SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------------- ---------------
Commission file number 0-28036
BROOKS FIBER PROPERTIES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE
- --------------------------------------------------------------------------------
(State or other jurisdiction of incorporation or organization)
43-1656187
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(I.R.S. Employer Identification No.)
425 Woods Mill Road South, Suite 300, St. Louis, Missouri 63017
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 314-878-1616
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Shares of Common Stock, par value $.01, outstanding at November 7, 1997:
38,907,148
Exhibit Index is on page 26.
1
<PAGE>
BROOKS FIBER PROPERTIES, INC. AND SUBSIDIARIES
PART I - Financial Information
Page No.
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1997
and December 31, 1996 3
Consolidated Statements of Operations for the Three
Months and Nine Months Ended September 30, 1997 and 1996 4
Consolidated Statement of Changes in Shareholders'
Equity for the Nine Months Ended September 30, 1997 5
Consolidated Statement of Cash Flows for the
Nine Months Ended September 30, 1997 and 1996 6
Notes to Consolidated Financial Statements 7 - 13
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 14 - 23
Part II - Other Information
Item 6. Exhibit(s) and Reports on Form 8-K 24
Signatures 25
2
<PAGE>
<TABLE>
BROOKS FIBER PROPERTIES, INC.
Consolidated Balance Sheets
September 30, 1997 December 31, 1996
--------------------------- ---------------------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 117,761,000 $ 261,880,000
Marketable securities, at cost 110,215,000 182,304,000
--------------------------- ---------------------------
227,976,000 444,184,000
Accounts receivable, net 28,117,000 13,989,000
Other current assets 18,200,000 11,989,000
--------------------------- ---------------------------
Total current assets 274,293,000 470,162,000
NETWORKS AND EQUIPMENT, at cost 653,117,000 306,455,000
Less accumulated depreciation and amortization 45,440,000 16,114,000
--------------------------- ---------------------------
NETWORKS AND EQUIPMENT, net 607,677,000 290,341,000
INVESTMENT IN MINORITY-OWNED VENTURE 74,009,000 20,000,000
OTHER ASSETS, net 211,276,000 99,078,000
--------------------------- ---------------------------
$ 1,167,255,000 $ 879,581,000
=========================== ===========================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 11,193,000 $ 6,511,000
Accrued liabilities 29,609,000 17,915,000
Other current liabilities 1,153,000 10,511,000
--------------------------- ---------------------------
Total current liabilities 41,955,000 34,937,000
--------------------------- ---------------------------
LONG-TERM DEBT, net of current portion 796,080,000 552,810,000
MINORITY INTERESTS 3,395,000 -
COMMON STOCK, subject to redemption, $.01 par value,
2,016,000 shares issued and outstanding 25,200,000 25,200,000
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value, 150,000,000 shares authorized,
36,493,508 and 29,066,139 shares issued and outstanding 365,000 291,000
Additional paid-in capital 456,093,000 323,850,000
Accumulated deficit (155,833,000) (57,507,000)
--------------------------- ---------------------------
Total shareholders' equity 300,625,000 266,634,000
--------------------------- ---------------------------
$ 1,167,255,000 $ 879,581,000
=========================== ===========================
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
<TABLE>
BROOKS FIBER PROPERTIES, INC.
Consolidated Statements of Operations
(Unaudited)
<CAPTION>
Three Months Ended September 30 Nine Months Ended September 30
---------------------------------------- ---------------------------------------
1997 1996 1997 1996
------------------- ------------------ ------------------- -----------------
<S> <C> <C> <C> <C>
Revenues $ 35,856,000 $ 12,943,000 $ 84,192,000 $ 28,147,000
Expenses:
Service costs 19,423,000 6,125,000 46,227,000 12,585,000
Selling, general & administrative expenses 22,736,000 10,158,000 59,222,000 25,504,000
Depreciation and amortization 15,397,000 4,265,000 36,420,000 9,859,000
------------------- ------------------- ------------------- -----------------
57,556,000 20,548,000 141,869,000 47,948,000
------------------- ------------------- ------------------- -----------------
Loss from operations (21,700,000) (7,605,000) (57,677,000) (19,801,000)
Other income (expense):
Interest income 5,710,000 4,816,000 15,814,000 11,074,000
Interest expense (20,723,000) (7,653,000) (53,671,000) (19,250,000)
------------------- ------------------- ------------------- -----------------
Loss before minority interest (36,713,000) (10,442,000) (95,534,000) (27,977,000)
Minority interest in share of loss 36,000 451,000 65,000 1,590,000
------------------- ------------------- ------------------- -----------------
Net loss before extraordinary item (36,677,000) (9,991,000) (95,469,000) (26,387,000)
Extraordinary loss on debt extinguishment - - (2,857,000) -
------------------- ------------------- ------------------- -----------------
Net loss $ (36,677,000) $ (9,991,000) $ (98,326,000) $ (26,387,000)
=================== =================== =================== =================
Pro forma loss per common and common
equivalent share before extraordinary item $ (0.96) $ (0.35) $ (2.69) $ (1.10)
Pro forma net loss per common and common
equivalent share for extraordinary item - - (0.08) -
------------------- ------------------- ------------------- -----------------
Pro forma loss per common and common
equivalent share $ (0.96) $ (0.35) $ (2.77) $ (1.10)
=================== =================== =================== =================
Pro forma weighted average number of
shares outstanding 38,107,350 28,368,352 35,495,798 24,071,672
=================== =================== =================== =================
</TABLE>
See accompanying notes to consolidated financial statements
4
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<TABLE>
BROOKS FIBER PROPERTIES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(Unaudited)
<CAPTION>
Common Stock Total
------------------------------------- Additional Accumulated Shareholders'
Shares Amount Paid-In Capital Deficit Equity
------------------ ----------------- ----------------- -------------------- ----------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996 29,066,139 $ 291,000 $ 323,850,000 $ (57,507,000) $ 266,634,000
Issuance of common stock in
connection with secondary
offering, net 1,008,514 10,000 23,211,000 - 23,221,000
Issuance of common stock in
connection with acquisitions 5,186,226 52,000 97,654,000 - 97,706,000
Options exercised 1,186,069 12,000 10,508,000 - 10,520,000
Issuance of common stock in
connection with employee stock
purchase plan 46,560 - 870,000 - 870,000
Net loss - - - (98,326,000) (98,326,000)
------------------ ----------------- ------------------ -------------------- ----------------
Balance, September 30, 1997 36,493,508 $ 365,000 $ 456,093,000 $ (155,833,000) $ 300,625,000
================== ================= ================== ==================== ================
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE>
<TABLE>
BROOKS FIBER PROPERTIES, INC.
