-----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, RqwpAaDUjmkZNIr25oqGnvPPiSydFrW4PmjArBH/IfXHm285EkJz87hpzMt3hnpC E7ugtsy2ShQj3ggTKuXa2g== 0000950109-97-006509.txt : 19971028 0000950109-97-006509.hdr.sgml : 19971028 ACCESSION NUMBER: 0000950109-97-006509 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19971024 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19971027 SROS: NONE 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 SEC ACT: SEC FILE NUMBER: 000-20135 FILM NUMBER: 97701464 BUSINESS ADDRESS: STREET 1: 3625 QUEEN PALM DR STREET 2: STE 720 CITY: TAMPA STATE: FL ZIP: 33619 BUSINESS PHONE: 8138290011 8-K 1 FORM 8-K 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): October 24, 1997 ---------------- INTERMEDIA COMMUNICATIONS INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 59-2913586 - -------------------------- ------------------- (State or other jurisdic- (I.R.S. Employer tion of incorporation or Identification No.) organization) 0-20135 ------------------------ (Commission File Number) 3625 Queen Palm Drive, Tampa, Florida 33619-1309 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (813) 829-0011 -------------- Item 5. Other Events - --------------------- On October 24, 1997, Intermedia Communications Inc. (the "Company") announced the commencement of two concurrent private offerings (the "Offerings") of its securities, to be resold by the initial purchasers pursuant to Rule 144A promulgated under the Securities Act of 1933, as amended (the "Securities Act"). The Company will offer $250 million of Senior Notes, with an overallotment option of $35 million, and $175 million liquidation preference of Depositary Shares, each representing a one-hundredth interest in a share of the Company's Series E Junior Convertible Preferred Stock, with an overallotment option of $43.75 million. The net proceeds from the offering of the Depositary Shares will be used by the Company to finance the continued expansion of the Company's telecommunications networks, including but not limited to, network electronics, such as local/long distance voice and data switches, and for general corporate purposes, including working capital. The net proceeds from the offering of the Senior Notes will be used to fund up to 80% of the cost of acquisition or construction by the Company of telecommunications related assets. A portion of the Company's expansion may occur through acquisitions (utilizing cash or securities of the Company) as an alternative to direct investments in the assets required to implement the expansion. The Senior Notes and the Depositary Shares to be sold in the Offerings will not and have not been registered under the Securities Act or any state securities or blue sky laws, and may not be offered or sold in the United States or in any state thereof absent registration or an applicable exemption from the registration requirements of such laws. Item 7. Financial Statements and Exhibits - ------------------------------------------ Exhibit 99.1 Press Release, dated October 24, 1997. Exhibit 99.2 Unaudited Financial Statements of DIGEX, Incorporated ("DIGEX") for the Six Months Ended June 30, 1997. Exhibit 99.3 Unaudited Pro Forma Condensed Consolidated Financial Statements of the Company and DIGEX for the Year Ended December 31, 1996 and the Six Months Ended June 30, 1997. 2 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: October 24, 1997 INTERMEDIA COMMUNICATIONS INC. ------------------------------ (Registrant) By: /s/ J. Christopher Brown ------------------------------------- Name: J. Christopher Brown Title: Senior Vice President - Investor Relations 3 EXHIBIT INDEX ------------- Exhibit No. Description ------- ----------- 99.1 Press Release, dated October 24, 1997. 99.2 Unaudited Financial Statements of DIGEX for the Six Months Ended June 30, 1997. 99.3 Unaudited Pro Forma Condensed Consolidated Financial Statements of the Company and DIGEX for the Year Ended December 31, 1996 and the Six Months Ended June 30, 1997. EX-99.1 2 PRESS RELEASE EXHIBIT 99.1 [LETTERHEAD OF INTERMEDIA COMMUNICATIONS APPEARS HERE] NEWS RELEASE CONTACTS: Chris Brown Senior Vice President, Investor Relations 813/829-2408 INTERMEDIA ANNOUNCES COMMENCEMENT OF PRIVATE OFFERINGS TAMPA, FL (October 24, 1997) - Intermedia Communications Inc. (Nasdaq/NM: ICIX) today announced the commencement of two concurrent private offerings of its securities, to be resold by the initial purchasers pursuant to Rule 144A promulgated under the Securities Act of 1933, as amended. The Company will offer $250 