SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event
reported): March 2, 2000
RSL Communications, Ltd.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Bermuda 333-25749 N/A
- --------------------------------------------------------------------------------
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of Identification Number)
Incorporation
or Organization)
Clarendon House
Church Street
Hamilton HM CX Bermuda
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(441) 295-2832
-------------------------------
(Registrant's telephone number)
<PAGE>
ITEM 5. OTHER EVENTS
On March 2, 2000, the Registrant issued a press release regarding its fourth
quarter 1999 financial results. The press release did not include certain
financial statements, related footnotes and certain other financial information
that will be filed with the Securities and Exchange Commission as part of the
Registrant's Annual Report on Form 10-K. A copy of the press release is attached
hereto as Exhibit 99.1 and is incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
99.1 Press release dated March 2, 2000.
<PAGE>
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.
RSL COMMUNICATIONS, LTD.
Date: March 13, 2000 By /s/ Avery S. Fischer
---------------------------------
Name: Avery S. Fischer
Title: Vice President of Legal Affairs
and General Counsel
<PAGE>
Exhibit Index
99.1 Press Release dated March 2, 2000.
EXHIBIT 99.1
FOR: RSL COMMUNICATIONS, LTD.
CONTACT: Financial Community: Jim Magrone
(212) 891-7442
News Media: Alan Garratt
(212) 891-7450
FOR IMMEDIATE RELEASE
RSL COMMUNICATIONS, LTD. REPORTS
FOURTH QUARTER 1999 RECORD REVENUES UP 7% SEQUENTIALLY
AND $5.3 MILLION POSITIVE EBITDA (normalized)
- - - - -
Full year 1999 revenues up 66%, positive EBITDA (normalized) $1.8 million
Hamilton, Bermuda & New York, NY - March 2, 2000 - RSL Communications,
Ltd. (NASDAQ: RSLC), a global integrated communications provider focused on
data/Internet and voice services, today announced record results for the fourth
quarter with revenues of $393.0 million, up 7% sequentially, and positive
normalized EBITDA(1) nearly doubling to $5.3 million compared to the third
quarter 1999. For the year ended December 31, 1999, revenues of $1.47 billion
grew 66% over 1998 and positive normalized EBITDA(1) of $1.8 million was reached
for the full year for the first time.
Itzhak Fisher, President and Chief Executive Officer of RSL COM said, "We
had an excellent quarter, with revenues from our European operations up 17%
sequentially and now representing 56% of consolidated revenues and rapidly
growing. We now have 75% of our consolidated revenues from high margin end users
as we continue to de-emphasize the wholesale and prepaid card products. Our
gross margin at 31.4% (excluding deltathree.com) shows continued improvement,
with RSL COM USA's margin growing to 21.4%, up from
<PAGE>
19.2% in the third quarter. We successfully completed a major financing, raising
approximately $300 million from the sale of equity and debt securities. The IPO
of deltathree.com in November was a tremendous success and RSL COM still owns
approximately 68% of deltathree.com's shares. Based on the current market price
of deltathree.com shares, RSL COM's equity stake in deltathree.com is valued at
approximately $800 million, or approximately $14 per RSL Communications, Ltd.
issued and outstanding common share. We are also delighted with the performance
of telegate AG, a leading international directory assistance provider in
Germany, in which we indirectly own an approximate 27% equity stake. Our
interest in telegate, based upon the current market price of its shares, is
valued at over $450 million, or approximately $8 per RSL Communications, Ltd.
issued and outstanding common share."
Donald R. Shassian, Chief Operating Officer of RSL COM said, "We continue
to add owned fiber optic transmission facilities and switches to our network,
which lowers our cost basis and improves margins. With the addition of our
STM-16 Pan European broadband network and the existing networks in Finland,
France and Germany, and the national networks under construction in Spain and
the U.K., we expect to have approximately 188,000 fiber kilometers in place
worldwide by year end 2000, up from 108,000 km currently installed. Excellent
progress has been made in executing our integrated services strategy. We now
have data/Internet capabilities and are aggressively marketing those services in
6 European countries, Australia, Canada and the USA. We are planning to
introduce data/Internet services to the rest of our European markets as the year
progresses. New business booked by our US operation during the fourth quarter
was approximately 2/3 data and 1/3 voice, a very positive reversal of the
historical mix. In 1999, total data/Internet revenues (excluding deltathree.com)
were $36 million, which we expect will triple in 2000. In addition, we are
exploring
<PAGE>
alternatives for certain non-strategic assets which will enable us to better
focus on our core European and USA operations. The potential sale and proceeds
from any of those assets we expect would be used to strengthen our balance sheet
and accelerate our European data and Internet initiatives."
