<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934.
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934.
COMMISSION FILE NO. 0-29-092
PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 54-1708481
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
1700 OLD MEADOW ROAD, SUITE 300, MCLEAN, VA 22102
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
(703) 902-2800
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
--- ---
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES
OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
<TABLE>
<CAPTION>
OUTSTANDING AS OF
CLASS APRIL 30, 1998
----- -------------------
<S> <C>
COMMON STOCK, $.01 PAR VALUE 19,914,357
</TABLE>
<PAGE>
PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Consolidated Statement of Operations................... 1
Consolidated Balance Sheet............................. 2
Consolidated Statement of Cash Flows................... 3
Notes to Consolidated Financial Statements............. 4
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS................... 6
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK..................................... 9
Part II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS...................................... 10
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.............. 10
Item 3. DEFAULTS UPON SENIOR SECURITIES........................ 10
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS..... 10
Item 5. OTHER INFORMATION...................................... 10
Item 6. EXHIBITS AND REPORTS ON FORM 8-K....................... 10
SIGNATURE................................................................. 11
EXHIBIT INDEX............................................................. 12
</TABLE>
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM I -- FINANCIAL STATEMENTS
PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1998 1997
-------- --------
<S> <C> <C>
NET REVENUE $ 80,051 $ 59,036
COST OF REVENUE 68,722 55,034
-------- --------
GROSS MARGIN 11,329 4,002
-------- --------
OPERATING EXPENSES
Selling, general and administrative 15,377 8,829
Depreciation and amortization 3,478 797
-------- --------
Total operating expenses 18,855 9,626
-------- --------
LOSS FROM OPERATIONS (7,526) (5,624)
INTEREST EXPENSE (7,175) (151)
INTEREST INCOME 2,384 785
OTHER INCOME -- 119
-------- --------
LOSS BEFORE INCOME TAXES (12,317) (4,871)
INCOME TAXES -- (36)
-------- --------
NET LOSS $(12,317) $ (4,907)
======== ========
BASIC AND DILUTED NET
LOSS PER COMMON SHARE $ (0.62) $ (0.28)
======== ========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 19,717 17,779
======== ========
</TABLE>
See notes to consolidated financial statements.
1
<PAGE>
PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
CONSOLIDATED BALANCE SHEET
(in thousands, except share amounts)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
----------- ------------
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 97,381 $ 115,232
Restricted investments 23,795 22,774
Accounts receivable (net of allowance of
$5,762 and $5,044) 69,124 58,172
Prepaid expenses and other current assets 7,048 5,152
--------- ---------
Total current assets 197,348 201,330
RESTRICTED INVESTMENTS 37,683 50,776
PROPERTY AND EQUIPMENT -- Net 70,023 59,241
INTANGIBLES -- Net 36,436 33,164
DEFERRED INCOME TAXES 2,667 2,620
OTHER ASSETS 11,406 10,882
--------- ---------
TOTAL ASSETS $ 355,563 $ 358,013
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 69,116 $ 56,358
Accrued expenses and other current liabilities 14,391 13,898
Accrued interest 4,406 11,016
Deferred income taxes 3,057 3,004
Current portion of long-term obligations 1,652 1,059
--------- ---------
Total current liabilities 92,622 85,335
LONG TERM OBLIGATIONS 230,586 230,152
OTHER LIABILITIES 527 --
--------- ---------
Total liabilities 323,735 315,487
--------- ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value -- authorized
2,455,000 shares; none issued and outstanding -- --
Common stock, $.01 par value -- authorized
40,000,000 shares; issued and outstanding,
19,822,945 and 19,662,233 shares 198 197
Additional paid-in capital 92,696 92,181
Accumulated deficit (60,322) (48,005)
Accumulated other comprehensive loss (744) (1,847)
--------- ---------
Total stockholders' equity 31,828 42,526
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 355,563 $ 358,013
========= =========
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1998 1997
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(12,317) $ (4,907)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation, amortization and accretion 3,567 797
Sales allowance 1,724 716
Stock issuance -- 401(k) plan employer match 20 --
Foreign currency transaction gain -- (119)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (11,020) (7,522)
(Increase) decrease in prepaid expenses
and other current assets (1,576) (661)
(Increase) decrease in other assets (325) (247)
Increase (decrease) in accounts payable 9,876 11,876
Increase (decrease) in accrued expense and
other current liabilities (413) 2,212
Increase (decrease) in accrued interest
payable (6,609) (326)
-------- --------
