UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
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 September 30, 2003
OR
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(Commission File Number 1-11965)
ICG COMMUNICATIONS, INC.
| Delaware (State or other jurisdiction of incorporation or organization) |
84-1342022 (IRS Employer Identification Number) |
161 Inverness Drive West
Englewood, Colorado 80112
(Address of principal executive offices)
Registrant’s telephone numbers, including area codes: (888) 424-1144 or (303) 414-5000
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 o
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
Yes o No x
Indicate by check whether the registrant has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by
a court.
Yes x No o
As of November 3, 2003, 8,000,000 shares of ICG Communications, Inc. common stock, $0.01 par value, were deemed issued and outstanding for financial reporting purposes, of which 7,706,894 shares had actually been distributed to stockholders.
1
PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ICG COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Reorganized Company)
(Unaudited)
| December 31, | September 30, | |||||||||
| 2002 | 2003 | |||||||||
| (in thousands) | ||||||||||
Assets |
||||||||||
Current assets: |
||||||||||
Cash and cash equivalents |
$ | 50,729 | $ | 19,962 | ||||||
Restricted cash, current (note 4) |
16,645 | 42,152 | ||||||||
Trade receivables, net of allowance of $9.0 million and $7.0 million at
December 31, 2002 and September 30, 2003, respectively (note 3) |
26,667 | 112,023 | ||||||||
Other receivables, net of allowance of $4.4 million and $0 at December
31, 2002 and September 30, 2003, respectively |
1,946 | 1,602 | ||||||||
Prepaid expenses and deposits |
5,656 | 5,608 | ||||||||
Total current assets |
101,643 | 181,347 | ||||||||
Property and equipment, net (note 6) |
231,238 | 212,060 | ||||||||
Restricted cash, non-current |
34,393 | 6,734 | ||||||||
Deposits |
7,076 | 6,826 | ||||||||
Deferred financing costs, net of accumulated amortization of $0.3 million
and $1.1 million at December 31, 2002 and September 30, 2003,
respectively (note 4) |
3,096 | 2,285 | ||||||||
Other assets |
12 | — | ||||||||
Total Assets |
$ | 377,458 | $ | 409,252 | ||||||
| (continued) | ||||||||||
See accompanying notes to condensed consolidated financial statements.
3
ICG COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Reorganized Company), Continued
(Unaudited)
| December 31, | September 30, | |||||||||
| 2002 | 2003 | |||||||||
| (in thousands) | ||||||||||
Liabilities and stockholders’ equity |
||||||||||
Current liabilities: |
||||||||||
Accounts payable |
$ | 8,921 | $ | 5,613 | ||||||
Accrued liabilities |
38,905 | 42,415 | ||||||||
Reorganization accruals (note 9) |
16,734 | 4,365 | ||||||||
Secured Notes, current portion (note 4) |
3,790 | 56,179 | ||||||||
Senior Subordinated Term Loan, current portion, net of $3.9
million of debt discount at September 30, 2003 (note 4) |
— | 21,091 | ||||||||
Other long-term debt, current portion |
9,183 | 8,239 | ||||||||
Capital lease obligations, current portion (note 5) |
5,642 | 707 | ||||||||
Deferred revenue, current portion (note 3) |
12,977 | 19,369 | ||||||||
Total current liabilities |
96,152 | 157,978 | ||||||||
Long-term liabilities: |
||||||||||
Secured Notes (note 4) |
55,359 | — | ||||||||
Capital lease obligations (note 5) |
90,943 | 79,061 | ||||||||
Senior Subordinated Term Loan, net of $4.9 million of debt
discount at December 31, 2002 (note 4) |
20,056 | — | ||||||||
Other debt |
16,660 | 14,343 | ||||||||
Deferred revenue |
16,525 | 12,193 | ||||||||
Other long-term liabilities (note 10) |
650 | 3,765 | ||||||||
Total liabilities |
296,345 | 267,340 | ||||||||
Commitments and contingencies (note 7) |
||||||||||
Stockholders’ equity: |
||||||||||
Reorganized Company preferred stock, $0.001 par value, 10,000,000
shares authorized; 0 shares issued and outstanding |
— | — | ||||||||
Reorganized Company common stock, $0.01 par value, 100,000,000
shares authorized; 8,000,000 shares deemed issued and outstanding |
80 | 80 | ||||||||
Additional paid-in capital |
82,509 | 82,509 | ||||||||
Retained earnings (accumulated deficit) |
(1,476 | ) | 59,323 | |||||||
Total stockholders’ equity |
81,113 | 141,912 | ||||||||
Total liabilities and stockholders’ equity |
$ | 377,458 | $ | 409,252 | ||||||
See accompanying notes to condensed consolidated financial statements.
