-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BN9flcWdO618WxZ9lOeuF7sBXk5bLjnT734ouHC0MmmPbMW2UsCUXqkG6bKRw2ev Mp7Cc2uq+Lx4vi1tp5X3Bg== 0000950130-98-003973.txt : 19980813 0000950130-98-003973.hdr.sgml : 19980813 ACCESSION NUMBER: 0000950130-98-003973 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980812 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TELEPORT COMMUNICATIONS GROUP INC CENTRAL INDEX KEY: 0001012099 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 133173139 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-20913 FILM NUMBER: 98684142 BUSINESS ADDRESS: STREET 1: 437 RIDGE RD STREET 2: EXECUTIVE BLDG 3 CITY: DAYTON STATE: NJ ZIP: 08810 BUSINESS PHONE: 7323922000 MAIL ADDRESS: STREET 1: 437 RIDGE RD STREET 2: EXECUTIVE BUILDING 3 CITY: DAYTON STATE: NJ ZIP: 08810 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1998 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________________________________________ Commission file number 0-20913 -------------------------------------------------------- TELEPORT COMMUNICATIONS GROUP INC. - ------------------------------------------------------------------------------- (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 13-3173139 - ------------------------------------------------------------------------------- (STATE OF OTHER JURISDICTION OF (I.R.S. EMPLOYER OR ORGANIZATION) IDENTIFICATION NO.) 437 RIDGE ROAD, EXECUTIVE BUILDING 3, DAYTON, NEW JERSEY 08810 - ------------------------------------------------------------------------------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (732) 392-2000 - ------------------------------------------------------------------------------- (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) 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____________ -------------------- Number of outstanding shares of Registrant's Common Stock as of July 23, 1998: 79,101,267 shares of Class A Common Stock and 113,489,040 shares of Class B Common Stock. PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS TELEPORT COMMUNICATIONS GROUP INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
JUNE 30, DECEMBER 31, 1998 1997 ---- ---- (UNAUDITED) ASSETS Current assets: Cash and cash equivalents $ 90,131 $ 173,331 ---------- ---------- Marketable securities 122,938 306,828 ---------- ---------- Accounts receivable: Trade-net of allowance for doubtful accounts ($17,141 in 1998 and $11,684 in 1997) 213,961 85,081 Related parties 6,196 6,351 Miscellaneous-net of allowance for doubtful accounts ($2,059 in 1998 and $297 in 1997) 12,004 6,639 ---------- ---------- Accounts receivable-net 232,161 98,071 ---------- ---------- Prepaid expenses 20,163 13,988 ---------- ---------- Other current assets 11,351 7,943 ---------- ---------- Total current assets 476,744 600,161 ---------- ---------- Fixed assets-at cost: Communications network 2,197,046 1,722,093 Other 213,130 150,990 ---------- ---------- 2,410,176 1,873,083 Less accumulated depreciation and amortization (478,113) (379,987) ---------- ---------- Fixed assets-net 1,932,063 1,493,096 ---------- ---------- Investments in and advances to unconsolidated affiliates 13,090 8,822 ---------- ---------- Goodwill and other intangible assets - net of accumulated amortization 984,138 237,806 ---------- ---------- Licenses-net of accumulated amortization 39,141 39,503 ---------- ---------- Other assets 87,694 76,913 ---------- ---------- Total assets $3,532,870 $2,456,301 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities ($3,791 in 1998 and $4,019 in 1997 with related parties) $ 476,844 $ 282,231 Current portion of capital lease obligations ($25,056 in 1998 and $28,172 in 1997 with related parties) 32,674 33,724 Short-term bank debt 53,175 52,575 Other current liabilities 9,943 6,742 ---------- ---------- Total current liabilities 572,636 375,272 Capital lease obligations ($6,302 in 1998 and $13,388 in 1997 with related parties) 13,152 19,095 Long-term bank debt 88,805 - Senior Notes 300,000 300,000 Senior Discount Notes 775,868 734,984 Unamortized notes costs (21,708) (23,059) Other liabilities 27,480 18,393 ---------- ---------- Total liabilities 1,756,233 1,424,685 ---------- ---------- Stockholders' equity: Common Stock, Class A $.01 par value: 450,000,000 shares authorized, 78,989,472 shares issued and outstanding at June 30, 1998; and 61,273,746 shares issued and outstanding at December 31, 1997 790 613 Common Stock, Class B $.01 par value: 300,000,000 shares authorized, 121,464,778 shares issued and outstanding at June 30, 1998 and December 31, 1997 1,215 1,215 Additional paid-in capital 2,516,358 1,654,328 Unrealized gain on marketable securities 58 164 Cumulative translation adjustment 980 - Accumulated deficit (621,739) (503,679) ---------- ---------- 1,897,662 1,152,641 Less cost of Class B Common Stock held in treasury, 7,975,738 shares at June 30, 1998 and December 31, 1997 (121,025) (121,025) ---------- ---------- Total stockholders' equity 1,776,637 1,031,616 ---------- ---------- Total liabilities and stockholders' equity $3,532,870 $2,456,301 ========== ==========
The accompanying notes are an integral part of these financial statements. 2 TELEPORT COMMUNICATIONS GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
THREE MONTHS ENDED SIX MONTHS ENDED June 30, June 30, 1998 1997 1998 1997 ------------- -------------- -------------- -------------- Revenues: Telecommunications services ($2,620 and $2,556 for the three months ended June 30, 1998 and 1997, and $5,142 and $4,498 for the six months ended June 30, 1998 and 1997, respectively, with related parties) $ 295,303 $ 115,664 $ 455,380 $ 212,508 Expenses: Operating 170,250 67,627 261,014 124,964 Selling, general and administrative 86,160 39,363 133,300 72,734 Merger related 945 - 10,275 - Depreciation and amortization 66,289 37,255 115,391 67,011 ------------ ------------ ------------ ------------ Total expenses 323,644 144,245 519,980 264,709 ------------ ------------ ------------ ------------ Operating loss (28,341) (28,581) (64,600) (52,201) ------------ ------------ ------------ ------------ Interest: Interest and other income 5,124 6,751 11,065 18,041 Interest expense ($476 and $1,700 for the three months ended June 30, 1998 and 1997, and $1,226 and $3,174 for the six months ended June 30, 1998 and 1997, respectively, with related parties) (32,365) (28,743) (63,889) (58,251) ------------ ------------ ------------ ------------ Total interest (27,241) (21,992) (52,824) (40,210) ------------ ------------ ------------ ------------ Loss before equity in losses of unconsolidated affiliates and income tax provision (55,582) (50,573) (117,424) (92,411) Equity in losses of unconsolidated affiliates - ( 243) - (2,833) ------------ ------------ ------------ ------------ Loss before income tax provision (55,582) (50,816) (117,424) (95,244) Income tax provision (284) (516) (636) (1,116) ------------ ------------ ------------ ------------ Net loss $ (55,866) $ (51,332) $ (118,060) $ (96,360) ============ ============ ============ ============ Loss per share $ (.29) $ (.31) $ (.64) $ (.59) ============ ============ ============ ============ Weighted average number of shares outstanding 191,901,624 164,860,699 183,438,640 163,271,950 ============ ============ ============ ============
