<PAGE>   1
================================================================================

                       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 QUARTER ENDED SEPTEMBER 30, 2000

                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

    FOR THE TRANSITION PERIOD FROM ________________ TO _______________

                         COMMISSION FILE NUMBER: 0-20135
                                                 -------

                         INTERMEDIA COMMUNICATIONS INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

            DELAWARE                                             59-2913586
-------------------------------                           ----------------------
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                           Identification Number)

                               ONE INTERMEDIA WAY
                              TAMPA, FLORIDA 33647
                    ----------------------------------------
                    (Address of principal executive offices)

                                 (813) 829-0011
                                ----------------
                                Telephone Number

         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 [ ]

           As of November 1, 2000, there were 54,724,625 shares of the
                     Registrant's Common Stock outstanding.

================================================================================




<PAGE>   2

                         INTERMEDIA COMMUNICATIONS INC.

                                      INDEX

<TABLE>
<CAPTION>

                                                                                            PAGE
                                                                                             NO.
                                                                                            ----
<S>      <C>                                                                                <C>
                          PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS (UNAUDITED):

         Condensed Consolidated Statements of Operations---Three and Nine months
              ended September 30, 2000 and 1999                                               3
         Condensed Consolidated Balance Sheets--September 30, 2000
              and December 31, 1999                                                           4
         Condensed Consolidated Statements of Cash Flows--Nine months ended
              September 30, 2000 and 1999                                                     5
         Notes to Condensed Consolidated Financial Statements                                 6

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
              RESULTS OF OPERATIONS                                                          16

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                          28

                           PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS                                                                   29

ITEM 2.  CHANGES IN SECURITIES                                                               29

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES                                                     29

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                 29

ITEM 5.  OTHER INFORMATION                                                                   29

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K                                                    29

SIGNATURES                                                                                   31

</TABLE>




                                       2
<PAGE>   3

                          PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                         INTERMEDIA COMMUNICATIONS INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
                    (IN THOUSANDS, EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>

                                                             THREE MONTHS ENDED                      NINE MONTHS ENDED
                                                       --------------------------------      --------------------------------
                                                       SEPTEMBER 30,      SEPTEMBER 30,      SEPTEMBER 30,      SEPTEMBER 30,
                                                           2000               1999               2000                1999
                                                       -------------      -------------      -------------      -------------
<S>                                                    <C>                <C>                <C>                <C>
Revenues:
         Local access and voice ..................      $     78,137       $    103,405       $    267,401       $    307,237
         Data, Internet and Web hosting ..........           139,746             93,517            384,075            256,852
         Integration services ....................            40,867             37,744            116,391             93,188
                                                        ------------       ------------       ------------       ------------
             Total Revenues ......................           258,750            234,666            767,867            657,277
Expenses:
         Network operations ......................           100,485             96,113            283,241            284,017
         Facilities administration and maintenance            49,020             26,871            130,504             72,678
         Cost of goods sold ......................            24,765             23,850             80,180             59,155
         Selling, general and administrative .....           102,760             74,973            347,944            203,292
         Depreciation and amortization ...........           121,619             80,951            328,124            226,692
         Deferred compensation ...................             2,640                607              7,351                704
         Business restructuring, integration and
          other charges ..........................                --              5,511              9,362             14,349
                                                        ------------       ------------       ------------       ------------
             Total operating expenses ............           401,289            308,876          1,186,706            860,887
                                                        ------------       ------------       ------------       ------------
Loss from operations .............................          (142,539)           (74,210)          (418,839)          (203,610)

Other income (expense):
         Interest expense ........................           (63,466)           (70,106)          (200,745)          (201,508)
         Gain on sale of Digex stock .............                --                 --            864,321                 --
         Other income ............................             6,290              8,941             37,115             29,248
                                                        ------------       ------------       ------------       ------------
Income (loss) before minority interest, income
   taxes, and extraordinary item .................          (199,715)          (135,375)           281,852           (375,870)
Benefit (provision) for income taxes .............             5,638                 --            (19,978)                --
                                                        ------------       ------------       ------------       ------------
Income (loss) before minority interest and
   extraordinary item ............................          (194,077)          (135,375)           261,874           (375,870)
Minority interest in net loss of subsidiary ......            15,658              2,608             37,039              2,608
                                                        ------------       ------------       ------------       ------------
Income (loss) before extraordinary item ..........          (178,419)          (132,767)           298,913           (373,262)
Extraordinary gain on early retirement of
   debt, net of tax ..............................              (192)                --             19,669                 --
                                                        ------------       ------------       ------------       ------------
Net income (loss) ................................          (178,611)          (132,767)           318,582           (373,262)
Preferred stock dividends and accretions .........           (31,189)           (23,338)           (88,882)           (68,786)
                                                        ------------       ------------       ------------       ------------
Net income (loss) attributable to common
   stockholders ..................................      $   (209,800)      $   (156,105)      $    229,700       $   (442,048)
                                                        ============       ============       ============       ============
Basic earnings per common share:
         Net income (loss) per common share
            before extraordinary item ............      $      (3.88)             (3.08)              3.94              (8.83)
         Extraordinary item ......................      $         --       $         --       $       0.37       $         --
                                                        ------------       ------------       ------------       ------------
         Net income (loss) per common share ......             (3.88)      $      (3.08)      $       4.31       $      (8.83)
                                                        ============       ============       ============       ============
Diluted earnings per common share:
         Income (loss) per common share before
            extraordinary item ...................      $      (3.88)      $      (3.08)      $       3.18       $      (8.83)
         Extraordinary item ......................                --                 --               0.25                 --
                                                        ------------       ------------       ------------       ------------
         Net income (loss) per common share ......      $      (3.88)      $      (3.08)      $       3.43       $      (8.83)
                                                        ============       ============       ============       ============
Weighted average number of shares outstanding:
         Basic ...................................        54,107,207         50,739,106         53,354,946         50,038,881
         Diluted .................................        54,107,207         50,739,106         79,457,966         50,038,881

</TABLE>




                            See accompanying notes.

                                       3
<PAGE>   4

                         INTERMEDIA COMMUNICATIONS INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS

                    (IN THOUSANDS, EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>

                                                                                SEPTEMBER 30, 2000       DECEMBER 31, 1999
                                                                                ------------------       -----------------
                                                                                    (UNAUDITED)              (AUDITED)
<S>                                                                             <C>                      <C>
                                ASSETS
Current assets:
         Cash and cash equivalents .....................................            $   323,777             $   240,827
         Restricted investments ........................................                 15,361                  10,252
         Accounts receivable, less allowance for
            doubtful accounts of $66,530 in 2000 and $29,056 in 1999 ...                301,942                 287,771
         Prepaid expenses and other current assets .....................                 55,825                  38,289
                                                                                    -----------             -----------
            Total current assets .......................................                696,905                 577,139
         Telecommunications equipment, net .............................              2,056,683               1,713,220
         Investments - available for sale ..............................                  2,000                      --
         Intangible assets, net ........................................                894,356                 948,215
         Other assets ..................................................                 45,895                  57,848
                                                                                    -----------             -----------
            Total assets ...............................................            $ 3,695,839             $ 3,296,422
                                                                                    ===========             ===========
   LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
Current liabilities:
         Accounts payable ..............................................            $   109,483             $   106,918
         Other accrued expenses ........................................                 96,687                 104,163
         Current portion of long-term debt and capital lease obligations                 17,673                  32,077
         Income taxes payable ..........................................                  1,837                      --
                                                                                    -----------             -----------
            Total current liabilities ..................................                225,680                 243,158
Other long-term liabilities ............................................                  2,856                      --
Long-term debt and capital lease obligations ...........................              2,545,249               2,935,210
Minority interest ......................................................                175,118                  53,964
Series B redeemable exchangeable preferred stock and accrued dividends,
  $1.00 par value;  600,000 shares authorized; 481,793 and 436,127
  issued and outstanding in 2000 and 1999, respectively ................                473,278                 426,889
Series D junior convertible preferred stock and accrued dividends,
  $1.00 par value; 69,000 shares authorized; 53,724 and 53,729 issued
  and outstanding in 2000 and 1999, respectively .......................                133,750                 133,268
Series E junior convertible preferred stock and accrued dividends,
  $1.00 par value; 87,500 shares authorized; 64,047 and 64,892 shares
  issued and outstanding in 2000 and 1999, respectively ................                159,222                 160,778
Series F junior convertible preferred stock and accrued dividends,
  $1.00 par value; 92,000 shares authorized; 79,600 shares issued and
  outstanding in 2000 and 1999, respectively ...........................                196,637                 195,860
Series G junior convertible participating preferred stock and accrued
   dividends, $1.00 par value; 200,000 shares authorized; 200,000
   shares issued and outstanding in 2000 ...............................                165,590                      --
Stockholders' deficit:
         Preferred stock, $1.00 par value; 911,500 and 1,111,500
           authorized in 2000 and 1999, respectively, no shares issued .                     --                      --
         Series C preferred stock, $1.00 par value; 40,000 shares
           authorized, no shares issued ................................                     --                      --
         Preferred stock in Digex subsidiary, $.01 par value;
           5,000,000 shares authorized; 100,000 designated as
           Series A Convertible; 100,000 shares outstanding in 2000 ....                      1                      --
         Common stock, $.01 par value; 150,000,000 shares authorized
           in 2000 and 1999; 54,586,458 and 51,834,098 shares issued
           and outstanding in 2000 and 1999, respectively ..............                    546                     518
         Additional paid-in capital ....................................              1,009,433                 767,456
         Accumulated deficit ...........................................             (1,374,759)             (1,604,459)
         Deferred compensation .........................................                (16,762)                (16,220)
                                                                                    -----------             -----------
Total stockholders' deficit ............................................               (381,541)               (852,705)
                                                                                    -----------             -----------
Total liabilities, redeemable preferred stock and
  stockholders' deficit ................................................            $ 3,695,839             $ 3,296,422
                                                                                    ===========             ===========
</TABLE>




                            See accompanying notes.

                                       4
<PAGE>   5

                         INTERMEDIA COMMUNICATIONS INC.