4
ICG COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
| Predecessor | Reorganized | Predecessor | Reorganized | |||||||||||||||||
| Company | Company | Company | Company | |||||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||
| 2002 | 2003 | 2002 | 2003 | |||||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||||||
Revenue (note 3): |
||||||||||||||||||||
Communications |
$ | 105,914 | $ | 87,769 | $ | 320,865 | $ | 285,581 | ||||||||||||
Early termination |
— | 75,779 | — | 75,779 | ||||||||||||||||
Total revenue |
105,914 | 163,548 | 320,865 | 361,360 | ||||||||||||||||
Operating costs and expenses: |
||||||||||||||||||||
Operating costs (note 3) |
63,053 | 59,212 | 191,343 | 181,738 | ||||||||||||||||
Selling, general and administrative expenses |
16,128 | 24,143 | 67,690 | 68,908 | ||||||||||||||||
Depreciation
and amortization (note 6) |
21,442 | 11,083 | 66,379 | 31,233 | ||||||||||||||||
Other expense (income), net |
(540 | ) | 2,798 | (11 | ) | 2,815 | ||||||||||||||
Total operating costs and expenses |
100,083 | 97,236 | 325,401 | 284,694 | ||||||||||||||||
Operating income (loss) |
5,831 | 66,312 | (4,536 | ) | 76,666 | |||||||||||||||
Other income (expense): |
||||||||||||||||||||
Interest expense (note 9) |
(5,087 | ) | (5,538 | ) | (15,390 | ) | (18,306 | ) | ||||||||||||
Interest income (note 9) |
— | 138 | — | 595 | ||||||||||||||||
Reorganization expense, net (note 9) |
(5,673 | ) | — | (34,405 | ) | — | ||||||||||||||
Other income (expense), net |
(87 | ) | 112 | (4 | ) | 1,844 | ||||||||||||||
Total other expense, net |
(10,847 | ) | (5,288 | ) | (49,799 | ) | (15,867 | ) | ||||||||||||
Net income (loss) |
$ | (5,016 | ) | $ | 61,024 | $ | (54,335 | ) | $ | 60,799 | ||||||||||
Net income (loss) per share: |
||||||||||||||||||||
Basic |
$ | (0.09 | ) | $ | 7.63 | $ | (1.00 | ) | $ | 7.60 | ||||||||||
Diluted |
$ | (0.09 | ) | $ | 7.18 | $ | (1.00 | ) | $ | 7.16 | ||||||||||
Weighted average number of shares deemed
outstanding: |
||||||||||||||||||||
Basic |
55,245 | 8,000 | 54,608 | 8,000 | ||||||||||||||||
Diluted |
55,245 | 8,499 | 54,608 | 8,488 | ||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
5
ICG COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders’ Equity (Reorganized Company)
(Unaudited)
| Retained | ||||||||||||||||||||
| Common Stock | Additional | Earnings | Total | |||||||||||||||||
| Paid-in | (Accumulated | Stockholders' | ||||||||||||||||||
| Shares | Amount | Capital | Deficit) | Equity | ||||||||||||||||
Balances at January 1, 2003 |
8,000 | $ | 80 | $ | 82,509 | $ | (1,476 | ) | $ | 81,113 | ||||||||||
Net income |
— | — | — | 60,799 | 60,799 | |||||||||||||||
Balances at September 30,
2003 |
8,000 | $ | 80 | $ | 82,509 | $ | 59,323 | $ | 141,912 | |||||||||||
See accompanying notes to condensed consolidated financial statements.