million of Senior Notes, with an overallotment option of $35 million, and $175 million liquidation preference of Depositary Shares, each representing a one-hundredth interest in a share of the Company's Series E Junior Convertible Preferred Stock, with an overallotment option of $43.75 million. The net proceeds from the offering of the Depositary Shares will be used by the Company to finance the continued expansion of the Company's telecommunications' networks, including but not limited to, network electronics, such as local/long distance voice and data switches, and for general corporate purposes, including working capital. The net proceeds from the offering of the Senior Notes will be used to fund up to 80% of the cost of acquisition or construction by the Company of telecommunications-related assets. A portion of the Company's expansion may occur through acquisitions (utilizing cash or securities of the Company) as an alternative to direct investments in the assets required to implement the expansion. The Senior Notes and the Depositary Shares to be sold in the offerings will not be and have not been registered under the Securities Act or any state securities or blue sky laws, and may not be offered or sold in the United States or in any state thereof absent registration or an applicable exemption from the registration requirements of such laws. Intermedia Communications is one of the nation's fastest growing telecommunications companies, providing integrated telecommunications solutions to business and government customers. These solutions include voice and data, local and long distance, and advanced network access services in cities throughout the eastern United States. Intermedia's enhanced data portfolio, including frame relay networking, ATM, and a full range of business Internet connectivity and web hosting services, offers seamless end-to-end service virtually anywhere in the world. Intermedia, headquartered in Tampa, Florida, with sales offices in over 40 cities in the eastern U.S., trades on the Nasdaq Stock Market's National Market under the symbol ICIX. Intermedia is on the World Wide Web at http://www.icix.net. -END- EX-99.2 3 UNAUDITED FIN STATEMENT OF DIGEX EXHIBIT 99.2 DIGEX, INCORPORATED BALANCE SHEETS (IN THOUSANDS)
DECEMBER 31, 1996 JUNE 30, 1997 ----------------- ------------- (UNAUDITED) ASSETS Current assets: Cash and cash equivalents.................... $ 32,667 $ 12,295 Accounts receivable, less allowance of $777 at December 31, 1996 and $1,463 at June 30, 1997..................... 3,298 6,158 Inventory and prepaid assets................. 1,250 1,367 Deferred income taxes........................ 8 8 -------- -------- Total current assets....................... 37,223 19,828 Property and equipment: Computer equipment and software.............. 20,302 31,049 Office furniture and equipment............... 1,099 1,823 Leasehold improvements....................... 793 839 -------- -------- Total property and equipment............... 22,194 33,711 Accumulated depreciation and amortization.... 3,616 6,908 -------- -------- Net property and equipment................. 18,578 26,803 Other assets................................... 972 1,830 -------- -------- Total assets................................... $56,773 $48,461 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses........ $ 8,501 $ 13,893 Deferred revenue............................. 4,931 4,096 Current portion of capital lease obligations................................. 2,843 4,524 Current portion of long-term debt............ 896 998 -------- -------- Total current liabilities.................. 17,171 23,511 Capital lease obligations, less current portion....................................... 4,878 9,944 Long-term debt, less current portion........... 1,018 941 Stockholders' equity: Preferred stock, $1.00 par value: Authorized shares--3,000 at December 31, 1996 and June 30, 1997; Issued and outstanding shares--none at December 31, 1996 and June 30, 1997 Common Stock, $.01 par value: Authorized shares--47,000 at December 31, 1996 and June 30, 1997; Issued and outstanding shares--11,285 at December 31, 1996 and 11,713 at June 30, 1997....................................... 113 120 Additional paid-in capital................... 61,947 67,478 Accumulated deficit.......................... (28,354) (50,488) Deferred compensation........................ -- (3,045) -------- -------- Total stockholders' equity................. 33,706 14,065 -------- -------- Total liabilities and stockholders' equity..... $ 56,773 $ 48,461 ======== ========