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

<TABLE>
<CAPTION>

                                                                                               NINE MONTHS ENDED
                                                                                    ----------------------------------------
                                                                                    SEPTEMBER 30, 2000    SEPTEMBER 30, 1999
                                                                                    ------------------    ------------------
<S>                                                                                 <C>                   <C>
OPERATING ACTIVITIES
         Net income (loss) .................................................            $ 318,581             $(373,262)
         Adjustments to reconcile net income (loss) to net cash used in
            operating activities:
                  Gain on sale of Digex common stock .......................             (864,321)                   --
                  Depreciation and amortization ............................              332,525               231,109
                  Extraordinary gain on early extinguishment of debt .......              (19,669)                   --
                  Amortization and other changes in deferred compensation ..                7,412                   716
                  Non cash restructuring charges ...........................                 (648)               (2,197)
                  Accretion of interest on notes payable and capital leases                91,083                77,234
                  Provision for doubtful accounts ..........................               63,032                14,965
                  (Gain) loss on sale of property and equipment ............                2,447                  (431)
                  Minority interest in net loss of subsidiary ..............              (37,039)               (2,608)
                  Changes in operating assets and liabilities:
                           Accounts receivable .............................              (77,236)              (81,303)
                           Prepaid expenses and other current assets .......              (15,762)              (12,296)
                           Other assets ....................................                1,519                  (739)
                           Accounts payable ................................                2,566               (21,003)
                           Other accrued expenses ..........................                4,901                (4,983)
                                                                                        ---------             ---------
                                    Net cash used in operating activities ..             (190,609)             (174,798)
INVESTING ACTIVITIES
         Purchases of restricted investments ...............................               (7,110)               (1,629)
         Purchases of telecommunications equipment .........................             (472,836)             (397,985)
         Proceeds from sale of Digex common stock, net of issuance costs ...              914,023                    --
         Proceeds from sale of fixed assets ................................                  190                 1,046
                                                                                        ---------             ---------
               Net cash provided by (used in) investing activities .........              434,267              (398,568)

FINANCING ACTIVITIES
         Proceeds from issuance of long-term debt, net of issuance costs ...                   --               487,096
         Proceeds from termination of capital leases .......................                1,515                    --
         Proceeds from issuance of note payable ............................                   --                 4,725
         Proceeds from issuance of revolving debt, net of issuance costs ...               24,701                    --
         Proceeds from issuance of common stock of subsidiary,
           net of issuance costs ...........................................              171,640               179,244
         Proceeds from issuance of preferred stock, net of issuance costs ..              187,424                    --
         Proceeds from issuance of preferred stock of subsidiary,
           net of issuance costs ...........................................               85,000                    --
         Exercise of common stock warrants and options .....................               19,556                 8,099
         Payments on early extinguishment of debt ..........................             (483,150)                   --
         Principal payments on long-term debt and capital lease obligations              (167,394)              (20,183)
                                                                                        ---------             ---------
                                    Net cash provided by (used in) financing
                                       activities ..........................             (160,708)              658,981

Increase  in cash and cash equivalents .....................................               82,950                85,615

Cash and cash equivalents at beginning of period ...........................              240,827               387,615
                                                                                        ---------             ---------

Cash and cash equivalents at end of period .................................            $ 323,777             $ 473,230
                                                                                        =========             =========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid ..............................................................            $ 126,991             $ 116,953
Income taxes paid ..........................................................               17,130                    --
Assets acquired under capital lease obligations and note payable ...........              146,782                10,842
Amendment to capital lease obligation ......................................                   --               (28,743)
Preferred stock issued as dividends on preferred stock .....................               45,665                39,987
Common stock issued as dividends on preferred stock ........................               31,735                26,186
Accretion of preferred stock ...............................................                8,594                 2,680
Common stock issued in purchase of business ................................                   --                 1,299
</TABLE>




                            See accompanying notes.

                                       5
<PAGE>   6

                         INTERMEDIA COMMUNICATIONS INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE 1.  BASIS OF PRESENTATION

         The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) necessary to present fairly the
information set forth therein have been included. The accompanying condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and footnotes included in the Annual Report on
Form 10-K of Intermedia Communications Inc. for the year ended December 31,
1999.

         The consolidated financial statements include the accounts of
Intermedia and its majority and wholly owned subsidiaries, including Digex,
Incorporated ("Digex"), a publicly-traded subsidiary of Intermedia. The
consolidated financial statements include 100% of the assets and liabilities of
these subsidiaries and the ownership interests of minority participants are
recorded as "minority interest". All significant intercompany transactions and
balances have been eliminated in consolidation.

         Operating results for the three and nine month periods ended September
30, 2000 are not necessarily an indication of the results that may be expected
for the year ending December 31, 2000.

RECENTLY ISSUED ACCOUNTING STANDARDS

         On December 3, 1999, the Securities and Exchange Commission ("SEC")
issued Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in
Financial Statements", which provides guidance on the recognition, presentation,
and disclosure of revenue in financial statements. SAB No. 101 was effective for
the first quarter of the fiscal year beginning after December 15, 1999, however,
recently the SEC has extended the implementation date for companies whose fiscal
year ends between December 16, 1999 and March 15, 2000 to the fourth quarter of
fiscal year 2000. On October 12, 2000, the SEC released its Frequently Asked
Questions and Answers ("Q&A") document to serve as additional guidance for
revenue recognition in financial statements. Digex is currently analyzing the
Q&A document and determining the impact of SAB 101 on its various revenue
recognition policies, including those pertaining to non-refundable installation
fees which Digex currently recognizes as revenue upon completion of service.

         Based upon the expected implementation of SAB 101, Digex does not
anticipate a material effect on its consolidated financial statements. Digex
has preliminarily determined that it will record a decrease of approximately $6
to $8 million in revenue and an increase in deferred revenue during the fourth
quarter as a result of the implementation. Digex also expects a decrease in
costs of approximately $6.0 to $8.0 million during the fourth quarter and an
increase in deferred costs as a result of the implementation. Digex will
recognize the deferred revenue and deferred costs over the remaining term of
the applicable agreements in 2001 and 2002. With the adoption of SAB 101, there
will be no economic impact to Digex's business operations or cash flows.

         In March 2000, the FASB issued FASB Interpretation No. 44 "Accounting
for Certain Transactions involving Stock Compensation, an Interpretation of APB
No. 25" which requires variable accounting for certain stock option
transactions. The Interpretation, which has been adopted prospectively as of
July 1, 2000, requires that stock options that have been modified to reduce the
exercise price be accounted for as variable. Intermedia repriced certain options
on January 22, 1999, and reduced the price to $14 per share, the then-current
market price of the stock. On July 1, 2000, 1,340,683 shares were




                                       6
<PAGE>   7

outstanding and subject to the variable repricing. Under the Interpretation, the
options are accounted for as variable from July 1, 2000 until the options are
exercised, forfeited or expire unexercised. Prior to the adoption of the
Interpretation, Intermedia accounted for these repriced stock options as fixed.
In addition, on August 16, 2000, Intermedia repriced 160,000 options and reduced
the price to $16.25 per share, the then-current market price of the stock.
Because the market price of Intermedia's stock increased since January 22, 1999
and August 16, 2000, the effect of adopting the Interpretation was to decrease
net income for the quarter ended September 30, 2000 by $.02 per share.

         In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities", an amendment of FASB
Statement No. 133, which is effective for fiscal years beginning after June 15,
2000. Intermedia does not anticipate that the adoption of this Statement will
have a significant impact on its results of operations or financial position.

NOTE 2.  MERGER AGREEMENT WITH WORLDCOM

         On September 1, 2000, Intermedia entered into a merger agreement with
WorldCom, Inc. ("WorldCom") whereby a subsidiary of WorldCom will be merged with
and into Intermedia. The outstanding shares of common stock of Intermedia will
be exchanged for shares of common stock of WorldCom, and Intermedia will become
a subsidiary of WorldCom. As a result of the merger, WorldCom will beneficially
own a majority of the capital stock of Digex, and will have voting control of
Digex. In addition, holders of Intermedia preferred stock, other than Intermedia
Series B Preferred Stock and any Series H Preferred Stock issued in connection
with the WorldCom Note Purchase Agreement described in Note 10, will receive
newly issued WorldCom Preferred Stock for the shares of Intermedia preferred
stock they own. The new WorldCom preferred stock will have substantially
identical terms as the Intermedia preferred stock. Any outstanding shares of
Intermedia Series B Preferred Stock and Series H Preferred Stock will remain
outstanding as preferred stock of Intermedia following the merger.

         In the merger, Intermedia common stockholders will receive a minimum of
0.8904 and a maximum of 1.1872 shares of WorldCom common stock for each share of
Intermedia common stock they own. The actual number of shares of WorldCom common
stock will be determined by dividing $39.00 by the weighted average per share
trading price for the WorldCom common stock over a period of 15 trading days
randomly selected from the 30 consecutive trading days ending on the third
trading day prior to the completion of the merger. In addition, if the weighted
average per share trading price of WorldCom is less than $36.50, WorldCom will
have the option of issuing 1.0685 shares of WorldCom common stock for each share
of Intermedia common stock and paying the remainder of the consideration in
cash. WorldCom common stock is quoted on The Nasdaq National Market under the
symbol "WCOM". The merger is subject to the receipt of consents and approvals
from various government entities, which may jeopardize or delay completion of
the merger. The merger is also subject to approval by the holders of a majority
of the voting power of the outstanding common stock and Series G Preferred Stock
of Intermedia, voting together as a single group, and the holders of a majority
of the voting power of the outstanding Series G Preferred Stock, voting as a
separate class. Subject to the foregoing approvals, the merger is expected to be
finalized during the first half of 2001.

NOTE 3.  BUSINESS RESTRUCTURING AND INTEGRATION PROGRAM

         As more fully described in Intermedia's 1999 Annual Report on Form
10-K, during the second quarter of 1998, management committed to and commenced
implementation of the restructuring program (the "Program") which was designed
to streamline and refocus Intermedia's operations and facilitate the
transformation of Intermedia's five separate operating companies into one
integrated communications provider. The Program was completed during June 2000.





                                       7
<PAGE>   8

         As provided for in the Program, Intermedia expensed business
restructuring and integration costs that were incurred since the inception of
the Program. These costs represent incremental, redundant, or convergence costs
that resulted directly from implementation of the Program, but are required to
be expensed as incurred.

         The following table sets forth the components of other business
restructuring and integration costs that were expensed as incurred during the
three and nine months ended September 30, 2000 and 1999 (in millions):

<TABLE>
<CAPTION>

                                                       THREE MONTHS ENDED             NINE MONTHS ENDED
                                                          SEPTEMBER 30,                 SEPTEMBER 30,
                                                      -------------------           --------------------
                                                      2000           1999            2000           1999
                                                      ----          -----           -----          -----
<S>                                                   <C>           <C>             <C>            <C>
Integration costs
     Network integration (A)                          $ --          $ 2.9           $ 4.8          $ 7.5
     Department and employee realignment (B)            --            0.4             2.7            1.1
     Functional re-engineering (C)                      --            2.7              --            5.1
     Other (D)                                          --            0.8             1.8            1.9
                                                      ----          -----           -----          -----

         Total integration costs                        --            6.8             9.3           15.6
                                                      ----          -----           -----          -----
         Business restructuring charges (E)             --           (1.3)             --           (1.3)
                                                      ----          -----           -----          -----
                                                      $ --          $ 5.5           $ 9.3          $14.3
                                                      ====          =====           =====          =====
</TABLE>

(A) Consists primarily of redundant network expense and amortization of a
    canceled contract for switched services.

(B) Consists of branding, employee severance, and contract termination costs.

(C) Consists primarily of consultant costs.

(D) Consists primarily of lease termination fees over estimated accrual from
    1998.

(E) Consists of adjustments to business restructuring accruals from 1998.

