1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
------------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
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 SPECIFIED IN ITS CHARTER)
------------------------
DELAWARE 75-2644120
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
5000 PLAZA ON THE LAKE, SUITE 200,
AUSTIN, TEXAS 78746
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) (512) 328-1112
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 30,799,560 on May 12,
1997.
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2
IXC COMMUNICATIONS, INC. AND SUBSIDIARIES
QUARTER ENDED MARCH 31, 1997
TABLE OF CONTENTS
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of March 31, 1997
and December 31, 1996........................................ 3
Condensed Consolidated Statements of Operations for the Three
Months Ended March 31, 1997 and 1996......................... 4
Condensed Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 1997 and 1996......................... 5
Notes to Condensed Consolidated Financial Statements......... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................... 10
Item 3. Quantitative and Qualitative Disclosures About Market
Risks........................................................ 15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................ 15
Item 2. Changes in Securities........................................ 15
Item 3. Defaults Upon Senior Securities.............................. 15
Item 4. Submission of Matters to a Vote of Security Holders.......... 15
Item 5. Other Information............................................ 15
Item 6. Exhibits and Reports on Form 8-K............................. 16
SIGNATURE............................................................................ 19
2
3
IXC COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
ASSETS
MARCH 31, DECEMBER 31,
1997 1996
----------- ------------
(UNAUDITED) (SEE NOTE 1)
Current assets:
Cash and cash equivalents....................................... $ 4,394 $ 61,340
Accounts receivable and other receivables, net of allowance for
doubtful accounts of $5,168 at March 31, 1997 and $4,030 at
December 31, 1996............................................ 55,083 47,568
Other current assets............................................ 2,874 2,197
--------- --------
Total current assets.................................... 62,351 111,105
Property and equipment............................................ 411,041 337,742
Less: accumulated depreciation.................................... (77,441) (69,133)
--------- --------
333,600 268,609
Escrow under Senior Notes......................................... 17,840 51,412
Investment in unconsolidated subsidiaries......................... 10,899 5,486
Deferred charges and other assets................................. 25,314 22,539
--------- --------
Total assets............................................ $ 450,004 $459,151
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and other current liabilities.................. $ 75,949 $ 74,945
Accrued interest................................................ 17,813 8,906
Current portion of long-term debt and capital lease
obligations.................................................. 5,156 6,750
--------- --------
Total current liabilities............................... 98,918 90,601
Long-term debt and capital lease obligations, less current
portion......................................................... 297,152 295,531
Other noncurrent liabilities...................................... 10,405 9,540
Stockholders' equity:
Preferred stock, 3,000,000 shares authorized; 10% Junior Series
3 cumulative preferred stock, $.01 par value; 12,550 shares
issued and outstanding (aggregate liquidation preference of
$19,529 at March 31, 1997)................................... 13 13
Common stock, $.01 par value; 100,000,000 shares authorized:
shares issued and outstanding 30,799,560 at March 31, 1997
and 30,795,014 at December 31, 1996.......................... 308 308
Additional paid-in capital........................................ 123,362 123,434
Accumulated deficit............................................... (80,154) (60,276)
--------- --------
Total stockholders' equity.............................. 43,529 63,479
--------- --------
Total liabilities and stockholders' equity.............. $ 450,004 $459,151
========= ========
See accompanying notes.
3
4
IXC COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS AND NUMBER OF SHARES IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS
ENDED MARCH 31,
---------------------
1997 1996
-------- --------
Net operating revenues:
Private line....................................................... $ 30,869 $ 22,629
Switched long distance............................................. 53,041 3,621
-------- --------
Net operating revenues..................................... 83,910 26,250
Operating expenses:
Cost of communication services..................................... 68,982 15,600
Operations and administration...................................... 16,567 10,417
Depreciation and amortization...................................... 10,002 6,010
-------- --------
(11,641) (5,777)
Interest income...................................................... 1,076 126
Interest income on escrow under Senior Notes......................... 203 2,557
Interest expense..................................................... (7,746) (9,870)
Equity in net loss of unconsolidated subsidiaries.................... (1,819) (5)
-------- --------
Loss before benefit for income taxes and minority interest........... (19,927) (12,969)
Benefit for income taxes............................................. 252 1,363
Minority interest.................................................... (203) (93)
-------- --------
Net loss............................................................. (19,878) (11,699)
Dividends applicable to preferred stock.............................. (470) (433)
-------- --------
Net loss applicable to common stockholders........................... $(20,348) $(12,132)
-------- --------
Net loss per common and common equivalent share...................... $ (0.65) $ (0.49)
======== ========
Weighted average common and common equivalent shares................. 31,484 25,011
======== ========
See accompanying notes.
4
5
IXC COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
FOR THE THREE MONTHS
ENDED MARCH 31,
---------------------------
1997 1996
----------- -----------
Net cash provided by (used in) operating activities............... $ (11,077) $ 3,003
Investing activities
Release of funds from escrow under Senior Notes................. 51,588 13,225
Deposit into escrow under Senior Notes.......................... (18,152) (2,557)
Purchase of property and equipment.............................. (68,743) (13,564)
--------- ---------
Net cash used in investing activities............................. (35,307) (2,896)
Financing activities
Principal payments on long-term debt and capital lease
obligations.................................................. (3,257) (1,359)
Capital contribution to unconsolidated subsidiary............... (7,233) --
Other financing activities...................................... (72) (171)
--------- ---------
Net cash used in financing activities............................. (10,562) (1,530)
--------- ---------
Net decrease in cash and cash equivalents......................... (56,946) (1,423)
Cash and cash equivalents at beginning of period.................. 61,340 6,915
--------- ---------
Cash and cash equivalents at end of period........................ $ 4,394 $ 5,492
========= =========
Supplemental disclosure of cash flow information:
Cash paid (received) for:
Interest..................................................... $ 291 $ 304
========= =========
Taxes........................................................ $ 70 $ (908)
========= =========
See accompanying notes.
