Prospectus Summary
This summary highlights information contained elsewhere in this prospectus. You should read the entire prospectus carefully. References in this prospectus to "Worldwide Fiber," "we," "our" and "us" refer to Worldwide Fiber Inc. (and its predecessor) and all of its subsidiaries as a combined entity, except where it is clear that those terms mean only the parent company.
The Company
We are a leading independent, facilities-based international provider of fiber optic communications network products and services. By the first quarter of 2001, our network will consist of approximately 37,800 route miles comprised of:
o 24,100 route miles in North America (of which more than 12,000 route miles have been developed to date);
o approximately 6,100 route miles in Europe as a result of swaps and co-development agreements; and o a 7,600 route mile transatlantic cable.
We intend to expand our network to provide further global connectivity. In addition, we will continue to develop bandwidth services on our network to meet our customers' demands and enable Internet services. Our network's design uses state-of-the-art optical technologies that we believe greatly reduces complexity and cost while allowing us to offer increased reliability and a wide range of products and services.
We believe that there is growing demand for fiber optic capacity to transmit high-bandwidth data, voice and video. This growing demand is being accelerated by improvements in "last mile" technology such as digital subscriber line, fixed and third generation wireless access and cable modems. In this changing market environment, we believe that we are in a favorable competitive position to satisfy this demand relative to other service providers due to our low-cost structure. Our market position and operating flexibility has allowed us to achieve a low-cost structure by utilizing:
o our construction skills;
o co-development and swaps along some corridors of our network;
o the use of equity as payment for important elements such as bulk rights-of-way; and o optical design and technologies which eliminate layers of equipment traditionally required to support legacy systems.
Our current and targeted customers include new and incumbent telecommunications service providers, Internet service providers, application service providers and large organizations with enterprise network needs. We believe that these customers have a limited choice of independent service providers capable of offering high-capacity, reliable, secure and cost-effective services, including enabling Internet services, between major population centers in North America and Europe. As a result, we believe that our targeted customers will buy services from us rather than purchase from another source or build these service capabilities themselves. To meet our customers' demands, we offer a wide range of services on a scalable basis, across an extensive geographic network. Our services include:
o bandwidth services--optical channels, private line transmission, packet-based data services such as Internet protocol transport and Asynchronous Transfer Mode, and virtual voice trunking; and o network infrastructure--dark fiber and conduit for sale, grant of indefeasible right to use or lease and construction services supporting the development of our network.
We also intend to expand our business to include:
o facilities, such as carrier hotels that will enable us to provide services such as Internet data centers, co-location, applications hosting, electronic commerce support and web hosting; and o network services such as video transport, independent Internet access for transport and peering and management services to allow carriers to migrate from circuit-switched technologies to packet-based technologies.
Business Strategy
To exploit the growing demand for bandwidth, our strategy is to:
o provide high-bandwidth connectivity between major global population centers;
o develop and operate a technologically advanced, high-capacity, low-cost network;
o extend the reach of our network through development and swaps of fiber and capacity;
o expand our marketing capabilities;
o increase the number of products and services that we offer, including Internet enabling services;
o capitalize on management experience and relationships; and o pursue additional strategic alliances.
The Network
Our 37,800 route mile network is scheduled to be completed by the first quarter of 2001. We plan to further develop and expand our network footprint in response to customer demand. Our network consists of fiber optic assets and capacity that we have installed or acquired from other developers and carriers through swaps or purchases along diverse rights-of-way.
o North America. In North America, our network is expected to cover approximately 24,100 route miles, encompassing both long-haul and intra-city route miles and providing connectivity between approximately 50 major population centers.
o Europe. In Europe, our network is expected to cover approximately 6,100 long-haul route miles (assuming, with respect to 1,300 route miles, the exercise of an option that we have) providing connectivity between approximately 20 major population centers by the first quarter of 2001.
o Hibernia Undersea Cable. Our 7,600 mile transatlantic cable will be a 1.92 terabits per second, high-capacity, self-healing ring that will connect landing sites in Boston, Halifax, Dublin and Liverpool.
o Future Expansion. In addition to expanding our network through North America and Europe and our Hibernia undersea cable (which will comprise an aggregate of more than 1.1 million fiber miles) to more population centers, we are reviewing opportunities to expand the geographic reach of our network to have transpacific connectivity and extend into Asia and Latin America. We will also consider building additional city rings in the major population centers reached by our network.
Recent Developments
Management
o Appointment of Chief Executive Officer. Mr. Gregory Maffei joined us as Chief Executive Officer in January 2000. He was previously employed by Microsoft Corporation for seven years, most recently as Chief Financial Officer, where he had responsibilities for Microsoft's worldwide financial, corporate development and strategic partnership initiatives. Prior to joining us, Mr. Maffei purchased approximately 8% of our total equity determined on a fully diluted basis as of December 22, 1999. Some of Mr. Maffei's shares are subject to repurchase by us in the event his employment ceases.
