<PAGE>
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-41126
333-41126-01
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED: JUNE 30, 2000.
[_] TRANSITION REPORT PURSUANT SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO _______
Commission file number: 000-30075
COMPLETEL EUROPE N.V.
(Exact name of registrant as specified in its charter)
Amsterdam, The Netherlands 98-0202823
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
Kruisweg 609
2132 NA Hoofddorp
The Netherlands
(Address of principal executive offices)
(31) 20 666 1701
(Issuer's telephone number)
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report)
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.
[X] Yes [_] No
As of July 1, 2000, the Registrant had outstanding 157,413,060 shares of its
capital stock.
<PAGE>
COMPLETEL EUROPE N.V.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C> <C>
PART I FINANCIAL INFORMATION 1
ITEM 1. Financial Statements (unaudited) 1
Consolidated Condensed Balance Sheets as of
June 30, 2000 and December 31, 1999 (unaudited) 1
Consolidated Condensed Statements of Operations for the
Three and Six Months Ended June 30, 2000 and 1999 (unaudited) 2
Consolidated Condensed Statement of Shareholders' Equity (Deficit) for the
Six Months Ended June 30, 2000 (unaudited) 3
Consolidated Condensed Statements of Cash Flows for the
Six Months Ended June 30, 2000 and 1999 (unaudited) 4
Notes to Unaudited Consolidated Condensed Financial Statements
(unaudited) 5
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 11
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 17
PART II OTHER INFORMATION 18
ITEM 6. Exhibits and Reports on Form 8-K 19
SIGNATURES 20
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
COMPLETEL EUROPE N.V. AND SUBSIDIARIES
--------------------------------------
CONSOLIDATED CONDENSED BALANCE SHEETS
-------------------------------------
(Stated in thousands of Euros-see Note 2)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 2000 1999
------ ------------------ -------------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents (Euro)550,419 (Euro) 57,115
Restricted investments 78,254 -
Customer accounts receivable 6,647 1,709
Affiliate receivables - 304
VAT receivables, prepaid expenses and other current assets 27,309 14,677
------- -------
Total current assets 662,629 73,805
------- -------
LONG-TERM ASSETS:
Property and equipment, net (Note 4) 180,626 91,946
Licenses and other intangibles, net 4,149 4,557
Deferred financing costs, net 20,079 5,082
Other long-term assets 997 818
------- -------
Total long-term assets 205,851 102,403
------- -------
TOTAL ASSETS (Euro)868,480 176,208
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY:
-------------------------------------
CURRENT LIABILITIES:
Network vendor payables (Euro) 50,680 (Euro) 28,593
Accrued liabilities and trade accounts payable 40,679 22,536
Affiliate payables 1,659 2,412
------- -------
Total current liabilities 93,018 53,541
------- -------
LONG-TERM DEBT 275,071 79,596
------- -------
SHAREHOLDERS' EQUITY:
Ordinary shares, Euro.10 par value; 625,000,000 shares authorized,
157,413,060 and 126,133,060 shares issued and outstanding
at June 30, 2000 and December 31, 1999, respectively (Euro) 15,741 (Euro) 12,613
Additional paid-in capital 724,723 116,463
Deferred compensation (72,476) (28,036)
Other cumulative comprehensive income 15,477 728
Accumulated deficit (183,074) (58,697)
-------- -------
TOTAL SHAREHOLDERS' EQUITY 500,391 43,071
-------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (Euro)868,480 (Euro)176,208
======== =======
</TABLE>
The accompanying notes are an integral part of these unaudited
condensed consolidated balance sheets.