Consolidated Statements of Cash Flows
(Unaudited)
<CAPTION>
Nine Months Ended September 30
------------------------------------------------------------
1997 1996
-------------------------- ---------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss before extraordinary items $ (95,469,000) $ (26,387,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 36,420,000 9,859,000
Non-cash interest expense 50,883,000 19,026,000
Minority interests (65,000) (1,590,000)
Changes in assets and liabilities, net of effects
from acquisitions:
Accounts receivable (13,270,000) (5,578,000)
Accounts payable and accrued expenses (5,801,000) (147,000)
Other, net (2,849,000) (3,674,000)
-------------------------- ---------------------------
Net cash used in operating activities (30,151,000) (8,491,000)
-------------------------- ---------------------------
Cash flows from investing activities:
Purchase of networks and equipment (290,340,000) (134,348,000)
Purchase of marketable securities (142,250,000) (250,123,000)
Maturity of marketable securities 214,338,000 122,994,000
Investment in minority-owned venture (54,009,000) (5,000,000)
Increase in other assets (17,159,000) (9,353,000)
Payment for acquisitions, net of cash acquired (52,765,000) (2,705,000)
-------------------------- ---------------------------
Net cash used in investing activities (342,185,000) (278,535,000)
-------------------------- ---------------------------
Cash flows from financing activities:
Issuance of common stock, net 34,611,000 185,500,000
Issuance of preferred stock and subscriptions
receivable payments, net - 1,106,000
Minority investment in subsidiary 3,460,000 7,991,000
Proceeds from long-term debt, net 241,501,000 238,926,000
Repayment of long-term debt and capital leases, net (50,424,000) (3,376,000)
Other financing activities (931,000) -
-------------------------- ---------------------------
Net cash provided by financing activities 228,217,000 430,147,000
-------------------------- ---------------------------
Net increase (decrease) in cash (144,119,000) 143,121,000
Cash, beginning of period 261,880,000 59,913,000
-------------------------- ---------------------------
Cash, end of period $ 117,761,000 $ 203,034,000
========================== ===========================
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 2,788,000 $ 221,000
========================== ===========================
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
BROOKS FIBER PROPERTIES, INC.
Notes to Consolidated Financial Statements
1. BASIS OF PRESENTATION
The consolidated balance sheet of Brooks Fiber Properties, Inc.
("BFP" or the "Company") at December 31, 1996 was obtained from the
Company's audited balance sheet as of that date. All other financial
statements contained herein are unaudited and, in the opinion of
management, contain all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation. Operating
results for the nine months ended September 30, 1997 are not
necessarily indicative of the results that may be expected for the
year ending December 31, 1997. The Company's accounting policies and
certain other disclosures are set forth in the notes to the Company's
audited consolidated financial statements as of and for the year ended
December 31, 1996.
2. CASH AND CASH EQUIVALENTS
For the purpose of reporting cash flows, cash and cash
equivalents consist primarily of cash on hand and highly liquid
securities with insignificant interest-rate risk and original
maturities of three months or less at date of acquisition.
3. MARKETABLE SECURITIES
Marketable securities consist of treasury bills and notes,
commercial paper, and repurchase agreements with maturities beyond
three months but less than twelve months. Marketable securities are
stated at cost, adjusted for discount accretion and premium
amortization. The securities in the Company's portfolio are classified
as "held to maturity" as management has the intent and ability to hold
those securities to maturity.
4. ACQUISITIONS AND JOINT VENTURES
Effective February 1, 1997, the Company acquired 100% of the
stock of certain companies related to Phoenix Fiberlink, Inc.
(Phoenix), a provider of competitive access and internet services in
Utah and Nevada. The purchase price was paid through the issuance by
the Company of an aggregate of 600,000 shares of common stock valued
at current market value and cash.
7
<PAGE>
Effective May 5, 1997, the Company acquired 100% of the stock of
Metro Access Networks, Inc. (MAN), a competitive local exchange
carrier with networks in operation or under construction in Dallas,
Fort Worth, Houston, San Antonio, Austin, Corpus Christi and Waco,
Texas. The purchase price was paid through the issuance by the Company
of an aggregate of 4,586,226 shares of common stock valued at current
market value and cash payments of approximately $6.5 million. The
following unaudited condensed pro forma information presents the
results of operations of the Company for the nine months ended
September 30, 1997, as if the above transaction has occurred on
January 1, 1997:
Revenue $ 85,422,000
Loss before minority interest $ (100,452,000)
The above acquisitions were accounted for using the purchase
method of accounting and, accordingly, the results of operations of
the acquired companies have been included in the Company's
consolidated financial statements since the effective date of
acquisition. Intangible assets of approximately $94.0 million were
recorded as a result of these acquisitions.
On February 25, 1997, the Company acquired a 60% interest in a
company formed by MaineCom Services (MaineCom), a subsidiary of
Central Maine Power Co., for the purposes of constructing, owning,
operating and developing networks initially in Portland, Maine and
Nashua and Manchester, New Hampshire, and other markets in Maine and
New Hampshire as may be agreed upon by the Company and MaineCom in the
future. The Company has contributed approximately $5.2 million for its
60% interest; MaineCom's investment of approximately $3.5 million is
reflected as a minority interest investment, net of minority interests
and losses.
In May 1997, the Company made an additional $4.0 million
convertible preferred stock investment in Verio, Inc. (Verio), a
privately-held consolidator of Internet service providers (ISPs). On
June 25, 1997, the Company purchased $50.0 million in debt securities
in Verio. The Verio debt securities mature on June 15, 2004, and pay
interest at the rate of 13-1/2% per annum semi-annually in arrears
commencing December 15, 1997. The debt securities include detachable
warrants, allowing the Company to purchase common stock in Verio at an
exercise price of one cent per share. The investment in Verio is
classified as Investment in Minority-Owned Venture on the Company's
consolidated balance sheet. At September 30, 1997, the Company held
shares of Verio preferred stock which are convertible into an
aggregate of 4,664,971 shares of Verio common stock and 400,000
warrants to purchase an additional 704,000 shares of Verio common
stock.
