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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Date of Report (Date of earliest event reported): August 3, 2000
PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 0-29092 54-1708481
(State or Other Jurisdiction of (Commission (IRS Employer
Incorporation) File Number) Identification No.)
1700 OLD MEADOW ROAD, SUITE 300, MCLEAN, VIRGINIA 22102
(Address if principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (703) 902-2800
ITEMS 1-4. NOT APPLICABLE
ITEM 5.
On August 3, 2000 Primus Telecommunications Group, Incorporated
announced its financial results for the quarter ended June 30, 2000.
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SECOND QUARTER FINANCIAL RESULTS
PRIMUS's net revenue in the second quarter of 2000 grew to a record
$300 million, compared with $186 million for the second quarter of 1999, an
increase of 62%. Record revenues were reported in the second quarter of 2000
for each of our major business regions, as well as sequential increases from
the first quarter of 2000. On a year-over-year basis, net revenue in Europe
increased 128% to $88 million; in North America net revenue increased 45% to
$132 million; and in the Asia-Pacific region net revenue increased 42% to $80
million. These gains were made despite the continuing adverse impact of
foreign currency exchange rates, which reduced revenue by approximately $9
million this quarter in comparison to the first quarter's average exchange
rates.
Data/Internet revenues, including voice-over-Internet Protocol (VoIP)
revenues, for iPRIMUS.com totaled $27 million in the second quarter, which
represents an increase of 349% year-over-year, and 32% sequentially from the
first quarter of 2000. VoIP revenues of approximately $5 million for the second
quarter were in line with the first quarter of 2000.
The geographic mix of the revenue base in the second quarter was 44%
from North America, 30% from Europe and 26% from Asia-Pacific. Part of the
increase in revenue from the Asia-Pacific region was from local access in
Australia, which resulted from unbundling of the local loop for consumers
that we had anticipated for later in the year. PRIMUS began offering local
service bundled with long distance services to respond to customer demand
even though the current gross margins from local services is minimal. The mix
of retail revenue for the second quarter of 2000 was 73.7% (31.2% business
and 42.5% residential), as compared to 73.3% (31.2% business and 42.1%
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residential) in the first quarter of 2000, showing relative growth of the retail
sector. The carrier segment's share of total revenue declined in the second
quarter to 26.3% of revenues from 26.7% in the prior quarter.
Gross margin for the second quarter of 2000 increased 98%, reaching a
record high of $85 million, compared with $43 million for the second quarter of
1999. As a percentage of net revenue, gross margin (which is computed after
accounting for bad debt) for the second quarter of 2000 was a record 28.3%, up
from 23.0% for the second quarter of 1999 and up sequentially from 28.0% for the
first quarter of 2000.
Selling, general, and administrative (SG&A) expenses for the second
quarter of 2000 were $83 million, or 27.8% of net revenue, compared with $42
million, or 22.4% of net revenue, for the second quarter of 1999, and 27.5% for
the first quarter of 2000. The SG&A increase reflects the impact of additional
spending to grow the data and Internet business, to ramp up SME and Global
Account activities, as well as the impact of the Company's acquisitions.
PRIMUS has generated positive EBITDA for five consecutive quarters.
EBITDA for the second quarter of 2000 was $1.5 million, as compared to $1.2
million in the second quarter of 1999. The Company's operating loss for the
second quarter of 2000 was $(25.6) million, compared with $(11.3) million for
the year-ago period. The net loss for the second quarter of 2000 was $(50.8)
million, or $(1.27) per basic and diluted share, compared with a net loss of
$(26.1) million, or $(0.92) per basic and diluted share, for the second quarter
of 1999. The weighted average number of basic and diluted common shares
outstanding this quarter was 40.1 million compared to 28.5 million for the
second quarter of 1999.
Capital expenditures for the second quarter of 2000 were over $60
million for continued network expansion, including continuing deployment of
the ATM+IP network, fiber optic cable capacity, switches and equipment, data
servers, and back office systems and software. PRIMUS's total investment in
gross property, plant and equipment was $446 million at the end of June 2000.
PRIMUS held cash and investments of $568 million at the end of June. We
believe that this level of liquidity will allow us to fund our business plan
through the end of next year, 2001. We continue to anticipate future capital
spending at an average rate of $50 million per quarter through the end of
2001, even though the actual quarter-to-quarter spending amounts may vary,
which should allow us to complete construction of our ATM+IP data network and
data centers. If current capital market conditions continue to persist into
the future, we would adjust this plan accordingly. We also should be able to
derive future liquidity from additional vendor lease financing for our
switches and network equipment, potential bank lines of credit against our
working capital, and, if needed, from private equity investments above and
beyond the additional $35 million committed by PRIMUS's existing strategic
technology partners.