Fourth Quarter 1999 Results
Consolidated revenues for the fourth quarter 1999 were $393.0 million,
compared to $368.8 million for the third quarter 1999 and $321.8 million for the
fourth quarter 1998.
Revenues from operations in Europe, RSL COM's largest market segment, were
$218.9 million in the fourth quarter 1999, compared to $187.0 million for the
third quarter 1999, a gain of 17.1%, and up 59.1% from the $137.6 million
recorded in the fourth quarter 1998. Revenues from operations in North America
were $120.2 million in the fourth quarter 1999, compared to $132.8 million in
the third quarter 1999, a decline of 9.5%, and $143.9 million in the fourth
quarter 1998. North American revenues declined primarily due to the deliberate
de-emphasis of marginally profitable wholesale and prepaid card products in the
USA and an increased focus on profitablity. Revenues from Asia/Pacific
operations were $51.4 million in the fourth quarter 1999, compared to $47.5
million in the third quarter 1999, a gain of 8.2%, and $39.7 million in the
fourth quarter 1998, up 29.5%. Revenues from operations in Latin America and
deltathree.com represented the balance.
Operations in Europe contributed 55.7% of consolidated revenues in the
fourth quarter 1999 compared to 50.7% in the third quarter 1999 and 42.8% in the
fourth quarter 1998 as RSL COM continues to successfully penetrate the higher
growth and higher margin European market. Revenues from operations in North
America were 30.6% of consolidated revenues in the fourth quarter 1999 versus
36.0% in the third quarter 1999 and 44.6% in the fourth quarter 1998. Revenues
from Asia/Pacific operations were 13.1% of consolidated revenues in the
<PAGE>
fourth quarter 1999 versus 12.9% in the third quarter 1999 and 12.3% in fourth
quarter 1998. Revenues from operations in Latin America and deltathree.com
represented the balance.
Revenues from end users represented 75% of consolidated, with 44% of
consolidated revenues from business and residence customers and 31% from mobile,
15% from wholesale and 10% from prepaid cards in the fourth quarter 1999. This
continues the favorable trend of a growing percentage of revenues coming from
higher margin retail end users.
Cost of services in the fourth quarter 1999 was $269.3 million, up 5.2%
from $256.1 million in the third quarter 1999 and up 12.0% from $240.4 million
in fourth quarter 1998. The increase in cost of services is primarily due to
growth in minutes.
The gross margin percentage(2) (excluding deltathree.com) was 31.4% in the
fourth quarter 1999, compared to a normalized 30.6% in the third quarter 1999
and 25.3% in the fourth quarter 1998. RSL COM's European operations reported a
gross margin of 36.5% in the fourth quarter 1999, compared to 37.8% in the third
quarter 1999, and 30.1% in the fourth quarter 1998. RSL COM USA's gross margin
percentage was 21.4% in the fourth quarter 1999, up from 19.2% in the third
quarter 1999 and 20.2% in the fourth quarter 1998.
Consolidated selling, general and administrative expense was $124.4
million in the fourth quarter 1999, compared to $112.6 million in the third
quarter 1999 and $90.6 million in fourth quarter 1998. SG&A expense increased in
the fourth quarter 1999 primarily due to higher expenses at deltathree.com and
growth in RSL COM's business and activities in support of introducing
data/Internet services in several markets. SG&A expense as a percent of revenue
excluding deltathree.com was 30.0% in the fourth quarter 1999, compared to 30.2%
in the third quarter, and 28.1% in the fourth quarter 1998.
The company recorded non-cash compensation expense of $18.0 million in the
fourth quarter 1999 relating to stock incentive awards previously granted to
employees, primarily at
<PAGE>
deltathree.com. As previously announced, upon the completion of deltathree.com's
initial public offering, RSL COM was required to record additional non-cash
compensation expense.
Normalized EBITDA(1) for the fourth quarter 1999 was $5.3 million, which
grew from $3.4 million excluding deltathree.com and $2.1 million as reported, in
the third quarter 1999. EBITDA from European operations was $8.3 million, up
from $7.7 million in the third quarter 1999, and was $2.9 million from North
American operations, up from $1.2 million in the third quarter 1999.
Net loss in the fourth quarter 1999 was $109.5 million, compared to a loss
of $118.9 million in the third quarter 1999 and a net loss of $63.0 million in
the fourth quarter last year. Net loss was higher in the third quarter 1999
primarily due to $32.1 million of special charges recorded in that period. The
Company's net loss in the fourth quarter 1999 increased compared to fourth
quarter 1998 primarily due to the non-cash compensation expense, as well as
higher interest, depreciation and amortization expense relative to the prior
period.