8
<PAGE>
5. MERGER AGREEMENT
The Company has agreed, subject to the terms and conditions of an
Amended and Restated Agreement and Plan of Merger dated as of October
1, 1997 (Merger Agreement) with WorldCom, Inc. (WorldCom), to merge
with a wholly-owned subsidiary of WorldCom. Upon consummation of the
proposed merger, the Company would become a wholly-owned subsidiary of
WorldCom, and each share of the Company's common stock would be
converted into the right to receive a number of shares of WorldCom
common stock equal to the exchange ratio provided for in the Merger
Agreement. If the average trading price per share of the WorldCom
common stock during the twenty (20) trading day period ending on the
fourth trading day prior to the closing date of the proposed merger is
$35.15 or above, the exchange ratio will be fixed at 1.65 shares of
WorldCom common stock for each share of the Company's common stock. If
such average trading price is below $35.15 per share but equal to or
above $31.35 per share, the exchange ratio will convert to a
fluctuating ratio based on a fixed price of $58.00 per share of the
Company's common stock. If such average trading price is below $31.35
per share, the exchange ratio will be fixed at 1.85 shares of WorldCom
common stock for each share of the Company's common stock. The
proposed merger is subject to a vote of the Company's stockholders,
regulatory approvals, required consents and other closing conditions.
WorldCom is one of the largest telecommunications companies in
the United States, serving local, long distance and Internet customers
domestically and internationally. WorldCom provides telecommunications
services to business, government, telecommunications companies and
consumer customers.
6. NETWORKS AND EQUIPMENT
Networks and equipment consist of the following:
September 30, December 31,
1997 1996
------------- ------------
Telecommunications networks $ 359,487,000 $170,687,000
Electronic and related equipment 198,841,000 85,050,000
Office equipment and furniture 40,702,000 22,625,000
Leasehold improvements and other equipment 28,319,000 14,456,000
Land and buildings 25,768,000 13,637,000
------------- ------------
653,117,000 306,455,000
Less accumulated depreciation 45,440,000 16,114,000
------------- ------------
$ 607,677,000 $290,341,000
============= ============
9
<PAGE>
As of September 30, 1997 and December 31, 1996, networks and
equipment include $64,421,000 and $21,875,000, respectively, of
networks in progress that are not in service and, accordingly, have
not been depreciated. In addition, for the nine months ended September
30, 1997 and September 30, 1996, interest totaling $2,633,000 and
$1,239,000, respectively, has been capitalized in connection with the
Company's network construction projects.
7. OTHER ASSETS
Other assets consist of the following:
September 30, December 31,
1997 1996
------------- -------------
Goodwill $ 160,807,000 $ 65,648,000
Debt issuance costs 27,935,000 20,437,000
Organization, development, and
pre-operating costs 26,960,000 13,756,000
Rights-of-way and other 9,214,000 3,604,000
Interest rate cap arrangement 150,000 1,511,000
------------- -------------
225,066,000 104,956,000
Less accumulated amortization 13,790,000 5,878,000
------------- -------------
$ 211,276,000 $ 99,078,000
============= =============
8. LONG-TERM DEBT AND EXTRAORDINARY LOSS
On June 30, 1997, the Company prepaid $50.0 million in
outstanding secured indebtedness with AT&T Credit Corporation. In
conjunction with this prepayment, an extraordinary loss of
approximately $2.9 million was charged to operations, including
write-downs of debt issuance costs and interest rate cap arrangements,
and applicable prepayment penalties. On September 10, 1997, the
Company repaid $100,000 in outstanding secured indebtedness under a
bank credit facility. See Note 13, Subsequent Events, for information
concerning the Company's $250 million senior secured bank credit
facility concluded on November 5, 1997.
On May 29, 1997, the Company issued $250 million of 10.0% Senior
Notes due June 1, 2007. Interest on the 10.0% Senior Notes is payable
semi-annually, commencing December 1, 1997. On or after June 1, 2002,
the Senior Notes will be redeemable at the option of the Company, in
whole or in part from time to time at the following prices (expressed
in percentages of the principal amount at the stated maturity), if
10
<PAGE>
redeemed during the twelve months beginning June 1 of the years
indicated below, with interest accrued to the redemption date:
Year Redemption Price
---- ----------------
2002 105.000%
2003 103.333%
2004 101.667%
2005 and thereafter 100.000%
The Senior Notes are senior unsecured obligations of the Company.
Under certain conditions related to a change in control of the Company
(which would include the proposed merger with WorldCom), the Company
may be required to repurchase all or any part of its outstanding
senior indebtedness.
9. SHAREHOLDERS' EQUITY
On February 4, 1997, the Company completed a secondary offering
of 6,723,429 shares of common stock at a price of $25.00 per share.
All of the 6,723,429 shares offered were sold by existing shareholders
of the Company, and the Company did not receive any proceeds from the
sale of these shares. In conjunction with the offering, the
underwriters were granted an over-allotment option by the Company to
purchase additional shares at $25.00 per share. This option was fully
exercised by the underwriters, and an additional 1,008,514 shares were
issued by the Company. Gross proceeds to the Company from this
offering totaled approximately $25.2 million, and proceeds net of
underwriting discounts and expenses totaled approximately $23.2
million.
On April 29, 1997, upon receiving the required approval from the
stockholders of the Company at the Company's 1997 Annual Meeting of
Stockholders, the Company's Restated Certificate of Incorporation was
amended to, among other things, increase the authorized number of
shares of common stock from 50 million shares to 150 million shares.
10. STOCK OPTIONS AND WARRANTS
The Company's 1993 Stock Option Plan (1993 Plan) authorizes the
granting of options and stock appreciation rights covering up to
3,400,000 shares of common stock. On February 18, 1997, the
Compensation Committee of the Board of Directors adopted and approved
the Company's 1997 Stock Incentive Plan which authorizes the issuance
of an additional 3,000,000 shares of common stock; stockholders'
approval was subsequently obtained at the 1997 Annual Meeting of
Stockholders on April 29, 1997. Stock options are granted with an
exercise price equal to the stock's fair market value at the date of
grant and generally vest over a period of three years from the date of
grant.
