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): March 14, 2000
e.spire Communications, Inc.
(Exact name of registrant as specified in its charter)
State of Delaware 0-25314 52-1947746
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File No.) Identification No.)
12975 Worldgate Drive
Herndon, Virginia 20701
(Address of Principal Executive (Zip Code)
Offices)
(703) 639-6000
(Registrant's telephone number,
including area code)
<PAGE>
Item 5. Other Events
On March 30, 2000, e.spire issued a press release announcing that its Board of
Directors has elected George F. Schmitt as Chairman. Mr. Schmitt succeeds
William R. Huff, who has been named Vice Chairman. In addition, the
Board approved Mr. Schmitt's appointment of Christopher J. Resavy as
Chief Operating Officer. e.spire Communications, Inc. issued a second press
release announcing its preliminary 4th quarter and full year financial
results.
On March 28, 2000, e.spire Communications, Inc. issued a press release
announcing that Dennis J. Kern resigned as its Chief Operating Officer,
effective March 24, 2000.
On March 14, 2000, Riley M. Murphy, Executive Vice President of Legal and
Regulatory Affairs, General Counsel and Secretary, resigned from e.spire to join
TriVergent, an integrated service provider of end-to-end technologies. Juliette
Pryor, e.spire's former Vice President and Associate General Counsel, assumed
Ms. Murphy's primary legal responsibilities as e.spire's General Counsel, Senior
Vice President and Secretary. Jim Falvey, e.spire's former Vice President of
Regulatory Affairs, now oversees all regulatory proceedings and initiatives as
e.spire's Senior Vice President of Regulatory Affairs.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
Exhibit Number Reference
(99) Additional Exhibits
Press Release dated March 28, 2000 Exhibit 99.1
Press Release dated March 30, 2000 Exhibit 99.2
Press Release dated March 30, 2000 Exhibit 99.3
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
e.spire Communications, Inc.
By:
Date: March 29, 2000 /s/ Juliette Pryor
------------------
Juliette Pryor,
Senior Vice President,
General Counsel and
Secretary
<PAGE>
Exhibit 99.1
FOR IMMEDIATE RELEASE
e.spire(TM) ANNOUNCES MANAGEMENT CHANGES
HERNDON, VA, MARCH 28, 2000 -- e.spire Communications, Inc. (NASDAQ: ESPI), the
communications company for the networked economy, today announced the
resignation of Dennis Kern, Chief Operating Officer, effective Friday, March 24,
2000. Kern resigned to accept a position with NEXTLINK Communications, Inc.
e.spire expects to announce a replacement, as well as other management
additions, as early as this week.
e.spire Communications, Inc. is a leading integrated communications provider,
offering traditional local and long distance, Internet access and Web-hosting
services, and advanced data solutions, such as ATM and frame relay. e.spire
provides dial-up Internet through its wholly-owned Internet service provider
(ISP), CyberGate, Inc., and Web-hosting services through CyberGate's subsidiary
ValueWeb. In addition, e.spire's subsidiary, ACSI Network Technologies, Inc.,
provides third parties, including other communications concerns, municipalities
and corporations, with turnkey fiber-optic design, construction and project
management expertise. For more information on e.spire, contact www.espire.net.
Contact:
Peggy Disney
703.639.6738
[email protected]
<PAGE>
EXHIBIT 99.2
e.spire(TM) BOARD ELECTS TELECOM INDUSTRY VETERAN
GEORGE F. SCHMITT AS CHAIRMAN; NAMES
CHRISTOPHER RESAVY COO
HERNDON, VA, MARCH 30, 2000 -- e.spire Communications, Inc. (NASDAQ: ESPI), the
communications company for the networked economy, today announced that its Board
of Directors has elected George F. Schmitt as Chairman. He succeeds
William R. Huff, who has been named Vice Chairman. Schmitt will also serve as
e.spire's Chief Executive Officer on an interim basis.
The Board also approved Schmitt's appointment of Christopher J. Resavy as Chief
Operating Officer. Both Schmitt and Resavy were previously executives at
Omnipoint Communications, a leading provider of wireless technology development
and service that was acquired by VoiceStream Wireless in February 2000.