5
6
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 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 footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended March 31, 1997
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1997. The Balance Sheet at December 31, 1996 has been derived
from the audited financial statements at that date, but does not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. The accompanying financial
statements should be read in conjunction with the audited consolidated financial
statements (including the notes thereto) for the year ended December 31, 1996.
2. EARNINGS (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE
Earnings (loss) per common share is based on net income (loss) less
preferred stock dividend requirements, divided by the weighted average common
and common equivalent shares outstanding during the period. Outstanding options
are included in the calculation to the extent they are dilutive or were issued
within one year of the Company's initial public offering. Earnings (loss) per
share on a fully diluted basis is not presented as the fully diluted effect is
either antidilutive or not materially different from primary earnings (loss) per
common share, as computed.
3. INCOME TAXES
The Company has determined that a valuation allowance should be applied
against a portion of the deferred tax assets related to the net operating loss
incurred in the first quarter of 1997 due to uncertainty regarding its
realizability. The difference between the tax benefit recorded for the three
months ended March 31, 1997 and the expected benefit at the federal statutory
rate is primarily due to the valuation allowance applied against the deferred
tax assets.
4. COMMITMENTS AND CONTINGENCIES
During 1997 the Company has made and will continue to make material
commitments related to the fiber expansion. These commitments are expected to be
paid with the proceeds received from the Company's recent convertible preferred
stock issuance (See Note 7 -- Subsequent Events), sale of fiber and cost sharing
arrangements which the Company has entered into with other large users of fiber
capacity.
During the first quarter of 1997, the Company entered into two agreements
with major long distance carriers for the sale of dark fiber for approximately
$219 million. These agreements provide for certain penalties if the Company does
not complete construction of the defined routes within the time frame specified
in the agreements. Management does not anticipate that the Company will incur
any substantial penalties under these provisions.
On April 4, 1997 Tel-Central Communications, Inc. ("Tel-Central") filed a
complaint against IXC Long Distance, Inc., one of the Company's subsidiaries, in
the United States District Court in the Western District of Missouri after the
Company terminated service to Tel-Central for failure to pay for services.
Tel-Central's complaint makes various state and federal law claims and seeks
damages of over $100 million and asks for punitive damages of $100 million. The
Company believes that Tel-Central's claims are without merit and that the
complaint is part of an attempt by Tel-Central to avoid payment of its
outstanding balance to the
6
7
IXC COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Company. The Company believes that it is unlikely that this suit will result in
any material liability to the Company.
From time to time the Company is involved in various legal proceedings
arising in the ordinary course of business, some of which are covered by
insurance. In the opinion of the Company's management, none of the claims
relating to such proceedings will have a material effect on the financial
condition or results of operations of the Company.
5. STOCK OPTIONS
During the quarter ended March 31, 1997, the Company granted no stock
options under the 1994 and 1996 Stock Plans. At March 31, 1997 stock options
covering 1,696,026 shares of common stock were outstanding.
6. PROSPECTIVE ACCOUNTING CHANGES
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share" ("SFAS
#128"), which simplifies the calculation of earnings per share. Under SFAS #128,
stock options and other equity instruments are excluded from the calculation of
"basic earnings per share", which will replace primary earnings per share
disclosures. SFAS #128 is effective for financial statements for periods ending
after December 15, 1997. The Company believes that the future adoption of SFAS
#128 will not have a significant impact on earnings per share disclosures for
the periods presented.
7. SUBSEQUENT EVENTS
In April 1997 the Company issued $100 million of 7 1/4% Junior Convertible
Preferred Stock Due 2007 ("Convertible Preferred Stock"). The net proceeds of
approximately $97.5 million from the offering will be used to fund capital
expenditures and for general corporate purposes. The Convertible Preferred Stock
and the common stock issuable upon conversion thereof have not been registered
under the Securities Act of 1933 and may not be offered or sold in the United
States absent registration or an applicable exemption from registration
requirements. On March 31, 2007, the Convertible Preferred Stock must be
redeemed by the Company at a price equal to the liquidation preference plus
accrued and unpaid dividends; thus it is "mandatorily redeemable" and will not
be included in stockholders' equity.
8. FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS AND NON-GUARANTOR
SUBSIDIARIES
The Company conducts a significant portion of its business through
subsidiaries. The Senior Notes are unconditionally guaranteed, jointly and
severally, by certain wholly-owned direct and indirect subsidiaries (the
"Subsidiary Guarantors"). The obligations of each Subsidiary Guarantor are
limited to the minimum extent necessary to prevent the guarantee from violating
or becoming voidable under applicable law relating to fraudulent conveyance or
fraudulent transfer or similar laws affecting the rights of creditors generally.
Certain subsidiaries of the Company do not guarantee the Senior Notes (the
"Non-Guarantor Subsidiaries"). The claims of creditors of Non-Guarantor
Subsidiaries have priority over the rights of the Company to receive dividends
or distributions from such subsidiaries.
