<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED September 30, 1996
COMMISSION FILE NUMBER 000-21043
PACIFIC GATEWAY EXCHANGE, INC.
------------------------------
(Exact name of registrant as specified in its charter)
Delaware 94-3134065
(State of Other Jurisdiction (IRS Employer
of Incorporation or Organization) Identification Number)
533 Airport Blvd, Suite 505, Burlingame, California, 94010
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (415) 375-6700
------------------
None
----
(Former name, former address and
former fiscal year if changed since last report)
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
---- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of 30 October, 1996
----------
Common Stock, par value $.001 19,461,829
(Titles of each class) (Number of Shares)
<PAGE>
PACIFIC GATEWAY EXCHANGE, INC.
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Part I - FINANCIAL INFORMATION:
Page
<S> ----
Balance sheet at <C>
September 30, 1996 and December 31, 1995 3
Statement of operations
for the three-and nine-month periods ended
September 30, 1996 and 1995 4
Statement of cash flows
for the nine-month periods ended
September 30, 1996 and 1995 5
Notes to financial statements 6
Management's discussion and analysis
of financial condition and results
of operations 7
Part II - OTHER INFORMATION 11
Item 1: Legal Proceedings 11
Item 2: Changes in Securities 11
Item 3: Defaults Upon Senior Securities 11
Item 4: Submission of Matters to a Vote of Security Holders 11
Item 5: Other Information 11
Item 6: Exhibits and Reports on Form 8-K 11
</TABLE>
2
<PAGE>
PACIFIC GATEWAY EXCHANGE, INC.
BALANCE SHEETS
(In thousands, except share amounts)
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1996 1996
------------------ -----------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 52,653 $ 1,792
Accounts receivable, net of allowance for doubtful accounts
of $1,529 in 1996 and $824 in 1995. 21,935 12,804
Accounts receivable, related party 3,628 3,262
Advances receivable, related party - 175
------------------ -----------------
Total current assets 78,216 18,033
PROPERTY AND EQUIPMENT:
Undersea fiber optic cables 9,912 5,826
Long distance communications equipment 10,355 6,092
Computers and Office Equipment 1,137 749
------------------ -----------------
21,404 12,667
Less accumulated depreciation 3,066 1,656
------------------ -----------------
Total property and equipment, net 18,338 11,011
Deferred income tax 222 148
Deposits and other assets 1,091 564
------------------ -----------------
Total assets $ 97,867 $ 29,756
================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 36,306 $ 20,191
Income taxes payable 1,076 735
Revolving line of credit - 3,000
Other liabilities 381 519
------------------ -----------------
Total current liabilities 37,763 24,445
Revolving line of credit, related party - 2,420
------------------ -----------------
Total liabilities 37,763 26,865
STOCKHOLDERS' EQUITY:
Preferred stock, $.0001 par value, authorized
1,000,000 shares - -
Common stock, $.0001 par value, authorized 25,000,000
shares, issued and outstanding 19,449,801 shares in 1996 1 1
and 14,100,000 shares in 1995
Additional paid in capital 54,856 941
Retained earnings 5,247 1,949
------------------ -----------------
Total stockholders' equity 60,104 2,891
------------------ -----------------
Total liabilities and stockholders' equity $ 97,867 $ 29,756
================== =================
</TABLE>
See Accompanying Notes to Financial Statements.
3
<PAGE>
PACIFIC GATEWAY EXCHANGE, INC.
STATEMENTS OF OPERATIONS
(In thousands, except net income per share)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
--------------------- ----------------------
1996 1995 1996 1995
---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
Revenues $ 38,702 $ 16,793 $ 97,492 $ 38,433
Revenues - related party 5,547 4,599 15,730 12,644
-------- -------- -------- --------
Total revenues 44,249 21,392 113,222 51,077
Cost of long distance services 37,449 18,904 99,227 44,099
-------- -------- -------- --------
Gross margin 6,800 2,488 13,995 6,978
Selling, general and administrative expenses 3,054 1,536 7,259 3,824
Depreciation 547 300 1,410 710
-------- -------- -------- --------
Total operating expenses 3,601 1,836 8,669 4,534
-------- -------- -------- --------
Operating income 3,199 652 5,326 2,444
Other Expenses 73 - 73 -
Interest expense/(income) (488) 153 (242) 381
-------- -------- -------- --------
Income before income taxes 3,614 499 5,495 2,063
Provision for income taxes 1,446 196 2,197 810
-------- -------- -------- --------
Net income $ 2,168 $ 303 $ 3,298 $ 1,253
-------- -------- -------- --------
Net income per share $ 0.12 $ 0.02 $ 0.21 $ 0.09
======== ======== ======== ========
Weighted average number of common shares
outstanding 18,586 14,300 15,655 14,300
-------- -------- -------- --------
</TABLE>
See Accompanying Notes to Financial Statements.