1 DIGEX, INCORPORATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 ----------------------- ----------------------- 1996 1997 1996 1997 ----------- ----------- ----------- ----------- (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) Net revenue: Business Internet services... $ 2,663 $ 9,983 $ 4,659 $ 17,671 Equipment sales.............. 340 922 576 1,975 ------- -------- ------- -------- Total revenue.............. 3,003 10,905 5,235 19,646 Costs and expenses: Network operations........... 2,963 9,698 4,743 17,919 Cost of equipment sales...... 324 758 513 1,669 Sales and marketing.......... 1,913 6,664 2,587 12,384 General and administrative... 1,894 4,332 2,451 6,122 Depreciation and amortization................ 578 1,767 925 3,390 ------- -------- ------- -------- Total expenses............. 7,672 23,219 11,210 41,484 ======= ======== ======= ======== Loss from operations........... (4,669) (12,314) (5,975) (21,838) Other income (expense): Interest and other income.... 33 254 47 486 Interest expense............. (626) (438) (1,167) (784) ------- -------- ------- -------- (594) (184) (1,120) (298) ------- -------- ------- -------- Net loss....................... (5,263) (12,498) (7,095) (22,136) Accretion of Series A Mandatorily Redeemable Convertible Preferred Stock to redemption value.............. (130) -- (253) -- ------- -------- ------- -------- Net loss attributable to common stockholders.................. $(5,393) $(12,498) $(7,348) $(22,136) ======= ======== ======= ======== Net loss per common share attributable to common stockholders.................. (0.70) (1.09) (0.98) (1.94) ======= ======== ======= ======== Weighted average common and common equivalent shares outstanding................... 6,788 11,504 6,788 11,399 ======= ======== ======= ========
2 DIGEX, INCORPORATED STATEMENT OF CASH FLOWS (IN THOUSANDS)
SIX MONTHS ENDED JUNE 30 -------------------------- 1996 1997 ------------ ------------ (UNAUDITED) (UNAUDITED) OPERATING ACTIVITIES: Net loss......................................... $ (7,095) $ (22,136) Adjustments to reconcile net loss to net cash provided by (used in) operating activities Depreciation and amortization.................. 925 3,390 Amortization of debt discount charged to interest expense.............................. 951 -- Non-cash compensation recorded for vested stock option grants................................. 400 3,418 Non-cash compensation recorded for 401(k) matching...................................... -- 250 Changes in operating assets and liabilities: Accounts receivable, net..................... (520) (2,616) Inventory and prepaid expenses............... (776) (117) Accounts payable and accrued expenses........ 7,088 5,393 Deferred revenue............................. 4,687 (835) Deferred compensation........................ -- (3,045) ----------- ------------ Net cash provided by (used in) operating activities...................................... 5,660 (16,298) INVESTING ACTIVITIES: Purchases of property and equipment, net......... (5,577) (2,667) Acquisition of Electronic Press Services Group... -- (844) Increase in other assets......................... (42) (276) ----------- ------------ Net cash used in inventing activities............ (5,619) (3,787) FINANCING ACTIVITIES: Proceeds from issuances of long-term debt........ -- 523 Repayment of long-term debt...................... -- (498) Borrowings under revolving line of credit........ 1,167 -- Repayments under revolving line of credit........ (1,167) -- Repayment of capital lease obligations........... (588) (1,948) Proceeds from issuance of debentures and detachable stock warrants....................... 1,000 -- Proceeds of issuance of Series B Mandatorily Redeemable Convertible Preferred Stock......... 5,000 -- Proceeds from issuance of warrants to purchase common stock to customer........................ 228 -- Proceeds from issuance of shares for the Employee Stock Purchase Plan............................. -- 258 Proceeds from exercise of stock options and warrants........................................ -- 1,378 Increase in deferred financing costs............. (245) -- ----------- ------------ Net cash provided by (used in) financing activities...................................... 5,395 (287) ----------- ------------ Net increase (decrease) in cash and cash equivalents..................................... 5,436 (20,372) Cash and cash equivalent at beginning of period.. 833 32,667 ----------- ------------ Cash and cash equivalents at end of period....... $ 6,269 $ 12,295 =========== ============ Interest paid.................................... $ 41 $ 771 =========== ============
