1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q/A
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________ .
COMMISSION FILE NUMBER 0-20803
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IXC COMMUNICATIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 75-2644120
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1122 CAPITAL OF TEXAS HIGHWAY SOUTH,
AUSTIN, TEXAS 78746-6426
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE): (512) 328-1112
This Amendment No. 1 on Form 10-Q/A amends and supersedes in all respects
the original version of this document as filed on November 15, 1999. The
amendment is required as it has been determined that the Company's filing agent
filed an incorrect version of the document due to an internal procedural error.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
The number of shares of Common Stock, $.01 par value, outstanding (the only
class of common stock of the Company outstanding) was 37,710,281 on November 8,
1999.
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2
IXC COMMUNICATIONS, INC. AND SUBSIDIARIES
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1999
TABLE OF CONTENTS
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of September 30,
1999 and December 31, 1998................................ 3
Condensed Consolidated Statements of Operations for the
Three and Nine Months Ended September 30, 1999 and 1998... 4
Condensed Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 1999 and 1998.................. 5
Notes to Condensed Consolidated Financial Statements........ 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 13
Item 3. Quantitative and Qualitative Disclosures About Market
Risk...................................................... 17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................... 18
Item 2. Changes in Securities and Use of Proceeds................... 18
Item 3. Defaults Upon Senior Securities............................. 18
Item 4. Submission of Matters to a Vote of Security Holders......... 18
Item 5. Other Information........................................... 19
Item 6. Exhibits and Reports on Form 8-K............................ 19
SIGNATURES............................................................ 23
2
3
IXC COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
AS OF AS OF
SEPTEMBER 30, DECEMBER 31,
1999 1998
ASSETS ------------- ------------
(UNAUDITED)
Cash and cash equivalents................................... $ 147,576 $ 264,826
Accounts and other receivables, net of allowance for
doubtful accounts of $43,780 at September 30, 1999 and
$16,664 at December 31, 1998................................ 86,481 107,558
Current portion of notes receivable......................... -- 63,748
Note receivable from Westel................................. -- 9,421
Other current assets........................................ 17,846 10,965
---------- ----------
Total current assets............................... 251,903 456,518
Property and equipment...................................... 1,733,312 1,193,655
Less: accumulated depreciation.............................. (313,095) (209,979)
---------- ----------
Property and equipment, net........................ 1,420,217 983,676
Non-current marketable securities........................... 372,954 219,880
Investments in unconsolidated subsidiaries.................. 6,071 9,505
Deferred charges and other non-current assets, net.......... 168,386 78,658
---------- ----------
Total assets....................................... $2,219,531 $1,748,237
========== ==========
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
Current portion of long-term debt and capital lease
obligations............................................... $ 162,332 $ 13,984
Accounts payable trade...................................... 157,952 33,558
Accrued service cost........................................ 36,131 43,177
Accrued liabilities......................................... 124,424 72,307
Current portion of unearned revenue......................... 52,224 33,640
---------- ----------
Total current liabilities.......................... 533,063 196,666
Long-term debt and capital lease obligations, less current
portion................................................... 813,735 679,016
Unearned revenue -- noncurrent.............................. 557,457 488,395
Other noncurrent liabilities................................ 55,821 8,848
7 1/4% Junior Convertible Preferred Stock; $.01 par value;
3,000,000 shares of all classes of Preferred Stock
authorized; 1,074,500 shares issued and outstanding at
September 30, 1999 and December 31, 1998 (aggregate
liquidation preference of $107,450 at September 30,
1999)..................................................... 103,965 103,623
12 1/2% Junior Exchangeable Preferred Stock; $.01 par value;
3,000,000 shares of all classes of Preferred Stock
authorized; 383,232 and 349,434 shares issued and
outstanding at September 30, 1999 and December 31, 1998
(aggregate liquidation preference of $389,207 at September
30, 1999 including accrued dividends of $5,898)........... 379,308 344,235
Stockholders' deficit:
6 3/4% Cumulative Convertible Preferred Stock, $.01 par
value; 3,000,000 shares of all classes of Preferred
Stock authorized; 155,250 shares issued and outstanding
at September 30, 1999 and December 31, 1998 (aggregate
liquidation preference of $155,250 at September 30,
1999)................................................... 2 2
Common Stock, $.01 par value; 300,000,000 shares
authorized; 37,580,106 and 36,409,709 shares issued and
outstanding at September 30, 1999 and December 31, 1998,
respectively............................................ 376 364
Additional paid-in capital.................................. 238,276 253,429
Unrealized gain on marketable securities.................... 89,351 --
Accumulated deficit......................................... (551,823) (326,341)
---------- ----------
Total stockholders' deficit........................ (223,818) (72,546)
---------- ----------
Total liabilities, redeemable preferred stock and
stockholders' deficit............................ $2,219,531 $1,748,237
========== ==========
See accompanying notes.
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IXC COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
-------------------- ---------------------
1999 1998 1999 1998
--------- -------- --------- ---------
Net operating revenue:
Private line service............................... $ 76,073 $ 61,908 $ 220,506 $ 154,480
Long distance switched services.................. 77,535 110,741 230,180 330,010
Data and Internet services....................... 5,556 3,631 16,084 5,308
Other............................................ 10,963 8,989 22,607 8,989
--------- -------- --------- ---------
170,127 185,269 489,377 498,787
Operating expenses:
Cost of services................................. 106,360 109,984 319,453 325,526
Operations and administration.................... 66,318 40,094 179,075 99,422
Restructuring charges............................ 6,744 -- 32,570 --
Depreciation and amortization.................... 50,651 34,801 126,494 77,589
Merger and other infrequent costs................ 1,078 444 1,223 8,089
--------- -------- --------- ---------
Operating loss................................ (61,024) (54) (169,438) (11,839)
Interest income.................................... 1,039 2,159 8,702 7,080
Interest expense................................... (10,536) (7,580) (30,645) (22,421)
Equity loss from unconsolidated subsidiaries....... (3,066) (8,307) (19,048) (30,326)
Other income (expense)............................. (4) 181 (12,729) 357
--------- -------- --------- ---------
Loss before provision for income taxes and minority
interest......................................... (73,591) (13,601) (223,158) (57,149)
Benefit (provision) for income taxes............... 4,493 (1,647) (1,818) (8,266)
Minority interest.................................. -- (216) (509) (641)
--------- -------- --------- ---------
Loss before extraordinary item..................... (69,098) (15,464) (225,485) (66,056)
--------- -------- --------- ---------
Extraordinary gain (loss), net..................... -- 163 -- (69,647)
--------- -------- --------- ---------
Net loss........................................... (69,098) (15,301) (225,485) (135,703)
--------- -------- --------- ---------
Dividends applicable to preferred stock............ (16,729) (15,341) (49,119) (42,548)
--------- -------- --------- ---------
Net loss applicable to common stockholders......... (85,827) (30,642) (274,604) (178,251)
--------- -------- --------- ---------
Other comprehensive income:
Change in unrealized gain on marketable securities
net of tax of ($27,860) and $48,112.............. (51,740) -- 89,351 --
--------- -------- --------- ---------
Comprehensive loss................................. $(137,567) $(30,462) $(185,253) $(178,251)
========= ======== ========= =========
Basic and diluted loss per share:
Before extraordinary item........................ $ (2.29) $ (0.86) $ (7.43) $ (3.03)
Extraordinary item............................... -- 0.01 -- (1.95)
--------- -------- --------- ---------
Net loss......................................... $ (2.29) $ (0.85) $ (7.43) $ (4.98)
========= ======== ========= =========
Weighted average shares outstanding................ 37,470 36,014 36,942 35,774
========= ======== ========= =========
See accompanying notes.
4
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IXC COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
----------------------
1999 1998
--------- ---------
Net cash provided by operating activities................... $ 140,165 $ 127,876
--------- ---------
Investing activities:
Capital Expenditures...................................... (449,691) (336,609)
Proceeds from collection of notes receivable.............. 750 2,025
Acquisitions, net of cash acquired and stock issued....... (73,324) (22,699)
Proceeds from sale of property and equipment.............. (264) --
Investments in unconsolidated subsidiaries................ (6,220) (26,885)
--------- ---------
Net cash used in investing activities....................... (528,749) (384,168)
--------- ---------
Financing activities:
Proceeds from sale of 9% Senior Notes..................... -- 450,000
Proceeds from sale of 6 3/4% Cumulative Convertible
Preferred Stock........................................ -- 147,213
Proceeds from issuance of debt and capital lease
obligations............................................ 288,907 14,022
Principal payments on debt and capital lease
obligations............................................ (15,840) (349,361)
Redemption of 10% Junior Series 3 Cumulative Preferred
Stock.................................................. -- (708)
Stock option exercises.................................... 6,731 3,445
Payment of dividends on preferred stock................... (8,464) (6,544)
Other financing activities................................ -- (14,438)
--------- ---------
Net cash provided by financing activities................... 271,334 243,629
--------- ---------
Effect of differing year-ends from merged entities.......... -- (1,502)
--------- ---------
Net decrease in cash and cash equivalents................... (117,250) (14,165)
Cash and cash equivalents at beginning of period............ 264,826 155,855
--------- ---------
Cash and cash equivalents at end of period.................. $ 147,576 $ 141,690
========= =========
Supplemental Disclosure of cash flow information:
Cash paid for:
Interest............................................... $ 5,943 $ 23,117
========= =========
Taxes.................................................. $ 1,369 $ 3,092
========= =========
See accompanying notes.
