<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
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Date of Report (Date of
earliest event reported): April 29, 1998
INTERMEDIA COMMUNICATIONS INC.
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(Exact name of registrant as specified in its charter)
Delaware 59-2913586
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(State or other jurisdic- (I.R.S. Employer
tion of incorporation or Identification No.)
organization)
0-20135
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(Commission File Number)
3625 Queen Palm Drive, Tampa, Florida 33619-1309
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (813) 829-0011
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<PAGE>
ITEM 5. OTHER MATERIALLY IMPORTANT EVENTS.
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On April 29, 1998, the Registrant issued the press release
attached hereto as Exhibit 99.1.
ITEM 7. EXHIBITS
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Press Release, dated April 29, 1998.
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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: April 29, 1998
INTERMEDIA COMMUNICATIONS INC.
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(Registrant)
By: /s/ Robert M. Manning
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Name: Robert M. Manning
Title: Senior Vice President and Chief
Financial Officer
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EXHIBIT INDEX
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Exhibit
No. Description
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99.1 Press Release, dated April 29, 1998.
<PAGE>
Contacts: Robert Manning
Senior Vice President and
Chief Financial Officer
or
Chris Brown
Senior Vice President
Investor Relations
813/829-0011
INTERMEDIA POSTS FIRST QUARTER REVENUE OF $136.8 MILLION
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Company Surpasses 220,000 Access Lines In Service
TAMPA, Florida (April 29, 1998) G Intermedia Communications Inc. (Nasdaq: ICIX)
today reported that revenue for the quarter ended March 31, 1998, was $136.8
million, a 66% sequential increase from the previous quarter's result of $82.6
million and 211% over the same period last year. EBITDA for the quarter was
$(9.8) million compared with $(9.9) million for the prior quarter and $(12.5)
million for the first quarter of 1997. Operational growth was highlighted by the
addition of three local/long distance voice switches and approximately 31,000
access line equivalents (ALEs) during the quarter, resulting in a total of 19
switches and 220,587 access lines in service at the end of the quarter,
including approximately 111,600 ALEs added from the acquisition of Shared
Technologies Fairchild (Shared). Intermedia's Enhanced Data network added 2,580
customer nodes, a sequential growth of 13%, for an end of period total of 22,789
nodes.
"This quarter has been one of continued success and new challenges," stated
David C. Ruberg, Intermedia's chairman, president, and chief executive officer.
"We finished 1997 at a revenue run rate more than three times the rate at the
beginning of the year. Giving effect to the LDS and National Tel acquisitions,
we will have quadrupled the size of our business in only four quarters.
"Our stated goal has been to evolve quickly into an Integrated Communications
Provider (ICP) possessing a broad product portfolio; a leadership position in
the rapidly developing data communications market; a compelling local product
offering; control of an expansive, low-cost backbone network; and scalable
systems that can deliver excellent customer support and innovative products.
Over the last several quarters we have worked diligently to put that platform in
place and a great deal of progress has been made. We completed the acquisitions
of DIGEX, Shared and LDS; and we expect to close the National Tel acquisition in
May. We completed our long-term network capacity purchase from Williams
Communications. We completed a large partnering arrangement with US West and are
in hot pursuit of other large partnering arrangements and a number of
substantial state government awards. Our strategy is working well, and we are
dealing with the inevitable stresses of bringing together multiple new elements
of the ICP platform, integrating acquisitions and growing at a rapid pace."
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ICIX Reports First Quarter Results
Page 2
April 29, 1998
EBITDA Results
The Company reported that its EBITDA margin continued its sequential improvement
from (12)% in the fourth quarter of 1997 to (7)% in the first quarter of 1998
and showed marked improvement from the (28)% recorded for the first quarter of
1997. "We are pleased with the improvement in the EBITDA margin but are
disappointed with the magnitude of this quarter=s EBITDA loss," commented Rob
Manning, Intermedia's chief financial officer. "Four developments contributed to
the lower-than-expected result: (1) The Williams capacity purchase was not
completed in January as expected, so the Company did not get the resultant
benefit of anticipated network cost savings; (2) we added incremental overhead,
principally in provisioning and customer service, in preparation for the US West
transaction and others that we are considering; (3) our gross margins were
negatively impacted by wholesale international long distance business, a
business we are planning to curtail to avoid similar margin uncertainty in
future periods; and (4) while we are investing in our new back office systems
that are expected to yield improved productivity in the second half of the year,
we incurred increased expenses to augment some of our systems and processes that
were at capacity as we integrated recent acquisitions and experienced strong
internal growth. Some of these activities, while costly in the short term, will
yield substantial benefits in the future."
