-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OAlZdyO+Ghkwr0KKjOrhzsfuELjhnTH1tUvj9oNT18OtcOvr8KjvDXpSshNwP6NB +yLsqWQ5yBGdhdUTTdv/aQ== 0000940180-96-000229.txt : 19960715 0000940180-96-000229.hdr.sgml : 19960715 ACCESSION NUMBER: 0000940180-96-000229 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960712 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960712 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERMEDIA COMMUNICATIONS OF FLORIDA INC CENTRAL INDEX KEY: 0000885067 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 592913586 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-20135 FILM NUMBER: 96594255 BUSINESS ADDRESS: STREET 1: 3625 QUEEN PALM DR STREET 2: STE 720 CITY: TAMPA STATE: FL ZIP: 33619 BUSINESS PHONE: 8136210011 8-K/A 1 FORM 8-K/A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ________________________ FORM 8-K/A Amendment No.1 CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 __________________________ Date of Report (Date of earliest event reported): July 12, 1996 ------------- INTERMEDIA COMMUNICATIONS INC. ------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 59-2913586 -------------------------- ------------------- (State or other jurisdic- (I.R.S. Employer tion of incorporation or Identification No.) organization) 0-20135 ------------------------ (Commission File Number) 3625 Queen Palm Drive, Tampa, Florida 33619-1309 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (813) 621-0011 -------------- 9280 Bay Plaza Boulevard, Suite 720, Tampa, Florida 33619 - -------------------------------------------------------------------------------- (Former address, if changed since last report) Item 7 of the Current Report on Form 8-K, dated June 28, 1996, of Intermedia Communications Inc., a Delaware Corporation, is hereby amended and restated to read in its entirety as follows: ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) Financial Statements of Business Acquired. Financial Statements for the Telecommunications Division of EMI for the years ended July 31 1994 and 1995 and for the eight month periods ended March 31, 1995 and 1996 (unaudited) are filed as part of this report. (b) Pro Forma Financial Information. Unaudited Pro Forma Condensed Consolidated Financial Statements for ICI are filed as part of this report. (c) Exhibits Number Exhibit - ------ ------- 2.1 Asset Purchase Agreement dated as of February 20, 1996 by and among EMI Communications Corp., Eastern Message, Inc., Eastern Message of New Jersey, Inc., Eastern Message of Pennsylvania, Inc., Eastern Message of Massachusetts, Inc., Eastern Message of Maryland, Inc., Newhouse Broadcasting Corporation and Intermedia Communications Inc. (f/k/a Intermedia Communication of Florida, Inc.) (the "Asset Purchase Agreement"). Exhibit 2.3 to the Registrant's Annual Report on Form 10- K for the year ended December 31, 1995 is hereby incorporated by reference. 2.2 Amendment No. 1 to the Asset Purchase Agreement. 99.1 Press release dated June 28, 1996. Report of Independent Certified Public Accountants Telecommunication Division of EMI Communications Corporation We have audited the accompanying balance sheets of Telecommunication Division of EMI Communications Corporation as of July 31, 1994 and 1995, and the related statements of operations and divisional equity and cash flows for each of the two years in the period ended July 31, 1995. These financial statements are the responsibility of the Division's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. The Telecommunication Division is a part of EMI Communications Corporation and has no separate legal status or existence. Transactions with EMI Communications Corporation and its parent, Newhouse Broadcasting Corporation, are described in the notes to financial statements. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Telecommunication Division of EMI Communications Corporation at July 31, 1994 and 1995, and the results of its operations and its cash flows for each of the years then ended, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP Tampa, Florida March 8, 1996 Telecommunication Division of EMI Communications Corporation Balance Sheets
July 31 ------------------------------- March 31 1994 1995 1996 --------------- -------------- -------------- (Unaudited) Assets Current assets: Accounts receivable (less allowance for doubtful accounts of $12,500 in 1994, 1995, and 1996, respectively) $ 3,737,927 $ 7,681,387 $ 5,765,999 Notes receivable and other assets 108,156 123,369 74,712 Prepaid expenses 241,709 311,396 429,736 ------------- ------------- -------------- Total current assets 4,087,792 8,116,152 6,270,447 Property and equipment, net 13,522,348 11,282,436 9,513,718 Deposits, deferred charges and other assets 441,256 331,197 403,408 ------------- ------------- -------------- Total assets $18,051,396 $19,729,785 $16,187,573 ============= ============= ============== Liabilities