-1-
<PAGE>
COMPLETEL EUROPE N.V. AND SUBSIDIARIES
--------------------------------------
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
-----------------------------------------------
(Stated in thousands of Euros, except share and per share amounts-see Note 2)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------------- -------------------------------
2000 1999 2000 1999
--------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
REVENUES (Euro) 5,494 (Euro) 295 (Euro) 8,466 (Euro) 295
OPERATING EXPENSES:
Network costs 5,551 402 8,562 521
Selling, general and administrative 17,247 6,132 30,374 9,586
Management fees to affiliated party 4,033 1,002 6,150 1,858
Non-cash compensation charges (credits) (5,431) 175 64,229 206
Depreciation and amortization 4,231 265 7,177 388
--------------- --------------- --------------- --------------
Total operating expenses 25,631 7,976 116,492 12,559
--------------- --------------- --------------- --------------
OPERATING LOSS (20,137) (7,681) (108,026) (12,264)
OTHER INCOME (EXPENSE):
Interest income 9,115 965 9,559 1,465
Interest expense, net of
capitalized interest (6,644) (2,726) (8,512) (3,896)
Foreign exchange loss and
other expense (10,508) (246) (18,451) (246)
--------------- --------------- --------------- --------------
Total other income (expense) (8,037) (2,007) (17,404) (2,677)
--------------- --------------- --------------- --------------
NET LOSS BEFORE INCOME TAXES (28,174) (9,688) (125,430) (14,941)
INCOME TAX PROVISION - - - -
--------------- --------------- --------------- --------------
NET LOSS BEFORE
EXTRAORDINARY ITEM (28,174) (9,688) (125,430) (14,941)
EXTRAORDINARY ITEM - gain on early
extinguishment of debt 1,053 - 1,053 -
--------------- --------------- --------------- --------------
NET LOSS (Euro) (27,121) (Euro) (9,688) (Euro) (124,377) (Euro) (14,941)
=============== =============== =============== ==============
BASIC AND DILUTED LOSS
PER ORDINARY SHARE:
Net loss before extraordinary item (Euro) (0.18) (Euro) (0.09) (Euro) (0.87) (Euro) (0.16)
Extraordinary item (Euro) 0.01 (Euro) - (Euro) 0.01 (Euro) -
--------------- --------------- --------------- --------------
Net loss (Euro) (0.17) (Euro) (0.09) (Euro) (0.88) (Euro) (0.16)
=============== =============== =============== ==============
WEIGHTED AVERAGE NUMBER
OF ORDINARY SHARES
OUTSTANDING 157,413,060 105,357,165 142,116,796 90,871,245
=============== =============== =============== ==============
</TABLE>
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
-2-
<PAGE>
EUROPE N.V. AND SUBSIDIARIES COMPLETEL
--------------------------------------
CONSOLIDATED CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
------------------------------------------------------------------
FOR THE SIX MONTHS ENDED JUNE 30, 2000
--------------------------------------
(Stated in thousands of Euros, except share amounts - see Note 2)
(Unaudited)
<TABLE>
<CAPTION>
Other
Cumulative
Additional Comprehensive
Ordinary Shares Paid-In Deferred Income Accumulated
-------------------------
Number Amount Capital Compensation (Loss) Deficit
----------- ------------ ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1999 126,133,060 (Euro)12,613 (Euro)116,463 (Euro)(28,036) (Euro) 728 (Euro) (58,697)
Issuance of ordinary shares
in connection with initial
public offering, net of
underwriters' discount and
offering costs 31,280,000 3,128 504,846 - - -
Deemed contributions by
Parent related to allocation
of non-cash compensation
charges - - 100,787 (100,787) - - -
Repurchase of shares allocated
from Parent - - (3,128) - - -
Issuance of stock options - - 5,755 (5,755) - -
Amortization of deferred
compensation - - - 62,102 - -
Cumulative translation
adjustment - - - - 14,749 -
Net loss - - - - - (124,377)
----------- ------ ------- ------- ------ --------
BALANCE, June 30, 2000 157,413,060 (Euro)15,741 (Euro)724,723 (Euro)(72,476) (Euro)15,477 (Euro)(183,074)
=========== ====== ======= ======= ====== ========
<CAPTION>
Total
Comprehensive
Income (Loss) Total
-------------- ------------
<S> <C> <C>
BALANCE, December 31, 1999 (Euro) (48,925) (Euro) 43,071
Issuance of ordinary shares
in connection with initial
public offering, net of
underwriters' discount and
offering costs 507,974
Deemed contributions by
Parent related to allocation
of non-cash compensation
charges - - -
Repurchase of shares allocated
from Parent - (3,128)
Issuance of stock options - -
Amortization of deferred
compensation - 62,102
Cumulative translation
adjustment 14,749 14,749
Net loss (124,377) (124,377)
-------- --------
BALANCE, June 30, 2000 (Euro)(109,628) (Euro) 500,391
======== ========
</TABLE>
The accompanying notes are an integral part of this unaudited
condensed consolidated financial statements.
