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                              UNITED STATES
                    SECURITIES AND EXCHANGE COMMISSION

                          WASHINGTON, D.C. 20549

                               -----------

                                FORM 10-Q

(Mark One)
[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
     For the quarterly period ended December 31, 1996
                                       or
[ ]  TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
     For the transition period from          to


                      Commission File Number 0-18195

                               -----------

                         U.S. LONG DISTANCE CORP.
          (Exact name of registrant as specified in its charter)

                  DELAWARE                           74-2522103
     (State or other jurisdiction of            (IRS Employer ID No.)
      incorporation or organization)     

        9311 SAN PEDRO, SUITE 100                        78216
           SAN ANTONIO, TEXAS                          (Zip code)
  (Address of principal executive offices)     


                              (210) 525-9009
           (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.  [X] Yes  [ ] No

     Indicated below is the number of shares outstanding of the registrant's
only class of common stock at February 6, 1997:

                                               NUMBER OF SHARES
                 TITLE OF CLASS                   OUTSTANDING
                 --------------                ----------------

          Common Stock, $0.01 par value           15,331,164


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<PAGE>


                U.S. LONG DISTANCE CORP. AND SUBSIDIARIES

                         QUARTERLY REPORT ON FORM 10-Q
               FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1996

                                  INDEX


<TABLE>
                                                                                                   PAGE
                                                                                                   ----
<S>       <C>                                                                                      <C>
PART I    FINANCIAL INFORMATION
Item 1.   Interim Consolidated Financial Statements (Unaudited)
          Consolidated Balance Sheets - December 31, 1996 and September 30, 1996 ..................   3
          Consolidated Statements of Income - For the Three Months Ended
            December 31, 1996 and 1995 ............................................................   4
          Consolidated Statements of Cash Flows - For the Three Months Ended
            December 31, 1996 and 1995 ............................................................   5
          Notes to Interim Consolidated Financial Statements ......................................   6
Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations ...  10
PART II   OTHER INFORMATION
Item 1.   Legal Proceedings .......................................................................  17
Item 6.   Exhibits and Reports on Form 8-K ........................................................  17
               (a) Exhibits .......................................................................  17
               (b) Current Reports on Form 8-K ....................................................  17
SIGNATURES ........................................................................................  18
</TABLE>





                                      2



<PAGE>

                        PART I - FINANCIAL INFORMATION

               ITEM 1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS

                   U.S. LONG DISTANCE CORP. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
                                  (UNAUDITED)

                                    ASSETS

<TABLE>
                                                                              DECEMBER 31,   SEPTEMBER 30,
                                                                                  1996           1996
                                                                              ------------   ------------
<S>                                                                            <C>            <C>
Current assets:
 Cash and cash equivalents ...................................................  $ 11,610       $ 8,842 
 Accounts receivable, net ....................................................    35,631        35,867 
 Prepaids and other ..........................................................     5,561         6,002 
                                                                                --------       -------
      Total current assets ...................................................    52,802        50,711 
 Property and equipment, net .................................................    29,447        29,577 
 Equipment held under capital leases, net ....................................       203           282
 Other assets:
  Excess of cost over net assets acquired, net ...............................    13,663        13,804 
  Other assets, net ..........................................................     4,882         4,870 
                                                                                --------       -------
      Total assets ...........................................................  $100,997       $99,244 
                                                                                --------       -------
                                                                                --------       -------

                               LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
 Trade accounts payable ......................................................  $ 14,372       $10,909 
 Accrued liabilities .........................................................    10,330        13,581 
 Current portion of long-term debt ...........................................     6,292         5,854 
 Current portion of obligations under capital leases .........................       228           294 
                                                                                --------       -------
      Total current liabilities ..............................................    31,222        30,638 
 Other liabilities ...........................................................       179            52 
 Long-term debt, less current portion ........................................     9,995        10,146 
 Obligations under capital leases, less current portion ......................       113           143 
                                                                                --------       -------
      Total liabilities ......................................................    41,509        40,979 

Commitments and contingencies (See Notes 5 and 7)

Stockholders' equity:
 Preferred stock, $0.01 par value, 10,000,000 shares authorized; no shares
   issued or outstanding at December 31, 1996 or September 30, 1996 ..........         0             0 
 Common stock, $0.01 par value, 50,000,000 shares authorized; 15,281,649 and
   15,255,977 shares issued and 15,077,548 and 15,051,876 shares outstanding 
   at December 31, 1996 and September 30, 1996, respectively .................       153           153 
 Additional paid-in capital ..................................................    54,623        54,554 
 Retained earnings ...........................................................     6,619         5,465 
 Treasury stock ..............................................................    (1,907)       (1,907) 
                                                                                --------       -------
      Total stockholders' equity .............................................    59,488        58,265 
                                                                                --------       -------
      Total liabilities and stockholders' equity .............................  $100,997       $99,244 
                                                                                --------       -------
                                                                                --------       -------
</TABLE>

                    The accompanying notes are an integral part of 
                       these consolidated financial statements.