Full Year 1999 Results
Consolidated revenues for the twelve months of 1999 were $1,469.8 million,
compared to $885.9 million in the same period of 1998, up 66%. Revenues from
operations in Europe were $736.3 million, or 50.1% of consolidated, for the full
year 1999, compared to $306.3 million, or 34.6% of consolidated, for 1998.
Revenues from operations in North America were $546.6 million, or 37.2% of
consolidated, for 1999, compared to $448.7 million, or 50.6% of consolidated, in
1998. Revenues from Asia/Pacific operations were $181.2 million, or 12.3% of
consolidated, for the twelve months of 1999, compared to $128.9 million, or
14.6% of consolidated, for 1998. Revenues from operations in Latin America and
deltathree.com represented the balance.
Normalized EBITDA(1) for the full year 1999 was $1.8 million, excluding
the special
<PAGE>
charges in the third quarter, non-cash compensation expense recorded in the
second, third and fourth quarters and the loss of deltathree.com, compared to a
$51.7 million EBITDA loss excluding deltathree.com and $54.8 million EBITDA loss
as reported, in 1998. Net loss for the twelve months of 1999 was $358.2 million,
compared to $198.4 million before an extraordinary charge in 1998.
At year end 1999, the Company had approximately $152 million of cash and
marketable securities available, excluding cash from deltathree.com and telegate
AG. This excludes the approximate $300 million raised from the sale of new
equity and debt securities in February, 2000.
RSL Communications, Ltd., is a rapidly growing facilities based
communications company that provides a broad range of data/Internet, voice and
value-added product and service solutions primarily to small and medium sized
businesses and residential customers in selected markets around the globe.
Through our subsidiary, deltathree.com, we also own and operate a privately
managed Internet Protocol (IP) telephony network with 45 points of presence in
29 countries around the world.
This release may contain forward-looking statements within the meaning of the
"Safe Harbor" provisions of the Private Securities Litigation Reform Act of
1995. These statements are based on management's current expectations or beliefs
and are subject to a number of risks and uncertainties that could cause actual
results to differ materially from those set forth in such statements. Factors
which may affect actual results ("Cautionary Statements") include, but are not
limited to, the Company's entering into newly opened markets, the integration of
acquisitions and new operations, substantial capital requirements, general
economic factors, the impact of rapid industry changes, increased competition,
pricing pressures, government regulation, the availability of transmission
facilities, reliance on sophisticated information systems, risks associated with
year 2000 compliance, devaluation and currency risks, as well as other risks
referenced from time to time in the Company's filings with the Securities and
Exchange Commission. For a detailed discussion of these and other Cautionary
Statements, please refer to the Company's filings with the SEC, including in the
first paragraph of the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" section of the Company's Form 10-K for the
fiscal year ended December 31, 1998 and in the "Risk Factors" section of the
Company's registration statement on Form S-4 filed with the Securities and
Exchange Commission in November 1999. All subsequent written and oral
<PAGE>
forward-looking statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by such Cautionary Statements.
The Company does not undertake any obligation to release publicly any revisions
to such forward-looking statements to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events.
This release is available on the RSL COM website at www.rslcom.com.
Financial Tables Follow
<PAGE>
RSL Communications, Ltd.
