<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1997
Commission file number 333-25749
RSL COMMUNICATIONS, LTD.
(Exact name of the registrant as specified in its charter)
Bermuda N/A
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) identification No.)
Clarendon House
Church Street
Hamilton HM CX Bermuda
(Address of principal executive offices)
(441) 295-2832
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No__
As at July 31, 1997, approximately 9,243,866 of the preferred shares, par value
$0.01 per share, 665,340 of the Class A common stock, par value $0.01 per share,
4,807,711 of the Class B common stock, par value $0.01 per share and none of the
Class C common stock, par value $0.01 per share, of the registrant were
outstanding.
<PAGE>
The Registrant's financial statements for the six months ended
June 30, 1997 were audited subsequent to the filing of the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1997.
As a result of such audit, this Registrant hereby amends the following items,
financial statements, or other portions of its Quarterly Report on Form 10-Q
for the fiscal quarter ended June 30, 1997 as set forth in the pages attached
hereto:
Part I - Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
RSL COMMUNICATIONS, LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
As of As of
June 30, December 31,
1997 1996
--------- ---------
<S> <C> <C>
Assets
Cash and Cash Equivalents $ 81,992 $ 104,068
Accounts Receivable, Net 44,012 26,479
Marketable Securities - Available for Sale 50,797 67,828
Prepaid Expenses and Other Current Assets 12,341 3,969
Marketable Securities - Held to Maturity 84,728 104,370
Property and Equipment 48,228 35,851
Less: Accumulated Depreciation (6,917) (3,513)
Goodwill and Other Intangibles, Net 120,312 87,605
Deposits and Other Assets 1,026 1,312
--------- ---------
Total Assets $ 436,519 $ 427,969
========= =========
Liabilities and Shareholders' Equity
Accounts Payable and Other Liabilities $ 89,190 $ 70,441
Short-term Debt and current portion of capital lease 9,204 6,974
Long-term Debt 21,788 18,425
Senior Notes, 12 1/4% Due 2006, Net 296,300 296,000
Other Liabilities - Noncurrent 6,678 15,286
Shareholders' Equity 13,359 20,843
--------- ---------
Total Liabilities and Shareholders' Equity $ 436,519 $ 427,969
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
RSL COMMUNICATIONS, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for loss per share)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES....................................................... $67,193 $ 23,900 $109,361 $ 39,764
COST OF SERVICES............................................... 59,828 20,973 96,797 35,657
GROSS PROFIT................................................... 7,365 2,927 12,564 4,107
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES................... 24,401 8,798 38,213 13,656
DEPRECIATION AND AMORTIZATION.................................. 4,697 1,303 8,960 2,175
LOSS FROM OPERATIONS........................................... (21,733) (7,174) (34,609) (11,724)
INTEREST INCOME................................................ 3,332 22 7,124 80
INTEREST EXPENSE............................................... (9,822) (337) (19,252) (635)
OTHER INCOME-NET............................................... 6,862 - 6,606 -
MINORITY INTEREST.............................................. (110) - (229) -
INCOME TAXES................................................... (99) - (357) -
--------- -------- --------- --------
NET LOSS....................................................... $ (21,570) $ (7,489) $ (40,717) $ (12,279)
--------- -------- --------- --------
--------- -------- --------- --------
LOSS PER SHARE OF COMMON STOCK................................. $ (4.15) $ (2.56) $ (8.14) $ (4.19)
WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING.. 5,195 2,928 5,003 2,928
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
RSL COMMUNICATIONS, LTD.