Network
o PSINet. In December 1999, we signed a contract with PSINetworks Canada Limited and PSINetworks Co. to grant to them an indefeasible right of use for bandwidth capacity between Vancouver and Chicago under which we will deliver this capacity by the end of March 2000. In addition, we will provide them with operations and other services. Some details of this agreement are subject to finalization.
o Europe. In December 1999, we signed contracts with Telia AB, Telewest Communications Group Limited and Carrier1 International GmbH. We are swapping fiber on part of our North American network for fiber on significant parts of Telia's European network, which is expected to be complete in the fourth quarter of 2000. We will develop with Telewest a multi-conduit network from London to Liverpool along diverse routes that pass through seven major population centers in England. We expect this network to be complete by the fourth quarter of 2000. Our agreement with Carrier1 provides us with wholesale capacity from London to 18 major European population centers. We also have options from Carrier1 to acquire dark fiber strands in Germany and/or wavelengths in France.
Investors
o Private Equity Investment. In September 1999, we completed a private placement of our redeemable convertible preferred shares to affiliates of Tyco International Ltd., Providence Equity Partners Inc., DLJ Merchant Banking Partners II L.P. and GS Capital Partners III, L.P. for $345 million. Together, these private placements represent a minority equity interest in us. Under the terms of the sale, each purchaser is entitled to nominate a representative to our board of directors. Currently three such nominees serve as our directors. Concurrently with the completion of this offering, the redeemable convertible preferred shares will automatically convert into Class A Non-Voting Shares.
Principal Executive Offices Our principal executive offices are located at 1500-1066 West Hastings Street, Vancouver, British Columbia, Canada V6E 3X1, and our electronic mail address is [email protected]. Our main phone number is (604) 681-1994.
The Offering
Class A Non-Voting Shares offered (a):
By us................................................
By the selling shareholders..........................
Shares to be outstanding following the offering (a):
Class A Non-Voting Shares............................
Class C Multiple Voting Shares.......................
Total................................................
Concurrent debt offerings.................... Concurrently with this offer- ing, we are offering in transactions under Rule 144A and Regulation S of the Securities Act by a separate offering memorandum:
o $ million in aggregate principal amount of Senior Notes due 20 ; and o Euro $ million ($ million) in aggregate amount of Senior Notes due 20 . The closing of this offering is not conditioned on the closing of the debt offerings, and the closing of the debt offerings is not conditioned on the closing of this offering.
Use of proceeds............................. We intend to use the net proceeds of this offering:
o to further develop and light our network;
o to develop new facilities to enable us to provide value added network services;
o for investments, acquisitions or strategic alliances that we may identify in the future; and o........to fund operating losses, for working capital and for general corporate purposes.
Proposed listing symbols:
Nasdaq National Market...............................
The Toronto Stock Exchange...........................
(a) Does not include Class A Non-Voting Shares that will be offered by us if the underwriters' overallotment option is exercised in full.
Summary Financial Data We were incorporated on February 5, 1998 and are indirectly a subsidiary of Ledcor Industries Limited, one of Ledcor Inc.'s subsidiaries. On May 31, 1998 we began our operations after some assets of the telecommunications division of Ledcor Industries were transferred to us. Prior to June 1, 1998, the operations were carried out by the telecommunications division.
The summary historical financial data for the year ended March 31, 1996, the five months ended August 31, 1996, the year ended August 31, 1997 and the nine months ended May 31, 1998 of our predecessor, the telecommunications division of Ledcor Industries, are derived from the audited financial statements of the predecessor division, which have been audited by Deloitte & Touche LLP, independent auditors.
Our summary consolidated historical financial data presented for the period from February 5, 1998 to December 31, 1998 are derived from our audited consolidated financial statements, which have been audited by PricewaterhouseCoopers LLP, independent auditors. Our unaudited pro forma financial data for the year ended December 31, 1998 are derived from our audited consolidated financial statements, the financial statements of the predecessor division and the consolidated financial statements of Worldwide Fiber (USA), Inc. included elsewhere in this prospectus and give effect to the following transactions as if they had occurred on January 1, 1998:
o the transfer of operations and assets to us from the telecommunications division of Ledcor Industries;
o the acquisition by us of an additional 25% interest in Worldwide Fiber (USA), Inc., which increased our interest to 75%;
o the interest expense on the $175 million senior notes and $500 million senior notes; and o the amortization of goodwill arising from the acquisition of the Canadian National Railway Company and Illinois Central Railroad Company minority equity interests.
The summary consolidated historical financial data as of and for the periods ended September 30, 1999 and 1998 are derived from our unaudited consolidated financial statements and include, in the opinion of our management, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the data for those periods.
The unaudited pro forma financial data for the nine months ended September 30, 1999 are derived from our unaudited interim consolidated financial statements for the nine month period ended September 30, 1999 included elsewhere in this prospectus. The unaudited pro forma income statement for the nine months ended September 30, 1999 gives effect to the following transactions as if they occurred on January 1, 1998:
o the interest expense on the $500 million senior notes; and o the amortization of goodwill arising from the acquisition of the Canadian National Railway Company and Illinois Central Railroad Company minority equity interests.
