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, 1999
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Commission file number 0-23139
RSL COMMUNICATIONS, LTD.
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(Exact name of the registrant as specified in its charter)
Bermuda N/A
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) identification No.)
Clarendon House
Church Street
Hamilton HM CX Bermuda
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(Address of principal executive offices)
(441) 295-2832
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(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 of July 31, 1999, the registrant had 29,556,036 of its Class A common stock,
par value $0.00457 per share, and 25,082,283 of its Class B common stock, par
value $0.00457 per share, outstanding.
The Registrant's Condensed Consolidated Statements of Cash Flows contained in
the financial statements of the Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 1999 contain a typographical error in the June
30, 1999 column under "Net cash provided by financing activities -- Other." As a
result of such error, the Registrant hereby amends the financial statements of
its Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1999 as
set forth in the pages attached hereto solely to correct such single
typographical error.
<PAGE>
RSL COMMUNICATIONS, LTD.
Table of Contents
Page
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
June 30, 1999 (Unaudited) and December 31, 1998....................... 1
Condensed Consolidated Statements of Operations for the
Three Month and Six Month Periods Ended June 30, 1999 (Unaudited)
and 1998 (Unaudited).................................................. 2
Condensed Consolidated Statements of Cash Flows for the Six Month
Periods Ended June 30, 1999 (Unaudited) and 1998 (Unaudited).......... 3
Notes to Condensed Consolidated Financial Statements.................... 4
PART II - OTHER INFORMATION
Signatures.............................................................. 7
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
RSL COMMUNICATIONS, LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
As of As of
June 30, December 31,
1999 1998
----------- -----------
(unaudited)
Assets
Cash and Cash Equivalents $ 320,704 $ 367,823
Accounts Receivable, Net 217,159 181,845
Marketable Securities - Available for Sale 135,774 98,637
Prepaid Expenses and Other Current Assets 94,763 77,772
----------- -----------
Total Current Assets 768,400 726,077
----------- -----------
Restricted Marketable Securities - Held to
Maturity 10,101 20,159
Marketable Securities - Available for Sale 13,260 12,911
Property and Equipment 455,919 369,508
Less: Accumulated Depreciation (81,430) (45,785)
----------- -----------
Property and Equipment, Net 374,489 323,723
Investment in Unconsolidated Subsidiaries 16,645 8,446
Goodwill and Other Intangibles, Net 629,324 589,517
Deposits and Other Assets 33,086 33,760
----------- -----------
Total Assets $ 1,845,305 $ 1,714,593
=========== ===========
Liabilities and Shareholders' Equity
Accounts Payable and Other Liabilities $ 466,423 $ 434,797
Short-term Debt 24,757 36,130
----------- -----------
Total Current Liabilities 491,180 470,927
----------- -----------
Total Long-term Debt 1,249,126 1,089,375
Other Liabilities - Noncurrent 67,509 20,807
----------- -----------
Total Liabilities 1,807,815 1,581,109
----------- -----------
Shareholders' Capital 534,472 500,647
Accumulated Deficit (496,982) (367,163)
----------- -----------
Total Shareholders' Equity 37,490 133,484
----------- -----------
Total Liabilities and Shareholders' Equity $ 1,845,305 $ 1,714,593
=========== ===========
See notes to condensed consolidated financial statements.