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IXC COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial statements of
IXC Communications, Inc. and its subsidiaries ("the Company") have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
notes 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 for
the periods indicated have been included. Operating results for the three and
nine month periods ended September 30, 1999 are not necessarily indicative of
the results that may be expected for the year ended December 31, 1999. The
accompanying unaudited condensed consolidated financial statements have been
restated for 1998 to include the operations of Eclipse Telecommunications, Inc.,
formerly Network Long Distance, Inc. ("Eclipse"), which was acquired on June 3,
1998 in a transaction accounted for as a pooling of interests. The condensed
consolidated balance sheet at December 31, 1998 has been derived from the
Company's audited financial statements but does not include all of the
information and notes required by generally accepted accounting principles for
complete financial statements. The accompanying financial statements should be
read in conjunction with the Company's audited consolidated financial statements
and notes thereto for the year ended December 31, 1998. Certain amounts shown in
the Company's 1998 financial statements have been reclassified to conform to the
1999 presentation.
2. ACQUISITIONS
On May 10, 1999, the Company acquired Coastal Telecom Limited Company, and
other related companies under common control ("Coastal"). Coastal is a retail
long distance reseller. The acquisition of Coastal was accounted for as a
purchase and was effective as of May 10, 1999. The purchase price amounted to
approximately $110.1 million and was comprised of $73.2 million of cash, $10.0
million of notes payable, $25.0 million of the Company's common stock, and
warrants to purchase 75,000 shares of the Company's common stock. Goodwill from
this acquisition totaled $ 103.3 million and is being amortized over a period of
7 years.
On November 9, 1999 the Company completed a merger with Cincinnati Bell
Inc. ("CBI"), a diversified telecommunications company headquartered in
Cincinnati, Ohio. For further discussion of this matter, see Note 10 of the
condensed consolidated financial statements.
3. MARKETABLE SECURITIES
PSINet Investment
The Company owns approximately 10.2 million shares of common stock of
PSINet, Inc. ("PSINet"). This investment had a fair market value of
approximately $368.0 million as of September 30, 1999. Of the total fair value,
$240.0 million was recorded as unearned revenue because it represented the sale
to PSINet of an agreement for an indefeasible right to use ("IRU") capacity on
the Company's network. The remaining fair value, net of tax, was reported as
unrealized gain on marketable securities because the PSINet investment is
"available-for-sale" as defined in Statement of Financial Accounting Standards
("SFAS") No. 115. The change in the unrealized gain amount, net of tax, is
included in other comprehensive income on the accompanying condensed
consolidated statement of operations.
In June and July, 1999, the Company received approximately $111.8 million
representing amounts from a financial institution in connection with two
prepaid, forward-sale contracts on 3.0 million shares of PSINet common stock.
This amount is accounted for as notes payable and is secured by 3.0 million
shares of PSINet common stock owned by the Company. The forward-sale obligation
for the first 1.5 million shares of PSINet
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IXC COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
stock may be settled at a specified date in the second quarter of 2002 for a
maximum amount of 1.5 million shares of PSINet stock, or, at the Company's
option, the equivalent value in cash.
The forward-sale obligation for the second 1.5 million shares of PSINet
common stock may be settled at a specified date in the first quarter of 2002 for
a maximum of the 1.5 million PSINet shares or, at the Company's option, the
equivalent value of the 1.5 million shares in cash.
DCI Telecommunications
In November 1998 the Company entered into an agreement to acquire 4.25
million shares of common stock of DCI Telecommunications, Inc. ("DCI"), as
consideration for payment of amounts due from one of the Company's customers
that was also a vendor of DCI. The agreement provided that DCI was to issue
additional shares of common stock to the Company if the market value of the
shares the Company owned did not reach $17.7 million by June 1, 1999. As of June
1, 1999, and subsequent thereto, the market value of the shares the Company
owned was less than the $17.7 million guaranteed in the November 1998 agreement.
DCI has publicly disclosed that it does not intend to issue additional shares to
the Company. The Company intends to vigorously pursue the remedies to which it
is entitled under the November 1998 agreement. As of September 30, 1999, the
Company has written down its investment in DCI by $12.8 million to $5 million as
a result of these uncertainties. This writedown was recorded in the second
quarter 1999 in other income/expense in the condensed consolidated statement of
operations contained in the Company's Form 10-Q for such quarter. As of
September 30, 1999, the quoted market price declined from June 30, 1999. The
Company considered the decline temporary and did not further reduce its
investment in DCI. The investment in DCI is included in non-current marketable
securities in the accompanying condensed consolidated balance sheet.
4. INCOME TAXES
The provision or benefit for income taxes recorded during interim periods
is calculated based on an estimated annual effective tax rate. For 1999, the
effective tax rate includes the impact of IRU transactions anticipated to occur
during the year. During the third quarter the Company reduced its profitability
assumptions for the year resulting in an income tax benefit for the quarter. A
valuation allowance was applied against the deferred tax assets arising during
1999 due to uncertainty regarding their realizability. As of September 30, 1999,
the Company has a total valuation allowance of $213.6 million against deferred
tax assets.
5. COMMITMENTS AND CONTINGENCIES
On July 21, 1999, July 23, 1999 and July 27, 1999, five lawsuits were filed
by the Company's stockholders in the Court of Chancery of the State of Delaware
relating to the Company's merger agreement with CBI. A further discussion of
this and other matters relative to the merger with CBI is contained in Note 10
and in Part II, Item I of the Form 10-Q.
In conjunction with the merger with CBI, potential areas of concern have
arisen regarding the Company's reporting under various Environmental Protection
Agency ("EPA") regulations. By comparing information with CBI, potential EPA
violations have been identified. The Company is in the process of inspecting its
facilities over the next 60 days. If any violations are identified, the related
penalties will be recorded during the fourth quarter of 1999. As the inspection
process is underway, it is not possible at this time to estimate the amount of
penalties, if any, that may be due.
Twenty-two Equal Employment Opportunity ("EEOC") suits, alleging sexual and
racial discrimination and retaliation, have been filed by employees located in
the Company's Houston, Texas office of its retail operations. Management was
quick to respond to these allegations and is closely monitoring the discovery
process. At this point, it is not possible to determine the amount, if any, of
penalties which may arise from these lawsuits.
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IXC COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
The Company is also involved in other legal proceedings arising in the
ordinary course of business, some of which are covered by insurance. In the
opinion of management, none of the claims relating to such proceedings will have
a material adverse effect on the Company's financial condition, results of
operations or cash flows.
6. SEGMENT REPORTING
The Company's financial reporting segments are based on the different types
of products the Company offers. The segments consist of the private line
segment, the switched long distance segment, and the data/ Internet segment. The
segments are separately evaluated because the products or services sold are
subject to different market forces and sales strategies. Management reviews the
gross profits of each reporting segment, but views the costs of the network and
administrative functions as supporting all business segments. Therefore, assets
(other than accounts receivable), liabilities, general and administrative
expenses, interest expense and income, and other expenses are not identified to
any one segment. Losses from equity method subsidiaries are not identified to
any one segment because those subsidiaries may have operations in multiple
segments. All operating revenue shown is derived from sales to external
customers. Revenue related to the sale of options in fibers that are jointly
owned with other carriers are not reported in any segment. The summarized
segment data is as follows (in thousands):
PRIVATE SWITCHED LONG DATA &
THREE MONTHS ENDED SEPTEMBER 30, 1999 LINE DISTANCE INTERNET OTHER TOTAL
------------------------------------- -------- ------------- -------- ------- ---------
Net operating revenue..................... $ 76,073 $ 77,535 $ 5,556 $10,963 $ 170,127
Cost of services.......................... 26,772 73,897 5,691 -- 106,360
-------- -------- ------- ------- ---------
Gross profit.............................. 49,301 3,638 (135) 10,963 63,767
Operations and administration............. 66,318
Restructuring charges..................... 6,744
Depreciation and amortization............. 50,651
Merger and other infrequent costs......... 1,078
---------
Operating loss............................ (61,024)
Interest income........................... 1,039
Interest expense.......................... (10,536)
Equity loss from unconsolidated
Subsidiaries............................ (3,066)
Other, net................................ (4)
---------
Loss before provision for income taxes,
minority interest, and extraordinary
item.................................... $ (73,591)
=========
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IXC COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
PRIVATE SWITCHED LONG DATA &
THREE MONTHS ENDED SEPTEMBER 30, 1998 LINE DISTANCE INTERNET OTHER TOTAL
------------------------------------- -------- ------------- -------- ------- ---------
Net operating revenue..................... $ 61,908 $110,741 $ 3,631 $ 8,989 $ 185,269
Cost of services.......................... 19,750 86,337 3,897 -- 109,984
-------- -------- ------- ------- ---------
Gross profit.............................. 42,158 24,404 (266) 8,989 75,285
Operations and administration............. 40,094
Depreciation and amortization............. 34,801
Merger and other infrequent costs......... 444
---------
Operating loss............................ (54)
Interest income........................... 2,159
Interest expense.......................... (7,580)
Equity loss from unconsolidated
subsidiaries............................ (8,307)
Other, net................................ 181
---------
Loss before provision for income taxes,
minority interest, and extraordinary
item.................................... $ (13,601)
=========
PRIVATE SWITCHED LONG DATA &
NINE MONTHS ENDED SEPTEMBER 30, 1999 LINE DISTANCE INTERNET OTHER TOTAL
------------------------------------ -------- ------------- -------- ------- ---------
Net operating revenue..................... $220,506 $230,180 $16,084 $22,607 $ 489,377
Cost of services.......................... 79,005 225,536 14,912 -- 319,453
-------- -------- ------- ------- ---------
Gross profit.............................. 141,501 4,644 1,172 22,607 169,924
Operations and administration............. 179,075
Restructuring charges..................... 32,570
Depreciation and amortization............. 126,494
Merger and other infrequent costs......... 1,223
---------
Operating loss............................ (169,438)
Interest income........................... 8,702
Interest expense.......................... (30,645)
Equity loss from unconsolidated
subsidiaries............................ (19,048)
Other, net................................ (12,729)
---------
Loss before provision for income taxes,
minority interest, and extraordinary
item.................................... $(223,158)
=========
9
10
IXC COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
PRIVATE SWITCHED LONG DATA &
NINE MONTHS ENDED SEPTEMBER 30, 1998 LINE DISTANCE INTERNET OTHER TOTAL
------------------------------------ -------- ------------- -------- ------- ---------
Net operating revenue..................... $154,480 $330,010 $ 5,308 $ 8,989 $ 498,787
Cost of services.......................... 61,387 255,598 8,541 -- 325,526
-------- -------- ------- ------- ---------
Gross profit.............................. 93,093 74,412 (3,233) 8,989 173,261
Operations and administration............. 99,422
Depreciation and amortization............. 77,589
Merger and other infrequent costs......... 8,089
---------
Operating loss............................ (11,839)
Interest income........................... 7,080
Interest expense.......................... (22,421)
Equity loss from unconsolidated
subsidiaries............................ (30,326)
Other, net................................ 357
---------
Loss before provision for income taxes,
minority interest, and extraordinary
item.................................... $ (57,149)
=========
7. INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES
At December 31, 1998, the Company was owed $9.4 million by Westel
International ("Westel"), the Company's partner in Progress International LLC
("Progress"). The note was secured by Westel's ownership in Progress, and
repayment was due on May 31, 1999. Westel failed to make scheduled payments on
the note and thereby transferred their share rights to the Company. As a result
of that forfeiture, the Company now owns 65.4% of Progress.
