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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(MARK ONE)
/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 333-56365
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MJD COMMUNICATIONS, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 13-3725229
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
521 EAST MOREHEAD STREET, SUITE 250 28202
CHARLOTTE, NORTH CAROLINA (Zip Code)
(Address of Principal Executive
Offices)
Registrant's Telephone Number, Including Area Code:
(704) 344-8150
------------------------
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 / /
As of November 12, 1999, the registrant had outstanding 1,810,147 shares of
common stock.
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MJD COMMUNICATIONS, INC.
QUARTERLY REPORT FOR THE PERIOD ENDED SEPTEMBER 30, 1999
INDEX
PAGE
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements........................................ 3
Condensed Consolidated Balance Sheets as of September 30,
1999 and
December 31, 1998........................................... 3
Condensed Consolidated Statements of Operations for the
three months 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....................................... 8
Item 3a. Quantitative and Qualitative Disclosures About Market
Risk........................................................ 15
PART II. OTHER INFORMATION
Item 5. Other Information........................................... 16
Item 6. Exhibits and Reports on Form 8-K............................ 16
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MJD COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
ASSETS
Current assets:
Cash and cash equivalents................................. $ 8,736 13,241
Accounts receivable and other............................. 27,662 22,395
-------- -------
Total current assets........................................ 36,398 35,636
-------- -------
Property, plant, and equipment, net......................... 152,475 142,321
-------- -------
Other assets:
Investments............................................... 30,643 37,894
Goodwill, net of accumulated amortization................. 209,983 203,867
Deferred charges and other assets......................... 20,700 21,173
-------- -------
Total other assets.......................................... 261,326 262,934
-------- -------
Total assets................................................ $450,199 440,891
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 11,888 10,153
Current portion of long-term debt and other............... 4,983 4,383
Demand notes payable...................................... 752 754
Accrued interest payable.................................. 8,803 3,947
Other accrued liabilities................................. 10,261 6,842
-------- -------
Total current liabilities................................... 36,687 26,079
-------- -------
Long-term liabilities:
Long-term debt, net of current portion.................... 371,467 364,610
Put warrant obligation.................................... 5,931 4,169
Deferred credits and other long-term liabilities.......... 30,752 32,712
-------- -------
Total long-term liabilities................................. 408,150 401,491
-------- -------
Minority interest........................................... 518 435
-------- -------
Common stock subject to put option.......................... 3,000 3,000
-------- -------
Stockholders' equity:
Common stock.............................................. 17 17
Additional paid-in capital................................ 45,965 45,735
Retained deficit.......................................... (44,138) (35,866)
-------- -------
Total stockholders' equity.................................. 1,844 9,886
-------- -------
Total liabilities and stockholders' equity.................. $450,199 440,891
======== =======
See accompanying notes to condensed consolidated financial statements.
3
MJD COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
(DOLLARS IN THOUSANDS)
Operating revenues:
Switched services................................... $29,213 19,801 80,911 49,286
Resold services..................................... 6,059 2,465 13,988 5,614
Other............................................... 4,075 3,377 12,772 8,377
------- ------ ------- -------
Total operating revenues.............................. 39,347 25,643 107,671 63,277
------- ------ ------- -------
Operating expenses:
Plant operations.................................... 5,381 4,036 14,937 9,767
Corporate and customer service...................... 12,694 7,295 34,937 17,170
Depreciation and amortization....................... 7,532 6,112 22,496 13,412
Cost of services resold............................. 5,406 1,788 12,125 4,160
Other............................................... 2,486 1,693 6,878 4,507
------- ------ ------- -------
Total operating expenses.............................. 33,499 20,924 91,373 49,016
------- ------ ------- -------
Income from operations................................ 5,848 4,719 16,298 14,261
------- ------ ------- -------
Other income (expense):
Net gain on sale of investments..................... 136 270 362 660
Interest income..................................... 55 146 335 273
Dividend income..................................... 349 70 941 115
Interest expense.................................... (10,162) (7,912) (29,061) (17,619)
Other, net.......................................... 266 104 1,338 302
------- ------ ------- -------
Total other expense................................... (9,356) (7,322) (26,085) (16,269)
Loss before income taxes and extraordinary item....... (3,508) (2,603) (9,787) (2,008)
Income tax benefit.................................... 55 1,086 1,573 697
------- ------ ------- -------
Loss before extraordinary item........................ (3,453) (1,517) (8,214) (1,311)
Extraordinary item net of tax......................... -- -- -- (2,521)
------- ------ ------- -------
Loss before minority interest......................... (3,453) (1,517) (8,214) (3,832)
Minority interest in income of subsidiaries........... (19) (31) (58) (68)
------- ------ ------- -------
Net loss.............................................. $(3,472) (1,548) (8,272) (3,900)
======= ====== ======= =======
See accompanying notes to condensed consolidated financial statements.
4
MJD COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1999 1998
---- ----
(DOLLARS IN THOUSANDS)
Cash flows from operating activities:
Net loss.................................................. $ (8,272) (3,900)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization............................. 23,948 14,140
Other non cash items...................................... (6,325) (559)
Loss on early retirement of debt.......................... -- 2,897
Changes in assets and liabilities arising from operations,
net of acquisitions:
Accounts receivable..................................... 401 1,880
Accounts payable and accrued expenses................... 4,056 2,823
Income taxes recoverable................................ 3,692 (2,871)
-------- --------
Total adjustments......................................... 25,772 18,310
-------- --------
Net cash provided by operating activities................. 17,500 14,410
-------- --------
Cash flows from investing activities:
Net capital additions..................................... (20,404) (6,672)
Acquisitions of telephone properties...................... (26,018) (171,701)
Other, net................................................ 18,804 2,862
-------- --------
Net cash used in investing activities..................... (27,618) (175,511)
Cash flows from financing activities:
Loan origination costs.................................... (64) (16,197)
Proceeds from issuance of long-term debt.................. 32,016 451,000
Repayment of long-term debt............................... (26,279) (298,055)
Net proceeds from the issuance of common stock............ -- 31,838
Dividends paid to stockholders............................ (18) (12)
Repurchase of stock and warrants.......................... -- (142)
Other, net................................................ (42) (41)
-------- --------
Net cash provided by financing activities................. 5,613 168,391
-------- --------
Net increase (decrease) in cash and cash equivalents........ (4,505) 7,290
Cash and cash equivalents, beginning of period.............. 13,241 6,822
-------- --------
Cash and cash equivalents, end of period.................... $ 8,736 14,112
======== ========
See accompanying notes to condensed consolidated financial statements.
