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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): October 27, 1998
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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 jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
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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Item 5. Other Events
On October 27, 1998, Intermedia Communications Inc. (the "Company") issued
the attached press release.
Item 7. Financial Statements and Exhibits
Exhibit 99 Press Release, dated October 27, 1998.
2
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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: October 27, 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 Page
No. Description No.
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<S> <C> <C>
99 Press Release, dated October 27,
1998.
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Exhibit 99
Contact: Curtis Lightburn
Vice President, Investor Relations
813-829-2408
[email protected]
INTERMEDIA REPORTS THIRD QUARTER 1998 RESULTS
REPORTS RECORD REVENUE AND EBITDA
COMPLETES DATA SERVICES AGREEMENT WITH BELL ATLANTIC
TAMPA, Florida (October 27, 1998) - Intermedia Communications Inc. (NASDAQ:
ICIX) today announced record revenues and EBITDA for the quarter ended
September 30, 1998.
Revenue for the third quarter of $192.4 million was up 170 percent over third
quarter 1997 revenues of $71.3 million. Competitive Local services revenue was
up 271 percent over the year ago period.
EBITDA for the third quarter increased 51 percent over last quarter, to $15.1
million, versus $10.1 million for the second quarter of 1998, and was up $28.4
million versus an EBITDA loss of $13.3 million for the third quarter of 1997.
Revenue for the first 9 months of 1998 was $519.4 million, up 214 percent over
the $165.3 million reported for the first 9 months of 1997. EBITDA of $15.4
million for the first 9 months of 1998 represented an improvement of $55.3
million versus an EBITDA loss of $39.9 million for the first nine months of
1997.
"In the third quarter, Intermedia's employees continued to focus on the
execution of our core Integrated Communications Provider strategy," said David
C. Ruberg, Intermedia's Chairman, President, and Chief Executive Officer. "As a
result, we achieved significantly better financial and operational performance.
We also completed a data services agreement with Bell Atlantic. We expect that
this agreement, in addition to the agreements we have signed with USWest and
Ameritech, will add significant future upside in our growth."
REVENUE ANALYSIS
Enhanced Data and Internet Services
Enhanced Data and Internet continued its strong growth. Revenue for the quarter
was $47.6 million, an increase of 54 percent over third quarter 1997 and an
increase of 12 percent over second quarter 1998. Strong growth was seen in all
data product offerings versus second quarter 1998. Web site management grew by
19 percent and Internet connectivity by 14 percent sequentially.
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"In the quarter, we were particularly pleased by the improving revenue growth
at DIGEX, where revenue has shown accelerating double digit sequential growth
each of the last three quarters," said Ruberg. "Additionally, our strength in
the Internet arena improves our strategic position in the marketplace."
Enterprise data services, principally frame relay and ATM, showed strong
growth, with recurring revenue up 14 percent over second quarter 1998. Frame
relay nodes in service increased by 3,143 to 30,266, up 75 percent over third
quarter 1997 and up 12 percent versus second quarter 1998.
Competitive Local Services
Competitive Local services continued its strong growth. Revenue for the quarter
was $43.8 million, an increase of 271 percent over third quarter 1997 and an
increase of 15 percent over second quarter 1998. Growth in revenues was
primarily due to the addition of 31,754 access lines in service. Total access
lines in service at the end of the third quarter was 311,898, a 515 percent
increase versus third quarter 1997 and an 11 percent increase versus second
quarter 1998. "100 percent of the net additions were on-switch. Our focus on
selling access lines that are on-switch has improved gross margins, operating
efficiency and customer service," said Robert M. Manning, Intermedia's Chief
Financial Officer.
Interexchange Services
Interexchange revenue was $71.6 million in the third quarter, a 159 percent
increase versus third quarter 1997, but a 14 percent decrease versus second
quarter 1998. The sequential decrease was primarily a result of the previously
announced exit of the wholesale interexchange business and selective revenue
pruning.
"Intermedia deliberately pruned revenue in certain segments that were either
non-strategic or economically unattractive," said Manning. "The decisions we
made lowered revenue growth, but increased margins and the long term health of
the business. We expect revenue growth in the long distance segment to pick up
again in 1999."
Integration Services
Integration Services continued its strong growth. Revenue for the quarter was
$29.4 million, an increase of 11 percent over second quarter 1998. Growth in
revenues resulted from continued increases in sales productivity and several
large systems sales.
MARGIN ANALYSIS
Gross Margin increased to 38.8 percent versus 16.5 percent for the third
quarter 1997 and 34.9 percent for the second quarter 1998. The continuing
improvement is due to improved revenue mix in favor of higher margin services,
the exiting of certain lines of business, and a higher percentage of on-switch
traffic. Access lines on-switch as a percent of total lines in service
increased to 66 percent from 59 percent at the end of the second quarter 1998.
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SG&A as a percent of revenue decreased to 30.9 percent versus 35.1 percent in
the third quarter 1997. The year-over-year improvement was a result of greater
operating leverage and attainment of synergies from acquired companies. SG&A as
a percent of revenue increased to 30.9 percent in the third quarter 1998 versus
29.6 percent in the second quarter of 1998 mostly as a function of increased
headcount in operations and circuit provisioning to accommodate projected
enhanced data growth.
