more cost-effective basis than many of its competitors. By
having a concentration of operator services call traffic in a
particular geographic region, the Company can utilize any long
distance facilities it installs or acquires to service a ready
base of call traffic, thereby lowering the marginal transmission
costs for any direct dial long distance traffic that the Company
acquires or develops in that region. The Company believes this
cost advantage not only improves the potential profitability of
both the Company's operator services and direct dial long
distance services business in such region, but also expands the
number of companies that would be attractive acquisition
candidates in that region.
The Company continually evaluates business opportunities,
including potential acquisitions. One or more of such
acquisitions could result in a substantial change in the
Company's operations and financial condition. The success of the
Company's acquisition activities will depend upon, among other
things, the availability of acquisition candidates, the
availability of funds to finance acquisitions and the
availability of management resources to oversee the operation of
acquired businesses. While the Company has, from time to time,
had discussions with communications companies, it has no
agreements or pending negotiations with respect to any
acquisition at the date of this report that would have a material
impact on the Company's financial position or results of
operations. There is no assurance that any acquisitions will be
completed.
OPERATOR SERVICES
The Company provides operator assisted services for private
pay telephones, hotels, motels, university dormitories and
hospitals. The Company's operator services are accessed when
calls requiring operator assistance and/or alternate billing
options are placed from customer locations. Such services
involve the use of live and automated operators to receive,
validate and complete the calls. The Company processes collect,
third-party, person-to-person and calling card calls and,
generally, shares a percentage of call revenues with its
customers.
At December 31, 1996, the Company provided operator services
to approximately 135,900 hotel, motel, hospital and dormitory
rooms. In addition, at December 31, 1996, the Company had
service contracts with private pay telephone owners covering
approximately 61,300 pay telephones. The Company carried 7.6
million average monthly minutes of operator services traffic
during the fourth quarter of fiscal 1996, as compared to 8.3
million and 9.1 million average monthly minutes during the fourth
quarters of fiscal 1995 and 1994, respectively. The Company's
operator services revenues amounted to $60.9 million, $59.6
million and $54.7 million in fiscal 1996, 1995 and 1994,
respectively.
INDUSTRY OVERVIEW
Management believes that there are approximately 125
operator services providers competing within the long distance
communications industry. AT&T continues to dominate the operator
services market, supplying operator services for traffic
originating from both the hospitality and pay telephone
industries. Additionally, MCI and Sprint provide operator
services and are considered by management to be major
competitors. Excluding AT&T, MCI, Sprint, General Telephone
Operating Companies ("GTE") and the RBOCs, management believes
the Company is one of the five largest providers of operator
services.
Many operator services providers, including the Company,
initially focused on the hospitality industry. More recently, as
the private pay telephone industry has grown and taken market
share from the public pay telephone market traditionally served
by AT&T, many operator services providers gained increased market
share by providing service to the owners of private and public
pay telephones. Competition between the Company and other
operator services providers is based upon commission programs,
quality of service, reporting and customer service.
-11-
<PAGE>
SALES AND MARKETING
The Company markets its operator services nationally through
the combined effort of regional sales representatives based in
Illinois, Texas, Florida and California and a network of agents.
The Company's corporate sales force focuses on larger accounts,
such as hotel management companies, multi-unit franchises,
hospital chains, large private pay telephone companies and
universities. The Company's agents market the Company's operator
services on a nationwide basis and typically receive a commission
based upon the volume of business generated. The Company also
participates in various industry trade shows and promotes its
operator services through advertisements in trade magazines. The
Company customizes its communications services to provide, among
other things, individualized reports and specialized call
branding to customers.
OPERATIONS
The Company owns and operates its own operator center in San
Antonio, Texas, which employed 311 operators and support staff at
December 31, 1996. The Company provides live and automated
operator services 24 hours per day, 365 days per year, and
features multi-lingual operators versed in Spanish, French,
German, Japanese and a variety of other languages. The Company
maintains a sophisticated emergency call handling system that
enables its operator to access police, fire and other emergency
agencies within the jurisdiction of the telephone from which the
call is placed. The Company utilizes its own transmission
facilities when possible or contracts to use facilities of other
long distance network providers as necessary.
