<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 MARCH 31, 2001

                                       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 April 25, 2001, there were 57,112,407 shares of the
                     Registrant's Common Stock outstanding.


<PAGE>   2


                         INTERMEDIA COMMUNICATIONS INC.

                                      INDEX

<TABLE>
<CAPTION>
                                                                                              PAGE
                                                                                               NO.
                          PART I. FINANCIAL INFORMATION
<S>           <C>                                                                             <C>
ITEM 1.       FINANCIAL STATEMENTS (UNAUDITED):

              Condensed Consolidated Statements of Operations---Three-months
                ended March 31, 2001 and 2000.................................................  3
              Condensed Consolidated Balance Sheets--March 31, 2001
                and December 31, 2000.........................................................  4
              Condensed Consolidated Statements of Cash Flows--Three-months
                ended March 31, 2001 and 2000.................................................  5
              Notes to Condensed Consolidated Financial Statements............................  6

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

                           PART II. OTHER INFORMATION

ITEM 1.       LEGAL PROCEEDINGS............................................................... 27

ITEM 2.       CHANGES IN SECURITIES........................................................... 27

ITEM 3.       DEFAULTS UPON SENIOR SECURITIES................................................. 27

ITEM 4.       SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............................. 27

ITEM 5.       OTHER INFORMATION............................................................... 27

ITEM 6.       EXHIBITS AND REPORTS ON FORM 8-K................................................ 27

SIGNATURES.................................................................................... 29
</TABLE>


<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
                                                                               -----------------------------------
                                                                               MARCH 31, 2001       MARCH 31, 2000
                                                                               --------------       --------------
<S>                                                                            <C>                  <C>
Revenues:
       Data, internet and web hosting ..................................        $    155,448         $    112,349
       Local access and voice ..........................................              77,107              108,544
       Integration services ............................................              35,216               38,623
                                                                                ------------         ------------
                                                                                     267,771              259,516

 Expenses:
       Network operations ..............................................             109,789               90,169
       Facilities administration and maintenance .......................              54,644               37,108
       Cost of goods sold ..............................................              21,649               26,689
       Selling, general and administrative .............................             108,331               90,447
       Depreciation and amortization ...................................             134,582               89,310
       Deferred compensation ...........................................               2,666                3,664
       Business restructuring, merger-related and other charges ........              20,792                2,630
                                                                                ------------         ------------
                                                                                     452,453              340,017
                                                                                ------------         ------------
Loss from operations ...................................................            (184,682)             (80,501)

Other income (expense):
       Interest expense ................................................             (66,417)             (72,933)
       Gain on sale of Digex stock .....................................                  --              864,321
       Interest and other income .......................................              10,219               13,818
                                                                                ------------         ------------
Net income (loss) before minority interest and income taxes ............            (240,880)             724,705
Provision for income taxes .............................................                  --               23,423
                                                                                ------------         ------------
Net income (loss) before minority interest .............................            (240,880)             701,282
Minority interest in net loss of subsidiary ............................              16,803                8,299
                                                                                ------------         ------------
Net income (loss) before cumulative change in accounting principle .....            (224,077)             709,581
Cumulative effect of a change in accounting principle ..................                  --                 (166)
                                                                                ------------         ------------
Net income (loss) ......................................................            (224,077)             709,415
Preferred stock dividends and accretions ...............................             (32,344)             (25,946)
                                                                                ------------         ------------
Net income (loss) attributable to common stockholders ..................        $   (256,421)        $    683,469
                                                                                ============         ============

Net income (loss) per common share:
       Basic ...........................................................        $      (4.58)        $      13.01
                                                                                ============         ============
       Diluted .........................................................        $      (4.58)        $       9.02
                                                                                ============         ============

Weighted average number of shares outstanding:
       Basic ...........................................................          56,023,105           52,545,409
       Diluted .........................................................          56,023,105           77,010,101
</TABLE>




                             See accompanying notes.


                                       3
<PAGE>   4

                         INTERMEDIA COMMUNICATIONS INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)
                    (IN THOUSANDS, EXCEPT SHARE INFORMATION)


<TABLE>
<CAPTION>
                                                                                               MARCH 31, 2001    DECEMBER 31, 2000
                                                                                               --------------    -----------------
<S>                                                                                            <C>               <C>
                                  ASSETS
Current assets:
      Cash and cash equivalents .........................................................      $      44,752       $     114,726
      Restricted investments ............................................................             15,660              15,450
      Accounts receivable, less allowance for
         doubtful accounts of $47,065 in 2001 and $58,410 in 2000 .......................            269,561             283,621
      Income tax receivable .............................................................                671              10,510
      Prepaid expenses and other current assets .........................................             61,080              61,621
                                                                                               -------------       -------------
         Total current assets ...........................................................            391,724             485,928
      Telecommunications equipment, net .................................................          2,058,458           2,067,088
      Investments available for sale ....................................................                 --               9,016
      Intangible assets, net ............................................................            858,457             876,407
      Other assets ......................................................................             42,140              46,033
                                                                                               -------------       -------------

         Total assets ...................................................................      $   3,350,779       $   3,484,472
                                                                                               =============       =============

   LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
      Accounts payable ..................................................................      $     116,374       $     126,414
      Other accrued expenses ............................................................            114,941             120,105
      Current portion of long-term debt and capital lease obligations ...................            207,790             128,277
                                                                                               -------------       -------------
         Total current liabilities ......................................................            439,105             374,796
Other long-term liabilities .............................................................              5,238               6,881
Long-term debt and capital lease obligations ............................................          2,438,953           2,392,430
Minority interest .......................................................................            142,485             159,288
Series B redeemable exchangeable preferred stock and accrued dividends, $1.00
  par value; 600,000 shares authorized;514,863 and 498,052 issued and outstanding
  in 2001 and 2000, respectively ........................................................            506,844             489,787
Series D junior convertible preferred stock and accrued dividends, $1.00 par
  value; 69,000 shares authorized; 53,724 issued and outstanding
  in 2001 and 2000, respectively ........................................................            134,079             133,914
Series E junior convertible preferred stock and accrued dividends, $1.00 par value;
  87,500 shares authorized; 64,047 shares issued and outstanding in 2001 and 2000,
  respectively ..........................................................................            159,619             159,421
Series F junior convertible preferred stock and accrued dividends, $1.00 par
  value; 92,000 shares authorized; 79,600 shares issued and outstanding
  in 2001 and 2000, respectively ........................................................            197,157             196,897
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 2001
   and 2000, respectively ...............................................................            170,611             168,082
Stockholders' equity (deficit):
      Preferred stock, $1.00 par value; 911,500 authorized in 2001 and 2000,
        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 2001
        and 2000, respectively ..........................................................                  1                   1
      Common stock, $.01 par value; 150,000,000 shares authorized in 2001 and
        and 2000; 56,757,677 and 55,138,703 shares issued and outstanding
        in 2000 and 1999, respectively ..................................................                568                 551
      Additional paid-in capital ........................................................          1,037,853           1,022,986
      Cumulative translation adjustment .................................................               (123)                (38)
      Unrealized gain on investment .....................................................                 --               7,016
      Accumulated deficit ...............................................................         (1,868,931)         (1,612,510)
      Deferred compensation .............................................................            (12,680)            (15,030)
                                                                                               -------------       -------------
Total stockholders' equity (deficit) ....................................................           (843,312)           (597,024)
                                                                                               -------------       -------------
Total liabilities, redeemable preferred stock and stockholders' equity (deficit) ........      $   3,350,779       $   3,484,472
                                                                                               =============       =============
</TABLE>


                             See accompanying notes.