11
<PAGE>
Stock option activity for the Company's Stock Option Plans for
the nine months ended September 30, 1997 is as follows:
Number Price per Share
---------- ---------------
Balance, December 31, 1996 2,750,186 $4.00 - $33.75
Granted 1,419,940 $21.75 - $39.0625
Exercised (1,186,069) $4.00 - $25.50
Canceled (299,930) $4.00 - $32.00
----------- -----------------
Balance, September 30, 1997 2,684,127 $4.00 - $39.0625
At September 30, 1997, outstanding warrants totaled 409,860 at
prices per share ranging from $11.35 to $31.04. On March 11, 1997, the
Board of Directors of the Company approved a one-year extension of the
expiration dates of stock warrants covering an aggregate of 345,600
shares of common stock which otherwise were scheduled to expire on
various dates from March 31, 1997 through May 31, 1997.
11. PRO FORMA LOSS PER SHARE
Pro forma loss per share has been computed using the number of
shares of common stock and common stock equivalents outstanding. The
weighted average number of shares used in computing pro forma loss per
share was 38,107,350 and 35,495,798 for the three and nine month
periods ended September 30, 1997, respectively, and 28,368,352 and
24,071,672 for the three and nine month periods ended September 30,
1996, respectively. Pursuant to Securities and Exchange Commission
Staff Accounting Bulletin No. 83, shares issued and stock options and
warrants granted at prices below the initial public offering price of
$27.00 per share during the twelve-month period preceding the date of
the Company's initial filing of the Registration Statement related to
such initial public offering (May 2, 1996) have been included in the
calculation of common stock equivalent shares for the nine months
ended September 30, 1996, using the treasury stock method, as if they
were outstanding for the entire six-month period ended June 30, 1996.
For the three and nine months ended September 30, 1997, the weighted
average number of shares was based on common stock outstanding and
does not include common stock equivalents as their inclusion would be
anti-dilutive.
12. COMMITMENTS AND CONTINGENCIES
During September 1995, GST Tucson Lightwave, Inc. (Lightwave) was
permitted to intervene in litigation originally filed by Brooks Fiber
Communications of Tucson, Inc. a wholly-owned subsidiary of BFP (BFC
Tucson). Lightwave filed a counterclaim against BFC Tucson, BFP and
Tucson Electric Power Company (TEP) charging BFC Tucson, BFP and TEP
with violations of antitrust laws, all of which stem from an agreement
between BFC Tucson and TEP that allowed BFC Tucson exclusive rights,
12
<PAGE>
for one year, to utilize certain of TEP's rights-of-way. The original
causes of action have been settled; however, the counterclaim by
Lightwave is currently still pending. The Company believes the claim
to be without merit and intends to vigorously defend against this
action. The Company believes that resolution of the matter will not
have a material adverse effect on the financial condition or results
of operations of the Company.
13. SUBSEQUENT EVENTS
On November 5, 1997, the Company concluded its previously
announced $250 million senior secured bank credit facility (the Credit
Facility), to be available to finance capital expenditures and provide
working capital. The Credit Facility has a seven year term and bears
interest at rates selected by the Company under terms of the Credit
Facility, including a Base Rate or reserve adjusted London Interbank
Offering Rate (LIBOR), plus applicable margin. The applicable margin
for Base Rate borrowings varies from 0.0% to 1.00%, and the applicable
margin for LIBOR rate borrowings varies from 0.625% to 2.00%, which
rates will be determined based upon the Company's leverage ratio
during each quarterly period. Interest is payable quarterly for Base
Rate borrowings and in varying periods, depending on the interest
periods, not to exceed six months, for LIBOR rate borrowings. The
Credit Facility contains certain restrictive operating and financial
covenants, including limitations on acquisitions, incurrence of
additional indebtedness, payment of dividends and asset sales. The
Credit Facility is also subject to an annual commitment fee, payable
quarterly, ranging from 0.25% to 0.375%, which rates will be
determined based upon the Company's leverage ratio during each
quarterly period. There are no borrowings currently outstanding under
the Credit Facility.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Company's condensed Consolidated Financial Statements and Notes thereto
included herewith, and with the Company's Management's Discussion and Analysis
of Financial Condition and Results of Operations and audited consolidated
financial statements and notes thereto as of and for the year ended December 31,
1996.
OVERVIEW
The Company is a leading facilities-based provider of competitive local
telecommunications services, commonly referred to as a competitive local
exchange carrier (CLEC), in selected markets within the United States. The
Company competes with incumbent local exchange carriers (ILECs) by providing
high quality, integrated local telecommunications services over fiber optic
digital networks to meet the voice, data and video transmission needs of its
customers. The Company's customers are principally inter-exchange carriers
(IXCs), internet service providers (ISPs), wireless carriers,
telecommunications-intensive business, government, and institutional end users
and residential customers. The Company offers these customers technologically
advanced local telecommunications services as well as superior customer service,
flexible pricing and route diversity.
The Company's goal is to become the primary full-service provider of
competitive local telecommunications services to its customers in selected
cities by offering superior products with excellent customer service at prices
below those charged by the ILECs. The principal elements of the Company's
strategy include targeting selected U.S. markets with an emphasis on second-
and third-tier markets, aggressively pursuing switched services opportunities,
further building out existing systems and expanding service offerings. The
Company provides these services in an expanding number of U. S. markets. As of
September 30, 1997, the Company had networks in operation or under construction
in a total of 44 U. S. cities. The Company plans to expand its network
operations to have systems in operation or under construction in a total of 50
cities by the end of 1998. As of September 30, 1997, the Company had a total of
28 digital telephone switches installed serving a total of 33 of its operating
networks. The Company plans to leverage its networks and customer relationships
by offering local dial tone, switched access termination and origination
services, centrex and desktop products in all of its operating networks. The
Company is also expanding its capabilities to provide flexible enhanced services
that compliment its switch-based services. Such enhanced services include, among
others, high speed video transport, frame relay and ATM-based packet transport
services, and Internet access products.