In February 1999 Marca-Tel S.A. de C.V. ("MarcaTel") and its primary
creditor agreed to allow MarcaTel to defer certain payments to the creditor
until June 1999. The creditor was given the right to acquire up to 10% of
MarcaTel and the creditor acquired additional shares which diluted the Company's
indirect interest from 32.1% (after taking into consideration the additional
share rights forfeited by Westel) to 30.5%. In June 1999 MarcaTel did not pay
the creditor, and a default was declared on the loan. Management of MarcaTel and
the Company have been meeting with the creditor during the third quarter to work
out the default provisions and an operating plan going forward. The Company's
indirect investment in MarcaTel was written down to zero in 1998.
In July 1999, the Company entered into an agreement with Unidial
Communications, Inc. to sell its share of Unidial Communications Services, LLC
("Unidial"). In conjunction with this agreement, the Company is relieved from
making any further capital contributions to Unidial. During the second quarter
of 1999, the Company reported losses totaling approximately $10.9 million
related to its investment in Unidial. As of September 30, 1999, the Company's
investment in Unidial was zero.
The Company is currently in discussions with Telenor Carrier Services AS
its joint venture partner, regarding the Company's exit from the joint venture
in Europe ("Storm"). As those discussions are continuing, and it is probable
that the Company will not recover any of its investment in the Storm joint
venture, the Company has written its investment in Storm down to zero. The total
loss from unconsolidated subsidiaries related to the Storm joint venture
recorded by the Company during the third quarter of 1999 was approximately $1.8
million.
8. RESTRUCTURING CHARGE
In the second quarter of 1999, the Company recorded a charge of
approximately $25.8 million to exit certain operations in the switched wholesale
business. The restructuring charge consists of severance and
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IXC COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
various other costs associated with workforce reduction, network
decommissioning, and various terminations. The workforce reduction of 94 people
included employees contributing to the sales function and employees contributing
to the network operations. The restructuring activities are expected to be
substantially complete by March 31, 2000. With the merger agreement reached
between CBI and the Company during the third quarter, it was determined that the
merged companies would need the switches that had been marked for
decommissioning in the second quarter's restructuring charge. Additionally, it
was determined that the total period contemplated for lease payments relating to
an abandoned office would not be required. As a result, the second quarter's
restructuring charge was reduced by $1.2 million during the third quarter
related to decommissioning the switches and $0.4 million related to reduction in
the lease pay off requirement.
In the third quarter of 1999, the Company recorded a charge of
approximately $8.3 million relating to the restructuring of the organization and
to exit certain foreign operations. The plan was developed by the new Chief
Executive Officer after reviewing the Company's operations. The workforce
reduction of 15 employees included management, administrative and foreign sales
personnel. The employees were notified of this program during July and August of
1999. Generally, all of the charges are expected to be paid by the first quarter
of 2000.
Activity in the accrued restructuring liabilities recorded in the second
and third quarters of 1999 are as follows (in thousands):
AMOUNT
PAID OR ACCRUED AT
RESTRUCTURING WRITTEN SEPTEMBER 30,
CHARGE DOWN ADJUSTMENTS 1999
------------- ------- ----------- -------------
SECOND QUARTER:
Severance.................................. $ 2,864 $1,367 $ -- $ 1,497
Network Decommissioning.................... 3,872 158 1,193 2,521
Asset Write-downs.......................... 12,722 658 -- 12,064
Terminate contractual obligations and exit
facilities............................... 6,368 285 380 5,703
------- ------ ------ -------
Total restructuring costs.................. $25,826 $2,468 $1,573 $21,785
======= ====== ====== =======
THIRD QUARTER:
Severance.................................. $ 7,554 $2,743 $ -- $ 4,811
Terminate contractual obligations and exit
facilities............................... 770 30 -- 740
------- ------ ------ -------
$ 8,324 $2,773 $ $ 5,551
======= ====== ====== =======
9. NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS
No. 133 establishes accounting and reporting standards requiring that derivative
instruments be recorded in the balance sheet as either an asset or liability
measured at its fair value. SFAS No. 133 was amended by SFAS No. 137 to be
effective for all fiscal years beginning after June 15, 2000. Management has not
yet assessed the impact of SFAS No. 133 on the Company's results of operations,
cash flows and financial position.
In June 1999 the FASB issued Interpretation No. 43 on FASB Statement No.
66. Statement No. 66 deals with accounting for real estate transactions.
Interpretation No. 43 specifies that leases of real property cannot be
considered sales type leases unless title to the property transfers at some
point during the lease term. Under this definition, profit relating to IRU
agreements for fiber optic wires or capacity cannot be recorded when the fiber
or capacity is delivered unless title to the fiber changes hands during the term
of the IRU
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IXC COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
agreement. None of the Company's IRU agreements include title transfer. The
Company has always recognized the profit from IRU agreements over the term of
the IRU agreement; therefore, no change in accounting will be required.
10. MERGER WITH CINCINNATI BELL, INC.
On July 20, 1999, the Company entered into a definitive merger agreement
with CBI, a diversified telecommunications company headquartered in Cincinnati,
Ohio. In accordance with the terms of the merger agreement, CBI purchased 5
million shares of the Company's common stock for $50 per share, in cash, from
the General Electric Pension Trust ("GEPT").
In July 1999, five stockholder class action suits were filed in the
Delaware Court of Chancery (the "Court") against the Company, certain former
members of the Company's board of directors, CBI and Ivory Merger Inc. These
complaints allege, among other things, that the defendants had breached their
fiduciary duties to the Company's stockholders by failing to maximize
stockholder value in connection with entering into the merger agreement. The
complaints seek charges and a court order enjoining completion of the merger. On
August 12, 1999, plaintiffs in the various actions moved for a preliminary
injunction to prevent the completion of the merger pending a full hearing on the
merits. A hearing in connection with that motion was held on October 20, 1999.
In an October 27, 1999 ruling, the Court denied plaintiffs' request for a
pecuniary injunction. However, the Court did not rule on the merits of the class
action suits, and these suits remain subject to further litigation. The Company
believes that the suits are without merit and intends to vigorously defend
against these complaints.
On November 9, 1999 the Company consummated the merger with CBI whereby the
Company's stockholders exchanged each share of common stock for 2.0976 shares of
CBI common stock. The merger was recorded under the purchase method of
accounting by CBI. In conjunction with the merger, CBI refinanced bank loans
totaling approximately $371.1 million plus accrued interest and terminated the
Company's existing credit facilities with the banks. CBI also refinanced other
loans totaling $20.2 million plus accrued interest at the merger date. In
connection with the merger, CBI and IXC entered into a $1.8 billion credit
facility. This credit facility will be utilized to fund the combined company.
The Company's 7 1/4% Junior Convertible Preferred Stock Due 2007 (the "7 1/4%
Preferred Stock") and the 6 3/4% Cumulative Convertible Stock (the "6 3/4%
Preferred Stock") were replaced with similar issues of CBI preferred stock.
Shares of the 12 1/2% Series B Junior Exchangeable Preferred Stock (the "12 1/2%
Preferred Stock") and the $450 million of 9% Senior Subordinated Notes (the "9%
Notes") remain outstanding after the merger.
11. CREDIT FACILITY
In September 1999, the Company completed a $310 million financing through
Bank of America and amended its existing credit facility. The credit facility
was comprised of two secured revolving loans. At September 30, 1999 the interest
rate was 8.25% and the Company borrowed $150 million under this credit facility.