                                       4


<PAGE>   5

                         INTERMEDIA COMMUNICATIONS INC.

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

<TABLE>
<CAPTION>
                                                                                              THREE MONTHS ENDED
                                                                                     ------------------------------------
                                                                                     MARCH 31, 2001        MARCH 31, 2000
                                                                                     --------------        --------------
<S>                                                                                  <C>                   <C>
OPERATING ACTIVITIES
       Net income (loss) ....................................................        $    (224,077)        $     709,415
       Cumulative effect of a change in accounting principle ................                   --                   166
       Adjustments to reconcile net income to net cash
          used in operating activities:
             Gain on sale of Digex stock ....................................                   --              (864,321)
             Depreciation and amortization ..................................              136,823                90,941
             Amortization of deferred compensation ..........................                1,500                 3,710
             Non cash restructuring charges .................................                   --                   (43)
             Accretion of interest on notes payable .........................               30,268                30,222
             Provision for doubtful accounts ................................                8,596                 6,682
             Gain on sale of property and equipment .........................                  234                   475
             Gain on sale of available for sale security ....................              (11,320)                   --
             Minority interest in net loss of subsidiary ....................              (16,803)               (8,299)
             Changes in operating assets and liabilities:
               Accounts receivable ..........................................                5,465               (28,696)
               Prepaid expenses and other current assets ....................                  542                (7,203)
               Other assets .................................................                1,668                   (91)
               Accounts payable .............................................              (10,040)              (24,457)
               Other accrued expenses .......................................                3,061                16,032
                                                                                     -------------         -------------
                 Net cash used in operating activities ......................              (74,083)              (75,467)

INVESTING ACTIVITIES
       Purchases of restricted investments ..................................                 (210)               (3,597)
       Purchases of telecommunications equipment ............................             (102,372)             (134,592)
       Proceeds from sale of available for sale security ....................               13,320                    --
       Proceeds from sale of Digex stock, net of issuance costs .............                   --               914,183
       Proceeds from sale of telecommunications equipment ...................                  701                    29
                                                                                     -------------         -------------
                 Net cash provided by (used in) investing activities ........              (88,561)              776,023

FINANCING ACTIVITIES
       Proceeds from issuance of long-term debt, net of issuance costs ......              111,984                24,790
       Proceeds from termination of capital leases ..........................                   --                   342
       Proceeds from issuance of common stock of subsidiary,
         net of issuance costs ..............................................                   --               171,675
       Proceeds from issuance of preferred stock, net of issuance costs .....                   --               187,456
       Proceeds from issuance of preferred stock of subsidiary, net .........                   --                85,000
       Exercise of common stock warrants and options ........................                1,581                11,189
       Principal payments on long-term debt and capital lease obligations ...              (20,810)             (113,341)
                                                                                     -------------         -------------
                  Net cash provided by financing activities .................               92,755               367,111

Increase (decrease) in cash and cash equivalents ............................              (69,889)            1,067,667
Effect of exchange rates on cash ............................................                  (85)                   --
Cash and cash equivalents at beginning of period ............................              114,726               240,827
                                                                                     -------------         -------------

Cash and cash equivalents at end of period ..................................        $      44,752         $   1,308,494
                                                                                     =============         =============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid ...............................................................        $      32,937         $      43,702
Preferred stock issued as dividends on preferred stock ......................               16,809                14,719
Common stock issued as dividends on preferred stock .........................               12,135                 8,672
Accretion of preferred stock ................................................                3,400                   879
Assets purchased through capital leases .....................................                4,577                    --
</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,
2000.

         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-month period ended March 31, 2001 are
not necessarily an indication of the results that may be expected for the year
ending December 31, 2001.

CHANGE IN ACCOUNTING PRINCIPLE

         Effective January 1, 2000, Digex changed its method of accounting for
revenue recognition in accordance with Staff Accounting Bulletin No. 101 ("SAB
101"), Revenue Recognition in Financial Statements. Historically, Digex has
recognized installation revenue, in accordance with industry practice, upon
completion of the managed Web hosting solution. The direct costs associates with
the installation were expensed as incurred. Under the new accounting method
adopted retroactive to January 1, 2000, Digex now recognizes installation
revenue and related direct incremental costs of performing the installation over
the contract term (generally 24 months). Accordingly, the consolidated statement
of operations for the first quarter of 2000 has been restated to reflect the
accounting change.

         For the quarter ended March 31, 2001, Digex recognized revenue of $2.6
million that was recorded as deferred revenue as of December 31, 2000. With the
adoption of SAB 101, there was no economic impact to Digex or Intermedia's
business operations, cash flows, or a material effect on either Digex or
Intermedia's consolidated financial statements. The issuance of SAB 101 had no
impact on Intermedia's other product lines.

RECENTLY ISSUED ACCOUNTING STANDARDS

         In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities," an amendment of SFAS No.
133, which is effective for fiscal years beginning after June 15, 2000. The
adoption of SFAS No. 133, as amended, effective January 1, 2001, had no material
effect on Intermedia's consolidated financial statements.


                                                                               6


<PAGE>   7


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 (or, if WorldCom's proposed
recapitalization is completed, shares of two new series of WorldCom trading
stock), 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, the 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 4 will receive newly issued WorldCom Preferred Stock for the
shares of Intermedia preferred stock they own. The new WorldCom preferred stock
will have substantially similar 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 original merger agreement, Intermedia common stockholders were
to 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 was to 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 ("the
sliding exchange ratio"). In addition, if the weighted average per share trading
price of WorldCom was less than $36.50, Worldcom would 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. However, on
February 15, 2001, the merger agreement was amended to change the exchange ratio
to a fixed ratio of 1.0 from the sliding exchange ratio and the WorldCom cash
election right was removed.

         In addition, the definition of "material adverse effect" when used in
connection with Intermedia was amended to exclude changes or effects:

         -        resulting from the marketing of any Intermedia assets by
                  WorldCom,

         -        arising from or relating to the Delaware Digex stockholders
                  litigation or the Florida Intermedia stockholder litigation,

         -        arising prior to February 15, 2001,

         -        consisting of any deterioration in the business substantially
                  resulting from circumstances or trends existing as of February
                  15, 2001, or in the results of operations or any consequential
                  changes in financial condition of Intermedia and its
                  subsidiaries, individually or in the aggregate.

         A condition to the merger was added requiring that the proposed
settlement of the Delaware Digex Stockholder litigation related to the merger
must have received final and unappealable court approval.

         On May 14, 2001, Intermedia and WorldCom entered a second amendment to
the merger agreement to make certain technical changes to the amended merger
agreement in connection with completing the merger and the WorldCom
recapitalization. Pursuant to the amended merger agreement, the parties agreed,
among other things, that subject to


                                                                               7

<PAGE>   8


the timely satisfaction or waiver of the conditions to the merger, the merger
would become effective on July 1, 2001.

         The merger is subject to stockholder approval of the amended merger
agreement and satisfaction of other conditions set forth in the amended merger
agreements. On April 6, 2001, the Chancery Court approved the settlement as
proposed by the parties. The deadline for appealing that approval expired on May
7, 2001, and no appeals have been filed with the Delaware Supreme Court.
Consequently, under Delaware law, the order approving the settlement has become
final and unappealable. The amended merger agreement 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. WorldCom and Intermedia expect to
complete the merger on July 1, 2001, subject to the satisfaction or waiver of
the various conditions to completion of the merger.