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended June 30,
(in thousands)
1997 1996
--------- ---------
(unaudited)
<S> <C> <C>
Net loss .................................................................................... $ (40,717) $ (12,279)
Depreciation and amortization ............................................................... 8,960 2,175
Working capital change and other ............................................................ (13,490) 1,927
--------- ---------
Net cash used in operations ............................................................ (45,247) (8,177)
--------- ---------
Acquisitions of subsidiaries ................................................................ (5,455) (10,616)
Purchase of property and equipment .......................................................... (7,511) (4,792)
Proceeds from marketable securities ......................................................... 17,031 --
Proceeds from restricted securities ......................................................... 22,665 --
Other ....................................................................................... 132 --
--------- ---------
Net cash provided by (used in) investing ............................................... 26,862 (15,408)
--------- ---------
Proceeds from notes payable ................................................................. -- 24,461
Payment of notes payable .................................................................... (1,987) --
Other ....................................................................................... (820) (153)
--------- ---------
Net cash (used in) provided by financing ............................................... (2,807) 24,308
--------- ---------
(Decrease)/increase in cash and cash equivalents............................................. (21,192) 723
Effects of foreign currency on cash and cash equivalents .................................... (884) --
Cash and cash equivalents at beginning of period ............................................ 104,068 5,163
--------- ---------
Cash and cash equivalents at end of period .................................................. $ 81,992 $ 5,886
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash paid for interest ...................................................................... $ 23,089 $ 634
========= =========
Issuance of Class A Common Stock ............................................................ $ 32,582 $ --
========= =========
Assets acquired under capital lease obligations.............................................. $ 6,359 $ 95
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
RSL COMMUNICATIONS, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
1. BASIS OF PRESENTATION
The Condensed Consolidated Financial Statements included herein have been
prepared by RSL Communications, Ltd. ("RSL") and RSL Communications PLC ("RSL
PLC" and, together with RSL and their direct and indirect subsidiaries, the
"Company"), pursuant to the rules and regulations of the Securities and Exchange
Commission. 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; however, in the opinion of management of the Company, the Condensed
Consolidated Financial Statements include all adjustments, consisting only of
normal recurring accruals, necessary to present fairly the financial information
for such periods. Certain of the data contained in these financial statements
are unaudited and should be read in conjunction with the Company's audited
consolidated financial statements and the notes thereto and other data included
in the joint Registration Statement of RSL and RSL PLC on Form S-4 filed with
the Securities and Exchange Commission on April 24, 1997 (Registration No.
333-25749).
2. EFFECTS OF RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share." This statement is effective for financial statements issued for periods
ending after December 15, 1997. Management has evaluated the effect on its
financial reporting from the adoption of this statement and does not believe it
to be significant.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income."
This statement is effective for financial statements issued for periods ending
after December 15, 1997. Management has evaluated the effect on its financial
reporting from the adoption of this statement and has found the majority of
required disclosures to be not applicable and the remainder to be not
significant.
In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information." SFAS No. 131 requires the reporting of
profit and loss, specific revenue and expense items, and assets for reportable
segments. It also requires the reconciliation of total segment revenues, total
segment profit or loss, total segment assets, and other amounts disclosed for
segments to the corresponding amounts in the general purpose financial
statements. SFAS No. 131 is effective for fiscal years beginning after December
15, 1997. The Company has not yet determined what additional disclosures may be
required in connection with adopting SFAS No. 131.
3. OTHER INCOME-NET
The accompanying Condensed Consolidated Statements of Operations for the three
months and six months ended June 30, 1997 include the effect of a reversal of
approximately $7.0 million from the Company's "other liabilities-noncurrent" in
the accompanying Condensed Consolidated Balance Sheets to "other income", as a
result of the Company's renegotiations of, and successful amendments to, certain
transmission capacity contracts.
4. SUMMARIZED FINANCIAL INFORMATION
The following presents summarized financial information of RSL PLC as of
December 31, 1996. RSL PLC is a 100% wholly owned subsidiary of the Company
incorporated on July 26, 1996. RSL PLC had no independent operations other than
serving solely as a foreign holding company for the Company's U.S. and European
operations. The Notes issued by RSL PLC are fully and unconditionally guaranteed
by RSL. RSL has not presented separate financial statements and other
disclosures concerning RSL PLC because management has determined that such
information is not material to holders of the Notes. RSL's financial statements
are, except for RSL's capitalization, Australian operations, corporate overhead
expenses and available credit facilities, identical to the financial statements
of RSL PLC.