5
MJD COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF FINANCIAL REPORTING
In the opinion of the management, the accompanying financial statements
reflect all adjustments, consisting of normal recurring adjustments, necessary
for a fair presentation of results of operations, financial position, and cash
flows. The results of operations for the interim periods are not necessarily
indicative of the results of operations, which might be expected for the entire
year. The condensed consolidated financial statements should be read in
conjunction with the Company's 1998 annual report on Form 10-K, which was filed
on March 29, 1999. Certain amounts from 1998 have been reclassified to conform
to the current period presentation.
(2) ACQUISITIONS
On February 1, 1999, the Company acquired 100% of the outstanding common
stock of Ravenswood Communications, Inc. and its subsidiaries. On February 16,
1999, the Company acquired 98% of the outstanding common stock of Columbus Grove
Telephone Company and its subsidiary. On April 30, 1999, the Company acquired
100% of the outstanding common stock of Union Telephone Company of Hartford,
Armour Independent Telephone Co. and its subsidiaries, Bridgewater-Canistota
Independent Telephone Co. and WMW Cable TV Co. (collectively, "Union"). On
September 1, 1999, the Company acquired 100% of the outstanding common stock of
Yates City Telephone Company. The aggregate purchase price for these
acquisitions was $37.6 million and acquisition costs were approximately
$980,000.
These acquisitions have been accounted for as purchases and, accordingly,
the acquired assets and liabilities have been recorded at their estimated fair
values at the dates of acquisition, and the results of operations have been
included in the accompanying consolidated financial statements since the dates
of acquisition. Goodwill recognized in connection with these acquisitions was
approximately $14.2 million and will be amortized over an estimated useful life
of 40 years.
The Company has entered into a definitive agreement to acquire one other
unrelated rural local exchange carrier (RLEC). This acquisition is expected to
close in the fourth quarter of 1999. The purchase price is expected to be
approximately $41.3 million and will be financed through cash flow from existing
operations or the Company's senior secured credit facility. The acquisition will
be accounted for using the purchase method of accounting.
The following unaudited pro forma information presents the combined results
of operations of the Company as though the acquisitions in 1999 and 1998,
referred to in the preceding paragraph, occurred on January 1, 1998. These
combined results include certain adjustments, including amortization of
goodwill, increased interest expense on debt related to the acquisitions and
related income tax effects. The pro forma financial information does not
necessarily reflect the results of operations that would have been achieved had
the acquisitions been consummated as of the assumed dates, nor are the results
necessarily indicative of the Company's future results of operations.
PRO FORMA
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1999 1998
---------- ----------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
Operating revenues.......................................... $109,844 96,527
Net loss.................................................... (8,434) (1,712)
6
MJD COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(3) STOCK OPTION PLAN
In August 1999, the compensation committee of the Board of Directors of
FairPoint Communications Corp. ("FairPoint"), approved the grant of options to
purchase 65,000 shares of common stock of FairPoint. All 960,500 options to
purchase shares of common stock of FairPoint granted under the FairPoint
Communications Corp. Stock Incentive Plan are exercisable at an exercise price
of $0.50 per share, which is the estimated fair market value of FairPoint's
common stock. The options have a term of ten years.
(4) REPORTABLE SEGMENTS
The Company has two reportable segments: rural local exchange carrier
("RLEC") operations and competitive local exchange carrier (CLEC) operations.
The RLEC operations provide local, long distance and other telecommunications
services to customers in rural communities in which competition is typically
limited or currently does not exist for local telecommunications services. The
CLEC operations provide local, long distance, Internet, and other
telecommunications services to customers in markets outside of the Company's
RLEC markets.
The Company utilizes the following information for purposes of making
decisions about allocating resources to a segment and assessing a segment's
performance:
RLEC CLEC
OPERATIONS OPERATIONS TOTAL
---------- ---------- --------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
Three months ended September 30, 1999:
Revenues from external customers.......................... $ 37,138 2,209 39,347
Intersegment revenues..................................... -- 936 936
EBITDA.................................................... 19,527 (5,361) 14,166
Nine months ended September 30, 1999:
Revenues from external customers.......................... $100,913 6,758 107,671
Intersegment revenues..................................... -- 1,529 1,529
EBITDA.................................................... 53,594 (11,882) 41,712
A reconciliation of reportable segment amounts to the Company's consolidated
balances for the nine months ended September 30, 1999 is as follows:
(DOLLARS IN THOUSANDS)
----------------------
EBITDA to net loss:
EBITDA.................................................... $41,712
Other components of net loss
Depreciation and amortization........................... (22,496)
Interest expense........................................ (29,061)
Income tax benefit...................................... 1,573
Net loss.............................................. $(8,272)
Comparative amounts for the nine months ended September 30, 1998 are not
presented because the CLEC's results of operations were not material.