The equity method has been used by the Company with respect to investments
in subsidiaries. The equity method has been used by Subsidiary Guarantors with
respect to investments in Non-Guarantor Subsidiaries. Separate financial
statements for Subsidiary Guarantors are not presented based on management's
determination that they do not provide additional information that is material
to investors. Presented below is condensed consolidating financial information
for the Company, the Subsidiary Guarantors and the Non-Guarantor Subsidiaries as
of and for the three months ended March 31, 1997.
7
8
IXC COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
8. FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS AND NON-GUARANTOR
SUBSIDIARIES -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
MARCH 31, 1997
------------------------------------------------------------------
NON-
SUBSIDIARY GUARANTOR
IXC GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ---------- ------------ ------------ ------------
(DOLLARS IN THOUSANDS)
Current assets:
Cash and cash equivalents.............. $ 9,210 $ (7,195) $ 1,104 $ 1,275 $ 4,394
Accounts receivable and other
receivables, net.................... 23 38,491 38,810 (22,241) 55,083
Other current assets................... 7,744 6,269 83 (11,222) 2,874
-------- -------- -------- ---------- --------
Total current assets........... 16,977 37,565 39,997 (32,188) 62,351
Property and equipment, net.............. 3,836 287,750 42,274 (260) 333,600
Escrow under Senior Notes................ 17,840 -- -- -- 17,840
Due from affiliates...................... 318,118 57,140 -- (375,258) --
Deferred charges and other assets........ (10,547) (6,649) 24,562 28,847 36,213
-------- -------- -------- ---------- --------
Total assets................... $346,224 $375,806 $106,833 $ (378,859) $450,004
======== ======== ======== ========== ========
Current liabilities:
Accounts payable, accrued interest and
other current liabilities........... $ 20,984 $ 72,422 $ 19,693 $ (19,337) $ 93,762
Due to affiliate....................... 3,173 6,650 4,228 (14,051) --
Current portion of long-term debt and
capital lease obligations........... -- 522 6,430 (1,796) 5,156
-------- -------- -------- ---------- --------
Total current liabilities...... 24,157 79,594 30,351 (35,184) 98,918
Long-term debt and capital lease
obligations, less current portion...... 277,771 1,128 23,020 (4,767) 297,152
Due to affiliates........................ -- 315,469 55,833 (371,302) --
Other noncurrent liabilities............. -- 11,945 763 (2,303) 10,405
Stockholders' equity (deficit):
Preferred stock........................ 13 -- 2,585 (2,585) 13
Common stock........................... 308 4 2 (6) 308
Additional paid-in capital............. 123,362 33,284 33,015 (66,299) 123,362
Retained earnings (accumulated
deficit)............................ (79,390) (65,618) (38,736) 103,590 (80,154)
-------- -------- -------- ---------- --------
Total stockholders' equity
(deficit).................... 44,296 (32,330) (3,134) 34,697 43,529
-------- -------- -------- ---------- --------
Total liabilities and
stockholders' equity
(deficit).................... $346,224 $375,806 $106,833 $ (378,859) $450,004
======== ======== ======== ========== ========
8
9
IXC COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
8. FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS AND NON-GUARANTOR
SUBSIDIARIES -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
-------------------------------------------------------------------
NON-
SUBSIDIARY GUARANTOR
IXC GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ---------- ------------ ------------ ------------
(DOLLARS IN THOUSANDS)
Net operating revenue:
Private line........................................... $ -- $ 33,836 $ 3,463 $ (6,430) $ 30,869
Switched long distance................................. -- 23,962 48,017 (18,938) 53,041
-------- -------- -------- -------- --------
Net operating revenues.......................... -- 57,798 51,480 (25,368) 83,910
Operating expenses:
Cost of communication service.......................... -- 43,408 50,744 (25,170) 68,982
Operations and administration.......................... -- 12,060 4,705 (198) 16,567
Depreciation and amortization.......................... 41 6,824 3,159 (22) 10,002
-------- -------- -------- -------- --------
(41) (4,494) (7,128) 22 (11,641)
Interest income.......................................... 8,848 2,430 330 (10,532) 1,076
Interest income on escrow under Senior Notes............. 203 -- -- -- 203
Interest expense......................................... (9,303) (6,991) (1,984) 10,532 (7,746)
Equity in net income (loss) of unconsolidated
subsidiaries........................................... (19,837) (10,013) (382) 28,413 (1,819)
-------- -------- -------- -------- --------
Income (loss) before (provision) benefit for income taxes
and minority interest.................................. (20,130) (19,068) (9,164) 27,734 (19,927)
Benefit (provision) for income taxes................... 252 (85) 786 (701) 252
Minority interest........................................ -- -- -- (203) (203)
-------- -------- -------- -------- --------
Net income (loss)........................................ $(19,878) $(19,153) $ (8,378) $ 27,531 $(19,878)
======== ======== ======== ======== ========
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
-------------------------------------------------------------------
NON-
SUBSIDIARY GUARANTOR
IXC GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ---------- ------------ ------------ ------------
(DOLLARS IN THOUSANDS)
Net cash provided by (used in) operating activities...... $ 12,687 $ (3,987) $ (9,612) $(10,165) $(11,077)
Investing activities:
Release of funds from escrow under Senior Notes........ 51,588 51,588
Deposits into escrow under Senior Notes................ (18,152) -- -- -- (18,152)
Purchase of property and equipment..................... (2,856) (62,086) (3,801) -- (68,743)
-------- -------- -------- -------- --------
Net cash provided by (used) in, investing activities... 30,580 (62,086) (3,801) -- (35,307)
Financing Activities
Payments from (advance to) affiliates.................. (99,348) 67,405 21,664 10,279 --
Principal payments on long-term debt and capital lease
obligations.......................................... -- (2,306) (1,291) 340 (3,257)
Capital contribution to unconsolidated subsidiary...... -- -- (7,233) -- (7,233)
Other financing activities............................. (72) 3,234 (3,234) -- (72)