4
<PAGE>
PACIFIC GATEWAY EXCHANGE, INC.
STATEMENT OF CASHFLOWS
(In thousands)
<TABLE>
<CAPTION>
Nine Months
Ended September 30,
-------------------------
1996 1995
--------- ---------
<S> (Unaudited)
OPERATING ACTIVITIES <C> <C>
Net Income $ 3,298 $ 1,253
Adjustments to net income:
Depreciation 1,410 710
Change in bad debts provision 705 552
Provision for deferred income tax (74) 10
Change in accounts receivable (10,027) (8,186)
Change in deposits and other assets (527) (5)
Change in accounts payable 16,887 9,511
Change in accrued liabilities (772) (72)
Change in other liabilities (138) 585
Change in income taxes recoverable 341 1,178
--------- ---------
Net cash provided by operating activities 11,103 5,536
--------- ---------
INVESTING ACTIVITIES
Purchase of property and equipment (8,737) (5,960)
--------- ---------
Net cash used in investing activities (8,737) (5,960)
--------- ---------
FINANCING ACTIVITIES
Proceeds from issuance of Common Stock 53,915 939
(Repayments) borrowings on revolving lines of credit (5,420) 939
--------- ---------
Net cash provided by financing activities 48,495 939
--------- ---------
Net increase in cash 50,861 515
Cash at beginning of the period 1,792 9
Cash at end of the period $ 52,653 $ 524
========= =========
SUPPLEMENTARY INFORMATION
Interest paid during period 270 228
Income taxes paid during period 1,929 863
</TABLE>
See Accompanying Notes to Financial Statements
5
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
PACIFIC GATEWAY EXCHANGE, INC.
NOTES TO FINANCIAL STATEMENTS
(1) GENERAL
- -----------
The financial statements included herein are unaudited and have been prepared in
accordance with generally accepted accounting principles for interim financial
reporting and Securities Exchange Commission ("SEC") regulations. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. In the opinion of
management, the financial statements reflect all adjustments (of a normal and
recurring nature) which are necessary to present fairly the financial position,
results of operations and cash flows for the interim periods. These financial
statements should be read in conjunction with the Prospectus of the Company
dated July 19, 1996. The results for the three month and nine month periods
ended September 30, 1996, are not necessarily indicative of the results that may
be expected for the year ending December 31, 1996.
(2) ACCOUNTING FOR INTERNATIONAL LONG DISTANCE TRAFFIC
- -------------------------------------------------------
The Company has entered into operating agreements with 30 telecommunications
carriers in 24 different countries under which international long distance
traffic is both delivered and received. Under these agreements, the foreign
carriers are contractually obligated to adhere to the policy of the Federal
Communications Commission (the "FCC"), whereby traffic from the foreign country
is routed to international carriers, such as the Company, in the same proportion
as traffic carried into the country. Mutually exchanged traffic between the
Company and foreign carriers is settled through a formal settlement policy that
generally extends over a six-month period at an agreed upon rate. The Company
records the amount due to the foreign partner as an expense in the period the
traffic is delivered. Of the 30 agreements the Company had at September 30,
1996, 15 agreements provided that the company generally must wait up to six
months before it actually receives the proportional return traffic. For these
agreements, the Company recognizes a loss in the period in which it sells to a
customer because the amount due to the foreign partner generally exceeds the
amount the Company charges its customers. As a result, a significant increase
in traffic with one or more of the carriers with which the Company must wait up
to six months to receive return traffic may cause the Company to report a net
loss in the accounting period in which such increase occurred. Historically,
when the return traffic is received in the future period, the Company generally
realized a gross margin on the return traffic that, when combined with the prior
period loss on the outbound traffic, has resulted in a gross profit on the total
transaction. Although the Company can reasonably estimate the revenue it will
receive under the FCC's proportional share policy, there is no guarantee that
there will be traffic delivered back to the United States or what impact changes
in future settlement rates will have on net payments made and revenue received.