         In conjunction with the original merger agreement, Intermedia initiated
a program to maintain the value of its business and retain its intellectual
capital and offered its employees cash incentives contingent upon the merger
agreement and subsequent closing of the transaction and their continued
employment. The program commitment is currently estimated to be approximately
$30.0 million and is payable upon merger milestones and final closing of the
transaction. Intermedia recorded $17.4 million related to retention for the
three months ended March 31, 2001, which is reflected in business restructuring,
merger-related and other charges.

NOTE 3.  GOING CONCERN

         At December 31, 2000, Intermedia had a stockholders' deficit of
$(597.0) million and had incurred losses attributable to common stockholders of
approximately $(577.6) million, $(650.9) million, and $(8.1) million (including
a non-recurring gain of $864.3 million related to the sale of Intermedia's
investment in Digex) for the years ended December 31, 1998, 1999 and 2000,
respectively. Intermedia also incurred additional losses attributable to common
stockholders of approximately $(256.4) million during the three months ended
March 31, 2001. Intermedia currently has limited financial resources available
to fund ongoing expected operating losses and capital expenditures. These
factors, among others, indicate that Intermedia may be unable to continue as a
going concern.

         The consolidated financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts or
the amounts and classification of liabilities that might be necessary should
Intermedia be unable to continue as a going concern. Intermedia's continuation
as a going concern is dependent upon its ability to generate sufficient cash
flow to meet its obligations on a timely basis, to obtain additional financing
as may be required, and ultimately to attain profitable operations and positive
cash flow.

         Intermedia entered into a definitive merger agreement with WorldCom on
September 1, 2000. This agreement was amended on February 15, 2001 and May 14,
2001. Intermedia's cash needs through June 30, 2001 are being funded by WorldCom
(pursuant to the September 1, 2000 merger agreement and the related October 31,
2000 14.12% subordinated note purchase agreement with WorldCom) and a Credit
Facility guaranteed by WorldCom. Intermedia's future capital needs depend on a
number of factors, certain of which are under Intermedia's control (such as
marketing expenses, staffing levels, customer growth and capital costs) and
others of which are not under Intermedia's control (such as competitive
conditions and government regulation). Moveover, the terms of Intermedia's
outstanding indebtedness (including Intermedia's Credit Facility) and preferred
stock as well as the terms of the merger agreement with WorldCom, impose certain
restrictions upon Intermedia's ability to incur additional indebtedness or issue
additional preferred stock.


                                                                               8

<PAGE>   9


         In the event that the merger agreement with WorldCom is terminated or
the merger is not completed for any reason, the sources of funding provided by
WorldCom, as well as WorldCom's guarantee of the Credit Facility, would no
longer be available. Although Intermedia expects that the merger with WorldCom
will be completed on July 1, 2001, there can be no assurance that the merger
will be completed when expected or if at all. If the merger is completed,
Intermedia will no longer be an independent company and, like other subsidiaries
of WorldCom, Intermedia will rely on WorldCom to supply all of its funding
requirements. In the event that the WorldCom merger is not completed or not
completed in accordance with the parties projected timetable, however,
Intermedia will be required to obtain all of its required funding as a
standalone entity. In such event, Intermedia's funding sources may be inadequate
to sustain its operations or fund its debt obligations, including any debt
obligations that may be accelerated as a direct or indirect result of the event
of default that may be caused by the termination of the merger agreement.

NOTE  4.  FINANCING AND GAIN ON SALE OF DIGEX STOCK

         At December 31, 1999, Intermedia entered into a five-year secured
$100.0 million Revolving Credit Agreement (the "Credit Agreement") outstanding
with several financial institutions (lenders). The Credit Facility may be repaid
and reborrowed from time to time in accordance with the terms and provisions of
the agreement, and is guaranteed by each of Intermedia's subsidiaries. The
Credit Facility is secured by a pledge of the stock of each of Intermedia's
subsidiaries, and is secured by substantially all of the assets of Intermedia
and its subsidiaries. On October 31, 2000, Intermedia and its lenders entered
into an amendment to the Revolving Credit Facility (the "Credit Facility") to
which, among other things the total commitment available for borrowing was
increased from $100.0 million to $350.0 million and Digex executed an amendment
and restated limited guaranty, limiting its aggregate liability under the
guaranty to the greater of either $90.0 million, less any amounts repaid by any
subsidiary of Digex under the Credit Facility, or the aggregate amount of any
loans, advances, extensions of credit, or capital contributions from Intermedia
or any of its subsidiaries to Digex or any of its subsidiaries, less the amount
of certain dividends and repayments made by Digex or any of its subsidiaries. In
connection with this amendment, Digex also executed an amended and restated
security agreement, reducing the value of the assets it was required to pledge
to secure its obligations as guarantor under the Credit Facility. In addition,
in the amended Credit Agreement, WorldCom agreed to guarantee in full
Intermedia's obligations under the Credit Facility pursuant to a guaranty dated
as of October 31, 2000, among WorldCom and the parties to the Credit Facility.
In general, the Credit Facility terminates on the earlier of (a) June 30, 2001,
(b) the consummation of the WorldCom merger, or (c) the date upon which certain
merger termination events, as defined in the fourth amendment to the Credit
Agreement.

         The interest rate on the Credit Facility is based on either a LIBOR or
an alternative base rate option, and is paid quarterly in arrears. The Credit
Agreement contains covenants customary for facilities of this nature, including
limitations on incurrence of additional debt, asset sales, acquisitions,
investments, etc. At March 31, 2001, Intermedia had $191.0 million drawn under
the Credit Facility.

         WorldCom and Intermedia have entered into a note purchase agreement
dated as of October 31, 2000, and amended as of February 15, 2001, pursuant to
which WorldCom has agreed to purchase up to an aggregate principal amount of
$225 million of Intermedia senior subordinated notes due October 31, 2009. Upon
each request by Intermedia for a purchase of notes by WorldCom, WorldCom may, at
its sole option, choose to purchase in lieu of notes shares of what would be a
new series of Intermedia preferred stock, the Intermedia Series H Preferred
Stock due October 31, 2009. The Intermedia Series H Preferred Stock will be
purchased at a liquidation preference equal to the principal amount of notes
requested to be purchased. At March 31, 2001, Intermedia had borrowed $31.0
million under the note purchase agreement, all of which is evidenced by 14.12%


                                                                               9
<PAGE>   10


Senior Subordinated Notes due 2009, and Intermedia had remaining availability of
$194.0 million as of such 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 $171.6
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 61.6% 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 $914.0 million of which approximately $639.1 million was used in
2000 to reduce Intermedia's outstanding debt and the remainder was used to
purchase telecommunications related assets. Intermedia recognized a gain on sale
of its investment in Digex stock of approximately $864.3 million.

NOTE  5.  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 quarter ended March 31, 2000 of $742 million. Intermedia utilized $742
million of net operating loss carryforwards during the quarter to offset regular
taxable income. As of December 31, 2000, approximately $830 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
$23 million in the three months ended March 31, 2000 of current tax expense
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 March 31, 2001, 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.