The accompanying notes are an integral part of these financial statements. 3 TELEPORT COMMUNICATIONS GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
UNREALIZED Class A CLASS B ADDITIONAL CUMULATIVE GAIN(LOSS) ON TOTAL Common COMMON PAID-IN TRANSLATION MARKETABLE ACCUMULATED TREASURY STOCKHOLDERS' Stock STOCK CAPITAL ADJUSTMENT SECURITIES DEFICIT STOCK EQUITY ----- ----- ------- ---------- ---------- ------- ----- ------ Balance at January 1, 1998 $613 $1,215 $1,654,328 $ - $ 164 $ (503,679) $(121,025) $1,031,616 Unrealized loss on marketable securities - - - - (106) - - (106) Cumulative Translation Adjustment - - - 980 - - - 980 Issuance of 16,271,141 shares of Class A Common Stock to acquire ACC Corp. 163 - 821,519 - - - - 821,682 Issuance of 1,444,585 shares of Class A Common Stock upon exercise of options and employee stock grants 14 - 40,511 - - - - 40,525 Net loss - - - - - (118,060) - (118,060) ----- ------ ---------- ------ ------ --------- --------- ---------- Balance at June 30, 1998 $790 $1,215 $2,516,358 $980 $ 58 $(621,739) $(121,025) $1,776,637 ===== ====== ========== ====== ====== ========= ========= ==========
The accompanying notes are an integral part of these financial statements. 4 TELEPORT COMMUNICATIONS GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
SIX MONTHS ENDED JUNE 30, 1998 1997 ------------------ ----------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(118,060) $ (96,360) Adjustments to reconcile net loss to net cash provided by (used for) operating activities, net of effects of acquisitions: Depreciation and amortization 115,391 67,011 Amortization of notes costs 1,351 1,351 Equity in losses of unconsolidated affiliates - 2,833 Amortization of deferred credits (12,556) (3,607) Provision for losses on accounts receivable 5,199 3,018 Accretion of discount on Senior Discount Notes 40,884 36,688 Accretion of TCI note - 1,022 Unrealized foreign exchange loss 721 - (Increase) in operating assets and increase (decrease) in operating liabilities: Accounts receivable (26,229) (25,633) Other assets (438) (12,659) Accounts payable and accrued liabilities 93,974 (4,137) Deferred credits 18,823 8,877 -------------- ------------- Net cash provided by (used for) operating activities 119,060 (21,596) -------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (381,827) (211,146) Investments in and advances to unconsolidated affiliates (4,256) (5,116) Proceeds from sales and maturities of marketable securities, net of purchases 184,046 79,196 Cash paid for acquisitions, net of cash acquired (9,448) (6,258) -------------- ------------- Net cash used for investing activities (211,485) (143,324) -------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on capital leases (23,197) (10,273) Proceeds from the exercise of employee stock options 33,870 5,403 Repayments of long-term debt (3,348) - Proceeds from issuance of long-term debt 1,900 - -------------- ------------- Net cash provided by (used for) financing activities 9,225 (4,870) -------------- ------------- NET DECREASE IN CASH AND CASH EQUIVALENTS (83,200) (169,790) CASH AND CASH EQUIVALENTS, JANUARY 1 173,331 277,540 -------------- ------------- CASH AND CASH EQUIVALENTS, JUNE 30 $ 90,131 $ 107,750 ============== =============
The accompanying notes are an integral part of these financial statements. 5 TELEPORT COMMUNICATIONS GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
SIX MONTHS ENDED JUNE 30, 1998 1997 ------------------- ------------------- SUPPLEMENTAL SCHEDULE OF CASH PAID FOR INTEREST AND NON-CASH INVESTING AND FINANCING ACTIVITIES: Cash paid during the period for interest $ 20,399 $ 19,318 ========== ========== Compensation paid in stock $ 12,404 $ - ========== ========== Fixed assets acquired under capital leases $ 11,430 $ 6,725 ========== ========== In February 1997, TCG purchased all of the assets and liabilities of CERFnet Services, Inc. for TCG's Class A Common Stock: Fair value of 2,100,000 Class A Common Stock $ - $ 47,407 Fair value of net assets acquired - (2,980) ---------- ---------- Goodwill recorded from non-cash transactions $ - $ 44,427 ========== ========== In March 1997, TCG purchased all of the assets and liabilities of Eastern TeleLogic Corporation for TCG's Class A Common Stock: Fair value of 2,757,083 Class A Common Stock $ - $ 46,078 Fair value of net liabilities acquired - 121,232 ---------- ---------- Goodwill recorded from non-cash transactions - $ 167,310 ========== ========== In April 1998, TCG purchased all of the assets and liabilities of ACC for TCG's Class A Common Stock: Fair value of 16,271,141 Class A Common Stock $ 821,682 $ - Fair value of net assets acquired (73,044) - ---------- ---------- Goodwill recorded from non-cash transactions $ 748,638 $ - ========== ==========
