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[WORLD ACCESS LOGO]
Filed by World Access, Inc.
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
of the Securities Exchange Act of 1934
Subject Companies: STAR Telecommunications, Inc. and
Communication TeleSystems International
d/b/a WorldxChange Communications
Form S-4 Registration Statement File No. 333-37750
TelDaFax AG
Form S-4 Registration Statement File No. 333-44864
WORLD ACCESS REPORTS PRO FORMA RESULTS FOR THE
THIRD QUARTER, INCLUDING WORLDXCHANGE
CONSOLIDATION
Pro Forma Revenue And Earnings Exceed Company Guidance
Strong Financial Position Includes More than $436 Million in Pro Forma Cash
and Investments
Atlanta, Georgia - November 9, 2000 - WORLD ACCESS, INC. (NASDAQ:
WAXS) announced pro forma third quarter results today based on the
consolidation of WorldxChange Communications as of August 1, 2000. The Company
is presenting its financials as pro forma results, because the presentation of
the accounting treatment for the WorldxChange financial results has not yet
been determined. Please refer to the detailed discussion below. On that basis,
World Access' third quarter revenue from continuing operations was a record
$320.7 million, an increase of $190.5 million or 146% over actual revenue
realized in the third quarter of 1999. Pro forma third quarter revenue
represented sequential growth of 5% over actual revenues generated in the
second quarter of 2000.
For the three months ended September 30, 2000, the Company realized
pro forma earnings before one-time items, interest, foreign exchange gains or
losses, taxes, depreciation and amortization ("EBITDA") from continuing
operations, adjusted for one-time charges, of ($8.9) million, or ($0.07) per
diluted share, compared to actual EBITDA of $8.6 million in the year-ago
period. The pro forma EBITDA loss for the quarter was $1.0 million better than
Company guidance.
Pro forma cash earnings, excluding one-time charges related to the
integration of WorldxChange and which add back acquisition-related amortization
expense, were ($0.17) per share, compared to consensus analyst estimates of
($0.33) per share, and an actual result of $0.03 in the second quarter of 2000.
The third quarter result includes approximately $0.04 per share related to a
gain on the sale of securities. The pro forma net loss from continuing
operations was $103.4 million for the third quarter, which includes $72.9
million in one-time charges, $30.6 million of depreciation and amortization
expense and $14.9 million in net interest expense and foreign exchange losses.
On a pro forma basis, the Company recorded a restructuring charge in
the third quarter of 2000 of $38.3 million, related to the integration of
WorldxChange. This charge reflects one-time costs associated with the
consolidation of facilities, severance, integration of network operations, and
elimination of duplicate activities. Pro forma SG&A in the quarter also
included a one-time charge of $34.6 million related to costs associated with
migration of billing systems and re-branding of all European retail activities
using the NETnet
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brand, and to increase reserves for doubtful accounts. These expenses are in
line with recent guidance and expectations.
John D. Phillips, Chairman and Chief Executive Officer, said, "We have
made tremendous progress in integrating WorldxChange in the third quarter,
including combining operating locations around the world, integrating our
networks, eliminating duplicative assets and rebranding retail product lines to
the NETnet brand throughout our European operating division. In addition, we
began rolling out a proprietary billing and back office system, which now
handles our combined carrier business, as well as our retail operations in five
European countries. While the day to day effort to make all this come together
has been grinding, we believe the results have significantly advanced our
operations and prepared us for the integration of our remaining and future
acquisitions.
"Our third quarter results, reported on a pro forma basis to reflect
the consolidation of WorldxChange's financial results as of August 1, have
placed us slightly ahead of our own business plan and the Street's
expectations. With a very strong balance sheet, we believe we can proceed with
our strategy of consolidating the European SME telecom market, while also
weathering the current competitive environment in long distance. This is
precisely why we have always focused on balance sheet strength and cash
conservation."
World Access' balance sheet remains solid after the third quarter. As
of September 30, 2000, pro forma for the consolidation of the financial results
of WorldxChange, World Access had more than $436 million in cash and
investments.
ACCOUNTING TREATMENT OF WORLDXCHANGE ACQUISITION NOT YET FINALIZED
World Access is reporting pro forma results today due to the
continuing review by the SEC of the Company's Form S-4 related to its
acquisitions of WorldxChange and STAR. We believe substantially all material
issues raised by the Commission in connection with the filing have been
settled, except for the determination of the proper accounting treatment for
the purchase of WorldxChange.
