<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM 8-K/A
Amendment No.1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
__________________________
Date of Report (Date of
earliest event reported): July 12, 1996
-------------
INTERMEDIA COMMUNICATIONS INC.
-------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 59-2913586
-------------------------- -------------------
(State or other jurisdic- (I.R.S. Employer
tion of incorporation or Identification No.)
organization)
0-20135
------------------------
(Commission File Number)
3625 Queen Palm Drive, Tampa, Florida 33619-1309
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (813) 621-0011
--------------
9280 Bay Plaza Boulevard, Suite 720, Tampa, Florida 33619
- --------------------------------------------------------------------------------
(Former address, if changed since last report)
<PAGE>
Item 7 of the Current Report on Form 8-K, dated June 28, 1996, of Intermedia
Communications Inc., a Delaware Corporation, is hereby amended and restated to
read in its entirety as follows:
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(a) Financial Statements of Business Acquired.
Financial Statements for the Telecommunications Division of EMI for the years
ended July 31 1994 and 1995 and for the eight month periods ended March 31, 1995
and 1996 (unaudited) are filed as part of this report.
(b) Pro Forma Financial Information.
Unaudited Pro Forma Condensed Consolidated Financial Statements for ICI are
filed as part of this report.
(c) Exhibits
Number Exhibit
- ------ -------
2.1 Asset Purchase Agreement dated as of February 20, 1996 by and among
EMI Communications Corp., Eastern Message, Inc., Eastern Message of
New Jersey, Inc., Eastern Message of Pennsylvania, Inc., Eastern
Message of Massachusetts, Inc., Eastern Message of Maryland, Inc.,
Newhouse Broadcasting Corporation and Intermedia Communications Inc.
(f/k/a Intermedia Communication of Florida, Inc.) (the "Asset Purchase
Agreement"). Exhibit 2.3 to the Registrant's Annual Report on Form 10-
K for the year ended December 31, 1995 is hereby incorporated by
reference.
2.2 Amendment No. 1 to the Asset Purchase Agreement.
99.1 Press release dated June 28, 1996.
<PAGE>
Report of Independent Certified Public Accountants
Telecommunication Division of
EMI Communications Corporation
We have audited the accompanying balance sheets of Telecommunication Division of
EMI Communications Corporation as of July 31, 1994 and 1995, and the related
statements of operations and divisional equity and cash flows for each of the
two years in the period ended July 31, 1995. These financial statements are the
responsibility of the Division's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
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.
The Telecommunication Division is a part of EMI Communications Corporation and
has no separate legal status or existence. Transactions with EMI Communications
Corporation and its parent, Newhouse Broadcasting Corporation, are described in
the notes to financial statements.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Telecommunication Division of
EMI Communications Corporation at July 31, 1994 and 1995, and the results of its
operations and its cash flows for each of the years then ended, in conformity
with generally accepted accounting principles.
/s/ Ernst & Young LLP
Tampa, Florida
March 8, 1996
<PAGE>
Telecommunication Division of
EMI Communications Corporation
Balance Sheets
<TABLE>
<CAPTION>
July 31
------------------------------- March 31
1994 1995 1996
--------------- -------------- --------------
(Unaudited)
<S> <C> <C> <C>
Assets
Current assets:
Accounts receivable (less
allowance for doubtful
accounts of $12,500 in
1994, 1995, and 1996,
respectively) $ 3,737,927 $ 7,681,387 $ 5,765,999
Notes receivable and
other assets 108,156 123,369 74,712
Prepaid expenses 241,709 311,396 429,736
------------- ------------- --------------
Total current assets 4,087,792 8,116,152 6,270,447
Property and equipment, net 13,522,348 11,282,436 9,513,718
Deposits, deferred charges
and other assets 441,256 331,197 403,408
------------- ------------- --------------
Total assets $18,051,396 $19,729,785 $16,187,573
============= ============= ==============
Liabilities and divisional
equity
Current liabilities:
Accounts payable $ 4,028,815 $ 4,875,071 $ 6,132,711
Federal transfer surcharge
(Note 7) 3,497,500 4,556,700 4,556,700
Accrued compensation, employee
benefits, pension, and
related taxes 367,892 355,501 337,143
Accrued sales and franchise
tax 91,092 609,845 1,196,958
Deferred revenue 101,627 140,492 82,745
Other accrued liabilities 50,428 56,892 4,111
------------- ------------- --------------
Total current liabilities 8,137,354 10,594,501 12,310,368
Accrued pension and
postretirement benefits 227,055 449,961 600,036
------------- ------------- --------------
8,364,409 11,044,462 12,910,404
Divisional equity 9,686,987 8,685,323 3,277,169
------------- ------------- --------------
Total liabilities and
divisional equity $18,051,396 $19,729,785 $16,187,573
============== ============= ==============
</TABLE>
See notes to financial statements.
