-----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, G2DNEV+HT5s7xHHWX7OHcAwitl7KB1A+XskHpruWxiWl5XS72Zt6T1gQo3xJGDI3 Anu9tONxe9qyvTlk77KM0w== 0000950130-98-000245.txt : 19980122 0000950130-98-000245.hdr.sgml : 19980122 ACCESSION NUMBER: 0000950130-98-000245 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980116 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980121 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERMEDIA COMMUNICATIONS 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: 98510478 BUSINESS ADDRESS: STREET 1: 3625 QUEEN PALM DR STREET 2: STE 720 CITY: TAMPA STATE: FL ZIP: 33619 BUSINESS PHONE: 8138290011 FORMER COMPANY: FORMER CONFORMED NAME: INTERMEDIA COMMUNICATIONS OF FLORIDA INC DATE OF NAME CHANGE: 19930328 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): January 16, 1998 ---------------- 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 January 16, 1998, Intermedia Communications Inc. (the "Company") sold $50 million principal amount (the "Additional Senior Notes") of its 8 1/2% Senior Notes due 2008 (the "Senior Notes") for aggregate gross proceeds of approximately $50,000,000. Bear, Stearns & Co. Inc. and Salomon Brothers Inc, the placement agents for the Company's private placement of $350 million principal amount of Senior Notes that was completed on December 23, 1997 (the "December Placement"), purchased the Additional Notes by exercising their over- allotment option with respect to the December Placement. The net proceeds from the sale of the Additional 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 Additional Senior Notes 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 - ------------------------------------------ Although there is no requirement that the Company file financial statements with the Securities and Exchange Commission (the "SEC") under Item 7, the Company hereby files pro forma financial statements which give effect to certain recent and pending acquisitions and recently completed financings, including the exercise of the over-allotment option described in item 5 above with respect to the sale of the $50 million principal amount of the Additional Senior Notes. (a) Pro Forma Financial Information Unaudited Pro Forma Condensed Consolidated Financial Statements for the Company are filed as part of this report. 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: January 21, 1998 INTERMEDIA COMMUNICATIONS INC. ------------------------------ (Registrant) By: /s/ Robert M. Manning ---------------------------- Name: Robert M. Manning Title: Senior Vice President and Chief Financial Officer Intermedia Communications Inc. Unaudited Pro Forma Condensed Consolidated Financial Statements The accompanying unaudited pro forma condensed consolidated balance sheet of Intermedia Communications Inc. at September 30, 1997, and the related unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 1996 and the nine month-period ended September 30, 1997 includes the historical and pro forma effects of the March, July, October and December 1997 Offerings as well as 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, the acquisition of DIGEX, Incorporated (DIGEX), which was consummated in July 1997 and the acquisition of Shared Technologies Fairchild, Inc. (STFI) which, while not yet consummated, is believed by management to be probable of consummation during the first quarter of 1998. The unaudited pro forma condensed consolidated statements of operations have been prepared to reflect the aforementioned offering and purchase transactions as if they were consummated at the beginning of each period for which pro forma statements of operations are presented, and at September 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. As such, the total cost of the STFI acquisition will be allocated to the tangible and intangible assets acquired and liabilities assumed based upon their respective fair values at the effective date of the STFI acquisition. Such allocations and the related amortization periods will be based on studies and valuations which have not yet been completed. Accordingly, the allocations reflected in the pro forma financial data are preliminary and subject to revision. As part of the purchase price allocation the Company is evaluating the in-process research and development of STFI. If the technological feasibility of the acquired technology has not been established and the technology has no future alternative uses, such in-process research and development will be written off. The Company has not yet begun to estimate an amount, if any, of the in-process research and development for STFI that might ultimately be written off. 