The accompanying notes are an integral part of these financial statements. 6 TELEPORT COMMUNICATIONS GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED) 1. HISTORY AND ACQUISITION BY AT&T Teleport Communications Group Inc. ("TCG" or the "Company") was the first and largest competitive local exchange carrier ("CLEC") in the United States. TCG, incorporated in March 1983, and TCG Partners, formed in December 1992, were each owned by Cox Communications, Inc. ("Cox"), Tele-Communications, Inc. ("TCI"), Comcast Corporation ("Comcast"), and Continental Cablevision, Inc. ("Continental") until June 26, 1996. In connection with the public offerings of Class A Common Stock, Senior Notes and Senior Discount Notes on July 2, 1996, TCG and Cox, TCI, Comcast and Continental entered into a reorganization agreement dated as of April 18, 1996 (the "TCG Reorganization Agreement"), pursuant to which TCG Partners and certain of the Company's unconsolidated affiliates became wholly-owned subsidiaries of TCG and TCG acquired the minority interests of the owners of the remaining unconsolidated affiliates. In November 1997, Continental sold its remaining ownership interest. As of June 30, 1998, TCI, Cox and Comcast (the "Cable Stockholders") owned 42.98%, 34.44% and 22.58%, respectively, of the Company's Class B Common Stock, representing 40.27%, 32.20% and 21.11%, respectively, of the combined voting power of the Company's combined Class A and Class B Common Stock (the "Common Stock"). As of June 30, 1998, TCG's Common Stock was owned 25.87%, 20.31%, 13.31% and 40.51% by TCI, Cox, Comcast and public shareholders, respectively. The accompanying financial statements have been prepared on the accrual basis of accounting. In the opinion of management, the accompanying consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary to present fairly the Company's financial position as of June 30, 1998, and the Company's results of operations and cash flows for the six months then ended. The results of operations for the six months ended June 30, 1998 are not necessarily indicative of the results expected for the full year. TCG filed a registration statement for a public offering (the "1997 Equity Offering") of 17,250,000 shares of Class A Common Stock on October 10, 1997, and the 1997 Equity Offering was consummated on November 13, 1997. Of the 17,250,000 shares, 7,304,408 shares were offered by the Company and 9,945,592 shares were offered by Continental. The Company did not receive any proceeds from the sale of shares by Continental. The net proceeds to the Company from its sale of shares pursuant to the 1997 Equity Offering were approximately $317.4 million, after deducting the underwriting discount and expenses of approximately $11.3 million. As a result of the consummation of the 1997 Equity Offering, Continental ceased to hold any shares of TCG Common Stock. On July 23, 1998, TCG consummated an Agreement and Plan of Merger with AT&T Corp., a New York corporation ("AT&T"), and TA Merger Corp., a Delaware corporation and a wholly-owned subsidiary of AT&T ("AT&T Merger Sub"), pursuant to which AT&T Merger Sub merged with and into TCG, with TCG surviving as a wholly-owned subsidiary of AT&T (the "AT&T Merger"). TCG's Class A Common Stock has been de-listed from the NASDAQ stock exchange. In the AT&T Merger, each share of TCG Class A Common Stock (including shares issued to former ACC stockholders in the ACC Merger (as defined in Note 3)), and each share of Class B Common Stock of TCG, par value $0.01 per share (the "TCG Class B Common Stock," and together with the TCG Class A Common Stock, the "TCG Common Stock") was converted into 0.943 of a share of AT&T Common Stock. For further information about the AT&T Merger see AT&T Corp.'s Registration Statement on Form S-4 (File No. 333-49419). 7 TELEPORT COMMUNICATIONS GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED) 2. SIGNIFICANT ACCOUNTING POLICIES Consolidation The 1998 and 1997 consolidated financial statements include the accounts of TCG and all wholly-owned subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation. Certain information and footnote disclosure normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These financial statements and notes should be read in conjunction with the financial statements of Teleport Communications Group Inc. and Subsidiaries included as part of TCG's Form 10-K for the year ended December 31, 1997, and the pro forma financial information included as part of TCG's Registration Statement on Form S-4 (File No. 333-45833) (the "ACC S-4"). Foreign Currency Translation Assets and liabilities of foreign subsidiaries of the Company, namely ACC Canada, ACC UK and ACC Germany, operating in Canada, the United Kingdom and Germany, respectively, are translated into US dollars using the exchange rates in effect at the balance sheet date. Results of operations are translated using the exchange rate at the date of the transaction. The effects of exchange rate fluctuations on translating foreign currency assets and liabilities into US dollars are included as part of the cumulative translation adjustment component of stockholders' equity, while gains and losses resulting from foreign currency transactions are included in net loss. Comprehensive Income In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No. 130 "Reporting Comprehensive Income". This statement is effective for financial statements issued for periods beginning after December 15, 1997. Management has evaluated the effect on its financial reporting from the adoption of this statement and has found the majority of required disclosures not to be applicable. The amounts for the six months ended June 30, 1998 and 1997, which consists of unrealized gain or loss on marketable securities and for the six months ended June 30, 1998 foreign currency translation adjustments, were not material, therefore no further disclosure is required. 3. ACQUISITIONS ACC Corp. On April 22, 1998, TCG consummated an Agreement and Plan of Merger by and among TCG, TCG Merger Co., Inc., a Delaware corporation and a wholly-owned subsidiary of TCG ("MergerCo"), and ACC Corp., a Delaware corporation ("ACC"), pursuant to which MergerCo merged with and into ACC (the "ACC Merger"), with ACC becoming a wholly-owned subsidiary of TCG. In the ACC Merger, the ACC stockholders received 0.90909 of a share of TCG Class A Common Stock for each ACC share. The total aggregate value of TCG Stock received by the ACC stockholders was approximately $1.1 billion. It is management's intention to more fully evaluate the acquired assets and liabilities, and as a result, the allocation of the acquisition costs among the tangible and intangible assets acquired with ACC Corp. may change. Kansas City Fiber Network, L.P. On July 6, 1998, TCG completed the purchase of substantially all of the assets used in connection with fiber optic communications of Kansas City Fiber Network, L.P. ("KCFN"), a Competitive Local Exchange Carrier ("CLEC"), located in the Kansas City Missouri/Overland Park, Kansas metropolitan area, a majority of the equity of which was owned by TCI. The purchase price was approximately $55 million in cash and TCG assumed certain obligations of the seller. 8 TELEPORT COMMUNICATIONS GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED) It is management's intention to more fully evaluate the acquired assets and liabilities, and as a result, the allocation of the acquisition costs among the tangible and intangible assets acquired with KCFN may change. Pro Forma Financial Information Unaudited pro forma financial information for the six months ended June 30, 1998 and 1997 as if the acquisitions of Eastern TeleLogic Corp. ("ETC"), CERFnet Services Inc. ("CERFnet") and BizTel, Inc. ("BizTel") had occurred on January 1, 1997, and the acquisitions of ACC and KCFN had occurred at the beginning of each of the respective periods is as follows (in thousands, except share amounts):