<PAGE>
Telecommunication Division of
EMI Communications Corporation
Statements of Operations and Divisional Equity
<TABLE>
<CAPTION>
Year Ended Eight-Month Period Ended
July 31 March 31
----------------------------- -----------------------------
1994 1995 1995 1996
-------------- -------------- -------------- --------------
(Unaudited)
<S> <C> <C> <C> <C>
Revenues
Communication service $32,920,416 $35,643,585 $24,062,849 $28,944,131
Microwave service 4,186,791 4,127,504 2,610,442 2,872,018
Other 205,756 250,775 158,401 167,989
-------------- -------------- -------------- --------------
37,312,963 40,021,864 26,831,692 31,984,138
Expenses
Facilities administration and
maintenance costs 35,602,603 36,082,066 24,939,266 30,209,380
Selling, general, and
administrative 3,021,910 2,873,478 1,591,032 1,897,880
Depreciation and amortization 5,140,841 5,122,796 3,274,746 2,923,391
-------------- -------------- -------------- --------------
43,765,354 44,078,340 29,805,044 35,030,651
-------------- -------------- -------------- --------------
Loss from operations (6,452,391) (4,056,476) (2,973,352) (3,046,513)
Interest expense, net (937,807) (790,452) (507,905) (108,116)
-------------- -------------- -------------- --------------
Loss before income taxes (7,390,198) (4,846,928) (3,481,257) (3,154,629)
Income tax benefit (2,711,889) (1,763,875) (1,270,702) (1,147,956)
-------------- -------------- -------------- --------------
Net loss (4,678,309) (3,083,053) (2,210,555) (2,006,673)
Divisional equity, beginning of year 9,425,642 9,686,987 9,686,987 8,685,323
Distribution from (to) parent 4,939,654 2,081,389 2,270,668 (3,401,481)
-------------- -------------- -------------- --------------
Divisional equity, end of year $ 9,686,987 $ 8,685,323 $ 9,747,100 $ 3,277,169
============== ============== ============== ==============
</TABLE>
See notes to financial statements.
<PAGE>
Telecommunication Division of
EMI Communications Corporation
Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended Eight-Month Period Ended
July 31 January 31
--------------- -------------- -------------- --------------
1994 1995 1995 1996
--------------- -------------- -------------- --------------
(Unaudited)
<S> <C> <C> <C> <C>
Operating activities
Net loss $(4,678,309) $(3,083,053) $(2,210,555) $(2,006,673)
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
Depreciation and amortization 5,140,841 5,122,796 3,274,746 2,923,391
Gain on sale of property, plant
and equipment (12,221) (21,831) - -
Changes in operating assets and
liabilities:
Accounts receivable 194,768 (3,943,460) (937,883) 1,915,388
Notes receivable and other assets (66,629) (15,213) 60,928 48,657
Prepaid expenses (70,709) (69,687) 241,709 (118,340)
Deposits, deferred charges and
other assets (114,823) 7,228 (430,032) (72,211)
Accounts payable and accrued
liabilities (917,000) 1,359,082 (393,054) 1,773,614
Federal transfer surcharge 1,147,700 1,059,200 374,598 -
Deferred revenue (47,067) 38,865 (36,847) (57,747)
Accrued pension and post-
retirement benefits 189,597 222,906 144,217 150,075
--------------- -------------- -------------- --------------
Net cash provided by (used in)
operating activities 766,148 676,833 87,827 4,556,154
Investing activities
Purchase of property and equipment (5,727,699) (2,795,123) (2,290,495) (1,154,673)
Proceeds from sale of property and
equipment 21,897 36,901 - -
--------------- -------------- -------------- --------------
Net cash used in investing activities (5,705,802) (2,758,222) (2,290,495) (1,154,673)
Financing activities
Distribution from (to) Parent 4,939,654 2,081,389 2,202,668 (3,401,481)
--------------- -------------- -------------- --------------
Net cash provided by financing
activities 4,939,654 2,081,389 2,202,668 (3,401,481)
--------------- -------------- -------------- --------------
Net increase (decrease) in cash and
cash equivalents - - - -
Cash and cash equivalents, beginning
of year - - - -
--------------- -------------- -------------- --------------
Cash and cash equivalents, end of year $ - $ - $ - $ -
=============== ============== ============== ===============
</TABLE>
See notes to financial statements.