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 September 30, 1997. Such pro forma financial information should be read in conjunction with the Consolidated Financial Statements and Notes of Intermedia Communications Inc. Intermedia Communications Inc. Unaudited Pro Forma Condensed Consolidated Balance Sheet September 30, 1997 (In Thousands)
HISTORICAL (A) (B) PRO FORMA PROFORMA CONSOLIDATED STFI ADJUSTMENTS TOTALS -------------- -------- ----------- --------- ASSETS Current assets: Cash and cash equivalents $ 471,101 $ 178 446,950 (j) 547,279 (760,900) (c) 389,950 (n) Short-term investments 491 491 Restricted investments 6,351 6,351 Accounts receivable, net 46,855 34,155 81,010 Prepaid expenses and other current assets 4,316 8,696 13,012 --------- ------- -------- --------- Total current assets 529,114 43,029 76,000 648,143 Restricted investments Telecommunications and other equipment 453,545 105,302 (37,234) (d) 521,613 Less accumulated depreciation (65,731) (37,234) 37,234 (d) (65,731) --------- ------- -------- --------- Telecommunications and other equipment, net 387,814 68,068 - 455,882 Intangible assets, net 162,610 258,075 429,345 (e) 850,030 Other assets 6,647 1,070 7,000 (k) 24,767 10,050 (n) --------- ------- -------- --------- Total assets 1,086,185 370,242 522,395 1,978,822 ========= ======= ======== ========= LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable 47,327 18,394 65,721 Other accrued expenses 28,257 16,582 44,839 Current portion of long-term debt and capital lease obligations 3,882 16,083 (13,036) (f) 6,929 --------- ------- -------- --------- Total current liabilities 79,466 51,059 (13,036) 117,489 Other noncurrent liabilities - Long-term debt and capital 615,380 239,633 260,250 (l) 1,276,294 lease obligations (125,269) (f) (113,700) (g) 400,000 (n) --------- ------- -------- --------- Total liabilities 694,846 290,692 408,245 1,393,783 Series B redeemable exchangeable preferred stock and accrued dividends 312,001 312,001 Series D redeemable exchangeable preferred stock and accrued dividends 170,109 170,109 Series E redeemable exchangeable preferred stock and accrued dividends - 193,700 (m) 193,700 Preferred Stock and Put Warrants - 40,948 (40,948) (h) - Stockholders' equity: Common stock 171 70 (70) (i) 171 Additional paid-in capital 237,334 78,137 (78,137) (i) 237,334 Accumulated deficit (319,478) (39,605) 39,605 (i) (319,478) Deferred compensation (8,798) (8,798) --------- ------- -------- --------- Total stockholders' equity (90,771) 38,602 (38,602) (90,771) --------- ------- -------- --------- Total liabilities, redeemable preferred stock and stockholders' equity 1,086,185 370,242 522,395 1,978,822 ========= ======= ======== =========
F-2 NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET SEPTEMBER 30, 1997 (a) This column represents the historical consolidated balance sheet of Intermedia at September 30, 1997. (b) This column represents the historical consolidated balance sheet of Shared Technologies Fairchild, Inc. (STFI) (c) This adjustment represents the cash purchase price for STFI and other expenditures as follows:
Purchase of 17,187,605 shares of outstanding STFI common stock at $15 per share. $257,814 Purchase and retirement of outstanding STFI options, warrants and convertible preferred stock. 103,386 Purchase of STFI Special Preferred Stock 22,000 Purchase of STFI Redeemable Put Warrant 2,100 Purchase of STFI's 12 1/4% Senior Subordinated Discount Notes (including a premium of $36,695). 175,000 Repayment of amounts outstanding under STFI's revolving credit facility. 113,700 Break-up and other fees 86,900 ---------- $760,900 ==========