6
ICG COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Predecessor | Reorganized | |||||||||||
| Company | Company | |||||||||||
| Nine months ended September 30, | ||||||||||||
| 2002 | 2003 | |||||||||||
| (in thousands) | ||||||||||||
Cash flows from operating activities: |
||||||||||||
Net income (loss) |
$ | (54,335 | ) | $ | 60,799 | |||||||
Adjustments to reconcile net loss to net cash provided by
operating activities before reorganization items: |
||||||||||||
Reorganization expense, net |
34,405 | — | ||||||||||
Depreciation and amortization |
66,379 | 31,233 | ||||||||||
Provision for uncollectible accounts |
4,016 | 1,100 | ||||||||||
Other |
3,105 | 6,995 | ||||||||||
Changes in operating assets and liabilities: |
||||||||||||
Receivables |
7,663 | (86,112 | ) | |||||||||
Prepaid expenses and deposits |
1,617 | 1,138 | ||||||||||
Accounts payable and accrued liabilities |
(28,435 | ) | 852 | |||||||||
Deferred revenue |
(2,535 | 2,059 | ||||||||||
Net cash provided by operating activities before reorganization items |
31,880 | 18,064 | ||||||||||
Reorganization items: |
||||||||||||
Reorganization expense, net |
(34,405 | ) | — | |||||||||
Net gain on negotiated settlements and disposal of long-lived assets |
(3,637 | ) | — | |||||||||
Increase in liabilities subject to compromise |
1,798 | — | ||||||||||
Increase (decrease) in post-petition reorganization accruals |
10,352 | (12,121 | ) | |||||||||
Net cash used by reorganization items |
(25,892 | ) | (12,121 | ) | ||||||||
Net cash provided by operating activities |
5,988 | 5,943 | ||||||||||
Cash flows from investing activities: |
||||||||||||
Acquisition of property and equipment |
(41,285 | ) | (27,266 | ) | ||||||||
Change in prepaid expenses, accounts payable and accrued liabilities for
acquisition of property and equipment |
3,312 | (743 | ) | |||||||||
Proceeds from disposition of property, equipment and other assets |
3,369 | 577 | ||||||||||
Decrease in restricted cash |
30 | 2,152 | ||||||||||
Decrease in long-term deposits |
236 | 250 | ||||||||||
Net cash used by investing activities |
(34,338 | ) | (25,030 | ) | ||||||||
| (continued) | ||||||||||||
See accompanying notes to condensed consolidated financial statements.
7
ICG COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Continued)
(Unaudited)
| Predecessor | Reorganized | |||||||||
| Company | Company | |||||||||
| Nine months ended September 30, | ||||||||||
| 2002 | 2003 | |||||||||
| (in thousands) | ||||||||||
Cash flows from financing activities: |
||||||||||
Principal payments on capital lease obligations |
$ | (8,647 | ) | $ | (4,579 | ) | ||||
Principal payments on long-term debt |
(7,101 | ) | ||||||||
Settlement of preferred dividends |
163 | — | ||||||||
Net cash used by financing activities |
(8,484 | ) | (11,680 | ) | ||||||
Net decrease in cash and cash equivalents |
(36,834 | ) | (30,767 | ) | ||||||
Cash and cash equivalents, beginning of period |
146,587 | 50,729 | ||||||||
Cash and cash equivalents end of period |
$ | 109,753 | $ | 19,962 | ||||||
Supplemental disclosure of cash flows information: |
||||||||||
Cash paid for interest |
$ | 10,542 | $ | 12,621 | ||||||
Cash paid for income taxes |
$ | — | $ | — | ||||||
Supplemental disclosure of non-cash investing and financing
activities: |
||||||||||