INTERMEDIA COMMUNICATIONS INC
8-K, 1998-09-03
TELEPHONE COMMUNICATIONS (NO RADIOTELEPHONE)
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<PAGE>
 
                      SECURITIES AND EXCHANGE COMMISSION

                            Washington, D.C.  20549

                           ________________________

                                   FORM 8-K

                                CURRENT REPORT

                    Pursuant to Section 13 or 15(d) of the
                        Securities Exchange Act of 1934

                          __________________________


Date of Report (Date of
earliest event reported): September 3, 1998
                          -----------------


                        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) 829-0011
                                                   --------------
<PAGE>
 
ITEM 7.   FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
- ----------------------------------------------------------------------------

          (b)  Although there is no requirement that Intermedia COmmunications
Inc. (the "Company") file financial statements with the Securities and Exchange
Commission under Item 7, the Company hereby files unaudited pro forma condensed
consolidated financial statements, as Exhibit 99.1, which give applicable effect
to the acquisitions of the affiliated entities known as National Tel, which was
consummated on April 30, 1998, the affiliated entities known as Long Distance
Savers, which was consummated on March 31, 1998, Shared Technologies Fairchild,
Inc., which was consummated on March 10, 1998, DIGEX Incorporated, which was
consummated in July 1997 and the Company's debt and equity offerings in 1997.

Exhibit 99.1   Unaudited Pro Forma Condensed Consolidated Financial Statements

                                       2
<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: September 3, 1998

                        INTERMEDIA COMMUNICATIONS INC.
                        ------------------------------
                                 (Registrant)



                         By: /s/ Robert M. Manning
                             ________________________                
                             Name:  Robert M. Manning
                             Title: Senior Vice President and Chief
                                       Financial Officer

                                      3 
<PAGE>
 
                                 EXHIBIT INDEX
                                 -------------


Exhibit
  No.          Description
- -------        -----------

Exhibit 99.1   Unaudited Pro Forma Condensed Consolidated Financial Statements

<PAGE>
 
                                                                    EXHIBIT 99.1

                        INTERMEDIA COMMUNICATIONS INC.

                         UNAUDITED PRO FORMA CONDENSED
                       CONSOLIDATED FINANCIAL STATEMENTS

                                    SUMMARY

     The accompanying unaudited pro forma condensed consolidated statement of
operations for the six months ended June 30, 1998 includes the historical and
pro forma effects of the acquisitions of National Telecommunications of Florida,
Inc. and NTC, Inc. (collectively, National), which was effected on April 1, 1998
and the Long Distance Savers group of companies (collectively, LDS), which was
effected on March 31, 1998. The unaudited pro forma condensed consolidated
statement of operations for the year ended December 31, 1997 includes the
historical and pro forma effects of the acquisitions described above and the
acquisitions of Shared Technologies Fairchild, Inc. (STFI), which was effected
on January 1, 1998 and DIGEX, Incorporated (DIGEX), which was effected July 1,
1997. The unaudited pro forma condensed consolidated statement of operations for
the year ended December 31, 1997 also includes the pro forma effects of the
March, July, October and December 1997 offerings, as the proceeds therefrom were
principally used for the aforementioned acquisitions.

     The pro forma effects are based on the historical financial statements of
the acquired businesses giving effect to these transactions under the purchase
method of accounting. As such, the total cost of all acquisitions have or will
be allocated to the net tangible and intangible assets acquired and liabilities
assumed based upon their respective fair values at the effective date of each
acquisition. Such allocations and the related amortization periods for purchase
transactions recently consummated will be based on valuations or other data
which have not yet been completed or obtained. Accordingly, the allocations
reflected in the pro forma statements of operations are preliminary and subject
to revision.

     The unaudited pro forma condensed consolidated statements of operations are
not intended to purport to be indicative of the actual results of operations
that would have been achieved had the acquisitions or offerings in fact been
consummated at the beginning of the periods presented. Such pro forma financial
information should be read in conjunction with the Consolidated Financial
Statements and Notes of Intermedia.

                                       5
<PAGE>
 
                        INTERMEDIA COMMUNICATIONS INC.

     UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS(A)
                         YEAR ENDED DECEMBER 31, 1997

<TABLE>
<CAPTION>
                                                           PRO FORMA    PRO FORMA                                    PRO FORMA 
                                                           ---------    ---------                                    --------- 
                                      HISTORICAL          ADJUSTMENTS   SUB TOTALS            HISTORICAL            ADJUSTMENTS
                                 ----------------------  -------------  ----------  -----------------------------   -----------
                                                                                                                               
                                     (B)         (C)                                  (D)       (E)        (F)                 
                                     ---         ---                                  ---       ---        ---                 
                                 CONSOLIDATED   DIGEX                                 STFI      LDS      NATIONAL              
                                 ------------  --------                               ----      ---      --------              
<S>                              <C>           <C>       <C>            <C>         <C>        <C>       <C>        <C>        
                                                                              (DOLLARS IN THOUSANDS)                           
Revenues........................  $  247,899   $ 19,646                 $ 267,545   $ 181,827  $122,267  $65,243
Costs and expenses:
 Facilities administration
  line maintenance costs........     199,139     19,588     (5,400)(g)    213,327     100,356    80,203   47,969
 Selling, general and
  administrative................      98,598     18,506       (374)(h)    116,730      68,482    31,486   10,428
 Depreciation and
  amortization..................      53,613      3,390      4,741 (i)     61,744      19,916     2,895      995      43,037 (m)
 Charge off of purchased
  in-process R&D................      60,000                               60,000
                                   ---------    -------   --------       --------     -------   -------   ------     ----------
                                     411,350     41,484     (1,033)       451,801     188,754   114,584   59,392      43,037
                                   ---------    -------   --------       --------     -------   -------   ------     ----------
 Income (loss) from
  operations....................    (163,451)   (21,838)     1,033       (184,256)     (6,927)    7,683    5,851     (43,037)
 Other income (expense):
   Interest expense.............     (60,662)      (784)   (76,491)(j)   (137,937)    (29,775)     (896)    (145)     15,974 (n)
                                                                                                                      11,121 (o)
                                                                                                                         145 (p)
   Interest and other
    income (expense)............      26,824        486     (5,120)(k)     22,190     (62,428)    4,908      212     (20,677)(k)
                                                                                                                      62,300 (q)   
                                   ---------    -------   --------       --------     -------   -------   ------     ----------
Income (loss) before income
 taxes and extraordinary item...    (197,289)   (22,136)   (80,578)      (300,003)    (99,130)   11,695    5,918
Income tax provision............                                                         (380)
                                   ---------    -------   --------       --------     -------   -------   ------     ----------
Income (loss) before
 extraordinary item.............    (197,289)   (22,136)   (80,578)      (300,003)    (99,510)   11,695    5,918      25,826
Extraordinary income (loss).....     (43,834)                             (43,834)
                                   ---------    -------   --------       --------     -------   -------   ------     ----------
Net income (loss)...............    (241,123)   (22,136)   (80,578)      (343,837)    (99,510)   11,695    5,918      25,826
Preferred stock dividends
 and accretions.................     (43,742)              (28,108)(l)    (71,850)     (4,628)                         4,628 (r)
                                   ---------    -------   --------       --------     -------   -------   ------     ----------
Net loss attributable to
 common stockholders............  $ (284,865)  $(22,136) $(108,686)     $(415,687)  $(104,138) $ 11,695  $ 5,918    $ 30,454
                                   =========    =======   ========       ========    ========   =======   ======     ==========
Net loss per share..............  $    (8.54)                           $  (12.47)
                                   =========                             ========
Weighted average number of
 shares O/S.....................      33,340                               33,340
                                   =========                             ========
EBITDA(t).......................  $  (49,838)                           $ (62,512)
                                   =========                             ========                                                 

<CAPTION> 
                                     PRO FORMA           
                                     ---------           
                                     TOTALS(A)           
                                     ---------           
<S>                                <C>                  
Revenues.......................... $   636,882
Costs and expenses:
 Facilities administration
  line maintenance costs..........     441,855
 Selling, general and
  administrative..................     227,126
 Depreciation and
  amortization....................     128,587
 Charge off of purchased
  in-process R&D..................      60,000
                                     ---------
                                       857,568
                                     ---------
 Income (loss) from
  operations......................    (220,686)
 Other income (expense):
   Interest expense...............    (141,513)


   Interest and other
    income (expense)..............       6,505

                                     ---------
Income (loss) before income
 taxes and extraordinary item.....    (355,694)
Income tax provision..............        (380)
                                     ---------
Income (loss) before
 extraordinary item...............    (356,074)
Extraordinary income (loss).......     (43,834)
                                     ---------
Net income (loss).................    (399,908)
Preferred stock dividends
 and accretions...................     (71,850)
                                     ---------
Net loss attributable to
 common stockholders..............  $ (471,758)
                                     =========
Net loss per share................  $   (11.34)
                                     =========
Weighted average number of
 shares O/S.......................      41,610(s)
                                     =========
EBITDA(t).........................  $  (32,099)
                                     ========= 
</TABLE> 

                            See Accompanying Notes

                                       6
<PAGE>
 
              NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED

                            STATEMENT OF OPERATIONS
                         YEAR ENDED DECEMBER 31, 1997
                       (DOLLARS AND SHARES IN THOUSANDS)

     (a)  The unaudited pro forma condensed consolidated statement of operations
for the year ended December 31, 1997 does not give effect to any potential cost
savings and synergies that could result from the DIGEX, STFI, LDS or National
acquisitions. The effect of the write-off of intangible assets associated with
the STFI acquisition, consisting of in-process research and development of $85.0
million, has not been reflected in the statement as it is a non-recurring
charge. The allocations of purchase price to the fair values of assets and
liabilities of STFI, LDS and National is preliminary for purposes of these pro
forma financial statements.