                                      3

<PAGE>

                U.S. LONG DISTANCE CORP. AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF INCOME
                   (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                               (UNAUDITED)

<TABLE>
                                                                                  THREE MONTHS ENDED
                                                                                     DECEMBER 31,
                                                                                  ------------------
                                                                                   1996         1995
                                                                                   ----         ----
<S>                                                                               <C>           <C>
Operating revenues:
 Direct dial long distance services ............................................. $35,375      $25,034 
 Operator services ..............................................................  13,372       14,674 
                                                                                  -------      -------
      Total operating revenues ..................................................  48,747       39,708 
Cost of services ................................................................  31,981       26,386 
                                                                                  -------      -------
 Gross profit ...................................................................  16,766       13,322 
Selling, general and administrative expense .....................................  11,931       11,382 
Depreciation and amortization expense ...........................................   2,643        2,771 
                                                                                  -------      -------
 Income (loss) from continuing operations .......................................   2,192         (831) 
Other income (expense):
 Interest income ................................................................     197          222 
 Interest expense ...............................................................    (350)        (376) 
 Other, net .....................................................................     (61)         (32) 
                                                                                  -------      -------
      Total other expense .......................................................    (214)        (186) 
Income (loss) from continuing operations before income tax benefit (provision)...   1,978       (1,017) 
Income tax benefit (provision) ..................................................    (825)         171 
                                                                                  -------      -------
Net income (loss) from continuing operations ....................................   1,153        (846) 

Discontinued operations (See Notes 1 and 2):
 Income from discontinued operations, net of  income taxes of $2,419 (1995)......       0        3,948 
                                                                                  -------      -------
Net income ...................................................................... $ 1,153      $ 3,102 
                                                                                  -------      -------
                                                                                  -------      -------

Net income (loss) per common share:
 Continuing operations .......................................................... $  0.07      $ (0.06) 
 Discontinued operations ........................................................    0.00         0.27 
                                                                                  -------      -------
 Net income per common share .................................................... $  0.07      $  0.21 
                                                                                  -------      -------
                                                                                  -------      -------

Weighted average common shares and common share equivalents outstanding            16,149       14,853
</TABLE>

                    The accompanying notes are an integral part of 
                       these consolidated financial statements.



                                      4

<PAGE>

                U.S. LONG DISTANCE CORP. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (IN THOUSANDS)
                               (UNAUDITED)

<TABLE>
                                                                           THREE MONTHS ENDED
                                                                               DECEMBER 31,
                                                                           ------------------
                                                                            1996       1995
                                                                            ----       -----
<S>                                                                         <C>        <C>
Cash flows from operating activities:
  Net income (1996), net loss from continuing operations (1995) .......... $ 1,153    $  (846)
  Adjustments to reconcile net income (1996), net loss from continuing 
    operations (1995) to net cash provided by operating activities:
      Depreciation and amortization ......................................   2,643      2,771 
      Loss on disposition of equipment ...................................      60        107 
      Provision for losses on accounts receivable ........................   1,654      1,594 
      Deferred compensation ..............................................       0         60 
      Changes in operating assets and liabilities:
        (Increase) decrease in accounts receivable .......................  (1,418)     2,494 
        (Increase) decrease in prepaids and other ........................     170       (331) 
        Increase (decrease) in accounts payable ..........................   3,463       (580) 
        Decrease in accrued liabilities ..................................  (3,251)    (2,851) 
        Increase (decrease) in other liabilities .........................     127       (168)
                                                                           -------    -------
Net cash provided by operating activities ................................   4,601      2,250 
                                                                           -------    -------

Net cash provided by discontinued operations .............................       0      1,212 

Cash flows from investing activities:
  Purchases of property and equipment ....................................  (1,989)    (1,073) 
  Other investing activities .............................................    (104)      (767) 
                                                                           -------    -------
Net cash used in investing activities ....................................  (2,093)    (1,840) 
                                                                           -------    -------

Cash flows from financing activities:
  Proceeds from issuance of debt .........................................   2,165          0 
  Payments on debt .......................................................  (1,878)    (1,419) 
  Payments on capital leases .............................................     (96)      (230) 
  Proceeds from issuance of common stock .................................      69         27 
                                                                           -------    -------
Net cash provided by (used in) financing activities ......................     260     (1,622) 
                                                                           -------    -------
Net increase in cash and cash equivalents ................................   2,768          0 
Cash and cash equivalents, beginning of period ...........................   8,842          0 
                                                                           -------    -------
Cash and cash equivalents, end of period ................................. $11,610    $     0 
                                                                           -------    -------
                                                                           -------    -------
</TABLE>

                 The accompanying notes are an integral part 
                 of these consolidated financial statements.


                                      5

<PAGE>


                U.S. LONG DISTANCE CORP. AND SUBSIDIARIES

            NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                               (UNAUDITED)

NOTE 1. PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION

     The interim consolidated financial statements included herein have been
prepared by U.S. Long Distance Corp. ("USLD") and subsidiaries (collectively
referred to as the "Company"), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission ("SEC"). All adjustments
have been made to the accompanying interim consolidated financial statements
which are, in the opinion of the Company's management, necessary for a fair
presentation of the Company's operating results. All adjustments are of a
normal recurring nature. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. It is recommended that these interim consolidated financial
statements be read in conjunction with the consolidated financial statements
and the notes thereto included in the Company's Annual Report on Form 10-K for
the fiscal year ended September 30, 1996. Certain prior period amounts have
been reclassified for comparative purposes and to reflect the spin-off
discussed in Note 2 below.

     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 revenues and expenses during the
reporting period. Actual results could differ from those estimates.

NOTE 2. DISCONTINUED OPERATIONS

     On August 2, 1996, the Company completed the spin-off of its subsidiary
engaged in the billing clearinghouse and information management services
business, Billing Information Concepts Corp. ("Billing"). The spin-off has been
accounted for as a discontinued operation and, accordingly, the Company
restated its consolidated financial statements for all periods presented prior
to that date in accordance with Accounting Principles Board Opinion No. 30. The
spin-off was a tax-free distribution of 100% of the common stock of Billing to
the Company's stockholders.

     Revenue of the discontinued operations of Billing was $23.4 million during
the three-month period ended December 31, 1995. Net income of the discontinued
operations of Billing was $3.9 million during the three-month period ended
December 31, 1995.