Net cash provided by (used in)
operating activities (17,073) 1,819
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (11,369) (8,774)
(Purchase) sale of short-term investments -- 19,766
(Purchase) sale of restricted investments 12,072 --
Cash used in business acquisitions, net of
cash acquired (1,627) --
-------- --------
Net cash provided by (used in)
investing activities (924) 10,992
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on capital lease (316) (55)
Principal payments on long-term obligations (114) (4,356)
Sale of common stock, net of transaction costs 496 --
-------- --------
Net cash provided by (used in)
financing activities 66 (4,411)
-------- --------
EFFECTS OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS 80 (262)
-------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS (17,851) 8,138
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 115,232 35,474
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 97,381 $ 43,612
======== ========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
---------------------
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial reporting and Securities and Exchange Commission ("SEC")
regulations. Certain information and footnote disclosures normally included
in the 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 normal and recurring nature) which are
necessary to present fairly the financial position, results of operations
and cash flows for the interim periods. The results for the three months
ended March 31, 1998 are not necessarily indicative of the results that may
be expected for the year ending December 31, 1998.
The financial statements should be read in conjunction with the Company's
audited consolidated financial statements included in the Company's most
recently filed Form 10-K.
(2) Merger, Acquisition and Investment
----------------------------------
In February 1998 the Company entered into an Agreement and Plan of Merger
("the Agreement") with TresCom International, Inc. ("TresCom"), a
facilities-based long distance telecommunications carrier focused on
international long distance traffic originating in the United States and
terminating in the Caribbean and Central and South America. The Agreement
was subsequently amended in April 1998. The amended Agreement calls for the
Company to acquire all of the approximately 12.3 million TresCom common
shares outstanding at a value of $12 per share, through the exchange of the
Company's shares of common stock. The transaction is subject to, among
other things, the approval of both Primus and TresCom stockholders and
certain regulatory authorities. The transaction is expected to be completed
by the end of the second quarter of 1998.
Effective March 1, 1998 the Company purchased a controlling interest in
Hotkey Internet Services Pty., Ltd. ("Hotkey"), a Melbourne, Australia
based internet service provider. The Company's 60% ownership of Hotkey was
purchased through an investment in Hotkey of approximately $1.3 million.
Effective March 1, 1998 the Company acquired all of the outstanding stock
of Eclipse Telecommunications Pty., Ltd. ("Eclipse"), a data communications
provider based in Sydney, Australia. The Company paid approximately $1.8
million in cash and 27,500 shares of the Company's Common Stock for
Eclipse.
(3) Subsequent Events
-----------------
On April 27, 1998 the Company announced a proposed offering of senior notes
("1998 Senior Notes Offering") to be privately placed in reliance on an
exemption from the registration requirements of the Securities Act of 1934,
as amended. The Company expects to close such offering of $150 million
principal amount of its 9 7/8% Senior notes due 2008 on May 19, 1998,
generating net proceeds of approximately $145 million.
4
<PAGE>
(4) Long Term Obligations
---------------------
Long-term obligations consist of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
(unaudited)
----------- ------------
<S> <C> <C>
Obligations under capital leases $ 9,343 $ 8,487
Senior Notes 222,706 222,616
Notes payable 189 -
Settlement obligation - 108
-------- --------
Subtotal 232,238 231,211
Less: Current portion of long term
obligations (1,652) (1,059)
-------- --------
$230,586 $230,152
======== ========
</TABLE>
On August 4, 1997 the Company completed the sale of $225 million 11 3/4%
senior notes and warrants to purchase 392,654 shares of the Company's
common stock ("1997 Senior Notes and Warrants Offering"). The senior notes
are due August 1, 2004 with early redemption at the option of the Company
at any time after August 1, 2001. Dividends are currently restricted by the
senior notes indenture. Interest payments are due semi-annually on February
1st and August 1st. A portion of the proceeds from this offering have been
pledged to secure the first six semi-annual interest payments on the senior
notes and are reflected on the balance sheet as restricted investments. A
portion of the proceeds of this offering, $2.535 million, was allocated to
the warrants, and the resulting debt discount is being amortized over the
life of the debt on the straight-line method which does not materially
differ from the effective interest method.