14
<PAGE>
In order to capitalize on the competitive dynamics of the changing IXC/ILEC
relationships, the Company has established close business alliances with major
IXCs, including preferred vendor relationships. In accordance with this
strategy, the Company and MCI Communications Corporation (MCI) have entered into
agreements which provide that, until September 30, 2001, the Company will be
MCI's preferred provider of certain local access services. During the nine
months ended September 30, 1997, this relationship was expanded to include 37 of
the Company's 44 markets. Also during February 1997, the Company and AT&T
Communications, Inc. (AT&T Communications), a wholly-owned subsidiary of AT&T
Corp. (AT&T), announced the first national agreement between AT&T and a CLEC,
whereby AT&T will begin utilizing the Company's networks to originate and
terminate the calls of AT&T customers served by the Company's networks. The
agreement represents a further expansion of the Company's relationship with AT&T
and provides for origination and termination of customer calls to be completed
through the Company's networks nationwide, thus bypassing the ILEC. The Company
believes preferred vendor relationships with IXCs provide opportunities to
leverage its partners' sales channels and market support to sell the Company's
products and services and expand the Company's potential revenue base. In
addition, the Company believes that relationships with IXCs facilitate its entry
into new markets by providing access between the IXCs and their customers.
In February 1997, the Company acquired 100% of the stock of certain
companies related to Phoenix Fiberlink, Inc. (Phoenix), a provider of
competitive access and Internet services in Utah and Nevada.
Also in February 1997, the Company acquired a 60% interest in a company
formed by MaineCom Services (MaineCom), a wholly-owned subsidiary of Central
Maine Power Co., for the purposes of constructing, owning, operating and
developing networks initially in Portland, Maine and Nashua and Manchester, New
Hampshire, and other markets in Maine and New Hampshire as may be agreed upon by
the Company and MaineCom in the future.
In May 1997, the Company acquired 100% of the stock of Metro Access
Networks, Inc. (MAN), a CLEC with networks in operation or under construction in
Dallas, Fort Worth, Houston, San Antonio, Austin, Corpus Christi and Waco,
Texas.
The development of the Company's businesses and the construction,
acquisition and expansion of its networks require significant expenditures, a
substantial portion of which is incurred before the realization of revenues.
These expenditures, together with the associated early operating expenses,
result in negative EBITDA until an adequate customer base may be established.
However, as this customer base grows, the Company expects incremental revenues
can be added within operating networks with minimal additional expense,
providing significant EDITDA contributions. The Company also incurs ongoing
capital expenditures with respect to both existing and new systems which are
directly related to the installation of new revenue-producing services.
15
<PAGE>
The following table provides selected statistical and financial data for
the Company as of the dates indicated:
As of September 30,
------------------------ Percentage
1997 1996 Increase
------------ ---------- ------------------
Cities in operation 34 22 55%
Cities under construction 10 8 25%
Buildings connected - on-net 1,667 734 127%
Buildings connected - off-net 2,202 913 141%
Route miles 2,177 787 177%
Fiber miles 180,179 50,572 256%
Switches installed 28 17 65%
CLEC lines in service 80,019 13,107 511%
VGE circuits 1,041,275 358,640 190%
Number of employees 1,605 711 126%
Total Assets
(dollars in thousands) $1,167,255 $637,350 83%
=========== ========== ==================
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1996
REVENUE
The Company's revenues increased to $35.9 million for the three months
ended September 30, 1997 from $12.9 million for the three months ended September
30, 1996, an increase of 177%. The increase in revenues reflects the impact of
the Company's acquisition and development activities, including an increase in
the number of networks in operation to 34 at September 30, 1997 from 22 at
September 30, 1996, as well as increased utilization of the Company's network
facilities arising from the sales of additional services to current and new
customers. A significant contributor to the overall revenue growth has been the
continued growth of local switched service revenues. Local switched services
revenues for the three months ended September 30, 1997 totaled $11.0 million as
compared to $2.2 million for the three month period ended September 30, 1996.
Total CLEC lines in service increased 44% sequentially to 80,019 at September
30, 1997, from 55,406 at June 30, 1997, and increased 511% from 13,107 at
September 30, 1996.
16
<PAGE>
COSTS AND EXPENSES
Service costs increased to $19.4 million for the three months ended
September 30, 1997 from $6.1 million for the three months ended September 30,
1996. The increase was due primarily to the impact of the Company's acquisition
and development activities, including increasing costs associated with
developing the Company's rapidly growing local switched services business and
the Company's expanding long distance resale operations. Service costs primarily
represent the portion of total operating expenses paid to third parties for
unbundled loop charges and other local and long distance service costs,
including right-of-way fees and ILEC and IXC collocation costs. Also included
are salaries and benefits associated with the technical operations of the
networks and other network costs.
The Company's selling, general and administrative expenses (SG&A) for the
three months ended September 30, 1997 were $22.7 million, as compared with SG&A
expenses of $10.2 million for the three months ended September 30, 1996. The
increase was principally due to the increasing number and continued expansion of
the Company's networks, including added personnel costs and marketing activities
related to the introduction of switched services. There is typically a period of
higher SG&A expense and a lag time in the generation of revenues following the
acquisition and development of the Company's networks. Management expects SG&A
expenses to continue to increase during the remainder of 1997 as the Company
continues to expand its networks, services and marketing activities. However,
SG&A expense as a percentage of revenues declined to 63.4% of revenues for the
three months ended September 30, 1997, as compared to 78.5% for the three months
ended September 30, 1996.
Depreciation and amortization expense increased to $15.4 million for the
three months ended September 30, 1997, from $4.3 million for the three months
ended September 30, 1996, as a result of the Company's acquisitions and the
continued expansion of the Company's networks.
INTEREST INCOME (EXPENSE)
Interest expense totaling $20.7 million was recorded during the three
months ended September 30, 1997, as compared to interest expense of $7.7 million
for the three months ended September 30, 1996. The primary contributor to the
substantial increase in interest expense as compared to the comparable period in
the prior year is non-cash interest expense totaling $21.0 million attributable
to accretion of the Company's senior discount notes issued during 1996 and to
accrued interest related to the issuance of the Company's senior notes in May
1997. Interest capitalized in connection with the Company's network construction
projects was $992,000 for the quarter ended September 30, 1997, as compared to
$802,000 for the quarter ended September 30, 1996. For the quarters ended
September 30, 1997 and 1996, interest income totaling $5.7 million and $4.8
million, respectively, was derived from the Company's available cash and cash
equivalents and marketable securities.