The Company switches the majority of its operator assisted
calls at its four main switching centers. Many operator assisted
calls are transmitted to the Company's switching centers via call
processing equipment installed at customer locations or in
customer pay telephone equipment. This call processing equipment
is programmed to recognize calls requiring operator assistance
and to access the Company's network by dialing the Company's
access number, then passing the call record information to one of
the switching centers. The Company validates the authorization
code or telephone number to be billed and then completes the
call, while recording the date, destination, duration and time of
day for subsequent billing purposes. At December 31, 1996, the
Company was authorized to complete international and interstate
calls placed throughout the United States, as well as intrastate
calls within 46 states.
COMPETITIVE ADVANTAGES
Management believes that the Company enjoys several
competitive advantages over many others in the operator services
industry. By virtue of the Company's large call volumes relative
to many other operator services providers and the cost efficiencies
it realizes by routing a large portion of its operator services
traffic over its own facilities and maintaining its own operator
center, the Company is able to provide high quality transmission
on an efficient and economical basis. Additionally, because it is
the source of commission payments to its operator services customers,
the Company believes that its financial stability and history of
timely payments allow it to compete effectively against many smaller,
under-capitalized operator services providers. Moreover, the
Company's flexible rate operations allow it to offer customized
commission programs to its customers as compared to larger operator
services providers.
In 1994, the Company implemented a computerized bulletin
board service called Stealth that allows its customers to access
the system from remote locations and obtain customized and
sophisticated reporting of calling patterns and volumes for each
customer location or pay telephone. This advanced reporting
system allows the Company's operator services customers to
analyze their traffic on a daily basis and maximize
telecommunications revenues by, for example, relocating
underutilized telephones. The Company's detailed reporting also
allows its customers to reconcile the accuracy or integrity of
their commissions. The Company employs a skilled, professional
staff of customer service employees and technicians, who provide
service 24 hours per day, 365 days per year.
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<PAGE>
STRATEGY AND GROWTH OPPORTUNITIES
The Company has developed a strong presence in operator
services throughout the United States. Through its direct sales
force and agents and its participation in state, regional and
national trade associations, the Company intends to pursue
geographic expansion on a nationwide basis. The Company will
continue to market its operator services business to both the
private pay telephone and hospitality industries and present new
products and services for these markets.
The Company's existing relationship with operator service
customers, who typically own or manage numerous private pay
telephones or hotels, provides a unique opportunity for the
Company. The Company will have the potential to provide local
access to a large volume of phones lines, yet limited number of
customers. These characteristics will allow the Company to
quickly and efficiently enter the local services market in
targeted areas.
USE OF PROCEEDS
The Shares being offered hereby are for the account of the
Selling Stockholders. Accordingly, the Company will not receive
any of the proceeds from the sale of the Shares by the Selling
Stockholders. See "Selling Stockholders."
DILUTION
The net tangible book value of the Company at December 31, 1996
was $45.8 million, or $3.04 per share. "Net tangible book value
per share" is equal to the Company's total tangible assets less
total liabilities (excluding deferred income taxes), divided by
the number of shares of Common Stock outstanding. Based on an
assumed public offering price of $12.00 (the closing price of
the Common Stock on the Nasdaq National Market on April 24, 1997),
new investors purchasing shares at the public offering price
would experience an immediate dilution of $8.2725 in net tangible
book value per share.
The following table illustrates the per-share dilution at
December 31, 1996:
Assumed public offering price $12.00
Net tangible book value $ 3.04
Assumed dilution to new investors
in the offering $ 8.96
SELLING STOCKHOLDERS
The following table sets forth the name of each of the
Selling Stockholders and the number of shares that may be offered
by each. The number of Shares that may be actually sold by the
Selling Stockholders will be determined by each Selling
Stockholder, and may depend upon a number of factors, including,
among other things, the market price of the Common Stock.
Because each Selling Stockholder may offer all, some or none of
the Shares that each holds, and because the offering contemplated
by this Prospectus is currently not being underwritten, no
estimate can be given as to the number of Shares that will be
held by any Selling Stockholder upon or prior to termination of
this offering. See "Plan of Distribution." The table below sets
forth information as of April 24, 1997, concerning the beneficial
ownership of the Shares of each Selling Stockholder. All
information as to beneficial ownership has been furnished by each
of the Selling Stockholders.