                                                                              10

<PAGE>   11


NOTE  6.  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
                                                                              MARCH 31, 2001
                                                                         2001                 2000
                                                                     ------------         ------------
<S>                                                                  <C>                  <C>
Numerator:
  Net income (loss)                                                  $   (224,077)        $    709,415
  Preferred stock dividends and accretions                                (32,344)             (25,946)
                                                                     ------------         ------------
  Numerator for basic income (loss) per
      share - income (loss) attributable to
      common stockholders                                                (256,421)             683,469
Effect of dilutive securities                                                                   10,973
                                                                     ------------         ------------
  Numerator for diluted income (loss) per share income (loss)
      attributable to common stockholders after assumed
      conversions                                                    $   (256,421)        $    694,442
Denominator:
 Denominator for basic income (loss) per
  share weighted-average shares                                        56,023,105           52,545,409
 Effect of dilutive securities                                                              24,464,692
                                                                     ------------         ------------
 Denominator for diluted income (loss) per
  share - adjusted weighted-average shares                             56,023,105           77,010,101
                                                                     ============         ============

Basic income (loss) per share of
  common share                                                       $      (4.58)        $      13.01
                                                                     ============         ============
Diluted income (loss) per share of
  common share                                                       $      (4.58)        $       9.02
                                                                     ============         ============
</TABLE>


         Unexercised options to purchase 933,455 shares of Common Stock as of
March 31, 2001 and outstanding convertible preferred stock, convertible into
22,486,370 shares of Common Stock as of March 31, 2001, were not included in the
computations of diluted loss per share in 2001 because assumed
exercise/conversion would be anti-dilutive.

NOTE  7.  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 to Internet service providers ("ISPs") in each state. Some of
Intermedia's interconnection agreements have expired and continue on a
month-to-month basis while the new agreements are being negotiated at 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.


                                                                              11

<PAGE>   12


         From 1997 through 2000, Intermedia recognized aggregate revenue from
these ILECS of approximately $203.3 million for these services. During the three
months ended March 31, 2001, Intermedia recognized approximately $7.0 million in
revenue for these services. As of March 31, 2001, $116.8 million in billed
reciprocal compensation 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 and diluted loss per share for
the year ended December 31, 2000 by $.84. Reciprocal compensation revenues for
the remainder of 2000 and in 2001 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 with the ILECs,
including the activity associated with the disputed ISP traffic, as local
network services, fully subject to reciprocal compensation, pursuant to the
terms of Intermedia's interconnection agreements. Accordingly, revenue is
recognized in the period that the traffic is terminated. Intermedia has filed
complaints against BellSouth in Florida and North Carolina, and BellSouth has
filed a complaint against Intermedia in Georgia, concerning a dispute over the
correct rates for the transport and termination of local traffic, commonly known
as reciprocal compensation. The rate 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 Multiple Tandem Access or "MTA", in
return for significantly lower reciprocal compensation rates. BellSouth has
contended that the signing of the amendment triggered the lower rates, while
Intermedia contended that the lower rates would only be in force if Intermedia
elected MTA. Intermedia's position is that it did not elect the MTA option. 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 this ruling 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 ruling with the Supreme Court of Florida. Amounts at risk in Florida are
approximately $57.0 million against prior period revenue in the event BellSouth
sustains this decision. In Georgia and North Carolina, the amounts at risk are
approximately $8.0 million and $11.0 million, respectively. The hearing in North
Carolina was held on October 10, 2000, with an expected state public utility
commission ruling in the second quarter of 2001. In Georgia, the complaint
hearing originally scheduled for December 18, 2000, was postponed and a new
hearing date has yet to be determined.

         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 or "PIU" for the billing of
terminating access services and requesting an award of damages. A hearing on
this matter has been scheduled for September 2001.

         Intermedia 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, argued that BellSouth had 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 argued 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. BellSouth subsequently filed a Motion to Dismiss, and in December
2000, the District Court partially granted BellSouth's motion. Specifically, the
court dismissed the federal antitrust counts and the counts alleging violation
of the Telecommunications Act. Further, the court deferred ruling on the state
fraud, breach of contract, and tortious interference counts and requested
additional briefing from the parties as to whether the court had


                                                                              12

<PAGE>   13


jurisdiction over the remaining state law claims. Intermedia has filed an appeal
of the court's ruling dismissing the antitrust claims and the counts alleging
violation of the Telecommunications Act. Intermedia further withdrew the state
law claims pending a decision to refile in state court.

         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.

         Other Disputes. 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 multi-party 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. In January 2001, Intermedia reached a settlement with Sprint and
subsequently withdrew from the federal court litigation against Sprint. However,
Intermedia remains a party to the federal court litigation against AT&T. The
judge in the AT&T litigation has stayed the case for six months and referred
portions of the access rate dispute to the FCC for consideration. The FCC has
until July 2001 to render a ruling, after which the dispute will revert back to
the district court for final adjudication. 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.

         Delaware Digex Shareholder Litigation. On September 5, 2000, and
thereafter, Intermedia, Digex, the directors of Digex, and in some cases,
WorldCom, were named as defendants in a total of thirteen lawsuits in the Court
of Chancery of the State of Delaware in and for New Castle County. Of those
thirteen lawsuits, eight were brought as class actions on behalf of Digex public
shareholders, three were brought as derivative actions, purportedly on behalf of
Digex, and two advanced both class action and derivative claims. On October 17,
2000, the Court ordered that all thirteen lawsuits to be consolidated into a
single combined derivative and class action.

         In general, the complaints advanced substantially similar allegations
that the defendants breached their fiduciary duties to the class members by
acting to further their own interests at the expense of Digex public
stockholders, by engaging in self-dealing and by failing to act in good faith
towards the Digex public stockholders. The complaints claimed that such alleged
wrongdoing caused irreparable harm to such stockholders. In addition, four of
the complaints 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 future transactions
between WorldCom and Digex. These complaints also alleged that WorldCom aided
and abetted the wrongdoing of Intermedia's and the Intermedia-affiliated
directors of Digex. The complaints sought injunctive relief and unspecified
damages.

         On February 15, 2001, a memorandum of understanding was executed on
behalf of all interested parties in the consolidated actions, setting forth an
agreement in principle providing for the settlement of all actions in their
entirety. WorldCom will make a settlement payment of WorldCom common stock
having a total value of $165.0 million for distribution to Digex common stock
holders. One half of the settlement fund net of plaintiffs' attorneys fees will
be distributed to record holders of Digex common stock on September 1, 2000. The
balance of the settlement fund net of attorneys' fees will be paid to record
holders of Digex stock at the time of the consummation of the merger. Neither
Intermedia nor its affiliates will be entitled to any distribution from the
settlement fund. The merger agreement between Intermedia and WorldCom will be
amended to change the consideration to be paid to Intermedia shareholders in
connection with the merger. All fees and expenses of all plaintiffs and all
counsel representing all


                                                                              13



<PAGE>   14

plaintiffs in the action will also be paid out of that settlement fund. In
connection with the proposed settlement, WorldCom will reimburse Digex for
certain fees and expenses incurred by Digex associated with the merger and the
consolidated lawsuit in an amount not to exceed $15.0 million. WorldCom has also
agreed to enter into certain commercial agreements with Digex. A further
provision of the settlement will make Section 203 of the Delaware General
Corporation Law inapplicable to future transactions between WorldCom and Digex.

         On March 2, 2001, Digex, WorldCom, and Intermedia entered into a
definitive Stipulation of Settlement with all relevant parties to settle all
claims related to the consolidated class action and derivative action in
accordance with the terms agreed to in the February 15, 2001 memorandum of
understanding. On March 5, 2001, the parties presented the settlement to the
Chancery Court and on that date, the Chancery Court ordered, among other things,
that the terms of the settlement be presented to record holders of shares of
Digex common stock (other than the defendants in the Delaware Digex stockholders
litigation and their affiliates) at any time during the period from and
including August 31, 2000, through and including March 2, 2001, through
published and mailed notice. At a hearing on April 6, 2001, the Court approved
the settlement as presented. The Court entered the order and final judgment (the
"order and final judgment"), as final in accordance with Court of Chancery Rule
54(b). At the April 6, 2001 hearing, the Court also entered a separate award of
attorneys' fees and reimbursement of expenses (the "fee award"), relating to the
Delaware Digex stockholders litigation. Under the amended merger agreement, it
is a condition to the parties' obligations to complete the merger that, among
other things, the order and final judgment become final and unappealable. Under
Delaware law, the deadline for filing an appeal of the Chancery Court's order
and final judgment approving the settlement expired May 7, 2001, and no such
appeals of that order were filed before that deadline. As a result, the order
and final judgment is now final and unappealable. Similarly, no timely appeals
were filed with respect to the Chancery Court's separate fee award.