EBITDA margin, as a percent of revenue, continued its steady increase to 7.9
percent in the third quarter 1998 versus 5.3 percent in the second quarter
1998, and negative 18.6 percent a year ago.
OUTLOOK
"Our focus on profitability has resulted in dramatic improvements in gross
margins and EBITDA margins," said Manning. "The Integration Program is going
well, and has contributed to our improvement in operating efficiency. We expect
that our continued focus on pursuing the best revenue opportunities, reducing
costs and selling to the right customers will enable us to continue to improve
profit margins."
"Throughout 1998, we have made every effort to balance our drive for increasing
near term profitability with our desire to invest now for future success," said
Manning. "We have the financial wherewithal to do that, and the current
volatility in the credit markets is not expected to have any impact on our
ability to execute on our business plan. In 1999, we expect to drive increasing
revenues and improving margins through the business infrastructure that we have
put in place."
Intermedia will host a conference call to discuss third quarter results and
outlook on October 28th, 1998 at 8:30am Eastern. The conference call number is
800-540-7046 or 212-676-5363.
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, the ability of Intermedia to implement its restructuring
and integration program, and the ability of the Company to successfully
implement its strategies, 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 provides integrated 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 solutions and web hosting services,
offers seamless end-to-end service virtually anywhere in the world.
Intermedia Communications Inc. is headquartered in Tampa, Florida. Intermedia
can be found on the World Wide Web at www.intermedia.com.
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INTERMEDIA COMMUNICATIONS INC.
FINANCIAL HIGHLIGHTS
(In thousands except share data)
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THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
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1998 1997 1998 1997
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Revenue:
Local network $ 43,778 $ 11,814 $ 115,648 $ 25,457
Enhanced data 47,585 30,843 126,790 54,831
Interexchange 71,552 27,637 199,049 80,877
Integration 29,438 952 77,882 4,152
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Total revenue 192,353 71,246 519,369 165,317
Expenses:
Network operations 83,778 49,032 243,337 116,295
Facilities administration and
maintenance 14,935 9,985 48,503 21,409
Cost of goods sold 19,014 503 49,923 2,537
Selling, general and administrative 59,482 25,004 162,231 64,983
Depreciation and amortization 53,662 16,100 142,827 34,274
Charge for in-process R&D -- 60,000 85,000 60,000
Business restructuring and
integration expenses 9,646 -- 62,198 --
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Total operating expenses 240,517 160,624 794,019 299,498
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Loss from operations (48,164) (89,378) (274,650) (134,181)
Other income (expense):
Interest expense (53,942) (17,689) (151,101) (39,895)
Other income 9,310 6,736 26,078 16,691
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Loss before extraordinary items (92,796) (100,331) (399,673) (157,385)
Extraordinary loss on early
extinguishment of debt -- (43,834) -- (43,834)
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Net loss (92,796) (144,165) (201,219)
Preferred stock dividends & accretions (30,647) (13,895) (68,118) (27,118)
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Net loss attributable to common
shareholders $ (123,443) $ (158,060) $ (467,791) $ (228,337)
============ ============ ============ ============
Loss per common share:
Net loss before charge for in-process
R&D and business restructuring including
other income, expenses and preferred
stock dividends and accretions $ (2.42) $ (1.62) $ (7.64) $ (3.78)
Charge for in-process R&D -- (1.79) (2.03) (1.82)
Charge for extinguishment of debt -- (1.31) -- (1.33)
Charge for business restructuring (.20) -- (1.48) --
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Net loss per common share $ (2.62) $ (4.72) $ (11.15) $ (6.93)
============ ============ ============ ============
Weighted average shares
outstanding (1) 47,041,191 33,479,460 41,948,399 32,925,462
EBITDA(2) $ 15,144 $ (13,278) $ 15,375 $ (39,907)
</TABLE>
(1) Share and per share amounts for the three months and the nine months ended
September 30, 1998, have been restated to reflect a two-for-one stock
split in June 1998.
(2) 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, and a business restructuring and integration expense
charge.
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Other Data:
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SEPTEMBER 30, JUNE 30,
1998 1998
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Local and Long Distance Services:(1)
Buildings connected(2) 4,331 4,309
Voice switches in operation 21 21
Long distance billable minutes (000s) 516,897 551,145
Access line equivalents 311,898 280,144
Access line equivalents per local switch(3) 7,303 6,180
Enhanced Data Services:(1)
Data switches installed 164 153
Nodes in service(4) 30,266 27,123
NNI connections 608 553
Gross PP&E (000s) $ 1,399,896 $ 1,246,879
Employees 3,678 3,597
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Stock Price:(5) High Low Close
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First Quarter $ 45.625 $ 26.907 $ 39.813
Second Quarter $ 45.234 $ 30.875 $ 41.938
Third Quarter $ 41.500 $ 20.375 $ 24.563
</TABLE>
(1) Amounts reflected in the table are based upon information contained in the
Company's operating records.
(2) Includes both on-net direct connections with Intermedia-owned fiber optic
cable and on-net extended connections with leased circuits.
(3) 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.
(4) Amount represents an individual point of origination and termination of
data served by the Company's enhanced network.
(5) Stock prices are adjusted for the Company's stock split on June 15, 1998.
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