1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
------------------ ---------------
Commission file number 0-21602
A. Full title of the plan and the address of the plan, if
different from that of the issuer named below:
LCI International 401(k) Savings Plan
B. Name of issuer of the securities held pursuant to the plan
and the address of its principal executive office:
LCI International, Inc.
8180 Greensboro Drive
Suite 800
McLean, Virginia 22102
703-442-0220
2
REQUIRED INFORMATION
The following financial statements and schedules for the LCI International
401(k) Savings Plan are being filed herewith:
Description Page No.
----------- --------
Report of Independent Public Accountants 3
Statements of Net Assets Available for Plan Benefits with Fund
Information as of December 31, 1996 and 1995 4 - 5
Statement of Changes in Net Assets Available for Plan Benefits with Fund
Information for the Year Ended December 31, 1996 6
Notes to Financial Statements and Schedules 7 - 11
Schedule I - Item 27a - Schedule of Assets Held for Investment Purposes
as of December 31, 1996 12
Schedule II - Item 27d - Schedule of Reportable Transactions for the Year
Ended December 31, 1996 13
Signature 14
The following exhibit is being filed herewith:
Exhibit No. Description Page No.
----------- ------------------------------------------- --------
23 Consent of Independent Public 16
Accountants
2
3
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Administrative Committee of the LCI International
401(k) Savings Plan:
We have audited the accompanying statements of net assets available for plan
benefits of the LCI INTERNATIONAL 401(k) SAVINGS PLAN (the Plan) as of December
31, 1996 and 1995 and the related statement of changes in net assets available
for plan benefits for the year ended December 31, 1996. These financial
statements and the schedules referred to below are the responsibility of the
Plan's management. Our responsibility is to express an opinion on these
financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, net assets available for plan benefits of the Plan as of
December 31, 1996 and 1995, and the changes in net assets available for plan
benefits for the year ended December 31, 1996, in conformity with generally
accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of Assets
Held for Investment Purposes and Reportable Transactions are presented for the
purpose of additional analysis and are not a required part of the basic
financial statements but are supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. The fund information in
the statements of net assets available for plan benefits and statement of
changes in net assets available for plan benefits is presented for the purpose
of additional analysis rather than to present the net assets available for plan
benefits and changes in net assets available for plan benefits of each fund.
The supplemental schedules and fund information have been subjected to the
auditing procedures applied in the audits of the basic financial statements
and, in our opinion, are fairly stated in all material respects in relation to
the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Columbus, Ohio,
June 27, 1997.
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4
LCI INTERNATIONAL
401(k) SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS WITH FUND INFORMATION
AS OF DECEMBER 31, 1996
CIGNA CIGNA Warburg Warburg
Guaranteed Guaranteed Capital Emerging
Short-Term Long-Term Appreciation Growth
Account Account Account Account
---------- ---------- ------------ ----------
ASSETS:
Cash $ - $ 1,601 $ 3,661 $ 16,319
Investments -
Investments, at market value - - 3,071,805 2,921,986
Investments, at contract value 528,142 4,037,835 - -
Participant loans - - - -
---------- ---------- ---------- ----------
Total investments 528,142 4,037,835 3,071,805 2,921,986
---------- ---------- ---------- ----------
Receivables -
Employer contributions 2,139 10,149 8,285 12,450
Employee contributions 6,206 36,042 27,218 38,550
Loan interest 1,968 254 924 1,248
---------- ---------- ---------- ----------
Total receivables 10,313 46,445 36,427 52,248
---------- ---------- ---------- ----------
NET ASSETS AVAILABLE FOR PLAN
BENEFITS $ 538,455 $4,085,881 $3,111,893 $2,990,553
========== ========== ========== ==========
LCI
Common
Stock
Account Loan Fund Total
---------- --------- -----------
ASSETS:
Cash $ 30,974 $ - $ 52,555
Investments -
Investments, at market value 2,568,860 - 8,562,651
Investments, at contract value - - 4,565,977
Participant loans - 263,944 263,944
---------- -------- -----------
Total investments 2,568,860 263,944 13,392,572
---------- -------- -----------
Receivables -
Employer contributions 14,414 - 47,437
Employee contributions 35,464 - 143,480
Loan interest 1,018 - 5,412
---------- -------- -----------
Total receivables 50,896 - 196,329
---------- -------- -----------
NET ASSETS AVAILABLE FOR PLAN
BENEFITS $2,650,730 $263,944 $13,641,456
========== ======== ===========
The accompanying notes and schedules are an integral part of this financial
statement.