1998 1997 ---- ---- Revenue.................................................................... $ 568,330 $ 394,867 Net loss................................................................... (120,371) (98,305) Loss per share............................................................. $ (0.63) $ (0.54) Weighted average number of shares outstanding.............................. 191,529,263 182,785,991
Pro forma adjustments for the six months ended June 30, 1998, include the amortization of the intangible assets relating to the aforementioned acquisitions. Pro forma adjustments for the six months ended June 30, 1997 include the reversal of TCG's equity in the losses of ETC and BizTel as well as amortization of the intangible assets relating to the aforementioned acquisitions. It is TCG's intention to more fully evaluate the acquired assets and liabilities of ACC and KCFN, and as a result, the allocation of the acquisition costs among the tangible and intangible assets acquired with ACC and KCFN may change. The pro forma financial information presented above is not necessarily indicative of the operating results which would have been achieved had the transactions occurred at the beginning of the periods presented or of the results to be achieved in the future. 4. DERIVATIVE FINANCIAL INSTRUMENTS The Company uses derivative financial instruments to reduce its exposure to market risks from changes in foreign exchange rates and interest rates. The Company does not hold or issue financial instruments for speculative purposes. The derivative instruments used are currency forward contracts and interest rate swap agreements. These derivatives are non-leveraged and involve little complexity. The Company enters into contracts to buy and sell foreign currencies in the future in order to protect the U.S. dollar value of certain currency positions and future foreign currency transactions. The fair value method is used to account for these instruments. Under the fair value method, changes in fair value are recognized in the consolidated balance sheet as a component of other accrued expenses, and in the consolidated income statement as foreign currency gain or loss. For reporting purposes, the contractual assets or liabilities of the foreign currency agreements are offset because the agreements provide for a right of offset. Any premiums or discounts related to foreign currency contracts are amortized over the life of the contracts. The Company enters into cross-currency rate swaps to hedge intercompany debt from certain subsidiaries. Under these agreements, the Company typically pays a fixed rate of interest on a foreign dollar note, and receives a variable rate of interest on a U.S. dollar receivable. The fair value method is used to account for these instruments. Under the fair value method, the amounts receivable and payable are carried at their fair value on the consolidated balance sheet as a component of other receivables. Changes in the fair value are recognized in the consolidated income statement as foreign currency gain or loss. Interest due under the fixed contracts and interest receivable under the variable contracts are recognized in the consolidated income statement as a component of net interest expense. 5. SUBSEQUENT EVENT On August 4, 1998, TCG offered to purchase any and all of its outstanding 9.875% Senior Notes due July 1, 2006 and 11.125% Senior Discount Notes due July 1, 2007 ("The Notes"). The tender offer will expire on August 10, 1998, unless extended. The price to be paid for the Notes will result from a yield to the earliest call of July 1, 2001, equal to a fixed spread of 12.5 basis points over the yield of the 5.625% U.S. Treasury Note due May 15, 2001, at the time a holder agrees to tender its Notes. 9 TELEPORT COMMUNICATIONS GROUP INC. AND SUBSIDIARIES ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS - --------------------- TCG consolidated ACC's financial results as of April 1, 1998. These results are included for the three months ended June 30, 1998. Revenue Total revenues increased to $295.3 million and $455.4 million for the three months and six months ended June 30, 1998 from $115.7 million and $212.5 million for the comparable period in 1997, representing increases of $179.6 million and $242.9 million, or 155% and 114%, respectively. Total revenue contributed by ACC for both the three months and six months ended June 30, 1998 is $111.6 million. Excluding ACC, total revenue would have increased to $183.7 million and $343.8 million for the three months and six months ended June 30, 1998, representing increases of $68.0 million and $131.3 million, or 59% and 62%, respectively. The increases in revenue occurred in every revenue category, most significantly switched services. These increases in revenues were also a result of increased market penetration, primarily in TCG's existing markets, as well as expansion into new markets. Annualized monthly recurring revenue increased to approximately $1.2 billion for the month of June 30, 1998, from $444.8 million for the comparable period in 1997, an increase of $755.2 million, or 170%. Monthly recurring revenue represents monthly service charges billable to telecommunications services customers for the month indicated, but excludes non-recurring revenues for certain one-time services, such as installation fees or equipment charges. Switched services revenue increased 304% and 206% for the three months and six months