1
<PAGE>
RSL COMMUNICATIONS, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except loss per share)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues ........................................ $ 367,700 $ 166,567 $ 707,981 $ 298,202
Operating Costs and Expenses:
Cost of Services (exclusive of depreciation and
amortization shown separately below) ........ 258,487 138,828 508,878 251,865
Selling, General and Administrative Expenses .. 115,981 44,182 213,823 79,817
Depreciation and Amortization ................. 43,004 11,576 80,083 21,124
--------- --------- --------- ---------
Total Operating Costs and Expenses 417,472 194,586 802,784 352,806
--------- --------- --------- ---------
Loss From Operations ............................ (49,772) (28,019) (94,803) (54,604)
Interest Income ................................. 5,039 6,028 11,094 10,834
Interest Expense ................................ (31,276) (18,866) (60,274) (33,330)
Other Income - Net .............................. 65 153 180 204
Foreign Exchange Transaction Gain (Loss) - Net .. 4,340 (1,705) 14,028 (1,708)
Minority Interest ............................... (609) 1,645 822 2,728
Loss in Equity Interest of
Unconsolidated Subsidiaries - Net ............. (152) -- (376) --
Income Tax Expense .............................. (490) (412) (490) (634)
--------- --------- --------- ---------
Loss before extraordinary item .................. (72,855) (41,176) (129,819) (76,510)
Extraordinary item .............................. -- (20,800) -- (20,800)
--------- --------- --------- ---------
Net Loss ........................................ $ (72,855) $ (61,976) $(129,819) $ (97,310)
========= ========= ========= =========
Loss Per Share of Common Stock
Before Extraordinary Item $ (1.36) $ (0.97) $ (2.44) $ (1.82)
Extraordinary Item Per Share of Common Stock $ -- $ (0.50) $ -- $ (0.50)
Basic and Diluted Loss Per Share of Common Stock $ (1.36) $ (1.47) $ (2.44) $ (2.32)
Weighted Average Number of Shares of Common Stock
Outstanding 53,394 42,295 53,163 42,021
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE>
RSL COMMUNICATIONS, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
----------------
June 30,
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1999 1998
--------- ---------
<S> <C> <C>
Net loss .................................................... $(129,819) $ (97,310)
Depreciation and amortization ............................... 80,083 21,124
Working capital change and other ............................ (29,892) (32,019)
--------- ---------
Net cash used in operations ............................... (79,628) (108,205)
--------- ---------
Acquisitions of subsidiaries ................................ (32,837) (81,375)
Purchase of property and equipment .......................... (89,375) (37,098)
(Purchase of) proceeds from maturity of marketable securities (23,399) 13,858
Proceeds from maturity of restricted securities ............. 10,575 18,750
Other ....................................................... 780 729
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Net cash used in investing activities ..................... (134,256) (85,136)
--------- ---------
Proceeds from the issuance of Notes ......................... 169,748 499,045
Payment of offering costs ................................... (256) (5,647)
Retirement of 1996 Notes .................................... -- (127,493)
Proceeds from short term debt ............................... 33,335 4,094
Payment of short term debt .................................. (27,699) --
Proceeds from issuance of Class A shares .................... 1,475 281
Other ....................................................... (7,907) (1,709)
--------- ---------
Net cash provided by financing activities ................. 168,696 368,571
--------- ---------
(Decrease) increase in cash and cash equivalents ............ (45,188) 175,230
Effects of foreign currency on cash and cash equivalents .... (1,931) (511)
Cash and cash equivalents at beginning of period ............ 367,823 144,894
--------- ---------
Cash and cash equivalents at end of period .................. $ 320,704 $ 319,613
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash paid for interest ...................................... $ 37,523 $ 17,356
========= =========
SUPPLEMENTAL SCHEDULE OF NON-
CASH INVESTING AND FINANCING ACTIVITIES:
Exchange of Class A Common Stock for stock of subsidiaries .. $ 34,611 $ 8,712
========= =========
Assets acquired under capital lease obligations ............. $ 3,934 $ 4,703
========= =========
Exchange of Class A Common Stock for Distribution Rights .... $ -- $ 44,000
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
RSL COMMUNICATIONS, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1999
1. BASIS OF PRESENTATION
The condensed consolidated financial statements of which these notes are part
have been prepared by RSL Communications, Ltd. ("RSL COM") and RSL
Communications PLC, a wholly owned subsidiary of RSL COM ("RSL PLC" and,
together with RSL COM and their direct and indirect subsidiaries, the
"Company"), pursuant to the rules and regulations of the Securities and Exchange
Commission (the "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. These Condensed Consolidated Financial Statements
should be read in conjunction with the Consolidated Financial Statements of RSL
COM and the notes thereto included in the Company's Annual Report on Form 10-K
for the year ended December 31, 1998.
2. PRIVATE PLACEMENT OF NOTES
In May 1999, RSL PLC issued $175 million aggregate principal amount at maturity
of 9.875% Senior Notes due 2009 (the "1999 Notes"). The 1999 Notes, which are
guaranteed as to the payment of principal and interest by RSL COM, generated net
proceeds of approximately $170 million.
3. REGISTRATION OF SHARES
In May 1999, the Company filed a post-effective amendment to a registration
statement with the Securities and Exchange Commission to register 909,798 Class
A common shares that can be issued upon the exercise of warrants. The Company
was required to register the shares underlying the warrants pursuant to a
registration rights agreement, entered into in connection with the 1996 private
offering of 300,000 units, each consisting of (i) $1,000 principal amount of 12
1/4% Senior Notes due 2006 (the "1996 Notes") and (ii) one warrant to purchase
3.975 shares of Class A Common Stock of RSL COM.