In September 1999, an amendment was made to the $600 million credit facility
which fixed the maximum amount of borrowings at $200 million. On November 9,
1999, the date of the consummation of the merger, IXC repaid all outstanding
borrowings under both credit facilities.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Except for the historical information contained below, certain matters
discussed in this item are forward-looking statements that involve a number of
risks and uncertainties. Our actual liquidity needs, capital resources and
results may differ materially from the discussion set forth in the
forward-looking statements. For a discussion of important factors that may cause
our actual results, performance or achievements to be materially different from
those expressed or implied by the forward-looking statements, see
"Business -- Risk Factors" in our Form 10-K for the fiscal year ended December
31, 1998. In light of such risks and uncertainties, there can be no assurance
that the forward-looking information contained in this item will in fact
transpire.
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the condensed
consolidated financial statements and segment data. Results for interim periods
may not be indicative of the results for the full years.
CONSOLIDATED OVERVIEW
Net operating revenue for the quarter and nine months ended September 30,
1999 decreased $15.1 million (8.2%) and $9.4 million (1.9%), respectively, from
the 1998 periods. The current year's revenue included the results of Coastal
beginning on its acquisition date of May 10, 1999. These year-over-year
decreases reflect significant declines in the wholesale portion of the switched
service operations that more than offset increases in private line and
data/Internet service revenue. Other revenue of $11.0 million for the third
quarter of 1999 and $22.6 million for the nine-month period relates to the sale
of an option of usage rights in fibers that are owned jointly with another
carrier.
Cost of services primarily reflects access charges paid to local exchange
carriers ("LEC's") and transmission lease payments (monetary and nonmonetary) to
other carriers. In comparison to the same periods in 1998, cost of services
decreased $3.6 million (3.3%) and $6.1 million (1.9%) for the quarter and nine
months ended September 30, 1999, respectively. During both periods, increases in
transmission lease expense and data/Internet costs were more than offset by
decreases in access costs relating to the reduction in the wholesale portion of
the switched service revenue. Access cost as a percentage of net switched
service revenue has increased year-over-year due to price competition and the
impact of the FCC mandated access reform, which became effective in July 1998.
In 1999 access cost was 84.9% and 87.9% of net switched service revenue for the
quarter and nine months respectively, versus 69.6% and 69.3% for the same
periods in 1998.
Operations and administrative costs increased $26.2 million and $79.7
million for the quarter and nine months ended September 30, 1999 to $66.3
million and $179.1 million, respectively. These increases were driven by
additional headcount, from 1,449 at September 1998 to 2,121 at September 1999.
This headcount increase includes additional sales personnel hired by the Company
to staff the 13 new sales offices opened in 1999. Current year headcount
includes employees associated with Coastal, which was acquired by the Company
effective May 10, 1999. The focus of these increased costs is to build the
retail channel's infrastructure as well as to upgrade the level of information
technology across the Company. Costs were also incurred to operate the larger
fiber optic network which increased from 9,217 route miles at September 1998 to
13,800 route miles at September 1999.
In the second quarter of 1999 the Company recorded a $25.8 million
restructuring charge to exit certain operations in the switched wholesale
business. The $6.7 million net restructuring charge reflects a third quarter
charge of $8.3 million and a reduction of $1.6 million in the restructuring
charge recorded during the second quarter. The third quarter charge included
severance costs associated with the termination of employees and costs to
terminate the leases and business in the Company's London office. There was no
such restructuring charge during the comparable periods in 1998. See Note 8 of
the condensed consolidated financial statements for a detailed description of
the restructuring charges.
Depreciation and amortization expense increased $15.9 million and $48.9
million for the quarter and nine months ended September 30, 1999 respectively,
reflecting the Company's increased investment in the fiber
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14
optic network and the amortization of goodwill from the Coastal acquisition. The
network's route miles increased from 9,217 at September 1998 to 13,800 at
September 1999.
Merger and other infrequent costs increased $0.6 million for the quarter
and decreased $6.9 million for the nine months ended September 30, 1999. The
current quarter's increase reflects costs associated with the CBI merger versus
a lower level of costs associated with the Eclipse merger in the same quarter in
the prior year. The nine-month decrease is due to the higher amount of costs
incurred for the Eclipse merger than have been incurred to date for the CBI
merger. The Company expects to incur additional costs of approximately $12
million for legal, accounting and other professional fees during the fourth
quarter of 1999 related to the merger with CBI.
Interest income declined $1.1 million for the quarter and increased $1.6
million for the nine months ended September 30, 1999. The decline between
quarters is due to less cash on hand during the full quarter in 1999. The
year-to-date increase reflects interest received during the first quarter of
1999 from notes receivable related to IRU agreements versus none during the
prior year.
Net interest expense increased $3.0 million and $8.2 million for the
quarter and nine months ended September 30, 1999, respectively, reflecting the
interest expense from the $450 million 9% Senior Subordinated Notes issued in
April 1998, the $200 million borrowed under our $600 million credit facility in
October 1998 and the $150 million borrowed under the $310 million credit
facility in September 1999. The increase in gross interest expense more than
offset a higher amount of capitalized interest, which was due to the increased
rate of network construction between periods.
Losses from unconsolidated subsidiaries decreased $5.2 million and $11.3
million for the quarter and nine months ended September 30, 1999, respectively.
The quarterly decrease is mainly due to losses in the prior year's from
MarcaTel. No such losses were recorded this year as the Company's investment in
MarcaTel was written down to zero in 1998 and no further significant additional
funding is required. The Company stopped recognizing PSINet losses and began
accounting for this investment using the cost method during the second quarter
of 1998 as its level of ownership and influence over PSINet had reduced. The
year-to-date decrease is due to the reduction in losses recorded for MarcaTel
and PSINet partially offset by the $10.8 million write-off of the Company's
joint venture with Unidial in the second quarter of 1999.
The year-to-date increase in other income/expense of $13.1 million is
mainly due to the $12.8 million reduction of the investment in DCI during the
current year as described in Note 2 to the condensed consolidated financial
statements. For the quarter ended September 30, 1999, other, income/expense was
modestly lower than the same period in the prior year.
Provision for income taxes decreased $6.1 million and $6.4 million for the
quarter and nine months ended September 30, 1999, respectively, reflecting a
lower level of projected fiber sales during the current year along with a higher
operating loss for tax purposes. A valuation allowance is applied against
deferred tax assets arising during the year due to the uncertainty of their
realization.
During the first nine months of 1998 the Company recorded an after-tax
extraordinary charge of $69.6 million relating to the April 1998 redemption of
$284.2 million of the 12 1/2% Senior Notes due 2005. There were no such charges
in 1999.
Dividends applicable to preferred stock increased $1.4 million and $6.6
million for the quarter and nine months ended September 30, 1999, respectively.
The additional dividends were primarily from the 6 3/4% Preferred Stock, which
was issued in March and April of 1998, and dividends on the 12 1/2% Preferred
Stock, which were paid with additional shares of 12 1/2% Preferred Stock. The
Company's net loss applicable to common shareholders increased to $85.8 million
and $274.6 million for the quarter and nine months ended September 30, 1999,
respectively, from $30.6 million and $178.3 million for the prior year's
comparable periods. These increases are due to the items listed above plus an
increase in the dividends applicable to preferred stock.
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15
SEGMENT INFORMATION
Private Line Services
Net private line revenue increased $14.2 million (22.9%) and $66.0 million
(42.7%) for the quarter and nine months ended September 30, 1999, respectively.
The revenue improvement reflects increased capacity requirements in the
industry. These increases are primarily due to three large contracts, including
one with a significant Internet service provider ("ISP") and the private line
agreement with Excel Communications. The gross profit for this segment improved
to $49.3 million and $141.5 million for the quarter and nine months ended
September 30, 1999, respectively. The gross margin percentage improved from
64.5% to 64.8% quarter over quarter and from 60.3% to 64.2% for the nine-month
periods. These improvements reflect an increased use of the Company's network to
provide services.
Switched Service Revenue
Switched long distance revenue declined $33.2 million (30.0%) to $77.5
million during the third quarter of 1999 and $99.8 million (30.3%) to $230.2
million year-to-date. These declines are primarily due to the conversion of the
Company's agreement with Excel Communications, formerly the Company's largest
customer, to a private line contract as it moved traffic to its own network, and
the decision in the second quarter of 1999 to exit a portion of the wholesale
switched service business. Revenue in the retail portion of the switched service
business increased $11.1 million over the comparable 1998 quarter due to the
acquisition of Coastal on May 10, 1999. Cost of services declined $12.4 million
(14.4%) and $30.1 million (11.8%) for the quarter and nine months ended
September 30, 1999, respectively, due to the reduction in traffic partially
offset by increased fixed access charges. The switched service segment's gross
margin declined $20.8 million for the quarter and $70.0 million year-to-date due
mainly to the decline in net revenue discussed previously.
Data/Internet
Revenue in the data/Internet segment increased $1.9 million and $10.8
million for the quarter and nine months ended September 30, 1999, respectively,
due mainly to the ATM/frame relay and Internet products produced by the Internet
companies the Company acquired during 1998. These products are mainly sold
through the retail distribution channel. The segment's gross margin was
relatively flat quarter-over-quarter and improved from a loss of $3.2 million in
1998 to a profit of $1.2 million for the nine months ended September 30, 1999.
This improvement reflects the increased net revenue being generated by the data/
Internet segment.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed the expansion of its network through
the issuance of debt and equity securities, the sale of IRU's in capacity and
fiber, and through borrowing against its ownership in PSINet.