3 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) June 30, 1997 (In thousands, except share and per share amounts) 1. BASIS OF PRESENTATION The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Item 310 (b) of Regulation S-B. 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. Operating results for the three month and six month periods ended June 30, 1997 are not necessarily indicative of the results that may be expected for the year ending December 31, 1997. For further information, refer to the financial statements and footnotes thereto included in the DIGEX, Incorporated annual report on Form 10-KSB for the year ended December 31, 1996. Certain reclassifications have been made to prior years' financial statements to conform to current years' presentation. 2. ACQUISITION OF ELECTRONIC PRESS SERVICES GROUP On January 3, 1997, the Company acquired all of the assets of Electronic Press Services Group (EPSG) for approximately $805 in cash and the assumption of approximately $20 in liabilities. Additionally, the Company issued to the sellers warrants to purchase 175,000 shares of common stock. These warrants are exercisable at any time during the period from December 31, 1997 through January 1, 2000 at $10.38 per share. The acquisition was accounted for as a purchase and the excess of the purchase price over the fair value of the assets received of $613 has been recorded as goodwill, which is being amortized over a ten year period. EPSG designs, integrates and manages electronic commerce solutions for corporate Internet Web sites. The acquisition of EPSG is an element of the Company's heightened focus on and evolving commitment to the most critical and highest revenue-producing customers, such as software publishers and mission- critical applications with high access and reliability requirements. 3. CAPITAL LEASE OBLIGATIONS The Company leases equipment under capital leases. Property and equipment includes the following amounts for leases that have been capitalized:
DECEMBER 31, JUNE 30, 1996 1997 ------------ -------- Computer equipment and software........................... $9,679 $17,938 Leasehold improvements.................................... -- 203 Office furniture and equipment............................ 110 342 ------ ------- 9,789 18,483 Less accumulated amortization............................. 2,214 4,253 ------ ------- $7,575 $14,230 ====== =======
4 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 3. CAPITAL LEASE OBLIGATIONS (CONTINUED) Amortization of leased assets is included in depreciation and amortization expense. Future minimum payments under capital lease obligations consist of the following at June 30, 1997: Through December 31, 1997....................................... $ 3,091 1998....................................... 6,655 1999....................................... 5,472 2000....................................... 2,603 2001....................................... 668 ------- Total minimum lease payments.................................... $18,489 Amounts representing interest................................... 4,021 ------- Present value of net minimum lease payments (including current portion of $4,524)............................................. $14,468 =======
4. LOSS PER SHARE The following table summarizes the computations of share amounts used in the computation of loss per share for the periods ended June 30, 1996 and June 30, 1997 (in thousands of shares):
THREE MONTHS ENDED SIX MONTHS JUNE 30, ENDED JUNE 30, ------------ -------------- 1996 1997 1996 1997 ----- ------ -------------- Weighted average number of shares of common stock outstanding during the period......... 1,618 11,504 1,618 11,399 Effect of options and warrants to purchase common stock issued within one year of registration statement...................... 2,990 -- 2,990 -- Effect of convertible debentures and preferred stock issued within one year of the registration statement.................. 2,180 -- 2,180 -- ----- ------ ------ ------- Total shares considered outstanding.......... 6,788 11,504 6,788 11,399 ===== ====== ====== =======