NOTE 3. STATEMENT OF CASH FLOWS

     Cash payments and non-cash activities during the periods indicated were as
follows:

                                                       THREE MONTHS ENDED
                                                           DECEMBER 31,
                                                       ------------------
                                                       1996          1995
                                                       ----          ----
                                                          (IN THOUSANDS)

     Cash payments for interest .....................  $350          $304
     Cash payments for income taxes .................   143             9
     Non-cash investing and financing activities:
       Return of escrowed treasury stock ............     0           118

NOTE 4. LONG-TERM DEBT AND OTHER BORROWING ARRANGEMENTS

     In October 1996, the Company entered into a five-year, $6.0 million
equipment financing facility. At December 31, 1996, the Company had $6.0
million available for borrowing and did not have any amounts borrowed under
this facility. Any borrowings under this facility will bear interest at the
five-year treasury bond rate as defined in the agreement. A proposal fee of
$60,000 was paid in connection with this facility.  In December 1996, the
Company entered into a $5.0 


                                      6

<PAGE>

million revolving credit receivable financing facility with Billing which 
allows the Company to borrow against its own operator services accounts 
receivable. This agreement may be canceled by either party upon written 
notice. At December 31, 1996, the Company had $5.0 million available for 
borrowing and did not have any amounts borrowed under this facility. Any 
borrowings under this facility will bear interest at the prime rate plus 
4.0%. This facility is collateralized by the related accounts receivable. In 
February 1997, the Company entered into a one-year, annually renewable, $10.0 
million credit receivable financing facility which allows the Company to 
borrow against its own direct dial long distance services accounts 
receivable. Any borrowings under this facility will bear interest at the 
prime rate plus 0.5%. This facility is collateralized by the related accounts 
receivable and the Company's cash accounts.

NOTE 5. INCOME TAXES

     The Company has been notified by the Internal Revenue Service ("IRS") that
a fiscal 1992 transaction between a wholly owned foreign subsidiary (Mega Plus
Dialing, Inc.) and its U.S. subsidiary (Billing, formerly Zero Plus Dialing,
Inc.) is proposed to be treated differently by the IRS than originally
characterized by the Company. The IRS district office has issued a report that
proposed an assessment of taxes, penalties and interest.  The assessment has
been appealed to the appellate division of the IRS.  The Company and its tax
counsel believe the possibility that the IRS will prevail in this matter is
remote.  Consequently, no accrual for this potential liability or any
associated taxes, interest or penalties has been made. At the present time,
management of the Company does not anticipate this matter will have a material
impact on the Company's financial position or results of operations.

NOTE 6. RELATED PARTY TRANSACTIONS

     The Company and Billing share a common individual on their respective
boards of directors. Therefore, the companies are considered related parties
for financial disclosure purposes. At December 31, 1996 and September 30, 1996,
the Company had accounts receivable from Billing of $468,000 and $1.3 million,
as well as notes receivable of $969,000 and $1.0 million, respectively.  In
addition, the Company had accounts payable to Billing of $831,000 and $1.1
million at December 31, 1996 and September 30, 1996, respectively. Operating
revenues recognized from Billing were $955,000 and $697,000 for the three-month
periods ended December 31, 1996 and 1995, respectively. In addition, the
Company incurred operating expenses related to billing and collection fee
charges from Billing of $1.2 million and $1.4 million for the three-month
periods ended December 31, 1996 and 1995, respectively.

     Historically, the Company has obtained financing for capital expenditures
through term debt agreements and capital lease agreements that were guaranteed
and cross-collateralized by the Company and Billing.  These debt agreements
were negotiated based on the strength of the consolidated financial statements,
earnings and cash flow of the consolidated group.  Most of these debt
agreements were secured by the assets of all the subsidiaries within the
consolidated group.  The Company has received from certain lenders loan
agreement amendments or separate loan agreements whereby the subject
indebtedness will be secured by only the Company's assets.  In other cases, the
existing guarantees and security arrangements between the Company and Billing
will remain in place for the duration of the facility.  In this regard, the
Company has agreed to pay Billing a credit support fee of 1% of the average
annual outstanding balance.

NOTE 7. COMMITMENTS AND CONTINGENCIES

     At December 31, 1996, the Company was obligated to pay $2.0 million in
connection with the purchase of a digital switch located in Atlanta, Georgia.

     The Company is involved in various claims, legal actions and regulatory
proceedings arising in the ordinary course of business. The Company believes it
is unlikely that the final outcome of any of the claims or proceedings to which
the Company is a party would have a material adverse effect on the Company's
financial position or results of operations; however, due to the inherent
uncertainty of litigation, there can be no assurance that the resolution of any
particular claim or proceeding would not have a material adverse effect on the
Company's results of operations for the fiscal period in which such resolution
occurred.


                                      7

<PAGE>

NOTE 8. REGULATORY MATTERS

BILLED PARTY PREFERENCE

     In April 1992, the FCC tentatively proposed adopting a "Billed Party
Preference" (BPP) system for automatically routing operator assisted calls to
each caller's pre-selected carrier, fundamentally changing the nature of the
operator services industry.  Comments were requested by the FCC during 1992 and
again in 1994.  In each case, industry participants overwhelmingly opposed the
idea as too costly, relative to the perceived benefits of such a system.

     On March 9, 1995, the FCC requested industry comment on two proposals it
had recently received relative to the BPP proceeding.  In an ex-parte petition,
the National Association of Attorney's General ("NAAG") suggested that the FCC
modify its current branding requirement such that operator service providers
("OSPs") would be required to announce at the beginning of each call more
specific information for obtaining access to alternate carriers (the "NAAG
Petition").  Another petition filed by a coalition of industry members,
including most of the RBOCs, two competitive access providers, the American
Public Communications Counsel ("APCC") and the Competitive Telecommunications
Association ("CompTel"), recommended that the FCC impose certain rate
thresholds for interstate operator assisted services, which the FCC would
presume to be reasonable, and any OSP electing to charge rates higher than such
threshold would be required to first prove to the FCC that such rates are
justified based upon the underlying costs of the service (the "APCC Rate Cap
Proposal").  The NAAG Petition was proposed to remain in effect until such time
that BPP is adopted and fully implemented.  The APCC Rate Cap Proposal was
proposed to obviate the need to consider any further action regarding BPP.