* * *
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The statements in this filing that are forward looking statements are based on
current expectations and are not strictly historical statements, which may
differ materially from actual results. Not strictly historical statements
include, without limitation, those regarding management's plans, expectations,
objectives, strategy, and timing for future operations and products such as
roll-out of our network or data centers, product plans and performance,
predictions or expectations of future growth, 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 or Internet industry or the general economy or capital
markets; DSL, Internet and telecom competition; changes in service offerings or
business strategies; inability to lease space for data centers at commercially
reasonable rates; difficulty in provisioning voice over IP services; changes in
the regulatory schemes and regulatory enforcement in the markets in which we
operate; the possible inability to raise capital when needed; risks associated
with PRIMUS's limited DSL, Internet and web-hosting experience and expertise,
entry into developing markets, and managing rapid growth; and risks associated
with international operations (including foreign currency translation risks);
dependence on effective information systems; dependence on third parties to
enable us to expand and manage our global network and operations; and dependence
on performance of PRIMUS's global IP+ATM communications network. These factors
are discussed more fully in PRIMUS's public filings, including its most recent
10Q and 10K filings with the Securities and Exchange Commission. Readers are
cautioned not to place undue reliance on these forward-looking statements which
speak only as of the date these statements were made. PRIMUS undertakes no
obligation to update any forward-looking statements contained in this filing.
(Tables to Follow)
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PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
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2000 1999 2000 1999
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<S> <C> <C> <C> <C>
NET REVENUE $ 300,136 $ 185,626 $ 588,089 $ 316,854
COST OF REVENUE 215,250 142,860 422,685 247,456
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GROSS MARGIN 84,886 42,766 165,404 69,398
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OPERATING EXPENSES
Selling, general and administrative 83,364 41,553 162,631 70,849
Depreciation and amortization 27,075 12,514 49,245 21,490
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Total operating expenses 110,439 54,067 211,876 92,339
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LOSS FROM OPERATIONS (25,553) (11,301) (46,472) (22,941)
INTEREST EXPENSE (33,343) (17,523) (63,285) (34,293)
INTEREST AND OTHER INCOME 8,102 2,756 15,711 6,011
--------- --------- --------- ---------
LOSS BEFORE INCOME TAXES (50,794) (26,068) (94,046) (51,223)
INCOME TAXES -- -- -- --
--------- --------- --------- ---------
NET LOSS $ (50,794) $ (26,068) $ (94,046) $ (51,223)
========= ========= ========= =========
BASIC AND DILUTED NET
LOSS PER COMMON SHARE $ (1.27) $ (0.92) $ (2.41) $ (1.80)
========= ========= ========= =========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 40,103 28,486 38,964 28,402
========= ========= ========= =========
Other Data:
EBITDA $ 1,522 $ 1,213 $ 2,773 $ (1,451)
========= ========= ========= =========
</TABLE>
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PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
CONDENSED CONSOLIDATED FINANCIAL DATA
Balance Sheet Data
(unaudited)
June 30, 2000
(IN THOUSANDS)
<TABLE>
<S> <C>
Cash, cash equivalents, restricted investments, and marketable securities $ 568,456
Accounts receivable, net 201,297
Other current assets 76,565
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TOTAL CURRENT ASSETS 846,318
Property and equipment, net 369,402
Intangible assets 561,586
Other assets 51,169
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TOTAL ASSETS $1,828,475
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Accounts payable and accrued expenses $ 293,516
Current portion of long-term obligations 19,575
Accrued interest 39,402
Other current liabilities 44,360
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TOTAL CURRENT LIABILITIES 396,853
Non current portion of long-term obligations 1,250,690
Other liabilities 9,045
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TOTAL LIABILITIES 1,656,588
Stockholders' equity 171,887
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,828,475
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</TABLE>
<TABLE>
<CAPTION>
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OPERATIONAL DATA
(THREE MONTHS ENDED JUNE 30, 2000)
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Minutes of Long-Distance Use ('000s)
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Region Net Revenue ($000s) Total International Domestic
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<S> <C> <C> <C> <C>
North America $131,903 911,419 428,977 482,442
Europe 88,550 570,958 314,990 255,968
Asia-Pacific 79,683 199,060 38,318 160,742
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Total $300,136 1,681,437 782,285 899,152
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ITEMS 6. NOT APPLICABLE.
ITEMS 7. c)Exhibits
NOT APPLICABLE.
ITEMS 8. NOT APPLICABLE.
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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 hereunto duly authorized.
PIMUS TELECOMMUNICATIONS
GROUP, INCORPORATED
By: /s/ Neil L. Hazard
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Chief Financial Officer
Date: August 4, 2000