Acquisition Integration
The Company has committed resources to plan and implement the integration of
acquired businesses so that maximum synergies will be realized and future costs
reduced. In connection with the integration and realignment of the Company's
businesses and operating structure, Intermedia expects to record a one-time
restructuring charge later this year, the amount of which is subject to the
completion of a detailed restructuring program. The charge would appear below
the EBITDA line. "The result of these activities will contribute to future
improvements in the financial performance of the Company, and the expected
accounting presentation will enable us to report in a fashion that is reflective
of the ongoing costs of our operations," said Manning.
Enhanced Data Services, Including Internet
Revenue for enhanced data services was $36.5 million, an increase of 15% over
the previous quarter's level of $31.8 million and 223% over the same period in
1997. Intermedia placed 14 frame relay switches in service during the quarter,
increasing its total to 150. Customer nodes (service delivery points) increased
from 20,209 to 22,789 or 13% during the quarter. As the leading open network
provider, the Company expanded its interconnection through network to network
interfaces (NNIs) to 433, an increase of 12% over the fourth quarter 1997 total
of 386. The Company now delivers its frame relay-based services to customers in
4,146 cities.
Recording its best quarter in the Internet services area, the Company's DIGEX
division posted increases in both the Business Internet Connectivity and Web
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ICIX Reports First Quarter Results
Page 3
April 29, 1998
Site Management areas, delivering double digit revenue growth for Internet
Services, attracting some of the nation's best known businesses as customers,
and providing rapid service installation intervals for high capacity
connections.
Local Services
Local services revenue grew by 104% sequentially from $16.5 million to $33.7
million, based on the inclusion of Shared and the continued growth in local
exchange services in core Intermedia markets. The 27,626 ALEs added (excluding
those added by Intermedia's Shared subsidiary) maintained the previous
percentage "on-switch" at approximately 60%. The 220,587 consolidated ALEs in
service include approximately 111,600, all of which are connected to Shared's
PBXs. The local trunks serving these PBXs will be migrated to Intermedia
switches over the next four quarters. The Company continues to focus on its long
standing strategy of increasing the percentage of ALEs on-switch through its
building-centric sales discipline and through the transition of resold services
onto the Company's local/long distance switches.
Interexchange Services
Interexchange services revenue was $44.8 million, a sequential increase of 39%
over $32.3 million in the fourth quarter of 1997, and 75% over the same period
last year, while achieving a record of 184 million billable minutes of use
during the quarter. The Company announced that it plans to exit the low margin
wholesale international long distance segment as it no longer represents
strategic revenue. The Company expects the impact of this action to result in
the loss of approximately $2 million of monthly revenue, all of which is
expected to be reflected in the operating results of the Company by the third
quarter of 1998.
Integration Services
For the quarter, Integration Services revenue increased to $21.8 million,
compared with $2.0 million last quarter and $1.9 million in the same period last
year. This category now includes integration services from the Company's recent
Shared acquisition, which accounted for substantially all of this quarter's
revenue in the category.
The Shared Technologies Fairchild Acquisition
The Company completed the acquisition of Shared, the nation's leading provider
of shared tenant services, on March 10. Beginning this quarter, Shared's results
are included in the consolidated results of Intermedia. The Shared subsidiary,
which had been experiencing declining revenue and EBITDA prior to the
acquisition, delivered quarter over quarter revenue growth of 4%, and improved
EBITDA, signaling the beginning of the revitalization of this business. This
growth came from both the services (shared tenant services) and systems (PBX and
key systems sales, installation and maintenance) businesses. Shared added
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ICIX Reports First Quarter Results
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April 29, 1998
approximately 3,800 access lines during the quarter, to the previous base of
approximately 107,800 access lines. In connection with the acquisition, the
Company recorded a one-time charge of $85 million in the first quarter to
reflect the write-off of in-process research and development. Subsequent to the
R&D charge, the preliminary allocation of the purchase price created goodwill of
approximately $620 million.
The LDS Communications and National Tel Acquisitions
Intermedia's acquisition of LDS Communications, which was consummated on March
31, will be reported in Intermedia's consolidated results beginning in the
second quarter of 1998. The Company expects to complete the acquisition of
National Tel in May 1998, and to include National Tel's results in the
consolidated results of Intermedia for the second quarter.
Expectations for 1998
"We are confident that our strong sales engine will deliver the consensus
revenue estimates for the second quarter of about $180 million and for the
entire year of approximately $750 million," added Manning. "As we carefully
phase out the international wholesale revenue and replace that revenue stream
with higher margin revenue, we expect to deliver EBITDA margins for the entire
year of about 8% - 9%. These estimates assume the continued allocation of
dedicated resources to complete the integrations and the appropriate accounting
for such costs pursuant to the restructuring program."
Statements contained in this news release regarding expected financial results
and other planned events are forward-looking statements, subject to
uncertainties and risks, including, but not limited to, the demand for
Intermedia's services, and the ability of the Company to successfully implement
its strategies, including the successful integration of Shared and LDS into
Intermedia, and the consummation of the National Tel acquisition and the
consequent realization of projected synergies, each of which may be impacted,
among other things, by economic, competitive or regulatory conditions. These and
other applicable risks are summarized under the caption "Risk Factors" in the
Company's Form 10-K Annual Report for its fiscal year ended December 31, 1997,
and are updated periodically through the filing of reports and registration
statements with the Securities and Exchange Commission.