(3) SIGINIFICANT EVENTS
- ------------------------
During the third quarter, the Company completed an initial public offering of
6,057,050 shares of which 4,940,050 (the "offering") were offered by the Company
and 1,116,550 shares were offered by certain selling shareholders. The net
proceeds to the Company (after deducting underwriting discounts and estimated
offering expenses) from the sale of the shares was approximately $54.4 million.
The company used $3.3 million of the net proceeds to repay indebtedness. The
Company intends to use $35 million of these proceeds to finance the expansion of
its international network facilities on new and existing routes and the
remaining proceeds are expected to be invested in joint ventures, strategic
alliances or acquisitions and for working capital and general corporate
purposes. In connection with the Offering, the US affiliate of Kokusau Denshin,
Denwa ("KDD"), one of Japan's leading international telecommunications carriers,
purchased 1,800,000 shares and, as a result, owns approximately 9.5% of the
Company's outstanding common stock.
6
<PAGE>
PACIFIC GATEWAY EXCHANGE, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS
The discussion herein contains certain forward-looking statements within the
meaning of section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, including statements regarding expected future
revenue from delayed proportional return traffic from foreign partners and the
estimated impact on future income from such delayed proportional return traffic
pursuant to certain operating agreements and the expected declining of rates on
gross margin for transaction pursuant to such operating agreements. The
Company's revenues and results of operations are difficult to forecast and could
differ materially from those projected in the forward-looking statements as a
result of numerous factors, including, without limitation, changes in
international settlement rates, changes in ratios between outgoing and incoming
traffic, foreign currency fluctuations, termination of certain operating
agreements and changes in the US tax law.
The following table sets forth income statement data as a percentage of revenues
for the period indicated.
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------------ --------------------------
1996 1995 1996 1995
---------- --------- ---------- -----------
<S> <C> <C> <C> <C>
Total revenues 100.0% 100.0% 100.0% 100.0%
Cost of long distance services 84.6% 88.4% 87.6% 86.3%
---------- -------- -------- -----------
Gross margin 15.4% 11.6% 12.4% 13.7%
Selling, general and administrative expenses 6.9% 7.2% 6.4% 7.5%
Depreciation 1.2% 1.4% 1.2% 1.4%
---------- -------- -------- -----------
Total operating expenses 8.1% 8.6% 7.7% 8.9%
---------- -------- -------- -----------
Operating income 7.2% 3.0% 4.7% 4.8%
Other Expenses 0.2% 0.0% 0.1% 0.0%
Interest expense -1.1% 0.7% -0.2% 0.7%
---------- -------- -------- -----------
Income before income taxes 8.2% 2.3% 4.9% 4.0%
Provision for income taxes 3.3% 0.9% 1.9% 1.6%
---------- -------- -------- -----------
Net income 4.9% 1.4% 2.9% 2.5%
=========== ======== ======== ===========
</TABLE>
Three Months Ended September 30, 1996 Compared to Three Months Ended September
30, 1995.
Revenues: Total revenues in the three months ended September 30, 1996,
increased 107% to $44.2 million from $21.4 million in the three months ended
September 30, 1995. The increase was primarily the result of both increased
sales to existing customers, due to an increase in the number of operating
agreements to 30 at September 30, 1996 from 17 at September 30, 1995 and a 97%
increase in the number of wholesale carrier customers to 69 at September 30,
1996 from 35 at September 30, 1995. As a result, total minutes have increased
120% from the same quarter last year while the average price per minute charged
to customers has slightly declined to 28 cents in the third quarter compared to
30 cents in the same quarter last year. The change in the terminating country
mix with
7
<PAGE>
significantly different rates per minute, the reduction in the rates
received for the traffic terminating in and transiting the US and the increase
in the incidental US domestic terminating traffic, are factors influencing the
average customer price per minute. During the third quarter (as in all prior
quarters) Pacific Gateway sent more minutes out than it received under its
operating agreements. Because the same rate is charged to us by the foreign
carrier to terminate calls in their country as we charge, declining rates have
an adverse effect on revenue and estimated return traffic revenue backlog, but,
as a result of sending more calls out than we receive, declining rates improve
the gross margin received on the entire transaction of a minute delivered with
such foreign carriers.
Gross profit: Gross profit increased 173.3% to $6.8 million from $2.4 million.