During September 1999, the Company completed a $310 million credit facility
which was guaranteed by CBI. The Company's $600 million credit facility was
amended in September 1999 to allow for a maximum capacity of $200 million, the
total amount of borrowings under this credit facility as of September 30, 1999.
The full amount outstanding under both credit facilities was paid off in
conjunction with the consummation of the merger on November 9, 1999. See Note 11
of the condensed consolidated financial statements for further discussion of
this credit facility.
Cash provided by operating activities increased $12.3 million (9.6%) to
$140.2 million for the nine months ended September 30, 1999 primarily due to
increased receipts of cash related to IRU sales.
Cash used in investing activities for the nine months ended September 30,
1999 increased $144.6 million (37.6%) over the prior year to $528.7 million, due
to an increase of $113.1 million in capital expenditures, to continue the
build-out of the Company's expansive fiber optic network, and an increase of
$50.6 million in cash used for the acquisition of businesses. Coastal was
acquired during 1999 versus several small Internet companies acquired during the
prior year. These uses of cash were offset somewhat by a decrease of
15
16
$20.7 million in investments in unconsolidated subsidiaries between years as the
Company slowed its funding of MarcaTel.
Cash provided by financing activities increased $27.7 million (11.4%) to
$271.3 million for the nine months ended September 30, 1999. During the same
period in 1998, the Company issued $450 million in 9% Notes and $155.3 million
in 6 3/4% Preferred Stock and redeemed $284.2 million of the 12 1/2% Senior
Notes. During the nine months ended September 30, 1999, the Company entered into
a $310 million credit facility with Bank of America and drew down $150 million
in funds, borrowed $111.8 million against a portion of its PSINet stock and drew
down $27.0 million from the line of credit used in the Coastal acquisition.
At September 30, 1999 the Company had $147.6 million in cash. At November
9, 1999, the date of the consummation of the merger, CBI and IXC obtained a $1.8
billion credit facility which will be used to fund the combined company. A
portion of these funds was used to repay approximately $391.2 million of the
Company's debt.
The Company expects the primary sources of cash over the next 12 months
will be cash on hand, cash generated by operations, proceeds of IRU sales and
proceeds from the CBI credit facility. The Company seeks to obtain sufficient
funding from these sources for the following major uses of cash:
- Network expansion and other capital expenditures;
- Debt service;
- Lease payments;
- Working capital, and;
- Dividends on preferred stock.
Capital spending in 1999 is projected to be approximately $600 million.
After 1999, capital expenditures are expected to continue to be substantial as
the Company intends to continue expanding its fiber-optic network.
The Company is required to make payments under the debt and capital lease
arrangements remaining after the merger with CBI of $1.4 million, $5.9 million,
$13.6 million, and $134.0 million for the remainder of 1999, 2000, 2001, and
2002, respectively. In addition, the Company is required to make semi-annual
interest payments on its 9% Notes and the remaining 12 1/2% Senior Notes.
Dividend payments on the 12 1/2% Preferred Stock are also required. The Company
has the option of paying dividends in additional shares of 12 1/2% Preferred
Stock through February 15, 2001. Management is currently evaluating whether
dividends on the 12 1/2% preferred stock will be paid in cash or additional
shares of stock. As of the date of this filing, no decision had been made. The
Company anticipates that all other debt service will be paid from cash. Under
the terms of the merger agreement, CBI is required to offer to purchase the 9%
Senior Subordinated Notes at 101% of face value within 30 days of November 9,
1999, the date of consummation of the merger. CBI expects that funds from the
new $1.8 billion credit facility will be utilized to fund any obligation created
by this offer.
The Company is required to make minimum annual lease payments for
facilities, equipment and transmission capacity used in operating the business.
In 1999, 2000, 2001 and 2002, these payments are expected to amount to
approximately $12.7 million, $34.0 million, $24.7 million and $13.6 million,
respectively, on existing operating leases. The Company expects to incur
additional operating lease costs in connection with the expansion of the network
and the retail and Internet operations. Additionally, in connection with the
network expansion from time to time the Company enters into various construction
and installation agreements with contractors.
The forward-looking statements set forth above with respect to the
estimated cash requirements relating to capital expenditures, the Company's
ability to meet such cash requirements and its ability to service debt are based
on certain assumptions as to future events. Important assumptions which if not
met, could adversely affect the Company's ability to achieve satisfactory
results include that: (a) there will be no significant delays with respect to
our network expansion; (b) our contractors and partners in cost-saving
arrangements will perform their obligations; (c) rights-of-way can be obtained
on a timely, cost-effective basis; and (d) the Company will increase traffic on
its network.
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YEAR 2000 RISKS
Substantially all of the Company's network was built in the last three
years. As a result, management believes that there is not a significant
investment in legacy systems having substantial Year 2000 exposure. However,
management has established a project team to identify, evaluate and address any
existing Year 2000 issues.
The project team has identified the following principal phases of the
project: a) assessment and planning, b) remediation, c) testing, and d)
contingency planning. The assessment and planning phase was substantially
complete at December 31, 1998. Of the applications identified as critical, over
95% have already been remedied and tested as of September 30, 1999. Testing on
these applications is expected to be completed by November 30, 1999. In
addition, all new components being purchased as part of the ongoing network and
IT infrastructure expansion are being evaluated to ensure compliance.
There can be no assurances that third parties, including customers,
suppliers, and other business partners, will convert their critical systems and
processes in a timely manner. Such failure by any of these parties could disrupt
the Company's business. Therefore, in addition to evaluating the internal
systems, the Company is in the process of evaluating and documenting the status
of Year 2000 compliance efforts by key suppliers.
Management currently projects incurring approximately $3.5 million through
the end of 2000 in connection with the Year 2000 remediation project, of which
approximately $2.4 million was incurred and expensed as of September 30, 1999.
Such amounts are exclusive of amounts which were already anticipated to be spent
on new hardware and software purchases resulting from the expansion of the
network and other business operations. Management believes that a portion of the
Year 2000 expenses will not be incremental costs, but rather will represent the
redeployment of existing IT resources. This redeployment may cause delays in
making other network upgrades or IT enhancements; however, the delays are not
expected to have a material adverse effect on the Company's operations.
As part of the Year 2000 initiative, management is developing contingency
and business continuity plans tailored for Year 2000-related problems. The
Company is in the process of completing an enterprise-wide business contingency
plan. Elements of the plan are already in place, including working disaster
recovery documents, a key supplier/business partner survey campaign, and a risk
management program.
The above information regarding cost estimates, risks, and estimated
readiness are forward looking statements based on numerous assumptions of future
events, including the availability and future costs of certain technological and
other resources, third party modification actions and other factors. Given the
complexity of these issues and other unidentified risks, actual results may vary
materially from those anticipated and discussed above. Specific factors that
might cause such differences include, among others, the availability and cost of
personnel trained in this area, the ability to locate and correct all affected
computer code, the timing and success of remedial efforts of the Company's third
party suppliers and similar uncertainties.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company is exposed to market risk related to changes in interest rates
because the interest rate on approximately $225 million of debt at September 30,
1999 is indexed to floating interest rates. Management monitors the risk
associated with interest rates on an ongoing basis, but the Company has not
entered into any interest rate swaps or other financial instruments to actively
hedge the risk of changes in prevailing interest rates.
Significantly all of the Company's revenue is derived from domestic
operations, so management believes the risk related to foreign currency exchange
rates is minimal.
A majority of the floating rate indebtedness was refinanced by CBI upon
consummation of the merger.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Five lawsuits have been filed in the Court of Chancery of the State of
Delaware relating to the Company's merger agreement with CBI. The first two
suits, each filed on July 21, 1999 by Angie Garone and Dr. Mark Gross,
respectively, each name the Company, Benjamin L. Scott, and the individuals on
the Company's Board of Directors on July 20, 1999. The third suit, filed on July
23, 1999, by Robert Bernard names the same defendants as the first two suits.
The fourth suit, filed on July 23, 1999, by James Intagliata names the same
defendants of the previously filed suits with the addition of CBI. The fifth
lawsuit was filed on July 27, 1999 by John D. Crawford, Carolyn Bagbey, Rick R.
Davis, Donna Raoust, Olivier Raoust and David Glenn Tatum Smith and names the
same defendants as the previous suits with the addition of Ivory Merger Inc., a
wholly owned subsidiary of CBI. Each suit was brought by a purported
stockholder, individually and allegedly as a class action on behalf of all of
the Company's stockholders. The complaints allege, among other things, that the
Company's former directors aided and abetted by CBI and Ivory Merger Inc., have
breached their fiduciary duties to the Company's stockholders by failing to
maximize stockholder value in connection with entering into the merger
agreement. The complaints also allege that the no solicitation and termination
provisions in the merger agreement with Cincinnati Bell improperly discourage
other potential bidders and prevented the Company from entertaining higher
offers. The complaints seek, among other things, damages. On August 12, 1999,
plaintiffs in the various actions moved for a preliminary injunction to prevent
the completion of the merger pending a full hearing on the merits. In an October
27, 1999 ruling the court refused to issue a court order enjoining the merger,
however, the court did not rule on the merits of the class actions suits, and
these suits remain subject to further litigation. The merger was consummated on
November 9, 1999. The Company and CBI believe that the complaints are without
merit and plan to vigorously defend themselves against these actions. The
Company no longer considers these suits to be material.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On November 9, 1999 the Company consummated its merger with CBI. Pursuant
to the merger agreement, upon the consummation of the merger each share of the
Company's common stock was converted into the right to receive 2.0976 shares of
common stock of CBI. In addition, each share of the Company's 7 1/4% Preferred
Stock and its 6 3/4% Preferred Stock was converted into the right to receive CBI
preferred securities with the same terms.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION
------- -----------
2.1 Agreement and Plan of Merger dated as of July 20, 1999,
among Cincinnati Bell Inc., IXC Communications, Inc. and
Ivory Merger Inc. (incorporated by reference to Exhibit 2.1
of Cincinnati Bell Inc.'s Form 8-K dated July 22, 1999 and
filed with the Commission on July 23, 1999).