ended June 30, 1998 from switched services revenue for the comparable period in 1997. Excluding ACC, switched services revenue would have increased 83% and 85% for the three months and six months ended June 30, 1998, respectively. Increased monthly dedicated services revenue, as well as sales growth in switched services products to new customers, also contributed to overall revenue growth. Dedicated services revenue increased 38% and 40% for the three months and six months ended June 30, 1998, respectively, from dedicated services revenue for the comparable periods in 1997. Operating Expenses Operating expenses increased to $170.3 million and $261.0 million for the three months and six months ended June 30, 1998, from $67.6 million and $125.0 million for the three months and six months ended June 30, 1997, increases of $102.7 million and $136.0 million, or 152% and 109%, respectively. Operating expenses were approximately 58% and 57% of revenue for the three months and six months ended June 30, 1998, and 58% and 59% of revenue for the three months and six months ended June 30, 1997. ACC's operating expenses were $73.5 million for both the three months and six months ended June 30, 1998. Excluding ACC, operating expenses would have increased to $96.8 million and $187.5 million for the three months and six months ended June 30, 1998, increases of $29.2 million and $62.5 million, or 43% and 50%, respectively. The year-over-year increase is directly related to the costs associated with the expansion of TCG's networks. These expenses include costs specifically associated with network operations, including compensation costs for technical personnel, access, rights-of-way, node, rent and maintenance expenses. Offsetting these expense increases were reductions in expenses due to renegotiation of interconnection agreements with incumbent local exchange carriers. Selling, General and Administrative Expenses Selling, general and administrative expenses increased to $86.2 million and $133.3 million for the three months and six months ended June 30, 1998, from $39.4 million and $72.7 million for the three months and six months ended June 30, 1997, increases of $46.8 million and $60.6 million, or 119% and 83%, respectively. Selling, general and administrative expenses were approximately 29% of revenue for both the three months and six months ended June 30, 1998 and 34% of revenue for both the three months and six months ended June 30, 1997. ACC's selling, general and administrative expenses were $31.1 million for both the three months and six months ended June 10 TELEPORT COMMUNICATIONS GROUP INC. AND SUBSIDIARIES ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) 30, 1998. Excluding ACC, selling, general and administrative expenses increased to $55.1 million and $102.2 million for the three months and six months ended June 30, 1998, increases of $15.7 million and $29.5 million, or 40% and 41%, respectively. The year-over-year increase is attributable to the costs required to maintain an infrastructure which supports the continued expansion of the Company's networks and the introduction of new services. These costs include compensation, occupancy, insurance, professional fees, and sales and marketing expenses. Merger Related Expenses The Company has recorded non-recurring merger costs of approximately $0.9 million and $10.3 million for the three months and six months ended June 30, 1998, respectively, which include professional fees and other expenses related to the AT&T Merger. EBITDA Before Merger Related Expenses EBITDA (earnings before interest, income tax provision, depreciation, amortization and equity in losses of unconsolidated affiliates) before merger related expenses is defined as EBITDA excluding the one-time merger costs related to by the AT&T Merger. EBITDA before merger related expenses increased to $38.9 million and $61.1 million for the three months and six months ended June 30, 1998, from EBITDA of $8.7 million and $14.8 million for the three months and six months ended June 30, 1997, or increases of $30.2 million and $46.3 million, respectively. ACC's EBITDA was $6.9 million for both the three months and six months ended June 30, 1998. Excluding ACC, EBITDA before merger related expenses increased to $32.0 million and $54.2 million for the three months and six months ended June 30, 1998, or increases of $23.3 million and $39.4 million, respectively. Increases in EBITDA in both existing and expansion cities are prompted by the leveraging of TCG's network, the growth of switch revenues, and the controlling of operating and selling, general and administrative expenses. EBITDA EBITDA increased to $38.0 million and $50.8 million for the three months and six months ended June 30, 1998, from $8.7 million and $14.8 million for the three months and six months ended June 30, 1997, increases of $29.3 million and $36.0 million, respectively. ACC's EBITDA was $6.9 million for both the three months and six months ended June 30, 1998. Excluding ACC, EBITDA increased to $31.1 million and $43.9 million for the three months and six months ended June 30, 1998, an increase of $22.4 million and $29.1 million, respectively. Increases in EBITDA in both existing and expansion cities are prompted by the leveraging of TCG's network, the growth of switch revenues, and the controlling of operating and selling, general and administrative expenses. Depreciation and Amortization Expense Depreciation and amortization expense increased to $66.3 million and $115.4 million for the three months and six months ended June 30, 1998, from $37.3 million and $67.0 million for the three months and six months ended June 30, 1997, increases of $29.0 million and $48.4 million, or 78% and 72%, respectively. ACC's depreciation and amortization expense was $11.6 million for both the three months and six months ended June 30, 1998. Excluding ACC, depreciation and amortization expense increased to $54.7 million and $103.8 million for the three months and six months ended June 30,1998, increases of $17.4 million and $36.8 million, or 47% and 55%, respectively. The increases are primarily attributable to increased depreciation related to the expansion of the Company's local telecommunications networks throughout the United States and increased amortization of goodwill, FCC licenses and other intangibles related to various 1997 and 1998 