"George is a well-known and highly respected telecommunications industry
executive, who is supremely qualified to lead e.spire in accomplishing its
business plan in the near and long terms," said Huff, founder and manager of The
Huff Alternative Income Fund, L.P. and e.spire's largest shareholder. "Under his
leadership Omnipoint grew from a startup to a tremendous presence as a leading
wireless services provider, and we expect he will achieve similar results at
e.spire."
Huff continued, "I and my associates have made tremendous financial investments
in e.spire, and we assure e.spire's shareholders and employees that we are
committed to its success. We will support George's leadership and provide
whatever resources the company needs to continue to grow and compete."
"Since joining e.spire's Board in January, I have undertaken a comprehensive
review of the company's strategy and operations," said Schmitt. "I am impressed
with e.spire's assets and structure, and am confident that we will find ways to
realize more value for our shareholders."
Schmitt has worked in the industry since 1965, when he took a position at
Pacific Telephone, now Pacific Bell, a division of SBC Corp., and he has
initiated some of its revolutionary changes. From 1990 to 1993, he served on the
Board of Management at Mannesmann Mobilfunk D2 (MMO) in Germany. As a member of
Mannesmann's Board and head of the company's technical department, he oversaw
the development and operation of the D2 network, the first commercial
all-digital network in the world using Global System for Mobile (GSM)
communications technology.
Before joining Omnipoint in 1996, Schmitt also held leadership positions at
AirTouch Communications Inc. and PCS PrimeCo L.P. (now known as PrimeCo Personal
Communications), a national Personal Communications Services partnership owned
by AirTouch and Bell Atlantic.
Schmitt most recently served as President of Omnipoint Communications Services,
LLC and Executive Vice President of Omnipoint Corporation. Under Schmitt's
leadership, Omnipoint Communications grew from a small enterprise with eight
employees and few customers to a large corporation with more than 2,000
employees and nearly one million customers, with licenses to cover 100 million
customers in 28 states.
Schmitt is also actively involved in many industry organizations. He is
currently Chairman of the Personal Communications Industry Association. He also
serves on the Boards of LHS Group, Objective System Integrators, PCSONE (a joint
venture with Omnipoint), Telesoft Partners and Telstreet.com. In addition, he
holds a seat on the Executive Committee of the GSM (Global System for Mobile)
Association, the international organization that oversees the worldwide
implementation of GSM wireless technology, where he served as Chairman from 1993
to 1994.
Resavy will join Schmitt at e.spire as COO, replacing Dennis J. Kern, who
recently resigned.
Resavy, who began working in the telecom industry in 1981, most recently served
as Senior Director for Omnipoint Communications, Inc. In this position, he was
responsible for the technical, engineering and operational oversight of
Omnipoint's Personal Communications Services network, including vendor
selection, billing, IS LAN/WAN design, network design, operations, office
management and facilities operations and standards. He joined Omnipoint in 1994
and held several positions including Chief Engineer and Chief Technical Officer.
Prior to joining Omnipoint, Resavy held positions at Cellular One of New York,
GTE Mobilnet in Houston, NYNEX and AT&T.
"Having worked with Chris at Omnipoint for many years, I know firsthand that he
is a skilled engineer and manager, and I look forward to working with him
again," said Schmitt, e.spire's incoming Chairman. "I watched him successfully
manage a large organization and network buildout and know that, because he
maintains high standards for himself and his team, he will be a great asset to
e.spire's management group."
The Company expects to schedule a conference call for analysts within 14 days.
e.spire Communications, Inc. is a leading integrated communications provider,
offering traditional local and long distance, dedicated Internet access and
advanced data solutions, such as ATM and frame relay. e.spire also provides
dial-up Internet through its wholly-owned Internet service provider (ISP),
CyberGate, Inc., and Web-hosting services through CyberGate's subsidiary
ValueWeb. In addition, e.spire's subsidiary, ACSI Network Technologies, Inc.,
provides third parties, including other communications concerns, municipalities
and corporations, with turnkey fiber-optic design, construction and project
management expertise. For more information on e.spire, contact www.espire.net.