<PAGE>
Telecommunication Division of
EMI Communications Corporation
Notes to Financial Statements
(Information pertaining to March 31, 1996 and for the eight-month
periods ended March 31, 1996 and 1995 is unaudited)
1. Summary of Significant Accounting Policies
Description of Business
The Telecommunication Division of EMI Communications Corporation (the
"Division") is a New York State based telecommunications company which operates
a digital network, offering full-service telecommunications including systems
engineering, interchange transmission facilities, end user communication
services and network management. The Division generally services governmental
entities, commercial end-users, as well as other corporations primarily in the
Northeast United States and Canada.
For the years ended July 31, 1994 and 1995, revenue of 70% and 67%,
respectively, was derived from the Division's primary customer, State of New
York's Office of General Services. In addition, for the years ended July 31,
1994 and 1995, 74% and 75%, respectively, of accounts receivable were owed to
the Division by this customer. The Division does not normally obtain collateral
on accounts receivable.
Financial Statement Presentation
The financial statements include only those accounts related to the Division's
operations after elimination of significant intercompany transactions. All
other accounts of EMI Communications Corporation and its parent, Newhouse
Broadcasting Corporation (collectively, the "Parent"), have not been included in
the financial statements since they are not directly related to the Division's
operations.
Property and Equipment
Property and equipment is recorded at cost. Depreciation is calculated over the
estimated useful lives of the assets using the straight-line and accelerated
methods for financial statement reporting and income tax purposes.
Income Taxes
The Division accounts for income taxes under the liability method as prescribed
by Financial Accounting Standards Board Statement No. 109, "Accounting for
Income Taxes." Under this
<PAGE>
Telecommunications Division of
EMI Communications Corporation
Notes to Financial Statements (continued)
(Information pertaining to March 31, 1996 and for the eight-month
periods ended March 31, 1996 and 1995 is unaudited)
1. Summary of Significant Accounting Policies (Continued)
method, deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that may be in effect when the
differences are expected to reverse. Refer to Note 3.
Postretirement Benefits
The Division accounts for postretirement benefits other than pensions in
accordance with Financial Accounting Standards Board Statement No. 106 by
accruing the estimated cost of retiree benefits other than pensions during the
employees' active service period. The Division is recognizing the transition
obligation over a 22-year period. Refer to Note 5.
Deferred Revenue
Proceeds received from telecommunication customers in advance of services are
deferred at the time of receipt and are included in revenues on a pro rata basis
as the services are provided.
Long Lived Assets
In March 1995, the FASB issued Statement No. 121, "Accounting for the
Impairment of Long Lived Assets and for Long-Lived Assets to Be Disposed Of,"
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. Statement No. 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Division will adopt Statement
No. 121 for the fiscal year ending July 31, 1997 and, due to the significant
amount of technical equipment maintained by the Division and the extensive
number of estimates to be made to assess the financial impact of adoption of
Statement No. 121, financial statement impact has not yet been determined.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
<PAGE>
Telecommunications Division of
EMI Communications Corporation
Notes to Financial Statements (continued)
(Information pertaining to March 31, 1996 and for the eight-month
periods ended March 31, 1996 and 1995 is unaudited)
1. Summary of Significant Accounting Policies (Continued)
Intercompany Accounts
All balance sheet related intercompany balances, which resulted from various
transactions between the Division and its Parent, have been presented on a net
basis and included in divisional equity. The balance is primarily the result of
the Division's capitalization and participation in the Parent's central cash
management program.
Intercompany Expense Allocation
The Parent provides various administrative services to the Division including
legal assistance, cash management and management advisory services. It is the
Parent's policy to charge these expenses and all other operating expense, on
both a direct and indirect cost basis. These expenses (which are included in
operating expenses) were $197,550 and $197,550 for the years ended July 31, 1994
and 1995, respectively. Interest charges have been allocated based on the assets
employed. For the years ended July 31, 1994 and 1995, interest paid was
$568,757 and $668,743, respectively. Management believes these allocation
methods are reasonable.