     (b)  This column represents the historical consolidated results of
operations for Intermedia for the year ended December 31, 1997.

     (c)  This column represents the operating results for DIGEX for the six
months ended June 30, 1997.

     (d)  This column represents the historical results of operations of STFI
for the year ended December 31, 1997.

     (e)  This column represents the historical results of operations of LDS for
the year ended December 31, 1997.

     (f)  This column represents the historical results of operations of
National for the year ended December 31, 1997.

     (g)  This adjustment represents the reduction of network lease expense due
to unfavorable lease terms accrued for in purchase accounting.

     (h)  This adjustment represents the reversal of DIGEX's amortization of
deferred compensation associated with stock compensation preceding the purchase.

     (i)  This adjustment represents the amortization expense of intangible
assets related to DIGEX.

     (j)  This adjustment represents interest expense, including amortization of
debt discount and finance costs, of $24,400 on the 11-1/4% Senior Discount Notes
Due 2007 that were issued in July 1997 (net of $10,800 reduction of interest due
to the retirement of the 13-1/2% Senior Notes), $19,800 on 8-7/8% Senior Notes
due 2007 that were issued in October 1997 and $43,100 on 8-1/2% Senior Notes due
2008 that were issued in December 1997 as if the Notes had been issued January
1, 1997.

     (k)  Where acquisitions were paid all or partially in cash, interest income
was reduced to reflect the absence of the cash or investments for the full year.

     (l)  This adjustment increases the preferred stock dividends and accretions
to amounts that would have been recorded if Intermedia's Series B, D and E
preferred stock had been outstanding for the entire period.

     (m)  This adjustment represents the additional amortization expense that
would have been incurred in connection with the STFI, LDS and National
acquisitions. For purposes of the pro forma presentation, it is assumed that the
excess of the purchase price over the net tangible assets acquired will
ultimately be allocated to either identifiable intangibles such as developed
technology and customer lists or goodwill with the weighted average amortization
period of 20 years.

                                       7
<PAGE>
 
     (n)  This adjustment represents the elimination of interest expense in
STFI's historical financial statements related to the 12-1/4% Senior
subordinated Discount Notes purchased by the Company.

     (o)  This adjustment represents the elimination of interest expense in
STFI's historical financial statements related to the Credit Facility Term Loans
and Revolving Credit Facility paid by the Company upon closing of the
acquisition.

     (p)  This adjustment represents the elimination of interest expense in
National's historical financial statements related to the outstanding debt paid
by the Company at closing.

     (q)  This adjustment represents the elimination of the following non-
recurring charges related to the STFI's terminated merger agreement with Tel-
Save, Inc. Termination of merger agreement--$15,000; Termination of long
distance service contract--$36,000; and Retirement of outstanding options held
by Tel-Save, Inc.--$11,300

     (r)  This adjustment represents the elimination of preferred stock
dividends and accretions of STFI.

     (s)  Includes the effect of 5,360 shares issued for LDS and 2,910 shares
issued for National.

     (t)  EBITDA consists of earnings (loss) before interest expense, interest
and other income, income tax (provision) benefit, depreciation, amortization and
charges for in-process R&D and the business integration and restructuring costs
associated with the Program. EBITDA is presented since it is a measure commonly
used in the telecommunications industry to measure operating performance, asset
value and financial leverage. It is presented to enhance the reader's
understanding of the Company's operating results and is not intended to present
cash flow for the periods presented.

                                       8
<PAGE>
 
                         INTERMEDIA COMMUNICATIONS INC.

     UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS(A)
                         SIX MONTHS ENDED JUNE 30, 1998

<TABLE>
<CAPTION>
                                                                     HISTORICAL
                                                        -----------------------------------
                                                             (B)         (C)        (D)         PRO FORMA      PRO FORMA
                                                             ---         ---        ---         ---------      ---------
                                                        CONSOLIDATED     LDS     NATIONAL     ADJUSTMENTS      TOTALS( A)
                                                        ------------   --------  ----------  ----------------  ----------
                                                                             (DOLLARS IN THOUSANDS)
<S>                                                     <C>            <C>       <C>         <C>               <C>
Revenues  ..............................................   $ 327,015   $30,012     $17,897             --      $ 374,924
Costs and expenses:
  Facilities administration and line
    maintenance costs...................................     224,034    19,345      12,924             _7        256,303
  Selling, general and administrative  .................     102,747     5,816       3,385             --        111,948
  Depreciation and amortization  .......................      89,166       655         276          3,528 (e)     93,625
  Charge off of purchased in-process R&D  ..............      85,000        --          --             --         85,000
  Business restructuring, integration and other
    charges   ..........................................      52,551        --          --             --         52,551
                                                           ---------   -------   ---------   ------------      ---------
                                                             553,498    25,816      16,585          3,528        599,427
                                                           ---------   -------     -------        -------      ---------
Income (loss) from operations  .........................    (226,483)    4,196       1,312         (3,528)      (224,503)
Other income (expense):
Interest expense  ......................................     (97,159)       --         (54)         1,972 (f)    (89,053)
                                                                                                       54 (g)
                                                                                                    6,134 (h)
Interest and other income (expense)  ...................      16,770        65          22         (1,181)(i)     15,676
                                                           ---------   -------     -------        -------      ---------
Income (loss) before income taxes and
 extraordinary items  ..................................    (306,872)    4,261       1,280          3,451       (297,880)
Income tax (provision) benefit  ........................          --        --          --             --             --
                                                           ---------   -------     -------        -------      ---------
Income (loss) before extraordinary item  ...............    (306,872)    4,261       1,280          3,451       (297,880)
Extraordinary income (loss)  ...........................          --        --          --             --             --
                                                           ---------   -------     -------        -------      ---------
Net income (loss)  .....................................    (306,872)    4,261       1,280          3,451       (297,880)
Preferred stock dividends and accretions  ..............     (37,471)       --          --             --        (37,471)
                                                           ---------   -------     -------        -------      ---------
Net loss attributable to common stockholders  ..........   $(344,343)  $ 4,261     $ 1,280        $ 3,451      $(335,351)
                                                           =========   =======     =======        =======      =========
Net loss per share  ....................................      $(8.75)                                             $(8.52)
                                                           =========                                           =========
Weighted average number of shares  .....................      39,374                                              39,374
                                                           =========                                           =========
EBITDA(j)  .............................................   $     234                                           $   6,673
                                                           =========                                           =========
</TABLE>



                             See Accompanying Notes

                                       9
<PAGE>
 
              NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
                            STATEMENT OF OPERATIONS

                        SIX MONTHS ENDED JUNE 30, 1998
                       (AMOUNTS AND SHARES IN THOUSANDS)

     (a)  The unaudited pro forma condensed consolidated statement of operations
for the six months ended June 30, 1998 does not give effect to any potential
cost savings and synergies that could result from the LDS or National
acquisitions. The allocations of purchase price to fair values of assets and
liabilities of STFI, LDS and National are preliminary for purposes of proforma
financial statements.

     (b)  This column represents the historical consolidated results of
operations for Intermedia for the six months ended June 30, 1998.

     (c)  This column represents the historical results of operations of LDS for
the three months ended March 31, 1998.

     (d)  This column represents the historical results of operations of
National for the three months ended March 31, 1998.

     (e)  This adjustment represents the additional amortization expense that
would have been incurred in connection with the LDS and National acquisitions.
For purposes of the pro forma presentation, it is assumed that the excess of the
purchase price over the net tangible assets acquired will ultimately be
allocated to either identifiable intangibles such as developed technology and
customer lists or goodwill with the weighted average amortization period of
approximately 20 years.

     (f)  This adjustment represents the elimination of interest expense in
STFI's historical financial statements related to the Credit Facility Term Loans
and Revolving Credit Facility paid by the Company upon closing of the
acquisition.

     (g)  This adjustment represents the elimination of interest expense in
National's historical financial statements related to the outstanding debt paid
by the Company at closing.

     (h)  This adjustment represents the elimination of imputed interest related
to a business acquisition.

     (i)  Where acquisitions were paid all or partially in cash, interest income
was reduced to reflect the absence of the cash or investments for the full year.

     (j)  EBITDA consists of earnings (loss) before interest expense, interest
and other income, income tax (provision) benefit, depreciation, amortization and
charges for in-process R&D and the business integration and restructuring costs
associated with the Program. EBITDA is presented since it is a measure commonly
used in the telecommunications industry to measure operating performance, asset
value and financial leverage. It is presented to enhance the reader's
understanding of the Company's operating results and is not intended to present
cash flow for the periods presented. 

                                      10

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