Certain statements regarding the development of the Company's businesses, the
markets for the Company's services and products, the Company's anticipated
capital expenditures, anticipated EBITDA and other statements are
forward-looking statements (as such term is defined in the Private Securities
Litigation Reform Act of 1995) which can be identified as any statement that
does not relate strictly to historical or current facts. Forward-looking
statements use such words as plans, expects, will, will likely result, are
expected to, will continue, is anticipated, estimate, project, believes,
anticipates, intends and expects, may, should, continue, seek, could and other
similar expressions. Although the Company believes that its expectations are
based on reasonable assumptions, it can give no assurance that its expectations
will be achieved. The important factors that could cause actual results to
differ materially from those in the forward-looking statements herein (the
"Cautionary Statements") include, without limitation, the Company's degree of
financial leverage, risks associated with debt service requirements and interest
rate fluctuations, risks associated with acquisitions and the integration
thereof, the impact of restriction under the Company's financial instruments,
dependence on availability of transmission facilities, regulation risks
including the impact of the Telecommunications Act of 1996, contingent
liabilities, the impact of competitive services and pricing, the ability of the
Company to successfully implement its strategies, as well as the other risks
referenced from time to time in the Company's filings with the SEC, including
the Company's Form 10-K for the year ended December 31, 1998. All subsequent
written and oral forward-looking statements attributable to the Company or
persons acting on its behalf are expressly qualified in their entirety by the
Cautionary Statements. The Company does not undertake any obligation to release
publicly any revisions to such forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
Contact:
Media Relations
Peggy Disney
703.639.6738
[email protected]
<PAGE>
EXHIBIT 99.3
e.spire REPORTS PRELIMINARY FOURTH QUARTER AND FULL YEAR RESULTS
Company Adopts Industry-Wide Accounting Practice for Dark Fiber Sales;
Establishes Additional Reciprocal
Compensation Reserves
HERNDON, VA, MARCH 30, 2000 -- e.spire Communications, Inc. (NASDAQ: ESPI), the
communications company for the networked economy, today announced preliminary
financial results for the quarter ended December 31, 1999. The Company expects
to release its final results after a full review by its newly appointed
management team and the completion of its annual audit.
To comply with prevailing industry accounting practices, the Financial
Accounting Standards Board Interpretation No. 43, "Real Estate Sales, an
interpretation of FASB Statement No. 66" ("FIN 43"), and the guidance of the
Company's independent auditors, e.spire adopted FIN 43, the operating lease
method of revenue recognition for dark fiber sales. This approach requires
e.spire's subsidiary, ACSI Network Technologies, to recognize revenue from
certain indefeasible rights of use (IRUs) as operating leases over the term of
the contract, instead of recognizing the entire revenue in the period when
payment is received and the dark fiber delivered. This treatment does not change
any of the economics or cash flows of these agreements. Consequently, the
adoption of FIN 43 resulted in a $12.3 million reduction in the Company's
estimated 1999 revenues.
Additionally, the Company established incremental reserves for reciprocal
compensation during the fourth quarter ended December 31, 1999, based on a state
by state analysis. At December 31, 1999, these reserves totaled $8.7 million.
The Company is taking these reserves despite the recent reciprocal compensation
victories in Bell South and GTE territories that resulted in cash collections of
approximately $16 million.
The Company expects to report revenues of approximately $55 million for the
quarter ended December 31, 1999 and approximately $244 million for the 12-month
period ended December 31, 1999, a 56% increase over full year 1998 revenues of
$156.8 million. Reflected in these numbers is the adoption of FIN 43 and the
reciprocal compensation reserves.
e.spire's newly elected Chairman and Acting Chief Executive Officer George
Schmitt said, "I am far less interested in past results than where this company
is going. I am excited about e.spire's prospects as we implement changes in the
way e.spire does business. We have completed e.spire's build-out phase. Our
emphasis will now turn to profitability."
The Company previously announced that it achieved gross installations of nearly
38,000 access lines during the fourth quarter of 1999, representing a 45%
increase over the previous quarter's gross adds of 26,000 lines. Cumulative
lines in service now total 164,290. In addition to the strong growth in
on-switch installations, e.spire also shed another 3,200 low-margin resale
lines. On-switch access lines now exceed more than 95% of total lines in
service.