Interim Financial Statements
The unaudited balance sheet at March 31, 1996 and the unaudited statements of
operations and divisional equity and cash flows for the eight-month periods
ended March 31, 1995 and 1996 have been prepared in accordance with generally
accepted accounting principles for interim financial information. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
<PAGE>
Telecommunications Division of
EMI Communications Corporation
Notes to Financial Statements (continued)
(Information pertaining to March 31, 1996 and for the eight-month
periods ended March 31, 1996 and 1995 is unaudited)
2. Property and Equipment
Property and equipment and the related lives for depreciation purposes consisted
of the following:
<TABLE>
<CAPTION>
July 31
------------------------------- Depreciable
1994 1995 Lives
--------------- -------------- -------------
<S> <C> <C> <C>
Land $ 271,259 $ 271,259
Buildings and improvements 1,331,246 1,340,246 10-31 years
Technical equipment 43,905,095 46,352,865 5-7 years
Other equipment, automobiles,
furniture and fixtures 3,970,720 3,953,279 5-7 years
--------------- --------------
49,478,320 51,917,649
Less accumulated depreciation (37,050,275) (41,703,424)
--------------- --------------
12,428,045 10,214,225
Leasehold improvements, net of
accumulated amortization of
$810,242 and $860,206 at
July 31, 1994 and 1995,
respectively 1,094,303 1,068,211 5-31 years
--------------- --------------
$ 13,522,348 $ 11,282,436
=============== ==============
</TABLE>
3. Income Taxes
The Division's taxable income is included in the consolidated federal income tax
return filed by the Parent. For financial reporting purposes the Division's
income tax expense or benefit is computed on a separate company basis, with the
resulting current income taxes payable or receivable and related deferred income
taxes settled through the intercompany accounts. Accordingly, all balance sheet
related income tax balances have been presented on a net basis and included in
divisional equity.
<PAGE>
Telecommunications Division of
EMI Communications Corporation
Notes to Financial Statements (continued)
(Information pertaining to March 31, 1996 and for the eight-month
periods ended March 31, 1996 and 1995 is unaudited)
3. Income Taxes (continued)
The income tax benefit differs from the amount computed by applying the federal
statutory rate to loss before income taxes. The difference is reconciled as
follows:
<TABLE>
<CAPTION>
Year Ended July 31
1994 1995
-------------- --------------
<S> <C> <C>
Loss before income taxes $(7,390,198) $(4,846,928)
Federal statutory rate 35% 35%
-------------- --------------
(2,586,569) (1,696,425)
State and local income taxes, net of
federal tax effect (132,872) (86,317)
Other 7,552 18,867
-------------- --------------
Benefit based on loss $(2,711,889) $(1,763,875)
============== ==============
</TABLE>
Deferred income taxes arise principally from differences between financial
reporting and income tax reporting of the federal transfer surcharge, accrued
postretirement and pension benefits, asset valuation allowances and accrued
expenses.
4. Pension Plan
The Division participates in a Parent-sponsored noncontributory pension plan
which covers substantially all employees. The plan provides participating
employees with retirement benefits in accordance with benefit provision formulas
which are based on years of service and career pay. The Division's funding
policy is to contribute amounts to the plan sufficient to meet the minimum
funding requirements set forth in the Employee Retirement Income Security Act of
1974, plus additional amounts as the Division may determine to be appropriate
from time to time.
<PAGE>
Telecommunication Division of
EMI Communications Corporation
Notes to Financial Statements (continued)
(Information pertaining to March 31, 1996 and for the eight-month
periods ended March 31, 1996 and 1995 is unaudited)
4. Pension Plan (Continued)
A summary of the components of net periodic pension costs is presented below:
<TABLE>
<CAPTION>
Year Ended July 31
------------------------
1994 1995
----------- ------------
<S> <C> <C>
Service cost-benefits earned during
the period $119,689 $ 110,981
Interest cost on projected benefit
obligation 117,086 127,169
Actual return on plan assets (20,672) (198,111)
Net amortization and deferral (62,598) 90,725
----------- ------------
Net periodic pension cost $153,505 $ 130,764
=========== ============
</TABLE>
Actuarial assumptions used to determine pension costs include a discount rate of
8.5%, expected long-term rate of return on assets of 9.5%, and expected rate of
increase in future compensation of 5% for all periods shown.