Loss per share is based on the average number of shares of common stock outstanding during the period adjusted for the effect of other outstanding securities as described in the following sentence. As required by the Securities and Exchange Commission, all common stock options, warrants, convertible debentures, and convertible preferred stock issued by the Company at exercise prices or conversion rates below the expected public offering price during the twelve month period prior to the initial public offering date have been included in the computation as if they were outstanding for all of the periods included in the initial public offering Registration Statement, which included the first three months of 1996, even if the result was anti- dilutive. 5 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 4. LOSS PER SHARE (CONTINUED) In February 1997, the Financial accounting Standards Board issued Statement No. 128, Earnings per Share, which is require to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. The impact of Statement 128 on the calculation of primary and fully diluted earnings per share for these quarters is not expected to be material. 5. INCOME TAXES No provision for income taxes is expected for 1997 as the Company expects to incur a net loss for the year and does not meet the criteria for recognizing an income tax benefit under the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." 6. SUBSEQUENT EVENTS On July 10, 1997 the shareholders of the company approved the sale to Intermedia Communications Inc. at $13 a share. The transaction closed on July 10, 1997. 6 EX-99.3 4 UNAUDITED PRO FORMA CONDENSED CON FINS STATEMENT EXHIBIT 99.3 INTERMEDIA COMMUNICATIONS INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The accompanying unaudited pro forma condensed consolidated balance sheet of Intermedia Communications Inc. at June 30, 1997, and the related unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 1996 and the six months ended June 30, 1997 includes the historical and pro forma effects of the acquisitions of the Telecommunications Division of EMI Communications Corporation (EMI), acquired in June 1996, certain assets and related business lines of Universal Telcom Technologies, Inc. (UTT) and of NetSolve, Incorporated (NetSolve) which were both acquired in December 1996, and the acquisition of DIGEX, Incorporated (DIGEX), which was consummated in July 1997. These pro forma financial statements also include the historical and pro forma effects of the issuance of the Series B redeemable exchangeable preferred stock, 11 1/4% Senior Discount Notes due 2007 and the Series D junior convertible preferred stock in July 1997. The unaudited pro forma condensed consolidated statements of operations have been prepared to reflect the aforementioned transactions as if they were consummated at the beginning of each period for which pro forma statements of operations are presented, and at June 30, 1997 for the condensed consolidated balance sheet. The pro forma effects are 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 supplemental notes. The pro forma information is not intended to purport to be indicative of the actual results or financial position that would have been achieved had the acquisitions in fact been consummated at the beginning of each period presented or at June 30, 1997. Such pro forma financial information should be read in conjunction with the Consolidated Financial Statements and Notes of Intermedia Communications Inc. 1 INTERMEDIA COMMUNICATIONS INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET JUNE 30, 1997 (IN THOUSANDS)
HISTORICAL --------------------- (A) (B) PRO FORMA PRO FORMA CONSOLIDATED DIGEX ADJUSTMENTS TOTALS ------------ -------- ----------- ---------- (IN THOUSANDS) ASSETS Current assets: Cash and cash equivalents.............. $ 347,863 $ 12,295 $(160,000)(c) $ 533,246 333,088 (d) Short-term investments.... 5,644 -- -- 5,644 Restricted investments.... 16,686 -- -- 16,686 Accounts receivable, net.. 26,835 6,158 -- 32,993 Prepaid expenses and other current assets........... 6,224 1,375 -- 7,599 --------- -------- --------- ---------- Total current assets.... 403,252 19,828 173,088 596,168 Restricted investments...... 10,483 -- -- 10,483 Telecommunications and other equipment.................. 347,588 33,711 (6,908)(e) 374,391 Less accumulated depreciation............... (53,667) (6,908) 6,908 (e) (53,667) --------- -------- --------- ---------- Telecommunications and other equipment, net............. 293,921 26,803 -- 320,724 Intangible assets, net...... 46,488 583 126,635 (f) 173,706 Other assets................ 4,391 1,247 5,795 (g) 11,433 --------- -------- --------- ---------- Total assets............ $758,535 $48,461 $ 305,518 $1,112,514 ========= ======== ========= ========== LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable.......... $ 27,799 $ 13,893 $ -- $ 41,692 Other accrued expenses.... 