7
MJD COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(5) SUBSEQUENT EVENTS
On October 20, 1999, FairPoint closed a $100 million convertible senior
secured revolving credit facility (the "FairPoint Credit Facility"). Under the
FairPoint Credit Facility, funds are available on a revolving basis, for a
period of up to five years from the date of closing. Borrowings under the
FairPoint Credit Facility are secured by all existing and future assets of
FairPoint and by 100% of the stock of FairPoint's subsidiaries. Pursuant to the
terms of the FairPoint Credit Facility, FairPoint is required to comply with
certain financial covenants. Upon breach of such financial covenants and certain
other covenants or at final maturity, at the lenders' option, an exchange of all
outstanding indebtedness plus outstanding and accrued interest for an equal
dollar amount of PIK preferred stock issued by the Company shall be available as
additional security.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
THE FOLLOWING DISCUSSION AND ANALYSIS PROVIDES INFORMATION THAT MANAGEMENT
BELIEVES IS RELEVANT TO AN ASSESSMENT AND UNDERSTANDING OF THE CONSOLIDATED
RESULTS OF OPERATIONS AND FINANCIAL CONDITION OF MJD COMMUNICATIONS, INC. AND
ITS SUBSIDIARIES (COLLECTIVELY, THE "COMPANY" OR "MJD"). THE DISCUSSION SHOULD
BE READ IN CONJUNCTION WITH THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS FOR
THE YEAR ENDED DECEMBER 31, 1998 INCLUDED IN THE COMPANY'S ANNUAL REPORT ON FORM
10-K, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 29, 1999.
CERTAIN STATEMENTS INCLUDED IN THIS DOCUMENT ARE FORWARD-LOOKING, SUCH AS
STATEMENTS RELATING TO ESTIMATES OF OPERATING AND CAPITAL EXPENDITURE
REQUIREMENTS, FUTURE REVENUE AND OPERATING INCOME, AND CASH FLOW AND LIQUIDITY.
SUCH FORWARD-LOOKING STATEMENTS ARE BASED ON THE COMPANY'S CURRENT EXPECTATIONS
AND ARE SUBJECT TO A NUMBER OF RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL
RESULTS IN THE FUTURE TO DIFFER SIGNIFICANTLY FROM RESULTS EXPRESSED OR IMPLIED
IN ANY FORWARD-LOOKING STATEMENTS MADE BY, OR ON BEHALF OF, THE COMPANY. THESE
RISKS AND UNCERTAINTIES INCLUDE, BUT ARE NOT LIMITED TO, UNCERTAINTIES RELATING
TO ECONOMIC AND BUSINESS CONDITIONS, GOVERNMENTAL AND REGULATORY POLICIES, AND
THE COMPETITIVE ENVIRONMENT IN WHICH THE COMPANY OPERATES. THESE AND OTHER RISKS
ARE DETAILED BELOW AS WELL AS IN OTHER DOCUMENTS FILED BY THE COMPANY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
OVERVIEW
MJD is an integrated communications provider offering bundled services such
as local dial tone, intra and inter-state access, long distance, enhanced
services, internet, data and other related communication services. MJD is
pursuing this strategy by acquiring and operating rural local exchange carriers
("RLECs"), the rural segment of the telecommunications industry, and a
competitive local exchange carrier ("CLEC") strategy in targeted ex-urban
markets adjacent to markets served by the company's RLEC operations. During the
nine months ended September 30, 1999, MJD acquired six RLECs (collectively, the
"1999 Acquisitions"), which in the aggregate serve approximately 7,800 access
lines. Including the 1999 Acquisitions, the Company owned and operated 23 RLECs
which served approximately 143,000 access lines located in twelve states at
September 30, 1999.
In April 1998, MJD launched its CLEC strategy under its wholly owned
subsidiary, FairPoint Communications Corp. ("FairPoint"). At September 30, 1999,
FairPoint was providing telecommunications services in 72 markets and had sold
and provisioned 24,425 access lines. With the inclusion of FairPoint, total
access lines under management by the Company was approximately 167,000 at
September 30, 1999.
OPERATING REVENUES: The Company's switched revenues are derived primarily
from: (i) the provision of basic local telephone service revenues; and (ii) the
provision of network access to inter-exchange carriers ("IXCs") for origination
and termination of interstate and intrastate long distance telephone calls.
Resold services revenues include long distance resale, FairPoint's revenue and
other resold services revenues. Other revenues include ancillary service
revenues such as billing and collection, enhanced services, Internet and other
such ancillary services.
OPERATING EXPENSES: The Company's operating expenses are categorized as
plant operations, corporate and customer service, depreciation and amortization,
cost of services resold and other general and administrative expenses. Year to
year operating expense changes are influenced by access line growth, the
Company's acquisition activity, general business inflationary adjustments, and
the expenses of the Company's CLEC business.
OTHER (INCOME) EXPENSES: The Company's other income includes interest
income, dividends, gain or loss on sale of assets and other miscellaneous,
non-operating income. The Company's other expenses consist primarily of interest
expense related to the Company's debt and other non-operating expenses.
9
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED WITH THREE MONTHS ENDED
SEPTEMBER 30, 1998
OPERATING REVENUES. Operating revenues increased $13.7 million to
$39.3 million in 1999 from $25.6 million in 1998 for the three months ended
September 30. The 1999 Acquisitions and the acquisitions completed after the
second quarter of 1998 accounted for $7.5 million of the revenue increase while
the operating revenues of RLECs owned and operated for the comparable period
increased by $3.4 million to $28.6 million. FairPoint's operating revenues
increased $2.8 million from $0.4 million to $3.2 million for the three months
ended September 30, 1999.
Basic local service revenue increased $1.8 million to $6.9 million in 1999
from $5.1 million in 1998 for the three months ended September 30. This revenue
increase is primarily attributable to an increase in access lines from internal
growth and from the 1999 Acquisitions and the acquisitions completed after the
second quarter of 1998. These acquisitions contributed $1.4 million of the
increase in basic local service revenue for the three months ended
September 30, 1999 while the RLECs owned and operated for the comparable period
increased by $0.4 million.
Universal Service Support Fund ("USSF") revenue increased $1.1 million to
$2.4 million in 1999 from $1.3 million in 1998 for the three months ended
September 30. The 1999 Acquisitions and acquisitions completed after the second
quarter of 1998 contributed $0.2 million of this increase while the RLECs owned
and operated for a comparable period, USSF revenues increased by $0.9 million.
This increase is attributable to USSF revenues received at Ellensburg Telephone
Company, a subsidiary of the Company ("Ellensburg"), beginning in the third
quarter of 1999. Ellensburg became eligible to receive USSF revenues due to a
study and reclassification of Central Office Equipment initiated by management.