A summary of the Plan's funded status and amounts recognized in the Division's
balance sheets is as follows:
<TABLE>
<CAPTION>
July 31
-----------------------------
1994 1995
------------- --------------
<S> <C> <C>
Actuarial present value of accumulated
benefit obligations:
Vested $(1,186,458) $(1,330,453)
Nonvested (43,423) (49,642)
------------- --------------
(1,229,881) (1,380,095)
Projected compensation increases (309,397) (327,406)
------------- --------------
Projected benefit obligations (1,539,278) (1,707,501)
Plan assets at market value 1,156,268 1,400,566
------------- --------------
Projected benefit obligations in excess
of plan assets (383,010) (306,935)
Unrecognized net transition obligation 57,348 50,975
Unrecognized net loss 190,795 104,322
------------- --------------
Pension liability recognized in the
balance sheets $ (134,867) $ (151,638)
============== ==============
</TABLE>
<PAGE>
Telecommunication Division of
EMI Communications Corporation
Notes to Financial Statements (continued)
(Information pertaining to March 31, 1996 and for the eight-month
periods ended March 31, 1996 and 1995 is unaudited)
4. Pension Plan (Continued)
The components of the pension liability recognized in the balance sheets are as
follows:
<TABLE>
<CAPTION>
July 31
-------------------------
1994 1995
------------ ------------
<S> <C> <C>
Current $ (58,599) $ (52,745)
Long-term (76,268) (98,893)
------------ ------------
$(134,867) $(151,638)
============ ============
</TABLE>
The Plan's assets at July 31, 1994 and 1995 were primarily invested in fixed
income securities, equities and short-term securities.
In addition to the defined benefit pension plan as described above, the Division
also participates in a defined contribution 401(k) plan covering substantially
all employees. Provisions of the plan allow employees to contribute a portion
of their salary or wages as prescribed under Section 401(k) of the Internal
Revenue Code. The Division provides an employer contribution based on a
percentage of the employee's contribution. The employer's contribution was
$37,016 and $48,999 for the years ended July 31, 1994 and 1995, respectively.
5. Postretirement Benefits Other Than Pensions
The Division participates in a Parent-sponsored postretirement health care and
life insurance plan to retirees and eligible dependents. These benefits are
funded as incurred from the general assets of the Division. Prior to July 31,
1993, the cost of retiree health care and life insurance benefits was charged to
expense as premiums were paid (pay-as-you-go-basis).
Effective August 1, 1993, the Division adopted Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions." This Statement requires that the cost of postretirement benefits be
accrued during an employee's active working career instead of recognizing this
cost on the cash basis. In accordance with Statement No. 106, the transition
obligation, representing the unrecognized accumulated past-service benefit
obligation for all plan participants, may be recognized as a cumulative effect
of an accounting change or may be amortized on a straight-line basis over the
average remaining service period of active plan participants. The Division has
elected to amortize the $783,450 of transitional
<PAGE>
Telecommunication Division of
EMI Communications Corporation
Notes to Financial Statements (continued)
(Information pertaining to March 31, 1996 and for the eight-month
periods ended March 31, 1996 and 1995 is unaudited)
5. Postretirement Benefits Other Than Pensions (Continued)
obligation on a straight-line basis over 22 years. For the years ended July 31,
1994 and 1995, the adoption of the statement resulted in an increase in
postretirement benefit cost of $150,787 and $200,281, respectively.
A summary of the components of net periodic other postretirement benefit costs
relating to the Plan is as follows:
<TABLE>
<CAPTION>
Year Ended July 31
---------------------
1994 1995
---------- ----------
<S> <C> <C>
Service cost - benefits earned during
the year $ 62,305 $ 82,538
Interest cost on projected benefit
obligation 62,299 88,144
Net amortization and deferral 35,611 37,430
---------- ----------
Net postretirement benefit cost $160,215 $208,112
========== ==========
</TABLE>
Actuarial assumptions used to determine the liability for the postretirement
benefits other than pensions included the assumed weighted average discount rate
used in determining the actuarial present value of the accumulated postretire-
ment benefit obligation of 8.5% and the assumed weighted average rate of
increase in future compensation levels related to pay-related life insurance
benefits of 5.0% for all periods shown.
The future health care cost trend rate for the year ended July 31, 1995 was
approximately 14% and is assumed to decrease to 7% by the year 2006 and remain
at that approximate level thereafter. The health care trend rate assumption has
a significant effect on the amounts reported. For example, increasing the
assumed health care cost trend rate by one percentage point would increase the
accumulated postretirement benefit obligations by $299,627 and increase the
aggregate of the service and interest cost components of the net postretirement
benefit costs by $57,070 for the year ended July 31, 1995.
The Division has not prefunded any of its postretirement health and life
insurance liabilities, and consequently, there are no expected returns on assets
anticipated in the calculation of expense.