14,348 4,096 9,800 (h) 28,244 Current portion of long- term debt and capital lease obligations........ 159,693 5,522 -- 165,215 --------- -------- --------- ---------- Total current liabilities............ 201,840 23,511 9,800 235,151 Other noncurrent liabilities................ 10,900 (h) 10,900 Long-term debt and capital lease obligations.......... 210,385 10,885 215,617 (i) 436,887 --------- -------- --------- ---------- Total liabilities....... 412,225 34,396 236,317 682,938 Series B redeemable exchangeable preferred stock and accrued dividends.................. 301,387 -- -- 301,387 Series D redeemable exchangeable preferred stock and accrued dividends.................. -- -- 167,100 (j) 167,100 Stockholders' equity: Common stock.............. 166 120 (120)(k) 166 Additional paid-in capital.................. 210,219 67,478 (67,478)(k) 230,219 20,000 (l) Accumulated deficit....... (161,418) (50,488) 50,488 (k) (265,252) (60,000)(m) (43,834)(n) Deferred compensation..... (4,044) (3,045) 3,045 (k) (4,044) --------- -------- --------- ---------- Total stockholders' equity................. 44,923 14,065 (97,899) (38,911) --------- -------- --------- ---------- Total liabilities, redeemable preferred stock and stockholders' equity................. $ 758,535 $ 48,461 $ 305,518 $1,112,514 ========= ======== ========= ==========
2 NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (a) This column represents the historical consolidated balance sheet of Intermedia at June 30, 1997. (b) This column represents the historical balance sheet of DIGEX at June 30, 1997. (c) This adjustment represents the cash purchase price for 11,953,436 shares of DIGEX common stock at $13 per share, plus transaction expenses of $4.6 million. (d) This adjustment represents cash proceeds of $167.1 million from the July 1997 Series D Redeemable Exchangeable Preferred Stock offering, cash proceeds of $363.9 million from the July 1997 issuance of 11 1/4% Senior Discount Notes due 2007 and cash payments of $197.9 million for the retirement of the 13 1/2% Senior Notes, originally due 2005. (e) This adjustment represents the elimination of DIGEX's accumulated depreciation as fixed assets have been recorded at fair values, which approximated net book value on the date of acquisition. (f) This adjustment represents the excess of the total purchase price (including $9.3 million related to duplicate facilities, $11.4 million related to unfavorable leases and $20.0 million related to stock options exchanged) for DIGEX, over the fair values of the net tangible and intangible assets acquired, less the effect of the write-off of in-process research and development projects acquired of $60.0 million, for which there were no alternative use. The balance, which is subject to further allocation, may be allocated to customer lists and other identifiable intangible assets based upon appraised values, with the excess allocated to goodwill. (g) This adjustment represents the deferred loan costs of $10.8 million related to the 11 1/4% Senior Discount Notes Due 2007, less the write-off of $5.0 million of deferred loan costs related to the 13 1/2% Senior Notes, originally due 2005, that were retired. (h) These adjustments represent the current and noncurrent portions of assumed liabilities for estimated duplicate network facility costs, following complete suspension of use of such facilities, and unfavorable leases. (i) This adjustment represents the sale of $374.7 million of 11 1/4% Senior Discount Notes due 2007, less the retirement of $159.1 million 13 1/2% Senior Notes due 2005. (j) This adjustment represents the sale of Series D Redeemable Exchangeable Preferred Stock. (k) These adjustments represent the elimination of DIGEX's stockholders' equity for pro forma combining purposes. (l) This adjustment represents the value ascribed to DIGEX's employee stock options and warrants that were exchanged for stock options of Intermedia at fair market value. These options and warrants were granted/issued by DIGEX prior to its acquisition by Intermedia and were "in-the-money" at the acquisition date. (m) This adjustment represents the write-off of in-process research and development projects acquired in the DIGEX acquisition for which there were no alternative future use. (n) This adjustment represents the extraordinary loss recorded in connection with the retirement of the 13 1/2% Senior Notes due 2005. 3 INTERMEDIA COMMUNICATIONS INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS, EXCEPT PER SHARE DATA)