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5
LCI INTERNATIONAL
401(k) SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS WITH FUND INFORMATION
AS OF DECEMBER 31, 1995
CIGNA CIGNA Warburg Warburg
Guaranteed Guaranteed Capital Emerging
Short-Term Long-Term Appreciation Growth
Account Account Account Account
---------- ---------- ------------ ----------
ASSETS:
Investments -
Investments, at market value $ - - $1,953,232 $1,592,475
Investments, at contract value 445,900 3,453,093 - -
Participant loans - - - -
---------- ---------- ---------- ----------
Total investments 445,900 3,453,093 1,953,232 1,592,475
---------- ---------- ---------- ----------
Receivables -
Employer contributions 1,398 7,468 4,523 7,253
Employee contributions 3,758 25,975 15,979 29,150
Loan interest 15 406 127 157
---------- ---------- ---------- ----------
Total receivables 5,171 33,849 20,629 36,560
---------- ---------- ---------- ----------
NET ASSETS AVAILABLE FOR PLAN
BENEFITS $ 451,071 $3,486,942 $1,973,861 $1,629,035
========== ========== ========== ==========
LCI
Common
Stock
Account Loan Fund Total
---------- --------- -----------
ASSETS:
Investments -
Investments, at market value $1,517,020 - $ 5,062,727
Investments, at contract value - 3,898,993
Participant loans - 256,127 256,127
---------- --------- -----------
Total investments 1,517,020 256,127 9,217,847
---------- --------- -----------
Receivables -
Employer contributions 7,445 - 28,087
Employee contributions 22,632 - 97,494
Loan interest 70 - 775
---------- --------- -----------
Total receivables 30,147 - 126,356
---------- --------- -----------
NET ASSETS AVAILABLE FOR PLAN
BENEFITS $1,547,167 $ 256,127 $ 9,344,203
========== ========= ===========
The accompanying notes and schedules are an integral part of this financial
statement.
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6
LCI INTERNATIONAL
401(k) SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS WITH FUND
INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1996
CIGNA CIGNA Warburg Warburg
Guaranteed Guaranteed Capital Emerging
Short-Term Long-Term Appreciation Growth
Account Account Account Account
----------- ------------- ------------ ------------
ADDITIONS TO NET ASSETS ATTRIBUTED TO:
Investment income -
Interest $ 20,928 $ 218,951 $ - $ -
Net appreciation (depreciation) in market value
of investments - - 482,998 185,813
----------- ------------ ------------- ------------
20,928 218,951 482,998 185,813
----------- ------------ ------------- ------------
Contributions -
Employer (net of forfeitures in the amount of
$184,562) 43,981 14,507 145,717 234,375
Employee 204,591 859,127 763,088 1,129,240
----------- ------------ ------------- ------------
248,572 873,634 908,805 1,363,615
----------- ------------ ------------- ------------
Total additions 269,500 1,092,585 1,391,803 1,549,428
----------- ------------ ------------- ------------
DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO:
Distributions to participants (including loans) (105,300) (545,304) (182,115) (157,307)
Loan repayments (including interest) 9,072 89,811 20,098 30,662
----------- ------------ ------------- ------------
Total deductions (96,228) (455,493) (162,017) (126,645)
INTERFUND TRANSFERS (85,888) (38,153) (91,754) (61,265
----------- ------------ ------------- ------------
Net increase 87,384 598,939 1,138,032 1,361,518
NET ASSETS AVAILABLE FOR PLAN BENEFITS:
Beginning of year 451,071 3,486,942 1,973,861 1,629,035
----------- ------------ ------------- ------------
End of year $ 538,455 $ 4,085,881 $ 3,111,893 $ 2,990,553
=========== ============ ============= ============
LCI
Common
Stock
Account Loan Fund Total
------------ ---------- -----------
ADDITIONS TO NET ASSETS ATTRIBUTED TO:
Investment income -
Interest $ - $ 20,106 $ 259,985
Net appreciation (depreciation) in market value
of investments (185,373) - 483,438
------------ ---------- -----------
(185,373) 20,106 743,423
------------ ---------- -----------
Contributions -
Employer (net of forfeitures in the amount of
$184,562) 255,483 - 694,063
Employee 940,434 - 3,896,480
------------ ---------- -----------
1,195,917 - 4,590,543
------------ ---------- -----------
Total additions 1,010,544 20,106 5,333,966
------------ ---------- -----------
DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO:
Distributions to participants (including loans) (240,826) 194,139 (1,036,713)
Loan repayments (including interest) 56,785 (206,428) -
------------ ---------- -----------
Total deductions (184,041) (12,289) (1,036,713)
INTERFUND TRANSFERS 277,060 - -
------------ ---------- -----------
Net increase 1,103,563 7,817 4,297,253
NET ASSETS AVAILABLE FOR PLAN BENEFITS:
Beginning of year 1,547,167 256,127 9,344,203
------------ ---------- -----------
End of year $ 2,650,730 $ 263,944 $13,641,456
============ ========== ===========
The accompanying notes and schedules are an integral part of this financial
statement.