<PAGE>
Telecommunication Division of
EMI Communications Corporation
Notes to Financial Statements (continued)
(Information pertaining to March 31, 1996 and for the eight-month
periods ended March 31, 1996 and 1995 is unaudited)
5. Postretirement Benefits Other Than Pensions (Continued)
A schedule reconciling the accumulated benefit obligation with the Division's
recorded liability follows:
<TABLE>
<CAPTION>
July 31
--------------------------
1994 1995
------------ -------------
<S> <C> <C>
Accumulated postretirement benefit
obligation:
Retirees $(112,698) $ (124,637)
Fully eligible active participants (173,328) (217,276)
Other active participants (515,843) (861,851)
------------ -------------
Accumulated postretirement benefit (801,869) (1,203,764)
obligation
Unrecognized net loss (gain) (96,757) 140,469
Unrecognized transition obligation 747,839 712,227
------------ -------------
Accrued noncurrent postretirement
benefit recognized in the balance
sheets $(150,787) $ (351,068)
============ =============
</TABLE>
6. Commitments and Contingencies
At July 31, 1994 and 1995, the Division has issued letters of credit amounting
to $6,023,000 and $5,780,000, respectively, related to performance guarantees on
contracts with a customer and a vendor.
The Division is obligated under long-term leases expiring at various dates
through 2008. Certain leases contain renewal options. The leases generally
provide that the Division shall pay adjustments for property taxes, insurance,
utilities, and other related charges.
<PAGE>
Telecommunication Division of
EMI Communications Corporation
Notes to Financial Statements (continued)
(Information pertaining to March 31, 1996 and for the eight-month
periods ended March 31, 1996 and 1995 is unaudited)
6. Commitments and Contingencies (continued)
Future minimum lease payments under noncancelable operating leases as of July
31, 1995 are as follows:
<TABLE>
<CAPTION>
Year Amount
---- -------------
<S> <C>
1996 $ 2,849,928
1997 2,329,665
1998 2,062,885
1999 1,640,367
2000 866,387
Thereafter 981,529
--------------
$10,730,761
==============
</TABLE>
Rent expense under these leases totaled $2,557,546 and $ 2,371,905 for the years
ended July 31, 1994 and 1995, respectively.
Aggregate future minimum rentals to be received under noncancelable subleases,
expiring on various dates through 2008, are as follows:
<TABLE>
<CAPTION>
Year Amount
---- -------------
<S> <C>
1996 $ 744,704
1997 534,587
1998 424,337
1999 332,719
2000 176,417
Thereafter 151,925
-------------
$2,364,689
=============
</TABLE>
<PAGE>
Telecommunication Division of
EMI Communications Corporation
Notes to Financial Statements (continued)
(Information pertaining to March 31, 1996 and for the eight-month
periods ended March 31, 1996 and 1995 is unaudited)
7. Federal Transfer Surcharge
During March 1995, the State of New York's Office of General Services ("OGS")
contested the billing of certain Federal Transfer Surcharges from January 1,
1991 through February 1995. The Division negotiated with OGS and on
December 14, 1995 a settlement was reached for the disputed surcharges.
Included in operations for the years ended July 31, 1994 and 1995 is $1,147,700
and $1,059,200, respectively, including interest charges of $137,000 and
$127,000, respectively, in connection with this settlement. No further charges
to operations for this settlement are expected and the settlement is expected to
be paid beginning in April 1996.
8. Subsequent Event
On February 20, 1996, the Parent entered into an agreement to sell the property
and equipment of the Division, as well as assign customer lists, certain
contracts and leases, to Intermedia Communications of Florida, Inc. (ICI) for
937,500 shares of ICI common stock. Consummation of the transaction is subject
to receipt of certain regulatory approvals and certain other conditions.
<PAGE>
Intermedia Communications Inc.
Unaudited Pro Forma Condensed Consolidated Financial Statements
On June 28, 1996, Intermedia Communications Inc. (ICI or the Company), acquired
the telecommunications division of EMI Communications Corporation (EMI) pursuant
to an Asset Purchase Agreement, dated as of February 20, 1996. ICI purchased
EMI's telecommunications division in exchange for 937,500 newly and validly
issued, fully paid and nonassessable chares of ICI common stock.
The accompanying unaudited pro forma condensed consolidated balance sheet as of
March 31, 1996 and the unaudited condensed consolidated statements of operations
for the three month period ended March 31, 1996 and year ended December 31, 1995
include the historical effects of the acquisition of the telecommunication
assets of EMI, as if EMI were acquired at the beginning of each respective
period. In addition, the accompanying unaudited pro forma condensed consoli-
dated statement of operations for the year ended December 31, 1995 has been
prepared to reflect the acquisition of FiberNet USA, Inc. and Subsidiaries and
FiberNet Telecommunications Cincinnati, Inc. (collectively, FiberNet) and EMI
as if they were consummated on January 1, 1995.
The pro forma information is based on the historical financial statements of the
acquired businesses giving effect to the transactions under the purchase method
of accounting and the assumptions and adjustments described in the accompanying
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
The pro forma information does not purport to be indicative of the actual
results that would have been achieved had the acquisitions actually been
completed as of the dates indicated.