-------- -------- -------- -------- --------
Net cash provided by (used in) financing activities.... (99,420) 68,333 9,906 10,619 (10,562)
Net increase (decrease) in cash and cash equivalents... (56,153) 2,260 (3,507) 454 (56,946)
Cash and cash equivalents at beginning of period....... 65,363 (9,455) 4,611 821 61,340
-------- -------- -------- -------- --------
Cash and cash equivalents at end of period............. $ 9,210 $ (7,195) $ 1,104 $ 1,275 $ 4,394
======== ======== ======== ======== ========
9
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 COMPARED WITH THE THREE MONTHS ENDED MARCH 31,
1996
Net operating revenues for the three months ended March 31, 1997 increased
219.0% to $83.9 million from $26.3 million for the three months ended March 31,
1996. The increase is primarily a result of the Company's rapid growth in
switched long distance revenues since its entry into this business in the fourth
quarter of 1995. Switched long distance services revenues for the three months
ended March 31, 1997 increased to $53.0 million from $3.6 million for the three
months ended March 31, 1996. Billable minutes of use for the three months ended
March 31, 1997 increased to 594 million from 34 million for the three months
ended March 31, 1996. Revenues for the Company's private line business for the
three months ended March 31, 1997 increased 36.7% to $30.9 million from $22.6
million for the three months ended March 31, 1996, primarily due to an increase
in market demand for capacity.
Cost of communication services consists principally of access charges paid
to Local Exchange Carriers ("LECs") and transmission lease payments to, and
exchanges with, other carriers. Cost of communication services for the three
months ended March 31, 1997 increased 342.3% to $69.0 million from $15.6 million
for the three months ended March 31, 1996. The increase is primarily a result of
the addition of long distance leases supporting the switched long distance
business, MOUs leased from other carriers and access charges paid to LECs in
connection with the switched long distance business and consistent with the
significant revenue growth. The Company has historically had a relatively low
cost of communication services as a percentage of revenues because substantially
all its revenues were derived from private line services, generally made at a
relatively low cost over its own network. The Company expects that, in the event
it achieves increases in private line revenues, its cost of communication
services as a percentage of such revenues will increase because additional
leases (or exchanges) of capacity from other carriers, at a relatively high
cost, will be required to support new business. The cost of communication
services as a percentage of revenues in the switched long distance business is
substantially greater than that in the private line business due to the
relatively high cost of LEC access charges, leases for long distance circuits
and MOUs leased from other carriers. Accordingly, increases in switched long
distance revenues are expected to further increase the Company's cost of
communication services as a percentage of revenues.
Operations and administration expenses for the three months ended March 31,
1997 increased 59.6% to $16.6 million from $10.4 million for the three months
ended March 31, 1996. This increase is primarily the result of operating
expenses associated with the Company's switched network. The Company anticipates
that as it expands its switched service business, operations and administration
expenses will continue to increase, but decline as a percentage of revenue.
Depreciation and amortization for the three months ended March 31, 1997
increased 66.7% to $10.0 million from $6.0 million for the three months ended
March 31, 1996. The increase is primarily the result of depreciation related to
capital assets associated with the Company's expansion and improvement of its
network. Depreciation and amortization will increase in subsequent periods, as
the Company's investment in newly constructed routes and other network equipment
is placed in service and depreciated.
Interest income for the three months ended March 31, 1997 decreased to $1.3
million from $2.7 million for the three months ended March 31, 1996. The
decrease relates to the use for purposes other than investment of the proceeds
from the sale of the Company's 12 1/2% Senior Notes due 2005 (the "Senior
Notes"), the Company's initial public offering in July 1996 (the "IPO") and the
sale of Common Stock to Trustees of General Electric Pension Trust in a private
placement which occurred simultaneously with the IPO (the "GEPT Private
Placement").
Interest expense for the three months ended March 31, 1997 decreased to
$7.7 million from $9.9 million for the three months ended March 31, 1996. The
decrease is primarily the result of capitalized interest expense associated with
the Company's network expansion.
Income taxes for the three months ended March 31, 1997 resulted in a $0.3
million tax benefit as opposed to a benefit of $1.4 million for the three months
ended March 31, 1996. The difference between the tax
10
11
benefits recorded for the three months ended March 31, 1997 and the expected
benefit at the federal statutory rate is primarily due to losses incurred (the
tax benefit of which is not recorded due to uncertainty regarding its
realization).
The Company experienced a net loss of $19.9 million for the three months
ended March 31, 1997 as opposed to a net loss of $11.7 million for the three
months ended March 31, 1996 as a result of the factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Except for the historical information contained below, the matters
discussed in this section are forward-looking statements that involve a number
of risks and uncertainties. The Company's 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 would
materially affect such matters, see "Business -- Risk Factors" in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996.
Cash used in operating activities was $11.1 million for the three months
ended March 31, 1997 compared to cash provided by operations of $3.0 million in
the comparable period of 1996, primarily as a result of expansion and
operational expenses associated with the Company's development of its switched
services business. The Company's switched long distance business will require
cash to meet operating expenses until sufficient traffic is routed by the
Company's customers over the network.