The unaudited pro forma as adjusted balance sheet data at September 30, 1999 gives effect to the following transactions as if they occurred on September 30, 1999:
o the issuance of Class A Non-Voting Shares for proceeds of $ ;
o the issuance of $ notes in the concurrent debt offerings;
o the conversion of our redeemable convertible preferred shares into Class A Non-Voting Shares;
o the acquisition of the Canadian National Railway Company and Illinois Central Railroad Company minority equity interests;
o the completion of the $565.0 million Hibernia bank facility, of which $ has been drawn;
o the completion of the $115 million senior credit facility (with additional senior secured revolving purchase money facilities of $35 million), of which $ has been drawn;
o the receipt of a promissory note from one of our executive officers and the issuance of our shares to the executive officer; and o the issuance of $1.0 million worth of Class A Non-Voting Shares to a consultant.
Our consolidated financial statements and the divisional financial statements of the predecessor division have been prepared in accordance with U.S. GAAP. The results of operations for the predecessor division are not comparable to our results of operations after the reorganization.
EBITDA presented in the following table consists of net income (loss) before interest expense, net of interest income, income tax expense (recovery), depreciation, amortization of goodwill and income attributable to minority interest. EBITDA is presented because we believe that it is a useful indicator of our ability to meet debt service and capital expenditure requirements. It is not intended as an alternative measure of operating results or cash flow from operations (as determined in accordance with generally acceptable accounting principles). EBITDA is not necessarily comparable to similarly titled measures for other companies and does not necessarily represent amounts of funds available for management's discretionary use.
For purposes of calculating the ratio of earnings to fixed charges, earnings consists of earnings (loss) before equity income, income tax expense (recovery), income attributable to minority interest, amortization of goodwill and fixed charges. Fixed charges consists of interest expensed and capitalized, plus the portion of rental expense which we believe to be representative of interest (assumed to be one-third of rental expense). Pro forma loss for the year ended December 31, 1998 would have been insufficient to cover fixed charges by approximately $74.5 million, and pro forma loss for the nine month period ended September 30, 1999 would have been insufficient to cover fixed charges by approximately $11.9 million.
Capital expenditures represent actual cash expenditures incurred during the period and do not include acquisitions of assets for non-cash consideration. Route miles represent the number of miles spanned by fiber optic cable owned at the end of the period, calculated without including physically overlapping segments of cable. Fiber miles represent the number of strands of fiber in a length of fiber optic cable owned at the end of the period, multiplied by the length of the cable in miles.
The following table presents summary consolidated financial data derived from our consolidated financial statements. You should read the following information along with "Management's Discussion and Analysis of Financial Condition and Results of Operations," the financial statements and the related notes included elsewhere in this prospectus.
Summary Financial Data
(Dollars in thousands except per share amounts)
Worldwide Fiber
Pro Forma
February 5, February 5, Pro Forma Nine Months Nine Months
1998 to 1998 to Year Ended Ended Ended
September 30, December 31, December 31, September 30, September 30,
1998 1998 1998 1999 1999
Income Statement Data:
Revenue.................... $ 104,819 $ 164,319 $ 207,038 $ 235,138 $ 235,138
Operating expenses:
Costs................... 90,909 147,621 182,518 165,263 165,263
General and administrative 1,318 2,274 8,140 17,263 18,138
Depreciation............ 260 464 639 871 871
Amortization of good-will -- -- 4,875 -- 3,656
Total operating expenses... 92,487 150,359 196,172 183,397 187,928
Operating income........... 12,332 13,960 10,866 51,741 47,210
Interest expense, net...... -- 225 85,352 12,448 49,248
Equity income (loss)....... (48) 928 -- -- --
Earnings (loss) before
income taxes............ 12,284 14,663 (74,486) 39,293 (2,038)
Income tax expense (recovery) 5,402 5,643 (26,710) 20,175 3,571
6,882 9,020 (47,776) 19,118 (5,609)
Income attributable
to minority interest.... -- -- 464 5,747 3,247
Net income (loss).......... $ 6,882 $ 9,020 $ (48,240) $ 13,371 $ (8,856)
Basic and diluted earnings
(loss) per share .......... $ 2.19 $ 0.86 $ (3.90) $ 0.05 $ (0.11)
Shares used to calculate
earnings (loss) per share:
Basic................. 3,140,871 10,482,089 12,360,578 140,973,458 140,973,458
Diluted............... 3,140,871 10,482,089 12,360,578 153,116,346 140,973,458
Other Financial Data: EBITDA .................... $ 12,544 $ 15,352 $ 16,380 $ 52,612 $ 51,737
Capital expenditures....... -- 1,065 -- 61,124 -- Ratio of earnings to fixed charges ................... 374.7x 26.8x -- 2.0x --
Statement of Cash Flows Data: Operating activities....... $ 99 $ (13,059) $ -- $ (38,427) $ -- Investing activities....... -- 1,177 -- (229,927) -- Financing activities....... -- 168,350 -- 787,000 --
Operating Data: Route miles................ -- 2,735 -- 8,807 --