         The Florida Intermedia Stockholders Litigation. On November 22, 2000,
Joan Monteforte, a stockholder of Intermedia, filed a "Class Representation
Complaint" on behalf of the stockholders of Intermedia in the Circuit Court in
and for Hillsborough County, Florida. The complaint alleged that Intermedia and
its directors breached their fiduciary duties owed to the stockholders of
Intermedia in connection with their negotiation of the merger. The complaint
sought equitable relief and damages on behalf of a class consisting of the
stockholders of Intermedia.

         On February 5, 2001, plaintiff voluntarily dismissed three of the
director defendants from the lawsuit (Messrs. Knapp, Navab and Greene).

         Beginning in January 2001, plaintiff coordinated her discovery in this
action with the discovery taken in the action filed on behalf of Digex and its
minority stockholders in the Chancery Court, which is discussed above. Plaintiff
also initiated her own discovery. In response to plaintiff's document demands,
defendants produced numerous documents. Defendants also provided plaintiff with
copies of the transcripts of depositions of Intermedia's directors, officers and
agents that were taken in connection with the Delaware Digex Stockholders
Litigation.

         After engaging in discovery, plaintiff prepared and served a "First
Amended Class Representation Complaint". The amended complaint alleges that
defendants breached their fiduciary duties owed to Intermedia's stockholders in
connection with the negotiation and September 1, 2000 approval of the merger
agreement. In particular, the amended complaint alleges that the Intermedia
board of directors failed to negotiate appropriate material adverse effect and
termination fee clauses in the merger agreement. Plaintiff alleges that, as a
result of these purported breaches of fiduciary duty, WorldCom could more easily
decline to consummate the merger, thereby injuring the stockholders of
Intermedia. The amended complaint sought to enjoin, preliminarily and
permanently, defendants, and all persons acting in concert with them, from
terminating or allowing WorldCom to terminate the merger agreement, as well as
to recover damages for the alleged breaches of fiduciary duties.


                                                                              14

<PAGE>   15


         The plaintiff in this lawsuit carefully monitored the proceedings in
the Delaware Digex Stockholders Litigation. In February 2001, as part of the
effort to settle the Delaware action, and thereby eliminate a potential
impediment to the merger, WorldCom and Intermedia negotiated changes to the
merger agreement, which eventually led to the execution, on February 15, 2001,
of the first amendment to the merger agreement.

         Through formal and informal discovery, plaintiff's counsel reviewed the
amendment to the merger agreement before it was approved by Intermedia's board
of directors. Plaintiff was provided with information and analyses, and, through
her advisors, conducted her own independent analyses, of the amendment to the
merger agreement. In the course of performing those analyses, plaintiff's
counsel discussed with Intermedia's financial advisor, Bear Stearns, various
analyses that Bear Stearns had performed in connection with its evaluation of
the revised merger, general market conditions affecting Intermedia, the overall
financial condition of Intermedia and other financial issues regarding the
revised merger.

         As a result of these analyses, the plaintiff and her advisors concluded
that the merger and the amended merger agreement are fair to the stockholders of
Intermedia and provided grounds for the settlement of the claims brought on
behalf of Intermedia's stockholders. Thus, on February 14, 2001, based on the
benefits provided to Intermedia's stockholders in the merger and the amended
merger agreement, the parties entered into a memorandum of understanding that
contemplates the dismissal of this lawsuit with prejudice and a release of all
claims of the Intermedia stockholders arising out of the subject matter of the
lawsuit.

         On February 23, 2001, the parties filed a stipulation of settlement
with the Circuit Court and at a hearing held on April 20, 2001, the Circuit
Court approved the settlement as presented.

NOTE  8.  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 also owns a 61.6% interest in
Digex, which provides managed Web site and application hosting services 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 the 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 March 31, 2001
   Revenue from external customers                   $   214.7          $   53.1                       $  267.8
   Intersegment revenue                                    1.7                          (1.7)
   Loss from operations                                 (140.9)            (43.8)                        (184.7)
Three months ended March 31, 2000
   Revenue from external customers                       233.7              25.8                          259.5
   Intersegment revenue                                    3.2                          (3.2)
   Loss from operations                                  (51.7)            (28.8)                         (80.5)

Total assets at March 31, 2001                       $ 2,880.3          $  470.5      $                $ 3,350.8
Total assets at March 31, 2000                         3,879.3             563.4        (2.7)          $ 4,440.0
</TABLE>


                                                                              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, 2000, 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, local and long distance, managed Web site and
application hosting, and systems integration services to business and government
customers throughout the United States. Intermedia is a significant nationwide
frame relay provider in the United States, a leading Internet service provider,
the largest shared tenant telecommunications service provider 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, the provision of integrated communications 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 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 1,108 network to network interfaces ("NNIs") and 211
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 achieved $(26.6) million and $15.1 million positive EBITDA
before certain charges for the first quarter in 2001 and 2000, 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, merger-related and other
charges. 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 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


                                                                              16


<PAGE>   17


analysis of Intermedia's operating performance relative to other companies in
the industry.

PLAN OF OPERATION

         Intermedia believes that since the September 5, 2000 announcement of
the proposed merger with WorldCom, Intermedia's business has suffered a number
of negative effects due, directly or indirectly, to the pendency of the merger.
These effects include the loss of suppliers, customers and employees, some of
which are significant to Intermedia's business. Although Intermedia has
attempted to mitigate these effects, the pendency of the merger has created
uncertainty in Intermedia's relationships with customers, suppliers and
employees, and this uncertainty is likely to continue. If the merger agreement
is terminated or if the merger is not completed for any reason, there can be no
assurance that Intermedia would be able to restore relationships with customers,
suppliers, and employees that have terminated their affiliation with Intermedia
since the announcement of the merger. Moreover, the loss of these customers,
suppliers and employees may have a material adverse effect on Intermedia's
business.

         In addition, since the announcement of the merger, Intermedia has
operated its business under the restrictions imposed by the merger agreement.
These restrictions limit Intermedia's level of capital expenditures, as well as
the ability of Intermedia to grow and expand its business. As a result, if the
merger agreement is terminated or if the merger is not completed for any reason,
Intermedia may not be as well positioned to effectuate its historic business
plan.

         In addition, pursuant to the Stipulation that WorldCom and Intermedia
entered into with the Antitrust Division, WorldCom agreed to divest of all of
Intermedia's assets, except for its Digex stock, within six months after the
merger (unless extended by the Antitrust Division) and, until the divestiture,
Intermedia and WorldCom have agreed to continue to operate Intermedia as an
independent competitive business.