-3-
<PAGE>
COMPLETEL EUROPE N.V. AND SUBSIDIARIES
--------------------------------------
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
----------------------------------------------
(Stated in thousands of Euros - see Note 2)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30, June 30,
2000 1999
--------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss (Euro)(124,377) (Euro)(14,941)
Adjustments to reconcile net loss to cash
used by operating activities-
Depreciation and amortization 7,177 388
Non-cash compensation expense 64,229 206
Accretion of senior discount notes 5,535 3,718
Amortization of deferred financing costs 359 152
Gain on early extinguishment of debt (1,053) -
Unrealized foreign exchange loss 9,753 -
Changes in assets and liabilities-
Increase in receivables (4,938) (4,666)
Increase in VAT receivable, prepaid expenses
and other current assets (12,632) (873)
Decrease (increase) in other long-term assets (179) 36
Increase in accrued liabilities and trade accounts payable 18,143 9,708
Decrease in net affiliate payables/receivables (449) (6,338)
-------- -------
Net cash used by operating activities (38,432) (12,610)
-------- -------
INVESTING ACTIVITIES:
Expenditures for property and equipment (95,225) (24,733)
Increase in network vendor payables 22,087 -
Purchase of licenses and other intangibles - (2,334)
Restricted investments, including funds placed in escrow (78,254) (64,676)
Proceeds from escrowed offering and investment earnings - 64,676
-------- -------
Net cash used by investing activities (151,392) (27,067)
-------- -------
FINANCING ACTIVITIES:
Net proceeds from senior discount notes - 63,063
Net proceeds from initial public offering 507,974 -
Net proceeds from issuance of common shares
and subsequent capital contributions - 55,720
Gross proceeds from senior notes 200,000 -
Repurchase of senior discount notes (14,867) -
Deferred financing costs (15,356) (3,370)
-------- -------
Net cash provided by financing activities 677,751 115,413
-------- -------
Effect of exchange rates on cash 5,377 4,948
-------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS 493,304 80,684
CASH AND CASH EQUIVALENTS, beginning of period 57,115 1,472
-------- -------
CASH AND CASH EQUIVALENTS, end of period (Euro) 550,419 (Euro) 82,156
======== =======
</TABLE>
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
4
<PAGE>
COMPLETEL EUROPE N.V. AND SUBSIDIARIES
--------------------------------------
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
--------------------------------------------------------------
1. GENERAL:
--------
CompleTel Europe N.V. ("CompleTel Europe") (together with its wholly-owned
subsidiaries, the "Company") seeks to be a leading facilities-based operator of
a technologically advanced, high capacity fiber optic communications
infrastructure and provider of telecommunications and Internet-related services
to business and government end-users, carriers and Internet service providers in
targeted metropolitan areas across Western Europe, with an initial focus on
network deployment in France and Germany. Additionally, the Company intends to
provide Internet access services in France, Germany and the United Kingdom
("UK"). The Company's deployment plan includes building networks in ten
metropolitan markets in France and seven markets in Germany.
The Company is majority owned by CompleTel LLC ("Parent").
The Company has been principally engaged in developing its business plans,
applying for and procuring regulatory and government authorizations, raising
capital, hiring management and other key personnel, working on the design,
development and construction of its fiber optic networks and operation support
systems, negotiating equipment and facilities agreements, and negotiating
interconnection agreements and certain right-of-way agreements. As a result of
these activities, the Company has experienced significant operating losses and
negative cash flows from operations. The Company expects to continue to generate
negative cash flows from operations in each market while it emphasizes
development, construction and expansion of its business and until the Company
establishes a sufficient revenue generating customer base in that market. The
Company also expects to experience ongoing operating losses and negative cash
flows as it expands its operations in the 17 cities in France and Germany
currently included in its business plan and provides Internet-related services
in these cities and the United Kingdom.
The Company is currently implementing its business plan to deploy and operate
metropolitan area networks ("MANs") in 17 cities in France and Germany and
provide Internet-related services in these cities and the United Kingdom. The
Company believes it has fully funded its current business plan to construct MANs
in these 17 cities and provide these Internet-related services.
2. BASIS OF PRESENTATION:
----------------------
The accompanying unaudited consolidated condensed financial statements have been
prepared in accordance with United States generally accepted accounting
principles ("U.S. GAAP") for interim financial information and are in the form
prescribed by the Securities and Exchange Commission. Accordingly, they do not
include all of the information and footnotes required by U.S. GAAP for complete
financial statements. The interim unaudited financial statements should be read
in conjunction with the audited financial statements of the Company as of and
for the year ended December 31, 1999. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments) considered
necessary for a fair presentation have been included. Operating results for the
three and six month periods ended June 30, 2000 are not necessarily indicative
of the results that may be expected for the year ended December 31, 2000.