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7
LCI INTERNATIONAL
401(k) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS AND SCHEDULES
DECEMBER 31, 1996 AND 1995
(1) DESCRIPTION OF THE PLAN
The following description of the LCI International 401(k) Savings Plan
(the Plan) is provided for general information purposes only. More
complete information regarding the Plan's provisions can be found in the
Plan document.
The Plan is a defined contribution plan available to all eligible
employees of LCI International, Inc. and subsidiaries (the Company). The
Plan was established effective September 1, 1984, and amended effective
October 1, 1992, to incorporate changes in the Plan name, custodian,
investments, eligibility and vesting. The Plan is subject to the
provisions of the Employee Retirement Income Security Act of 1974, as
amended (ERISA). Certain employees of the Company have been appointed to
the Administrative Committee of the Plan.
The Plan has a group annuity contract with Connecticut General Life
Insurance Company (CIGNA or the Custodian). The Custodian pools the
Company's funds with those of other pension plans and executes investment
transactions. At December 31, 1996, participants have invested or may
invest in one or more of the following accounts.
- CIGNA Guaranteed Short-Term Account - Invests in short term,
money-market securities which provide a guaranteed rate of return
based on current investment conditions.
- CIGNA Guaranteed Long-Term Account - Invests primarily in
commercial mortgages and private bond placements which provide a
guaranteed rate of return based on current investment conditions.
- Warburg Capital Appreciation Account - Invests in shares of the
Warburg Pincus Counsellors Capital Appreciation Fund, a no-load
mutual fund. This fund is invested primarily in common stocks of
U.S. based companies. Its investment objective is to generate
long-term capital appreciation.
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- Warburg Emerging Growth Account - Invests in shares of Warburg,
Pincus Counsellors Emerging Growth Fund, Inc., a no-load mutual
fund. This fund is primarily invested in small or medium-sized
companies that have passed their start-up phase and show positive
earnings and prospects of achieving significant profit in a
relatively short period of time. Its investment objective is to
maximize capital appreciation.
- LCI Common Stock Account - Invests in shares of LCI International,
Inc. Common Stock. The purpose of this fund is to allow employees
to invest in the Company's common stock.
The employees choose the percentage of their salary to be contributed to
the Plan and how it is to be allocated among the five accounts. As
limited by the Internal Revenue Code of 1986, as amended (IRC), a
participant's pretax deferrals cannot exceed $9,500 in 1996.
All income is allocated to the members of each fund in the same
proportion that the value of their account in the fund bears to the total
value of all accounts in such fund.
The Company provides matching contributions to be allocated to the
accounts as directed by the employees. The Company matches $.50 for each
$1.00 contributed up to 6% of an employee's salary. Participants are
immediately vested in their salary deferrals plus actual earnings
thereon. Vesting in Company matching contributions and earnings thereon,
is as follows:
Years of Service Vesting Percent
---------------- ---------------
5 or less 0%
more than 5 100%
Employees become eligible as participants in the Plan upon completion of
at least one-thousand (1,000) hours credited in a consecutive
twelve-month period.
All administrative expenses are paid by the Company. As permitted by the
Plan agreement, forfeitures may be used as an offset to administrative
expenses or the employer contributions. For the year ended December 31,
1996, forfeitures reduced employer contributions.
The normal form of benefit distribution is a qualified joint and survivor
annuity for married participants or a single life annuity for unmarried
partcipants. The optional forms of benefit distribution are a single
lump-sum payment, installments or a combination of both. In addition,
the Plan includes a provision for employees to make withdrawals from
their accounts under certain "hardship" circumstances, if approved by the
Trustees. Participants are permitted to borrow against their accounts in
accordance with the regulations of the IRC and the Plan provisions.