Consolidated Statements of Operations
(In thousands, except per share data)
Unaudited
<TABLE>
<CAPTION>
Three Months Ended Years Ended
December 31, December 31,
------------ ------------
1999 1998 % Change 1999 1998 % Change
---- ---- -------- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 393,037 $ 321,820 22% $ 1,469,849 $ 885,938 66%
Operating costs and expenses:
Cost of services (269,325) (240,421) 12% (1,034,334) (702,602) 47%
Selling, general and administrative
expenses (124,413) (90,647) 37% (447,883) (238,141) 88%
Non-cash compensation expense (17,960) -- -- (23,562) -- --
Special charge -- -- -- (30,143) -- --
Depreciation and amortization (51,750) (32,163) 61% (177,865) (75,445) N/A
----------- ----------- ----------- -----------
Operating costs and expenses (463,448) (363,231) 28% (1,713,787) (1,016,188) 69%
----------- ----------- ----------- -----------
Loss from operations (70,411) (41,411) 70% (243,938) (130,250) 87%
Interest income 4,091 2,864 43% 20,593 16,104 28%
Interest expense (37,423) (23,784) 57% (133,244) (75,431) 77%
Other Income - net 258 294 -12% 764 739 3%
Foreign exchange transaction gain
(loss) 6,462 (434) N/A 17,022 (11,055) N/A
Minority interest (7,396) 1,757 N/A (11,365) 6,079 N/A
Loss in equity interest of
unconsolidated subsidiaries (3,158) (1,651) 91% (4,718) (3,276) 44%
Income taxes (1,933) (608) N/A (3,341) (1,334) N/A
----------- ----------- ----------- -----------
Loss before extraordinary item (109,510) (62,973) 74% (358,227) (198,424) 81%
Extraordinary item -- -- -- -- (20,800) --
----------- ----------- ----------- -----------
Net loss $ (109,510) (62,973) 74% $ (358,227) $ (219,224) 63%
----------- ----------- ----------- -----------
Net loss per share of common stock
before extraordinary item $ (2.00) $ (1.33) 50% $ (6.63) $ (4.52) 47%
Extraordinary item per share of
common stock $ -- $ -- -- $ -- $ (0.47) --
Net loss per share of common stock $ (2.00) $ (1.33) 50% (6.63) (4.99) 33%
Net loss per share of
common stock excluding
losses of deltathree.com $ (1.57) $ (1.32) 19% $ (5.93) $ (4.92) 21%
Weighted average number of shares of
common stock outstanding 54,891 47,392 16% 54,022 43,913 23%
EBITDA (1) $ 5,318 $ (8,833) N/A $ 1,827 $ (51,662) N/A
</TABLE>
<PAGE>
Other Operating Data:
RSL Communications, Ltd.
Consolidated Statements of Operations
Unaudited
<TABLE>
<CAPTION>
Three Months Ended Years Ended
December 31, December 31,
------------ ------------
1999 1998 % Change 1999 1998 % Change
---- ---- -------- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues: (in thousands)
North American $ 120,187 $ 143,873 -16% $ 546,615 $ 448,682 22%
European
- - fixed wire $ 121,933 $ 62,853 94% $ 423,182 $ 196,141 N/A
- - mobile $ 96,971 $ 74,762 30% $ 313,092 $ 110,146 N/A
Asia and Other
- - fixed wire $ 28,747 $ 22,211 29% $ 102,068 $ 74,999 36%
- - mobile $ 23,932 $ 17,563 36% $ 81,270 $ 54,228 50%
deltathree.com (3) $ 1,267 $ 558 N/A $ 3,622 $ 1,742 N/A
Billable Minutes: (in thousands)
North American 816,191 779,658 5% 3,188,190 2,283,548 40%
European
- - fixed wire 681,187 262,086 N/A 2,055,283 777,357 N/A
- - mobile 132,924 -- N/A 480,716 -- N/A
Asia and Other
- - fixed wire 82,748 56,649 46% 278,258 204,501 36%
- - mobile 41,083 26,630 54% 132,443 86,606 53%
deltathree.com 15,592 2,098 N/A 27,544 5,169 N/A
Consolidated revenue per
minute (4) $ 0.16 $ 0.19 -16% $ 0.17 $ 0.20 -5%
<CAPTION>
Customers as of December 31, 1999: Carrier Business Residential Mobile Total
------- -------- ----------- ------ -----
<S> <C> <C> <C> <C> <C>
North American 135 82,863 52,216 -- 135,079
European 163 56,517 196,082 443,911 696,510
Asia and Other -- 9,585 99,172 117,312 226,069
</TABLE>
(1) EBITDA, as used herein, consists of loss from operations before
depreciation and amortization. EBITDA for the year ended December 31, 1999
has been normalized to exclude a $2.0 million inventory write-off recorded
in cost of services in connection with the one-time special charge of
$32.1 million to reorganize and streamline operations. EBITDA for all
periods presented has also been normalized to exclude non-cash
compensation expense and to exclude the EBITDA loss of deltathree.com, the
Company's Internet telephony unit. EBITDA is provided because it is a
measure commonly used in the telecommunications industry. It is presented
to enhance an understanding of the Company's operating results and is not
intended to represent cash flow or results of operations in accordance
with U.S. GAAP for the periods indicated.
(2) Gross margin percentage is defined as revenues less cost of services
divided by revenues.
(3) Excludes services provided to other RSL COM operating companies of $3.4
<PAGE>
million for the fourth quarter 1999 and $7.4 million for the year ended
December 31, 1999. The fourth quarter 1998 amount includes a year-to-date
adjustment to eliminate intercompany revenue.
(4) Consolidated revenue per minute consists of consolidated revenues less:
revenues derived from equipment sales, revenues generated from directory
assistance and European mobile and data services, divided by total
billable minutes excluding minutes generated from the Company's European
mobile and data services.
# # #