The preparation of financial statements in conformity with U.S. GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of expenses during
the reporting period. Actual results could differ from those estimates. The
Company has adopted a calendar fiscal year. Certain prior year amounts have been
reclassified to conform with the current year presentation.
5
<PAGE>
Functional Currency
Prior to January 1, 2000, the functional currency for CompleTel Europe,
CompleTel Holding I B.V., CompleTel Holding II B.V. and CompleTel ECC B.V. was
the U.S. dollar and the functional currency for each of CompleTel Europe's
operating subsidiaries was the applicable local currency. Effective January 1,
2000, CompleTel Europe, CompleTel Holding I B.V., CompleTel Holding II B.V. and
CompleTel ECC B.V and each of their subsidiaries, except those in the U.K.,
utilized the euro as their functional currency. Additionally, the Company has
elected to use the euro as its financial reporting currency. As a result, the
Company has restated prior period amounts by translating prior period U.S.
dollar amounts into the euro. The company's results of operations (accumulated
deficit) for periods prior to January 1, 1999 (introduction date for the euro)
have been restated using the January 1, 1999 exchange rate between the U.S.
dollar and the euro.
3. INITIAL PUBLIC OFFERING:
------------------------
On March 30, 2000, the Company completed its initial public offering ("IPO") of
common stock. In that offering, the Company issued 31,280,000 shares of its
common stock in exchange for gross proceeds of approximately Euro 547.4 million.
The Company will use the proceeds to (i) further develop fiber optic networks in
its target markets in France and Germany, (ii) fund the expansion of its
Internet-related services, (iii) develop complimentary local access systems,
(iv) fund net operating losses and (v) for general corporate purposes.
Compensation Charges
The Company's IPO caused certain common units of Parent held by employees of the
Company and Parent to vest as a result of meeting specified performance vesting
criteria. As a result, the Company recorded compensation expense of
approximately (Euro) 42.4 million based on the value of those vested common
units as implied by the IPO price received. In addition, based upon the IPO
value of the Company as indicated above, the Company recorded additional
compensation expense and deferred compensation in the quarter ended March 31,
2000, of approximately (Euro) 24.0 million and (Euro) 74.9 million,
respectively, for performance vesting units that did not vest as a result of the
IPO but which may vest upon a qualified sale by Madison Dearborn Partners
("MDP") (investor in Parent) or in May 2005 based on a deemed vesting date as
defined. The additional deferred compensation are amortized to expense over the
remaining vesting period to May 18, 2005 (deemed vesting date if not prior due
to a qualified sale by MDP as defined in the executive securities agreements).
The recorded amount of compensation expense and deferred compensation for these
variable awards are adjusted at each reporting date to reflect management's
estimate of the number of such units that will ultimately vest and the fair
market value of those units as of the end of each reporting period based on the
then current market value of the Company's ordinary shares. Accordingly, as of
June 30, 2000, the Company reduced previously recorded compensation expense and
deferred compensation by approximately (Euro) 7.5 million and Euro 32.2 million,
respectively, based on the June 30, 2000 share price of CompleTel Europe N.V.
The compensation charges (credits) described above are included in non-cash
compensation charges (credits) in the accompanying statement of operations for
the three and six months ended June 30, 2000. Also included in non-cash
compensation charges for the three and six months ended June 30, 2000 is (Euro)
1.9 million and (Euro) 5.3 million, respectively resulting from the recognition
of deferred compensation on fixed stock option awards granted to employees and
other common units of Parent held by employees subject only to time vesting.
6
<PAGE>
4. PROPERTY AND EQUIPMENT:
-----------------------
Property and equipment includes network equipment, office furniture and
equipment, computer equipment and software, leasehold improvements and
construction in progress. These assets are stated at cost and are depreciated
when ready for their intended use. Property and equipment at June 30, 2000 and
December 31, 1999, consisted of the following (in thousands):
June 30, December 31,
2000 1999
-------------- ------------
Network equipment (Euro) 82,182 (Euro)42,343
Office furniture and equipment 3,229 1,384
Computer equipment and software 7,909 5,095
Leasehold improvements 4,476 1,847
Buildings 216 205
------- ------
Property and equipment, in service 98,012 50,874
Less: accumulated depreciation (10,878) (4,144)
------- ------
Property and equipment, in service, net 87,134 46,730
Network construction in progress 93,492 45,216
------- ------
Property and equipment, net (Euro)180,626 (Euro)91,946
======= ======
5. LONG-TERM DEBT:
---------------
Senior Discount Notes
In February 1999, the Company completed an offering of 147,500 units (the
"Units") consisting of $147.5 million aggregate principal amount at maturity of
14% Senior Discount Notes due 2009 (the "Notes") issued by CompleTel Europe and
1,475,000 non-voting Class B Membership Interests of CompleTel Holdings.