Cash used in investing activities for the three months ended March 31, 1997
increased to $35.3 million from $2.9 million for the three months ended March
31, 1996, primarily as a result of the purchases of property and equipment for
the fiber expansion and deposits into escrow under the Senior Notes to fund
interest requirements. The Company's total capital expenditures were $68.7
million for the three months ended March 31, 1997 including capital expenditures
relating to the construction of network routes and related equipment.
As of March 31, 1997, the Company had approximately $22.2 million in cash,
including $17.8 million in funds held in escrow under the Senior Notes which was
held to meet the April 1997 interest payment with respect to the Senior Notes.
In February 1997, the Company and a carrier entered into a contract pursuant to
which the carrier will purchase an indefeasible right to use fibers from Chicago
to Los Angeles (the "Chicago-Los Angeles Fiber Sale") which will result in
proceeds to the Company of approximately $97.9 million. The Company expects to
receive all of such amount in 1997, assuming the construction of the network
expansion between Los Angeles and Chicago proceeds according to schedule. In
April 1997, the Company received net proceeds of approximately $97.5 million
through the issuance and sale (the "Convertible Stock Sale") of its 7 1/4%
Junior Convertible Preferred Stock Due 2007 (the "Convertible Preferred Stock").
In addition, the Company is engaged in discussions with potential lenders
regarding a revolving credit facility (the "Proposed Credit Facility") under
which it expects to be able to borrow up to a certain percentage of eligible
accounts receivable. Although the total availability under the Proposed Credit
Facility will vary from time to time according to the aggregate amount of
eligible accounts receivable, the Company anticipates that the lender will
impose a limit on borrowings under the facility. There can be no assurance that
the Company will obtain such facility. The Company expects that its operating
income (loss) plus depreciation and amortization ("EBITDA") for 1997 will
increase significantly over EBITDA for 1996. In February 1997, the Company
entered into a contract with another carrier pursuant to which the carrier will
purchase an indefeasible right to use fibers from Los Angeles to New York (the
"New York-Los Angeles Fiber Sale") which entitles the Company to receive
approximately $121.0 million. Assuming that the network expansion proceeds
according to schedule, this amount will be due in January 1998. However, the
carrier has the option to pay this amount over a period of up to 24 months
commencing January 1998.
The preceding forward-looking statements regarding the Company's operating
income and EBITDA for 1997 are based on certain assumptions as to future events,
many of which are not within the Company's control. Important factors that could
adversely affect the Company's ability to achieve the EBITDA results discussed
above include: (i) delays or cost overruns with respect to the network
expansion; (ii) delays by the Company's contractors and partners in cost-saving
arrangements in fulfilling their obligations; (iii) delays or
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higher-than-expected costs in obtaining rights-of-way; (iv) delays in the
completion of the routes of the network expansion scheduled for completion in
1997; (v) an inability by the Company to continue to increase traffic on its
switched network, in particular, higher margin traffic; (vi) an inability by the
Company to successfully commence service for new switched long distance services
on a cost-effective basis (including the provision of billing information in an
accurate and timely manner) for volumes that it has not previously handled,
(vii) the loss of one or more large customers; (viii) increases in expenses; and
(ix) decreases in the Company's rates caused by the competitive pressures.
The Company anticipates the following uses for its available cash: (i) the
network expansion and other capital expenditures; (ii) debt service; (iii) lease
payments; (iv) funding its joint venture in Mexico; and (v) working capital.
The Company anticipates that capital expenditures for 1997 will be as
follows: (i) for construction of the network expansion, at least $260.0 million;
and (ii) for other capital expenditures, at least $90.0 million. The Company
frequently revises its estimates of capital expenditures because of the rapid
growth of the Company's business and because the large, on-going network
expansion is subject to changes in design, route and capacity and is also
subject to variances from expected costs. The Company anticipates that in the
event customers require additional facilities or elements of the network
expansion are accelerated into 1997, expenditures in 1997 may be increased. In
addition, if and to the extent cash is available, the Company plans to make
additional capital expenditures of up to $50.0 million to increase the capacity
and efficiency of the network. The preceding forward-looking statement regarding
capital expenditures for 1997 are based on certain assumptions as to future
events, many of which are not under the Company's control. Important factors
which could increase the amount of the capital expenditures include construction
delays or construction cost overruns, delays or higher than expected costs in
obtaining rights of way, or changes in the scope of the network expansion and
increased demands by the Company's customers. Capital expenditures of $68.7
million were made during the three months ended March 31, 1997. The Company
expects to continue to make substantial capital expenditures in 1998 and
thereafter.
The Company is required to make interest payments in the amount of $35.6
million on the Senior Notes each year. The Company's EBITDA is currently
insufficient to cover the Company's debt service requirements under the Senior
Notes. The Company anticipates that such payments during 1997 will be made from
cash on hand. At March 31, 1997, the aggregate liquidation preference was
approximately $19.5 million, including accrued and unpaid dividends on the
Series 3 Preferred Stock. Such dividends accrue at an annual rate of 10% (based
on the liquidation preference) plus interest. The Company will also be required
(except in certain limited circumstances) to pay quarterly cash dividends on the
Convertible Preferred Stock (at an annual rate of 7 1/4%) beginning June 30,
1999 (and prior to such time such dividends may be paid in cash or additional
shares of Convertible Preferred Stock). Payment of dividends on the Convertible
Preferred Stock is not currently permitted under the terms of the indenture (the
"Indenture") for the Company's 12 1/2% Senior Notes due 2005 (the "Senior
Notes") until certain financial conditions have been met or under the terms of
the Series 3 Preferred Stock until the Company's Restated Certificate of
Incorporation, as amended, is amended (which is expected to occur in June 1997).