In order to continue its rapid integration of WorldxChange, World
Access and WorldxChange executed an Executive Management Services Agreement on
August 1, 2000, giving World Access complete control of the management,
operations and assets of WorldxChange. In addition, shareholders representing
more than 50% of World Access' voting securities and 83% of the voting
securities of WorldxChange signed irrevocable voting agreements in which they
agreed to vote in favor of the WorldxChange merger.
Based on the foregoing, World Access believes it should account for
the purchase of WorldxChange as of August 1, 2000, and consolidate the results
of WorldxChange from that date.
The Company and its independent auditors, Ernst & Young, LLP, continue
to discuss the proper accounting treatment for the third quarter results with
the SEC and resolution is expected in the near future. For purposes of this
release, while continuing its discussions with the SEC, the Company is
presenting results on a pro forma basis as if WorldxChange had been
consolidated as of August 1, which is consistent with previously released
guidance. However, it is possible that the SEC will require World Access may be
required to file its third quarter results without the WorldxChange
consolidation, which might result in materially different results than those
presented here today.
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Bryan D. Yokley, Chief Financial Officer of World Access, commented,
"We are obviously anxious to finalize this issue with the SEC and complete the
review process for our outstanding acquisitions. We continue to believe that
the consolidation of WorldxChange as of August 1 most accurately reflects the
results of our operations to the investment community. We also believe that
this issue is strictly one of financial presentation of results, and has no
impact on gross revenues, assets and operations of the Company going forward.
The companies have been operating as one since August 1 and will continue to do
so. In addition, we also believe that our presentation is a conservative view
of the Company's results. Due to WorldxChange's operating losses, the
consolidation results in lower reported pro forma earnings. Naturally, if we
cannot persuade the SEC of our viewpoint, we will file our results in
accordance with their instruction."
Yokley added, "Due to the extensive integration of all aspects of
WorldxChange and World Access operations, including network operations, sales,
billing, costing, and routing, the Company is not readily able to separate the
operations from an accounting standpoint. This was one further rationale for
entering into the management agreement and voting agreements. Consequently, we
are not currently in a position to report results on a non-consolidated basis."
ABOUT WORLD ACCESS
World Access is focused on being a leading provider of bundled voice,
data and Internet services to small- to medium-sized business customers located
throughout Europe. In order to accelerate its progress toward a leadership
position in Europe, World Access is acting as a consolidator for the highly
fragmented retail telecom services market, with the objective of amassing a
substantial and fully integrated business customer base. To date, the Company
has acquired several strategic assets, including Facilicom International, which
operates a Pan-European long distance network and carries traffic for
approximately 200 carrier customers, and NETnet, with retail sales operations
in 9 European countries. NETnet's services include long distance, internet
access and mobile services. Located strategically throughout the United States
and 13 European countries, World Access provides end-to-end international
communication services over an advanced asynchronous transfer mode internal
network that includes gateway and tandem switches, an extensive fiber network
encompassing tens of millions of circuit miles and satellite facilities. For
additional information regarding World Access, please refer to the Company's
website at www.waxs.com.
THIS PRESS RELEASE MAY CONTAIN FINANCIAL PROJECTIONS OR OTHER
FORWARD-LOOKING STATEMENTS MADE PURSUANT TO THE SAFE HARBOR PROVISIONS
OF THE SECURITIES REFORM ACT OF 1995. SUCH STATEMENTS INVOLVE RISKS
AND UNCERTAINTIES WHICH MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY.
THESE RISKS INCLUDE: THE ULTIMATE RESOLUTION OF ISSUES RELATING TO THE
CONSOLIDATED ACCOUNTING TREATMENT IN THE WORLDXCHANGE ACQUISITION
CURRENTLY BEING ADDRESSED WITH THE SEC; POTENTIAL INABILITY TO
IDENTIFY, COMPLETE AND INTEGRATE ACQUISITIONS; DIFFICULTIES IN
EXPANDING INTO NEW BUSINESS ACTIVITIES; DELAYS IN NEW SERVICE
OFFERINGS; THE POTENTIAL TERMINATION OF CERTAIN SERVICE AGREEMENTS OR
THE INABILITY TO ENTER INTO ADDITIONAL SERVICE AGREEMENTS; AND OTHER
RISKS DESCRIBED IN THE COMPANY'S SEC FILINGS, INCLUDING THE COMPANY'S
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999, AS
AMENDED, THE COMPANY'S QUARTERLY REPORTS ON FORM 10Q FOR THE QUARTERS
ENDED MARCH 31, 2000 AND JUNE 30, 2000, AS AMENDED, AND THE COMPANY'S
REGISTRATION STATEMENTS ON FORMS S-3 (NO. 333-79097) AND S-4 (NO.