                                                                              17

<PAGE>   18


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 MARCH 31,
                                                            2001              2000
                                                          --------          --------
<S>                                                      <C>                <C>
Revenues:
   Data, internet and web hosting                             58.0%             43.3%
   Local access and voice                                     28.8              41.8
   Integration services                                       13.2              14.9
                                                          --------          --------
                                                             100.0             100.0
Expenses:
   Network operations                                         41.0              34.7
   Facilities administration and
     maintenance                                              20.4              14.3
   Cost of goods sold                                          8.1              10.3
   Selling, general and administrative                        40.4              34.9
   Depreciation and amortization                              50.3              34.4
   Deferred compensation                                       1.0               1.4
 Business restructuring, merger-related and
      Other charges                                            7.8               1.0
                                                          --------          --------
 Loss from operations                                        (69.0)            (31.0)
                                                                            --------
 Other income (expense):

   Interest expense                                          (24.8)            (28.1)
   Gain on sale of Digex stock                                  --             333.1
   Interest and other income                                   3.8               5.3
                                                          --------          --------
   Net income (loss) before minority
     interest and income taxes                               (90.0)            279.3
   Provision for income taxes                                   --               9.0
                                                          --------          --------
   Income (loss) before minority interest                    (90.0)            270.3
   Minority interest in net loss of subsidiary                 6.3               3.2
                                                          --------          --------
   Net income (loss) before cumulative effect of a
           Change in accounting principle                    (83.7)            273.5
   Cumulative effect of a change in accounting
           Principle                                            --               (.1)
                                                          --------          --------
   Net income (loss)                                         (83.7)            273.4
   Preferred stock dividends and accretions                  (12.1)            (10.0)
                                                          --------          --------
   Net income (loss) attributable to common
        stockholders                                         (95.8)%           263.4%
                                                          ========          ========
</TABLE>


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

<TABLE>
<CAPTION>
                                                                  MARCH 31, 2001       MARCH 31, 2000
                                                                  --------------       --------------
<S>                                                               <C>                  <C>
Data, Internet and Web Hosting: (1)
         Web hosting servers                                           4,107                2,911
         Data switches in operation                                      211                  193
         NNI connections                                               1,108                  959

   Access and Voice: (1)
         ABN revenue ready buildings (2)                                 797                  664
         Voice switches in operation                                      29                   29
         Access line equivalents                                     658,480              566,113

   Employees (1)                                                       5,702                5,423
</TABLE>


                                                                              18

<PAGE>   19


(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 MARCH 31, 2001 COMPARED TO QUARTER ENDED MARCH 31, 2000:

Revenue

         Total revenue increased 3.2% to $267.8 million for the first quarter of
2001 compared to $259.5 million for the same period in 2000. The Digex Web Site
and application hosting segment revenue increased 105.7% $53.1 million for the
first quarter of 2001 compared to $25.8 million for the same period in 2000. The
overall increase was primarily due to the continued expansion of the frame relay
and ATM networks as well as strong growth in Internet and Web site and
application hosting services.

         Data, internet, and web hosting revenue increased 38.4% to $155.4
million for the first quarter of 2001 compared to $112.3 million for the same
period in 2000. This increase was principally a result of strong growth in
managed web site and application hosting services of the Digex Web site and
application hosting segment as well as expansion of Intermedia's frame relay and
ATM network. The Digex Web site and application hosting segment revenues
increased by $27.3 million due to new customer growth, a significant increase in
the number of managed servers per customer, and a rise of monthly revenue per
server in the first quarter of $4,249 in 2001 compared to $3,293 for the same
period in 2000. The number of installed base of servers at Digex increased 41.1%
to 4,107 at the end of the first quarter of 2001 from 2,911 at the end of the
first quarter of 2000. In addition, the continued expansion of Intermedia's
enhanced data network contributed increased revenues of $12.8 million in the
first quarter of 2001 compared to the same period in 2000. Intermedia's data
network expanded by 149 NNI connections and 18 data switches since March 31,
2000 that facilitated the revenue growth.

         Local access and voice revenue decreased 28.9% to $77.1 million for the
first quarter of 2001 compared to $108.5 million for the same period in 2000.
This decrease was principally due to the decrease in reciprocal compensation
revenue from certain ILECs of $25.4 million in the first quarter of 2001
compared to the same period in 2000 due to lower rates as a result of regulatory
changes during 2000. The number of access line equivalents has increased by
79,119 from April 1, 2000 through the end of the first quarter of 2001. The
additional access line equivalents were primarily on-switch, approximately 92.4%
as of March 31, 2001 compared to 88.8% as of March 31, 2000, contributing to
improved gross margins and allowing Intermedia to cross-sell additional services
to its customers. In addition, there were decreases in long distance revenue of
approximately $7.3 million in the first quarter of 2001 compared to the first
quarter of 2000. The decrease in long distance is a result of the industry
experiencing per minute pricing declines as well as attrition of the customer
base.

         Integration services revenue decreased 8.8% to $35.2 million for the
first quarter of 2001 compared to $38.6 million for the same period in 2000.
This decrease was principally due to a slowdown in the economy and a decline in
telecommunications equipment sales during the first quarter of 2001 as compared
to the first quarter of 2000.


                                                                              19
<PAGE>   20


Operating Expenses

         Total operating expenses increased 33.1% to $452.5 million for the
first quarter of 2001 compared to $340.0 million for the same period in 2000.
The Digex Web site and application hosting segment total operating expenses
increased $42.3 million during the period due to increased level of operations
and an expanded customer base to support.

         Network expenses increased 21.7% to $109.8 million for the first
quarter of 2001 compared to $90.2 million for the same period in 2000.
Intermedia has experienced increased network costs related to the growth in the
frame relay and ATM network.

         Facilities administration and maintenance expenses increased 47.2% to
$54.6 million for the first quarter of 2001 compared to $37.1 million for the
same period in 2000. The increase resulted from support costs relating to the
expansion of Intermedia's owned and leased network capacity, increases in
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
segment accounted for $14.1 million of the increase related to the increased
level of operations and the expansion of the two new data centers including
costs related to the hiring of additional personnel in customer service,
engineering, and facilities administration supporting server growth.

         Cost of goods sold decreased 19.1% to $21.6 million for the first
quarter of 2001 compared to $26.7 million for the same period in 2000. This
decrease was principally due to the decrease in demand for telecommunications
equipment as well as an increased effort to receive discounts on volume
purchasing.

         Selling, general and administrative expenses increased 19.8% to $108.3
million for the first quarter of 2001 compared to $90.4 million for the same
period in 2000. Intermedia's increase resulted from increased sales incentive
compensation, employee-related benefits and taxes related to the increased
property value of the telecommunication equipment. The Digex Web site and
application hosting segment accounted for approximately $10.6 million of this
increase. The increases at Digex are primarily as part of Digex's growth
strategy, as Digex continued to build infrastructure and administrative
requirements to operate as a separate public company. Increases in 2001 costs
for Digex include the costs associated with an increased employee base,
advertising campaigns, rent for additional office space, consultants'
professional fees, an increased provision for doubtful accounts receivable and
the addition of key executive management to support the growth of the business.

         Depreciation and amortization expenses increased 50.7% to $134.6
million for the first quarter of 2001 compared to $89.3 million for the same
period in 2000. This increase was principally due to depreciation and
amortization of telecommunications equipment placed in service since April 1,
2000 relating to ongoing network expansion (including the irrevocable right of
use of the Williams Communications nationwide network). The Digex Web site and
application hosting segment accounted for $16.3 million of the increase due to
additional servers and other facilities and equipment placed in service since
March 31, 2000. Depreciation and amortization expense is expected to increase in
future periods based on Digex's continued expansion of the new data centers and
due to future increased server installations based upon customer demand.

         Deferred compensation expense decreased 27.0% to $2.7 million for the
first quarter of 2001 compared to $3.7 million for the same period in 2000. The
decrease resulted from accelerated vesting of restricted stock granted to
certain executives in 2000.