(5) New Accounting Pronouncements
-----------------------------
In January 1998, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income
(SFAS No. 130). Under SFAS No. 130, the Company's foreign currency
translation adjustments are considered to be components of other
comprehensive income (loss), and the stockholders' equity section of the
accompanying balance sheet has been reclassified accordingly. During the
quarters ended March 31, 1998 and 1997, the Company's foreign currency
translation adjustment totaled $ 1.1 million and $ (0.1) million,
respectively. For the year ending December 31, 1998, the Company will
report its net income (loss) and its foreign currency translation income or
loss within a separate statement of comprehensive income (loss).
(6) Reclassifications
-----------------
Certain prior year amounts have been reclassified to conform to the current
year presentation.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Primus is a global facilities-based telecommunications company that offers
international and domestic long distance and other telecommunications
services to business, residential and wholesale carrier customers in North
America, Asia-Pacific and Europe. The Company is capitalizing on the
increasing demand for high-quality international telecommunications services
resulting from the globalization of the world's economies and the worldwide
trend toward telecommunications deregulation. The Company currently provides
services in the United States, Canada, Mexico, Japan, Australia and the
United Kingdom.
Net revenue is earned based on the number of minutes billable by the Company
and is recorded upon completion of a call, adjusted for sales allowance. The
Company generally prices its services at a savings compared to the major
carriers operating in its service regions. The Company's net revenue is
derived from carrying a mix of business, residential and wholesale carrier
long distance traffic and, in Australia, also from provision of local, data
and cellular services.
Cost of revenue is primarily comprised of costs incurred from other domestic
and foreign telecommunications carriers to originate, transport and terminate
calls. The majority of the Company's cost of revenue is variable, based upon
the number of minutes of use, with transmission and termination costs being
the Company's most significant expense. As the Company increases the portion
of traffic transmitted over its leased or owned facilities, cost of revenue
increasingly will be comprised of fixed costs.
Although the Company's functional currency is the U.S. dollar, a significant
portion of the Company's net revenue is derived from its sales and operations
outside the United States. In the future, the Company expects to continue to
derive a significant portion of its net revenue and incur a significant
portion of its operating costs outside the United States and changes in
foreign currency exchange rates may have a significant effect on the
Company's results of operations. The Company historically has not engaged in
hedging transactions.
OTHER OPERATING DATA
The following information for the three months ended March 31, 1998 and 1997 is
provided for informational purposes and should be read in conjunction with the
unaudited Consolidated Financial Statements and Notes provided herein and the
Consolidated Financial Statements presented with the Company's most recently
filed Form 10-K.
6
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------
Three Months Ended March 31, 1998
--------------------------------------------------
Minutes of Long Distance Use
Net --------------------------------------
Revenue International Domestic Total
------- ------------- -------- -------
<S> <C> <C> <C> <C>
North America $26,310 78,950 20,138 99,088
Europe 9,082 22,944 11,462 34,406
Asia-Pacific 44,659 24,596 61,151 85,747
------- ------- ------ -------
Total $80,051 126,490 92,751 219,241
======= ======= ====== =======
<CAPTION>
--------------------------------------------------
Three Months Ended March 31, 1997
--------------------------------------------------
Minutes of Long Distance Use
Net --------------------------------------
Revenue International Domestic Total
------- ------------- -------- -------
<S> <C> <C> <C> <C>
North America $ 8,271 17,629 6,346 23,975
Europe 3,879 4,253 4,533 8,786
Asia-Pacific 46,886 2,384 59,481 61,865
------- ------- ------ -------
Total $59,036 24,266 70,360 94,626
======= ======= ====== =======
</TABLE>
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1998 AS COMPARED
TO THE THREE MONTHS ENDED MARCH 31, 1997
Net revenue increased $21.1 million or 36%, from $59.0 million for the three
months ended March 31, 1997 to $80.1 million for the three months ended March
31, 1998. Of the increase, $18 million was associated with the North
American operations, which represents a growth rate of approximately 218%
(approximately 167% exclusive of net revenue associated with the Telepassport
/ USFI operations acquired in the fourth quarter of 1997), as a result of
increased traffic volumes primarily in its wholesale carrier operations and,
to a lesser extent, in its business and residential customer base. The
European operations contributed $5.2 million to the year-over-year net
revenue growth, which represents a growth rate of approximately 134%. The
European net revenue increased from $3.9 million for the three months ended
March 31, 1997 to $9.1 million for the three months ended March 31, 1998,
resulting primarily from wholesale traffic being carried in 1998, and to a
lesser extent, growth in retail customer traffic. The Company's Asia-Pacific
net revenue decreased by $2.2 million or 5%, from $46.9 million for the three
months ended March 31, 1997 to $44.7 million for the three months ended March
31, 1998. The decrease in the Asia-Pacific net revenue was primarily a
result of a 14% drop in the Australian dollar's average exchange rate and, to
a lesser extent, a change in traffic mix away from lower-margin local traffic
in favor of higher-margin long distance traffic.