Network access revenue increased $6.6 million to $19.9 million in 1999 from
$13.3 million in 1998 for the three months ended September 30. This revenue
increase is primarily attributable to the increase in minutes of use contributed
by the 1999 Acquisitions and acquisitions completed after the second quarter of
1998. Network access revenue contributed by these acquisitions in the three
months ended September 30, 1999 was $4.6 million. For the RLECs owned and
operated for a comparable period, network access revenue increased by
$2.0 million to $15.3 million in 1999 from $13.3 million in 1998. This increase
is primarily attributable to 1998 cost study true up payments that were received
from traffic pattern shifts that resulted in higher network access revenue.
Resold services revenues increased $3.6 million to $6.1 million in 1999 from
$2.5 million in 1998 for the three months ended September 30. Revenue
contributed by the 1999 acquisitions and the acquisitions completed after the
second quarter of 1998 provided $0.1 million. For the RLECs owned and operated
for the comparable period, revenue increased $0.5 million. Long distance service
resold contributed $0.2 million. FairPoint reported $3.2 million in revenue for
the three month period compared to $0.4 million from the prior year period ended
September 30, 1998.
Other revenues increased $0.7 million to $4.1 million in 1999 from $3.4
million in 1998 for the three months ended September 30. Revenue contribution
from the 1999 acquisitions and the acquisitions completed after the second
quarter of 1998 provided $1.3 million of the increase in other revenue while the
RLECs owned and operated for a comparable period decreased $0.6 million.
OPERATING EXPENSES. Operating expenses, which include plant operations,
corporate and customer service, depreciation and amortization, cost of services
resold and other general and administrative expenses, increased $12.6 million to
$33.5 million in 1999 from $20.9 million in 1998 for the three months ended
September 30. The increase was primarily attributed to the operating expenses
associated with the 1999 Acquisitions and the acquisitions completed after the
second quarter 1998, which in the aggregate accounted for an increase of
$4.5 million. In addition, for the RLECs owned and operated for a comparable
period, operating expenses increased approximately $0.6 million to
$20.0 million in 1999 from $19.4 million in 1998. This change was primarily
attributable to an increase in cost of services resold at the
10
Company's long distance subsidiary. FairPoint's operating expenses accounted for
$7.5 million of the Company's operating expense increase, increasing from
$1.5 million for the three months ended September 30, 1998 to $9.0 million for
the three months ended September 30, 1999.
INCOME FROM OPERATIONS. As a result of the factors described above, income
from operations increased $1.1 million to $5.8 million in 1999 from
$4.7 million in 1998 for the three months ended September 30. As a percentage of
revenues, income from operations was 14.9% as compared to 18.4% for the three
months ended September 30, 1999 and 1998, respectively. This income from
operations margin decline for the three months ended September 30, 1999 is
primarily attributable to the expenses of FairPoint. For RLECs owned and
operated for a comparable period, the income from operations increased
$2.8 million to $8.6 million in 1999 from $5.8 million in 1998 and the income
from operations margin increased to 30.2% from 23.0%. This increase is primarily
attributable to the increased USSF and network access revenue.
OTHER INCOME (EXPENSE). Total other expense increased $2.0 million to
$9.3 million in 1999 from $7.3 million in 1998 for the three months ended
September 30. The increase was primarily attributable to an increase in interest
expense associated with additional debt required to complete the 1999 and 1998
acquisitions.
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED WITH NINE MONTHS ENDED
SEPTEMBER 30, 1998
OPERATING REVENUES. Operating revenues increased $44.4 million to
$107.7 million in 1999 from $63.3 million in 1998 for the nine months ended
September 30. The 1999 Acquisitions and the acquisitions completed by the
Company in 1998 (the "1998 Acquisitions") accounted for $36.0 million of the
revenue increase while the RLECs owned and operated for a comparable period,
operating revenues increased by $2.4 million to $46.6 million from
$44.2 million. FairPoint's operating revenues increased $6.0 million from
$0.4 million in 1998 to $6.4 million 1999.
Basic local service revenue increased $7.7 million to $19.7 million in 1999
from $12.0 million in 1998 for the nine months ended September 30. This revenue
increase is primarily attributable to an increase in access lines from internal
growth and access lines acquired in the 1999 Acquisitions and the 1998
Acquisitions. The 1999 Acquisitions and the 1998 Acquisitions accounted for
89,211 access lines, or 53% of total access lines operated by the Company at
September 30, 1999. The RLECs owned and operated by the Company for the
comparable periods achieved internal growth of 2,717 access lines. The 1999
Acquisitions and 1998 Acquisitions contributed $6.9 million of the increase in
basic local service revenue in 1999 while the RLECs owned and operated for a
comparable period contributed $0.8 million of the increase.
USSF revenue increased $1.9 million to $5.6 million in 1999 from
$3.7 million in 1998 for the nine months ended September 30. The 1999
Acquisitions and 1998 Acquisitions contributed $1.5 million in USSF revenue,
while for the RLECs owned and operated for the comparable period, USSF revenues
increased by $0.4 million to $3.9 million.
Network access revenue increased $22.1 million to $55.7 million in 1999 from
$33.6 million in 1998 for the nine months ended September 30. This revenue
increase is primarily attributable to the increase in minutes of use contributed
from internal growth and by the 1999 Acquisitions and the 1998 Acquisitions.
Network access revenue contributed by the 1999 Acquisitions and the 1998
Acquisitions was $19.9 million. For the RLECs owned and operated for a
comparable period, network access revenue increased by $2.2 million to
$26.3 million. The increase in 1999 was primarily associated with 1998 cost
study true up payments that were received from traffic pattern shifts that
resulted in higher network access revenue.
Resold service revenue increased $8.4 million to $14.0 million in 1999 from
$5.6 million in 1998 for the nine months ended September 30. Revenue contributed
by the 1999 Acquisitions and the 1998 Acquisitions provided $1.9 million of the
increase in resold services revenues. Long distance service resold
11
contributed $0.6 million. FairPoint reported $6.4 million in revenue for the
nine month period compared to $0.5 million from the prior year period ending
September 30, 1998.