         Business restructuring, merger-related and other charges increased
700.0% to $20.8 million for the first quarter of 2001 compared to $2.6 million
in the same period in 2000. The increase in the business restructuring,
merger-related and other charges is due to the costs incurred in the first
quarter of 2001 related to the proposed


                                                                              20

<PAGE>   21


merger with WorldCom, including 50% of the retention bonus being paid out to
Intermedia employees in February 2001 as a result of meeting certain merger
milestones. The costs incurred during the first quarter of 2000 related
primarily to the restructuring program associated with network integration. The
restructuring program was completed on June 30, 2000.

Interest Expense

         Interest expense decreased 8.9% to $66.4 million for the first quarter
of 2001 compared to $72.9 million for the same period in 2000. The decrease is
due to the repurchase of $670.0 million aggregate principal amount of senior
notes in the second and fourth quarters of 2000. Interest expense at the Digex
Web site and application hosting segment increased $.3 million as a result of
the capital lease for the new Digex corporate headquarters facility entered into
during the third quarter of 2000, capital leases for vehicles entered into
during the fourth quarter of 2000, and additional capital leases for vehicles
and accrued interest under the $3.0 million loan in the first quarter of 2001.
Interest cost capitalized in connection with Intermedia's construction of
telecommunications equipment amounted to approximately $2.3 million in the first
quarter of 2001 compared to $3.4 million in the same period of 2000.

Gain on sale of Digex stock

         Gain on sale of Digex stock was approximately $864.3 million for the
quarter ended March 31, 2000. On February 16, 2000, Intermedia sold 10,650,000
shares of its investment in Digex's Class B Common Stock. Gross proceeds
amounted to $914.0 million.

Other Income

         Other income decreased 26.1% to $10.2 million for the first quarter of
2001 compared to $13.8 million for the same period in 2000. This decrease was
primarily the result of interest earned on the comparatively lower level of
average cash balances in the first quarter of 2001 as compared to the first
quarter of 2000. The cash proceeds received in 2000 from the secondary offering
of Digex stock were depleted as of November 30, 2000. The decrease in interest
and other income at the Digex Web site and application hosting segment was $3.2
million as a result of the decrease in the interest earned on the remaining cash
proceeds from the investment in Digex by Microsoft and a subsidiary of Compaq
and exercised stock options in 2000.

Net Income (Loss) before Minority Interest and Income Taxes

         Net income (loss) before minority interest and income taxes decreased
133.2% to $(240.9) million for the first quarter of 2001 compared to $724.7
million for the same period in 2000. The decrease in net income (loss) before
minority interest and income taxes is due to the gain on sale of Digex stock in
2000 and additional operating expenses in 2001 described above.

Provision for Income Taxes

         Provision for income taxes is approximately $23.4 million for the first
quarter of 2000. Although Intermedia utilized net operating losses to offset
regular federal taxable income, a provision for current income tax expense for
the first quarter of 2000 is required for AMT purposes. Since Intermedia
incurred losses in the first quarter of 2001, there was no provision for income
taxes.


                                                                              21

<PAGE>   22


Income (Loss) Before Minority Interest

         Net income (loss) before minority decreased 134.3% to $(240.9) million
for the first quarter of 2001 compared to $701.3 million for the same period in
2000. Intermedia's loss in the first quarter of 2001 compared to the net income
before minority interest in the prior year was principally the result of the
sale of Digex common stock by Intermedia as described above. As a result of the
Gain on Sale of Digex stock, Intermedia utilized $742 million of net operating
loss carryforwards for federal tax purposes.

Minority Interest in Net Loss of Subsidiary

         A minority interest in net loss of subsidiary increased 102.4% to $16.8
million for the first quarter of 2001 compared to $8.3 million for the same
period in 2000. The increase in 2001 was due to increased losses at the Digex
Web site and application hosting segment.

Net Income (Loss) Before Cumulative Change in Accounting Principle

         Net income (loss) before cumulative change in accounting principle
decreased 131.6% to $(224.1) million for the first quarter of 2001 compared to
$709.6 million for the same period in 2000. The decrease resulted primarily from
the Gain of Sale of Digex Stock in 2000 and related income tax provision that
resulted from the utilization of net operating loss carryforwards when applied
to earnings estimated for calendar year 2000.

Cumulative Change in Accounting Principle

         The cumulative change in accounting principle of $.2 million in 2000
was due to the Digex Web site and application hosting segment's change in its
method of accounting for revenue recognition in accordance with SAB 101
effective January 1, 2000.

Net Income (loss)

         Net income (loss) decreased 131.6% to $(224.1) million for the first
quarter of 2001 compared to $709.4 million for the same period in 2000. The
decrease resulted primarily from the gain on sale of Digex stock and cumulative
change in accounting principle in 2000.

Preferred Stock Dividends and Accretions

         Preferred stock dividends and accretions increased 24.7% to $32.3
million for the first quarter of 2001 compared to $25.9 million for the same
period in 2000 which is due to the increased number of shares outstanding for
which dividends will accrue. Management does not expect to pay cash dividends in
the foreseeable future.

EBITDA Before Certain Charges

         EBITDA before certain charges decreased $41.7 million to $(26.6)
million for the first quarter of 2001 compared to $15.1 million for the same
period in 2000. The decrease in EBITDA in 2001 compared to the prior year was
impacted by the pendency of the merger with WorldCom effects on the loss of
suppliers, customers and employees. Although Intermedia has attempted to
mitigate these effects, the pendency of the merger has created uncertainty in
Intermedia's relationships with customers, suppliers, and employees, and this
uncertainty is likely to continue. In addition, since the


                                                                              22

<PAGE>   23


announcement of the merger, Intermedia has operated its business under the
restrictions imposed by the merger agreement. These restrictions limit
Intermedia's level of capital expenditures, as well as the ability of Intermedia
to grow and expand its business.

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 $102.4 million and $134.6 million for the three months ended
March 31, 2001 and 2000, respectively, excluding capital leases. 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 related
to the development of the Digex Web site and application hosting 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 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 dependent on outside sources to meet its cash
flow requirements.

         On December 31, 1999, Intermedia entered into a five-year secured $100
million Credit Agreement outstanding with several financial institutions
(lenders). 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, which is now fully guaranteed by WorldCom. As of March 31,
2001, Intermedia had $191.0 million outstanding under its Credit Facility. In
general, the Credit Facility terminates on the earlier of (a) June 30, 2001, (b)
the consummation of the WorldCom merger, or (c) the date upon which certain
merger termination events, as defined in the fourth amendment to the Credit
Agreement, shall have occurred.

         On July 11, 2000, Intermedia announced that it was exploring strategic
alternatives with regard to Digex, including, without limitation, the possible
sale of its ownership position in Digex. As described in the Notes to the
consolidated financial statements, on September 1, 2000 Intermedia entered into
a merger agreement with 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 (or, if WorldCom's
proposed recapitalization is completed, shares of two new series of WorldCom
trading stock), 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 terms that are substantially similar to the terms of 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.


                                                                              23

<PAGE>   24


         On February 15, 2001, concurrent with the settlement of the Delaware
Digex Stockholders Litigation, Intermedia and WorldCom amended the terms of the
merger agreement to, among other things, reduce the exchange ratio payable in
the merger to holders of Intermedia's common stock and to make certain
modifications to the provisions of the merger agreement relating to the term
"material adverse effect" as it applies to Intermedia. Under the amended merger
agreement, pursuant to a fixed exchange ratio, Intermedia stockholders will
receive 1.0 share of WorldCom common stock for each share of Intermedia common
stock they own and WorldCom will not have the option of paying any part of the
consideration in cash (other than cash payments in lieu of fractional shares).
The definition of the term "material adverse effect" in the merger agreement has
been narrowed to eliminate various categories of items as potentially giving
rise to breaches of Intermedia's representations and warranties included in the
amended merger agreement.