<TABLE>
<CAPTION>
As of As of
December 31, June 30,
1996 1997
($ in thousands) ($ in thousands)
-------- --------
<S> <C> <C>
Current Assets ............................ $201,738 $178,260
Non-current Assets ........................ 225,121 242,259
Current Liabilities ....................... 76,229 91,081
Non-current Liabilities ................... 374,693 387,728
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
From Date of
Incorporation
(July 26, 1996) to Six Months ended
December 31, 1996 June 30, 1997
($ in thousands) ($ in thousands)
-------------------- -------------------
<S> <C> <C>
Net Revenue ........................ $ 63,090 $ 102,175
Gross Profit ....................... 8,890 11,995
Net Loss ........................... (21,627) (33,738)
</TABLE>
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Overview
The Company is a rapidly growing multinational telecommunications company
which provides a broad array of international and domestic telephone services,
including long distance calling to over 200 countries, calling card, private
line and value-added services. The Company focuses on providing international
long distance voice service to small and medium-sized businesses in strategic
markets. The Company currently has operations in the United States, the United
Kingdom, France, Germany, Sweden, Finland, the Netherlands, Denmark and
Australia. The Company is expanding its operations and network into additional
strategic markets which account for a significant portion of the remaining
international traffic.
Results Of Operations
The Company has significant revenues, costs, assets and liabilities that
are, for the most part, denominated in local currencies. Therefore, results of
operations, as stated in local currencies, and the Company's business practices
and plans with respect to a particular country, are not significantly affected
by exchange rate fluctuations. However, such results of operations as reported
in U.S. dollars may be significantly affected by fluctuations in the value of
the local currencies in which the Company transacts business in relation to the
U.S. dollar. Results of operations of the Company's subsidiaries are translated
into U.S. dollars on the basis of average exchange rates throughout the period.
Assets and liabilities are translated into U.S. dollars on the basis of rates of
exchange as of the balance sheet dates. The Company has monitored in the past,
and will continue to closely monitor, its currency exposure.
Results Of Operations For The Three Months Ended June 30, 1997 Compared To The
Three Months Ended June 30, 1996
Revenues. Revenues increased to $67.2 million for the three months ended
June 30, 1997 compared to $23.9 million for the three months ended June 30,
1996, an increase of 181%. This increase is due primarily to an increase in the
Company's U.S. revenues from $20.2 million for the three months ended June 30,
1996 to $43.3 million for the same period this year and the Company's European
revenues, which increased from $3.8 million for the three months ended June 30,
1996 to $16.7 million for the same period this year. The Company generated
revenues in the United States, in seven European countries and in Australia
during the second quarter of 1997. The increase in U.S. and European revenues
was primarily due to both increased traffic volume from existing customers and
significant increases in the Company's U.S. commercial customer base. Revenues
from the Company's Australian operations commenced with the acquisition of an
Australian customer base in May 1997.
Cost of Services. Cost of services increased to $59.8 million for the
three months ended June 30, 1997 from $21.0 million for the three months ended
June 30, 1996, an increase of 185%. This increase is primarily due to increased
traffic and increased rates paid to the Company's carrier vendors. As a
percentage of revenues, cost of services increased to 89.0% for the three months
ended June 30, 1997 from 87.8% for the three months ended June 30, 1996. The
increase in cost of services as a percentage of revenues is primarily
attributable to the Company's U.S. operations' costs of services which represent
66.1% of the Company's total cost of services. The Company's U.S. operations
generated a gross margin of 8.8% in the second quarter of 1997 compared to the
Company's European operations which produced an 18.0% gross margin for the same
period. The Company is currently seeking to purchase additional capacity on
routes on which it has experienced, or anticipates experiencing, overflow
traffic, in order to reduce costs. In addition, the Company's prices to
customers utilizing these routes are often adjusted to take into account an
increased expectation of overflow traffic.
Gross Margins. The Company's consolidated gross margins decreased to 11.0%
for the three months ended June 30, 1997 from 12.3% for the three months ended
June 30, 1996 primarily due to significant price reductions in the markets of
France and Germany. Gross margins in the United States decreased to 8.8% for the
second quarter of 1997 from 11.0% for the second quarter of 1996, while gross
margins in the Company's European operations decreased to 18.0% for the second
quarter of 1997 from 19.1% for the second quarter of 1996.
Selling, General and Administrative Expense. Selling, general and
administrative ("SG&A") expense for the three months ended June 30, 1997
increased by $15.6 million, or 177%, to $24.4 million from $8.8 million for the
three months ended June 30, 1996. This increase is primarily attributable to the
reasons previously provided for revenues and cost of services above. As a
percent of U.S. revenues, the Company's U.S. SG&A expense decreased to 15.3% for
three months ended June 30, 1997 from 23.0% in the comparable period last year.