17
<PAGE>
NET LOSS
For the reasons stated above, the Company's net loss before minority
interest increased to $36.7 million for the three months ended September 30,
1997, from $10.4 million for the three months ended September 30, 1996. Minority
interests in net losses, representing minority investors' interests in certain
of the Company's subsidiaries, totaled $36,000 and $451,000 for the three months
ended September 30, 1997 and 1996, respectively.
EBITDA
Earnings before interest, taxes, depreciation, amortization, minority
interest and extraordinary items (EBITDA) decreased to ($6.3) million for the
three months ended September 30, 1997, from ($3.3) million for the three months
ended September 30, 1996, a decrease of $3.0 million. The decrease reflects the
increasing service and SG&A expenses noted above resulting from the acquisition,
development and expansion of the Company's networks. However, EBITDA increased
sequentially to ($6.3) million for the three months ended September 30, 1997,
from ($8.6) million for the three months ended June 30, 1997, reflecting the
increasing revenues and a decline in the growth of service and SG&A expenses as
economies of scale are being achieved. EBITDA is a measure commonly used in the
telecommunications industry and is presented to assist in an understanding of
the Company's operating results and is not intended to represent cash flow or
results of operations in accordance with generally accepted accounting
principles.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1996
REVENUE
The Company's revenues increased to $84.2 million for the nine months ended
September 30, 1997 from $28.1 million for the nine months ended September 30,
1996, an increase of 199%. The increase in revenues reflects the impact of the
Company's acquisition and development activities as well as increased
utilization of the Company's network facilities arising from the sales of
additional services to current and new customers. A significant contributor to
the overall revenue growth has been the continued growth of local switched
service revenues. Local switched services revenues for the nine months ended
September 30, 1997 totaled $23.5 million as compared to $4.4 million for the
nine month period ended September 30, 1996.
COSTS AND EXPENSES
Service costs increased to $46.2 million for the nine months ended
September 30, 1997 from $12.6 million for the nine months ended September 30,
1996. The increase was due primarily to the impact of the Company's acquisition
and development activities, including increasing costs associated with
developing the Company's rapidly growing local switched services and the
Company's expanding long distance resale operations.
18
<PAGE>
The Company's SG&A for the nine months ended September 30, 1997 were $59.2
million, as compared with SG&A expenses of $25.5 million for the nine months
ended September 30, 1996. The increase was principally due to the increasing
number and continued expansion of the Company's networks, including added
personnel costs and marketing activities related to the introduction of switched
services. However, SG&A expense as a percentage of revenues declined to 70.3%
for the nine months ended September 30, 1997, as compared to 90.6% for the nine
months ended September 30, 1996.
Depreciation and amortization expense increased to $36.4 million for the
nine months ended September 30, 1997, from $9.9 million for the nine months
ended September 30, 1996, as a result of the Company's acquisitions and the
continued expansion of the Company's networks.
INTEREST INCOME (EXPENSE)
Interest expense totaling $53.7 million was recorded during the nine months
ended September 30, 1997, as compared to interest expense of $19.3 million for
the nine months ended September 30, 1996. The primary contributors to the
substantial increase in interest expense as compared to the comparable period in
the prior year is non-cash interest expense totaling $51.8 million attributable
to accretion of the Company's senior discount notes issued during 1996 and to
accrued interest related to the issuance of the Company's senior notes in May
1997. Interest capitalized in connection with the Company's network construction
projects was $2.6 million for the nine months ended September 30, 1997, as
compared to $1.3 million for the nine months ended September 30, 1996. For the
nine months ended September 30, 1997 and 1996, interest income totaling $15.8
million and $11.1 million, respectively, was derived from the Company's
available cash and cash equivalents and marketable securities.
NET LOSS
For the reasons stated above, the Company's net loss before minority
interest and extraordinary item increased to $95.5 million for the nine months
ended September 30, 1997, from $28.0 million for the nine months ended September
30, 1996. Minority interests in net losses, representing minority investors'
interests in certain of the Company's subsidiaries, totaled $65,000 and $1.6
million for the nine months ended September 30, 1997 and 1996, respectively. As
a result, the Company's net loss before extraordinary items was $95.5 million
and $26.4 million for the nine months ended September 30, 1997 and 1996,
respectively. The Company recognized an extraordinary loss of $2.9 million
related to the early extinguishment of secured indebtedness on June 30, 1997.
Inclusive of extraordinary losses, the Company's net loss for the nine months
ended September 30, 1997 was $98.3 million as compared to a net loss of $26.4
million for the nine months ended September 30, 1996.
19
<PAGE>
EBITDA
EBITDA decreased to ($21.3) million for the nine months ended September 30,
1997, from ($9.9) million for the nine months ended September 30, 1996, a
decrease of $11.4 million. The decrease reflects the increasing service and SG&A
expenses noted above resulting from the acquisition, development and expansion
of the Company's networks.
LIQUIDITY AND CAPITAL RESOURCES
The Company's total assets increased from $879.6 million as of December 31,
1996, to $1,167.3 million at September 30, 1997. The Company's current assets of
$274.3 million at September 30, 1997, including cash and cash equivalents and
marketable securities of $228.0 million, exceeded current liabilities of $42.0
million, providing working capital of $232.3 million as compared to $435.3
million at December 31, 1996. Network and equipment totaled $653.1 million at
September 30, 1997 as compared to $306.5 million at December 31, 1996. Other
assets, principally goodwill, net of accumulated amortization, increased to
$211.3 million at September 30, 1997, from $99.1 million at December 31, 1996,
primarily as a result of the Company's acquisitions of the Phoenix and MAN
networks.
On February 4, 1997, the Company completed a secondary offering of
6,723,429 shares of common stock at a price of $25.00 per share. All of these
shares were sold by existing stockholders, and the Company did not receive any
proceeds from the sale of these shares. In conjunction with the offering, the
underwriters were granted an over-allotment option by the Company at $25.00 per
share. This option was fully exercised by the underwriters, and an additional
1,008,514 shares were issued by the Company. Gross proceeds to the Company from
this offering totaled approximately $25.2 million, and proceeds net of
underwriting discounts and expenses totaled approximately $23.2 million.
On May 29, 1997, the Company issued $250 million aggregate principal amount
of 10.0% Senior Notes due June 1, 2007. The Company received proceeds net of
underwriting fees from the Senior Notes of approximately $242.8 million.