<PAGE>
Intermedia Communications Inc.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
March 31, 1996
<TABLE>
<CAPTION>
Historical
------------------------------- Pro Forma Pro Forma
Consolidated (1) EMI (2) Adjustments Totals
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<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 32,820,116 $ - $32,820,116
Restricted investments, including
interest receivable 19,817,578 - 19,817,578
Short-term investments 2,100,000 - 2,100,000
Accounts receivable, net 9,098,178 5,840,711 $ (5,840,711)/(3)/ 9,098,178
Prepaid expenses and other
current assets 2,819,099 429,736 (429,736)/(3)/ 2,819,099
--------------------------------------------------------------------
Total current assets 66,654,971 6,270,447 (6,270,447) 66,654,971
Restricted investments 30,855,253 - 30,855,253
Telecommunications equipment, net 90,909,312 9,513,718 7,611,282/(4)/ 108,034,312
Intangibles, net 26,442,128 - 26,442,128
Other assets 218,407 403,408 (403,408)/(3)/ 218,407
--------------------------------------------------------------------
Total assets $215,080,071 $16,187,573 $ 937,427 $232,205,071
====================================================================
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 7,011,847 $10,689,411 $(10,689,411)/(3)/ $ 7,011,847
Accrued taxes 7,152,274 - 7,152,274
Other accrued expenses 2,550,396 1,620,957 (1,620,957)/(3)/ 2,800,396
250,000 /(4)/
Advance billings 1,716,696 - 1,716,696
Current portion of long-term debt 109,095 - 109,095
Current portion of capital lease
obligations 972,503 - 972,503
--------------------------------------------------------------------
Total current liabilities 19,512,811 12,310,368 (12,060,368) 19,762,811
Long-term debt 159,224,002 - 159,224,002
Capital lease obligations 4,930,214 - 4,930,214
Other noncurrent liabilities - 600,036 (600,036)/(3)/ -
--------------------------------------------------------------------
Total liabilities 183,667,027 12,910,404 (12,660,404) 183,917,027
Stockholders' equity:
Common stock 103,638 - 9,375 /(4)/ 113,013
Additional paid-in capital 74,145,464 - 16,865,625 /(4)/ 91,011,089
Division equity - 3,277,169 (3,277,169)/(3)/ -
Accumulated deficit (42,836,058) - (42,836,058)
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Total stockholders' equity 31,413,044 3,277,169 13,597,831 48,288,044
---------------------------------------------------------------------
Total liabilities and stockholders'
equity $215,080,071 $16,187,573 $ 937,427 $232,205,070
====================================================================
</TABLE>
<PAGE>
Intermedia Communications Inc.
Unaudited Pro Forma
Condensed Consolidated Statement of Operations
Three-month period ended March 31, 1996
<TABLE>
<CAPTION>
Historical
--------------------------
(a) (b) Pro Forma Pro Forma
Consolidated EMI Adjustments Totals
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $13,502,870 $12,784,036 $ (48,309)/(d)/ $26,238,597
Expenses:
Facilities administration
and maintenance and line costs 9,258,342 7,426,926 (48,309)/(d)/ 16,636,959
Selling, general and administrative 5,920,226 5,432,933 11,353,159
Depreciation and amortization 3,280,515 835,499 (223,892)/(e)/ 3,892,122
-----------------------------------------------------------
18,459,083 13,695,358 (272,201) 31,882,240
-----------------------------------------------------------
Loss from operations (4,956,213) (911,322) 223,892 (5,643,643)
Interest expense (5,381,866) (30,840) 30,840/(g)/ (5,381,866)
Interest and other income 1,444,731 44,736 1,489,467
-----------------------------------------------------------
Loss before income taxes (8,893,348) (897,426) 254,732 (9,536,042)
Income taxes (benefit) - (325,396) (325,396)/(h)/ -
-----------------------------------------------------------
Net loss $(8,893,348) $ (572,030) $ (70,664) $(9,536,042)
===========================================================
Net loss per share $ (0.86) $ (0.84)
============= ============
Weighted average number of
shares outstanding 10,383,451 11,320,951 (i)
============== ==================
</TABLE>
<PAGE>
Intermedia Communications Inc.