The Company's European operations generated $13.2 million or 54.0% of the
Company's consolidated SG&A, although such operations accounted for 24.8% of the
Company's total revenues due to a greater proportion of start-up costs in
Europe. SG&A expense as a percentage of revenues will continue to increase as a
result of start-up costs attributable to new local operations.
Depreciation and Amortization Expense. Depreciation and amortization
expense increased 262% to $4.7 million for the three months ended June 30, 1997
from $1.3 million for the three months ended June 30, 1996. This increase is
primarily attributable to the increased amortization of goodwill recorded as a
result of acquisitions. Depreciation and amortization expense is expected to
increase in the future as the Company acquires additional businesses and assets.
Interest Income. Interest income increased to $3.3 million for the three
months ended June 30, 1997 from $22,000 for the three months ended June 30,
1996, primarily as a result of interest earned on the remaining net proceeds of
the Private Offering.
Interest Expense. Interest expense increased to $9.8 million for the three
months ended June 30, 1997 from $337,000 for the three months ended June 30,
1996, primarily as a result of interest related to the Notes.
Net Loss. Net loss increased to $21.6 million for the three months ended
June 30, 1997, as compared to net loss of $7.5 million for the three months
ended June 30, 1996 due to the factors described above.
Results Of Operations For The Six Months Ended June 30, 1997 Compared To The Six
Months Ended June 30, 1996
Revenues. Revenues increased to $109.4 million for the six months ended
June 30, 1997 compared to $39.8 million for the six months ended June 30, 1996,
an increase of 175%. This increase is due primarily to an increase in the
Company's U.S. revenues from $35.4 million for the six months ended June 30,
1996 to $69.9 million for the same period this year and the Company's European
revenues, which increased from $4.4 million for the six months ended June 30,
1996 to $32.3 million for the same period this year. The Company generated
revenues in the United States, in seven European countries and in Australia
during the second quarter of 1997. The Company had revenue producing operations
in only the United States and five European countries in the first half of 1996.
The increase in U.S. revenues was primarily due to both increased traffic volume
from existing customers and significant increases in the Company's U.S.
commercial customer based. Revenues from the Company's European operations
increased as a result of the generation of revenues by its start-up operations
in the United Kingdom, Sweden and Finland and the operations it acquired in
Germany, France and the Netherlands.
Cost of Services. Cost of services increased to $96.8 million for the six
months ended June 30, 1997 from $35.7 million for the six months ended June 30,
1996, an increase of 171%. This increase is primarily due to increased traffic
and increased rates paid to the Company's carrier vendors. As a percentage of
revenues, cost of services decreased to 88.5% for the six months ended June 30,
1997 from 89.7% for the six months ended June 30, 1996. The decrease in cost of
services as a percentage of revenues is primarily attributable to the Company's
growing European revenues which represented 29.5% of the Company's total
revenues for the six months ended June 30, 1997 as compared to 10.9% of the
Company's total revenues for the same period in 1996, the Company's European
operations having generated greater gross margins (18.7% for the six months
ended June 30, 1997) than the Company's U.S. operations (8.5% for the six months
ended June 30, 1997) and, to a lesser extent, to a decrease in overflow traffic.
The Company is currently seeking to purchase additional capacity on routes on
which it has experienced, or anticipates experiencing, overflow traffic, in
order to reduce costs. In addition, the Company's prices to customers utilizing
these routes are often adjusted to take into account an increased expectation of
overflow traffic.
Gross Margins. The Company's consolidated gross margins increased to 11.5%
for the six months ended June 30, 1997 from 10.3% for the six months ended June
30, 1996. Gross margins in the United States decreased to 8.5% from 9.5% for the
six months ended June 30, 1997 as compared to the same period in 1996, while
gross margins in the Company's European operations increased to 18.7% for the
six months ended June 30, 1997 from 17.0% for the six months ended June 30,
1996.
Selling, General and Administrative Expense. Selling, general and
administrative ("SG&A") expense for the six months ended June 30, 1997 increased
by $24.5 million, or 179%, to $38.2 million from $13.7 million for the six
months ended June 30, 1996. This increase is primarily attributable to the
reasons previously provided for revenues and cost of services above. As a
percent of U.S. revenues, the Company's U.S. SG&A expense decreased to 16.5% for
six months ended June 30, 1997 from 22.3% in the comparable period last year.