The Company expects to report earnings before interest, taxes, depreciation,
amortization and non-cash compensation (EBITDA) for the quarter ended December
31, 1999, as a loss of approximately $35 million. Included in the EBITDA loss
are the effects of the aforementioned accounting pronouncement and reciprocal
compensation reserves, as well as other items such as an increase in receivable
reserves. Preliminary EBITDA for the full year totaled a loss of approximately
$84 million.
On the financing front, the Company announced during the fourth quarter that it
had obtained vendor financing of $50 million from GATX Capital Corporation. More
recently, e.spire announced $175 million in new equity funding commitments from
The Huff Alternative Income Fund, L.P., Greenwich Street Capital Partners II,
L.P. (GSC Partners) and the Honeywell International Inc. Master Retirement
Trust, in cooperation with Allied Capital Management LLC, a subsidiary of
Honeywell International Inc.
The Company requires a significant amount of cash to fund its capital
expenditures and working capital needs. As of December 31, 1999, the Company's
unrestricted cash balance was approximately $63 million. The Company already has
obtained $100 million from the aforementioned preferred stock financing and also
has the available financings under the GATX facility. e.spire will continue to
explore the availability of additional financing necessary to fulfill the cash
needs of the business in 2000 and beyond, but cannot guarantee that it will be
able to obtain such financing. The Company has retained Morgan Stanley Dean
Witter to explore additional financing sources, divest non-core assets and
consider strategic alternatives.
Due to the financial results for the quarter, the Company was not in compliance
with certain covenants within its $200 million Senior Secured Credit Facility.
The Company intends to engage in discussions with its bank group regarding this
matter, although there can be no assurance that the Company will be successful
in obtaining the necessary waivers or avoiding the adverse consequences that
would result from such failure.
The Company's failure to comply with certain of its covenants as mentioned above
could, if not remedied or waived, result in cross covenant violations related to
other of the Company's debt instruments. These and other issues are currently
being reviewed by e.spire's new management before the release of final financial
results. The Company expects to file its Form 10-K with the Securities and
Exchange Commission by April 14, 2000.
e.spire Communications, Inc. is a leading integrated communications provider,
offering traditional local and long distance, Internet access and Web hosting
services, and advanced data solutions such as native ATM and frame relay.
e.spire provides dial-up Internet through its wholly-owned Internet service
provider (ISP), CyberGate, Inc., and Web-hosting services through CyberGate's
subsidiary ValueWeb. e.spire's subsidiary, ACSI Network Technologies, Inc.,
provides third parties, including other communications concerns, municipalities
and corporations, with turnkey fiber optic design, construction and project
management expertise. For more information on e.spire, contact www.espire.net.
Certain statements regarding the development of the Company's businesses, the
markets for the Company's services and products, the Company's anticipated
capital expenditures, anticipated EBITDA and other statements are
forward-looking statements (as such term is defined in the Private Securities
Litigation Reform Act of 1995) which can be identified as any statement that
does not relate strictly to historical or current facts. Forward-looking
statements use such words as plans, expects, will, will likely result, are
expected to, will continue, is anticipated, estimate, project, believes,
anticipates, intends and expects, may, should, continue, seek, could and other
similar expressions. Although the Company believes that its expectations are
based on reasonable assumptions, it can give no assurance that its expectations
will be achieved. The important factors that could cause actual results to
differ materially from those in the forward-looking statements herein (the
"Cautionary Statements") include, without limitation, the Company's degree of
financial leverage, risks associated with debt service requirements and interest
rate fluctuations, risks associated with acquisitions and the integration
thereof, the impact of restriction under the Company's financial instruments,
dependence on availability of transmission facilities, regulation risks
including the impact of the Telecommunications Act of 1996, contingent
liabilities, the impact of competitive services and pricing, the ability of the
Company to successfully implement its strategies, as well as the other risks
referenced from time to time in the Company's filings with the SEC, including
the Company's Form 10-K for the year ended December 31, 1998. All subsequent
written and oral forward-looking statements attributable to the Company or
persons acting on its behalf are expressly qualified in their entirety by the
Cautionary Statements. The Company does not undertake any obligation to release
publicly any revisions to such forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
Contact:
John Polchin
e.spire Communications, Inc.
301.639.6030
Peggy Disney
e.spire Communications, Inc.
703.639.6738
