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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): FEBRUARY 1, 1999
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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.
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On February 9, 1999, the Registrant issued the press releases attached
hereto as Exhibits 99.1 and 99.2.
On February 1, 1999, the Company's board of directors approved, subject to
consummation of the Offering (as described in the attached press release), a
1999 capital expenditure budget of approximately $480 million (which does not
include the non-cash Williams network capacity purchase and includes
approximately $60 million of capital expenditures associated with the Web
hosting business). If the Offering is consummated, the Company believes its
business plan will be funded into the second half of 2000. If the Offering is
not consummated, management of the Company intends to arrange alternate
financing, such as the bank credit facility referred to below, or to submit to
the board of directors for its approval a scaled down capital expenditure budget
which can be funded through the end of 1999 from the Company's existing
resources. Depending on market conditions, the Company may determine to raise
additional capital at any time. There can be no assurance, however, that the
Company will be successful in raising sufficient debt or equity on terms that it
will consider acceptable. Moreover, the terms of the Company's outstanding
indebtedness and preferred stock impose certain restrictions upon the Company's
ability to incur additional indebtedness or issue additional preferred stock.
The Company has entered discussions with several banks for a bank credit
facility, although there can be no assurance that a bank facility on terms
satisfactory to the Company will be established.
ITEM 7. EXHIBITS
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99.1 Press Release dated February 9, 1999.
99.2 Press Release dated February 9, 1999.
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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: February 9, 1999
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 February 9, 1999.
99.2 Press Release dated February 9, 1999.
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EXHIBIT 99.1
CONTACT: Curtis Lightburn
Vice President
Investor Relations
813/829-2408
[email protected]
INTERMEDIA ANNOUNCES COMMENCEMENT OF PRIVATE OFFERING AND INTENT
TO PUBLICLY OFFER WEB HOSTING SUBSIDIARY
TAMPA, FL (February 9, 1999) - Intermedia Communications Inc. (Nasdaq: ICIX),
today announced the commencement of private offerings of $500 million of
ten-year notes.
The net proceeds from the offerings of the notes will be used to fund the cost
of acquisition or construction by the Company of telecommunications-related
assets and for general corporate purposes. A portion of the Company's expansion
may occur through acquisitions (utilizing cash or securities of the Company) as
an alternative to direct investments in the assets required to implement the
expansion.
The notes to be sold in the offerings have not been and will not be registered
under the Securities Act or any state securities or blue sky laws, and may not
be offered or sold in the United States or in any state thereof absent
registration or an applicable exemption from the registration requirements of
such laws.
The Company also announced its intent to cause its wholly-owned Web hosting
subsidiary, DIGEX, Incorporated, to offer to sell a portion of its capital
stock to the public. While Intermedia expects to own at least 51% of the
capital stock of DIGEX after the public offering, the Company may take other
actions in the future which would further decrease its ownership interest.
DIGEX anticipates using the proceeds of the public offering to finance a
portion of the expenses and capital requirements associated with the continued
rapid expansion of the Web hosting business, including constructing additional
data centers.
Intermedia may elect not to proceed with the DIGEX offering based on valuation
issues or marketing considerations. There can be no assurance that DIGEX will
successfully complete the planned public offering or, if completed, of the
timing or the proceeds thereof.
Intermedia provides 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, Florida and can be found on the World
Wide Web at http://www.intermedia.com.
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Exhibit 99.2
Contact: Curtis Lightburn
Vice President, Investor Relations
813-829-2408
[email protected]
INTERMEDIA ANNOUNCES SUMMARY FOURTH QUARTER AND
YEAR END 1998 RESULTS
REPORTS RECORD REVENUE AND POSITIVE EBITDA
TAMPA, Florida (February 9, 1999) - Intermedia Communications Inc. (NASDAQ:
ICIX) today announced record revenue and positive EBITDA for the quarter ended
December 31, 1998.
Revenue for the fourth quarter of $193.4 million was up 134 percent over fourth
quarter 1997 revenue of $82.6 million. Competitive Local and Enhanced Data and
Internet services continued their sequential growth with Enhanced Data and
Internet services revenue up 15 percent and Competitive Local services revenue
up 9 percent over third quarter 1998.
EBITDA before certain charges for the fourth quarter was positive $13.5
million, versus an EBITDA loss of $9.9 million for the fourth quarter of 1997.
Revenue for the full year of 1998 was $712.8 million, up 188 percent over the
$247.9 million reported for the full year of 1997. EBITDA before certain
charges of $28.9 million for the full year of 1998 versus an EBITDA loss of
$49.8 million for the full year of 1997 represented an improvement of $78.7
million.
"In the fourth quarter, we 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. "We also
recently made three key additions to the senior management team in Nancy
Faigen, President of DIGEX Web Hosting; Richard Buyens, Intermedia's Senior
Vice President of Sales; and Richard Marchant, Vice President of Engineering.
As a result, we are confident we have put ourselves in a position to
significantly grow revenues and expand margins in 1999."