Other revenues increased $4.4 million to $12.8 million in 1999 from $8.4
million in 1998 for the nine months ended September 30. Revenue contributed by
the 1999 Acquisitions and the 1998 Acquisitions provided $5.1 million of the
increase in other revenues for the nine months ended September 30, 1999. For the
RLECs owned and operated for the comparable period by the Company, other
revenues decreased $0.7 million to $3.9 million.
OPERATING EXPENSES. Operating expenses, which include plant operations,
corporate and customer service, depreciation and amortization, cost of services
resold and other general and administrative expenses, increased $42.4 million to
$91.4 million in 1999 from $49.0 million in 1998 for the nine months ended
September 30. The increase was primarily attributable to the operating expenses
associated with the 1999 Acquisitions and the 1998 Acquisitions, which in the
aggregate accounted for $20.8 million of the increase. In addition, for the
RLECs owned and operated for the comparable period, operating expenses increased
approximately $3.8 million, or 11.98%, to $35.8 million in 1999 from
$32.0 million in 1998. The change was primarily attributable to an increase in
corporate and customer service expenses and in cost of services resold at the
Company's long distance subsidiary. Corporate expenses increased primarily due
to the $1.4 million in one-time charges incurred during the second quarter of
1999. These charges were due to the buy-out of an employment contract and the
write-off of costs associated with due diligence expense for acquisitions on
which MJD was not the successful bidder. Corporate salaries and related costs
were approximately $1.0 million higher due to increased staff levels and other
expenses to accommodate the 1998 and 1999 acquisitions activity and company
growth. Long distance toll costs increased $1.1 million as the number of
companies that wholesale services are being provided to has increased. In
addition, the wholesale rates in the state of Maine have increased dramatically
during 1999. FairPoint's operating expenses increased $16.0 million from
$2.3 million to $18.3 million in 1999.
INCOME FROM OPERATIONS. As a result of the factors described above, income
from operations increased $2.0 million to $16.3 million in 1999 from
$14.3 million in 1998 for the nine months ended September 30. As a percentage of
revenues, income from operations was 15.1% as compared to 22.5% for the nine
months ended September 30, 1999 and 1998, respectively. This margin decline in
1999 is primarily attributable to the expenses associated with FairPoint, an
increase in corporate and customer services expenses and long distance cost of
services resold. For the RLECs owned and operated for a comparable period, the
income from operations decreased $1.4 million to $10.8 million. The income from
operations margin decreased to 23.2% from 27.7%. This decrease was primarily
attributable to an increase in corporate and customer services expenses and long
distance costs of services resold.
OTHER INCOME (EXPENSE). Total other expense increased $9.8 million to
$26.1 million in 1999 from $16.3 million in 1998 for the nine months ended
September 30. The increase was primarily attributable to an increase in interest
expense associated with the additional debt incurred to complete the 1999
Acquisitions and 1998 Acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
The Company's acquisition strategy has required a significant amount of the
Company's capital resources. The Company historically has used the proceeds of
institutional and bank debt, private equity offerings, and available cash flow
to fund the Company's acquisition strategy.
The Company maintains a senior secured credit facility (the "Credit
Facility"), which within the Credit Facility is an $85 million reducing
revolving term facility with a remaining term of five years. This facility is
available for general corporate purposes, capital expenditures and acquisitions.
At September 30, 1999, there was an outstanding balance of $9,644,999 under this
revolving term facility. At September 30, 1999, the Company had available under
the reducing revolving term facility approximately $75.4 million.
12
Borrowings under the Credit Facility are guaranteed by the Company's four
mid-tier subsidiary companies and secured by certain subsidiaries' pledge of
stock. Pursuant to the Credit Facility, the Company is required to comply with
certain financial covenants. For the nine months ended September 30, 1999, the
Company was in compliance with such covenants.
On May 5, 1998, the Company completed a public offering of debt consisting
of $125 million in aggregate principal amount of 9 1/2% Senior Subordinated
Notes (the "Fixed Rate Note") and $75 million in aggregate principal amount of
Floating Rate Callable Securities (the "Floating Rate Note"), each due in 2008
(collectively the "Notes"). The Notes are general unsecured obligations of the
Company, subordinated in right of payment to all existing and future senior debt
of the Company, and effectively subordinated to all existing and future debt and
other liabilities of the Company's subsidiaries. Interest on the Notes is
payable semi-annually.
The Company's entry into additional markets as a CLEC is expected to result
in initial operating losses in its CLEC business. The Company invested equity of
approximately $4.4 million in FairPoint in 1998 and expects to invest additional
equity of approximately $10.4 million in 1999, in order to enable FairPoint to
expand into 83 additional markets and increase its total number of CLEC markets
served to approximately 93. In addition, FairPoint plans to build
telecommunications facilities to migrate its customers to the Company's existing
networks, which will require substantial capital expenditures in 1999 and 2000.
The Credit Facility limits the Company's investment in its CLEC business to
(i) $5.0 million per year so long as the senior debt leverage ratio (as
calculated under the Credit Facility) exceeds 4.0x and (ii) $15.0 million per
year whenever such leverage ratio is under 4.0x.
On October 20, 1999, FairPoint closed a $100 million convertible senior
secured revolving credit facility (the "FairPoint Credit Facility"). Under the
FairPoint Credit Facility, funds are available on a revolving basis, for a
period up to five years from the date of closing. Borrowings under the FairPoint
Credit Facility are secured by all existing and future assets of FairPoint and
by 100% of the stock of FairPoint's subsidiaries. Pursuant to the terms of the
FairPoint Credit Facility, FairPoint is required to comply with certain
financial covenants. Upon default of certain covenants or at final maturity, at
the lenders' option, an exchange of all outstanding indebtedness plus
outstanding and accrued interest for an equal dollar amount of PIK preferred
stock issued by the Company shall be available as additional security. FairPoint
has only a limited operating history and operates in a highly competitive
environment. In addition, FairPoint has significant capital requirements due to
the significant expenditures necessary to sell and market its CLEC services and
to purchase equipment to conduct operations. FairPoint has relied and is
expected to continue to rely on the Company to fulfill its capital needs and
provide credit support for its debt financing requirements. The FairPoint Credit
Facility, together with cash invested and to be invested by the Company, is
expected to fund FairPoint's current business plan through 2004.