HISTORICAL ------------------------------------------------- PRO FORMA (B) (C) (D) (E) (F) PRO FORMA TOTALS CONSOLIDATED EMI UTT NETSOLVE DIGEX ADJUSTMENTS (A) ------------ ------- ------- -------- -------- ----------- --------- Revenues................ $103,397 $25,882 $ 4,812 $18,028 $ 15,573 $ (48)(g) $ 167,644 Costs and expenses: Facilities administration and management and line costs................ 81,105 24,331 4,331 12,084 16,020 (48)(g) 128,023 (9,800)(h) Selling, general and administrative....... 36,610 1,646 1,335 1,072 18,934 59,597 Depreciation and amortization......... 19,836 1,931 40 -- 2,855 (584)(i) 1,799 (j) 9,482 (k) 35,359 -------- ------- ------- ------- -------- -------- --------- 137,551 27,908 5,706 13,156 37,809 849 222,979 -------- ------- ------- ------- -------- -------- --------- Income (loss) from operations........... (34,154) (2,026) (894) 4,872 (22,236) (897) (55,335) Other income (expense): Interest expense.... (35,213) -- (230) (30) (1,566) 260 (l) (59,613) (22,834)(q) Interest and other income............. 12,168 118 -- -- 497 (10,759)(m) 2,024 -------- ------- ------- ------- -------- -------- --------- Income (loss) before income tax benefit..... (57,199) (1,908) (1,124) 4,842 (23,305) (34,230) (112,924) Income tax benefit...... -- 677 -- -- -- (677)(n) -- -------- ------- ------- ------- -------- -------- --------- Net income (loss)....... (57,199) (1,231) (1,124) 4,842 (23,305) (34,907) (112,924) Preferred stock dividends and accretions............. -- -- -- -- -- (57,400)(p) (57,400) -------- ------- ------- ------- -------- -------- --------- Net loss attributable to common stockholders.... $(57,199) $(1,231) $(1,124) $ 4,842 $(23,305) $(92,307) $(170,324) ======== ======= ======= ======= ======== ======== ========= Net loss per share...... $ (4.08) $ (11.73) ======== ========= Weighted average number of shares outstanding.. 14,018 14,518 (o) ======== =========
4 NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (YEAR ENDED DECEMBER 31, 1996) (a) The unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 1996 does not give effect to any potential cost savings and synergies that could result from the DIGEX acquisition. The effect of the write-off of intangible assets consisting of in-process research and development (R & D) projects of $60 million has not been reflected in the statement as it is a nonrecurring charge. In addition, the effect of the extraordinary charge for loss on extinguishment of debt of $43 million has not been reflected in the statement as it is also a non-recurring charge. (b) This column represents Intermedia's historical results of operations for the year ended December 31, 1996, which includes the operating results of EMI beginning July 1, 1996, and UTT and NetSolve beginning December 1, 1996. (c) This column represents EMI's historical results of operations for the six months ended June 30, 1996. (d) This column represents UTT's historical results of operations for the eleven months ended November 30, 1996. (e) This column represents NetSolve's historical results of operations for the eleven months ended November 30, 1996. (f) This column represents DIGEX's historical results of operation for the year ended December 31, 1996. (g) This adjustment represents the elimination of intercompany sales between Intermedia and EMI, prior to its acquisition. (h) This adjustment represents reduction of assumed liabilities in connection with the DIGEX acquisition related to duplicate network facility costs of $4,100 and unfavorable lease rates of $5,700. (i) This adjustment represents a reduction in EMI's historical depreciation expense as a result of the allocation of purchase price to fair values of fixed assets acquired. In addition, these fixed assets are being depreciated for pro forma purposes on a straight line basis using an estimated weighted average remaining life of seven years versus original estimated lives and accelerated depreciation historically followed. (j) This adjustment represents the additional amortization expense that would have been incurred had UTT and NetSolve been acquired at the beginning of the year. (k) This adjustment represents the additional amortization expense that is expected to be incurred in connection with the DIGEX acquisition. For purposes of the pro forma presentation, it is assumed that the excess of the purchase price over the net tangible assets acquired will be allocated to developed technology (5 year lives) and goodwill (10 year life). The Company is investigating the amount and the