Although it has not expressed any intent to do so, the Company has the
right under the Plan to discontinue its matching contributions at any
time and to terminate the Plan subject to provisions of ERISA. In the
event of Plan termination, participants will become fully vested in their
account balances.
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(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The accompanying financial statements have been prepared on an accrual
basis.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those
estimates and assumptions.
Investments
The CIGNA Guaranteed Short-Term Account and CIGNA Guaranteed Long-Term
Account are stated at contract value, which approximates fair value, as
reported to the Plan by CIGNA. Contract value represents contributions
made under the contracts, plus earnings, less Plan withdrawals. The
remaining investments are stated at market value as determined by the
Custodian based on the established market prices of the underlying
investments.
Net appreciation (depreciation) in market value of assets is based on
market value at year-end and the market value at the beginning of the
Plan year or cost at the time of purchase during the year.
Purchases and sales of securities are recorded on a trade-date basis.
Participant Loans
Subject to the provisions of the IRC and the Plan, a participant may
borrow against the balance in their account. The participant executes a
promissory note with an interest rate based on prevailing commercial
lending rates. Loan principal and interest are paid over periods ranging
from one, but not more than five years. Participant loans are valued at
cost which approximates fair value.
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(3) TAX STATUS
The Plan obtained its latest determination letter on January 8, 1996, in
which the Internal Revenue Service stated that the Plan as then designed,
was in compliance with the applicable requirements of the IRC. The Plan
has no amendments that were not included in the above mentioned
determination letter. The Company believes that the Plan is currently
designed and operated in compliance with the applicable requirements of
the IRC and is qualified, and that the related trust is tax exempt.
(4) INVESTMENTS
The Custodian of the Plan held the Plan's investments and executed the
transactions per the participant's instructions. The fair market values
of individual assets that represent 5% or more of the Plan's net assets
as of December 31, 1996 and 1995 are as follows:
1996 1995
----------- -----------
CIGNA Guaranteed Short-Term Account $ 528,142 $ 445,900
CIGNA Guaranteed Long-Term Account 4,037,835 3,453,093
Warburg Capital Appreciation Account 3,071,805 1,953,232
Warburg Emerging Growth Account 2,921,986 1,592,475
LCI Common Stock Account 2,568,860 1,517,020
(5) RELATED PARTY
The Warburg Capital Appreciation Account and the Warburg Emerging Growth
Account invest in mutual funds managed by Warburg, Pincus Counsellors,
Inc., a wholly-owned subsidiary of E.M. Warburg, Pincus & Co., Inc. E.M.
Warburg Pincus & Co., Inc. through affiliates, is a shareholder of the
Company. Certain Plan investment funds are managed by the Custodian of
the Plan. The Common Stock of the Company is included in the Plan
investments. Transactions resulting from the above constitute
party-in-interest transactions.
(6) REQUIRED SCHEDULE INFORMATION
There is no information to be reported for the following schedules as of
and for the year ended December 31, 1996:
a. Loans or Fixed Income Obligations.
b. Leases in Default or Classified as Uncollectible.
c. Nonexempt Transactions.
d. Assets Held for Investment Purposes Which Were Both Acquired and
Disposed of within the Plan Year.
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(7) RECONCILIATION TO FORM 5500
As of December 31, 1996 and 1995, the Plan had $52,423 and $131,506,
respectively, of pending distributions to participants who elected to
withdraw from the Plan. These amounts are recorded as a liability in the
Plan's Form 5500; however, these amounts are not recorded as a liability
in the accompanying statements of net assets available for benefits in
accordance with generally accepted accounting principles.
The following table reconciles net assets available for benefits per the
financial statements to Form 5500 as filed by the Company for the years
ended December 31, 1996 and 1995:
Benefits Net Assets Available
Payable to Benefits for Plan Benefits
Participants Paid December 31
------------ ---------- --------------------------
1996 1995
----------- -----------
Financial statement balance $ - $1,036,713 $13,641,456 $ 9,344,203
Accrued benefit payments 52,423 52,423 (52,423) (131,506)
Less: 1995 accrual for benefit
payment - (131,506) - -
------------ ---------- ----------- -----------
Form 5500 balance $ 52,423 $ 957,630 $13,589,033 $ 9,212,697
============ ========== =========== ===========
(8) SUBSEQUENT EVENTS
Effective March 1, 1997, the Plan Investment Committee approved the
addition of the following Plan investment options:
CIGNA Lifetime Funds
CIGNA Stock Market Index Fund
PBHG Growth Account
Effective April 1, 1997, the Plan Investment Committee approved the
elimination of the Guaranteed Short-Term Account as a Plan investment
option. The amounts invested in this account were transferred to other
investments at the direction of the participant.