     Subsequently, in June 1996, the FCC issued a Second Further Notice of
Proposed Rulemaking (SFNPRM) in this proceeding.  In it, the FCC proposed
adopting a rule which would require operator service providers to announce the
rates for certain calls to the billed party prior to connecting the call,
thereby allowing the billed party to disconnect such call without incurring any
unwanted charges.  In September, the FCC released its Second Request for
Comment in the SFNPRM, soliciting technical and other administrative details to
support the proposed announcement requirement.  Most commentors objected to the
discriminatory nature of the proposal, which would have some carriers
announcing rates while others would not.  If any of these proposals are adopted
by the FCC, the Company's operator service traffic could be materially
adversely affected.

MFJ LEGISLATION

     On February 8, 1996, President Clinton signed the Telecommunications Act
of 1996 into law.  The new law allows the RBOCs to petition their respective
"in-region" state regulatory agencies to seek authority from the FCC to allow
the applicant RBOC to provide long distance services. To obtain this authority,
each state agency is required to certify to the FCC that the applicant RBOC has
satisfied a legislative "checklist" that outlines the steps required for an
RBOC to open its network to competition on a local basis.  These steps include
the provision of competitive network interconnection, unbundled access to
network elements and other  necessary access to poles, ducts, conduits and
rights-of-way. Furthermore, applicant RBOCs must provide non-discriminatory
access to white pages listings and telephone number assignments.  Applicant
RBOCs must provide local number portability, toll dialing parity and local
service resale.  The FCC is required to consult with the Department of Justice
("DOJ") to assist in determining if an applicant RBOC's entry into the long
distance business violates any anti-trust standards the DOJ considers
appropriate. Ninety days after receiving such an application, the FCC is
required to render its decision. RBOCs are required to establish separate
subsidiaries through which they could first offer in-region long distance
services. RBOCs may provide out-of-region long distance services subject to
existing laws and regulations governing long distance communications.

     To date, no RBOC has requested authority for in-region interLATA
authority, because the provisions set forth above have not been satisfied by
any RBOC.  However, many entities have reached interconnection agreements with
one or more of the RBOCs to date, including the Company, and many states have
adopted rules governing local competition. It is reasonable to expect that the
conditions for RBOC entry will be met in the near future, and carriers in the
interLATA long distance business today, such as the Company, will encounter
new, formidable competition.


                                      8

<PAGE>

REGULATORY RATE PROCEEDINGS

     During the course of normal operations, a regulated company may at any
time come under specific scrutiny with regard to any of its rates, terms or
conditions by which such service is rendered by a state or federal regulatory
agency charged with such oversight responsibility, or by an attorney general or
other jurisdictional consumer officials.  In such cases, a regulated company
can be required to, among other things, provide cost justification for the
charges it imposes on some or all of its services, or to address perceived
consumer inequities.  After review of such justification, the regulatory
agency, generally, has the authority to require a carrier to modify the process
by which such services are rendered or to effect changes to its applicable rate
structure.  Consumer officials and attorneys general can pursue civil action if
their concerns are not adequately addressed by the carrier.  The Company
operates in several jurisdictions in which its tariffs or services may, from
time to time, fall under such scrutiny at the discretion of the governing
regulatory agency or other officials.  The Company could therefore be required,
as a result of such an investigation and subsequent proceeding, to implement
changes in its rate structure, which could ultimately affect its revenues.  The
Company cannot predict whether or not any such requirement may be imposed in
any particular jurisdiction.







                                      9

<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

FORWARD-LOOKING STATEMENTS - CAUTIONARY STATEMENTS

     THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS CERTAIN "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND SECTION 21E OF THE SECURITIES EXCHANGE ACT
OF 1934, AS AMENDED (THE "EXCHANGE ACT").  SPECIFICALLY, ALL STATEMENTS OTHER
THAN STATEMENTS OF HISTORICAL FACTS INCLUDED IN THIS REPORT REGARDING THE
COMPANY'S FINANCIAL POSITION, BUSINESS STRATEGY AND PLANS AND OBJECTIVES OF
MANAGEMENT OF THE COMPANY FOR FUTURE OPERATIONS ARE FORWARD-LOOKING STATEMENTS.
THESE FORWARD-LOOKING STATEMENTS ARE BASED ON THE BELIEFS OF THE COMPANY'S
MANAGEMENT, AS WELL AS ASSUMPTIONS MADE BY AND INFORMATION CURRENTLY AVAILABLE
TO THE COMPANY'S MANAGEMENT. WHEN USED IN THIS REPORT, THE WORDS "ANTICIPATE,"
"BELIEVE," "ESTIMATE," "EXPECT" AND "INTEND" AND WORDS OR PHRASES OF SIMILAR
IMPORT, AS THEY RELATE TO THE COMPANY OR COMPANY'S MANAGEMENT, ARE INTENDED TO
IDENTIFY FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS REFLECT THE CURRENT VIEW
OF THE COMPANY WITH RESPECT TO FUTURE EVENTS AND ARE SUBJECT TO CERTAIN RISKS,
UNCERTAINTIES AND ASSUMPTIONS RELATED TO CERTAIN FACTORS INCLUDING, WITHOUT
LIMITATIONS, COMPETITIVE FACTORS, GENERAL ECONOMIC CONDITIONS, CUSTOMER
RELATIONS, RELATIONSHIPS WITH VENDORS, THE INTEREST RATE ENVIRONMENT,
GOVERNMENTAL REGULATION AND SUPERVISION, SEASONALITY, THE OPERATION OF THE
COMPANY'S NETWORKS, TRANSMISSION COSTS, PRODUCT INTRODUCTIONS AND ACCEPTANCE,
TECHNOLOGICAL CHANGE, CHANGES IN INDUSTRY PRACTICES, ONE-TIME EVENTS AND OTHER
FACTORS DESCRIBED HEREIN ("CAUTIONARY STATEMENTS").  ALTHOUGH THE COMPANY
BELIEVES THAT THE EXPECTATIONS ARE REASONABLE, IT CAN GIVE NO ASSURANCE THAT
SUCH EXPECTATIONS WILL PROVE TO BE CORRECT.  BASED UPON CHANGING CONDITIONS,
SHOULD ANY ONE OR MORE OF THESE RISKS OR UNCERTAINTIES MATERIALIZE, OR SHOULD
ANY UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY
FROM THOSE DESCRIBED HEREIN AS ANTICIPATED, BELIEVED, ESTIMATED, EXPECTED OR
INTENDED.  ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS
ATTRIBUTABLE TO THE COMPANY OR PERSONS ACTING ON ITS BEHALF ARE EXPRESSLY
QUALIFIED IN THEIR ENTIRETY BY THE APPLICABLE CAUTIONARY STATEMENTS.