2.2 Amendment No. 1 dated as of October 13, 1999, among
Cincinnati Bell Inc., IXC Communications, Inc. and Ivory
Merger Inc. (incorporated by reference to Exhibit 2.1 of
Form 8-K dated October 14, 1999 and filed with the
Commission on October 14, 1999).
3.1+ Restated Certificate of Incorporation of IXC Communications,
Inc., as amended.
3.2+ Bylaws of IXC Communications, Inc., as amended.
4.1 Indenture dated as of October 5, 1995, by and among IXC
Communications, Inc., on its behalf and as
successor-in-interest to I-Link Holdings, Inc. and IXC
Carrier Group, Inc., each of IXC Carrier, Inc., on its
behalf and as successor-in-interest to I-Link, Inc., CTI
Investments, Inc., Texas Microwave Inc. and WTM Microwave
Inc., Atlantic States Microwave Transmission Company,
Central States Microwave Transmission Company, Telcom
Engineering, Inc., on its behalf and as
successor-in-interest to SWTT Company and Microwave Network,
Inc., Tower Communication Systems Corp., West Texas
Microwave Company, Western States Microwave Transmission
Company, Rio Grande Transmission, Inc., IXC Long Distance,
Inc., Link Net International, Inc. (collectively, the
"Guarantors"), and IBJ Schroder Bank & Trust Company, as
Trustee (the "Trustee"), with respect to the 12 1/2% Series
A and Series B Senior Notes due 2005 (incorporated by
reference to Exhibit 4.1 of IXC Communications, Inc.'s and
each of the Guarantor's Registration Statement on Form S-4
filed with the Commission on April 1, 1996 (File No.
333-2936) (the "S-4")).
4.2 Form of 12 1/2% Series A Senior Notes due 2005 (incorporated
by reference to Exhibit 4.6 of the S-4).
4.3 Form of 12 1/2% Series B Senior Notes due 2005 and
Subsidiary Guarantee (incorporated by reference to Exhibit
4.8 of IXC Communications, Inc.'s Amendment No. 1 to
Registration Statement on Form S-1 filed with the Commission
on June 13, 1996 (File No. 333-4061) (the "S-1 Amendment")).
4.4 Amendment No. 1 to Indenture and Subsidiary Guarantee dated
as of June 4, 1996, by and among IXC Communications, Inc.,
the Guarantors and the Trustee (incorporated by reference to
Exhibit 4.11 of the S-1 Amendment).
4.5 Indenture dated as of August 15, 1997, between IXC
Communications, Inc. and The Bank of New York (incorporated
by reference to Exhibit 4.2 of IXC Communications, Inc.'s
Current Report on Form 8-K dated August 20, 1997, and filed
with the Commission on August 28, 1997 (the "8-K")).
4.6 First Supplemental Indenture dated as of October 23, 1997,
among IXC Communications, Inc., the Guarantors, IXC
International, Inc. and IBJ Schroder Bank & Trust Company
(incorporated by reference to Exhibit 4.13 of IXC
Communications, Inc.'s Annual Report on Form 10-K for the
year ended December 31, 1997, and filed with the Commission
on March 16, 1998 (the "1997 10-K")).
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EXHIBIT
NUMBER DESCRIPTION
------- -----------
4.7 Second Supplemental Indenture dated as of December 22, 1997,
among IXC Communications, Inc., the Guarantors, IXC Internet
Services, Inc., IXC International, Inc. and IBJ Schroder
Bank & Trust Company (incorporated by reference to Exhibit
4.14 of the 1997 10-K).
4.8 Third Supplemental Indenture dated as of January 6, 1998,
among IXC Communications, Inc., the Guarantors, IXC Internet
Services, Inc., IXC International, Inc. and IBJ Schroder
Bank & Trust Company (incorporated by reference to Exhibit
4.15 of the 1997 10-K).
4.9 Fourth Supplemental Indenture dated as of April 3, 1998,
among IXC Communications, Inc., the Guarantors, IXC Internet
Services, Inc., IXC International, Inc., and IBJ Schroder
Bank & Trust Company (incorporated by reference to Exhibit
4.15 of IXC Communications, Inc.'s Registration Statement on
Form S-3 filed with the Commission on May 12, 1998 (File No.
333-52433)).
4.10 Purchase Agreement dated as of April 16, 1998, by and among
IXC Communications, Inc., CS First Boston, Merrill, Morgan
Stanley and Nationsbanc Montgomery Securities LLC
(incorporated by reference to Exhibit 4.1 of IXC
Communications, Inc.'s Current Report on Form 8-K dated
April 21, 1998, and filed with the Commission on April 22,
1998 (the "April 22, 1998 8-K").
4.11 Indenture dated as of April 21, 1998, between IXC
Communications, Inc. and IBJ Schroder Bank & Trust Company,
as Trustee (incorporated by reference to Exhibit 4.3 of the
April 22, 1998 8-K).
10.1 Office Lease dated as of June 21, 1989 with USAA Real Estate
Company, as amended (incorporated by reference to Exhibit
10.1 of the S-4).
10.2 Equipment Lease dated as of December 1, 1994, by and between
DSC Finance Corporation and Switched Services
Communications, L.L.C.; Assignment Agreement dated as of
December 1, 1994, by and between Switched Services
Communications, L.L.C. and DSC Finance Corporation; and
Guaranty dated December 1, 1994, made in favor of DSC
Finance Corporation by IXC Communications, Inc.
(incorporated by reference to Exhibit 10.2 of the S-4).
10.3 Amended and Restated Development Agreement by and between
Intertech Management Group, Inc. and IXC Long Distance, Inc.
(incorporated by reference to Exhibit 10.7 of IXC
Communications, Inc.'s and the Guarantors' Amendment No. 1
to Registration Statement on Form S-4 filed with the
Commission on May 20, 1996 (File No. 333-2936) ("Amendment
No. 1 to S-4")).
10.4 Third Amended and Restated Service Agreement dated as of
April 16, 1998, among IXC Long Distance, Inc., IXC Carrier,
Inc., IXC Broadband, Inc. and Excel Telecommunications, Inc.
(incorporated by reference to Exhibit 10.6 of IXC
Communications, Inc.'s Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998, filed with the Commission on
May 15, 1998 (the "June 30, 1998 10-Q")).
10.5 Equipment Purchase Agreement dated as of January 16, 1996,
by and between Siecor Corporation and IXC Carrier, Inc.
(incorporated by reference to Exhibit 10.9 of the S-4).
10.6 IRU Agreement dated as of November 1995 between WorldCom,
Inc. and IXC Carrier, Inc. (incorporated by reference to
Exhibit 10.11 of Amendment No. 1 to the S-4).
10.7 Lease dated as of June 4, 1997, between IXC Communications,
Inc. and Carramerca Realty, L.P. (incorporated by reference
to Exhibit 10.17 of the June 30, 1997 10-Q).
20
21
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.8 IRU and Stock Purchase Agreement dated as of July 22, 1997,
between IXC Internet Services, Inc. and PSINet Inc.
(incorporated by reference to Exhibit 10.19 of IXC
Communications, Inc.'s Amendment No. 1 to Form 10-Q/A for
the quarter ended September 30, 1997 filed with the
Commission on December 12, 1997 (the "September 30, 1997
10-Q/A")).
10.9 Joint Marketing and Services Agreement dated as of July 22,
1997, between IXC Internet Services, Inc. and PSINet Inc.
(incorporated by reference to Exhibit 10.20 of the September
30, 1997 10-Q/A).
10.10 Employment Agreement dated as of September 9, 1997, between
Benjamin L. Scott and IXC Communications, Inc. (incorporated
by reference to Exhibit 10.21 of IXC Communication Inc.'s
Amendment No. 1 to Registration Statement on S-4 filed with
the Commission on December 15, 1997 (File No. 333-37157)
("Amendment No. 1 to the EPS S-4")).
10.11 Employment Agreement dated April 8, 1999, by and between IXC
Communications, Inc. and Valerie G. Walden (incorporated by
reference to Exhibit 10.24 of IXC Communications, Inc.'s
Form 10-Q dated August 16, 1999 and filed with the
Commission on August 16, 1999).
10.12 Employment Agreement dated April 26, 1999, by and between
IXC Communications, Inc. and James F. Guthrie (incorporated
by reference to Exhibit 10.25 of IXC Communications, Inc.'s
Form 10-Q dated August 16, 1999 and filed with the
Commission on August 16, 1999).
10.13 Employment Agreement dated May 27, 1999, by and between IXC
Communications, Inc. and John M. Zrno (incorporated by
reference to Exhibit 10.26 of IXC Communications, Inc.'s
Form 10-Q dated August 16, 1999 and filed with the
Commission on August 16, 1999).
10.14 Contract for Services dated June 28, 1999, by and between
IXC Communications, Inc. and American Business Development
Corp. (incorporated by reference to Exhibit 10.27 of IXC
Communications, Inc.'s Form 10-Q dated August 16, 1999 and
filed with the Commission on August 16, 1999).