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<PAGE>
<TABLE>
<CAPTION>
Shares of Common Common Stock Common Stock
Stock Owned Offered in Beneficially Owned
Before Offering The Offering After Offering(1)
------------------ ------------- ------------------
Number Percent Number Number Percent
--------- ------- ---------- -------- -------
<S> <C> <C> <C> <C> <C>
Communications Central, Inc....... 125,000(2) * 125,000(2) 0 0
Ronald I. McDougall................ 33,334(3) * 33,334(3) 0 0
John W. Savery..................... 33,333(4) * 33,333(4) 0 0
Neil L. Ingram..................... 33,333(5) * 33,333(5) 0 0
____________
* Represents less than 1%.
(1) Assumes all shares of Common Stock offered hereby are sold.
(2) Includes 62,500 shares that Communications Central, Inc. has
the right to acquire within 60 days upon the exercise of
outstanding warrants and 62,500 shares that vest on January 15, 1998.
(3) Includes 16,667 shares that Mr. McDougall has the right to
acquire within 60 days upon the exercise of outstanding warrants
and 16,667 shares that may be acquired under such warrants beginning
on January 15, 1998.
(4) Includes 16,666 shares that Mr. Savery has the right to acquire
within 60 days upon the exercise of outstanding warrants and 16,667
shares that may be acquired under such warrants beginning on
January 15, 1998.
(5) Includes 16,667 shares that Mr. Ingram has the right to acquire
within 60 days upon the exercise of outstanding warrants and 16,666
shares that may be acquired under such warrants beginning on
January 15, 1998.
</TABLE>
PLAN OF DISTRIBUTION
The Company will not receive any proceeds from the sale of
the Shares by the Selling Stockholders. The Shares may be sold
from time to time to purchasers directly by each Selling
Stockholder. Alternatively, each Selling Stockholder may sell its
Shares in one or more transactions (which may involve one or more
block transactions) on the Nasdaq National Market, in privately
negotiated transactions or otherwise, or in a combination of such
transactions; each sale may be made either at market prices
prevailing at the time of such sale or at negotiated prices; some
or all of the Shares may be sold through broker-dealers acting as
brokers or agents on behalf of each Selling Stockholder or to
broker-dealers acting as principals for resale by such dealers;
and in connection with such sales, such broker-dealers may
receive compensation in the form of commissions, discounts or
fees from each Selling Stockholder and/or the purchasers of such
Shares for whom they may act as broker or agent. However, neither
the Company nor either of the Selling Shareholders has entered
into any arrangements or underwriting agreements with any
broker-dealer or agent relative to the Shares to be offered hereby.
It is anticipated that each Selling Stockholder will offer all of
the Shares held by it for sale. All expenses of registration
incurred in connection with this offering are being borne by the
Company, but all brokerage commissions and other similar expenses
incurred by each Selling Stockholder will be borne by such
Selling Stockholder.
At the time a particular offer of Shares is made, if and to
the extent required, a supplement to this Prospectus (the
"Prospectus Supplement") will be distributed that will identify
and set forth the aggregate amount of Shares being offered and
the terms of the offering, including the name or names of any
underwriters, dealers or agents, the purchase price paid by any
underwriter for Shares purchased from each Selling Stockholder,
any commissions, discounts and other items constituting
compensation from each Selling Stockholder and any commissions,
discounts or concessions allowed or reallowed or paid to dealers,
including the proposed selling price to the public.
Each Selling Stockholder and any dealer acting in connection
with the offering of any of the Shares or any broker executing or
selling orders on behalf of that Selling Stockholder may be
deemed to be an "underwriter" within the meaning of the
Securities Act, in which event any profit on the sale of any or
all of the Shares and any
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<PAGE>
commissions, discounts or concessions received by any such dealers
or brokers may be deemed to be underwriting commissions and
discounts under the Securities Act. Any dealer or broker
participating in any distribution of the Shares may be required
to deliver a copy of this Prospectus, including the Prospectus
Supplement, if any, to any person who purchases any of the Shares
from or through such dealer or broker.