GENERAL

     The following is a discussion of the consolidated financial condition and
results of operations of the Company for the three-month periods ended December
31, 1996 and 1995. It should be read in conjunction with the Interim
Consolidated Financial Statements of the Company, the Notes thereto and other
financial information included elsewhere in this report. For purposes of the
following discussion, references to year periods refer to the Company's fiscal
year ended September 30 and references to quarterly periods refer to the
Company's fiscal quarter ended December 31.

     On July 10, 1996, the Company's Board of Directors approved a plan to spin
off the Company's Billing Group Business as a separate public company.  To
effect the spin-off, the Board approved the distribution of the outstanding
shares of common stock of its wholly owned subsidiary that owned and operated
the Billing Group Business, Billing, to the Company's stockholders. The
distribution was completed on August 2, 1996.

     The spin-off has been accounted for as a discontinued operation and,
accordingly, the Company restated its consolidated financial statements for all
periods presented prior to that date in accordance with Accounting Principles
Board Opinion No. 30.  The unaudited Consolidated Pro Forma Statement of
Operations for the three-month period ended December 31, 1995 is also included
and discussed in a separate section below.

OVERVIEW

     Revenues increased 23% in the first quarter of 1997 to $48.7 million from
$39.7 million in the first quarter of 1996. The Company's gross profit margin
was 34.4% during the quarter ended December 31, 1996, compared to 33.6% during
the quarter ended December 31, 1995.

     The Company's selling, general and administrative ("SG&A") expenses as a
percentage of revenues in the quarter ended December 31, 1996 decreased to
24.5% from 28.7% in the quarter ended December 31, 1995. This decrease was
primarily the result of tighter expense controls and increased efficiencies.
Depreciation and amortization expenses as a percentage of revenues decreased to
5.4%  during the quarter ended December 31, 1996 from 7.0% during the quarter
ended December 31, 1995. Income from continuing operations of $2.2 million was
reported for the quarter ended December 31, 

                                     10
<PAGE>
1996, compared to a loss of $831,000 during the same quarter of the prior year.

RESULTS OF OPERATIONS

     The following table presents certain items in the Consolidated Statements
of Income as a percentage of total revenues for the three-month periods ended
December 31, 1996 and 1995:
                                                        THREE MONTHS ENDED
                                                           DECEMBER 31,
                                                        ------------------- 
                                                         1996        1995
                                                         ----        ----
          Operating revenues:
          Direct dial long distance services ..........  73.0%       63.0%
          Operator services ...........................  27.0        37.0
                                                        -----       -----
          Total operating revenues .................... 100.0       100.0
          Operating expenses:
          Cost of services ............................  65.6        66.4
          Selling, general and administrative .........  24.5        28.7
          Depreciation and amortization ...............   5.4         7.0
                                                        -----       -----
          Income (loss) from continuing operations ....   4.5%       (2.1)%
                                                        -----       -----
                                                        -----       -----

OPERATING REVENUES
     DIRECT DIAL LONG DISTANCE SERVICES.  Direct dial long distance services
revenue increased 41% to $35.4 million in the first quarter of 1997 compared to
$25.0 million in the first quarter of 1996. The increase in revenue is
primarily attributable to growth in the number of customers serviced. The
Company believes that there are opportunities for continued expansion, both
internally and externally through acquisitions, in both of its primary
businesses.  However, because direct dial long distance services represent the
largest market in which the Company is active, management believes that this
business presents the Company with its greatest revenue growth opportunity. The
Company believes that its base of operator services business affords it the
opportunity to expand its direct dial long distance business on a more cost
effective basis than many of its direct dial long distance competitors.
Accordingly, the Company continues to consider potential acquisitions.
Acquisition activity is focused primarily on small to medium-sized companies
that will grow the Company's direct dial long distance business. In January
1997, the Company completed its acquisition of Omni Communications, Inc., a
regional direct dial long distance service provider headquartered in Palm Beach
Gardens, Florida. This acquisition did not have a material effect on the
Company's financial position or results of operations. The Company continues to
evaluate other acquisition candidates in strategic geographic areas to expand
its market.

     OPERATOR SERVICES.  Operator services revenue was $13.4 million in the
first quarter of  1997 compared to $14.7 million in the first quarter of 1996.
The Company processed 3.6 million operator services calls in the first quarter
of 1997 compared to 4.4 million in the first quarter of 1996. The Company
serviced an average of approximately 62,900 pay telephones and 139,000
hospitality rooms per month for the quarter ended December 31, 1996, compared
to an average of approximately 66,200 pay telephones and 129,600 hospitality
rooms per month for the quarter ended December 31, 1995. The decrease in
revenue is attributable to the decrease in volume of operator services calls.
The decrease in call volume is primarily attributable to an increasing
awareness on the part of the consumer of the ability to select a carrier of
choice by dialing access codes of other carriers ("dial-around").
Additionally, changes in federal or state regulations could negatively impact
revenues of the Company (See Note 8 to the Interim Consolidated Financial
Statements).