10.15 Joint Reporting Agreement dated June 15, 1999 among the
Filing Persons (incorporated by reference to Exhibit 1 of
IXC Communications, Inc.'s Amendment No. 1 to Form 13D dated
June 15, 1999 and filed with the Commission on June 17,
1999).
10.16 Master Agreement dated as of June 2, 1999 between MLI and
Internet (incorporated by reference to Exhibit 2 of IXC
Communications, Inc.'s Amendment No. 1 to Form 13D dated
June 15, 1999 and filed with the Commission on June 17,
1999).
10.17 Securities Loan Agreement dated as of June 2, 1999 between
MLI and Internet (incorporated by reference to Exhibit 3 of
IXC Communications, Inc.'s Amendment No. 1 to Form 13D dated
June 15, 1999 and filed with the Commission on June 17,
1999).
10.18 Confirmation of OTC Transaction dated as of June 3, 1999
between Merrill Lynch International and IXC Internet
Services, Inc. (incorporated by reference to Exhibit 4 of
IXC Communications, Inc.'s Amendment No. 2 to Form 13D dated
June 25, 1999 and filed with the Commission on June 29,
1999).
10.19 Confirmation of OTC Transaction dated as of July 6, 1999
between Merrill Lynch International and IXC Internet
Services, Inc. (incorporated by reference to Exhibit 1 of
IXC Communications, Inc.'s Amendment No. 4 to Form 13D dated
July 31, 1999 and filed with the Commission on August 5,
1999).
21
22
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.20 Employment Agreement dated as of December 7, 1998, by and
between IXC Communications, Inc. and Michael W. Vent
(incorporated by reference to Exhibit 10.25 to IXC
Communications, Inc.'s Form 10-K dated March 26, 1999 and
filed with the Commission on March 31, 1999).
10.21+ Lease Agreement dated October 1, 1998, between The
Prudential Insurance Company of America (as successor in
interest to Kramer 34 HP, Ltd.), as Landlord, and IXC
Communications Services, Inc., as Tenant, as amended by the
First Amendment to Lease Agreement dated December 29, 1998,
the Second Amendment to Lease Agreement dated May 13, 1999,
the Third Amendment to Lease Agreement dated June 1999, the
Fourth Amendment to Lease Agreement dated August 16, 1999,
and the Fifth Amendment to Lease Agreement dated October 1,
1999, relating to certain space in the building commonly
known as Kramer 3 in Austin, Texas.
10.22+ Lease Agreement dated May 13, 1999, between Kramer 34 HP,
Ltd., as Landlord, and IXC Communications Services, Inc., as
Tenant, as amended by the First Amendment to Lease Agreement
dated June 1999, relating to certain space in the building
commonly known as Kramer 2 in Austin, Texas.
27.1+ Financial Data Schedule.
- ---------------
+ Filed herewith.
(b) Reports on Form 8-K.
(1) Form 8-K dated July 21, 1999 and filed with the Commission on July
21, 1999 with respect to a press release announcing the agreement between
IXC Communications, Inc. and Cincinnati Bell Inc. to an Agreement and Plan
of Merger and a press release reporting on IXC Communications, Inc.'s
anticipated results of operations for the fiscal quarter ending July 31,
1999.
(2) Form 8-K dated July 26, 1999 and filed with the Commission on July
27, 1999 announcing the Agreement and Plan of Merger dated as of July 20,
1999, among IXC Communications, Inc., Cincinnati Bell Inc. and Ivory Merger
Inc. and the Stockholders Agreements and Stock Option Agreements related
thereto.
(3) Form 8-K dated August 3, 1999 and filed with the Commission on
August 4, 1999 with respect to a press release announcing IXC
Communications, Inc.'s results of operations for the fiscal quarter ended
July 31, 1999.
(4) Form 8-K dated August 6, 1999 and filed with the Commission on
August 9, 1999 with respect to two Schedules 13D filed with the Commission
relating to the common stock of PSINet Inc.
(5) Form 8-K dated September 14, 1999 and filed with the Commission on
September 14, 1999 with respect to a press release announcing the
completion of a $310 million credit facility with Bank of America, N.A.
(6) Form 8-K dated September 19, 1999 and filed with the Commission on
September 21, 1999 reporting the approval by IXC Communications, Inc.'s
board of directors of the purchase by Oak Hill Capital Partners, L.P. of up
to five percent of IXC Communications, Inc.'s common stock in the open
market.
(7) Form 8-K dated September 21, 1999 and filed with the Commission on
September 24, 1999 reporting that IXC Communications, Inc.'s 7 1/4% Junior
Convertible Preferred Stock Due 2007, Depositary Shares representing 1/20
of a share of the 6 3/4% Cumulative Convertible Preferred Stock and 12 1/2%
Series B Junior Exchangeable Preferred Stock Due 2009 began trading on the
New York Stock Exchange.
22
23
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
IXC COMMUNICATIONS, INC.
By: /s/ KEVIN W. MOONEY
------------------------------------
Kevin W. Mooney
Chief Financial Officer
(Duly Authorized Officer and
Principal Financial Officer)
Dated: January 7, 1999
23
24
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
2.1 Agreement and Plan of Merger dated as of July 20, 1999,
among Cincinnati Bell Inc., IXC Communications, Inc. and
Ivory Merger Inc. (incorporated by reference to Exhibit 2.1
of Cincinnati Bell Inc.'s Form 8-K dated July 22, 1999 and
filed with the Commission on July 23, 1999).
2.2 Amendment No. 1 dated as of October 13, 1999, among
Cincinnati Bell Inc., IXC Communications, Inc. and Ivory
Merger Inc. (incorporated by reference to Exhibit 2.1 of IXC
Communications, Inc.'s Form 8-K dated October 14, 1999 and
filed with the Commission on October 14, 1999).
3.1+ Restated Certificate of Incorporation of IXC Communications,
Inc., as amended.
3.2+ Bylaws of IXC Communications, Inc., as amended.
4.1 Indenture dated as of October 5, 1995, by and among IXC
Communications, Inc., on its behalf and as
successor-in-interest to I-Link Holdings, Inc. and IXC
Carrier Group, Inc., each of IXC Carrier, Inc., on its
behalf and as successor-in-interest to I-Link, Inc., CTI
Investments, Inc., Texas Microwave Inc. and WTM Microwave
Inc., Atlantic States Microwave Transmission Company,
Central States Microwave Transmission Company, Telcom
Engineering, Inc., on its behalf and as
successor-in-interest to SWTT Company and Microwave Network,
Inc., Tower Communication Systems Corp., West Texas
Microwave Company, Western States Microwave Transmission
Company, Rio Grande Transmission, Inc., IXC Long Distance,
Inc., Link Net International, Inc. (collectively, the
"Guarantors"), and IBJ Schroder Bank & Trust Company, as
Trustee (the "Trustee"), with respect to the 12 1/2% Series
A and Series B Senior Notes due 2005 (incorporated by
reference to Exhibit 4.1 of IXC Communications, Inc.'s and
each of the Guarantor's Registration Statement on Form S-4
filed with the Commission on April 1, 1996 (File No.
333-2936) (the "S-4")).
4.2 Form of 12 1/2% Series A Senior Notes due 2005 (incorporated
by reference to Exhibit 4.6 of the S-4).
4.3 Form of 12 1/2% Series B Senior Notes due 2005 and
Subsidiary Guarantee (incorporated by reference to Exhibit
4.8 of IXC Communications, Inc.'s Amendment No. 1 to
Registration Statement on Form S-1 filed with the Commission
on June 13, 1996 (File No. 333-4061) (the "S-1 Amendment")).
4.4 Amendment No. 1 to Indenture and Subsidiary Guarantee dated
as of June 4, 1996, by and among IXC Communications, Inc.,
the Guarantors and the Trustee (incorporated by reference to
Exhibit 4.11 of the S-1 Amendment).
4.5 Indenture dated as of August 15, 1997, between IXC
Communications, Inc. and The Bank of New York (incorporated
by reference to Exhibit 4.2 of IXC Communications, Inc.'s
Current Report on Form 8-K dated August 20, 1997, and filed
with the Commission on August 28, 1997 (the "8-K")).
4.6 First Supplemental Indenture dated as of October 23, 1997,
among IXC Communications, Inc., the Guarantors, IXC
International, Inc. and IBJ Schroder Bank & Trust Company
(incorporated by reference to Exhibit 4.13 of IXC
Communications, Inc.'s Annual Report on Form 10-K for the
year ended December 31, 1997, and filed with the Commission
on March 16, 1998 (the "1997 10-K")).
4.7 Second Supplemental Indenture dated as of December 22, 1997,
among IXC Communications, Inc., the Guarantors, IXC Internet
Services, Inc., IXC International, Inc. and IBJ Schroder
Bank & Trust Company (incorporated by reference to Exhibit
4.14 of the 1997 10-K).
25
EXHIBIT
NUMBER DESCRIPTION
------- -----------
4.8 Third Supplemental Indenture dated as of January 6, 1998,
among IXC Communications, Inc., the Guarantors, IXC Internet
Services, Inc., IXC International, Inc. and IBJ Schroder
Bank & Trust Company (incorporated by reference to Exhibit
4.15 of the 1997 10-K).
4.9 Fourth Supplemental Indenture dated as of April 3, 1998,
among IXC Communications, Inc., the Guarantors, IXC Internet
Services, Inc., IXC International, Inc., and IBJ Schroder
Bank & Trust Company (incorporated by reference to Exhibit
4.15 of IXC Communications, Inc.'s Registration Statement on
Form S-3 filed with the Commission on May 12, 1998 (File No.
333-52433)).