333-37750 AND 333-44864), ALL OF WHICH ARE INCORPORATED BY REFERENCE
INTO THIS PRESS RELEASE.
WORLD ACCESS CONTACT: MICHELE WOLF
(404-231-2025) V.P. OF INVESTOR RELATIONS
HTTP://WWW.WAXS.COM
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WORLD ACCESS, INC. AND SUBSIDIARIES
SUMMARY PRO FORMA CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPT. 30 NINE MONTHS ENDED SEPT. 30
--------------------------- -----------------------------
2000 1999 2000 1999
--------- ------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Carrier services $ 249,372 $130,210 $ 770,372 $ 328,224
Retail services 71,291 -- 111,891 --
--------- -------- ----------- ---------
Total Revenue 320,663 130,210 882,263 328,224
Cost of services 272,222 115,973 762,552 298,777
Selling, general and administrative 57,309 5,667 108,647 14,341
Depreciation and network amortization 9,576 1,219 18,899 3,653
Amortization of intangibles 21,058 1,229 48,247 3,392
Restructuring expense 38,321 -- 38,321 --
One-time SG&A charge 34,600 -- 34,600 --
Restructuring credit -- -- (3,995) --
--------- -------- ----------- ---------
Total Operating Expenses 433,086 124,088 1,007,271 320,163
--------- -------- ----------- ---------
Operating Income (Loss) (112,423) 6,122 (125,008) 8,061
Interest and other income 4,943 913 14,197 1,785
Interest expense 19,844 2,418 48,416 6,733
Realized gain on securities 7,625 -- 7,625 --
Loss on equity investment (207) -- (207) --
Foreign exchange gain (loss) (586) -- (375) --
--------- -------- ----------- ---------
Income (Loss) From Continuing Operations Before (120,492) 4,617 (152,184) 3,113
Income Taxes
Income tax expense (benefit) (17,121) 1,990 (19,236) 2,214
--------- -------- ----------- ---------
Income (Loss) From Continuing Operations (103,371) 2,627 (132,948) 899
Net income (loss) from discontinued operations (9,048) 11,578 (15,197) 19,726
Net gain (loss) on disposals of discontinued operations -- -- 35,773 (12,342)
--------- -------- ----------- ---------
Net Income (Loss) (112,419) 14,205 (112,372) 8,283
Preferred stock dividends 744 784 1,907 1,197
--------- -------- ----------- ---------
Net Income (Loss) Available to Common Stockholders $(113,163) $ 13,421 $ (114,279) $ 7,086
--------- -------- ----------- ---------
</TABLE>
THE FINANCIAL INFORMATION CONTAINED IN THIS PRESS RELEASE AND RELATED EXHIBITS
IS PRESENTED ON A PRO FORMA BASIS, WHICH REFLECTS CONSOLIDATED ACCOUNTING FOR
WORLD ACCESS AND WORLDXCHANGE BEGINNING AUGUST 1, 2000. THE SEC CURRENTLY
DISAGREES WITH THIS ACCOUNTING TREATMENT, AND THE COMPANY IS CONTINUING TO
ADDRESS THIS ISSUE WITH COMMISSION STAFF. THE COMPANY'S ACTUAL FINANCIAL
RESULTS COULD DIFFER MATERIALLY FROM THIS PRO FORMA PRESENTATION DEPENDING UPON
THE ULTIMATE RESOLUTION OF THIS ACCOUNTING ISSUE.