Besides debt service, the Company's primary liquidity requirements are
expected to be for general corporate purposes, capital expenditures and to
finance the Company's pending or future acquisition activities. The Company has
historically generated sufficient cash flow from operations to meet all of its
capital expenditure requirements. During the first nine months of 1999 and 1998,
the Company spent approximately $20.4 million and $6.7 million, respectively, on
capital expenditures. The Company expects capital expenditures in 1999 for all
existing operations to be approximately $26.7 million, which are expected to be
funded through existing operations. Approximately $19.0 million of the
$26.7 million will be expended at MJD's RLEC properties and the difference of
$7.7 million at FairPoint.
Net cash provided by operating activities was $17.5 million and
$14.4 million for the nine months ended September 30, 1999 and 1998,
respectively. Net cash used in investing activities was $27.6 million and
$175.5 million for the nine months ended September 30, 1999 and 1998,
respectively. These cash flows primarily reflect expenditures relating to
acquisitions of RLECs of $26.0 million and $171.7 million for the nine months
ended September 30, 1999 and 1998, respectively, and capital expenditures of
$20.4 million and $6.7 million for the nine months ended September 30, 1999 and
1998, respectively. Net cash provided
13
by financing activities was $5.6 and $168.4 million for the nine months ended
September 30, 1999 and 1998, respectively. These cash flows primarily represent
borrowings of long-term debt. A majority of the proceeds were utilized to repay
long-term debt and to complete acquisitions.
Adjusted EBITDA is not a measure of performance under generally accepted
accounting principles and should not be construed as a substitute for
consolidated net earnings (loss) as a measure of performance or as a substitute
for cash flow as a measure of liquidity. Adjusted EBITDA presented herein
differs from the definition of EBITDA in the indenture relating to the Notes.
The definition of EBITDA in such indenture is designed to determine EBITDA for
the purposes of contractually limiting the amount of debt, which the Company may
incur. Adjusted EBITDA as calculated by the Company is not necessarily
comparable to similarly captioned amounts of other companies.
Management believes adjusted EBITDA provides useful information regarding
the Company's ability to incur and/or service debt. Increases or decreases in
Adjusted EBITDA may indicate improvements or decreases, respectively, in the
Company's free cash flows available to incur and/or service debt and cover fixed
charges. Management expects that, because Adjusted EBITDA is commonly used in
the telecommunications industry as a measure of performance, investors may use
this data to analyze and compare other telecommunications companies with the
Company in terms of operating performance, leverage and liquidity.
Adjusted EBITDA represents net earnings (loss) plus interest expense, income
taxes, depreciation, amortization, and extraordinary items.
Adjusted EBITDA increased 43.8% to $41.7 million for the nine months ended
September 30, 1999 from $29.0 million for the nine months ended September 30,
1998. Adjusted EBITDA reported by the RLECs was $53.6 million and by FairPoint
was $(11.9) million for the nine months ended September 30, 1999.
The Company may secure additional funding through the sale of public or
private debt and/or equity securities or enter into another bank credit facility
to fund future acquisitions and operations. If the Company's growth occurs more
rapidly than is currently anticipated or if its operating results are below
expectations, there can be no assurance that the Company will be successful in
raising sufficient additional capital on terms that it will consider acceptable,
or that the Company's operations will produce positive cash flow in sufficient
amounts to meet its debt obligations. The Company's failure to raise and
generate sufficient funds may require it to delay or abandon some of its planned
future growth or expenditures, which could have a material adverse effect on the
Company's growth and its ability to compete in the telecommunications industry.
NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities"
("SFAS 133"), which establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. SFAS 137
"Accounting for Derivative Investments and Hedging Activities--Deferral of the
Effective Date of FASB Statement No. 133", delays the effective date of this
statement to all fiscal quarters of fiscal years beginning after June 15, 2000.
The Company anticipates adopting this accounting pronouncement in 2001; however,
management believes it will not have a significant impact on the Company's
consolidated financial statements.
14
YEAR 2000
The Year 2000 issue concerns the inability of computer systems and certain
other equipment to properly recognize and process data that uses two digits
rather than four to designate particular years. The Company has initiated a Year
2000 Project Plan ("the Plan") to assess whether its systems that process date
sensitive information will perform satisfactorily leading up to and beyond
January 1, 2000. The goal of the Plan is to correct, prior to January 1, 2000,
any Year 2000-related problem with critical systems, the failure of which could
have a material adverse effect on the Company's operations. The Plan includes
steps to (i) identify each critical system element that requires date code
remediation, (ii) establish a plan to remediate such systems, (iii) implement
all required remediations and (iv) selectively test the remediated systems.
Thus far, the identification phase has identified Year 2000 issues in the
following critical Company-owned systems; (i) switching and transmission
hardware and software used by the Company to route and deliver telephone calls;
(ii) network support systems, including customer services systems and
(iii) billing and collection systems used by the Company to invoice and process
most of its customer payments. In addition, the Company (i) receives critical
services from providers of utilities and other services to facilities that house
employees and switching, transmission and other equipment and (ii) is dependent
upon outside vendors for, among other things, the provision of critical network
components. The Company is also critically reliant upon the systems of other
telecommunication carriers with which the Company's systems interconnect for the
routing and delivery of telephone calls. The Company has also identified
potential Year 2000 related liability with respect to the telephone equipment
manufactured by unaffiliated parties that the Company has sold or leased to its
customers. The identification, planning and remediation phases of the Plan are
materially complete as they relate to Company-owned systems.
Based on work completed under the Plan to date, the Company currently
intends to take the following additional steps under its Plan with respect to
Company-owned systems, third-party vendors and other telecommunications
carriers:
- The Company generally has remediate Company-owned switching, transmission,
billing and collection and other critical systems through the revision or
replacement of current system components. The selective testing and
verification of such changes are expected to be completed during 1999. Due
to the large number of system components requiring remediation, the
Company does not intend to test every remediated system but will rely upon
the results of selective testing to determine the effectiveness of
remediation efforts.