and divisional equity Current liabilities: Accounts payable $ 4,028,815 $ 4,875,071 $ 6,132,711 Federal transfer surcharge (Note 7) 3,497,500 4,556,700 4,556,700 Accrued compensation, employee benefits, pension, and related taxes 367,892 355,501 337,143 Accrued sales and franchise tax 91,092 609,845 1,196,958 Deferred revenue 101,627 140,492 82,745 Other accrued liabilities 50,428 56,892 4,111 ------------- ------------- -------------- Total current liabilities 8,137,354 10,594,501 12,310,368 Accrued pension and postretirement benefits 227,055 449,961 600,036 ------------- ------------- -------------- 8,364,409 11,044,462 12,910,404 Divisional equity 9,686,987 8,685,323 3,277,169 ------------- ------------- -------------- Total liabilities and divisional equity $18,051,396 $19,729,785 $16,187,573 ============== ============= ==============
See notes to financial statements. Telecommunication Division of EMI Communications Corporation Statements of Operations and Divisional Equity
Year Ended Eight-Month Period Ended July 31 March 31 ----------------------------- ----------------------------- 1994 1995 1995 1996 -------------- -------------- -------------- -------------- (Unaudited) Revenues Communication service $32,920,416 $35,643,585 $24,062,849 $28,944,131 Microwave service 4,186,791 4,127,504 2,610,442 2,872,018 Other 205,756 250,775 158,401 167,989 -------------- -------------- -------------- -------------- 37,312,963 40,021,864 26,831,692 31,984,138 Expenses Facilities administration and maintenance costs 35,602,603 36,082,066 24,939,266 30,209,380 Selling, general, and administrative 3,021,910 2,873,478 1,591,032 1,897,880 Depreciation and amortization 5,140,841 5,122,796 3,274,746 2,923,391 -------------- -------------- -------------- -------------- 43,765,354 44,078,340 29,805,044 35,030,651 -------------- -------------- -------------- -------------- Loss from operations (6,452,391) (4,056,476) (2,973,352) (3,046,513) Interest expense, net (937,807) (790,452) (507,905) (108,116) -------------- -------------- -------------- -------------- Loss before income taxes (7,390,198) (4,846,928) (3,481,257) (3,154,629) Income tax benefit (2,711,889) (1,763,875) (1,270,702) (1,147,956) -------------- -------------- -------------- -------------- Net loss (4,678,309) (3,083,053) (2,210,555) (2,006,673) Divisional equity, beginning of year 9,425,642 9,686,987 9,686,987 8,685,323 Distribution from (to) parent 4,939,654 2,081,389 2,270,668 (3,401,481) -------------- -------------- -------------- -------------- Divisional equity, end of year $ 9,686,987 $ 8,685,323 $ 9,747,100 $ 3,277,169 ============== ============== ============== ==============
See notes to financial statements. Telecommunication Division of EMI Communications Corporation Statements of Cash Flows
Year Ended Eight-Month Period Ended July 31 January 31 --------------- -------------- -------------- -------------- 1994 1995 1995 1996 --------------- -------------- -------------- -------------- (Unaudited) Operating activities Net loss $(4,678,309) $(3,083,053) $(2,210,555) $(2,006,673) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 5,140,841 5,122,796 3,274,746 2,923,391 Gain on sale of property, plant and equipment (12,221) (21,831) - - Changes in operating assets and liabilities: Accounts receivable 194,768 (3,943,460) (937,883) 1,915,388 Notes receivable and other assets (66,629) (15,213) 60,928 48,657 Prepaid expenses (70,709) (69,687) 241,709 (118,340) Deposits, deferred charges and other assets (114,823) 7,228 (430,032) (72,211) Accounts payable and accrued liabilities (917,000) 1,359,082 (393,054) 1,773,614 Federal transfer surcharge 1,147,700 1,059,200 374,598 - Deferred revenue (47,067) 38,865 (36,847) (57,747) Accrued pension and post- retirement benefits 189,597 222,906 144,217 150,075 --------------- -------------- -------------- -------------- Net cash provided by (used in) operating activities 766,148 676,833 87,827 4,556,154 Investing activities Purchase of property and equipment (5,727,699) (2,795,123) (2,290,495) (1,154,673) Proceeds from sale of property and equipment 21,897 36,901 - - --------------- -------------- -------------- -------------- Net cash used in investing activities (5,705,802) (2,758,222) (2,290,495) (1,154,673) Financing activities Distribution from (to) Parent 4,939,654 2,081,389 2,202,668 (3,401,481) --------------- -------------- -------------- -------------- Net cash provided by financing activities 4,939,654 2,081,389 2,202,668 (3,401,481) --------------- -------------- -------------- -------------- Net increase (decrease) in cash and cash equivalents - - - - Cash and cash equivalents, beginning of year - - - - --------------- -------------- -------------- -------------- Cash and cash equivalents, end of year $ - $ - $ - $ - =============== ============== ============== ===============