CompleTel Europe issued the Notes at a substantial discount from their principal
amount at maturity. The proceeds of the offering, net of offering fees and
costs, were approximately $72.6 million (Euro)74.1 million) and were held in an
escrow account until CompleTel Europe received a minimum commitment of $90
million in senior credit facilities. To comply with Netherlands laws, the Notes
are guaranteed by Parent on a senior unsecured basis. As Parent is a holding
company with no operations other than the operations to be conducted by
CompleTel Europe and its subsidiaries, it is unlikely that Parent will have
sufficient funds to satisfy CompleTel Europe's obligations on the Notes if
CompleTel Europe is unable to satisfy its own obligation on the Notes. Of the
$75 million (Euro)76.6 million) gross proceeds from the offering, approximately
$70.5 million (Euro)72.0 million) was attributed to the Notes and approximately
$4.5 million (Euro)4.6 million) was attributed to the 1,475,000 Class B
Membership Interests of CompleTel Holdings.
Cash interest will not accrue on the Notes prior to February 15, 2004, with the
Notes accreting to their stated principal amount at maturity at an effective
interest rate of 15.1%. The accretion will be charged to interest expense.
Commencing February 15, 2004, interest on the Notes will accrue at 14% per annum
and will be payable in cash on August 15 and February 15 of each year. The Notes
mature February 16, 2009.
Credit Agreement
In January 2000, the Company executed an agreement for a (Euro)265 million
senior secured credit facility with Goldman Sachs International and Paribas as
co-arrangers of the facility. The funds were to be available to the Company's
subsidiaries, initially to include CompleTel ECC, CompleTel Services S.A.S.,
CompleTel France and CompleTel Germany, in two tranches including a euro term
facility available until December 31, 2000, in the aggregate amount of (Euro)105
million and a euro revolving loan facility available until December 31, 2002, in
the aggregate amount of (Euro)160 million. The (Euro)160 million tranche was to
become available after May 31, 2000, if the euro term facility was fully drawn,
and other conditions were satisfied. Following December 31, 2002, up to
(Euro)141
7
<PAGE>
million of the outstanding advances under the euro revolving loan facility will
first be converted into a term loan, and any other outstanding advances will
become part of a (Euro)19 million working capital facility. The facility matures
on December 31, 2006.
In April 2000, the Company entered into an agreement (the "Suspension
Agreement") with the lenders under its credit facility which provides that the
Company will not borrow funds under its credit facility until the credit
facility is amended and that, in turn, during this period, the lenders will
suspend the application of various provisions, including substantially all of
the representations, covenants and events of default in the credit facility.
During such period, certain other provisions of the credit facility will remain
in effect including, without limitation, the obligation to maintain the security
interests of the lenders and to pay, among other things, commitment fees to the
lenders. The Suspension Agreement will be in effect until the earlier of (a)
January 11, 2001 (b) the date the Company cancels its credit facility or (c) the
date an amendment to the credit facility is in effect. In the event that an
amendment to the credit facility cannot be agreed upon by six months, or, if
extended by the Company, nine months, after the effective date of the Suspension
Agreement, the Suspension Agreement and credit facility will terminate. After
giving effect to this offering, without this suspension of the covenants, the
Company would not be able to borrow under its credit facility without obtaining
a waiver from the lenders. The Company intends to negotiate an amendment to the
credit facility prior to the expiration of the Suspension Agreement which will
include modifications to the covenants and permit the Company to borrow under
such amended credit facility.
Senior Notes
In April 2000, the Company completed an offering of an aggregate (Euro)200
million 14% senior notes due 2010 (the "Senior Notes"). A portion of the
proceeds were used to repurchase $27.0 million ((Euro)27.6 million) principal
amount at maturity of the Notes. The Company lent approximately (Euro)78.0
million of the net proceeds of the Senior Notes offering to a wholly-owned
subsidiary which used the funds to invest in a portfolio of securities which is
pledged as security for the Senior Notes. The proceeds of these pledged
securities will be used to make the first six interest payments on the Senior
Notes. The remaining proceeds from the Senior Notes offering will be used to (i)
fund the further deployment of the Company's networks in existing markets and an
additional six cities in France and Germany, (ii) fund the expansion of the
Company's Internet-related services, (iii) develop complementary local access
systems, (iv) fund net operating losses and (v) for general and corporate
purposes.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
-------------- ------------
<S> <C> <C>
14% Senior Discount Notes, face amount
$147.5 million, due 2009, effective interest rate
of 15.1%, at accreted value (Euro) 75,071 (Euro)79,596
(Euro)265 million senior secured credit facility - -
14% Senior Notes, face amount
(Euro)200 million due 2010 200,000 -
------- ------
Total (Euro)275,071 (Euro)79,596
======= ======
</TABLE>
8
<PAGE>
6. SEGMENT REPORTING:
------------------
SFAS 131, "Disclosures about Segments of an Enterprise and Related Information,"
establishes standards for the way that public business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports issued to shareholders. Operating segments are
components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance.