OPERATING EXPENSES
     COST OF SERVICES. The gross profit margin of 34.4% reported for the
quarter ended December 31, 1996 increased from 33.6% achieved in the comparable
prior year quarter. This increase is due to improved direct dial long distance
services gross margins. The direct dial long distance services margin has
increased primarily as a result of continued improvements in networking
efficiencies and reductions in transmission costs. This increase was offset by
an increase in the direct dial long distance services revenues as a percentage
of total revenue. Such revenues have a lower gross margin than the operator
services revenue and accounted for 73% of the Company's total revenues for the
first quarter of 1997 compared to 63% for the corresponding quarter of 1996.
Although management continues to undertake measures to improve gross 

                                     11
<PAGE>

profit margins, continued pricing pressures and the impact of regulatory 
issues could pressure future gross profit margins.

     SELLING, GENERAL AND ADMINISTRATIVE.  SG&A expenses for the first quarter
of 1997 were $11.9 million, representing 24.5% of revenues, compared to
$11.4 million in the first quarter of 1996, or 28.7% of revenues. SG&A expenses
as a percentage of revenues have continued to decrease as a result of tighter
expense controls and efforts to streamline the Company's operations.

     DEPRECIATION AND AMORTIZATION.  Depreciation and amortization expense was
$2.7 million in the first quarter of 1997, compared to $2.8 million in the
first quarter of 1996. As a percent of revenues, depreciation and amortization
expenses declined to 5.4% in the first quarter of 1997 from 7.0% in the prior
year quarter. This decrease is primarily attributable to the increase in
revenues from the prior year quarter.

INCOME (LOSS) FROM CONTINUING OPERATIONS
     Income from continuing operations in the first quarter of 1997 increased
to $2.2 million for the first quarter of 1997 compared to a loss of $831,000 in
the first quarter of 1996. The continued improvement in operations is primarily
attributable to the increase in revenues, as discussed above, and the decrease
in SG&A expenses as a percentage of revenues.

OTHER EXPENSE, NET
     Net other expense increased slightly to $214,000 in the first quarter of
1997 from $186,000 in the first quarter of 1996.  This increase is primarily
attributable to a higher level of indebtedness over the prior year quarter.

INCOME TAXES
     The Company's effective tax rate is higher than the federal statutory rate
due to the addition of state income taxes and certain deductions taken for
financial reporting purposes which are not deductible for federal income tax
purposes.

NET INCOME
     The Company reported net income of $1.2 million in the first quarter of
1997 compared to net income of $3.1 million in the first quarter of 1996.  This
decrease is attributable to the spin-off of Billing, which provided $3.9
million of net income from discontinued operations in the first quarter of
1996.

EFFECTS OF SPIN-OFF OF BILLING GROUP BUSINESS

     The Consolidated Statements of Income included in this report reflect the
continuing operations of the Company for the three-month period ended December
31, 1996 and continuing operations and discontinued operations of the Company
for the three-month period ended December 31, 1995. Included below is
supplemental unaudited pro forma financial information that management believes
is important to provide an understanding of the results of the Company on a
stand-alone basis. A Consolidated Pro Forma Statement of Income is presented
below for the three-month period ended December 31, 1995. This unaudited
Consolidated Pro Forma Statement of Income is based on the historical statement
of that period adjusted to reflect a pro forma benefit for income taxes at a
42% tax rate for purposes of comparability. The unaudited Consolidated Pro
Forma Statement of Income gives effect to the spin-off as if it had occurred on
September 30, 1995. For comparative purposes, the Company's historical Interim
Consolidated Statement of Income for the three-month period  ended December 31,
1996, is also included below.

     The unaudited consolidated pro forma financial information is presented
for informational purposes only and should be read in conjunction with the
Company's historical Interim Consolidated Financial Statements and Notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" set forth herein. The unaudited Consolidated Pro Forma
Statement of Income of the Company reflects, in management's opinion, all
adjustments necessary to fairly state the pro forma results of operations for
the period presented and to make the unaudited pro forma statement not
misleading.



                                     12

<PAGE>

                   U.S. LONG DISTANCE CORP. AND SUBSIDIARIES
                                       
                CONSOLIDATED PRO FORMA STATEMENTS OF INCOME
                 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                               (UNAUDITED)

                                                       THREE MONTHS ENDED
                                                           DECEMBER 31,
                                                       -------------------
                                                         1995      1996
                                                         ----      ----
                                                       PRO FORMA   ACTUAL

Operating revenues:
  Direct dial long distance services ................. $25,034    $35,375
  Operator services ..................................  14,674     13,372
                                                       -------    -------
      Total operating revenues .......................  39,708     48,747
Cost of services .....................................  26,386     31,981
                                                       -------    -------
  Gross profit .......................................  13,322     16,766
Selling, general and administrative expense ..........  11,382     11,931
Depreciation and amortization expense ................   2,771      2,643
                                                       -------    -------
  Income (loss) from operations ......................    (831)     2,192
Other expense, net ...................................    (186)      (214)
                                                       -------    -------
Income (loss) before income tax benefit (provision)...  (1,017)     1,978
Income tax benefit (provision) .......................     428       (825)
                                                       -------    -------
Net income (loss) .................................... $  (589)   $ 1,153
                                                       -------    -------
                                                       -------    -------

Net income (loss) per common share ................... $ (0.04)   $  0.07

Weighted average common shares and common share 
  equivalents outstanding ............................  14,853     16,149







                                     13

<PAGE>
OUTLOOK
     The statements contained in this Outlook are based on current
expectations. These statements are forward-looking, and actual results may
differ materially.