The Company expects to meet its needs for cash in 1997 by using cash on
hand, the proceeds of the Convertible Stock Sale, cash generated by operations,
the proceeds of the Chicago-Los Angeles Fiber Sale, additional cost-saving
arrangements and vendor financing it may seek. In addition, the Company is
engaged in discussions with potential lenders regarding the Proposed Credit
Facility under which it expects to be able to borrow up to a certain percentage
of eligible accounts receivable and may also be eligible to borrow additional
funds on a secured basis. Although the total availability under the Proposed
Credit Facility will vary from time to time according to the aggregate amount of
eligible accounts receivable, the Company anticipates that the lender will
impose a limit on borrowings under the facility. There can be no assurance that
the Company will be successful in obtaining the necessary cash or the Proposed
Credit Facility to meet its needs. A failure to raise such cash would delay or
prevent such capital expenditures and the construction of the network expansion.
Also, the foregoing capital expenditure and cash requirements for 1997 and 1998
do not take into account any acquisitions.
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The Company is indirectly participating in the development of a long
distance network to engage in the telecommunications business in Mexico by
Marca-Tel S.A. de C.V. ("Marca-Tel"). The Company indirectly owns 24.5% of
Marca-Tel through its ownership of 50% of Progress International LLC ("Progress
International"), which owns 49% of Marca-Tel. The remaining 51% of Marca-Tel is
owned by a Mexican individual and Fomento Radio Beep, S.A. de C.V. The other 50%
of Progress International is owned by Westel International, Inc.
Progress International, which is seeking FCC authority to operate in the
United States as an international resale carrier, is responsible for providing
all the capital that may be required from Marca-Tel's stockholders in order to
finance Marca-Tel. The Company and Westel jointly have contributed funds to
Progress International (approximately $21.0 million by the Company as of March
31, 1997), substantially all of which has been used to fund Marca-Tel. Although
the Company cannot accurately predict the capital that will be required from
Progress International to implement the Marca-Tel business plan, it estimates
that an additional $45.0 million (and possibly significantly more) will be
required by Marca-Tel from the stockholders of Progress International during
1997-1998. Progress International is considering selling equity interests in
Progress International to one or more third parties who could assist Progress
International with the funding of Marca-Tel. However, Progress International has
not had any material discussions in this regard and there can be no assurance
that any such funding will be available on satisfactory terms or at all. The
Company is currently, and may remain, the primary source of funds available to
Progress International for investment in Marca-Tel. Since the ownership
interests of the Company and Westel in Progress International are to be
proportional to their respective capital contributions, the Company's percentage
ownership of Progress International, and therefore its indirect ownership
interest in Marca-Tel, could increase if it makes additional capital
contributions. The Indenture contains significant limitations on the Company's
ability to invest in Progress International or Marca-Tel.
Marca-Tel is deploying three switching centers and a fiber optic route
linking Mexico's three major cities (Mexico City, Monterrey and Guadalajara),
with interconnection to the Company's U.S. network at its border crossing at
Reynosa/McAllen. Marca-Tel has entered into a turn-key contract with a major
international supplier of telecommunications equipment for a portion of this
build that provides for interim vendor financing for the equipment and fiber
purchases as well as a portion of the construction work. The Company anticipates
that Marca-Tel may be able to obtain additional funding through some combination
of the following: (i) offerings of debt or equity securities; (ii) other
incurrences of debt; (iii) joint venture arrangements with third parties; and
(iv) additional vendor financing of equipment purchases. Initially, such sources
of capital likely will not be adequate to meet the needs of Marca-Tel, and the
Company anticipates that, until such sources are adequate to enable Marca-Tel to
continue to pursue its business plan, it will be necessary for Progress
International to fund the shortfall. The Company is not obligated to continue to
fund Progress International; however, if Progress International does not fund
Marca-Tel's needs, the Company's interest in Progress International, and thus
its indirect interest in Marca-Tel, may be diluted or lost entirely. Although
the Indenture generally restricts the amount of funding the Company can provide
Progress International, the Indenture does allow the Company to use the $12.5
million proceeds of the GEPT Private Placement for Progress International. The
Indenture also allows the Company to fund Progress International with the
proceeds of certain equity offerings or, under certain circumstances, with funds
raised through debt incurrence or, provided that the Company meets certain
financial ratios, from working capital. No assurance can be given that adequate
funding sources will be available from Progress International or from third
parties to implement Marca-Tel's business plan or, if implemented, that such
business plan will be successful.
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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, the Company's ability to service its
debt, the Company's and Westel's ability to fund Marca-Tel and the successful
completion and operation of Marca-Tel's fiber optic system in Mexico are based
on certain assumptions as to future events. Important factors that could
adversely affect the Company's ability to achieve the results discussed above
include that: (i) there will be no significant delays or cost overruns with
respect to the network expansion; (ii) the Company's contractors and partners in
cost-saving arrangements will perform their obligations; (iii) rights-of-way can
be obtained in a timely, cost-effective basis; (iv) the routes of the network
expansion scheduled for completion in 1997 are substantially completed on
schedule; (v) the Company will continue to increase traffic on its switched
network; (vi) the Company can successfully commence service for new switched
long distance services on a cost effective basis (including the provision of
billing information in an accurate and timely manner) for volumes that it has
not previously handled; (vii) the Company can successfully complete the
Chicago-Los Angeles Fiber Sale and the New York-Los Angeles Fiber Sale; and
(viii) the Company can obtain funds from vendor financing, the Proposed Credit
Facility or otherwise.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Not Applicable.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On April 4, 1997 Tel-Central Communications, Inc. ("Tel-Central") filed a
complaint against IXC Long Distance, Inc., one of the Company's subsidiaries, in
the United States District Court in the Western District of Missouri after the
Company terminated service to Tel-Central for failure to pay for services.