- With respect to critical services provided by utilities and other third
parties, the Company has contacted all such suppliers and is now following
up on responses. Thus far, a majority of suppliers contacted have
responded that their systems and service delivery mechanisms are Year 2000
compliant or can be made so through currently available modifications. The
Company plans to continue monitoring all third-party remediation efforts
and to make contingency plans for the delivery of such services as
necessary.
- The Year 2000 compliance status of other telecommunications carriers with
which the Company's switching systems interconnect is not yet known. The
Company is making inquiries with these carriers to determine their
compliance status and expects to obtain the results of compliance tests
prior to December 31, 1999, although there can be no assurance that
carriers will supply this information.
While the Company currently believes that it will be able to remediate and
selectively test Company-owned systems in time to minimize any detrimental
effect on its operations, there can be no assurance that such steps will be
successful. Failure by the Company to timely and effectively remediate its
systems, or the failure of critical vendors and suppliers and other
telecommunications carriers to remediate affected systems, could have a material
adverse impact on the Company's business, financial condition, results of
15
operations and prospects. Because the impact of Year 2000 issues on the Company
is materially dependent on the mitigation efforts of parties outside the
Company's control, the Company cannot assess with certainty the magnitude of any
such potential adverse impact. However, based upon risk assessment work
conducted thus far, the Company believes that the most reasonably likely worst
case scenario of the failure by the Company, its suppliers or other
telecommunications carriers with which the Company interconnects to resolve Year
2000 issues would be an inability by the Company (i) to provide
telecommunications services to the Company's customers, (ii) to route and
deliver telephone calls originating from or terminating with other
telecommunications carriers, (iii) to timely and accurately process service
requests and (iv) to timely and accurately bill its customers. In addition to
lost earnings, these failures could also result in a loss of customers due to
service interruptions and billing errors, substantial claims by customers and
increased expenses associated with Year 2000 litigation, stabilization of
operations and executing mitigation and contingency plans.
Contingency planning to maintain and restore services in the event of
natural disasters, power failures and systems-related problems is a routine part
of the Company's operations. The Company believes that such contingency plans
will assist the Company in responding to the failure by outside service
providers to successfully address Year 2000 issues. In addition, the Company has
identified various Year 2000-specific contingency plans, including
identification of alternate vendors and service providers and manual
alternatives to system operations. These Year 2000-specific contingency plans
are materially complete, but their review and development will continue for the
remainder of 1999.
The total costs to implement the Plan was approximately $1.0 million. The
costs incurred to date and any unanticipated remaining costs are for outside
consultants, software and hardware applications. These costs were expensed as
incurred, unless new systems were purchased that were capitalized in accordance
with generally accepted accounting principles. The Company does not separately
track the internal costs incurred for the Year 2000 project, and such cost are
principally the related payroll costs for its information systems group. Some of
the costs represent ongoing investment in systems upgrades, the timing of which
is being accelerated in order to facilitate Year 2000 compliance. In some
instances, such upgrades will position the Company to provide more and
better-quality services to its customers than they currently receive. The
Company expects to fund these costs with cash provided by operations. Cost
estimates and statements of the Company's plans discussed above are
forward-looking statements that are derived using numerous assumptions of future
events, many of which are outside the Company's control, including the
availability and future cost of trained personnel and various other resources,
third party modification plans, the absence of systems requiring remediation
that have not yet been discovered, and other factors.
ITEM 3A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is not exposed to material future earnings or cash flow
exposures from changes in interest rates on long-term debt as approximately 82%
of the Company's debt is at fixed rates or effectively at fixed rates through
the use of interest rate swaps. At September 30, 1999, the fair value of the
Company's long-term debt is estimated by discounting the future cash flows of
each instrument at rates currently offered to the Company for similar debt
instruments of comparable maturities. At September 30, 1999, the Company had
long-term debt of approximately $375.1 million and estimated fair value of
approximately $364.3 million. The market risk is estimated as the potential
decrease in fair value of the Company's long-term debt resulting from a
hypothetical increase of 91.9 basis points in interest rates (ten percent of the
rates currently offered to the Company). An increase of 10% in interest rates
would result in approximately a $0.7 million decrease in fair value of the
Company's long-term debt.
The Company has entered into interest rate swaps to manage its exposure to
fluctuations in interest rates of its variable rate debt. The fair value of
these swaps was approximately $0.2 million at September 30, 1999. The positive
fair value indicates an estimated amount the Company would be paid to cancel the
contracts or transfer them to other parties. Pertaining to the Credit Facility,
the Company used an interest rate swap agreement with a notional amount of
$25 million to effectively convert a portion of its
16
variable interest rate exposure to a fixed rate of 9.91%. The swap agreement
expires on September 29, 2000. As to its Floating Rate Notes, the Company used
two interest rate swap agreements, with notational amounts of $50 million and
$25 million, respectively, to effectively convert its variable interest rate
exposure to a fixed rate of 10.01% and 9.95%, respectively. Both swap agreements
expire on November 1, 2001.
17
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
Pending Acquisition. The Company has entered into an agreement to acquire an
unrelated rural local exchange carrier. This acquisition is expected to close in
the fourth quarter of 1999. The aggregate purchase price is expected to be
approximately $41.3 million and will be financed through existing operations and
the Company's senior secured credit facility.
The above referenced acquisition will be accounted for using the purchase
method of accounting.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
2.1 Stock Purchase Agreement, dated March 6, 1997 among the
Company, MJD Partners, L.P. Carousel Capital Partners, L.P.,
Kelso Investment Associates V, L.P. and Kelso Equity
Partners, V, L.P., as amended*
2.2 Stock Purchase Agreement dated as of March 28, 1996 among
MJD Services Corp., Rick A. Moore, Tom D. Moore, Penta-Gen
Investments, Inc., and Odin Telephone Exchange, Inc.*
2.3 Agreement and Plan of Merger dated as of March 27, 1998 by
and among MJD Ventures, Inc., Utilities Acquisition Corp.
and Utilities, Inc.*
2.4 Agreement and Plan of Merger, dated as of August 6, 1996
among MJD Holdings Corp., C&E Acquisitions Corp. and
Chatauqua and Erie Telephone Corporation*
2.5 Stock Purchase Agreement, dated as of September 24, 1996
among MJD Holdings Corp., Kadoka Telephone Co., Bruce G.