(d) This adjustment represents the elimination of STFI's accumulated depreciation as fixed assets will be recorded at fair values, which the Company believes approximate net book values on the date of acquisition. (e) This adjustment represents the excess of the total purchase price for STFI over the fair values of the net tangible and intangible assets acquired. The balance, which is subject to further allocation, may be allocated to customer lists and other identifiable intangibles based upon appraised values, with the excess allocated to goodwill. Cash purchase price $ 760,900 Book value of STFI's 12 1/4% Senior Subordinated Discount Notes purchased by the Company (138,305) Book value of STFI's preferred stock and warrants purchased by the Company (40,948) Repayment of amounts outstanding under STFI's revolving credit facility. (113,700) Net assets of STFI at September 30, 1997, including previously recorded goodwill (38,602) ------------ Pro forma adjustment to record additional goodwill related to the STFI acquisition $ 429,345 ============
(f) These adjustments reflect the elimination of STFI's 12-1/4% Senior Subordinated Discount Notes purchased by the Company, net of the $36,695 premium. (g) This adjustment reflects the repayment of amounts outstanding under STFI's revolving credit facility by the Company. (h) This adjustment reflects the retirement of STFI's preferred stock and put warrants purchased by the Company. (i) These adjustments represent the elimination of STFI's stockholders' equity for proforma combining purposes. (j) This adjustment represents cash proceeds of $193.7 million from the October 1997 Series E Junior Convertible Preferred Stock offering, and cash proceeds of $253.3 million from the October 1997 issuance of 8-7/8% Senior Notes due 2007. (k) This adjustment represents the deferred finance costs of $7 million related to the 8-7/8% Senior Notes Due 2007. (l) This adjustment represents the sale of $260.3 million of 8-7/8% Senior Notes due 2007. (m) This adjustment represents the net proceeds from the sale of Series E Redeemable Exchangeable Preferred Stock. (n) These adjustments reflect the December 1997 sale of $400 million of 8-1/2% Senior Notes due 2008 which yielded proceeds of $390 million, with deferred finance costs of approximately $10 million. F-3 Intermedia Communications Inc. Unaudited Pro Forma Condensed Consolidated Statement of Operations Year ended December 31, 1996 (In Thousands, Except Per Share Data))
HISTORICAL ------------------------------------------------------------ ----------- --------- (B) (C) (D) (E) (F) PRO FORMA PRO FORMA CONSOLIDATED EMI UTT NETSOLVE DIGEX ADJUSTMENTS SUB-TOTALS -------------- ------- ------- ------- -------- ----------- --------- 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) 35,359 1,799 (j) 9,482 (k) -------------- ------- ------- ------- -------- --------- --------- 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) (118,295) (81,516)(q) Interest and other income (expense) 12,168 118 - - 497 (10,759)(m) 2,024 -------------- ------- ------- ------- -------- --------- --------- Income (loss) before income taxes and extraordinary item (57,199) (1,908) (1,124) 4,842 (23,305) (92,912) (171,606) Income tax (provision) benefit - 677 - - - (677)(n) - ------------------------------------------------------------------------------------------ Income (loss) before extraordinary item (57,199) (1,231) (1,124) 4,842 (23,305) (93,589) (171,606) Extraordinary loss on early extinguishment of debt -------------- ------- ------- ------- -------- --------- --------- Net income (loss) (57,199) (1,231) (1,124) 4,842 (23,305) (93,589) (171,606) Preferred stock dividends and accretions - - - - - (71,851)(p) (71,851) -------------- ------- ------- ------- -------- --------- --------- Net loss attributable to common stockholders $(57,199) $(1,231) $(1,124) $ 4,842 $(23,305) $(165,440) $(243,457) ============== ======= ======= ======= ======== ========= ========= Net loss per share $(4.08) $(16.77) ============== ========= Weighted average number of shares O/S 14,018 14,518 (o) ============== ========= EBITDA $(14,318) $(19,976) ============== =========