Tel-Central's complaint makes various state and federal law claims and seeks
damages of over $100 million and asks for punitive damages of $100 million. The
Company believes that Tel-Central's claims are without merit and that such
complaint is part of an attempt by Tel-Central to avoid payment of its
outstanding balance to the Company. The Company believes that it is unlikely
that this suit will result in any material liability to the Company.
ITEM 2. CHANGES IN SECURITIES
The Company did not sell any unregistered securities during the three
months ended March 31, 1997.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
On April 1, 1997, IXC Communications, Inc. (the "Company") issued and sold
1,000,000 shares of 7 1/4% Junior Convertible Preferred Stock Due 2007 (the
"Convertible Preferred Stock") in a private placement to two initial purchasers,
which shares were subsequently sold to "qualified institutional buyers" and
certain "accredited investors" (as defined in the Securities Act of 1933, as
amended). The Convertible Preferred Stock is convertible at the option of the
holders, unless previously redeemed, at any time after May 31, 1997, into shares
of Common Stock at a rate (subject to adjustment in certain events) of 4.263
shares of Common Stock for each share of Convertible Preferred Stock, equivalent
to a conversion price of $23.46 for each share of Common Stock. Dividends on the
Convertible Preferred Stock accrue at a rate per annum of 7 1/4% per share on
the liquidation preference thereof of $100 per share ($7.25 per annum per
share). Dividends payable prior to or on March 31, 1999, are, at the option of
the Company, payable (i) in cash or (ii) through the issuance of additional
shares of Convertible Preferred Stock equal to the dividend amount divided by
the liquidation preference of such additional shares. After March 31, 1999, to
the extent and for so long as the Company is not permitted to pay cash dividends
on the Convertible Preferred Stock by the terms of any then outstanding
indebtedness or any other agreement or instrument to which the Company is
subject, the Company will be required to pay dividends, which shall accrue at
the rate per annum of 8 3/4%, through the issuance of additional shares of
Convertible Preferred Stock. Payment of dividends on the Convertible Preferred
Stock is not currently permitted under the Indenture for the Company's 12 1/2%
Senior Notes due 2005 until certain financial conditions have been met or under
the terms of the Company's 10% Junior Series 3 Cumulative Redeemable Preferred
Stock ("Series 3 Preferred Stock") until certain financial conditions have been
met or under the terms of the Series 3 Preferred Stock until the Company's
Restated Certificate of Incorporation, as amended, is amended (which is expected
to occur in June 1997).
In January 1997, the Company entered into an agreement to purchase L.D.
Services, Inc. ("LDS"), a long-distance switchless reseller with 1996 revenues
of approximately $30.0 million. The consideration for this acquisition will be
Common Stock of the Company. A regulatory commission has stayed the LDS
acquisition pending further investigation. The Company is unable to determine
when and if the closing of the LDS acquisition will occur.
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The Company has revised its earlier announced estimate of the net cost of
the network expansion for various reasons, including changes in the route,
changes in the electronics to be included in the network and revisions in the
estimated cost of the network expansion. The Company now estimates that the cost
of the network expansion (net of cost-saving arrangements and the proceeds of
fiber sales through March 31, 1997) will be approximately $203.9 million or
$29,100 per mile.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------ ----------------------------------------------------------------------------------
3.1+ Restated Certificate of Incorporation of the Company, as amended.
3.2+ Bylaws of the Company, as amended.
4.1 Specimen certificate representing shares of Common Stock of the Company
(incorporated by reference to Exhibit 4.1 of the Company Registration Statement on
Form S-1 filed with the Securities and Exchange Commission (the "Commission") on
May 20, 1996, as amended (File No. 333-4061) (the "S-1")).
4.2 Indenture dated as of October 5, 1995 by and among the Company, 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, with respect to the 12 1/2% Series A
and Series B Senior Notes due 2005 (incorporated by reference to Exhibit 4.1 of
the Company's and each of the Guarantor's Registration Statement on Form S-4 filed
with the Commission on April 1, 1996, as amended (File No. 333-2936) (the "S-4")).
4.3 Purchase Agreement dated October 5, 1995 by and among the Company, and the
Purchasers named therein (incorporated by reference to Exhibit 4.2 of the S-4).
4.4 A/B Exchange Registration Rights Agreement dated as of October 5, 1995 by and
among the Company, the Guarantors and the Purchasers named therein (incorporated
by reference to Exhibit 4.3 of the S-4).
4.5 Escrow Account and Disbursement Agreement dated as of October 5, 1995 by and among
the Company, IBJ Schroder Bank & Trust Company, as Escrow Holder, and IBJ Schroder
Bank & Trust Company, as Collateral Agent (incorporated by reference to Exhibit
4.4 of the S-4).
4.6 Escrow Account Security Agreement dated as of October 5, 1995 by and between the
Company and IBJ Schroder Bank & Trust Company (incorporated by reference to
Exhibit 4.5 of the S-4).