         Pursuant to the memorandum of understanding relating to the settlement
of the Delaware Digex Stockholders Litigation, on February 28, 2001, WorldCom
and Digex entered into a letter agreement relating to WorldCom's provision of
funding to Digex to support the Digex business plans for 2001 and 2002, subject
to the satisfaction of certain conditions. These conditions include the
consummation of the WorldCom/Intermedia merger and the settlement to the
reasonable satisfaction of WorldCom and Digex of the Delaware Digex Stockholders
Litigation.

         On October 31, 2000, Intermedia also entered into a subordinated note
purchase agreement with WorldCom under which Intermedia authorized the issue and
sale of up to $225.0 million aggregate principal amount of Senior Subordinated
Notes due 2009 and 22,500 shares of Series H Preferred Stock. Interest on any
notes issued under the subordinated 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 weighted 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 the Series H
Preferred Stock. Borrowings under the note purchase agreement are subject to
WorldCom's approval of the expenditures for which the borrowed funds will be
used. Moreover, in the event that the merger agreement were terminated, this
source of funding would no longer be available to Intermedia. Intermedia has
borrowed $31 million under these financing arrangements as of March 31, 2001.

       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.

         In addition, pursuant to the Stipulation that WorldCom and Intermedia
entered into with the Antitrust Division, WorldCom agreed to divest of all of
Intermedia's assets, except for its Digex stock, within six months after the
merger (unless extended by the Antitrust Division) and, until the divestiture,
Intermedia and WorldCom have agreed to continue to operate Intermedia as an
independent competitive business.

         As reflected in the report delivered by Intermedia's independent
auditors, Ernst & Young LLP, in connection with the preparation of Intermedia's
fiscal year 2000 audited consolidated financial statements, Intermedia's
consolidated financial statements in the Annual Report on Form 10-K have been
prepared assuming that Intermedia will continue as a going concern, which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. As described in Note 3 to the accompanying
condensed consolidated financial statements, Intermedia has had recurring
operating losses and has a net capital deficiency. At March 31, 2001, Intermedia
had a stockholders' deficit of $(843.3) million and had incurred losses
attributable to common stockholders of approximately $(8.1) million (including a
non-recurring gain of $864.3 million related to the sale of Intermedia's
investment in Digex), $(650.9) million and $(577.6) million for the years ended
December 31, 2000, 1999 and 1998, respectively. Intermedia also incurred
$(256.4)


                                                                              24


<PAGE>   25


million in losses attributable to common stockholders in the three month period
ended March 31, 2001. Intermedia currently has limited financial resources
available to fund ongoing expected operating losses. These factors, among
others, indicate that Intermedia may be unable to continue as a going concern.

         The consolidated financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts or
the amounts and classification of liabilities that might be necessary should
Intermedia be unable to continue as a going concern. Intermedia's continuation
as a going concern is dependent upon its ability to generate sufficient cash
flow to meet its obligations on a timely basis, to obtain additional financing
as may be required, and ultimately to attain profitable operations and positive
cash flow. Intermedia's future capital needs depend on a number of factors,
certain of which are under Intermedia's control (such as marketing expenses,
staffing levels, customer growth and capital costs) and others of which are not
under Intermedia's control (such as competitive conditions and government
regulation). Moreover, the terms of Intermedia's outstanding indebtedness
(including Intermedia's Credit Facility) and preferred stock as well as the
terms of the merger agreement with WorldCom, impose certain restrictions upon
Intermedia's ability to incur additional indebtedness or issue additional
preferred stock.

         Intermedia's cash needs through June 30, 2001 are being funded by
WorldCom pursuant to the merger agreement, as amended, the related October 31,
2000 subordinated note purchase agreement and the Credit Facility which have
been guaranteed by WorldCom. In the event that the merger agreement with
WorldCom is terminated or the merger is not completed for any reason, the
sources of funding provided by WorldCom, as well as WorldCom's guarantee of the
Credit Facility, would no longer be available. Although Intermedia expects that
the merger with WorldCom will be completed on July 1, 2001, there can be no
assurance that the merger will be completed when expected or if at all. If the
merger is completed, Intermedia will no longer be an independent company and,
like other subsidiaries of WorldCom, Intermedia will rely on WorldCom to supply
all of its funding requirements. In the event that the WorldCom merger is not
completed or not completed in accordance with the parties' projected timetable,
however, Intermedia will be required to obtain all of its required funding as a
standalone entity. In such event, Intermedia's funding sources may be inadequate
to sustain its operations or fund its debt obligations, including any debt
obligations that may be accelerated as a direct or indirect result of the event
of default that may be caused by the termination of the merger agreement.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE

         While all of Intermedia's long term debt bears fixed interest rates,
the fair market value of Intermedia's fixed rate long-term debt is sensitive to
changes in interest rates. The 14.12% Senior Subordinated Notes issued during
the first quarter of 2001 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.

         The Digex web site segment had no changes to its quantitative and
qualitative disclosure during the first quarter of 2001.

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 this Form 10-Q that are not
historical facts are "forward-looking statements" (as such term is defined in
the Private Securities


                                                                              25


<PAGE>   26

Litigation Reform Act of 1995). Forward-looking statements can be identified by
the use of words such as "estimates," "projects," "anticipates," "expects,"
"intends," "believes," or comparable terminology, the negative thereof or other
variations thereon or by discussions of strategy that involve risks and
uncertainties.

         Management wishes to caution you that all forward-looking statements
contained in this Form 10-Q are only estimates and predictions. Actual results
could differ materially from those anticipated in this Form 10-Q as a result of
risks facing us or actual events differing from the assumptions underlying such
statements. Such risks and assumptions included, but are not limited to, the
"Risk Factors" in Intermedia's Annual Report on Form 10-K for the year ended
December 31, 2000. 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.


                                                                              26

<PAGE>   27


PART  II.  OTHER INFORMATION

ITEM  1.  LEGAL PROCEEDINGS

         Intermedia is not a party to any material legal proceedings other than
the items described in Note 7 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. For further information regarding pending
material legal proceedings to which Intermedia is a party, see the disclosure
under the caption "The Merger-Litigation" in the proxy statement of Intermedia
which forms a part of the Registration Statement on Form S-4 of WorldCom, Inc.
(File No. 333-60482) relating to the merger.

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
------         -------

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.


                                                                              27


<PAGE>   28


         (b) Reports on Form 8-K


         The following reports on Form 8-K of Intermedia were filed during the
first quarter of 2001:

        Intermedia filed a Current Report on Form 8-K, dated February 1, 2001,
    reporting under Item 5 the issuance of a press release discussing Digex's
    fourth quarter and year 2000 results. Intermedia also reported under Item 7
    the filing of the press release as an exhibit to the Form 8-K.

        Intemedia filed a Current Report on Form 8-K, dated February 15, 2001,
    reporting under Item 5 the issuance of a press release announcing the
    proposed settlement of the consolidated shareholder class action suit
    arising from the proposed merger with WorldCom. Intermedia also reported
    under Item 7 the filing of the Memorandum of Understanding and press release
    as exhibits to the Form 8-K.

         Intermedia filed a Current Report on Form 8-K, dated March 12, 2001,
    reporting under Item 5 the issuance of a press release discussing
    Intermedia's fourth quarter and year 2000 results. Intermedia also reported
    under Item 7 the filing of the press release as an exhibit to the Form 8-K.


                                                                              28



<PAGE>   29


                                   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: May 15, 2001


                                   INTERMEDIA COMMUNICATIONS INC.
                                           (Registrant)


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


                                                                              29