4.10 Purchase Agreement dated as of April 16, 1998, by and among
IXC Communications, Inc., CS First Boston, Merrill, Morgan
Stanley and Nationsbanc Montgomery Securities LLC
(incorporated by reference to Exhibit 4.1 of IXC
Communications, Inc.'s Current Report on Form 8-K dated
April 21, 1998, and filed with the Commission on April 22,
1998 (the "April 22, 1998 8-K").
4.11 Indenture dated as of April 21, 1998, between IXC
Communications, Inc. and IBJ Schroder Bank & Trust Company,
as Trustee (incorporated by reference to Exhibit 4.3 of the
April 22, 1998 8-K).
10.1 Office Lease dated as of June 21, 1989 with USAA Real Estate
Company, as amended (incorporated by reference to Exhibit
10.1 of the S-4).
10.2 Equipment Lease dated as of December 1, 1994, by and between
DSC Finance Corporation and Switched Services
Communications, L.L.C.; Assignment Agreement dated as of
December 1, 1994, by and between Switched Services
Communications, L.L.C. and DSC Finance Corporation; and
Guaranty dated December 1, 1994, made in favor of DSC
Finance Corporation by IXC Communications, Inc.
(incorporated by reference to Exhibit 10.2 of the S-4).
10.3 Amended and Restated Development Agreement by and between
Intertech Management Group, Inc. and IXC Long Distance, Inc.
(incorporated by reference to Exhibit 10.7 of IXC
Communications, Inc.'s and the Guarantors' Amendment No. 1
to Registration Statement on Form S-4 filed with the
Commission on May 20, 1996 (File No. 333-2936) ("Amendment
No. 1 to S-4")).
10.4 Third Amended and Restated Service Agreement dated as of
April 16, 1998, among IXC Long Distance, Inc., IXC Carrier,
Inc., IXC Broadband, Inc. and Excel Telecommunications, Inc.
(incorporated by reference to Exhibit 10.6 of IXC
Communications, Inc.'s Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998, filed with the Commission on
May 15, 1998 (the "June 30, 1998 10-Q")).
10.5 Equipment Purchase Agreement dated as of January 16, 1996,
by and between Siecor Corporation and IXC Carrier, Inc.
(incorporated by reference to Exhibit 10.9 of the S-4).
10.6 IRU Agreement dated as of November 1995 between WorldCom,
Inc. and IXC Carrier, Inc. (incorporated by reference to
Exhibit 10.11 of Amendment No. 1 to the S-4).
10.7 Lease dated as of June 4, 1997, between IXC Communications,
Inc. and Carramerca Realty, L.P. (incorporated by reference
to Exhibit 10.17 of the June 30, 1997 10-Q).
10.8 IRU and Stock Purchase Agreement dated as of July 22, 1997,
between IXC Internet Services, Inc. and PSINet Inc.
(incorporated by reference to Exhibit 10.19 of IXC
Communications, Inc.'s Amendment No. 1 to Form 10-Q/A for
the quarter ended September 30, 1997 filed with the
Commission on December 12, 1997 (the "September 30, 1997
10-Q/A")).
10.9 Joint Marketing and Services Agreement dated as of July 22,
1997, between IXC Internet Services, Inc. and PSINet Inc.
(incorporated by reference to Exhibit 10.20 of the September
30, 1997 10-Q/A).
26
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.10 Employment Agreement dated as of September 9, 1997, between
Benjamin L. Scott and IXC Communications, Inc. (incorporated
by reference to Exhibit 10.21 of IXC Communication Inc.'s
Amendment No. 1 to Registration Statement on S-4 filed with
the Commission on December 15, 1997 (File No. 333-37157)
("Amendment No. 1 to the EPS S-4")).
10.11 Employment Agreement dated April 8, 1999, by and between IXC
Communications, Inc. and Valerie G. Walden (incorporated by
reference to Exhibit 10.24 of IXC Communications, Inc.'s
Form 10-Q dated August 16, 1999 and filed with the
Commission on August 16, 1999).
10.12 Employment Agreement dated April 26, 1999, by and between
IXC Communications, Inc. and James F. Guthrie (incorporated
by reference to Exhibit 10.25 of IXC Communications, Inc.'s
Form 10-Q dated August 16, 1999 and filed with the
Commission on August 16, 1999).
10.13 Employment Agreement dated May 27, 1999, by and between IXC
Communications, Inc. and John M. Zrno (incorporated by
reference to Exhibit 10.26 of IXC Communications, Inc.'s
Form 10-Q dated August 16, 1999 and filed with the
Commission on August 16, 1999).
10.14 Contract for Services dated June 28, 1999, by and between
IXC Communications, Inc. and American Business Development
Corp. (incorporated by reference to Exhibit 10.27 of IXC
Communications, Inc.'s Form 10-Q dated August 16, 1999 and
filed with the Commission on August 16, 1999).
10.15 Joint Reporting Agreement dated June 15, 1999 among the
Filing Persons (incorporated by reference to Exhibit 1 of
IXC Communications, Inc.'s Amendment No. 1 to Form 13D dated
June 15, 1999 and filed with the Commission on June 17,
1999).
10.16 Master Agreement dated as of June 2, 1999 between MLI and
Internet (incorporated by reference to Exhibit 2 of IXC
Communications, Inc.'s Amendment No. 1 to Form 13D dated
June 15, 1999 and filed with the Commission on June 17,
1999).
10.17 Securities Loan Agreement dated as of June 2, 1999 between
MLI and Internet (incorporated by reference to Exhibit 3 of
IXC Communications, Inc.'s Amendment No. 1 to Form 13D dated
June 15, 1999 and filed with the Commission on June 17,
1999).
10.18 Confirmation of OTC Transaction dated as of June 3, 1999
between Merrill Lynch International and IXC Internet
Services, Inc. (incorporated by reference to Exhibit 4 of
IXC Communications, Inc.'s Amendment No. 2 to Form 13D dated
June 25, 1999 and filed with the Commission on June 29,
1999).
10.19 Confirmation of OTC Transaction dated as of July 6, 1999
between Merrill Lynch International and IXC Internet
Services, Inc. (incorporated by reference to Exhibit 1 of
IXC Communications, Inc.'s Amendment No. 4 to Form 13D dated
July 31, 1999 and filed with the Commission on August 5,
1999).
10.20 Employment Agreement dated as of December 7, 1998, by and
between IXC Communications, Inc. and Michael W. Vent
(incorporated by reference to Exhibit 10.25 to IXC
Communications, Inc.'s Form 10-K dated March 26, 1999 and
filed with the Commission on March 31, 1999).
27
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.21+ Lease Agreement dated October 1, 1998, between The
Prudential Insurance Company of America (as successor in
interest to Kramer 34 HP, Ltd.), as Landlord, and IXC
Communications Services, Inc., as Tenant, as amended by the
First Amendment to Lease Agreement dated December 29, 1998,
the Second Amendment to Lease Agreement dated May 13, 1999,
the Third Amendment to Lease Agreement dated June 1999, the
Fourth Amendment to Lease Agreement dated August 16, 1999,
and the Fifth Amendment to Lease Agreement dated October 1,
1999, relating to certain space in the building commonly
known as Kramer 3 in Austin, Texas.
10.22+ Lease Agreement dated May 13, 1999, between Kramer 34 HP,
Ltd., as Landlord, and IXC Communications Services, Inc., as
Tenant, as amended by the First Amendment to Lease Agreement
dated June 1999, relating to certain space in the building
commonly known as Kramer 2 in Austin, Texas.
27.1+ Financial Data Schedule.
- ---------------
+ Filed herewith.
(b) Reports on Form 8-K.
(1) Form 8-K dated July 21, 1999 and filed with the Commission on July
21, 1999 with respect to a press release announcing the agreement between
IXC Communications, Inc. and Cincinnati Bell, Inc. to an Agreement and Plan
of Merger and a press release reporting on IXC Communications, Inc.'s
anticipated results of operations for the fiscal quarter ending July 31,
1999.
(2) Form 8-K dated July 26, 1999 and filed with the Commission on July
27, 1999 announcing the Agreement and Plan of Merger dated as of July 20,
1999, among IXC Communications, Inc., Cincinnati Bell Inc. and Ivory Merger
Inc. and the Stockholders Agreements and Stock Option Agreements related
thereto.
(3) Form 8-K dated August 3, 1999 and filed with the Commission on
August 4, 1999 with respect to a press release announcing IXC
Communications, Inc.'s results of operations for the fiscal quarter ended
July 31, 1999.
(4) Form 8-K dated August 6, 1999 and filed with the Commission on
August 9, 1999 with respect to two Schedules 13D filed with the Commission
relating to the common stock of PSINet Inc.
(5) Form 8-K dated September 14, 1999 and filed with the Commission on
September 14, 1999 with respect to a press release announcing the
completion of a $310 million credit facility with Bank of America, N.A.
(6) Form 8-K dated September 19, 1999 and filed with the Commission on
September 21, 1999 reporting the approval by IXC Communications, Inc.'s
board of directors of the purchase by Oak Hill Capital Partners, L.P. of up
to five percent of IXC Communications, Inc.'s common stock in the open
market.
(7) Form 8-K dated September 21, 1999 and filed with the Commission on
September 24, 1999 reporting that IXC Communications, Inc.'s 7 1/4% Junior
Convertible Preferred Stock Due 2007, Depositary Shares representing 1/20
of a share of the 6 3/4% Cumulative Convertible Preferred Stock and 12 1/2%
Series B Junior Exchangeable Preferred Stock Due 2009 began trading on the
New York Stock Exchange.