See notes to financial statements. Telecommunication Division of EMI Communications Corporation Notes to Financial Statements (Information pertaining to March 31, 1996 and for the eight-month periods ended March 31, 1996 and 1995 is unaudited) 1. Summary of Significant Accounting Policies Description of Business The Telecommunication Division of EMI Communications Corporation (the "Division") is a New York State based telecommunications company which operates a digital network, offering full-service telecommunications including systems engineering, interchange transmission facilities, end user communication services and network management. The Division generally services governmental entities, commercial end-users, as well as other corporations primarily in the Northeast United States and Canada. For the years ended July 31, 1994 and 1995, revenue of 70% and 67%, respectively, was derived from the Division's primary customer, State of New York's Office of General Services. In addition, for the years ended July 31, 1994 and 1995, 74% and 75%, respectively, of accounts receivable were owed to the Division by this customer. The Division does not normally obtain collateral on accounts receivable. Financial Statement Presentation The financial statements include only those accounts related to the Division's operations after elimination of significant intercompany transactions. All other accounts of EMI Communications Corporation and its parent, Newhouse Broadcasting Corporation (collectively, the "Parent"), have not been included in the financial statements since they are not directly related to the Division's operations. Property and Equipment Property and equipment is recorded at cost. Depreciation is calculated over the estimated useful lives of the assets using the straight-line and accelerated methods for financial statement reporting and income tax purposes. Income Taxes The Division accounts for income taxes under the liability method as prescribed by Financial Accounting Standards Board Statement No. 109, "Accounting for Income Taxes." Under this Telecommunications Division of EMI Communications Corporation Notes to Financial Statements (continued) (Information pertaining to March 31, 1996 and for the eight-month periods ended March 31, 1996 and 1995 is unaudited) 1. Summary of Significant Accounting Policies (Continued) method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that may be in effect when the differences are expected to reverse. Refer to Note 3. Postretirement Benefits The Division accounts for postretirement benefits other than pensions in accordance with Financial Accounting Standards Board Statement No. 106 by accruing the estimated cost of retiree benefits other than pensions during the employees' active service period. The Division is recognizing the transition obligation over a 22-year period. Refer to Note 5. Deferred Revenue Proceeds received from telecommunication customers in advance of services are deferred at the time of receipt and are included in revenues on a pro rata basis as the services are provided. Long Lived Assets In March 1995, the FASB issued Statement No. 121, "Accounting for the Impairment of Long Lived Assets and for Long-Lived Assets to Be Disposed Of," which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. Statement No. 121 also addresses the accounting for long-lived assets that are expected to be disposed of. The Division will adopt Statement No. 121 for the fiscal year ending July 31, 1997 and, due to the significant amount of technical equipment maintained by the Division and the extensive number of estimates to be made to assess the financial impact of adoption of Statement No. 121, financial statement impact has not yet been determined. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Telecommunications Division of EMI Communications Corporation Notes to Financial Statements (continued) (Information pertaining to March 31, 1996 and for the eight-month periods ended March 31, 1996 and 1995 is unaudited) 1. Summary of Significant Accounting Policies (Continued) Intercompany Accounts All balance sheet related intercompany balances, which resulted from various transactions between the Division and its Parent, have been presented on a net basis and included in divisional equity. The balance is primarily the result of the Division's capitalization and participation in the Parent's central cash management program. Intercompany Expense Allocation The Parent provides various administrative services to the Division including legal assistance, cash management and management advisory services. It is the Parent's policy to charge these expenses and all other operating expense, on both a direct and indirect cost basis. These expenses (which are included in operating expenses) were $197,550 and $197,550 for the years ended July 31, 1994 and 1995, respectively. Interest charges have been allocated based on the assets employed. For the years ended July 31, 