4. COMPREHENSIVE LOSS
Comprehensive loss consists of net loss and other gains and losses affecting
shareholder's equity that, under generally accepted accounting principles, are
excluded from net income. For RSL COM, such items consist primarily of foreign
currency translation gains and losses and unrealized gains and losses on
marketable equity investments.
4
<PAGE>
The components of total comprehensive loss for interim periods are presented in
the following table:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Loss ................................. $ (72,855) $ (61,976) $(129,819) $ (97,310)
Other Comprehensive Income (Loss)
Foreign currency translation adjustments 5,633 (4,173) (1,619) (6,983)
Unrealized gain on securities .......... 349 -- 341 --
--------- --------- --------- ---------
5,982 (4,173) (1,278) (6,983)
--------- --------- --------- ---------
Total Comprehensive Loss ................. $ (66,873) $ (66,149) $(131,097) $(104,293)
========= ========= ========= =========
</TABLE>
5. NET LOSS PER SHARE
Net loss per share is computed on the basis of the weighted average number of
common shares outstanding during the period. Diluted loss per share amounts are
not presented because the inclusion of these amounts would be anti-dilutive.
6. ACQUISITIONS
In June 1999, RSL COM Spain, S.A., a subsidiary of the Company, acquired a 33.4%
economic interest in Consorcio Europeo para las Telecomunicaciones, S.A.,
("Cetel"), a supplier of nationwide telecommunications services in Spain, for
approximately $9.6 million. The investment in Cetel is being accounted for under
the equity method of accounting and is included in the Investment in
Unconsolidated Subsidiaries in the accompanying Condensed Consolidated Balance
Sheet.
In June 1999, the Company issued to an affiliate of the Cisneros Group of
Companies 1,032,485 shares of Class A Common Stock, and cash of $3.2 million in
exchange for the remaining 49% interest in RSL COM Latin America, Ltd. not
already owned by the Company. The valuation of the assets acquired is
preliminary and as a result, the allocation of the purchase price may change.
7. SUMMARIZED FINANCIAL INFORMATION FOR RSL PLC
The following presents summarized financial information of RSL PLC as of June
30, 1999 and as of December 31, 1998. RSL PLC had no independent operations
other than serving solely as a foreign holding company for the Company's North
American and European operations. Notes issued by RSL PLC are fully and
unconditionally guaranteed by RSL COM. RSL COM has not presented separate
financial statements and other related disclosures concerning RSL PLC because
management has determined that such information is not material to shareholders
or holders of the notes issued by RSL PLC. RSL COM's financial statements are,
except for RSL COM's capitalization, deltathree.com operations, Asia/Pacific
operations, Latin American operations, corporate overhead expenses and drawn
credit facilities, identical to the financial statements of RSL PLC.
5
<PAGE>
As of As of
June 30, December 31,
1999 1998
---- ----
(unaudited)
(in thousands)
Current Assets ....................... $ 716,445 $ 686,727
Non-current Assets ................... $ 948,696 $ 877,696
Current Liabilities .................. $ 434,809 $ 411,667
Non-current Liabilities .............. $1,660,719 $1,479,159
Six Months Ended
June 30,
1999 1998
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(unaudited)
(in thousands)
Revenues ............................. $ 624,042 $ 242,909
Net Loss ............................. $ (97,142) $ (86,802)
8. Subsequent Event
In February 1999, the Company announced that RSL COM Deutschland GmbH ("RSL
Germany"), its German subsidiary, and Debitel Kommunikationstechnik GmbH & Co.
KG ("Debitel"), Europe's largest mobile reseller company had agreed that Debitel
will utilize the Company's fixed wired network for new telecommunications
services that it will be promoting to German consumers. On August 13, 1999, the
Company announced that, effective October 31,1999, it has agreed to terminate
this agreement with Debitel. As part of the agreement Debitel will pay the
Company $11.6 million for network services in addition to the $5.3 million
already paid for services since the beginning of the year. As part of the
termination agreement, Metro Holding AG ("Metro"), one of the founders of
Debitel and a shareholder in the Company, has agreed to provide funding to
promote certain RSL Germany products through Metro's sales and distribution
channels.
6
<PAGE>
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 8, 1999 By /s/ Joel S. Beckoff
----------------- ----------------------------------------
Name: Joel S. Beckoff
Title: Vice President - Controller
and Chief Accounting Officer
7