appropriate amortization periods for the intangible assets. (l) This adjustment represents the elimination of interest expense on UTT's and NetSolve's historical statement of operations. (m) Where acquisitions were paid all or partially in cash, interest income was adjusted to reflect the absence of the cash or investments for the full year. (n) Represents the elimination of the historical income tax benefit of EMI that would not have been realized had the operations of EMI been consolidated with Intermedia for the year. (o) Includes the weighted effect of 937,500 shares issued in June 1996 for EMI and 31,380 shares issued in December 1996 for UTT. (p) This adjustment represents the preferred stock dividends and accretions that would have been recorded if Intermedia's Series B and D preferred stock had been outstanding for the entire period. (q) This adjustment represents interest expense of $44.4 million on the 11 1/4% Senior Discount Notes due 2007 that were issued in July 1997, net of $21.6 million reduction of interest due to the retirement of the 13 1/2% Senior Notes. 5 INTERMEDIA COMMUNICATIONS INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1997 (IN THOUSANDS)
HISTORICAL --------------------- (B) (C) PRO FORMA PRO FORMA CONSOLIDATED DIGEX ADJUSTMENTS TOTALS(A) ------------ -------- ----------- ---------- Revenues...................... $ 94,070 $ 19,646 $ 113,716 Costs and expenses: Facilities, administration and maintenance and line costs...................... 80,721 19,588 $ (3,600)(d) 96,709 Selling, general and administrative............. 39,978 18,506 (374)(e) 58,110 Depreciation and amortization............... 18,174 3,390 4,741 (f) 26,305 ---------- -------- -------- ---------- 138,873 41,484 767 181,124 ---------- -------- -------- ---------- Loss from operations.......... (44,803) (21,838) (767) (67,408) Other income (expenses): Interest expense............ (22,206) (784) (10,824)(g) (33,814) Other income................ 9,956 486 (5,120)(h) 5,322 ---------- -------- -------- ---------- Net loss...................... (57,053) (22,136) (16,711) (95,900) Preferred stock dividends and accretions................... (13,223) -- (14,771)(i) (27,994) ---------- -------- -------- ---------- Net loss attributable to common stock................. $ (70,276) $(22,136) $(31,482) $ 123,894 ========== ======== ======== ========== Net loss per common share..... $ (4.30) $ (7.58) ========== ========== Weighted average number of shares outstanding........... 16,347,288 16,347,288 ========== ==========
6 NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (SIX MONTHS ENDED JUNE 30, 1997) (a) The unaudited pro forma condensed consolidated statement of operations for the six months ended June 30, 1997 does not give effect to any potential cost savings and synergies that could result from the DIGEX acquisition. The effect of the write-off of intangible assets consisting of in-process research and development (R&D) projects of $60 million has not been reflected in the statement as it is a non-recurring charge. In addition, the effect of the extraordinary charge for loss on extinguishment of debt of $43 million has not been reflected in the statement as it is also a non-recurring charge. (b) This column represents the historical results of operations for the six months ended June 30, 1997. (c) This column represents the historical results of operations of DIGEX for the six months ended June 30, 1997. (d) This adjustment represents reduction of assumed liabilities in connection with the DIGEX acquisition related to duplicate facility costs of $800 and unfavorable lease rates of $2,800. (e) This adjustment represents the reversal of DIGEX's deferred compensation amortization for the period. (f) This adjustment represents the amortization of intangible assets. Capitalized technologies are amortized over 8 years. All other intangible assets are being amortized over 10 years. (g) This adjustment represents interest expense of $21.6 million on the 11 1/4% Senior Discount Notes Due 2007 that were issued in July 1997, net of $10.8 million reduction of interest due to the retirement of the 13 1/2% Senior Notes. (h) This adjustment represents the estimated reduction in interest income that would have been experienced had the cash purchase price been paid at the beginning of the period. (i) This adjustment represents the preferred stock dividends and accretions that would have been recorded if the Series B and D Preferred Stock had been outstanding for the entire period. 7 -----END PRIVACY-ENHANCED MESSAGE-----