Conlee and Virginia L. Conlee*
2.6 Stock Purchase Agreement, dated as of June 24, 1997 among
MJD Ventures, Inc., Gary Porter, Virginia M. Porter, Renee
Porter, C-R Communications, Inc., C-R Telephone Company and
certain stockholders*
2.7 Agreement and Plan of Merger, dated as of September 2, 1997
among MJD Holdings Corp., Taconic Acquisition Corp. and
Taconic Telephone Corp.*
2.8 Agreement and Plan of Merger, dated December 31, 1997 among
MJD Ventures, Inc., Ellensburg Acquisition Corp. and
Ellensburg Telephone Company*
2.9 Agreement and Plan of Merger, dated as of March 12, 1998
among MJD Communications, Inc., Chouteau Acquisitions Corp.,
Chouteau Telephone Company and certain shareholders of
Chouteau Telephone Company*
2.10 Stock Purchase Agreement, dated as of October 16, 1998 among
MJD Service Corp., Carla J. Brownlee and Ravenswood
Communications, Inc.*
3.1 Amended and Restated Certificate of Incorporation of the
Company*
3.2 Amended and Restated By-Laws of the Company*
4.1 Indenture, dated as of May 5, 1998, between the Company and
United States Trust Company of New York, as trustee,
relating to the Company's $125,000,000 9 1/2% Senior
Subordinated Notes due 2008 and $75,000,000 Floating Rate
Callable Securities due 2008*
4.2 Form of Initial Fixed Rate Security*
4.3 Form of Initial Floating Rate Security*
4.4 Form of Exchange Fixed Rate Security*
4.5 Form of Exchange Floating Rate Security*
4.6 Form of Purchase Agreement dated as of April 30, 1998
between the Company and the Initial Purchasers named
therein*
4.7 Registration Agreement dated as of April 30, 1998 between
the Company and the Initial Purchasers named therein*
18
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
10.1 Credit Agreement dated as of March 30, 1998 among the
Company, various lending institutions, NationsBanc of Texas,
N.A. and Bankers Trust Company*
10.2 Form of B Term Note*
10.3 Form of C Term Note Floating Rate*
10.4 Form of C Term Note Fixed Rate*
10.5 Form of RF Note*
10.6 Form of AF Note*
10.7 Subsidiary Guarantee, dated as of March 30, 1998, by MJD
Holdings Corp., MJD Ventures, Inc., MJD Services Corp., ST
Enterprises, Ltd. for the benefit of Bankers Trust Company*
10.8 Pledge Agreement, dated as of March 30, 1998 among MJD
Communications, Inc., ST Enterprises, Ltd., MJD Holdings
Corp., MJD Services Corp., MJD Ventures, Inc., C-R
Communications, Inc., as pledgors, and Bankers Trust
Company, as collateral agent and pledgee*
10.9 Capital Contribution Agreement, dated as of March 27, 1998
among Kelso Investment Associates V, L.P., Kelso Equity
Partners V, L.P., Carousel Capital Partners, L.P., MJD
Communications, Inc. and Bankers Trust Company*
10.10 Stockholder's Agreement, dated as of July 31, 1997 among
Kelso Investment Associates V, L.P., Kelso Equity Partners
V, L.P., Carousel Capital Partners V, L.P., the Company and
MJD Partners, L.P.*
10.11 Registration Rights Agreement, dated as of July 31, 1997
among Kelso Investment Associates V, L.P., Kelso Equity
Partners, L.P., the Company and MJD Partners, L.P.*
10.12 Financial Advisory Agreements, dated as of July 31, 1997
among the Company, MJD Holdings Corp. and affiliates of each
of Kelso Investment Associates V, L.P., Kelso Equity
Partners, L.P. and Carousel Capital Partners, L.P.*
10.13 Share Exchange Agreement, dated as of July 31, 1997 between
the Company and MJD Partners, L.P.*
10.14 Contribution Agreement, dated as of July 31, 1997 between
Meyer Haberman, Jack H. Thomas, Eugene B. Johnson and Bugger
Associates, Inc. and MJD Partners, L.P.*
10.15 Contribution Agreement, dated as of July 31, 1997 between
MJD Partners, L.P. and the Company*
10.16 Amended and Restated Class A Voting Common Stock Purchase
Warrants of the Company*
10.17 Consulting Agreement, dated as of July 31, 1997 between MJD
Partners, Inc. and Bugger Associates, Inc.*
10.18 Severance Agreement, dated as of July 31, 1997 between ST
Enterprises, LTD and John P. Duda*
10.19 Severance Agreement, dated as of July 31, 1997 among the
Company, MJD Partners, Inc. and Eugene B. Johnson*
10.20 Severance Agreement, dated as of July 31, 1997 between the
Company and Walter E. Leach, Jr.*
10.21 Severance Agreement, dated as of July 31, 1997 among the
Company, MJD Partners, Inc. and Jack H. Thomas*
10.22 Amendment to Credit Agreement dated as of July 30, 1998,
among the Company, various lending institutions, NationsBanc
of Texas, N.A. and Bankers Trust Company*
10.23 Form of Purchase Agreement and Subordination Agreement
between Bankers Trust Company and the Company*
21 Subsidiaries of the Company*
27 Financial Data Schedule
- ------------------------
* Previously filed.
(b) Reports on Form 8-K
The Company did not file any current reports on Form 8-K during the quarter
ended September 30, 1999
19
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.
MJD COMMUNICATIONS, INC.
By: /s/ WALTER E. LEACH, JR.
-----------------------------------------
Walter E. Leach, Jr.
SENIOR VICE PRESIDENT
CHIEF FINANCIAL OFFICER AND SECRETARY
Dated: November 12, 1999