NOTE 4.  FINANCING AND GAIN ON SALE OF DIGEX STOCK

         On January 12, 2000, Digex sold 100,000 shares of its preferred stock,
designated as Series A Convertible Preferred Stock (the "Digex Series A
Preferred Stock"), and warrants to purchase 1,065,000 shares of Digex's Class A
Common Stock (the "Digex Warrants"), for an aggregate of $100 million, of which
$15 million was in the form of equipment purchase credits. The Digex Series A
Preferred Stock has an aggregate liquidation preference of $100 million, and is
convertible into approximately 1,462,000 of Class A Common Stock of Digex. The
Digex Warrants can be exercised at any time over their three-year term at a
price of $57 per Digex share (the fair value of Digex's Class A Common Stock on
the transaction commitment date).

         On February 16, 2000, Digex completed its second public offering of
12,650,000 shares of its Class A Common Stock. Digex offered 2,000,000 shares of
its Class A Common Stock and received net proceeds of approximately $172
million. Consistent with Intermedia's established policy, Digex's direct sale of
its unissued shares is accounted for as a capital transaction, thus resulting in
no gain on the sale. As part of that offering, Intermedia sold 10,650,000 shares
of its investment in Digex's Class B Common Stock, which upon the sale,
automatically converted into Class A Common Stock of Digex. Following such sales
of Digex stock, Intermedia owns approximately 62% of the outstanding Common
Stock of Digex. In addition, Intermedia retains approximately 94.2% voting
interest in Digex. The net proceeds from the sale by Intermedia of its
investment in Digex were approximately $914 million. Approximately $483 million
was used in the second quarter of




                                       8
<PAGE>   9

2000 to reduce Intermedia's outstanding debt. Intermedia recognized a gain on
sale of its investment in Digex stock of approximately $864 million.

         On February 17, 2000, Intermedia sold 200,000 shares of its 7% Series
G Junior Convertible Participating Preferred Stock and warrants to purchase
2,000,000 shares of common stock for net proceeds of approximately $188
million. The Series G Preferred Stock has a liquidation preference of $1,000
per share and is convertible to 5,555,556 shares of Intermedia's common stock.
The dividend feature is cumulative and is payable quarterly in cash or common
stock of Intermedia. The warrants are exercisable in two separate groups of
1,000,000 common shares at an exercise price of $40 and $45 per share
respectively. The proceeds were allocated between the Intermedia Series G
Preferred Stock and the Intermedia warrants based upon their relative fair
values.

NOTE 5.  LONG-TERM DEBT AND EXTRAORDINARY GAIN ON EARLY RETIREMENT OF DEBT

         During April and May 2000, Intermedia used $483 million of the proceeds
from the public sale of a portion of its investment in Digex to repurchase (the
"repurchase")and subsequently retire various outstanding senior notes as
follows:

         8.875% Senior Notes                          $ 75,000
         8.5% Senior Notes                             150,000
         8.6% Senior Notes                             175,000
         9.5% Senior Notes                             100,000

         The repurchase resulted in an extraordinary gain, as shown in the
accompanying consolidated statement of operations, of approximately $19.9
million, net of tax, in the second quarter. The change in the effective tax rate
in the third quarter resulted in an adjustment to the extraordinary gain in the
third quarter of $.2 million.

NOTE 6.  INCOME TAXES

         Intermedia realized a taxable gain of approximately $881 million on the
sale of its investment in Digex stock resulting in consolidated taxable income
for the nine months ended September 30, 2000 of $561.7 million. Intermedia
utilized $561.7 million of net operating loss carryforwards during the nine
months ended September 30, 2000 to offset regular taxable income. As of
September 30, 2000, approximately $616 million of net operating loss
carryforwards are available to offset future taxable income through the year
2019. However, limitations apply to the use of the net operating loss
carryforwards. Although Intermedia utilized net operating losses to offset
regular federal taxable income, Intermedia has recorded approximately $5.6
million and $(20.0) million of current tax benefit(expense) for the three and
nine month periods ended September 30, 2000 related to the Alternative Minimum
Tax ("AMT"). The payment of AMT creates a credit carryforward which may be used
indefinitely to reduce regular federal income taxes in the future.

         At September 30, 2000, primarily as a result of the net operating loss
carryforwards and AMT credit carryforwards, Intermedia was in a net deferred tax
asset position. The full amount of the net deferred tax asset was offset by a
valuation allowance due to uncertainties associated with the future realization
of the deferred tax asset.




                                       9
<PAGE>   10

NOTE 7.  EARNINGS PER SHARE

         The following table sets forth the computation of basic and diluted
income (loss) per share of Intermedia Common Stock (dollars in thousands, except
share and per share amounts):

<TABLE>
<CAPTION>

                                                            THREE MONTHS ENDED                    NINE MONTHS ENDED
                                                               SEPTEMBER 30,                         SEPTEMBER 30,
                                                      -------------------------------       -------------------------------
                                                          2000               1999               2000               1999
                                                      ------------       ------------       ------------       ------------
<S>                                                   <C>                <C>                <C>                <C>
Numerator:
  Income (loss) before extraordinary item             $   (178,419)      $   (132,767)      $    298,913       $   (373,262)
  Extraordinary item, net of tax                              (192)                --             19,669                 --
                                                      ------------       ------------       ------------       ------------
  Net income (loss)                                       (178,611)          (132,767)           318,582           (373,262)
  Preferred stock dividends and accretions                 (31,189)           (23,338)           (88,882)           (68,786)
                                                      ------------       ------------       ------------       ------------
  Numerator for basic income (loss) per share -
      income (loss) attributable to
      common stockholders                                 (209,800)          (156,105)           229,700           (442,048)
  Effect of dilutive securities                                 --                 --             42,468                 --
                                                      ------------       ------------       ------------       ------------
  Numerator for diluted income (loss) per
      share - income (loss) attributable to
      common stockholders after assumed
      conversions                                     $   (209,800)      $   (156,105)      $    272,168       $   (442,048)
Denominator:
  Denominator for basic loss per share -
       weighted-average shares                          54,107,207         50,739,106         53,354,946         50,038,881
  Effect of dilutive securities                                 --                 --         26,103,020                 --
                                                      ------------       ------------       ------------       ------------
  Denominator for diluted income (loss) per
        share - adjusted weighted-average shares        54,107,207         50,739,106         79,457,966         50.038,881
                                                      ============       ============       ============       ============

Basic income (loss) per share of common stock         $      (3.88)      $      (3.08)      $       4.31       $      (8.83)
                                                      ============       ============       ============       ============
Diluted income (loss) per share of
        common stock                                  $      (3.88)      $      (3.08)      $       3.43       $      (8.83)
                                                      ============       ============       ============       ============
</TABLE>

         Unexercised options to purchase 1,843,788 and 3,300,737 shares of
Common Stock as of September 30, 2000 and 1999, respectively, unexercised stock
warrants convertible into 2,200,000 shares of Common Stock as of September 30,
2000, and outstanding convertible preferred stock, convertible into 22,486,370
and 17,001,314 shares of Common Stock as of September 30, 2000 and 1999, were
not included in the computations of diluted loss per share in the three months
ended September 30, 2000 and for the three and nine months ended September 30,
1999 because assumed exercise/conversion would be anti-dilutive.

NOTE 8.  CONTINGENCIES

         Other than the BellSouth, Sprint, AT&T, and Digex shareholder lawsuits
described below, Intermedia is not a party to any pending legal proceedings
except for various claims and lawsuits arising in the normal course of business.
Intermedia does not believe that these normal course of business claims or
lawsuits will have a material effect on Intermedia's financial condition,
results of operations or cash flows.

         Intermedia maintains interconnection agreements with incumbent local
exchange carriers ("ILECs") in Florida, Georgia, North Carolina, Tennessee, and
in numerous other states across the country. These contracts govern the
reciprocal amounts to be billed by competitive carriers for terminating local
traffic in each state. While certain of Intermedia's interconnection agreements
have expired and are in the process of being renegotiated, all but one of the
expired contracts continue on a month-to-month basis at




                                       10
<PAGE>   11

existing rates for reciprocal compensation. New interconnection agreements with
BellSouth were executed and filed by joint consent in Florida and North Carolina
on October 4, 2000 and October 16, 2000, respectively.

         From 1997 through 1999, Intermedia recognized revenue from these ILECs
of approximately $144.8 million for these services. During the three and nine
month periods ended September 30, 2000, Intermedia recognized approximately $8.8
million and $49.4 million, respectively, in revenue for these services. As of
September 30, 2000, $177.4 million in billed reciprocal compensation revenue
receivable has not been collected.

         As a result of recent trends among state public utility commissions
towards lower ISP reciprocal compensation rates, Intermedia recorded a reserve
of approximately $45.0 million against reciprocal receivables recorded through
March 31, 2000 as a change in accounting estimate in the second quarter of 2000.
The adjustment of $45.0 million decreased basic earnings (loss) per share for
the nine months ended September 30, 2000 by ($.84) and diluted earnings (loss)
per share for the nine months ended September 30, 2000 by ($.57). Reciprocal
compensation revenues for the second and third quarters of 2000 were recorded at
lower rates which reflect those trends discussed above and the rates agreed to
in the new interconnection agreements with BellSouth for the states of Florida
and North Carolina.

         Intermedia accounts for reciprocal compensation pursuant to the terms
of its interconnection agreements with the ILECs as local network services.
Accordingly, revenue is recognized in the period that the traffic is terminated.
This traffic and resulting revenue include fees for terminating local calls to
Internet Service Providers ("ISPs"). A dispute arose between Intermedia and
BellSouth because of an amendment to the interconnection agreement between the
two companies designed to implement a cost savings for Intermedia in
interconnection architecture, known as MTA, in return for significantly lower
reciprocal compensation rates. BellSouth has contended that the signing of the
amendment triggered the lower rates, while Intermedia has contended that the
lower rates would only be in force if Intermedia implemented MTA. Intermedia's
position is that it did not elect the MTA option and as a result it filed
complaints against BellSouth in Florida and North Carolina (and BellSouth has
filed a complaint against Intermedia in Georgia) concerning the dispute over the
correct rates for the transport and termination of local traffic. In Florida,
the Florida Public Service Commission ruled on August 29, 2000 in favor of
BellSouth's interpretation. On October 13, 2000, Intermedia filed an appeal of
the Florida commission's decision with the United States District Court for the
Northern District of Florida. On the same date, Intermedia also filed a motion
for stay of the commission's decision with the Supreme Court of Florida. Amounts
at risk in Florida are approximately $57 million against prior period revenue in
the event BellSouth sustains this decision. In Georgia and North Carolina, the
amounts at risk are approximately $8 million and $11 million, respectively. The
hearing in North Carolina was held on October 10, 2000, with an expected state
public utility commission ruling in the first quarter of 2001. In Georgia, the
complaint hearing is scheduled for December 18, 2000, with an expected state
public utility commission ruling by the end of the first quarter of 2001.

         On June 5, 2000, BellSouth filed a complaint against Intermedia before
the Florida Public Service Commission alleging that Intermedia had improperly
reported its percentage of interstate usage for the billing of terminating
access services and requesting an award of damages. The complaint is expected to
be docketed for hearing in the year 2001.