The Company's European operations generated $20.6 million or 53.9% of the
Company's consolidated SG&A, although such operations accounted for 29.5% of the
Company's total revenues due to a greater proportion of start-up costs in
Europe. SG&A expense as a percentage of revenues will continue to increase as a
result of start-up costs attributable to new local operations.
Depreciation and Amortization Expense. Depreciation and amortization
expense increased 309% to $9.0 million for the six months ended June 30, 1997
from $2.2 million for the six months ended June 30, 1996, an increase of $6.8
million. This increase is primarily attributable to the increased amortization
of goodwill recorded as a result of acquisitions. Depreciation and amortization
expense is expected to increase in the future as the Company acquires additional
businesses and assets.
Interest Income. Interest income increased to $7.1 million for the six
months ended June 30, 1997 from $80,000 for the six months ended June 30, 1996,
primarily as a result of interest earned on the remaining net proceeds of the
Private Offering.
Interest Expense. Interest expense increased to $19.3 million for the six
months ended June 30, 1997 from $635,000 for the six months ended June 30, 1996,
an increase of approximately $18.7 million, as a result of interest related to
the Notes.
Net Loss. Net loss increased to $40.7 million for the six months ended
June 30, 1997, as compared to a net loss of $12.3 million for the six months
ended June 30, 1996 due to the factors described above.
Liquidity and Capital Resources
The Company has incurred significant operating and net losses, due in
large part to the start-up and development of the Company's local operations and
the development of the Company's European network infrastructure. The Company
expects that such losses will continue as the Company implements its growth
strategy. Historically, the Company has funded its operating losses and capital
expenditures through capital contributions, borrowings and a portion of the net
proceeds of the Company's private offering completed in October 1996 (the
"Private Offering").
Cash used in operating activities for the six months ended June 30, 1997
totaled $45.2 million compared with $8.2 million for the same period in 1996.
Capital expenditures for the six months ended June 30, 1997 were $13.9 million
compared with $4.9 million for the comparable period in 1996. Funds expended for
acquisitions were $5.5 million during the six months ended June 30, 1997
compared with $10.6 million for the six months ended June 30, 1996.
In connection with the issuance of the Notes in the Private Offering, the
Company was required to purchase marketable securities, which are held by the
trustee under the Indenture, in order to secure the payment of the first six
scheduled interest payments on the Notes. The market value of such restricted
marketable securities was approximately $84.8 million at June 30, 1997. On May
15, 1997, the Company made its first required semi-annual interest payment in
the amount of approximately $22.7 million. The funds required for the interest
payment were released from the restricted securities portfolio.
One of the Company's primary equipment vendors has provided to the Company
$50.0 million in vendor financing to fund the purchase of additional switching
and related telecommunications capital equipment. At June 30, 1997,
approximately $30.2 million was available under this facility. Borrowings from
this equipment vendor accrue interest at a rate of LIBOR plus either 5.25% or
4.5% depending on the equipment purchased.
The Company is currently contractually committed to the purchase of three
international gateway and two domestic switches. This commitment amounts to
approximately $8.0 million, all of which is being currently financed under the
Company's vendor financing facility.
The Company's 1997-1998 planned network facilities expansion is comprised
primarily of both international gateway and domestic switches and is projected
to require approximately $15 million of the currently available $19.8 million
under the Company's vendor financing facility.
The Company anticipates that it will enter 7 new markets over the next two
years. The costs to be incurred in the first year in order to capitalize such
operations are projected to range from $500,000 to $1.5 million per market,
exclusive of costs related to the acquisition of switching and network equipment
which is expected to be vendor financed, and any losses incurred.
The Company's indebtedness was approximately $313.1 million at June 30,
1997, of which $305.9 million represents long-term debt and $7.2 million
represents short-term debt.
The Company has a $7.5 million revolving credit facility with a bank (the
"Revolving Credit Facility"). The Company also has a $35.0 million subordinated
shareholder standby facility (the "Shareholder Standby Facility") pursuant to
which the Company's Chairman has agreed to provide (or arrange for a bank to
provide) RSL with up to $35.0 million of subordinated debt. The Company was not
utilizing either of these facilities at June 30, 1997 and the full amount of
each of these facilities was available. The Company's Chairman has provided a
guarantee in connection with the Company's borrowings under the Revolving Credit
Facility.