acquisitions. Interest Income Interest income decreased to $5.1 million and $11.1 million for the three months and six months ended June 30, 1998, from $6.8 million and $18.0 million for the three months and six months ended June 30, 1997, or decreases of $1.7 million and $6.9 million, respectively. ACC's interest income was $0.1 million for both the three months and six months ended June 30, 1998. Excluding ACC, interest income decreased to $5.0 million and $11.0 million for the three months and six months ended June 30, 1998, or decreases of $1.8 million and $7.0 million, 11 TELEPORT COMMUNICATIONS GROUP INC. AND SUBSIDIARIES ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) respectively. The decreases are attributable to decreases in the average outstanding balances of cash and cash equivalents and marketable securities. Interest Expense Interest expense increased to $32.4 million and $63.9 million for the three months and six months ended June 30, 1998, from $28.7 million and $58.3 million for the three months and six months ended June 30, 1997, or increases of $3.7 million and $5.6 million, respectively. ACC's interest expense was $1.5 million for both the three months and six months ended June 30, 1998. Excluding ACC, interest expense increased to $30.9 million and $62.4 million for the three months and six months ended June 30, 1998, an increase of $2.2 million and $4.1 million, or 8% and 7%, respectively. The increase primarily resulted from the interest expense on the bank debt which TCG assumed in the acquisitions of ETC and ACC. Equity in Losses of Unconsolidated Affiliates TCG no longer recorded equity in losses of unconsolidated affiliates due to the consolidation of ETC and BizTel. Equity in losses of unconsolidated affiliates for the three months and six months ended June 30, 1997 was $0.2 million and $2.8 million, respectively. Net Loss The Company's results for the three months and six months ended June 30, 1998 reflected net losses of $55.9 million and $118.1 million, compared to net losses of $51.3 million and $96.4 million for the three months and six months ended June 30, 1997, or increases of $4.6 million and $21.7 million, respectively. These increases in net loss are attributable to the factors discussed above. ACC's net loss was $6.2 million for both the three months and six months ended June 30, 1998. Excluding ACC, the Company's net loss decreased to $49.7 million for the three months ended June 30, 1998 and increased to $111.9 million for the six months ended June 30, 1998, representing a decrease in net loss of $1.6 million for the three months ended June 30, 1998 and an increase in net loss of $15.5 million for the six months ended June 30, 1998. LIQUIDITY AND CAPITAL RESOURCES TCG had total assets of approximately $3.5 billion and $2.5 billion as of June 30, 1998 and December 31, 1997, respectively. At June 30, 1998 the Company had current assets of approximately $476.7 million and current liabilities of $572.6 million, providing negative working capital of approximately $95.9 million. ACC contributed $88.2 million of current assets and $98.3 million of current liabilities. As a wholly-owned subsidiary of AT&T, the Company's liquidity and capital resource requirements will be provided by AT&T. Network and equipment, net of depreciation, as of June 30, 1998, aggregated approximately $1.9 billion. To finance TCG's capital expenditures, acquisitions, investments, working capital and for other general corporate purposes, TCG's wholly-owned subsidiary, TCG New York, Inc. (TCGNY), maintained a $400 million Revolving Credit Agreement. On July 30, 1998, TCGNY's loan facility was terminated. On May 28, 1998 TCG announced its election to commence the accrual and payment of cash interest on TCG's 11.125% Senior Discount Notes due July 1, 2007. The accrual of interest payments began July 1, 1998 and cash interest will be paid semi-annually beginning January 1, 1999. In addition, on July 1, 1998 the principal amount of the Notes will be reduced to the accreted value of $723 per $1,000 face amount of the securities. This election is in accordance with the terms of the Notes and will not effect the original yield of the Notes. As of July 1, 1998, investors will begin earning cash interest at the original yield rather than continue accreting principal. On August 4, 1998, TCG offered to purchase any and all of its outstanding 9.875% Senior Notes due July 1, 2006 and 11.125% Senior Discount Notes due July 1, 2007 ("The Notes"). The tender offer will expire on August 10, 1998, unless extended. The price to be paid for the Notes will result from a yield to the earliest call of July 1, 2001, equal to a fixed spread of 12.5 basis points over the yield of the 5.625% U.S. Treasury Note due May 15, 2001, at the time a holder agrees to tender its Notes. 12 TELEPORT COMMUNICATIONS GROUP INC. AND SUBSIDIARIES ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) Net cash provided by (used for) financing activities for the six months ended June 30, 1998 and June 30, 1997, was $9.2 million and $(4.9) million, respectively, comprised primarily of principal payments on capital leases and proceeds from the exercise of employee stock options for both periods. Net cash provided by (used for) operating activities was $119.1 million and $(21.6) million for the six months ended June 30, 1998 and 1997, respectively. Net cash used for investing activities was $211.5 million and $143.3 million for the six months ended June 30, 1998 and 1997, respectively. As of June 30, 1998, cash and cash equivalents were $90.1 million and marketable securities were $122.9 million. TCG made capital expenditures (excluding acquisitions) of $393.3 million and $217.6 million for the six months ended June 30, 1998 and 1997, respectively. The Company anticipates that capital expenditures (excluding acquisitions) will be in excess of $1.1 billion in the aggregate in 1998, primarily for the expansion, development and construction of its networks, the acquisition and deployment of switches and the expansion of operating support systems. Earnings before fixed charges were insufficient to cover fixed charges for the six months ended June 30, 1998 and 1997, by $117.4 million and $95.2 million, respectively. THE YEAR 2000 The Year 2000 problem arose from the fact that due to early limitations on memory and disk storage, many