Cost of revenue increased $13.7 million, from $55.0 million, or 93% of net
revenue, for the three months ended March 31, 1997 to $68.7 million, or 86%
of net revenue, for the three months ended March 31, 1998. The increase in
the cost of revenue is attributable to the increase in traffic volumes. The
decrease in the cost of revenue as a percentage of net revenue is reflective
of the expansion of the Company's global network, the continuing migration of
existing and newly generated customer traffic onto the Company's network,
especially in Australia with the advent of equal access, and a change in the
Australian traffic mix away from lower-margin local traffic.
Gross Margin increased $7.3 million, from $4.0 million, or 6.8% of net
revenue, for the three months ended March 31, 1997 to $11.3 million, or 14.2%
of net revenue, for the three months ended March 31, 1998. The approximately
740 basis point increase in the gross margin as a percentage of net revenue
is due to the reduction in cost of revenue factors stated above.
Selling, general and administrative expenses increased $6.6 million, from
$8.8 million to $15.4 million for the three months ended March 31, 1997 and
1998, respectively. The increase is attributable to the hiring of additional
sales and marketing staff and engineering personnel, the
7
<PAGE>
addition of expenses from acquired operations, and increased advertising and
promotional expenses associated primarily with the Company's residential
marketing campaigns in Australia.
Depreciation and amortization expense increased from $0.8 million for the
three months ended March 31, 1997 to $3.5 million for the three months ended
March 31, 1998. The increase is associated with increased depreciation
expense from capital expenditures for fiber, switching and other network
equipment being placed into service and increased amortization expense
associated with intangible assets acquired in the Company's acquisitions.
Interest expense increased from $0.2 million for the three months ended March
31, 1997 to $7.2 million for the three months ended March 31, 1998. The
increase is primarily attributable to the interest expense associated with
the Company's 1997 Senior Notes and Warrants Offering.
Interest income of $2.4 million for the three months ended March 31, 1998 is
attributable to the investment of the Company's cash , cash equivalents and
restricted investment balances.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity requirements arise from cash used in operating
activities, purchases of network equipment including switches, related
transmission equipment, and international cable capacity, interest and
principal payments on outstanding indebtedness, including capital leases, and
acquisitions of and strategic investments in businesses. The Company has
financed its growth through private placements of its common stock, the
initial public offering of its common stock, the 1997 Senior Notes and
Warrants Offering and capital lease financing. The semi-annual interest
payments due under the 1997 Senior Notes through August 1, 2000 have been pre-
funded and will be paid from restricted investments.
Net cash used in operating activities was $17.1 million for the three months
ended March 31, 1998 as compared to net cash provided by operating activities
of $1.8 million for the three months ended March 31, 1997. The increase in
operating cash used is primarily comprised of an increase of $7.4 million for
an increase in the net loss and an increase of $6.3 million in accrued
interest payable related to the 1997 Senior Notes.