Intermedia Communications is one of the nation's fastest growing
telecommunications companies, providing integrated telecommunications solutions
to business and government customers. These solutions include voice and data,
local and long distance, and advanced network access services in major U.S.
markets. Intermedia's enhanced data portfolio, including frame relay networking,
ATM, and a full range of business Internet connectivity and web hosting
services, offers seamless end-to-end service virtually anywhere in the world.
Intermedia is headquartered in Tampa with sales offices in 80 cities. Intermedia
can be found on the World Wide Web at http://www.intermedia.com.
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ICIX Reports First Quarter Results
Page 5
April 29, 1998
Intermedia will host a conference call on Wednesday, April 29, from 11:00 a.m.
to 12:00 noon (Eastern) to review the Company's first quarter 1998 results. To
participate in this conference, call (888) 937-3225. A replay will be available
from 1:00 p.m. on April 29 through Friday May 1 at 6:00 p.m. (Eastern) by
calling (800) 633-8284, ID 4171187.
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ICIX Reports First Quarter Results
Page 6
April 29, 1998
INTERMEDIA COMMUNICATIONS INC.
Financial Highlights
<TABLE>
<CAPTION>
Three Months Ended
March 31,
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1998 1997
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<S> <C> <C>
Revenue:
Local network $ 33,676,854 $ 5,209,526
Enhanced data 36,536,791 11,320,440
Interexchange 44,750,714 25,537,132
Integration 21,820,895 1,871,263
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Total revenue 136,785,254 43,938,361
Expense:
Network operations 71,543,193 30,001,989
Facilities administration and maintenance 15,032,638 5,634,685
Cost of goods sold 13,690,217 1,269,766
Selling, general and
administrative 46,346,371 19,526,354
Depreciation and amortization 39,863,713 8,294,300
Charge for in-process R&D 85,000,000 -
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Total operating expenses 271,476,132 64,727,094
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Loss from operations (134,690,878) (20,788,733)
Other Income (expense):
Interest (49,300,631) (11,089,239)
Other 10,729,190 4,473,537
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Net Loss (173,262,319)
Preferred stock dividends & accretion (18,594,490) (3,375,000)
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Net loss attributable to common shareholders $(191,856,809) $(30,779,435)
============= ============
Loss per common share:
Net loss before charge for in-process R & D including other income,
expenses and preferred stock dividends and accretions $ (6.05) $ (1.89)
Charge for in-process R & D $ (4.82) $ -
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Net loss per common share $(10.87) $(1.89)
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Weighted average shares outstanding 17,653,134 16,296,744
EBITDA(1) $(9,827,165) $(12,494,433)
</TABLE>
(1) Earnings before interest, taxes, depreciation and amortization (EBITDA)
is a measure of operating cash flow. EBITDA excludes an in-process R&D
charge related to the acquisition of Shared accounted for in the first
quarter of 1998.
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ICIX Reports First Quarter Results
Page 7
April 29, 1998
Other Data:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
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<S> <C> <C>
Local and Long Distance Services:
Buildings connected(1) 4,071 3,005
Voice switches in operation 19 16
Long distance billable minutes 184,227,094 139,437,921
Access line equivalents 220,587 81,349
Access line equivalents per local switch(2) 4,928 5,007
Enhanced Data Services:
Data switches installed 150 136
Frame relay cities 4,146 4,104
Nodes in service 22,789 20,209
NNI connections 433 386
Gross PP&E $ 1,120,706,300 $ 545,013,300
Employees 3,329 2,036
Stock Price High Low Close
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First Quarter $91.25 $53.813 $79.625
</TABLE>
(1) Includes both on-net direct connections with Intermedia-owned fiber optic
cable and on-net extended connections with leased circuits.
(2) Calculated by dividing the number of on-switch access line equivalents by
the number of switches providing local service. Excludes access lines
contributed by Shared.
Pro Forma (Unaudited)
Selected Information
NOTE: Pro forma column reflects the acquisition of LDS and National Tel as if
they occurred at the beginning of the period.
<TABLE>
<CAPTION>
Intermedia Pro Forma(1)
1Q 1998 1Q 1998
Actual (Unaudited)
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<S> <C> <C>
Revenue
1Q98 annualized (millions) $ 547.2 $ 738.8
Employees 3,329 3,466
Business customers 83,876 95,074
Access line equivalents 220,587 238,918
Sales force (personnel with sales quota) 530 564
Sales cities 80 81
</TABLE>
(1) Pro forma information is not necessarily indicative of the results that
would have occurred if the acquisitions were made at the beginning of
the period or of results that may occur in the future.