         While Intermedia continues to vigorously pursue the collection of all
receivables and believes that future revenue recognized under the new
interconnection agreements will be realized, there can be no assurance that
future regulatory, congressional, and judicial rulings will be favorable, or
that different pricing plans will be adopted when the interconnection agreements
are renegotiated or arbitrated.




                                       11
<PAGE>   12

OTHER LITIGATION

         Intermedia has also filed a complaint against BellSouth in U.S.
District Court for the Middle District of Florida. The suit, which was filed on
July 11, 2000, argues that BellSouth has violated antitrust laws, the Federal
Communications Act, and other federal and state laws and regulations in refusing
to provide adequate transport facilities to Intermedia. Intermedia argues that
BellSouth's failure to provide adequate transport has prevented Intermedia from
expanding its network and customer base as Intermedia has planned, and that as a
result, Intermedia is entitled to an amount of damages that will be established
at trial.

         In addition, Intermedia has joined a number of other competitive
carriers in filing a multi-party complaint against Sprint and AT&T in a federal
district court in Virginia. The suit charges that Sprint and AT&T are unlawfully
refusing to pay Intermedia (and other members of the multiparty group) lawfully
tariffed charges for access services provided to Sprint and AT&T. Intermedia has
filed claims against the two carriers that total over $3.5 million, plus other
damages. While Intermedia continues to vigorously pursue the collection of all
receivables and believes that future revenue recognized under its tariffs will
be realized, there can be no assurance that future regulatory, congressional,
and judicial actions relating to these matters will be favorable.

DIGEX SHAREHOLDER LAWSUIT

         The following 10 purported class actions were filed against Intermedia,
Digex, the directors of Digex, and, in some cases, WorldCom, in the Court of
Chancery of the State of Delaware in and for New Castle County:

         .        Mohamed Yassin v. Intermedia et al., on September 5, 2000;

         .        Gerard F. Hug v. Intermedia et al., on September 5, 2000;

         .        Taam Associates v. Intermedia et al., on September 6, 2000;

         .        David Reynoldson v. Intermedia et al., on September 12, 2000;

         .        John F. Prince v. Intermedia et al., on September 11, 2000;

         .        Thomas Turberg v. Intermedia et al., on September 14, 2000;

         .        Jason Reiner v. Digex et al., on September 8, 2000;

         .        Marilyn Kalabsa v. Digex et al., on September 13, 2000;

         .        TCW Technology Limited Partnership v. Intermedia et al., on
                  September 20, 2000, which is also a purported derivative suit,
                  as described below; and

         .        Kansas Public Employee Retirement System (KPER) v. Intermedia
                  et al., on October 4, 2000, which is also a purported
                  derivative suit as described below.

         These actions purported to be class actions brought on behalf of all
persons, other than the defendants, who own the common stock of Digex, against
Intermedia, Digex, the directors of Digex who are also directors or executive
officers of Intermedia, and in the case of the first six actions listed,
WorldCom and the independent directors of Digex.

         Each of the foregoing complaints made substantially similar allegations
that the defendants, other than WorldCom, breached their fiduciary duties to the
class members by acting to further their own interests at the expense of Digex
public stockholders, engaged in self-dealing with and did not act in good faith
towards the Digex public




                                       12
<PAGE>   13

stockholders, and caused irreparable harm to such stockholders. In addition, in
Reiner v. Digex et al., KPER v. Intermedia et al., Kalabsa v. Digex et al. and
TCW Technology v. Intermedia et al., the plaintiffs alleged that the Digex board
members who are also directors or executive officers of Intermedia conferred a
substantial benefit on Intermedia at the expense of the Digex public
stockholders by voting to waive application of section 203 of the Delaware
General Corporation Law to WorldCom. The foregoing actions, except for Reiner v.
Digex et al., KPER v. Intermedia et al., Kalabsa v. Digex et al. and TCW
Technology v. Intermedia et al., also alleged that WorldCom aided and abetted
Intermedia's and Digex's wrongdoing. The complaints sought injunctive relief and
unspecified damages, including orders:

         .        preliminarily and permanently enjoining the defendants and all
                  persons acting in concert with them, from proceeding with,
                  consummating or closing the contemplated transactions;

         .        in the event the contemplated transaction is consummated,
                  rescinding it and setting it aside or awarding rescissory
                  damages to the class members;

         .        directing the defendants to account to the class members for
                  their damages sustained as a result of the wrongs complained
                  of;

         .        awarding the plaintiffs the costs of the actions, including
                  reasonable allowances for attorneys' and experts' fees; and

         .        in the case of Reiner v. Digex et al., KPER v. Intermedia et
                  al., Kalabsa v. Digex et al., and TCW Technology v. Intermedia
                  et al., enjoining the waiver by the Digex board of directors
                  of section 203 of the Delaware General Corporation Law's
                  application to WorldCom.

         Additionally the following five actions were filed against the
directors of Digex, Intermedia, as the majority stockholder of Digex common
stock, and Digex, as a nominal defendant, in the Court of Chancery of the State
of Delaware in and for New Castle County:

         .        David J. Steinberg et al. v. Ruberg et al., on September 7,
                  2000;

         .        Crandon Capital Partners v. Ruberg et al., on September 12,
                  2000;

         .        TCW Technology v. Intermedia et al., which was also a
                  purported class action complaint as described above;

         .        Sinha v. Ruberg et al., on October 4, 2000; and

         .        KPER v. Intermedia et al., which was also a purported class
                  action complaint as described above.

         These actions purported to be stockholder derivative actions brought on
behalf of Digex. Each of these complaints made substantially similar allegations
that Intermedia breached its fiduciary duties to Digex by usurping an alleged
Digex corporate opportunity for itself, and the Digex directors breached their
fiduciary duty of loyalty to Digex by permitting Intermedia to usurp Digex's
alleged corporate opportunity and approving the merger. The complaints sought
injunctive relief and unspecified damages, including orders substantially
similar to those sought in the purported class actions described above.

         The Court established a schedule to conduct expedited discovery and a
hearing on the preliminary injunctions sought in the TCW Technology v.
Intermedia et al. case was scheduled for November 29, 2000. Thereafter, on
October 17, 2000, the Court ordered all thirteen purported derivative and class
action lawsuits listed above to be consolidated into a single action to proceed
according to the schedule set for TCW Technology v. Intermedia, et al.
Accordingly, on October 19, 2000, all of the above listed plaintiffs




                                       13
<PAGE>   14

filed a "Consolidated Class Action and Derivative Complaint." The claims in the
consolidated action are essentially identical to the claims in the prior
thirteen separate actions, except that the consolidated complaint also alleges
that the individual defendants breached fiduciary duties as officers and
directors of Digex by allegedly causing Digex to provide confidential
information to Bear Stearns with knowledge that the provision of that
information was either contrary to Digex's interests or would not result in any
benefit to Digex. The consolidated action also differs from some of the prior
separate actions insofar as Digex directors Richard A. Jalkut and Jack Reich,
named as defendants in certain of the prior actions, were not named as
defendants in the consolidated action. Following the filing of the consolidated
complaint, plaintiffs also voluntarily dismissed defendant Digex director Mark
K. Shull. The defendants intend to defend vigorously these actions.

NOTE 9.  SEGMENT INFORMATION

         Intermedia has two separate operating segments. The core business is
its integrated communications services segment which provides three principal
groups of service offerings to business and government customers, as reported in
Intermedia's statement of operations. Intermedia owns approximately 62% of the
outstanding Common Stock of Digex, which provides managed Web site and
application hosting services segment to large businesses and Internet companies
operating mission-critical, multi-functional Web sites and Web-based
applications. Each of these segments has separate management teams and
operational infrastructures. Substantially all of the revenues from both
Intermedia and Digex are attributable to customers in the United States.
Additionally, all of Intermedia's assets are located within the United States.

         The table below summarizes Intermedia's segment reporting data (in
millions). Eliminations include intersegment revenues, receivables, and
investment related accounts.

<TABLE>
<CAPTION>

                                               CORE
                                            INTEGRATED
                                          COMMUNICATIONS                          CONSOLIDATED
                                             SERVICES       DIGEX   ELIMINATIONS   INTERMEDIA
                                          --------------  --------  ------------  ------------
<S>                                       <C>             <C>       <C>           <C>
Three months ended September 30, 2000
   Revenue from external customers         $    212.3     $   46.5         --       $  258.8
   Intersegment revenue                           1.9           --   $   (1.9)            --
   Loss from operations                        (101.7)       (40.8)        --         (142.5)
Three months ended September 30, 1999
   Revenue from external customers              218.6         16.1         --          234.7
   Intersegment revenue                           2.6           --       (2.6)            --
   Loss from operations                         (52.5)       (21.7)        --          (74.2)

Nine months ended September 30, 2000
   Revenue from external customers              651.2        116.7         --          767.9
   Intersegment revenue                           8.8           --       (8.8)            --
   Loss from operations                        (311.4)      (107.4)        --         (418.8)
Nine months ended September 30, 1999
   Revenue from external customers              619.2         38.1         --          657.3
   Intersegment revenue                           6.7           --       (6.7)            --
   Loss from operations                        (155.5)       (48.1)        --         (203.6)


Total assets at September 30, 2000         $  3,157.2     $  538.6         --       $3,695.8
Total assets at September 30, 1999            3,198.0        342.1     (164.1)       3,376.0
</TABLE>




                                       14
<PAGE>   15

NOTE 10. SUBSEQUENT EVENTS

         On July 11, 2000, Intermedia announced that it is exploring strategic
alternatives with regard to Digex, including, without limitation, the possible
sale of its ownership position in Digex. On September 1, 2000, Intermedia
entered into a merger agreement with WorldCom, Inc. whereby, upon the
consummation of the merger, a subsidiary of WorldCom will be merged with and
into Intermedia, the outstanding shares of common stock of Intermedia will be
exchanged for shares of common stock of WorldCom and Intermedia will become a
subsidiary of WorldCom. As a result of the merger, WorldCom will beneficially
own a majority of the capital stock of Digex and will have voting control of
Digex. The merger is expected to be consummated in the first half of 2001.

         On October 31, 2000, Intermedia increased the commitments available
under its Credit Facility to $350.0 million and renegotiated certain terms of
its Credit Agreement. The Credit Facility is fully guaranteed by WorldCom, Inc.
and expires June 30, 2001.

         On October 31, 2000, Intermedia also entered into a Note Purchase
Agreement with WorldCom, Inc. Intermedia authorized the issue and sale of up to
$225.0 million aggregate principal amount of 14.12% Senior Subordinated Notes
due 2009 and 22,500 shares of Series H Preferred Stock. Interest on any notes
issued under the Note Purchase Agreement will be payable monthly on the unpaid
balance of the aggregate principal amount outstanding, and is based on the
greater of 14.12% and the average weighed interest rate of Intermedia's other
outstanding debt and senior preferred stock on each date of determination. Until
April 2001, interest on any notes issued will be capitalized and added to the
principal. At the option of WorldCom, financings under the Note Purchase
Agreement may take the form of purchases of Preferred Stock.