Unaudited Pro Forma Condensed Consolidated Statements of Operations
Year ended December 31, 1995
<TABLE>
<CAPTION>
Historical
----------------------------------------
(a) (c) (b) Pro Forma Pro Forma
Consolidated FiberNet EMI Adjustments Totals
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 38,630,574 $ 38,790 $43,369,515 $(351,796)/(d)/ $81,687,083
Expenses:
Facilities administration and
maintenance and line costs 22,989,195 29,849 39,936,405 (351,796)/(d)/ 62,603,653
Selling, general and
administrative 14,992,458 236,572 3,065,864 18,294,894
Depreciation and amortization 10,195,871 75,518 4,736,679 (2,290,250)/(e)/ 12,808,073
90,255 /(f)/
--------------------------------------------------------------------------
48,177,524 341,939 47,738,948 (2,551,791) 93,706,620
--------------------------------------------------------------------------
Loss from operations (9,546,950) (303,149) (4,369,433) 2,199,995 (12,019,537)
Interest expense (13,766,639) (59,793) (532,320) 532,320/(g)/ (13,826,432)
Interest and other income 4,060,040 - 21,831 4,081,871
Loss before income taxes (19,253,549) (362,942) (4,879,922) 2,732,315 (21,764,098)
Income taxes (benefit) (96,952) - (1,776,076) (1,776,076)/(h)/ (96,952)
--------------------------------------------------------------------------
Net loss $(19,156,597) $(362,942) $(3,103,846)$ 956,239 $(21,667,146)
==========================================================================
Net loss per share $(1.91) $(1.95)
============== ===============
Weighted average number of
shares outstanding 10,035,774 11,087,205(i)
============== ===============
</TABLE>
<PAGE>
Intermedia Communications Inc.
Notes to Unaudited Pro Forma Condensed
Consolidated Financial Statements
Balance Sheet Adjustments
1. Represents the historical condensed consolidated balance sheet of ICI as of
March 31, 1996.
2. Represents the divisional balance sheet of EMI as of March 31, 1996.
3. To reflect the elimination of all EMI assets, liabilities and divisional
equity that are not being acquired by ICI as part of the purchase of EMI.
Under the terms of the EMI purchase agreement, ICI is only acquiring the
telecommunications assets of EMI which principally consist of
telecommunications equipment and existing telecommunications service
contracts.
4. To reflect the issuance of ICI common stock in exchange for the
telecommunications assets of EMI. Under the terms of the EMI purchase
agreement, ICI has agreed to issue 937,500 shares of common stock for such
assets. For pro forma purposes, the stock has been valued at $18 per share
which represents an average of the selling price of ICI's common stock for a
period before and after the date of the acquisition agreement, February 20,
1996. The Company has initially allocated all of the estimated fair value of
the common stock plus $250,000 in estimated acquisition-related costs to the
telecommunications equipment pending final analysis of the value of the
equipment and any acquired intangible assets.
Statements of Operations Adjustments
(a) Represents the historical condensed consolidated statement of operations of
ICI for the quarter ended March 31, 1996 and the year ended December 31,
1995, which as to 1995 include the operations of FiberNet from March 1,
1995.
(b) Represents the historical condensed statement of operations of EMI for the
quarter ended March 31, 1996 and the twelve months ended January 31, 1996.
The operations for the month of January 1996 are included in both periods.
The revenue and net loss for the month of January 1996 were $4,057,721 and
$15,163, respectively.
(c) Represents the historical condensed statement of operations of FiberNet for
the two months ended February 28, 1995.
(d) Represents the elimination of revenues between ICI and EMI.
<PAGE>
Intermedia Communications Inc.
Notes to Unaudited Pro Forma Condensed
Consolidated Financial Statements (continued)
Statements of Operations Adjustments (continued)
(e) Represents the reduction in historical depreciation expense of EMI's
telecommunications equipment as a result of the assets being depreciated on
a straight-line basis using an estimated weighted average remaining life of
seven years for pro forma purposes versus the original estimated lives and
the accelerated depreciation method historically followed by EMI.
(f) To reflect the two months of goodwill amortization related to the FiberNet
acquisition not included in ICI's historical consolidated financial
statements.
(g) Represents the elimination of interest costs which would not have been
incurred because of the proposed acquisition of EMI's telecommunications
assets with ICI Common Stock.
(h) Represents the elimination of EMI's historical income tax benefit as a
result of ICI's significant net operating losses.
(i) The pro forma weighted average number of shares outstanding has been
adjusted to reflect the issuance of common stock for FiberNet in 1996 and
1995 and EMI in 1996 as if they occurred at the beginning of the indicated
period.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: July 12, 1996
INTERMEDIA COMMUNICATIONS INC.
------------------------------
(Registrant)
By: David C. Ruberg
-----------------------------
Name: David C. Ruberg
Title: Chairman, Chief Executive Officer
and President