As a percentage of revenue, gross profit increased from 11.6% in the prior
period to 15.4% in the current period. This percentage increase results from
savings derived from; a reduction in our transit or resale rates on our non-
direct countries; a reduction in the foreign access charges on our direct
routes; a reduction in our domestic termination rates in the US and a small one
time retroactive reduction in foreign access charges in the quarter. These
savings were offset by the effects of an increase in the estimated return
traffic revenue backlog which adversely effects the current gross margin. The
cost of long distance service increased to $37.4 million in the three months
ended September 30, 1996 from $18.9 million in the three months ended September
30, 1995. This increase in costs represents growth in outbound traffic on new
and existing routes in advance of receiving proportional return traffic,
resulting in an increase in the estimated delayed proportional return traffic
backlog amount at September 30, 1996.
Selling General and Administrative Expenses: As a percentage of revenues,
selling, general and administrative expenses decreased from 7.2% in the prior
period to 6.9% in the current period and the actual expenses increased 98.8% to
$3.1 million from $1.5 million. This increase was due primarily to increased
personnel and sales commission expenses. The increase in personnel expenses was
directly related to the increase in employees to 45 at September 30, 1996 from
24 at September 30, 1995. The increase in sales commission expenses was
primarily due to increased revenues.
Depreciation: Depreciation increased 82% to $547,000 from $300,000. As a
percentage of revenues, depreciation was 1.2% of revenue for the quarter ended
September 30 1996, and 1.4% for the same period in 1995. The increase in dollar
amount was primarily due to depreciation of additional transmission facilities
acquired over the year.
Income Tax: Income taxes increased to $1.4 million from $196,000, primarily
due to increased operating income. The effective tax rate was 39.3% in 1995 and
40% in 1996.
Nine Months Ended September 30, 1996 Compared to Nine Months Ended September,
1995.
Revenues: Total revenues in the nine months ended September 30, 1996,
increased 122% to $113.2 million from $51.1 million in the nine months ended
September 30, 1995. The increase was primarily the result of both increased
sales to existing customers, due to an increase in the number of operating
agreements to 30 at September 30, 1996 from 17 at September 30, 1995, and a 97%
increase in the number of wholesale carrier customers to 69 at September 30,
1996 from 35 at September 30, 1995.
Gross profit: Gross profit increased 100.6% to $14.0 million from $7.0
million. As a percentage of revenue, gross profit decreased from 13.7% in the
prior period to 12.4% in the current period. This percentage decrease was
primarily as a result of the increase in the estimated return traffic revenue.
The cost of long distance service increased to $99.2 million in the nine months
ended September 30, 1996 from $44.1 million in the nine months ended September
30, 1995. This increase in costs represents growth in outbound traffic on new
and existing routes in advance of proportional return traffic resulting in an
increase in the estimated delayed proportional return traffic backlog amount at
September 30, 1996.
8
<PAGE>
Selling General and Administrative Expenses: As a percentage of revenues,
selling, general and administrative expenses decreased from 7.5% in the prior
period to 6.4% in the current period, the actual expenses increased 83.8% to
$7.3 million from $3.8 million. This increase was due primarily to increased
personnel and sales commission expenses. The increase in personnel expenses was
directly related to the increase in employees to 45 at September 30, 1996 from
24 at September 30, 1995. The increase in sales commission expenses was
primarily due to increased revenues.
Depreciation: Depreciation increased 98.6% to $1.4 million from $710,000. As
a percentage of revenues, depreciation decreased from 1.4% in the prior period
to 1.2% in the current period. The increase in dollar amount was primarily due
to depreciation of additional transmission facilities acquired between September
30, 1995 and September 30, 1996.
Income Tax: Income taxes increased to $2.2 million from $810,000, primarily
due to increased operating income. The effective tax rate was 39.3% in 1995 and
40% in 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its rapid growth, including its capital expenditures,
through funds provided by operations, a revolving credit facility with a
principal stockholder, a revolving credit facility with a commercial lender and
the sale of shares of common stock. The length of the Company's accounts payable
turnover is partially due to its accounts payable with foreign partners which
generally have 180 day terms as a result of the six month lag inherent in the
international telecommunications service settlement process.
Net cash provided by operating activities was $11.1 million for the nine months
ended September 30, 1996 and $5.5 million for the nine months ended September
30, 1995. This increase was primarily as a result of an increase in net income
and accounts payable which exceeded the increases in accounts receivable.