         To comply with the terms of certain of Intermedia's indentures, in
October and November 2000, Intermedia used $155.9 million of the proceeds of the
public sale of shares of Digex in February 2000 to repurchase and subsequently
retire certain outstanding senior notes.





















                                       15
<PAGE>   16

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

         The following discussion should be read in conjunction with the
condensed consolidated financial statements and notes thereto included herewith,
and with the Management's Discussion and Analysis of Financial Condition and
Results of Operations and audited consolidated financial statements and notes
thereto included in Intermedia's Annual Report on Form 10-K for the year ended
December 31, 1999, filed with the Commission.

OVERVIEW

         Intermedia provides integrated data and voice communications services,
including enterprise data solutions (frame relay and ATM), Internet
connectivity, private line data, managed Web site and application hosting
services, local and long distance, and integration services to approximately
90,000 business and government customers. As of September 30, 2000, Intermedia
is the fourth largest nationwide frame relay provider in the United States
(based upon frame relay revenues), a leading Tier One Internet service provider,
the largest shared tenant telecommunications service provider in the United
States, one of the largest independent providers of competitive local services
in the United States, and a leading domestic provider of systems integration
services. Intermedia is also a leading and rapidly growing provider of managed
Web site and application hosting services to large corporations and Internet
companies through Digex, its publicly traded subsidiary. As more fully discussed
in the notes to the financial statements, Intermedia operates in primarily two
segments, integrated communications provider and Web site and application
hosting services. Intermedia uses a management approach to report its financial
and descriptive information about its operating segments. Where significant, the
revenue, profitability and cash needs of the Digex Web site and application
hosting services segment are discussed below.

         Intermedia delivers its local access and voice services, primarily
through its owned local and long distance switches, over a digital transport
network. Intermedia offers its data and Internet services to its customers on an
extensive inter-city network that connects its customers to locations
nationwide. Through its network to network interfaces ("NNIs") and data
switches, Intermedia has established one of the most densely deployed frame
relay switching networks in the nation. Intermedia's nationwide interexchange
network carries both its data and voice traffic.

         Intermedia's EBITDA before certain charges for the third quarter was
$(18.3) million and $12.9 million in 2000 and 1999, respectively. EBITDA before
certain charges consists of earnings (loss) before interest expense, interest
and other income, deferred compensation, income taxes, depreciation,
amortization, and business integration, restructuring and other costs associated
with the Program. EBITDA before certain charges does not represent funds
available for management's discretionary use and is not intended to represent
cash flow from operations. EBITDA before certain charges should not be
considered as an alternative to net loss as an indicator of Intermedia's
operating performance or to cash flows as a measure of liquidity. In addition,
EBITDA before certain charges is not a term defined by generally accepted
accounting principles and, as a result, the EBITDA before certain charges
presented herein may not be comparable to similarly titled measures used by
other companies. Intermedia believes that EBITDA before certain charges is often
reported and widely used by analysts, investors and other interested parties in
the telecommunications industry. Accordingly, this information has been
disclosed herein to permit a more complete comparative analysis of Intermedia's
operating performance relative to other companies in the industry.

PLAN OF OPERATION

         Intermedia believes its revenue growth will be generated primarily from
its Data, Internet and Web site and application hosting services segment. Based
on Intermedia's analysis of Federal Communications Commission market data and
its knowledge of the




                                       16
<PAGE>   17

industry, Intermedia estimates that the market for enhanced data, local
exchange, and interexchange services exceeds $100.0 billion within its service
territory.

RESULTS OF OPERATIONS

         The following table presents, for the periods indicated, certain
information derived from the Unaudited Condensed Consolidated Statements of
Operations of Intermedia, expressed in percentages of revenue:

<TABLE>
<CAPTION>

                                                 THREE MONTHS ENDED        NINE MONTHS ENDED
                                                    SEPTEMBER 30              SEPTEMBER 30
                                                 ------------------        ------------------
                                                  2000         1999         2000         1999
                                                 -----        -----        -----        -----
<S>                                              <C>          <C>          <C>          <C>
Revenues:
  Local access and voice                          30.2%        44.1%        34.8%        46.7%
  Data, Internet, and Web hosting                 54.0         39.8         50.0         39.1
  Integration services                            15.8         16.1         15.2         14.2
                                                 -----        -----        -----        -----
                                                 100.0        100.0        100.0        100.0
Expenses:
  Network operations                              38.9         40.9         36.9         43.2
  Facilities administration and maintenance       18.9         11.5         17.0         11.1
  Cost of goods sold                               9.6         10.2         10.4          9.0
  Selling, general and administrative             39.7         32.2         45.3         31.0
  Depreciation and amortization                   47.0         34.5         42.7         34.5
  Deferred compensation                            1.0           --          1.0           --
  Business restructuring,
    integration and other charges                   --          2.3          1.2          2.2
                                                 -----        -----        -----        -----
Loss from operations                             (55.1)       (31.6)       (54.5)       (31.0)
Other income (expense):
  Interest expense                               (24.5)       (29.9)       (26.1)       (30.7)
  Gain on sale of Digex stock                       --           --        112.5           --
    Other income                                   2.4          3.8          4.8          4.5
                                                 -----        -----        -----        -----
Income (loss) before minority
  interest, income taxes and
  extraordinary gain                             (77.2)       (57.7)        36.7        (57.2)
Benefit (provision) for income
  taxes                                            2.2           --         (2.6)          --
                                                 -----        -----        -----        -----
Income (loss) before minority
  interest and extraordinary gain                (75.0)       (57.7)        34.1        (57.2)
Minority interest in net loss of
  subsidiary                                       6.1          1.1          4.8           .4
                                                 -----        -----        -----        -----
Income (loss) before
  extraordinary gain                             (68.9)       (56.6)        38.9        (56.8)
                                                 -----        -----        -----        -----
Extraordinary gain on early
  retirement of debt, net of tax                   (.1)          --          2.6           --
                                                 -----        -----        -----        -----
Net income (loss)                                (69.0)       (56.6)        41.5        (56.8)
  Preferred stock dividends and
     accretions                                  (12.1)        (9.9)       (11.6)       (10.5)
                                                 -----        -----        -----        -----
Net income (loss) attributable to
  common stockholders                            (81.1)%      (66.5)%       29.9%       (67.3)%
                                                 =====        =====        =====        =====
</TABLE>




                                       17
<PAGE>   18

         The following table sets forth other statistical data derived from
Intermedia's operating records:

<TABLE>
<CAPTION>

                                           SEPTEMBER 30, 2000       SEPTEMBER 30, 1999
                                           ------------------       ------------------
<S>                                        <C>                      <C>
Data, Internet and Web Hosting:(1)
         Web hosting servers                     3,914                       1,993
         Data switches in operation                207                         176
         NNI connections                         1,057                         827

Access and Voice: (1)
         ABN revenue ready buildings (2)           786                         641
         Voice switches in operation                29                          27
         Access line equivalents               637,192                     446,291

Employees (1)                                    5,788                       4,575
</TABLE>

(1) Amounts reflected in the table are based upon information contained in
    Intermedia's and Digex's operating records.

(2) Buildings with license agreements that either have an installed multi-tenant
    full service platform or are located in an Intermedia switch city and
    service area.

QUARTER ENDED SEPTEMBER 30, 2000 COMPARED TO QUARTER ENDED SEPTEMBER 30, 1999:

Revenue

         Total revenue increased 10.3% to $258.8 million for the third quarter
of 2000 compared to $234.7 million for the same period in 1999. This increase
was primarily due to the continued expansion of frame relay and private line
networks as well as strong growth in Internet and the Web site and application
hosting services segment. Intermedia's core strategic revenue categories
continue to grow, and Intermedia plans to maintain its emphasis on sales of
Data, Internet and Web hosting as the core component of its growth in revenue.

         Local access and voice revenue decreased 24.5% to $78.1 million for the
third quarter of 2000 compared to $103.4 million for the same period in 1999.
This decrease was principally due to decreases in long distance revenue, as well
as a change in booking rates for reciprocal compensation revenue in 2000. The
decrease in long distance revenue is primarily a result of per minute pricing
declines experienced industry-wide. In addition, Intermedia is no longer
focusing its marketing efforts on sales of long distance services on a stand
alone basis. In addition, reciprocal compensation revenue from certain ILECs
decreased approximately $12.3 million from the same period last year due to the
change in accounting estimate for reciprocal compensation and the reduced rates
in 2000. Intermedia will continue to experience decreased reciprocal
compensation revenue as a result of this change. The decrease was partially
offset by Intermedia's continued rollout of local exchange services into
additional markets. The number of access line equivalents increased by 190,901
from October 1, 1999 through the end of the third quarter of 2000 as a result of
growth in Intermedia's voice services, particularly the sale of its flagship
product, IntermediaOne, its newly expanded integrated voice, Internet access and
data communications platform for business.

         Data, Internet, and Web site and application hosting service segment
revenue increased 49.4% to $139.7 million for the third quarter of 2000 compared
to $93.5 million for the same period in 1999. This increase was principally a
result of the expansion of




                                       18
<PAGE>   19
Intermedia's frame relay and private line services, as well as strong growth in
Internet and Web related services. Intermedia's data network expanded by 230 NNI
connections and 31 data switches since October 1, 1999. The Digex Web site and
application hosting services segment revenues increased by $30.4 million due to
new customer growth as well as a significant increase in the number of servers
per customer and revenue per server.

         Integration services revenue increased 8.5% to $40.9 million for the
third quarter of 2000 compared to $37.7 million for the same period in 1999.
This increase was principally due to an increased demand in current markets and
an expansion of sales efforts into new markets in the third quarter of 2000 as
compared to the third quarter of 1999.

Operating Expenses

         Total operating expenses increased 29.9% to $401.3 million for the
third quarter of 2000 compared to $308.9 million for the same period in 1999.
The Digex Web site and application hosting services segment total operating
expenses increased $49.5 million during the period due to increased level of
operations, expenses related to execution of its growth strategy, and the
continued build up of the infrastructure and administrative requirements
necessary for Digex to operate as a public company separate from Intermedia.

         Network expenses increased 4.6% to $100.5 million for the third quarter
of 2000 compared to $96.1 million for the same period in 1999. Intermedia
continues to increase capacity from new switches, frame relay nodes and fiber
miles which reduces the amount of network costs that are required to be
purchased from outside vendors.

         Facilities administration and maintenance expenses increased 82.2% to
$49.0 million for the third quarter of 2000 compared to $26.9 million for the
same period in 1999. The increase resulted from support costs relating to the
expansion of Intermedia's owned and leased network capacity, increased
maintenance expenses due to network expansion, and increased payroll expenses
related to additional engineering and operations staff necessary to support and
service the expanding network. The Digex Web site and application hosting
services segment accounted for $15.0 million or 67.8% of the increase. These
costs related to the increased level of operations and the expansion of the new
data centers, including costs related to the hiring of additional personnel and
consultants in customer service, engineering, and facilities administration
supporting server growth.