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REVENUE ANALYSIS
Enhanced Data and Internet Services
Enhanced Data and Internet continued its growth. Revenue for the fourth quarter
was $54.8 million, an increase of 72 percent over fourth quarter 1997 and an
increase of 15 percent over third quarter 1998. For the year, revenue was
$181.6 million, up 110 percent over 1997 revenues.
Growth was seen in all data product offerings. Internet connectivity was up by
12 percent sequentially. Enterprise data services, principally frame relay and
ATM, showed accelerating growth, with revenue up 19 percent over third quarter
1998. Frame relay nodes in service increased by 5,002 from 30,266 at the end of
the third quarter to 35,268, up 17 percent compared to third quarter 1998 and
up 75 percent over fourth quarter 1997. RBOC related sales contributed to the
increased nodes in service.
"In the quarter, we were particularly pleased by the improving revenue growth
at DIGEX, where Web Hosting revenue was up 21 percent sequentially. DIGEX
continues to be a leading value added player in the Web Hosting arena," said
Ruberg. "Our overall strength in Enhanced Data and Internet services is
expected to be a core component of our growth."
Competitive Local Services
Competitive Local services continued its growth. Revenue for the quarter was
$47.8 million, an increase of 189 percent over fourth quarter 1997 and an
increase of 9 percent over third quarter 1998. For the year, revenue was $163.4
million, a 289 percent increase over 1997.
Access lines in service grew by 35,686. Total access lines in service at the
end of the fourth quarter was 347,584 a 327 percent increase versus fourth
quarter 1997 and an 11 percent increase versus third quarter 1998. At the end
of the fourth quarter, 69 percent of the lines in service were on-switch. "Our
focus on selling access lines that are on-switch has improved gross margins,
operating efficiency and customer service," said James F. Geiger, Intermedia's
Chief Marketing Officer.
Interexchange Services
Interexchange revenue was $67.3 million in the fourth quarter, a 109 percent
increase versus fourth quarter 1997, but a 6 percent decrease versus third
quarter 1998. The sequential
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decrease was primarily a result of the previously announced exit of the
wholesale interexchange business, selective revenue pruning, and seasonal
factors.
For the year, interexchange revenue was $266.4 million, a 135 percent increase
over 1997.
"Intermedia deliberately pruned revenue in certain segments that were either
non-strategic or economically unattractive," said Robert M. Manning,
Intermedia's Chief Financial Officer. "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 resume in 1999."
Integration Services
Integration Services revenue for the quarter was $23.5 million, a decrease of
20 percent versus third quarter of 1998. The decrease in sales was due largely
to seasonality.
OUTLOOK
"As we continue to scale our business, we improve our ability to add revenue
efficiently over the assets we have deployed," said Manning. "As a result, we
expect to drive increases in revenue and EBITDA in 1999."
"We have made additional progress in integrating our acquisitions, and have
completed the consolidation of five independent accounting back office
functions onto one common general ledger platform."
Full results will be made public in conjunction with Intermedia's normally
scheduled Earnings Release, previously announced and scheduled for February
24th.
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.
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Intermedia Communications Inc. is headquartered in Tampa, Florida. Intermedia
can be found on the World Wide Web at www.intermedia.com.
INTERMEDIA COMMUNICATIONS INC.
FINANCIAL HIGHLIGHTS
(In thousands except share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
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1998 1997 1998 1997
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<S> <C> <C> <C> <C>
Revenue:
Competitive Local Services $ 47,776 $ 16,510 $ 163,423 $ 41,967
Enhanced Data & Internet Services 54,845 31,805 181,636 86,636
Interexchange Services 67,321 32,275 266,370 113,152
Integration Services 23,472 1,993 101,354 6,144
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Total Revenue 193,414 82,583 712,783 247,899
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EBITDA before certain charges (1) $ 13,520 $ (9,931) $ 28,894 $ (49,838)
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</TABLE>
(1) EBITDA before certain charges consists of earnings before interest, income
taxes, depreciation, amortization and charges for in-process R & D. EBITDA
before certain charges does not represent funds available for management's
discretionary use and is not intended to represent cash flow from operations.
EBITDA before certain charges should not be considered as an alternative to net
loss as an indicator of the Company's operating performance or to cash flows as
a measure of liquidity. In addition, EBITDA before certain charges is not a
term defined by generally acceptable accounting principles and, as a result,
the measure of EBITDA before certain charges presented herein may not be
comparable to similarly titled measures used by other companies.
Other Data:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1998
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<S> <C> <C>
Local and Long Distance Services:(1)
Buildings connected(2) 4,342 4,331
Voice switches in operation 23 21
Access line equivalents 347,584 311,898
Access line equivalents per local switch(3) 11,692 7,303
Enhanced Data Services:(1)
Data switches installed 177 164
Nodes in service(4) 35,268 30,266
NNI connections 680 608
Employees 3,931 3,678
</TABLE>
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(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.
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