     The industry in which the Company operates is very competitive and is
characterized by rapid change. In addition, the Company has faced, and
continues to face, regulatory issues which have affected or which may affect
operating revenues and operating profit. The continued success of the Company
is dependent on its ability to adapt to these competitive and regulatory
changes. In developing strategies to achieve continued growth in operating
revenues and operating profits, the Company anticipates continuing geographic
expansion, expanding its product offerings and controlling costs to improve
gross margins and reduce SG&A expense as a percentage of revenue.

     The Company continues to evaluate and take actions to improve the
profitability of its existing products through, among other things, a
regionalized approach to pricing, to identify new products to fully utilize the
Company's existing sales distribution channels and to evaluate programs that
are expected to increase revenues through partnerships with independent sales
agents. In December 1996, management expanded product offerings to include
Internet services. Furthermore, the Company is in the process of expanding
product offerings to include local access in the second quarter of 1997, as
well as paging by the end of the third quarter of 1997 and cellular and frame
relay/ISDN services in selected markets within the next 12 to 18 months. The
Company expects that the expansion of products will increase revenues, as well
as strengthen customer relationships and increase customer retention.  The
Company also plans to expand its direct dial long distance services residential
customer base in selected markets through direct marketing efforts, as well as
by offering long distance services to employees of commercial customers. To
expand its footprint nationally over the next several years, management is
considering and will continue to consider new investments in switching and
related networking equipment.  In January 1997, the Company purchased a digital
switch in Atlanta, Georgia. In addition, the Company completed the acquisition
of Omni Communications, Inc., a regional direct dial long distance service
provider headquartered in Palm Beach Gardens, Florida, in January 1997. This
acquisition, although not material to the Company's financial position or
results of operations, was strategically planned to increase the Company's
presence in the Southeast region of the United States as it brings to the
Company a high quality customer base concentrated in Florida. Omni's existing
customer base complements the Company's network expansion strategy, as Omni's
customers will be serviced directly by the recently purchased digital switch
discussed above. The Company continues to evaluate other acquisition candidates
in strategic geographic areas to expand its market.

     The Company believes that the planned introduction of the local service
product provides the Company a large opportunity for growth. The local services
industry is estimated to be a $95 billion market. The Company plans to
aggressively expand into the local service business and has signed resale
agreements with two RBOCs covering 15 states and an interconnection agreement
with one RBOC covering five states. The Company believes that it has the
potential to capitalize on its relationship with existing customers to bundle
the local product with its existing products and services. The Company's
strategy is to initially resell local services to its operator services
customers. The Company's existing relationship with operator services
customers, who typically own or manage numerous private pay telephones or
hotels, provides a unique opportunity for the Company in that  the Company will
have the potential to provide local access to a large volume of phone lines,
yet a limited number of customers. These factors should allow the Company to
quickly and efficiently enter the local services market in targeted areas.
Secondly, the Company plans to resell local services in target markets where
the Company has an existing high concentration of long distance customers. This
strategy should give the Company a higher than average sales success rate and
minimize customer attrition. In addition, it should allow the Company to more
quickly attain the critical mass necessary to justify a capital investment in
local switches. Lastly, the Company plans to offer local resale services
broadly throughout its customer base. The bundling of these services with
operator and long distance services will enhance the Company's product
offerings and provide new and existing customers with the integrated
communication services they desire.

     The Company has implemented a number of actions designed to improve
overall profitability and reduce the Company's cost structure. With regard to
improving the Company's gross margins, management is focused on maximizing
network efficiencies by implementing technological improvements and reducing
unit costs.  In November 1995, the Company joined the Associated Communication
Companies of America ("ACCA"), a cooperative that provides members 

                                     14
<PAGE>
with opportunities to pool purchasing power to acquire lower transmission 
rates from interexchange carriers through volume discounts and to work in 
partnership with other members to capitalize on resource sharing arrangements 
such as switch partitioning and network sharing.  The Company already has 
realized, from this arrangement, certain benefits and expects continued 
benefits as the organization broadens its vendor base.

     In an effort to streamline functional processes and reduce future SG&A
expenses, the Company has implemented several technologically advanced tools.
An example of one such implementation is the Company's recent deployment of
notebook computers to the sales force. These notebook computers have software
that allows the Company's sales force to quickly process sales proposals and
make enhanced marketing presentations on site at customer locations. In
addition, once a proposal has been accepted, the sales force will use the
notebook to electronically transmit the order information to the Company's data
base and enter the order into the Company's system automatically. This sales
automation tool will not only improve the Company's revenue flow as customer
orders will be received on an on-line, real-time basis, but should also
streamline the sales and order processing functions and thus reduce SG&A
expenses. Lastly, management has streamlined and reorganized certain corporate,
administrative and overhead functions to align its infrastructure with the
smaller operation that resulted from the spin-off.

     Over the past several years, the Company has undertaken a program of
developing new products and expanding its existing service offerings,
geographic focus and network.  In connection with these new products and
services, the Company has made significant investments in telecommunications
circuits, switches, equipment and software. These investments, generally, are
timed to coincide closely with anticipated revenue growth.  In addition, the
Company continues to increase its sales and marketing, customer support,
network operations and field services commitments in anticipation of the
expansion of its customer base in targeted geographic markets. The Company
expects to continue to expand the breadth and scale of its network and related
sales and marketing, customer support and operations activities. The Company
attempts to carefully plan these expansion efforts to minimize the effect on
profitability; however, these expansion efforts could cause the Company to
incur significant increases in expenses, from time to time, in anticipation of
potential future growth in the Company's customer base and targeted geographic
markets.

     The Company's future results of operations and the other forward-looking
statements contained in this Outlook, in particular the statements regarding
revenue growth and reducing cost structure, involve a number of risks and
uncertainties. In addition to the factors discussed above, other factors that
could cause actual results to differ materially are the following: business
conditions and the general economy, competitive factors, introduction and
acceptance of new products, pricing pressures, availability of leased network
facilities, risk of collection of accounts receivable, technological
advancements, regulatory factors, litigation and other factors as discussed in
the cautionary statements.