         Cost of goods sold increased 3.8% to $24.8 million for the third
quarter of 2000 compared to $23.9 million for the same period in 1999. This
increase was principally due to the increase in demand for telecommunications
equipment and a change in the revenue mix.

         Selling, general and administrative expenses increased 37.1% to $102.8
million for the third quarter of 2000 compared to $75.0 million for the same
period in 1999. Intermedia's increase results from an increase in overhead
related expenses and sales and marketing personnel's expenditures to support
Intermedia's growth strategy. The Digex Web site and application services
segment accounted for approximately $18.8 million of this increase ($1.5
million related to the general & administrative services agreement with
Intermedia that is eliminated in consolidation). The increases in expenses at
Digex are primarily a result of the Digex growth strategy and building the
infrastructure to operate as a public company separate from Intermedia.
Increases in costs for Digex include the costs associated with an increased
employee base, advertising campaigns, back office support (including the costs
related to the general & administrative services agreement, as amended, with
Intermedia), an increased provision for doubtful accounts receivable, and the
addition of key executive management to support the growth of the business.
Digex expects that its growth strategy will continue to require significant
sales and marketing activities including an expansion of the sales force and
further development of brand name recognition.

         Depreciation and amortization expenses increased 50.1% to $121.6
million for the third quarter of 2000 compared to $81.0 million for the same
period in 1999. This increase

                                       19
<PAGE>   20

was principally due to depreciation and amortization of telecommunications
equipment placed in service since October 1, 1999 as a result of ongoing network
expansion (including the indefeasable right of use acquired from Williams
Communications nationwide network). The Digex Web site and application hosting
services segment accounted for $13.8 million of the increase due to additional
servers and facilities placed in service since October 1, 1999. Depreciation and
amortization expense is expected to increase in future periods based primarily
on Digex's plan to expand the data centers and increase server installations.

         Deferred compensation expense increased 333.3% to $2.6 million for the
third quarter of 2000 compared to $.6 million for the same period in 1999. As
discussed more fully in the footnotes to the financial statements, Intermedia
adopted FASB Interpretation No. 44 during the third quarter of 2000. In
accordance with this interpretation, Intermedia recorded approximately $1.2
million in expense during the third quarter of 2000 to reflect the change in
value of certain stock options that were repriced in 1999 and 2000 which are now
accounted for as variable. Additionally, the increase over the prior period
resulted from stock options granted to certain Digex employees at exercise
prices below market value since July 29, 1999.

         Business restructuring and integration expense decreased to zero for
the third quarter of 2000 compared to $5.5 million in the same period in 1999,
which consists of costs related to businesses exited and integration and other
restructuring costs. The decrease in the business restructuring and integration
expense is due to the completion of the restructuring program in June 2000.

Interest Expense

         Interest expense decreased 9.4% to $63.5 million for the third quarter
of 2000 compared to $70.1 million for the same period in 1999. This decrease is
due to the effect of the repurchase of $500 million in principle amount of
senior notes during the second quarter of 2000. Interest cost capitalized in
connection with Intermedia's construction of telecommunications equipment
amounted to approximately $3.3 million for the three months ended September 30,
2000 compared to $2.3 million for the three months ended September 30, 1999.

Other Income

         Other income decreased 29.2% to $6.3 million for the third quarter of
2000 compared to $8.9 million for the same period in 1999. This decrease was
primarily the result of expenses associated with due diligence activities
related to the merger and possible sale of Digex incurred at the Digex Web
site and application hosting services segment level of $2.7 million in the
third quarter of 2000.

Income (Loss) before Minority Interest, Income Taxes, and Extraordinary Gain

         Income (loss) before minority interest, income taxes, and extraordinary
gain increased 47.5% to $(199.7) million for the third quarter of 2000 compared
to $(135.4) million for the same period in 1999. The increase in the income
(loss) before minority interest, income taxes, and extraordinary gain is due to
the increase in depreciation and amortization and selling, general and
administrative expenses described above in the section entitled "Operating
Expenses".

Benefit (Provision) for Income Taxes

         Benefit (Provision) for income taxes is approximately $5.6 million for
the third quarter of 2000. Although Intermedia utilized net operating losses to
offset regular federal taxable income, a benefit for current income tax expense
was recognized for AMT purposes in the third quarter of 2000 as the estimated
annual income tax provision was adjusted.




                                       20
<PAGE>   21

Income (Loss) Before Minority Interest and Extraordinary Gain

         Income (loss) before minority interest and extraordinary gain increased
43.4% to $(194.1) million for the third quarter of 2000 compared to $(135.4)
million for the same period in 1999. The increase in the income(loss) before
minority interest and extraordinary gain is due to the increased depreciation
and amortization and selling, general and administrative expenses described
above. In addition, the increased operating losses reduced estimated annual
income tax provision, which created a benefit in the third quarter of 2000.

Minority Interest in Net Loss of Subsidiary

         Minority interest in net loss of subsidiary increased 503.8% to $15.7
million compared to $2.6 million for the same period in 1999. The minority
interest in net loss of subsidiary was based upon Intermedia's ownership of
Digex during the third quarter of 2000 which changed due to the February 2000
sale of stock described above.

Income (Loss) before Extraordinary Gain

         Income (loss) before extraordinary gain increased 34.3% to $(178.4)
million in the third quarter of 2000 compared to $(132.8) million in the same
period in 1999 due to the increased operating expenses and the increased
minority interest in net loss of subsidiary in 2000 described above.

Net Income (Loss)

         Net income (loss) increased 34.5% to $(178.6) million for the third
quarter of 2000 compared to $(132.8) million for the same period in 1999. The
increase resulted primarily from the increased operating expenses, income tax
benefit, and a larger minority interest in net loss of subsidiary in 2000
compared to 1999.

Preferred Stock Dividends and Accretions

         Preferred stock dividends and accretions increased 33.9% to $31.2
million for the third quarter of 2000 compared to $23.3 million for the same
period in 1999 which is due to the increased number of shares outstanding for
which dividends will accrue primarily from the issuance of the Series G to KKR
in the first quarter of 2000. Management does not expect to pay cash dividends
in the foreseeable future.

EBITDA Before Certain Charges

         EBITDA before certain charges decreased $31.2 million to $(18.3)
million for the third quarter of 2000 compared to $12.9 million for the same
period in 1999. The change is primarily attributable to reduced reciprocal
compensation revenue of $12.3 million and due to a change in recording this
revenue in 2000 the increased costs of the Digex Web site and application
hosting services segment related to its growth strategy.

         EBITDA before certain charges consists of earnings (net loss) before
interest expense, interest and other income, income taxes, depreciation,
amortization, and business integration, restructuring and other costs associated
with the Program. EBITDA before certain charges does not represent funds
available for management's discretionary use and is not intended to represent
cash flow from operations. EBITDA before certain charges




                                       21
<PAGE>   22

should not be considered as an alternative to net income (loss) as an indicator
of Intermedia's operating performance or to cash flows as a measure of
liquidity. In addition, EBITDA before certain charges is not a term defined by
generally accepted accounting principles and, as a result, the EBITDA before
certain charges presented herein may not be comparable to similarly titled
measures used by other companies. Intermedia believes that EBITDA before certain
charges is often reported and widely used by analysts, investors and other
interested parties in the telecommunications industry. Accordingly, this
information has been disclosed herein to permit a more complete comparative
analysis of Intermedia's operating performance relative to other companies in
the industry.

NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1999:

Revenue

         Total revenue increased 16.8% to $767.9 million for the nine months
ended September 30, 2000 compared to $657.3 million for the same period in 1999.
This increase was primarily due to the continued expansion of the frame relay
and private line networks as well as strong growth in Internet and Web site and
application hosting services segment. Intermedia's core strategic revenue
categories continue to grow, and Intermedia plans to maintain its emphasis on
sales of Data, Internet and Web hosting as the core component of its growth in
revenue.

         Local access and voice revenue decreased 13.0% to $267.4 million for
the nine months ended September 30, 2000 compared to $307.2 million for the same
period in 1999. This decrease was principally due to the decrease in long
distance revenue as well as a change in booking rates for reciprocal
compensation in 2000. The decrease in long distance revenue is primarily a
result of per minute pricing declines experienced industry-wide. In addition,
Intermedia is no longer focusing its marketing efforts on sales of long distance
services on a stand alone basis. Reciprocal compensation revenue from certain
ILECs decreased approximately $8.8 million from the same period last year due to
the change in accounting estimate for reciprocal compensation and the reduced
rates in 2000. Intermedia will experience decreased reciprocal compensation
revenue in the future due to the change in billing rates in the second quarter
of 2000. The decrease was partially offset by Intermedia's continued rollout of
local exchange services into additional markets. The number of access line
equivalents has increased by 190,901 from October 1, 1999 through the end of the
third quarter of 2000 as a result of growth in Intermedia's voice services,
particularly the sale of its flagship product, IntermediaOne, its newly
expanded integrated voice, Internet access and data communications platform for
business.

         Data, Internet, and Web site and application service agreement revenue
increased 49.5% to $384.1 million for the nine months ended September 30, 2000
compared to $256.9 million for the same period in 1999. This increase was
principally a result of the expansion of Intermedia's frame relay and private
line network as well as strong growth in Internet and Web related services.
Intermedia's data network expanded by 230 NNI connections and 31 data switches
since October 1, 1999. The Digex Web site and application hosting services
segment revenues increased by $78.6 million due to new customer growth, a
significant increase in the number of servers per customer, and a rise in
monthly revenue per server.

         Integration services revenue increased 24.9% to $116.4 million for the
nine months ended September 30, 2000 compared to $93.2 million for the same
period in 1999. This increase was principally due to increased demand in current
markets and an expansion of sales efforts into new markets in the nine months
ended September 30, 2000 as compared to the same period in 1999.

Operating Expenses

         Total operating expenses increased 37.8% to $1.2 billion for the nine
months ended September 30, 2000 compared to $860.9 million for the same period
in 1999. The Digex Web




                                       22
<PAGE>   23
site and application hosting services segment total operating expenses increased
$137.8 million during the nine months ended September 30, 2000 compared to the
same period in 1999. The increase in the operating expenses of Digex is due to
increased level of operations, expenses related to execution of its growth
strategy, and continued build up of the infrastructure and administrative
requirements necessary for Digex to operate as a public company separate from
Intermedia.

         Network expenses decreased .3% to $283.2 million for the nine months
ended September 30, 2000 compared to $284.0 million for the same period in 1999.
Intermedia continues to increase capacity from new switches, frame relay nodes
and fiber miles which reduces the amount of network costs that are required to
be purchased from outside vendors.

         Facilities administration and maintenance expenses increased 79.5% to
$130.5 million for the nine months ended September 30, 2000 compared to $72.7
million for the same period in 1999. The increase resulted from support costs
relating to the expansion of Intermedia's owned and leased network capacity,
increased maintenance expenses due to the network expansion, and increased
payroll expenses related to additional engineering and operations staff
necessary to support and service the expanding network. The Digex Web site and
application hosting services segment accounted for $35.7 million of the
increase as a result of the increased level of operations and the expansion of
the new data centers including costs related to the hiring of additional
personnel and consultants in customer service, engineering, and facilities
administration supporting server growth.