Net cash provided by investing activities was $45.2 million for the nine months
ended September 30, 1996 and net cash used in investing activities was $6.0
million for the nine months ended September 30, 1995. During the third quarter,
the Company completed an initial public offering of 6,057,050 shares, of which
4,940,050 shares were offered by the Company, which provided the Company with
net proceeds of approximately $54.4 million. The Company used $3.3 million to
repay debt and the remaining will be used to finance investment in international
network facilities, working capital and offshore ventures, alliances or
acquisitions.
Net cash used in financing activities was $5.4 million for the nine months ended
September 30, 1996 and $939,000 for the nine months ended September 30, 1995.
The lines of credit with Bank of America and with Mr Ronald Jensen, a major
shareholder in Pacific Gateway were repaid in the second and third quarters of
1996.
The deficit in working capital excluding cash is $11.3 million compared to a
deficit of $10.8 million at the end of the previous quarter. This is due to the
significant delay that occurs in both paying and receiving the actual cash for
the minutes sent and received from overseas. This is offset by the estimated
return traffic revenue backlog of $11.8 million dollars.
At September 30, 1996, the Company had outstanding commitments of $11.2 million
for the acquisition of additional ownership in digital undersea fiber optic
cables and network equipment. The Company believes that the net proceeds from
the Offering, together with cash provided by operating activities and other
existing sources of liquidity, will be sufficient to meet its outstanding
capital commitments and its expected capital expenditures and working capital
needs through the end of 1997. The expenditures in 1995 and 1996 were primarily
for the acquisition of partial ownership interests in international fiber optic
cable transmission systems and related equipment.
9
<PAGE>
OTHER OPERATING DATA
- --------------------
The information set forth below illustrates management's estimate of the amount
of revenue derived from the proportional delayed return traffic which certain
carriers are contractually obligated to provide to the Company within six months
of the Company delivering certain outbound calls. See Note 2 to the Notes to
the Financial Statements. The estimated delayed return traffic revenue is based
on the anticipated ratios between the outgoing and incoming traffic and
anticipated settlement rates. The information concerning estimated delayed
return traffic revenue backlog contains "forward looking statements" within the
meaning of Section 27A of the Securities Act of 1933 and 21E of the Securities
Exchange Act of 1934. The actual results and actual amounts of delayed return
traffic revenue could differ materially from the estimated amounts reflected
herein as a result of numerous factors, including, but not limited to, changes
in international settlement rates, changes in ratios between outgoing and
incoming traffic, foreign currency fluctuations, termination of certain
operating agreements and changes in US tax law.
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
--------------------------- ----------------------------
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
1996 1995 1996 1995
-------------- ---------- ------------ -----------
<S>
Revenues received in current period <C> <C> <C> <C>
from delayed return traffic/(1)/ 4,535 1,260 10,677 2,246
Estimated delayed return traffic revenue
backlog at end of period /(2)/ 11,812 5,258/(6)/ 11,812 5,258/(6)/
Estimated delayed return traffic revenue
backlog at end of preceding period 10,946/(3)/ 3,476/(3)(6)/ 6,142/(3)/ 986/(3)(6)/
Increase (decrease) in estimated revenues
from delayed return traffic/(5)/ 866 1,782 5,670 4,272
</TABLE>
(1) Represents revenue recorded in the current period from certain of the
Company's operating agreements which require the Company to wait up to six
months to receive the return traffic. See Note 2 of the Notes to the
Financial Statements.
(2) For the three and nine month periods ended September 30, 1995, the amount
reflects the revenue actually received by the Company from delayed return
traffic for the six months following the end of such period. The amount as
of September 30, 1996 reflects management's estimate of the revenue to be
received by the Company from delayed return traffic during the six months
ending March 31, 1997, such estimate being based on the anticipated ratios
between outgoing and incoming traffic and anticipated settlement rates.
(3) For the three month period ending September 30, 1995, the amount reflects
the revenue actually received by the Company from delayed return traffic
during the six months ending March 31,1996 (ie., the amount to be earned
during the ensuing six months as of September 30, 1995). For the three
month period ending September 30,1996, the amount reflects management's
estimate of the revenue to be received by the Company from delayed return
traffic during the six months ending March 31,1997 (i.e., the estimated
delayed return traffic revenue backlog at September 30, 1996), such
estimate being based on the anticipated ratios between outgoing and
incoming traffic and anticipated settlement rates.