1994 and 1995, interest paid was $568,757 and $668,743, respectively. Management believes these allocation methods are reasonable. Interim Financial Statements The unaudited balance sheet at March 31, 1996 and the unaudited statements of operations and divisional equity and cash flows for the eight-month periods ended March 31, 1995 and 1996 have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Telecommunications Division of EMI Communications Corporation Notes to Financial Statements (continued) (Information pertaining to March 31, 1996 and for the eight-month periods ended March 31, 1996 and 1995 is unaudited) 2. Property and Equipment Property and equipment and the related lives for depreciation purposes consisted of the following:
July 31 ------------------------------- Depreciable 1994 1995 Lives --------------- -------------- ------------- Land $ 271,259 $ 271,259 Buildings and improvements 1,331,246 1,340,246 10-31 years Technical equipment 43,905,095 46,352,865 5-7 years Other equipment, automobiles, furniture and fixtures 3,970,720 3,953,279 5-7 years --------------- -------------- 49,478,320 51,917,649 Less accumulated depreciation (37,050,275) (41,703,424) --------------- -------------- 12,428,045 10,214,225 Leasehold improvements, net of accumulated amortization of $810,242 and $860,206 at July 31, 1994 and 1995, respectively 1,094,303 1,068,211 5-31 years --------------- -------------- $ 13,522,348 $ 11,282,436 =============== ==============
3. Income Taxes The Division's taxable income is included in the consolidated federal income tax return filed by the Parent. For financial reporting purposes the Division's income tax expense or benefit is computed on a separate company basis, with the resulting current income taxes payable or receivable and related deferred income taxes settled through the intercompany accounts. Accordingly, all balance sheet related income tax balances have been presented on a net basis and included in divisional equity. Telecommunications Division of EMI Communications Corporation Notes to Financial Statements (continued) (Information pertaining to March 31, 1996 and for the eight-month periods ended March 31, 1996 and 1995 is unaudited) 3. Income Taxes (continued) The income tax benefit differs from the amount computed by applying the federal statutory rate to loss before income taxes. The difference is reconciled as follows:
Year Ended July 31 1994 1995 -------------- -------------- Loss before income taxes $(7,390,198) $(4,846,928) Federal statutory rate 35% 35% -------------- -------------- (2,586,569) (1,696,425) State and local income taxes, net of federal tax effect (132,872) (86,317) Other 7,552 18,867 -------------- -------------- Benefit based on loss $(2,711,889) $(1,763,875) ============== ==============
Deferred income taxes arise principally from differences between financial reporting and income tax reporting of the federal transfer surcharge, accrued postretirement and pension benefits, asset valuation allowances and accrued expenses. 4. Pension Plan The Division participates in a Parent-sponsored noncontributory pension plan which covers substantially all employees. The plan provides participating employees with retirement benefits in accordance with benefit provision formulas which are based on years of service and career pay. The Division's funding policy is to contribute amounts to the plan sufficient to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1974, plus additional amounts as the Division may determine to be appropriate from time to time. Telecommunication Division of EMI Communications Corporation Notes to Financial Statements (continued) (Information pertaining to March 31, 1996 and for the eight-month periods ended March 31, 1996 and 1995 is unaudited) 4. Pension Plan (Continued) A summary of the components of net periodic pension costs is presented below:
Year Ended July 31 ------------------------ 1994 1995 ----------- ------------ Service cost-benefits earned during the period $119,689 $ 110,981 Interest cost on projected benefit obligation 117,086 127,169 Actual return on plan assets (20,672) (198,111) Net amortization and deferral (62,598) 90,725 ----------- ------------ Net periodic pension cost $153,505 $ 130,764 =========== ============
Actuarial assumptions used to determine pension costs include a discount rate of 8.5%, expected long-term rate of return on assets of 9.5%, and expected rate of increase in future compensation of 5% for all periods shown. A summary of the Plan's funded status and amounts recognized in the Division's balance sheets is as follows:
July 31 ----------------------------- 1994 1995 ------------- -------------- Actuarial present value of accumulated benefit obligations: Vested $(1,186,458) $(1,330,453) Nonvested (43,423) (49,642) ------------- -------------- (1,229,881) (1,380,095) Projected compensation increases (309,397) (327,406) ------------- -------------- Projected benefit obligations (1,539,278) (1,707,501) Plan assets at market value 1,156,268 1,400,566 ------------- -------------- Projected benefit obligations in excess of plan assets (383,010) (306,935) Unrecognized net transition obligation 57,348 50,975 Unrecognized net loss 190,795 104,322 ------------- -------------- Pension liability recognized in the balance sheets $ (134,867) $ (151,638) ============== ==============
Telecommunication Division of EMI Communications Corporation Notes to Financial Statements (continued) (Information pertaining to March 31, 1996 and for the eight-month periods ended March 31, 1996 and 1995 is unaudited) 4. Pension Plan (Continued) The components of the pension liability recognized in the balance sheets are as follows:
July 31 ------------------------- 1994 1995 ------------ ------------ Current $ (58,599) $ (52,745) Long-term (76,268) (98,893) ------------ ------------ $(134,867) $(151,638) ============ ============
The Plan's assets at July 31, 1994 and 1995 were primarily invested in fixed income securities, equities and short-term securities. In addition to the defined benefit pension plan as described above, the Division also participates in a defined contribution 401(k) plan covering substantially all employees. Provisions of the plan allow employees to contribute a portion of their salary or wages as prescribed under Section 401(k) of the Internal Revenue Code. The Division provides an employer contribution based on a percentage of the employee's contribution. The employer's contribution was $37,016 and $48,999 for the years ended July 31, 1994 and 1995, respectively. 5. Postretirement Benefits Other Than Pensions The Division participates in a Parent-sponsored postretirement health care and life insurance plan to retirees and eligible dependents. These benefits are funded as incurred from the general assets of the Division. Prior to July 31, 1993, the cost of retiree health care and life insurance benefits was charged to expense as premiums were paid (pay-as-you-go-basis). Effective August 1, 1993, the Division adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." This Statement requires that the cost of postretirement benefits be accrued during an employee's active working career instead of recognizing this cost on the cash basis. In accordance with Statement No. 106, the transition obligation, representing the unrecognized accumulated past-service benefit obligation for all plan participants, may be recognized as a cumulative effect of an accounting change or may be amortized on a straight-line basis over the average remaining service period of active plan participants. The Division has elected to amortize the $783,450 of transitional Telecommunication Division of EMI Communications Corporation Notes to Financial Statements (continued) (Information pertaining to March 31, 1996 and for the eight-month periods ended March 31, 1996 and 1995 is unaudited) 5. Postretirement Benefits Other Than Pensions (Continued) obligation on a straight-line basis over 22 years. For the years ended July 31, 1994 and 1995, the adoption of the statement resulted in an increase in postretirement benefit cost of $150,787 and $200,281, respectively. A summary of the components of net periodic other postretirement benefit costs relating to the Plan is as follows:
Year Ended July 31 --------------------- 1994 1995 ---------- ---------- Service cost - benefits earned during the year $ 62,305 $ 82,538 Interest cost on projected benefit obligation 62,299 88,144 Net amortization and deferral 35,611 37,430 ---------- ---------- Net postretirement benefit cost $160,215 $208,112 ========== ==========
Actuarial assumptions used to determine the liability for the postretirement benefits other than pensions included the assumed weighted average discount rate used in determining the actuarial present value of the accumulated postretire- ment benefit obligation of 8.5% and the assumed weighted average rate of increase in future compensation levels related to pay-related life insurance benefits of 5.0% for all periods shown. The future health care cost trend rate for the year ended July 31, 1995 was approximately 14% and is assumed to decrease to 7% by the year 2006 and remain at that approximate level thereafter. The health care trend rate assumption has a significant effect on the amounts reported. For example, increasing the assumed health care cost trend rate by one percentage point would increase the accumulated postretirement benefit obligations by $299,627 and increase the aggregate of the service and interest cost components of the net postretirement benefit costs by $57,070 for the year ended July 31, 1995. The Division has not prefunded any of its postretirement health and life insurance liabilities, and consequently, there are no expected returns on assets anticipated in the calculation of expense. Telecommunication Division of EMI Communications Corporation Notes to Financial Statements (continued) (Information pertaining to March 31, 1996 and for the eight-month periods ended March 31, 1996 and 1995 is unaudited) 5. Postretirement Benefits Other Than Pensions (Continued) A schedule reconciling the accumulated benefit obligation with the Division's recorded liability follows:
July 31 -------------------------- 1994 1995 ------------ ------------- Accumulated postretirement benefit obligation: Retirees $(112,698) $ (124,637) Fully eligible active participants (173,328) (217,276) Other active participants (515,843) (861,851) ------------ ------------- Accumulated postretirement benefit (801,869) (1,203,764) obligation Unrecognized net loss (gain) (96,757) 140,469 Unrecognized transition obligation 747,839 712,227 ------------ ------------- Accrued noncurrent postretirement benefit recognized in the balance sheets $(150,787) $ (351,068) ============ =============
6. Commitments and Contingencies At July 31, 1994 and 1995, the Division has issued letters of credit amounting to $6,023,000 and $5,780,000, respectively, related to performance guarantees on contracts with a customer and a vendor. The Division is obligated under long-term leases expiring at various dates through 2008. Certain leases contain renewal options. The leases generally provide that the Division shall pay adjustments for property taxes, insurance, utilities, and other related charges. Telecommunication Division of EMI Communications Corporation Notes to Financial Statements (continued) (Information pertaining to March 31, 1996 and for the eight-month periods ended March 31, 1996 and 1995 is unaudited) 6. Commitments and Contingencies (continued) Future minimum lease payments under noncancelable operating leases as of July 31, 1995 are as follows:
Year Amount ---- ------------- 1996 $ 2,849,928 1997 2,329,665 1998 2,062,885 1999 1,640,367 2000 866,387 Thereafter 981,529 -------------- $10,730,761 ==============
Rent expense under these leases totaled $2,557,546 and $ 2,371,905 for the years ended July 31, 1994 and 1995, respectively. Aggregate future minimum rentals to be received under noncancelable subleases, expiring on various dates through 2008, are as follows:
Year Amount ---- ------------- 1996 $ 744,704 1997 534,587 1998 424,337 1999 332,719 2000 176,417 Thereafter 151,925 ------------- $2,364,689 =============
Telecommunication Division of EMI Communications Corporation Notes to Financial Statements (continued) (Information pertaining to March 31, 1996 and for the eight-month periods ended March 31, 1996 and 1995 is unaudited) 7. Federal Transfer Surcharge During March 1995, the State of New York's Office of General Services ("OGS") contested the billing of certain Federal Transfer Surcharges from January 1, 1991 through February 1995. The Division negotiated with OGS and on December 14, 1995 a settlement was reached for the disputed surcharges. Included in operations for the years ended July 31, 1994 and 1995 is $1,147,700 and $1,059,200, respectively, including interest charges of $137,000 and $127,000, respectively, in connection with this settlement. No further charges to operations for this settlement are expected and the settlement is expected to be paid beginning in April 1996. 8. Subsequent Event On February 20, 1996, the Parent entered into an agreement to sell the property and equipment of the Division, as well as assign customer lists, certain contracts and leases, to Intermedia Communications of Florida, Inc. (ICI) for 937,500 shares of ICI common stock. Consummation of the transaction is subject to receipt of certain regulatory approvals and certain other conditions. Intermedia Communications Inc. Unaudited Pro Forma Condensed Consolidated Financial Statements On June 28, 1996, Intermedia Communications Inc. (ICI or the Company), acquired the telecommunications division of EMI Communications Corporation (EMI) pursuant to an Asset Purchase Agreement, dated as of February 20, 1996. ICI purchased EMI's telecommunications division in exchange for 937,500 newly and validly issued, fully paid and nonassessable chares of ICI common stock. The accompanying unaudited pro forma condensed consolidated balance sheet as of March 31, 1996 and the unaudited condensed consolidated statements of operations for the three month period ended March 31, 1996 and year ended December 31, 1995 include the historical effects of the acquisition of the telecommunication assets of EMI, as if EMI were acquired at the beginning of each respective period. In addition, the accompanying unaudited pro forma condensed consoli- dated statement of operations for the year ended December 31, 1995 has been prepared to reflect the acquisition of FiberNet USA, Inc. and Subsidiaries and FiberNet Telecommunications Cincinnati, Inc. (collectively, FiberNet) and EMI as if they were consummated on January 1, 1995. The pro forma information is based on the historical financial statements of the acquired businesses giving effect to the transactions under the purchase method of accounting and the assumptions and adjustments described in the accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements. The pro forma information does not purport to be indicative of the actual results that would have been achieved had the acquisitions actually been completed as of the dates indicated. Intermedia Communications Inc. Unaudited Pro Forma Condensed Consolidated Balance Sheet March 31, 1996