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SCHEDULE I
LCI INTERNATIONAL
401(k) SAVINGS PLAN
EMPLOYER IDENTIFICATION NUMBER 31-1115867
PLAN NUMBER 001
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
AS OF DECEMBER 31, 1996
Market
Identity of Party or Fund Description Cost Value
---------------------------------- -------------------------------------------- ----------- -----------
*Connecticut General Life Insurance Guaranteed Short-Term Account $ 528,142 $ 528,142
*Connecticut General Life Insurance Guaranteed Long-Term Account 4,037,835 4,037,835
*Chase Manhattan Bank LCI Common Stock Account 2,467,802 2,568,860
*Connecticut General Life Insurance Warburg Capital Appreciation Account 2,224,810 3,071,805
*Connecticut General Life Insurance Warburg Emerging Growth Account 2,403,925 2,921,986
Various Participants Participant Loans (Interest rates ranging
from 6.5% to 11.3%) 263,944 263,944
* Denotes party-in-interest transactions
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SCHEDULE II
LCI INTERNATIONAL
401(k) SAVINGS PLAN
EMPLOYER IDENTIFICATION NUMBER 31-1115867
PLAN NUMBER 001
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
Number of Purchase Selling
Identity of Party Involved Description of Asset Transactions Price Price
---------------------------------- ------------------------------------ ------------ ------------ ------------
*Connecticut General Life Insurance Guaranteed Short-Term Account Various $ 263,632 N/A
*Connecticut General Life Insurance Guaranteed Short-Term Account Various N/A $ 202,318
*Connecticut General Life Insurance Guaranteed Long-Term Account Various 1,855,500 N/A
*Connecticut General Life Insurance Guaranteed Long-Term Account Various N/A 1,055,049
*Chase Manhattan Bank LCI Common Stock Account 104 1,706,081 N/A
*Chase Manhattan Bank LCI Common Stock Account 58 N/A 481,894
*Connecticut General Life Insurance Warburg Capital Appreciation Account 75 1,055,662 N/A
*Connecticut General Life Insurance Warburg Capital Appreciation Account 72 N/A 423,226
*Connecticut General Life Insurance Warburg Emerging Growth Account 78 1,582,731 N/A
*Connecticut General Life Insurance Warburg Emerging Growth Account 85 N/A 439,480
Current Value
Cost of at Transaction Net Realized
Identity of Party Involved Asset Date Gain(Loss)
---------------------------------- ---------- -------------- ------------
*Connecticut General Life Insurance $ 263,632 $ 263,632 $ -
*Connecticut General Life Insurance 202,318 202,318 -
*Connecticut General Life Insurance 1,855,500 1,855,500 -
*Connecticut General Life Insurance 1,055,049 1,055,049 -
*Chase Manhattan Bank 1,706,081 1,706,081 -
*Chase Manhattan Bank 300,321 481,894 181,573
*Connecticut General Life Insurance 1,055,662 1,055,662 -
*Connecticut General Life Insurance 315,419 423,226 107,807
*Connecticut General Life Insurance 1,582,731 1,582,731 -
*Connecticut General Life Insurance 351,374 439,480 88,106
* Denotes party-in-interest transactions
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SIGNATURE
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934,
the Administrative Committee has duly caused this annual report to be signed on
its behalf by the undersigned hereunto duly authorized.
LCI INTERNATIONAL 401(k) SAVINGS PLAN
(Name of Plan)
Date: June 27, 1997 By: /s/ JOSEPH A. LAWRENCE
---------------------------------------
Joseph A. Lawrence
Senior Vice President Finance and
Development
and Chief Financial Officer
LCI International, Inc.
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LCI INTERNATIONAL 401(k) SAVINGS PLAN
ANNUAL REPORT ON FORM 11-K
FOR FISCAL YEAR ENDED DECEMBER 31, 1996
INDEX TO EXHIBITS
Exhibit No. Description Page No.
----------- ------------------------------------------ --------
23 Consent of Independent Public Accountants Page 16
99 LCI International 401(k) Savings Plan *
*Incorporated By Reference to Exhibit 99 to the LCI International, Inc.'s Form
S-8 Registration Statement filed on April 29, 1997.
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