Interest on the 10.0% Senior Notes is payable semi-annually, commencing December
1, 1997.
On November 5, 1997, the Company concluded its previously announced $250
million senior secured bank credit facility (the Credit Facility), to be
available to finance capital expenditures and provide working capital. The
Credit Facility has a seven year term and bears interest at rates selected by
the Company under terms of the Credit Facility, including a Base Rate or reserve
adjusted London Interbank Offering Rate (LIBOR), plus applicable margin. The
applicable margin for Base Rate borrowings varies from 0.0% to 1.00%, and the
applicable margin for LIBOR rate borrowings varies from 0.625% to 2.00%, which
rates will be determined based upon the Company's leverage ratio during each
quarterly period. Interest is payable quarterly for Base Rate borrowings and in
varying periods, depending on the interest periods, not to exceed six months,
for LIBOR rate borrowings. The Credit Facility contains certain restrictive
operating and financial covenants, including limitations on acquisitions,
incurrence of additional indebtedness, payment of dividends and
20
<PAGE>
asset sales. The Credit Facility is also subject to an annual commitment
fee, payable quarterly, ranging from 0.25% to 0.375%, which rates will be
determined based upon the Company's leverage ratio during each quarterly period.
In May 1997, the Company made an additional $4.0 million convertible
preferred stock investment in Verio, Inc. (Verio), a privately-held consolidator
of ISPs. On June 25, 1997, the Company purchased $50.0 million of 13.5% debt
securities in Verio. The Verio debt securities mature on June 15, 2004 and pay
interest semi-annually in arrears commencing December 15, 1997. The debt
securities include detachable warrants, allowing the Company to purchase common
stock in Verio at an exercise price of one cent per share. At September 30,
1997, the Company holds shares of Verio preferred stock which are convertible
into an aggregate of 4,664,971 shares of Verio common stock and 400,000 warrants
to purchase an additional 704,000 shares of Verio common stock, representing an
approximate 24% fully diluted equity interest.
On June 30, 1997, the Company prepaid $50.0 million in outstanding secured
indebtedness with AT&T Credit Corporation. In conjunction with this prepayment,
an extraordinary loss of approximately $2.9 million was charged to operations,
including write-downs of debt issuance costs and interest rate cap arrangements,
and applicable prepayment penalties.
On September 10, 1997, the Company repaid $100,000 outstanding under a bank
credit facility.
The competitive local telecommunications services business is a
capital-intensive business. The Company's operations have required and will
continue to require substantial capital investment for (i) the installation of
electronics for switched services in the Company's operating networks; (ii) the
expansion and improvement of the Company's operating systems, including the
installation of capabilities to provide other enhanced services; and (iii) the
design, construction, development and acquisition of additional networks. For
the nine months ended September 30, 1997 and 1996, the Company's capital
expenditures, primarily for installation of digital switches, expansion of
existing networks, and the design, construction, development and acquisition of
new networks totaled $290.3 million and $134.3 million, respectively.
In response to the demand initially encountered for its services, the
Company will continue aggressive capital deployment plans for the development
and expansion of its existing networks to allow for an increased level of
demand-driven capital spending necessary to take full advantage of the
opportunities presented by offering a full array of local exchange services. In
addition, with the acquisition of MAN, the Company is establishing a strategic
market presence in Texas, the third largest telecommunications state in the
country. The addition of these markets represents a significant increase in the
Company's addressable market potential, to 44 markets. The Company currently
estimates that it will spend approximately $400 million during 1997 to fund
these capital needs (including expenditures on the networks acquired in the MAN
acquisition). Such amounts are expected to be funded from the Company's existing
cash resources and from existing credit facilities.
The Company's strategic plan calls for having systems in operation or under
development in a total of 50 cities by the end of 1998, which will require
21
<PAGE>
substantial additional capital. The Company expects this expansion into
additional cities to be accomplished by the acquisition of existing networks as
well as the development of new networks. The Company will continue to evaluate
additional revenue opportunities in its existing markets and other strategic
initiatives, and as such opportunities may develop, the Company plans to make
additional capital investments in its networks that may be required to pursue
such opportunities, such as costs required to extend a network or install
additional telecommunications equipment to meet specific customer requirements.
Due to the number and variability of the factors which could affect the amount
of capital that will be required for such purposes, the Company cannot provide a
reasonable estimate of such additional capital needs. For example, the size of a
particular network to be developed or acquired and the types of electronics
installed can impact significantly the amount of capital required. Similarly,
the potential cost of acquiring additional networks is not determinable, and it
is possible that the Company could acquire existing networks using a variety of
financing alternatives. The Company expects to meet such additional capital
needs with the proceeds from future credit facilities, sales of additional
equity securities and joint ventures. However, there can be no assurance that
the Company will be able to raise or generate sufficient funds to enable it to
meet all of its strategic objectives. Moreover, there can be no assurance that
actual expenditures will not be significantly higher or lower than the Company's
current estimates.
The Company intends to preserve financial flexibility in order to react to
the rapidly evolving telecommunications marketplace and new opportunities. The
Company will continue to take advantage of favorable financing arrangements,
including sales of debt and equity securities in the public and private markets,
to maintain this flexibility.
MERGER AGREEMENT
The Company has agreed, subject to the terms and conditions of an Amended
and Restated Agreement and Plan of Merger dated as of October 1, 1997 (Merger
Agreement) with WorldCom, Inc. (WorldCom), to merge with a wholly-owned
subsidiary of WorldCom. Upon consummation of the proposed merger, the Company
would become a wholly-owned subsidiary of WorldCom, and each share of the
Company's common stock would be converted into the right to receive a number of
shares of WorldCom common stock equal to the exchange ratio provided for in the
Merger Agreement. If the average trading price per share of the WorldCom common
stock during the twenty (20) trading day period ending on the fourth trading day
prior to the closing date of the proposed merger is $35.15 or above, the
exchange ratio will be fixed at 1.65 shares of WorldCom common stock for each
share of the Company's common stock. If such average trading price is below
$35.15 per share but equal to or above $31.35 per share, the exchange ratio will
convert to a fluctuating ratio based on a fixed price of $58.00 per share of the
Company's common stock. If such average trading price is below $31.35 per share,
the exchange ratio will be fixed at 1.85 shares of WorldCom common stock for
each share of the Company's common stock. The proposed merger is subject to a
vote of the Company's stockholders, regulatory approvals, required consents and
other closing conditions.