Historical ------------------------------- Pro Forma Pro Forma Consolidated (1) EMI (2) Adjustments Totals -------------------------------------------------------------------- Assets Current assets: Cash and cash equivalents $ 32,820,116 $ - $32,820,116 Restricted investments, including interest receivable 19,817,578 - 19,817,578 Short-term investments 2,100,000 - 2,100,000 Accounts receivable, net 9,098,178 5,840,711 $ (5,840,711)/(3)/ 9,098,178 Prepaid expenses and other current assets 2,819,099 429,736 (429,736)/(3)/ 2,819,099 -------------------------------------------------------------------- Total current assets 66,654,971 6,270,447 (6,270,447) 66,654,971 Restricted investments 30,855,253 - 30,855,253 Telecommunications equipment, net 90,909,312 9,513,718 7,611,282/(4)/ 108,034,312 Intangibles, net 26,442,128 - 26,442,128 Other assets 218,407 403,408 (403,408)/(3)/ 218,407 -------------------------------------------------------------------- Total assets $215,080,071 $16,187,573 $ 937,427 $232,205,071 ==================================================================== Liabilities and stockholders' equity Current liabilities: Accounts payable $ 7,011,847 $10,689,411 $(10,689,411)/(3)/ $ 7,011,847 Accrued taxes 7,152,274 - 7,152,274 Other accrued expenses 2,550,396 1,620,957 (1,620,957)/(3)/ 2,800,396 250,000 /(4)/ Advance billings 1,716,696 - 1,716,696 Current portion of long-term debt 109,095 - 109,095 Current portion of capital lease obligations 972,503 - 972,503 -------------------------------------------------------------------- Total current liabilities 19,512,811 12,310,368 (12,060,368) 19,762,811 Long-term debt 159,224,002 - 159,224,002 Capital lease obligations 4,930,214 - 4,930,214 Other noncurrent liabilities - 600,036 (600,036)/(3)/ - -------------------------------------------------------------------- Total liabilities 183,667,027 12,910,404 (12,660,404) 183,917,027 Stockholders' equity: Common stock 103,638 - 9,375 /(4)/ 113,013 Additional paid-in capital 74,145,464 - 16,865,625 /(4)/ 91,011,089 Division equity - 3,277,169 (3,277,169)/(3)/ - Accumulated deficit (42,836,058) - (42,836,058) --------------------------------------------------------------------- Total stockholders' equity 31,413,044 3,277,169 13,597,831 48,288,044 --------------------------------------------------------------------- Total liabilities and stockholders' equity $215,080,071 $16,187,573 $ 937,427 $232,205,070 ====================================================================
Intermedia Communications Inc. Unaudited Pro Forma Condensed Consolidated Statement of Operations Three-month period ended March 31, 1996
Historical -------------------------- (a) (b) Pro Forma Pro Forma Consolidated EMI Adjustments Totals ----------------------------------------------------------- Revenues $13,502,870 $12,784,036 $ (48,309)/(d)/ $26,238,597 Expenses: Facilities administration and maintenance and line costs 9,258,342 7,426,926 (48,309)/(d)/ 16,636,959 Selling, general and administrative 5,920,226 5,432,933 11,353,159 Depreciation and amortization 3,280,515 835,499 (223,892)/(e)/ 3,892,122 ----------------------------------------------------------- 18,459,083 13,695,358 (272,201) 31,882,240 ----------------------------------------------------------- Loss from operations (4,956,213) (911,322) 223,892 (5,643,643) Interest expense (5,381,866) (30,840) 30,840/(g)/ (5,381,866) Interest and other income 1,444,731 44,736 1,489,467 ----------------------------------------------------------- Loss before income taxes (8,893,348) (897,426) 254,732 (9,536,042) Income taxes (benefit) - (325,396) (325,396)/(h)/ - ----------------------------------------------------------- Net loss $(8,893,348) $ (572,030) $ (70,664) $(9,536,042) =========================================================== Net loss per share $ (0.86) $ (0.84) ============= ============ Weighted average number of shares outstanding 10,383,451 11,320,951 (i) ============== ==================
Intermedia Communications Inc. Unaudited Pro Forma Condensed Consolidated Statements of Operations Year ended December 31, 1995