     The Company believes that it has the competitive product offerings,
personnel and financial resources for continued business success; however,
future revenues, costs and profits all are influenced by a number of factors
and are subject to certain risks and uncertainties, as discussed above.

LIQUIDITY AND CAPITAL RESOURCES

     The Company's cash balance increased to $11.6 million at December 31,
1996, from $8.8 million at September 30, 1996. Working capital was $21.6
million at December 31, 1996, compared to $20.1 million at September 30, 1996.
The Company's current ratio was 1.7:1 at both December 31, 1996 and September
30, 1996.  Additionally, the Company's cash flow provided by continuing
operations was $4.6 million for the quarter ended December 31, 1996 as compared
to $2.3 million for the quarter ended December 31, 1995.

     Capital expenditures amounted to approximately $2.0 million during the
quarter ended December 31, 1996. These expenditures were related primarily to
the purchase of telecommunications equipment, computer equipment and software,
and office furniture. During the remaining nine months of fiscal 1997, the
Company anticipates capital expenditures of $16.0 million to $20.0 million to
service the Company's projected growth. Approximately $10.0 million to $12.0
million of these capital expenditures are expected to be purchases of
telecommunications equipment, approximately $5.0 million to $7.0 million are
expected to be purchases of computer hardware and software to develop systems
to support the anticipated growth of the Company's business and the remainder
is expected to be for purchases of office furniture and 

                                     15
<PAGE>

equipment. The Company anticipates financing these capital expenditures 
primarily through term notes with various lending institutions.  Although 
line of credit commitments have been made by various lenders for equipment 
purchases, there is no assurance that the Company will be able to obtain 
satisfactory financing for these capital expenditures.

   The Company's operations and expansion into new geographic markets will
continue to require substantial capital investment for the development and
procurement of transmission facilities and telecommunications and office
equipment. In addition, any acquisitions that the Company may consummate may
require substantial capital investment. The Company believes that it has the
ability to continue to secure long-term equipment financing and that this
ability, combined with cash flow generated from operations and available
borrowing capacity under its existing credit facilities, will be sufficient to
fund capital expenditures, working capital needs and debt repayment
requirements for the foreseeable future.

     The Company has a $10.0 million equipment financing facility. At December
31, 1996, the Company had $10.0 million available for borrowing and did not
have any amounts borrowed under this facility.  In addition, the Company has a
$6.0 million equipment financing facility. At December 31, 1996, the Company
had $6.0 million available for borrowing and did not have any amounts borrowed
under this facility. The Company also has a $5.0 million revolving credit
receivable financing facility with Billing which allows the Company to borrow
against its own operator services accounts receivable. At December 31, 1996,
the Company had $5.0 million available for borrowing and did not have any
amounts borrowed under this facility. In February 1997, the Company entered
into a $10.0 million credit receivable financing facility which allows the
Company to borrow against its own direct dial long distance services accounts
receivable. The new debt facilities do not contain any debt covenants that are
of a materially more restrictive nature than those of the pre-existing debt
facilities.

     The Company continually evaluates business opportunities, including
potential acquisitions. The primary focus of the Company's acquisition
activities is to make additional acquisitions that will grow the Company's
direct dial long distance business.  One or more of such acquisitions could
result in a substantial change in the Company's operations and financial
condition. The success of the Company's acquisition activities will depend,
among other things, on the availability of acquisition candidates, the
availability of funds to finance acquisitions and the availability of
management resources to oversee the operation of acquired businesses.

     As consideration for any acquisitions, the Company may issue common stock,
preferred stock, convertible debt or other securities, in addition to or in
lieu of the payment of cash, that could result in dilution of the percentage
ownership of public stockholders. The Company does not intend to seek
stockholder approval for any such acquisitions or security issuances unless
required by applicable laws or regulations.



                                     16

<PAGE>

                       PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

     The Company is involved in various claims, legal actions and regulatory
proceedings arising in the ordinary course of business.  The Company believes
it is unlikely that the final outcome of any of the claims or proceedings to
which the Company is a party would have a material adverse effect on the
Company's financial position or results of operations; however, due to the
inherent uncertainty of litigation, there can be no assurance that the
resolution of any particular claim or proceeding would not have a material
adverse effect on the Company's results of operations for the fiscal period in
which such resolution occurred.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits:

          The exhibits listed below are filed as part of or incorporated by
     reference in this report. Where such filing is made by incorporation by
     reference to a previously filed document, such document is identified in
     parentheses.

EXHIBIT
NUMBER                             DESCRIPTION
-------                            -----------
  3.1   Restated Certificate of Incorporation (Exhibit 3.1 to Form 10-K for the
        Fiscal Year Ended September 30, 1996)
  3.2   Bylaws, as amended (Exhibit 3.2 to Form 10-K for the Fiscal Year Ended
        September 30, 1996)
  4.1   Form of Certificate Evidencing Common Stock (Exhibit 4.1 to Form 10-K
        for the Fiscal Year Ended September 30, 1996)
 11.1   Computation of Earnings Per Share (filed herewith)
 27.1   Financial Data Schedule (filed herewith)

     (b)    Current Reports on Form 8-K:

        None.





                                     17

<PAGE>

                                SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.

                             U.S. LONG DISTANCE CORP.
                                 (Registrant)


Date:  February 11, 1997      By:      /s/ PHILLIP J. STORIN
                                 ---------------------------------------------
                                           Phillip J. Storin
                                          SENIOR VICE PRESIDENT
                                         CHIEF FINANCIAL OFFICER
                              (Duly authorized and Principal Financial Officer)



Date:  February 11, 1997      By:      /s/  PATRICK M. AELVOET
                                 ---------------------------------------------
                                            Patrick M. Aelvoet
                                               VICE PRESIDENT
                                            CORPORATE CONTROLLER
                              (Duly authorized and Principal Accounting Officer)






                                     18