The Company has advised the Selling Shareholders that during
such time as they may be engaged in a distribution of the Shares
included herein they are required to comply with applicable
provisions of the Exchange Act, including Regulation M promulgated
under the Exchange Act. In general Regulation M precludes any
Selling Shareholder, any "affiliated purchasers" and any
broker-dealer or other person who participates in such distribution
from bidding for or purchasing, or attempting to induce any person
to bid for or purchase, any security which is the subject of the
distribution until the entire distribution is complete. A
"distribution" is defined in the rules as an offering of securities
that is distinguished from ordinary trading activities and depends
on the "magnitude of the offering and the presence of special
selling efforts and selling methods." Regulation M also prohibits
any bids or purchases made in order to stabilize the price of
security in connection with the distribution of that security.
In order to comply with certain states' securities laws, if
applicable, the Shares will be sold in such jurisdictions only
through registered or licensed brokers or dealers. In certain
states, the Shares may not be sold unless the Shares have been
registered and qualify for sale in such state, or unless an
exemption from registration or qualification is available and is
obtained.
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
The authorized capital stock of the Company currently
consists of 50,000,000 shares of Common Stock, par value $.01 per
share, and 10,000,000 shares of preferred stock, par value $.01
per share (the "Preferred Stock"), which is subject to
designation and issuance by the Board in the future. On April 24,
1997, there were 15,401,576 shares of Common Stock outstanding
and held of record by approximately 615 stockholders. There are
currently no outstanding shares of Preferred Stock. At April 24,
1997, there were a total of 2,728,709 shares of Common Stock
reserved for issuance upon the exercise of outstanding stock
options under the Company's employee stock option plan, director
options under the option plan for non-employee directors,
compensation contract options and the outstanding warrants of the
Selling Stockholders.
The following descriptions of capital stock are qualified in
all respects by reference to the Company's Restated Certificate
of Incorporation.
COMMON STOCK
Holders of Common Stock are entitled to receive dividends
when, as and if declared by the Board from funds legally
available therefor. Each share of Common Stock entitles the
holder thereof to one vote upon matters voted upon by the
stockholders. Cumulative voting for the election of directors is
not permitted, which means that the holders of a majority of
shares voting for the election of directors can elect all members
of each class of the Board. Except as otherwise required by
applicable Delaware law, a majority vote is sufficient for any
action that requires the vote or concurrence of stockholders,
except that a plurality vote is sufficient to elect directors.
The holders of Common Stock do not have any preemptive,
subscription, redemption or conversion rights or privileges. Upon
liquidation or dissolution of the Company, the holders of Common
Stock are entitled to share ratably in the net assets of the
Company remaining after payment of liabilities and liquidation
preferences of any outstanding shares of Preferred Stock. All
shares of Common Stock now outstanding are, and the Shares of
Common Stock to be sold by the Selling Stockholders hereby will
be, upon issuance, fully paid and non-assessable.
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<PAGE>
PREFERRED STOCK
The Preferred Stock may be issued from time to time by the
Board in one or more series, without further stockholder approval
or action, with such designations, powers, limitations,
restrictions, qualifications, rights, preferences and privileges
as the Board may determine.
TRANSFER AGENT
The transfer agent and registrar for the Common Stock is
Montreal Trust Company of Canada, Vancouver, B.C., Canada.
INDEMNIFICATION
The Company's Certificate provides that the Company shall
indemnify any and all persons who may serve or who have served at
any time as directors or officers, or who at the request of the
Board may serve or at any time have served as directors or
officers of another corporation in which the Company at such time
owned or may own shares of stock or of which the Company was or
may be a creditor, and their respective heirs, administrators,
successors and assigns, against any and all expenses, including
amounts paid upon judgments, attorneys' fees and amounts paid in
settlement (before or after suit is commenced), actually and
necessarily incurred by such persons in connection with the
defense or settlement of any claim, action, suit or proceeding in
which they, or any of them, are made parties, or a party, or
which may be asserted against them or any of them, by reason of
being or having been a director or officer of the Company, or of
such other corporation, except in relation to matters as to which
any such director or officer or former director or officer or
person is adjudged in any action, suit or proceeding to be liable
for his own negligence or misconduct in the performance of his
duties. Such indemnification shall be in addition to any other
rights to which those indemnified may be entitled under any law,
bylaw, amendment, vote of stockholders or otherwise.