Historical ---------------------------------------- (a) (c) (b) Pro Forma Pro Forma Consolidated FiberNet EMI Adjustments Totals -------------------------------------------------------------------------- Revenues $ 38,630,574 $ 38,790 $43,369,515 $(351,796)/(d)/ $81,687,083 Expenses: Facilities administration and maintenance and line costs 22,989,195 29,849 39,936,405 (351,796)/(d)/ 62,603,653 Selling, general and administrative 14,992,458 236,572 3,065,864 18,294,894 Depreciation and amortization 10,195,871 75,518 4,736,679 (2,290,250)/(e)/ 12,808,073 90,255 /(f)/ -------------------------------------------------------------------------- 48,177,524 341,939 47,738,948 (2,551,791) 93,706,620 -------------------------------------------------------------------------- Loss from operations (9,546,950) (303,149) (4,369,433) 2,199,995 (12,019,537) Interest expense (13,766,639) (59,793) (532,320) 532,320/(g)/ (13,826,432) Interest and other income 4,060,040 - 21,831 4,081,871 Loss before income taxes (19,253,549) (362,942) (4,879,922) 2,732,315 (21,764,098) Income taxes (benefit) (96,952) - (1,776,076) (1,776,076)/(h)/ (96,952) -------------------------------------------------------------------------- Net loss $(19,156,597) $(362,942) $(3,103,846)$ 956,239 $(21,667,146) ========================================================================== Net loss per share $(1.91) $(1.95) ============== =============== Weighted average number of shares outstanding 10,035,774 11,087,205(i) ============== ===============
Intermedia Communications Inc. Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements Balance Sheet Adjustments 1. Represents the historical condensed consolidated balance sheet of ICI as of March 31, 1996. 2. Represents the divisional balance sheet of EMI as of March 31, 1996. 3. To reflect the elimination of all EMI assets, liabilities and divisional equity that are not being acquired by ICI as part of the purchase of EMI. Under the terms of the EMI purchase agreement, ICI is only acquiring the telecommunications assets of EMI which principally consist of telecommunications equipment and existing telecommunications service contracts. 4. To reflect the issuance of ICI common stock in exchange for the telecommunications assets of EMI. Under the terms of the EMI purchase agreement, ICI has agreed to issue 937,500 shares of common stock for such assets. For pro forma purposes, the stock has been valued at $18 per share which represents an average of the selling price of ICI's common stock for a period before and after the date of the acquisition agreement, February 20, 1996. The Company has initially allocated all of the estimated fair value of the common stock plus $250,000 in estimated acquisition-related costs to the telecommunications equipment pending final analysis of the value of the equipment and any acquired intangible assets. Statements of Operations Adjustments (a) Represents the historical condensed consolidated statement of operations of ICI for the quarter ended March 31, 1996 and the year ended December 31, 1995, which as to 1995 include the operations of FiberNet from March 1, 1995. (b) Represents the historical condensed statement of operations of EMI for the quarter ended March 31, 1996 and the twelve months ended January 31, 1996. The operations for the month of January 1996 are included in both periods. The revenue and net loss for the month of January 1996 were $4,057,721 and $15,163, respectively. (c) Represents the historical condensed statement of operations of FiberNet for the two months ended February 28, 1995. (d) Represents the elimination of revenues between ICI and EMI. Intermedia Communications Inc. Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements (continued) Statements of Operations Adjustments (continued) (e) Represents the reduction in historical depreciation expense of EMI's telecommunications equipment as a result of the assets being depreciated on a straight-line basis using an estimated weighted average remaining life of seven years for pro forma purposes versus the original estimated lives and the accelerated depreciation method historically followed by EMI. (f) To reflect the two months of goodwill amortization related to the FiberNet acquisition not included in ICI's historical consolidated financial statements. (g) Represents the elimination of interest costs which would not have been incurred because of the proposed acquisition of EMI's telecommunications assets with ICI Common Stock. (h) Represents the elimination of EMI's historical income tax benefit as a result of ICI's significant net operating losses. (i) The pro forma weighted average number of shares outstanding has been adjusted to reflect the issuance of common stock for FiberNet in 1996 and 1995 and EMI in 1996 as if they occurred at the beginning of the indicated period. 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: July 12, 1996 INTERMEDIA COMMUNICATIONS INC. ------------------------------ (Registrant) By: David C. Ruberg ----------------------------- Name: David C. Ruberg Title: Chairman, Chief Executive Officer and President -----END PRIVACY-ENHANCED MESSAGE-----