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WORLD ACCESS, INC. AND SUBSIDIARIES
SUMMARY PRO FORMA CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPT. 30 NINE MONTHS ENDED SEPT. 30
---------------------------- ----------------------------
2000 1999 2000 1999
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(UNAUDITED)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Income (Loss) Per Common Share:
Basic:
Continuing Operations $ (1.27) $ 0.05 $ (2.05) $ (0.01)
Discontinued Operations (0.11) 0.32 0.31 0.20
-------- ------- -------- --------
Net Income (Loss) $ (1.38) $ 0.37 $ (1.74) $ 0.20
======== ======= ======== ========
Diluted (a):
Continuing Operations $ (1.27) $ 0.04 $ (2.05) $ (0.01)
Discontinued Operations (0.11) 0.27 0.31 0.18
-------- ------- -------- --------
Net Income (Loss) $ (1.38) $ 0.31 $ (1.74) $ 0.18
======== ======= ======== ========
Weighted Average Shares Outstanding: (Pro forma)
Basic 82,078 36,509 65,796 36,245
======== ======= ======== ========
Diluted 120,236 43,491 102,053 40,048
======== ======= ======== ========
Other Financial Data for Continuing Operations:
EBITDA Before Restructuring and One Time Charge (b) $ (8,868) $ 8,570 $ 11,064 $15,106
======== ======= ======== ========
EBITDA Before Restructuring and One Time Charge Per Diluted Share (b) $ (0.07) $ 0.20 $ 0.11 $ 0.38
======== ======= ======== ========
Cash Earnings (Loss) Before Restructuring and One Time Charge (c) $(20,498) $ 3,072 $(22,904) $ 3,094
======== ======= ======== ========
Cash Earnings (Loss) Per Fully Diluted Share (a) $ (0.17) $ 0.07 $ (0.22) $ 0.08
======== ======= ======== ========
</TABLE>
(a) For purposes of reporting loss amounts per diluted share, potential
common shares consisting of shares subject to stock options and
warrants, convertible notes and convertible preferred stock are
excluded as their effect would be anti-dilutive. Therefore, the basic
weighted average shares were used in the computation of loss amounts
per diluted share.
(b) EBITDA from continuing operations before restructuring credit consists
of earnings (loss) before net interest expense/income, income taxes,
foreign exchange gains or losses, depreciation and amortization.
(c) Cash earnings (loss) represents earnings (loss) from continuing
operations less preferred stock dividends, plus amortization of
intangibles and plus restructuring and one time charges.
THE FINANCIAL INFORMATION CONTAINED IN THIS PRESS RELEASE AND RELATED EXHIBITS
IS PRESENTED ON A PRO FORMA BASIS, WHICH REFLECTS CONSOLIDATED ACCOUNTING FOR
WORLD ACCESS AND WORLDXCHANGE BEGINNING AUGUST 1, 2000. THE SEC CURRENTLY
DISAGREES WITH THIS ACCOUNTING TREATMENT, AND THE COMPANY IS CONTINUING TO
ADDRESS THIS ISSUE WITH COMMISSION STAFF. THE COMPANY'S ACTUAL FINANCIAL
RESULTS COULD DIFFER MATERIALLY FROM THIS PRO FORMA PRESENTATION DEPENDING UPON
THE ULTIMATE RESOLUTION OF THIS ACCOUNTING ISSUE.
World Access and STAR have filed a joint proxy statement/prospectus and
other relevant documents concerning the STAR merger and the WorldxChange merger
with the United States Securities and Exchange Commission (the "SEC").
Additionally, World Access has filed a proxy statement/prospectus and other
relevant documents concerning the TelDaFax transactions with the SEC. WE URGE
INVESTORS TO READ THE JOINT PROXY STATEMENT/PROSPECTUS, THE PROXY
STATEMENT/PROSPECTUS, AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC
BECAUSE THEY CONTAIN IMPORTANT INFORMATION. Investors will be able to obtain the
documents free of charge at the SEC's website, www.sec.gov. In addition,
documents filed with the SEC by World Access will be available free of charge by
writing to: Investor Relations, World Access, Inc., 945 E. Paces Ferry Road,
Suite 2200, Atlanta, Georgia 30326, or by telephone request to (404) 231-2025.
Documents filed by STAR can be obtained by writing to: Investor Relations, STAR
Telecommunications, Inc., 223 East De LaGuerra Street, Santa Barbara, California
93101, or by telephone request (805) 899-1962.
The participants (as defined in Instruction 3 to Item 4 of Schedule
14A) in the solicitation of proxies from the World Access stockholders for the
approval of the merger include World Access and Walter J. Burmeister, Kirby J.
Campbell, Bryan Cipoletti, Stephen J. Clearman, John P. Imlay, Jr., Massimo
Prelz Oltramonti, John D. Phillips, John P. Rigas, Carl E. Sanders, Dru A.
Sedwick and Lawrence C. Tucker, each a director of World Access. PLEASE SEE
WORLD ACCESS' ANNUAL REPORT ON FORM 10-K OR THE YEAR ENDED DECEMBER 31, 1999,
FILED ON MARCH 30, 2000, FOR A DESCRIPTION OF THE WORLD ACCESS SECURITY HOLDINGS
OF EACH OF THE WORLD ACCESS DIRECTORS.