computer programs indicated the year by only two digits, rather than four. This limitation can cause programs (both system and application) that perform arithmetic operations, comparisons, or sorting of data fields to yield incorrect results when working outside the year range of 1900- 1999. TCG began its investigation into Year 2000 compliance in the fourth quarter of 1996 and has finished this investigation in 1997. The investigation covered all network equipment used to provide services to TCG customers, network operations support systems used to support the operations of its networks, and all administrative support systems. TCG expects to complete the remediation of all effected systems in 1998. In 1999 it is anticipated that integration testing will be complete. TCG is working closely with its vendors to effectuate their Year 2000 correction plans on a timely basis. There can be no assurance that such procedures will be successfully implemented within the required time frames or that additional procedures will not be necessary. A failure of TCG's or of its significant vendors' computer systems could have a material adverse effect on TCG's business and financial position and results of operations. The cost to TCG of the procedures to correct the Year 2000 problem is currently estimated at $5.0 million. As a consequence of the AT&T Merger, many functions now performed by TCG systems may be migrated to systems provided by AT&T, and the analysis and investigation described above do not include such AT&T systems. ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK In the normal course of business, the Company uses various financial instruments, including derivative financial instruments, for purposes other than trading. These instruments include letters of credit, guarantees of debt, interest rate swap agreements and foreign currency exchange contracts relating to U.S. dollar payables of foreign subsidiaries. The Company does not use derivative financial instruments for speculative purposes. Foreign currency exchange contracts are used to mitigate foreign currency exposure and are intended to protect the U.S. dollar value of certain currency positions and future foreign currency transactions. By their nature, all such instruments involve risk, including the risk of nonperformance by counterparties. The Company controls its exposure to counterparty credit risk through monitoring procedures and by entering into multiple contracts. Based upon the Company's knowledge of the financial position of the counterparties to its existing derivative instruments, the Company believes that it does not have any significant exposure to any individual counterparty or any major concentration of credit risk related to any such financial instruments. 13 PART II - OTHER INFORMATION ITEM 1: LEGAL PROCEEDINGS On December 16, 1997, prior to public announcement of the AT&T Merger, an action was filed by a TCG public stockholder in the Delaware Court of Chancery against TCG, TCG's directors and the Cable Stockholders. The plaintiff's complaint alleges that, based on public reports, TCG's directors, management and controlling stockholders were negotiating the sale of TCG to AT&T on a preferential basis. This sale on a preferential basis, the complaint alleges, would offer little or no premium over the current market price of TCG Class A Common Stock and is therefore unfair and inadequate to TCG's public stockholders. The plaintiff seeks to enjoin the merger of TCG and AT&T or, alternatively, to rescind the transaction and/or recover damages in the event that the transaction is consummated. The complaint seeks to have the action certified for class action status and to appoint the plaintiff as the class representative. On January 12, 1998, an action was filed by two TCG public stockholders in the Delaware Court of Chancery against TCG, certain TCG directors and officers, the Cable Stockholders and AT&T. The complaint alleges that the exchange ratio in the AT&T Merger represents an inadequate premium for stockholders of TCG Class A Common Stock. The complaint further alleges that the actions of the TCG directors, officers and Cable Stockholders in connection with the AT&T Merger constitute a breach of various fiduciary duties owed to the holders of TCG Class A Common Stock. The plaintiffs seek to enjoin the merger of TCG and AT&T or, alternatively, to rescind the transaction and/or recover damages in the event that the transaction is consummated. The complaint seeks to have the action certified for class action status and to appoint the plaintiffs as the class representatives. On January 28, 1998, an action was filed by a TCG public stockholder in the Delaware Court of Chancery against TCG, certain TCG directors and officers, and the Cable Stockholders. The complaint alleges that the exchange ratio in the AT&T Merger represents an inadequate premium for stockholders of TCG Class A Common Stock. The complaint further alleges that the actions of the TCG directors, officers and Cable Stockholders in connection with the AT&T Merger constitute a breach of various duties owed to the stockholders of TCG Class A Common Stock. The plaintiffs seek to enjoin the merger of TCG and AT&T or, alternatively, to rescind the transaction and/or recover damages and fees in the event that the transaction is consummated. The complaint seeks to have the action certified for class action status and to appoint the plaintiff as the class representative. Plaintiffs' counsel in the above three putative stockholder class action proceedings have agreed (i) to defer the obligation of the defendants to answer the actions and (ii) to consolidate the actions by filing an amended consolidated complaint. As of August 11, 1998, the amended consolidated complaint had not been filed. The Company believes that these proceedings, individually and in the aggregate, are without merit and that any associated costs will not have a material adverse effect on TCG's financial condition, results of operations or cash flows. ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS There were no reportable events during the quarter ended June 30, 1998. ITEM 3: DEFAULTS UPON SENIOR SECURITIES There were no reportable events during the quarter ended June 30, 1998. ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Pursuant to the provision of the Amended and Restated Stockholders' Agreement, dated as of June 26, 1996, among the Company and the Cable Stockholders, Gary S. Howard, having been designated a nominee by TCI, was elected by unanimous vote of each of the holders of the Company's Class B Common Stock on April 1, 1998, as a Director of the Company to fill the vacancy created by resignation of Brendan R. Clouston. 14 Pursuant to a Voting Agreement among the Cable Stockholders and AT&T, each Cable Stockholder executed and delivered to TCG a written consent, dated January 8, 1998, in favor of and approving the AT&T Agreement and the AT&T Merger, no further vote or meeting of TCG stockholders was necessary to approve and consummate the AT&T Merger. In connection with the AT&T Merger, all of the members of the TCG Board of Directors were removed and replaced with AT&T designees on July 23, 1998. ITEM 5: OTHER INFORMATION There were no reportable events during the quarter ended June 30, 1998. ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K A. Exhibits: Exhibit No. - ----------- *2.1 Reorganization Agreement, dated as of April 18, 1996 *****2.2 Agreement and Plan of Merger, dated as of November 26, 1997, by and among Teleport Communications Group Inc., TCG Merger Co., Inc. and ACC Corp. ******2.3 Agreement and Plan of Merger Among AT&T Corp., TA Merger Corp. and Teleport Communications Group Inc., dated as of January 8, 1998 *3.1 Amended and Restated Certificate of Incorporation of TCG, as revised *3.2 Amended and Restated By-laws of TCG, as revised *4.1 Amended and Restated Stockholders' Agreement dated June 26, 1996 *4.2 Indenture between TCG and United States Trust Company of New York, as Trustee, relating the 11 1/8% Senior Discount Notes due 2007 of TCG *4.3 Indenture between TCG and United States Trust Company of New York, as Trustee, relating to 9 7/8% Senior Notes due 2006 of TCG *4.4 Form of Stock Certificate for Teleport Communications Group, Inc. Class A Common Stock *4.5 Form of Global Security for 11 1/8% Senior Discount Notes due 2007 of TCG *4.6 Form of Global Security for 9 7/8% Senior Notes due 2006 of TCG ******9.00 Voting Agreement *10.1 New York Franchise Agreement, dated May 2, 1994, as amended *10.2 Participation Agreement, dated May 15, 1984 *10.3 Agreement of Lease, dated May 15, 1984, as amended *10.4 Keepwell Agreement, dated June 7, 1984, as amended *10.5 Agreement of Lease with Teleport Associates, dated November 10, 1987 *10.6 Agreement of Sublease between Merrill Lynch/WFC/L, Inc. and TC Systems, Inc. dated January 30, 1990 ****10.7 Amended and Restated Loan Agreement, dated July 28, 1997 *10.8 Teleport Communications Group Inc. 1993 Unit Appreciation Plan *10.9 Teleport Communications Group Inc. 1993 Stock Option Plan, as amended *10.10 Form of Teleport Communications Group Inc. Employee Stock Purchase Plan *10.11 Deferred Compensation Plan of Teleport Communications Group Inc. *10.12 Make-up Plan of Teleport Communications Group Inc. for the Retirement Savings Plan *10.13 Teleport Communications Group Inc. 1996 Equity Incentive Plan *10.14 Robert Annunziata Employment Agreement, dated December 18, 1992, as amended *10.15 John A. Scarpati Employment Agreement, dated July 12, 1994, as amended *10.16 Robert C. Atkinson Employment Agreement, dated July 12, 1994, as amended *10.17 Stuart A. Mencher Employment Agreement, dated July 12, 1994, as amended *10.18 Alf T. Hansen Employment Agreement, dated July 12, 1994, as amended *10.19 Agreement among Teleport Communications Group Inc. and Comcast Corporation, dated April 18, 1996 *10.20 First Amendment to the Teleport Communications Group Inc. 1993 Stock Option Plan *10.21 Second Amendment to the Teleport Communications Group Inc. 1993 Stock Option Plan *10.22 First Amendment to the Teleport Communications Group Inc. 1996 Equity Incentive Plan **10.23 Teleport Communications Group Inc. 1997 Employee Stock Purchase Plan ***10.24 Teleport Communications Group Inc. Restricted Stock and Bonus Plan 27.00 Financial Data Schedule 15 *Incorporated by reference to the corresponding exhibit of TCG's Registration Statements on Form S-1 (File Nos. 333-3850 and 333-3984). **Incorporated by reference to the corresponding exhibit of TCG's Registration Statement on Form S-8 (File No. 333-30571). ***Incorporated by reference to the corresponding exhibit of TCG's Registration Statement on Form S-8 (File No. 333-30569). ****Incorporated by reference to the corresponding exhibit of TCG's Registration Statement on Form S-3 (File No. 333-37597). *****Incorporated by reference from TCG's Periodic Report on Form 8-K, dated November 26, 1997. ******Incorporated by reference from TCG's Periodic Report on Form 8-K, dated January 8, 1998. B. Reports on Form 8-K: The following reports on Form 8-K were filed during the quarter ended June 30, 1998: An Item 5 report on form 8-K, dated April 22, 1998, was filed to announce the completion of the merger with ACC Corp. An Item 5 report on form 8-K, dated May 28, 1998, was filed to commence the accrual of cash interest on its 11 1/8% Senior Discount Notes. An Item 5 report on form 8-K, dated July 7, 1998, was filed to announce the completion of the merger with Kansas City Fiber Network, L.P. An Item 5 report on form 8-K, dated July 23, 1998, was filed reporting the Company's financial results for the fiscal quarter ended June 30, 1998. An Item 5 report on form 8-K, dated August 4, 1998, was filed reporting the Company's tender offer to purchase any and all of its outstanding 9.875% Senior Notes due July 1, 2006 and 11.125% Senior Discount Notes due July 1, 2007. 16 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf of the undersigned, thereunto duly authorized. TELEPORT COMMUNICATIONS GROUP INC. Dated: ________, 1998 By: /s/ John A. Scarpati -------------------------------- Name: John A. Scarpati Title: Senior Vice President and Chief Financial Officer Dated: ________, 1998 By: /s/ Maria Terranova-Evans -------------------------------- Name: Maria Terranova-Evans Title: Vice President and Controller (Principal Accounting Officer) EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1998 JUN-30-1998 90,131 122,938 213,961 17,141 0 476,744 2,410,176 478,113 3,532,870 572,636 1,241,966 0 0 2,005 1,895,657 3,532,870 0 295,303 0 170,250 66,289 2,477 32,365 (55,582) 284 (55,866) 0 0 0 (55,866) (.29) (.29)
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