4.7 Form of 12 1/2% Series A Senior Notes due 2005 (incorporated by reference to
Exhibit 4.6 of the S-4).
4.8 Form of 12 1/2% Series B Senior Notes due 2005 and Subsidiary Guarantee
(incorporated by reference to Exhibit 4.8 of the S-1).
4.9 Amendment No. 1 to Indenture and Subsidiary Guarantee dated as of June 4, 1996 by
and among the Company, the Guarantors and the Trustee (incorporated by reference
to Exhibit 4.11 of the S-1).
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EXHIBIT
NUMBER DESCRIPTION
- ------ ----------------------------------------------------------------------------------
4.10 Stock Exchange Agreement dated as of June 10, 1996 by and between the Company and
Trustees of General Electric Pension Trust ("GEPT") (incorporated by reference to
Exhibit 4.12 of the S-1).
4.11 Registration Rights Agreement dated as of June 10, 1996 by and among IXC
Communications, Inc., GEPT and certain stockholders of the Company (incorporated
by reference to Exhibit 4.13 of the S-1).
4.12 + Purchase Agreement dated as of March 25, 1997 by and among the Company, Credit
Suisse First Boston Corporation ("CS First Boston") and Dillon Read & Co. Inc.
("Dillon Read").
4.13 + Registration Rights Agreement dated as of March 25, 1997 by and among the Company,
CS First Boston and Dillon Read.
4.14 + Amendment to Registration Rights Agreement dated as of March 25, 1995 between the
Company and GEPT.
10.1 Office Lease dated 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 the Company (incorporated by reference to
Exhibit 10.2 of the S-4).
10.3 Amended and Restated 1994 Stock Plan of the Company, as amended (incorporated by
reference to Exhibit 10.3 of the Company's Annual Report on Form 10-K (the "10-K")
for the year ended December 31, 1996).
10.4 Form of Non-Qualified Stock Option Agreement under the 1994 Stock Plan of the
Company (incorporated by reference to Exhibit 10.4 of the S-4).
10.5 Form of the Company's Restricted Stock Agreement (incorporated by reference to
Exhibit 10.5 of the S-4).
10.6 Form of the Company's Restricted Stock Agreement (incorporated by reference to
Exhibit 10.6 of the S-4).
10.7 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 the S-4).
10.8 Second Amended and Restated Service Agreement dated as of January 1, 1996 by and
between Switched Services Communications, L.L.C. and Excel Telecommunications,
Inc. (incorporated by reference to Exhibit 10.8 of the S-4).
10.9 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).
10.10 1996 Stock Plan of the Company, as amended (incorporated by reference to Exhibit
10.10 of the 10-K).
10.11 IRU Agreement dated as of November 1995 between WorldCom, Inc. and IXC Carrier,
Inc. (incorporated by reference to Exhibit 10.11 of the S-4).
10.12 Outside Directors' Phantom Stock Plan of the Company, as amended (incorporated by
reference to Exhibit 10.12 of the 10-K).
10.13 Business Consultant and Management Agreement dated as of January 3, 1995 by and
between the Company and Culp Communications Associates (incorporated by reference
to Exhibit 10.13 of the S-1).
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EXHIBIT
NUMBER DESCRIPTION
- ------ ----------------------------------------------------------------------------------
10.14 Employment Agreement dated December 28, 1995 by and between the Company and James
F. Guthrie (incorporated by reference to Exhibit 10.14 of the S-1).
10.15 Employment Agreement dated August 28, 1995, by and between the Company and David
J. Thomas (incorporated by reference to Exhibit 10.15 of the S-1).
10.16 Special Stock Plan of the Company (incorporated by reference to Exhibit 10.16 of
the 10-K).
10.17 Stock Acquisition Agreement and Plan of Merger dated as of January 17, 1997 by and
among the Company, IXC Long Distance, Inc., IXC-One Acquisition Corp., L.D.
Services, Inc. and the Shareholders named therein (incorporated by reference to
Exhibit 10.17 of the 10-K).
11.1+ Statement of Computation of Earnings per Share.
27 + Financial Data Schedule.
- ---------------
+ Filed herewith.
(b) Reports on Form 8-K.
(1) Form 8-K dated February 27, 1997 and filed with the Commission on March
3, 1997 announcing that the Company had entered into a Securities Purchase
Agreement (the "Purchase Agreement") with Morgan Stanley Capital Partners III,
L.P. and two related investment limited partnerships and Trustees of General
Electric Pension Trust in connection with the proposed issuance of a new 7%
Series A Convertible Preferred Stock of the Company (the "Series A Stock"). The
Purchase Agreement was never consummated and the Series A Stock has never been
issued and is no longer authorized under the Company's charter.
(2) Form 8-K dated March 6, 1997 and filed with the Commission on March 7,
1997 reporting the Company's audited financial statements for the year ended
December 31, 1996.
(3) Form 8-K dated March 26, 1997 and filed with the Commission on March
27, 1997 with respect to the Company's notice of proposed unregistered offering
pursuant to Rule 135c(d) of the Securities Act of 1933, as amended, with respect
to the sale of Convertible Preferred Stock, which subsequently occurred in April
1997.
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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.
IXC Communications, Inc.,
a Delaware corporation
May 14, 1997 By: /s/ JOHN J. WILLINGHAM
------------------------------------
John J. Willingham
Senior Vice President
Chief Financial Officer and
Assistant Secretary (Duly
Authorized Officer and
Principal Financial Officer)
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