-------- ----------- ------------ (U) PRO FORMA PRO FORMA STFI ADJUSTMENTS TOTALS (A) -------- ----------- ------------ Revenues $157,241 $ 324,885 Costs and expenses: Facilities administration and management and line costs 82,572 210,595 Selling, general and administrative 39,799 99,396 Depreciation and amortization 15,530 28,974 (r) 79,863 -------------- -------- -------- 137,901 28,974 389,854 -------------- -------- -------- Income (loss) from operations 19,340 (28,974) (64,969) Other income (expense): Interest expense (22,903) 11,525 (s) (129,673) Interest and other income (expense) (3,912) (2,024)(m) (3,912) -------------- -------- -------- Income (loss) before income taxes and extraordinary item (7,475) (19,473) (198,554) Income tax (provision) benefit (783) (783) --------------------------------------------- Income (loss) before extraordinary item (8,258) (19,473) (199,337) Extraordinary loss on early extinguishment of debt (311) (311) -------------- -------- -------- Net income (loss) (8,569) (19,473) (199,648) Preferred stock dividends and accretions (2,366) 2,366 (t) (71,851) -------------- -------- -------- Net loss attributable to common stockholders (10,935) (17,107) (271,499) ============== ======== ======== Net loss per share $(18.70) ======= Weighted average number of shares O/S 14,518 (o) ======= EBITDA $ 14,894
F-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 or STFI acquisitions in 1997 or the EMI, UTT and Netsolve acquisitions in 1996. The effect of the write-off of intangible assets associated with the DIGEX acquisition, 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. Finally, the Company has not yet determined an amount, if any, that might ultimately be written-off related to in-process research and development related to STFI, however, any such nonrecurring charge would be excluded from the pro forma condensed consolidated statement of operations. (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 a reduction of expense to eliminate the lease costs for DIGEX'S duplicate network facility costs of $4.1 million and unfavorable lease rates of $5.7 million. (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 for borrowings which were retired at the aquisition by the proceeds of other borrowings by the Company. (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 appropriate period. (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, D and E 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 and $23.7 million on 8-7/8% Senior Notes due 2007 that were issued in October 1997 and $35 million on 8 1/2% Senior Notes due 2008 that were issued in December 1997 (net of $21.6 million reduction of interest due to the retirement of the 13-1/2% Senior Notes) as if the Notes had been issued on January 1, 1996. (r) This adjustment represents the additional amortization expense that is expected to be incurred in connection with the impending STFI 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 ultimately be allocated to identifiable intangibles such as F-5 developed technology, customer lists and goodwill; with the weighted average amortization period of 20 years. The Company will obtain valuations and determine the appropriate amortization periods for intangible assets and goodwill once the acquisition is consummated. (s) This adjustment represents the elimination of interest expense in STFI's historical financial statements related to the 12 1/4% Senior subordinated Discount Notes purchased by the Company. (t) This adjustment represents the elimination of preferred stock dividends and accretions of STFI. (u) This column represents STFI's historical results of operations for the year ended December 31, 1996. F-6 Intermedia Communications Inc. Unaudited Pro Forma Condensed Consolidated Statement of Operations Nine months ended September 30, 1997 (In Thousands)
HISTORICAL ------------------------ (b) (c) PRO PRO (M) PRO PRO FORMA FORMA FORMA FORMA CONSOLIDATED DIGEX ADJUST- SUB TOTALS STFI ADJUST- TOTALS MENTS MENTS ------------- ------- ------- -------- ------ ------ -------- Revenues $ 165,317 $ 19,646 $ 184,963 141,779 326,742 Costs and expenses: Facilities, administration and maintenance and line costs 200,241 19,588 (7,060)(g) 212,769 56,831 269,600 Selling, general and administrative 64,983 18,506 (374)(h) 83,115 51,536 134,651 Depreciation and amortization 34,274 3,390 7,112 (i) 44,776 14,294 20,829 (j) 79,899 --------- ------- ------- -------- ------ ------ -------- 299,498 41,484 (322) 340,660 122,661 20,829 484,150 --------- ------- ------- -------- ------ ------ -------- Loss from operations (134,181) (21,838) 322 (155,697) 19,118 (20,829) (157,408) Other income (expense): Interest expense (39,895) (784) (56,989)(d) (97,668) (21,694) 11,781 (k)(107,581) Other income (loss) 16,691 486 (7,680)(e) 9,497 (210) (9,497) (e) (210) --------- ------- ------- -------- ------ ------ -------- Loss before income taxes and extraordinary item (157,385) (22,136) (64,347) (243,868) (2,786) (18,545) (265,199) Income tax provision (214) (214) --------- ------- ------- -------- ------ ------ -------- Loss before extraordinary item (157,385) (22,136) (64,347) (243,868) (3,000) (18,545) (265,413) Extraordinary loss on early extinguishment of debt (43,834) (43,834) (43,834) ---------- ------- ------- -------- ------ ------ -------- Net loss (201,219) (22,136) (64,347) (287,702) (3,000) (18,545) (309,247) --------- ------- ------- -------- ------ ------ -------- Preferred stock dividends and accretions (27,118) (26,017)(f) (53,135) (3,689) 3,689 (l) (53,135) Net loss attributable to common stock $(228,337) (22,136) (90,364) (340,837) (6,689) (14,856) (362,382) ========== ======= ======= ======== ====== ======= ======== Net loss per common share $( 13.87) $(20.70) $(22.01) ========= ======= ======= Weighted average number of shares outstanding 16,463 16,463 16,463 ========== ======= ====== EBITDA $(99,907) $(110,921) $(77,509) ========== ======= ======
F-7 NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (NINE MONTHS ENDED SEPTEMBER 30, 1997) (a) The unaudited pro forma condensed consolidated statement of operations for the nine months ended September 30, 1997 does not give effect to any potential cost savings and synergies that could result from the DIGEX or STFI acquisitions. In addition, the Company has not yet determined an amount, if any, that might ultimately be written-off related to in- process research and development related to STFI, however, any such nonrecurring charge would be excluded from the pro forma condensed consolidated statement of operations. (b) This column represents the historical results of operations for the nine months ended September 30, 1997. (c) This column takes into effect the operating results for DIGEX for the six months ended June 30, 1997. (d) This adjustment represents interest expense of $23.9 million on the 11- 1/4% Senior Discount Notes Due 2007 that were issued in July 1997 and $17.6 million on 8-7/8% Senior Notes due 2007 that were issued in October 1997 and $26.3 million on 8-1/2% Senior Notes due 2008 that were issued in December 1997 (net of $10.8 million reduction of interest due to the retirement of the 13-1/2% Senior Notes) as if the Notes had been issued January 1, 1997. (e) 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. (f) This adjustment represents the preferred stock dividends and accretions that would have been recorded if Intermedia's Series B, D and E preferred stock had been outstanding for the entire period. (g) This adjustment represents reduction of expense for the reversal of certain assumed liabilities in connection with the DIGEX acquisition related to duplicate facility costs of $4.2 million and unfavorable lease rates of $2.8 million. (h) This adjustment represents the reversal of DIGEX's deferred compensation amortization for the period. (i) This adjustment represents the additional amortization expense of intangible assets related to DIGEX. Capitalized technologies are amortized over 8 years. All other intangible assets are being amortized over 10 years. (j) This adjustment represents the additional amortization expense that is expected to be incurred in connection with the impending STFI 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 ultimately be allocated to identifiable intangibles such as developed technology, customer lists and goodwill with the weighted average amortization period of 20 years. The Company will fully investigate the amount and appropriate amortization periods for intangible assets and goodwill once the acquisition is consummated. (k) This adjustment represents the elimination of interest expense in STFI's historical financial statements related to the 12 1/4% Senior subordinated Discount Notes purchased by the Company. (l) This adjustment represents the elimination of preferred stock dividends and accretions of STFI. (m) This column represents the historical results of operations of Shared Technologies Fairchild, Inc. for the nine months ended September 30, 1997. F-8 -----END PRIVACY-ENHANCED MESSAGE-----