(4) For the nine month period ending September 30, 1996 and 1995, the estimated
delayed return traffic revenue backlog represents the amount of revenue
actually received by the Company from delayed return traffic during the
nine months ending September 30, 1996 and 1995, respectively (i.e., the
amount to be earned during the ensuing six months as of March 31, 1996 and
1995, respectively)
10
<PAGE>
(5) The increase (decrease) in the amount of estimated delayed return traffic
revenue earned during the three months ended September 30, 1996 and 1995,
is the difference between the amount of estimated delayed return traffic
revenue backlog at September 30, 1996 and June 30, 1996 and the difference
between the amount of estimated delayed return traffic revenue backlog at
September 30, 1995 and June 30, 1995, respectively. The increase (decrease)
in the amount of estimated delayed return traffic revenue earned during the
nine months ended September 30, 1996 and 1995 is the difference between the
amount of estimated delayed return traffic revenue backlog at September 30,
1996 and December 31, 1995 and the difference between the amount of
estimated delayed return traffic revenue backlog at September 30, 1995 and
December 31, 1994, respectively. The amount of the increase (decrease)
reflects management's estimate of such revenue earned in the particular
three or six month period, although not reported on the Company's financial
statements until up to six months later, under the operating agreements
which require the Company to wait up to six months before such revenue is
actually received pursuant to the contractual obligation of foreign
carriers to deliver such return traffic. Historically the company has
realized an after tax net margin of approximately 50% on the amount of such
revenues when these are received.
(6) At the end of each quarter, the Company determines the actual amount of
delayed return traffic revenue received for each preceding six month period
and uses this actual amount as the "estimated" return traffic backlog for
the period ending six months earlier. As a result, in each current quarter
and the immediately preceding quarter, the amounts represent estimates.
However, in the quarter ending six months prior to the current quarter, the
delayed return backlog represents the amount that the Company actually
received in the ensuing six months.
PART II. OTHER INFORMATION
Item 1. Legal proceedings
None
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
Exhibit 11 (Computation of Per Share Earnings) and Exhibit 27
(Financial Data Schedule) attached
B. Reports on Form 8-K
None
11
<PAGE>
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.
PACIFIC GATEWAY EXCHANGE, INC.
Dated: November 14, 1996
By: /s/ Howard A. Neckowitz
------------------------------------------
Howard A. Neckowitz
President and CEO
(Authorized Signaturory)
By: /s/ Sandra Grey
------------------------------------------
Sandra Grey
Chief Financial Officer
(Principal Financial and Accounting Officer)
12
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------ -----------------------
11 Computation of Earnings Per Share of Common Stock.
27 Financial Data Schedule
13
<PAGE>
PACIFIC GATEWAY EXCHANGE
EXHIBIT 11 - STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(In thousands, except net income per share)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------------------ ------------------------------
1996 1995 1996 1995
------------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
COMPUTATION OF EARNINGS PER COMMON
AND COMMON EQUIVALENT SHARE:
Average Shares Outstanding 18,173 14,100 15,410 14,100
Add:
Common stock equivalent of stock
options and warrants 413 200 245 200
------------- ------------ ------------ -----------
18,586 14,300 15,655 14,300
============= ============ ============ ===========
Net Income 2,168 303 3,298 1,253
============= ============= ============ ===========
Net Income per Share 0.12 0.02 0.21 0.09
============= ============ ============ ===========
</TABLE>
NOTE: All share and per hare amounts have been restated for the prior period
presented to reflect the nine hundred and forty to one stock split on
October 20, 1995.
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-START> JAN-01-1996 JUL-01-1996
<PERIOD-END> SEP-30-1996 SEP-30-1996
<CASH> 52,653 52,653
<SECURITIES> 0 0
<RECEIVABLES> 25,563 25,563
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 78,216 78,216
<PP&E> 21,404 21,404
<DEPRECIATION> 3,066 3,066
<TOTAL-ASSETS> 97,867 97,867
<CURRENT-LIABILITIES> 37,763 37,763
<BONDS> 0 0
0 0
0 0
<COMMON> 54,857 54,857
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 97,867 97,867
<SALES> 113,222 44,249
<TOTAL-REVENUES> 113,222 44,249
<CGS> 99,227 37,449
<TOTAL-COSTS> 99,227 37,449
<OTHER-EXPENSES> 7,352 3,127
<LOSS-PROVISION> 1,410 547
<INTEREST-EXPENSE> (242) (488)
<INCOME-PRETAX> 5,495 3,614
<INCOME-TAX> 2,197 1,446
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,298 2,168
<EPS-PRIMARY> 0.21 0.12
<EPS-DILUTED> 0 0
</TABLE>