         Cost of goods sold increased 35.5% to $80.2 million for the nine months
ended September 30, 2000 compared to $59.2 million for the same period in 1999.
The increase is due to an increase in demand for telecommunications equipment
and a change in the revenue mix.

         Selling, general and administrative expenses increased 71.1% to $347.9
million for the nine months ended September 30, 2000 compared to $203.3 million
for the same period in 1999. The increase is due to a $46.1 million adjustment
to bad debt expense primarily to establish a reserve for reciprocal
compensation revenue, an increase in sales and marketing personnel's efforts to
support Intermedia's growth strategy, and an increase in other overhead
departments. The Digex Web site and application hosting services segment
accounted for $57.6 million of the increase ($2.5 million related to the
general & administrative services agreement with Intermedia that eliminates in
consolidation). The increase in expenses at Digex are primarily a result of
Digex growth strategy and building infrastructure to operate as a public
company separate from Intermedia. The increases in costs for Digex include
expenses associated with an increased employee base, advertising campaigns,
back office support (including the costs related to the general &
administrative services agreement, as amended, with Intermedia) an increased
provision for doubtful accounts receivable, and the addition of key executive
management to support the growth of the business. Digex expects that its growth
strategy will continue to require significant sales and marketing activities,
including an expansion of its sales force and further development of brand name
recognition.

         Depreciation and amortization expenses increased 44.7% to $328.1
million for the nine months ended September 30, 2000 compared to $226.7 million
for the same period in 1999. This increase was principally due to depreciation
and amortization of telecommunications equipment placed in service since October
1,1999 as a result of ongoing network expansion (including the irrevocable right
of use acquired from the Williams Communications nationwide network). The Digex
Web site and application hosting services segment accounted for $34.3 million of
the increase due to additional servers and other facilities and equipment placed
in service since October 1, 1999. Depreciation and amortization expense is
expected to increase in future periods based on Digex's plans to continue
expanding its data centers and to future increased server installations.

         Deferred compensation expense increased 957.1% to $7.4 million for the
nine months ended September 30, 2000 compared to $.7 million for the same period
in 1999. As discussed more fully in the footnotes to the financial statements,
Intermedia adopted FASB Interpretation No. 44 during the third quarter of 2000.
In accordance with this

                                       23
<PAGE>   24

interpretation, Intermedia recorded approximately $1.2 million in expense during
the third quarter of 2000 to reflect the change in value of certain stock
options that were repriced in 1999 and 2000 which are now accounted for as
variable. Additionally, the increase over the prior period resulted from stock
options granted to certain Digex employees at exercise prices below market value
since July 29, 1999.

         Business restructuring and integration expense decreased 34.3% to $9.4
million for the nine months ended September 30, 2000 compared to $14.3 million
in the same period in 1999, which consists of costs related to businesses exited
and integration and other restructuring costs. The decrease in the business
restructuring and integration expense is due to the completion of the
restructuring program in June 2000.

Interest Expense

         Interest expense decreased .4% to $200.7 million for the nine months
ended September 30, 2000 compared to $201.5 million for the same period in
1999. This decrease is due to the repurchase of $500 million principal amount
of senior notes in the second quarter of 2000. Interest expense at the Digex
Web site and application hosting services segment increased $.8 million for the
nine months ended September 30, 2000 due to the new capital lease for the Digex
corporate headquarters in the third quarter of 2000. Interest cost capitalized
in connection with Intermedia's construction of telecommunications equipment
amounted to approximately $11.2 million for the nine months ended September 30,
2000 compared to $7.6 million for the same period in 1999.

Gain on sale of Digex stock

         Gain on sale of Digex stock is approximately $864.3 million for the
nine months ended September 30, 2000. On February 16, 2000, Intermedia sold
10,650,000 shares of its investment in Digex's Class B Common Stock which was
converted to Class A Common Stock upon such sale. Gross proceeds amounted to
$914 million.

Other Income

         Other income increased 27.1% to $37.1 million for the nine months
ended September 30, 2000 compared to $29.2 million for the same period in 1999.
This increase was the result of interest earned on the comparatively higher
level of average cash balances for the nine months ended September 30, 2000 as
compared to the same period in 1999. This was offset by $2.7 million in
expenses associated with due diligence activities related to the merger and
possible sale of Digex in the third quarter of 2000.

Income (Loss) before Minority Interest, Income Taxes, and Extraordinary Gain

         Income (loss) before minority interest, income taxes, and extraordinary
gain increased 175.0% to $281.9 million for the third quarter of 2000 compared
to $(375.9) million for the same period in 1999. The increase in the income
(loss) before minority interest, income taxes, and extraordinary gain is
principally due to the gain on sale of Digex stock offset by the increased
operating expenses described above.

Benefit (Provision) for Income Taxes

         Benefit (Provision) for income taxes is approximately ($20.0) million
for the nine months ended September 30, 2000. Although Intermedia utilized net
operating losses to offset regular federal taxable income, a provision for
current income tax expense is required for AMT purposes.

Income (Loss) Before Minority Interest and Extraordinary Gain

         Income (loss) before minority interest and extraordinary gain increased
169.7% to $261.9 million for the nine months ended September 30, 2000 compared
to $(375.9) million for the same period in 1999. The increase in the income
(loss) before minority interest and extraordinary gain is due to the gain on the
sale of Digex stock in 2000 which is




                                       24
<PAGE>   25

offset by the increased operating expenses in 2000 described above and the
income tax provision required as a result of the projected taxable income for
2000.

Minority Interest in Net Loss of Subsidiary

         Minority interest in net loss of subsidiary increased 1323.0% to $37.0
million for the nine months ended September 30, 2000 compared to $2.6 million
for the same period in 1999 was recorded by Intermedia. The minority interest in
net loss of subsidiary was based upon Intermedia's ownership of Digex during the
third quarter of 2000 which changed due to the February 2000 sale of stock
described above.

Income (Loss) before Extraordinary Gain

         Income (loss) before extraordinary gain increased 180.1% to $298.9
million for the nine months ended September 30, 2000 compared to $(373.3)
million in the same period in 1999 due to the gain on the sale of Digex stock in
2000 offset by the increased operating expenses and minority interest in 2000.

Extraordinary Gain on Early Extinguishment of Debt, Net of Tax

         Extraordinary gain on early extinguishment of debt of $19.7 million in
the nine months ended September 30, 2000 is due to the repurchase of senior
notes originally issued in October 1997, December 1997, and February 1999, net
of a tax provision of $1.2 million.

Net Income (Loss)

         Net income (loss) increased 185.3% to $318.6 million for the nine
months ended September 30, 2000 compared to $(373.3) million for the same period
in 1999. The increase resulted primarily from the gain on the sale of Digex
Common Stock, extraordinary gain on early extinguishment of debt of $19.7
million, and related income tax provision that resulted from the utilization of
net operating loss carryforwards when applied to earnings estimated for calendar
year 2000.

Preferred Stock Dividends and Accretions

         Preferred stock dividends and accretions increased 29.2% to $88.9
million for the nine months ended September 30, 2000 compared to $68.8 million
for the same period in 1999 which is due to the increased number of shares
outstanding for which dividends will accrue primarily from the issuance of
Series G Preferred Stock in the first quarter of 2000. Management does not
expect to pay cash dividends in the foreseeable future.

EBITDA Before Certain Charges

         EBITDA before certain charges decreased $112.1 million to $(74.0)
million for the nine months ended September 30, 2000 compared to $38.1 million
for the same period in 1999.




                                       25
<PAGE>   26

Liquidity and Capital Resources

         Intermedia's operations have required substantial capital investment
for the purchase of telecommunications equipment and the design, construction
and development of Intermedia's networks. Capital expenditures for Intermedia
were approximately $472.8 million and $398.0 million for the nine months ended
September 30, 2000 and 1999, respectively, excluding capital leases and
telecommunications equipment acquired in connection with business acquisitions.
Intermedia expects that it will continue to have substantial capital
requirements in connection with the (i) expansion and improvement of
Intermedia's existing networks, (ii) design, construction and development of new
networks, primarily on a demand driven basis, (iii) connection of additional
buildings and customers to Intermedia's networks, and (iv) continued expansion
of data centers and server equipment related to the development of the Digex Web
site and application hosting services segment.

         The substantial capital investment required to build Intermedia's
network has resulted in negative cash flow after consideration of investing
activities over the last five years. Intermedia expects to continue to produce
negative cash flow after investing activities for the next several years due to
the continuous expansion and the development of Intermedia's networks. With
respect to the Digex Web site and application hosting services segment,
Intermedia anticipates significant cash requirements for several years for data
center capacity, increasing the employee base to support expanding operations,
and investing in its marketing and research and development efforts both in the
United States and abroad. Until sufficient cash flow after investing activities
is generated, Intermedia will be required to utilize its current and future
capital resources, including the issuance of additional debt and/or equity
securities, to meet its cash flow requirements.

         On December 22, 1999, Intermedia entered into a Revolving Credit
Agreement ("Credit Agreement") for a five-year $100.0 million Revolving Credit
Facility ("Credit Facility"). At September 30, 2000, Intermedia did not have any
outstanding debt under the Credit Facility.

         On January 12, 2000, Microsoft and a subsidiary of Compaq made a $100.0
million equity investment in Digex through the purchase of 100,000 shares of the
Digex preferred stock, designated as Series A Convertible Preferred Stock, and
warrants to purchase 1,065,000 shares of Digex Class A Common Stock. Digex also
entered into strategic development agreements and joint marketing agreements
with both companies.

         On February 16, 2000, Digex completed its second public offering of
12,650,000 shares of its Class A Common Stock. Digex offered 2,000,000 shares of
its Class A Common Stock and received net proceeds of approximately $172
million. Also, as part of that offering, Intermedia sold 10,650,000 shares of
Digex Class A Common Stock, which upon the sale, automatically converted into
Class A Common Stock of Digex. Intermedia now owns approximately 62.0% of the
outstanding Common Stock of Digex. In addition, Intermedia retains approximately
94.2% of the voting interest in Digex. The net proceeds to Intermedia were
approximately $914 million of which approximately $483 million was used in the
second quarter of 2000 to reduce Intermedia's outstanding debt.

         On February 17, 2000, an affiliate of KKR made a $200.0 million equity
investment in Intermedia in a private placement transaction. In exchange for
this investment, Intermedia issued 200,000 shares of its Series G Junior
Convertible Participating Preferred Stock (the Series G Preferred Stock), with
an aggregate liquidation preference of $200.0 million, and warrants to purchase
2,000,000 shares of Intermedia's Common Stock. Dividends on the Series G
Preferred Stock accumulate at a rate of 7% of the aggregate liquidation
preference thereof and are payable quarterly in arrears through either cash or
the issuance of shares of common stock of Intermedia. Net proceeds to Intermedia
were approximately $188.0 million.