Additionally, the Company shall, to the extent required, and
may, to the extent permitted, by Section 145 of the Delaware
General Corporation Law ("DGCL"), as amended from time to time,
indemnify and reimburse all persons whom it may indemnify and
reimburse pursuant thereto. Expenses incurred by an officer or
director in defending a civil or criminal action, suit or
proceeding shall be paid by the Company in advance of the final
disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay
such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Company as authorized in
Section 145(e) of the DGCL. The indemnification provided for in
the Certificate is not exclusive of any other rights to which
those entitled to receive indemnification or reimbursement
thereunder may be entitled.
LIMITATION OF LIABILITY
Section 102 of the DGCL authorizes a Delaware corporation to
include a provision in its certificate of incorporation limiting
or eliminating the personal liability of its directors to the
corporation and its stockholders for monetary damages for breach
of directors' fiduciary duty of care. The duty of care requires
that, when acting on behalf of the corporation, directors exercise
an informed business judgment based on all material information
reasonably available to them. Absent the limitations authorized by
such provision, directors are accountable to corporations and their
stockholders for monetary damages for conduct constituting gross
negligence in the exercise of their duty of care. Although Section
102 of the DGCL does not change a director's duty of care, it
enables corporations to limit available relief to equitable remedies
such as injunction or rescission. Pursuant to such provision, the
Company adopted an amendment to its Certificate at the 1993 Annual
Meeting of Stockholders limiting the personal liability of directors
of the Company (in their capacity as directors but not in their
capacity as officers) to the Company or its stockholders to the
fullest extent permitted by the DGCL. As a result, a director of the
Company may not be held personally liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as
a director, except for (i) any breach of the director's duty of
loyalty to the Company or its stockholders, (ii) acts or
omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) unlawful payments
of dividends or unlawful stock repurchases, redemptions or other
distributions, and (iv) any transaction from which the director
derived an improper personal benefit.
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<PAGE>
The adoption of this provision may have the effect of
reducing the likelihood of derivative litigation against
directors and may discourage or deter stockholders or management
from bringing a lawsuit against directors for breach of their
duty of care, even though such an action, if successful, might
otherwise have benefitted the Company and its stockholders.
However, the adoption of this provision, together with the
provision described above that requires the Company to indemnify
its officers and directors against certain liabilities, is
intended to enable the Company to attract qualified persons to
serve as directors who might otherwise be reluctant to do so.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be
passed upon for the Company by Arter & Hadden, Dallas, Texas.
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<PAGE>
============================= ==============================
No dealer, salesperson or
any other person has been
authorized to give any
information or to make any
representations other than 225,000 SHARES
those contained in this
Prospectus in connection
with the offer made by this
Prospectus, and, if given or
made, such information or U.S. LONG DISTANCE CORP.
representations must not be
relied upon as having been
authorized by the Company,
the Selling Stockholders or
any other person. This COMMON STOCK
Prospectus does not
constitute an offer to sell
or the solicitation of any
offer to buy any security
other than the Shares of
Common Stock offered by this
Prospectus, nor does it
constitute an offer to sell
or a solicitation of any
offer to buy the Shares of
Common Stock by anyone in
any jurisdiction in which
such offer or solicitation
is not authorized, or in
which the person making such
offer or solicitation is not
qualified to do so, or to
any person to whom it is
unlawful to make such offer
or solicitation. Neither the
delivery of this Prospectus
nor any sale made hereunder
shall, under any
circumstances, create any
implication that information
contained herein is correct
as of any time subsequent to
the date hereof.
---------------
------------ PROSPECTUS
---------------
TABLE OF CONTENTS
Page
Available Information 2
Incorporation of
Certain Documents
by Reference 2
Prospectus Summary 3
Risk Factors 5
Disclosure Regarding April 24, 1997
Forward-Looking
Statement 7
The Company 8
Use of Proceeds 13
Dilution 13
Selling Stockholders 13
Plan of Distribution 14
Description of Capital
Stock 15
Legal Matters 17
============================= ==============================