One of the Company's subsidiaries, Cyberlink, Inc., has a $5.0 million
line of credit to finance its accounts receivable, and an additional $2.0
million line of credit from the same lender to finance its capital expenditures.
During the six months ended June 30,1997, the lines of credit were reduced to
$570,000 and $0, respectively. The interest rate applicable to such commitments
is 2.25% and 2.5% over the lender's prime rate, respectively.
Management believes that the remaining net proceeds of the Notes, together
with available borrowings under the Revolving Credit Facility and the
Shareholder Standby Facility, vendor financing and short-term lines of credit
and overdraft facilities from local banks, are expected to fund the Company's
planned expansion of its existing operations and fund operating losses for 15 to
20 months. Management believes that no significant restrictions on future
earnings or liquidity exists and that the Company's existing level of
indebtedness will not have any adverse impact on its operating flexibility. The
Company continually monitors its level of indebtedness. However, the Company is
continuously reviewing and considering acquisition opportunities and is
considering equity financing opportunities. The Company intends to pursue
acquisitions which it believes will expand or enhance its current operations.
Accordingly, such acquisitions and investments, if consummated, may require a
material portion of the Company's financial resources and may accelerate the
need for raising additional capital in the future.
Shareholders' Equity
Pursuant to an agreement and plan of reorganization between the Company,
the Note Issuer and Charles Piluso ("Piluso"), Piluso elected to exchange his
shares in International Telecommunications Group, Ltd., a subsidiary of the
Company, for shares in the Company. Accordingly, the Company issued Piluso
665,340 of the Class A Common Stock (the "RSL Share"), par value $0.01 per
share, of the Company in exchange for 15,619 shares of common stock of ITG and
recorded approximately $32,575,000 as additional paid in capital.
Seasonality
The Company's European operations experience seasonality during July and
August, December and January, and, to a lesser extent, March, as these months
are traditional holiday months in most European countries and many European
businesses, which are the Company's principal European customers, are closed
during portions of these months.
Subsequent Events
In July 1997, the Company acquired a majority interest in Delta Three,
Inc. ("Delta Three"), a telecommunications provider utilizing the Internet and
networks based on Internet Protocols to provide telecommunications services. The
Company paid $6.4 million for approximately 55% ownership of the Company. Delta
Three utilizes the Internet, traditionally a device for communications between
computers, as a transmission medium for ordinary telephone calls.
The Company and Delta Three also entered into a services agreement
pursuant to which, among other things, Delta Three will provide the Company with
discounted carrier telephony services and the Company will provide Delta Three
with termination services at preferred rates and the co-location of Delta
Three's servers with the Company's facilities.
In September 1997, the Company purchased additional shares in ITG from
certain minority shareholders for $17,709,000 in cash and cancellation of a
note receivable of approximately $733,000. In connection with the purchase
of these shares, the Company satisfied all remaining loan obligations with
such minority shareholders.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this amendment on Form 10-Q/A to its Quarterly
Report on Form 10-Q to be signed on its behalf by the undersigned thereunto duly
authorized.
RSL COMMUNICATIONS, LTD.
Date: September 25, 1997 By /s/ Mark Hirschhorn
-------------------------
Name: Mark Hirschhorn
Title: Global Controller
(Authorized Officer and
Chief Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 81,992
<SECURITIES> 135,525
<RECEIVABLES> 47,963
<ALLOWANCES> 3,951
<INVENTORY> 0
<CURRENT-ASSETS> 12,341
<PP&E> 48,228
<DEPRECIATION> 69,700
<TOTAL-ASSETS> 436,519
<CURRENT-LIABILITIES> 98,394
<BONDS> 300,000
0
93,000
<COMMON> 55,000
<OTHER-SE> 13,211
<TOTAL-LIABILITY-AND-EQUITY> 436,519
<SALES> 109,361
<TOTAL-REVENUES> 109,361
<CGS> 96,797
<TOTAL-COSTS> 96,797
<OTHER-EXPENSES> 40,476
<LOSS-PROVISION> 2,468
<INTEREST-EXPENSE> 19,553
<INCOME-PRETAX> 40,360
<INCOME-TAX> 357,000
<INCOME-CONTINUING> 40,717
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> (8.14)
<EPS-DILUTED> (8.14)
</TABLE>