         In May 2000, Intermedia completed the repurchase of $500.0 million face
value of senior indebtedness with a portion of the proceeds it obtained from its
sale of Digex stock. Annual cash interest savings as a result of the repurchase
are approximately $44.0 million.




                                       26
<PAGE>   27

         On July 11, 2000, Intermedia announced that it is exploring strategic
alternatives with regard to Digex, including, without limitation, the possible
sale of its ownership position in Digex. As described in the footnotes to the
financial statements, on September 1, 2000 Intermedia entered into a merger
agreement with WorldCom, Inc. whereby a subsidiary of WorldCom will be merged
with and into Intermedia. The outstanding shares of common stock of Intermedia
will be exchanged for shares of common stock of WorldCom, and Intermedia will
become a subsidiary of WorldCom. As a result of the merger, WorldCom will
beneficially own a majority of the capital stock of Digex, and will have voting
control of Digex. In addition, holders of Intermedia preferred stock, other than
Intermedia Series B Preferred Stock and Series H Preferred Stock, will receive
newly issued WorldCom preferred stock for the shares of Intermedia preferred
stock they own. The new WorldCom preferred stock will have substantially
identical terms as the Intermedia preferred stock. Any outstanding shares of
Intermedia Series B Preferred Stock and Series H Preferred Stock will remain
outstanding as preferred stock of Intermedia following the merger.

         In the merger, Intermedia common stockholders will receive a minimum of
0.8904 and a maximum of 1.1872 shares of WorldCom common stock for each share of
Intermedia common stock they own. The actual number of shares of WorldCom common
stock will be determined by dividing $39.00 by the weighted average per share
trading price for the WorldCom common stock over a period of 15 trading days
randomly selected from the 30 consecutive trading days ending on the third
trading day prior to the completion of the merger. In addition, if the weighted
average per share trading price of WorldCom is less than $36.50, WorldCom will
have the option of issuing 1.0685 shares of WorldCom common stock for each share
of Intermedia common stock and paying the remainder of the consideration in
cash. WorldCom common stock is quoted on The Nasdaq National Market under the
symbol "WCOM". The merger is subject to the receipt of consents and approvals
from various government entities, which may jeopardize or delay completion of
the merger. The merger is also subject to certain stockholder approval. Subject
to the foregoing approvals, the merger is expected to be finalized during the
first half of 2001.

         On October 31, 2000, Intermedia increased the commitments available
under its Credit Facility to $350.0 million and renegotiated certain terms of
its Credit Agreement. The Credit Facility is fully guaranteed by WorldCom, Inc.
and expires June 30, 2001.

         On October 31, 2000, Intermedia also entered into a Note Purchase
Agreement with WorldCom, Inc. Intermedia authorized the issue and sale of up to
$225.0 million aggregate principal amount of 14.12% Senior Subordinated Notes
due 2009 and 22,500 shares of Series H Preferred Stock. Interest on any notes
issued under the Note Purchase Agreement will be payable monthly on the unpaid
balance of the aggregate principal amount outstanding, and is based on the
greater of 14.12% and the average weighed interest rate of Intermedia's other
outstanding debt and senior preferred stock on each date of determination. Until
April 2001, interest on any notes issued will be capitalized and added to the
principal. At the option of WorldCom, financings under the Note Purchase
Agreement may take the form of purchases of Preferred Stock.

         To comply with the terms of certain of Intermedia's indentures, in
October and November 2000, Intermedia used $155.9 million of the proceeds of the
public sale of shares of Digex in February 2000 to repurchase and subsequently
retire certain outstanding senior notes.

         Intermedia believes its business plan to be funded into mid 2001 with
existing cash resources and committed financings available. In the event that
this merger is not consummated, Intermedia's future capital needs depend on a
number of factors, certain of which it controls (such as marketing expenses,
staffing levels, customer growth and capital costs) and others which it cannot
control (such as competitive conditions and government regulation). Moreover,
the terms of Intermedia's outstanding indebtedness (including the Credit
Facility) and preferred stock impose certain restrictions upon Intermedia's
ability to incur additional indebtedness or issue additional preferred stock.




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<PAGE>   28

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE

         While all of Intermedia's long term debt bears fixed interest rates as
of September 30, 2000, the fair market value of Intermedia's fixed rate
long-term debt as of September 30, 2000 is sensitive to changes in interest
rates. The WorldCom 14.12% Senior Subordinated Notes authorized on October 31,
2000 bear interest on a variable basis payable monthly after the first six
months. Intermedia runs the risk that market rates will decline and the required
payments will exceed those based on the current market. Under its policies,
Intermedia does not use interest rate derivative instruments to manage its
exposure to interest rate changes.

         Digex expects to continue recognizing revenue from international sales
denominated in foreign currency. As a global concern, Digex could face exposure
to adverse movements in foreign currency exchange rates on the financial results
of foreign subsidiaries that are translated into U.S. dollars upon
consolidation. These exposures may change over time as business practices evolve
and could affect Digex's financial results. Currently, Digex does not hedge
against any foreign currency risk and, as a result, could incur gains or losses.

Impact of Inflation

         Inflation has not had a significant impact on Intermedia's operations
over the past 3 years.

         The information set forth above in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" include
forward-looking statements that involve numerous risks and uncertainties.
Forward-looking statements can be identified by the use of forward-looking
terminology such as "estimates," "projects," "anticipates," "expects,"
"intends," "believes," or the negative thereof or other variations thereon or
comparable terminology or by discussions of strategy that involve risks and
uncertainties. Intermedia's actual results could differ materially from those
anticipated in such forward-looking statements as a result of certain factors,
including those set forth in the section entitled "Risk Factors" in Intermedia's
Annual Report on Form 10-K report for the year ended December 31, 1999. Readers
are cautioned not to place undue reliance on any forward-looking statements
contained in this report. Intermedia undertakes no obligation to publish the
results of any adjustments to these forward-looking statements that may be made
to reflect events on or after the date of this report or to reflect the
occurrence of unexpected events.












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<PAGE>   29

PART II.  OTHER INFORMATION

ITEM  1.  LEGAL PROCEEDINGS

          Intermedia is not a party to any material legal proceedings other than
the reciprocal compensation proceedings, the Digex shareholder lawsuits and the
BellSouth lawsuit described in Note 10 of the "Notes to Condensed Consolidated
Financial Statements" and various claims and lawsuits arising in the normal
course of business. Intermedia does not believe that these normal course of
business claims or lawsuits will have a material effect on Intermedia's
financial condition or results of operations.

ITEM  2.  CHANGES IN SECURITIES
          None.

ITEM  3.  DEFAULTS UPON SENIOR SECURITIES
          None.

ITEM  4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
          None.

ITEM  5.  OTHER INFORMATION
          None.

ITEM  6.  EXHIBITS AND REPORTS ON FORM 8-K
          (a)  Exhibits

NUMBER    EXHIBIT
------    -------

2.1      Agreement and Plan of Merger among WorldCom, Inc., Wildcat Acquisition
         Corp., and Intermedia, dated as of September 1, 2000. Incorporated
         herein by reference to Intermedia's Form 8-K (File No. 000-20135) filed
         with the SEC on September 7, 2000.

3.1      Restated Certificate of Incorporation of Intermedia, together with all
         amendments, thereto. Exhibit 3.1 to Intermedia's Registration Statement
         on Form S-4, filed with the SEC on June 16, 1998 (No. 333-46369) is
         incorporated herein by reference.

3.2      By-laws of Intermedia, together with all amendments thereto. Exhibit
         3.2 to Intermedia's Registration Statement on Form S-1, filed with the
         Commission on November 8, 1993 (No. 33-69052) is incorporated herein by
         reference.

4.1      Certificate of Designation of Voting Power, Designation Preferences and
         Relative, Participating, Optional and Other Special Rights and
         Qualifications, Limitations and Restrictions of 14.12% Series H
         Redeemable Preferred Stock of Intermedia.

10.1     Note Purchase Agreement dated as of October 31, 2000, between
         Intermedia and WorldCom, Inc.

10.2     Fourth Amendment to Credit Agreement, dated as of October 31, 2000,
         between Intermedia, Bank of America N.A., the Bank of New York and
         Toronto Dominion (Texas), Inc. and the Guarantors named therein,
         amending the Revolving Credit.




                                       29
<PAGE>   30

         Agreement dated as of December 22, 1999, filed as Exhibit 10.12 to
         Intermedia's Annual Report on Form 10-K for the year ended December 31,
         1999.

27.1     Financial Data Schedule (For SEC Use Only)

         (b) Reports on Form 8-K

         The following reports on Form 8-K of Intermedia were filed during the
third quarter of 2000:

         Intermedia filed a Current Report on Form 8-K, on August 1, 2000,
reporting under Item 5 the issuance of a press release related to the second
quarter results of its subsidiary, Digex, Inc. Intermedia also reported under
Item 7 the filing of the press release as an exhibit to the Form 8-K.

         Intermedia filed a Current Report on Form 8-K on August 2, 2000,
reporting under Item 5 the issuance of a press release related to its second
quarter results. Intermedia also reported under Item 7 the filing of the press
release as an exhibit to the Form 8-K.

         Intermedia filed a Current Report on Form 8-K, on August 16, 2000,
reporting under Item 5 the filing of the Form 10-Q of its subsidiary, Digex,
Inc. for the quarter ended June 30, 2000. Intermedia also reported under Item 7
the Form 10-Q of Digex, Inc. for the quarter ended June 30, 2000 as an exhibit
to the Form 8-K.

         Intermedia filed a Current Report on Form 8-K on September 7, 2000
reporting under Item 5 the entering into a merger agreement with WorldCom, Inc.
Intermedia also reported under Item 7 the agreement and plan of merger among
WorldCom, Inc., Wildcat Acquisition Corp., and Intermedia Communications Inc.,
dated September 1, 2000.

         Intermedia filed a Current Report on Form 8-K on September 14, 2000
reporting under Item 5 that in connection with the execution of the Merger
Agreement, WorldCom and certain Stockholders of Intermedia entered into a
Stockholders Agreement, dated as of September 1, 2000, pursuant to which, among
other things, the Stockholders have agreed to vote their shares of Intermedia
Common Stock and 7% Series G Junior Convertible Participating Preferred Stock to
approve the transactions contemplated by the Merger Agreement. Intermedia also
reported under Item 7 the Stockholders Agreement.

         Intermedia filed a Current Report on Form 8-K on September 15, 2000
reporting under Item 5 that eight complaints were filed in connection with the
Merger Agreement with WorldCom, Inc. Intermedia also reported under Item 7 the
actual complaints as exhibits.











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<PAGE>   31

                                   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 by the
undersigned thereunto duly authorized.

Dated: November 14, 2000


                                              INTERMEDIA COMMUNICATIONS INC.
                                                       (Registrant)


                                                   /s/ Jeanne M. Walters
                                              ------------------------------
                                              Vice President, Controller and
                                                 Chief Accounting Officer
















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