22
<PAGE>
WorldCom is one of the largest telecommunications companies in the United
States, serving local, long distance and Internet customers domestically and
internationally. WorldCom provides telecommunications services to business,
government, telecommunications companies and consumer customers.
IMPACT OF NEW ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 128, "Earnings per Share." SFAS No.
128 establishes standards for the computation and presentation of earnings per
share for entities with publicly held common stock or potential common stock.
This Statement is effective for financial statements issued for periods ending
after December 15, 1997, and requires retroactive restatement of all prior
period earnings per share data presented. The effect of SFAS No. 128 on the
financial periods presented is not material to the Company.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." This Statement establishes standards for reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. All items that are required to be recognized under
accounting standards as components of comprehensive income must be reported in a
financial statement with the same prominence as other financial statements. SFAS
No. 130 is effective for fiscal years beginning after December 15, 1997.
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
The statements contained in this report which are not historical facts are
forward-looking statements that involve risks and uncertainties. Management
wishes to caution the reader that these forward-looking statements, such as the
Company's plans to have systems in operation or under construction in a total of
50 cities by the end of 1998 and its plans to offer switched and enhanced
services in all of its markets, are only predictions; actual events or results
may differ materially as a result of risks facing the Company. Such risks
include, but are not limited to, the Company's ability to successfully market
its services to current and new customers, access markets, identify, finance and
complete suitable acquisitions, design fiber optic backbone routes, install
cable and facilities, including switching electronics, and obtain rights-of-way,
building access rights and any required governmental authorizations, franchises
and permits, all in a timely manner, at reasonable costs and on satisfactory
terms and conditions, as well as favorable regulatory, legislative and judicial
developments.
23
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit No.
(Reference to Item 601(b)
of Regulation S-K) Description
------------------------- ------------------------------------------------
3.1 Second Restated Certificate of Incorporation of
the Company(incorporated by reference to Exhibit
3.1 to the Company's Registration Statement on
Form S-4 (File No. 333-29427) filed with the
Commission on June 17, 1997 (the "June
Form S-4"))
3.2 By-laws of the Company, as amended on April 29,
1997(incorporated by reference to Exhibit 3.6 to
the June Form S-4)
11 Statement Regarding Computation of Per Share
Earnings
27 Financial Data Schedule (furnished to the
Securities and Exchange Commission for
Electronic Data Gathering, Analysis, and
Retrieval (EDGAR) purposes only)
(b) Reports on Form 8-K
There were no reports on Form 8-K filed by the Company during the quarter
for which this report is filed.
24
<PAGE>
SIGNATURES
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.
BROOKS FIBER PROPERTIES, INC.
(Registrant)
Date: November 13, 1997 By: /S/ James C. Allen
-----------------------------------------
James C. Allen
(Chief Executive Officer)
Date: November 13, 1997 By: /S/ David L. Solomon
-----------------------------------------
David L. Solomon
(Principal Financial Officer)
25
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
3.1 Second Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 to the Company's
Registration Statement on Form S-4 (File No. 333-29427) filed with the
Commission on June 17, 1997 (the "June Form S-4"))
3.2 By-laws of the Company, as amended on April 29, 1997 (incorporated by
reference to Exhibit 3.6 to the June Form S-4)
11 Computation of Earnings Per Share
27 Financial Data Schedule (furnished to the Securities and Exchange
Commission for Electronic Data Gathering, Analysis, and Retrieval
(EDGAR) purposes only)
26
<TABLE>
EXHIBIT 11
BROOKS FIBER PROPERTIES, INC.
Statement Regarding Computation of Earnings Per Share
<CAPTION>
Nine Months Ended September 30,
1997 1996
-------------------- --------------------
<S> <C> <C>
Shares outstanding - beginning of period 31,082,139 1,162,800
Weighted average number of common and common
equivalent shares issued(1) 4,413,659 22,908,872
-------------------- --------------------
Weighted average number of common and common
equivalent shares outstanding 35,495,798 24,071,672
-------------------- --------------------
Net loss $ (98,326,000) $ (26,387,000)
==================== ====================
Pro forma loss per common and common equivalent shares $ (2.77) $ (1.10)
==================== ====================
</TABLE>
(1) Common and common equivalent shares issued consist of certain effects of
shares issued, stock options and warrants, and preferred stock for the nine
months ended September 30, 1996. For the nine months ended September 30,
1996, common equivalent shares from convertible preferred stock (using the
if converted method) and stock options and warrants (using the treasury
stock method) have been included in the computation. Pursuant to the
Securities and Exchange Commission rules, convertible preferred stock which
will be automatically converted at the date of issuance is included even
though inclusion may be anti-dilutive. Pursuant to the Securities and
Exchange Commission Staff Accounting Bulletin No. 83, shares issued and
stock options and warrants granted by the Company at prices below the
public offering price during the twelve-month period preceding the date of
the initial filing of the Registration Statement have been included in the
calculation of common stock equivalent shares, using the treasury stock
method, as if they were outstanding for the entire six-month period ended
June 30, 1996. For the nine months ended September 30, 1997, the weighted
average number of shares was based on common stock outstanding and does not
include common stock equivalents as their inclusion would be anti-dilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR BROOKS FIBER PROPERTIES, INC. AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 117,761,000
<SECURITIES> 110,215,000
<RECEIVABLES> 28,117,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 274,293,000
<PP&E> 653,117,000
<DEPRECIATION> 45,440,000
<TOTAL-ASSETS> 1,167,255,000
<CURRENT-LIABILITIES> 41,955,000
<BONDS> 796,080,000
25,200,000
0
<COMMON> 365,000
<OTHER-SE> 300,260,000
<TOTAL-LIABILITY-AND-EQUITY> 1,167,255,000
<SALES> 84,192,000
<TOTAL-REVENUES> 84,192,000
<CGS> 0
<TOTAL-COSTS> 141,869,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 37,857,000
<INCOME-PRETAX> (95,469,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (95,469,000)
<DISCONTINUED> 0
<EXTRAORDINARY> (2,857,000)
<CHANGES> 0
<NET-INCOME> (98,326,000)
<EPS-PRIMARY> (2.77)
<EPS-DILUTED> (2.77)
</TABLE>