Net cash used in investing activities was $0.9 million for the three months
ended March 31, 1998 compared to net cash provided by investing activities of
$11.0 million for the three months ended March 31, 1997. Net cash used in
investing activities during the three months ended March 31, 1998 includes
$11.4 million of capital expenditures primarily for the expansion of the
Company's global network, and $1.6 million for business acquisitions and
investments, partially offset by cash provided by the sale of restricted
investments used to fund interest payments on the 1997 Senior Notes
Net cash provided by financing activities was $0.1 million for the three
months ended March 31, 1998 as compared to net cash used by financing
activities of $4.4 million during the three months ended March 31, 1997. Cash
provided by financing activities in the three months ended March 31, 1998
resulted from the issuance of the Company's common stock through the exercise
of employee options.
The Company anticipates aggregate capital expenditures of approximately $225
million during 1998 and 1999 (of which approximately $11.4 million was
expended in the first quarter of 1998). Such capital expenditures will be
primarily for international and domestic switches and points of presence,
international and domestic fiber optic cable capacity and satellite earth
station facilities for new and existing routes, and other transmission
equipment and back office support systems.
8
<PAGE>
On April 27, 1998 the Company announced a proposed offering of senior notes to
be privately placed in reliance on an exemption from the registration
requirements of the Securities Act of 1934, as amended. The Company expects
to close such offering of $150 million principal amount of its 9 7/8% Senior
notes due 2008 on May 19, 1998, generating net proceeds of approximately $145
million.
The Company believes that its cash, cash equivalents, and restricted
investments along with available capital lease financing (subject to
limitations in the 1997 Senior Notes indenture) and the net proceeds of
approximately $145 million from the 1998 Senior Notes Offering will be
sufficient to fund the Company's operating losses, debt service requirements,
capital expenditures and other cash needs for its operations for at least the
next 18 to 24 months. The Company is continually evaluating the expansion of
its network and plans to accelerate its investment in international and
domestic fiber optic cable capacity and other transmission facilities. In
addition, following the proposed TresCom merger, the Company expects to make
additional investments in the TresCom network in order to expand services in
Latin America. In order to fund these additional cash requirements, including
the expansion of the combined network, Primus anticipates that it will be
required to raise a significant amount of cash in excess of its existing cash,
cash equivalents and restricted investments and the expected net proceeds from
the 1998 Senior Notes Offering. Consequently, the Company expects to raise
additional capital from public or private equity or debt sources to meet its
new financing needs, including for the continued buildout of the network.
Additionally, if the Company's plans or assumptions change (including those
with respect to the development of the network, the level of its operations
and its operating cash flow), if its assumptions prove inaccurate, if it
consummates additional investments or acquisitions or if it experiences
unexpected costs or competitive pressures, or if existing cash and any other
borrowings prove insufficient, the Company may require to seek additional
capital sooner than expected.
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
Statements in this Form 10-Q which are based on current expectations and are
not strictly historical statements may differ materially from actual results.
Not strictly historical statements include, without limitation, those
regarding management's plans, objectives and strategy for future operations,
product plans and performance, management's assessment of market factors, and
future financial performance. Among factors that could cause actual results
to differ materially are changes in business conditions, changes in the
telecommunications industry and the general economy; competition; changes in
service offering; and risks associated with Primus's limited operating
history, entry into developing markets (such as, with the pending TresCom
merger, the Caribbean, Central America and South America), managing rapid
growth, risks associated with international operations, dependence on
effective information systems, and development of the network. These factors
are discussed more fully in the company's Form 10-K filed with the Securities
and Exchange Commission.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
9
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits (see index on page 12)
(b) Reports on Form 8-K
Current Report on Form 8-K dated November 3, 1997 (as amended on
Form 8-K/A on January 5, 1998 and January 7, 1998) with regards
to the acquisition of USFI, Inc. and Telepassport L.L.C.
Current Report on Form 8-K dated February 6, 1998 (as amended on
Form 8-K/A on February 6, 1998) with regards to the Merger
Agreement with TresCom International, Inc.
10
<PAGE>
SIGNATURE
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.
PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
Date May 15, 1998 By: /s/ Neil L. Hazard
------------- ------------------
Neil L. Hazard
(Executive Vice President and Chief Financial
Officer)
11
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
2.1 Agreement and Plan of Merger by and among the Company, TresCom
International, Inc. and Taurus Acquisition Corporation ("TAC"),
dated as of February 3, 1998, and as amended by Amendments No. 1
and 2 to Agreement and Plan of Merger dated as of April 8, 1998 and
as of April 16, 1998, respectively: Incorporated by reference from
the Company's Current Reports on Forms 8-K dated February 6, 1998
(as amended by Form 8-K/A dated February 6, 1998), April 10, 1998
and April 23, 1998 (as amended by Form 8-K/A dated April 23, 1998).
3.1 Amended and Restated By-laws: Incorporated by reference to Exhibit
3.2 of the Company's Annual Report on Form 10-K for the year ended
December 31, 1996.
3.2 Amended and Restated Certificate of Incorporation: Incorporated by
reference to Exhibit 3.2 of the Company's Registration Statement
on Form S-1 (333-10875).
10.1 Stockholder Agreement by and among the Company, TAC, K. Paul Singh
and Warburg, Pincus, Investors, L.P. dated as of February 3, 1998,
and as amended as of April 16, 1998: Incorporated by reference to
Exhibit 10.1 of the Company's Current Report on Form 8-K dated
February 6, 1998 (as amended by Form 8-K/A dated February 6, 1998),
and to Exhibit 10.1 of the Company's Current Report on Form 8-K
dated April 23, 1998 (as amended by Form 8-K/A dated April 23,
1998).
10.2 Voting Agreement by and between TresCom and K. Paul Singh dated as
of February 3, 1998: Incorporated by reference to Exhibit 10.2 of
the Company's Current Report on Form 8-K dated February 6, 1998 (as
amended by Form 8-K/A dated February 6, 1998).
10.3 Voting Agreement by and between TresCom and John F. DePodesta dated
as of February 3, 1998: Incorporated by reference to Exhibit 10.3
of the Company's Current Report on Form 8-K dated February 6, 1998
(as amended by Form 8-K/A dated February 6, 1998).
10.4 Voting Agreement by and between the Company and Wesley T. O'Brien
dated as of February 3, 1998, and as amended as of April 16, 1998:
Incorporated by reference to Exhibit 10.4 of the Company's Current
Report on Form 8-K dated February 6, 1998 (as amended by Form 8-K/A
dated February 6, 1998), and to Exhibit 10.2 of the Company's
Current Report on Form 8-K dated April 23, 1998 (as amended by Form
8-K/A dated April 23, 1998).
10.5 Voting Agreement by and between the Company and Rudy McGlashan
dated as of February 3, 1998, and as amended as of April 16, 1998:
Incorporated by reference to Exhibit 10.5 of the Company's Current
Report on Form 8-K dated February 6, 1998 (as amended by Form 8-K/A
dated February 6, 1998), and to Exhibit 10.3 of the Company's
Current Report on Form 8-K dated April 23, 1998 (as amended by Form
8-K/A dated April 23, 1998.
27.1 Financial Data Schedule for the three months ended March 31, 1998
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE BALANCE SHEET OF
PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED AT MARCH 31, 1998 AND THE INCOME
STATEMENT FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 121,176
<SECURITIES> 0
<RECEIVABLES> 74,886
<ALLOWANCES> 5,762
<INVENTORY> 0
<CURRENT-ASSETS> 197,348
<PP&E> 75,406
<DEPRECIATION> 5,383
<TOTAL-ASSETS> 355,563
<CURRENT-LIABILITIES> 92,622
<BONDS> 230,586
0
0
<COMMON> 198
<OTHER-SE> 31,828
<TOTAL-LIABILITY-AND-EQUITY> 355,563
<SALES> 0
<TOTAL-REVENUES> 80,051
<CGS> 0
<TOTAL-COSTS> 68,722
<OTHER-EXPENSES> 23,646
<LOSS-PROVISION> 1,724
<INTEREST-EXPENSE> 7,175
<INCOME-PRETAX> (12,317)
<INCOME-TAX> 0
<INCOME-CONTINUING> (12,317)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,317)
<EPS-PRIMARY> (0.62)
<EPS-DILUTED> (0.62)
</TABLE>