Management currently evaluates the Company's development efforts according to
the geographic location of its markets. Certain financial information reflecting
the Company's development efforts is presented below.
As of and for the three months ended June 30, 2000 (in thousands):
<TABLE>
<CAPTION>
CompleTel
CompleTel CompleTel CompleTel Europe
SAS GmbH UK Ltd. And Other Consolidated
------------- -------------- ------------ -------------- --------------
<S> <C> <C> <C> <C> <C>
Revenues (Euro) 3,565 (Euro) 502 (Euro) 1,427 (Euro) - (Euro) 5,494
Depreciation and amortization 2,479 1,243 62 447 4,231
Net income (loss) (18,734) (12,149) (753) 4,515 (27,121)
Total assets 143,646 81,910 2,577 640,347 868,480
Expenditures for long-lived
assets 27,105 28,823 256 4,497 60,681
As of and for the three months ended June 30, 1999 (in thousands):
CompleTel
CompleTel CompleTel CompleTel Europe
SAS GmbH UK Ltd. And Other Consolidated
------------- -------------- ------------ -------------- --------------
Revenues (Euro) 258 (Euro) - (Euro) 37 (Euro) - (Euro) 295
Depreciation and amortization 176 2 9 78 265
Net loss (5,083) (548) (229) (3,828) (9,688)
Total assets 47,497 503 1,021 67,764 116,785
Expenditures for long-lived
assets 12,589 215 17 2,651 15,472
As of and for the six months ended June 30, 2000 (in thousands):
CompleTel
CompleTel CompleTel CompleTel Europe
SAS GmbH UK Ltd. And Other Consolidated
------------- -------------- ------------ -------------- --------------
Revenues (Euro) 5,373 (Euro) 730 (Euro) 2,363 (Euro) - (Euro) 8,466
Depreciation and amortization 4,518 1,969 97 593 7,177
Net loss (32,169) (18,664) (1,066) (72,478) (124,377)
Total assets 143,646 81,910 2,577 640,347 868,480
Expenditures for long-lived
assets 46,094 43,270 423 5,438 95,225
</TABLE>
9
<PAGE>
As of and for the six months ended June 30, 1999 (in thousands):
<TABLE>
<CAPTION>
CompleTel
CompleTel CompleTel CompleTel Europe
SAS GmbH UK Ltd. And Other Consolidated
------------- -------------- ------------ -------------- --------------
<S> <C> <C> <C> <C> <C>
Revenues (Euro) 258 (Euro) - (Euro) 37 (Euro) - (Euro) 295
Depreciation and amortization 299 2 9 78 388
Net loss (8,763) (675) (597) (4,906) (14,941)
Total assets 47,497 503 1,021 67,764 116,785
Expenditures for long-lived
assets 23,628 240 36 3,163 27,067
</TABLE>
10
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
When used in this report, the words "intend", "expect," "estimate,"
"anticipate," "project," "believe," "plan," and "should," or other variations of
such terms, are intended to identify forward-looking statements. Specifically,
statements included in this report that are not historical facts, including
statements about our beliefs and expectations about our business and our
industry are forward-looking statements. These statements are subject to risks
and uncertainties that could cause actual results or outcomes to differ
materially. These risks and uncertainties include, but are not limited to, our
ability to do the following in a timely manner: successfully market our network
services to current and new customers; interconnect with and develop cooperative
working relationships with incumbent local exchange carries; develop efficient
operations support systems and other back office systems; successfully and
efficiently transfer new customers to our networks and access new geographic
markets; successfully develop Internet data centers and market our Internet-
related services; identify, finance and complete suitable acquisitions and
partnering arrangements with other companies; secure additional financing
necessary to carry out our plans and expand our services; install new switching
facilities and other network equipment; obtain leased fiber optic line capacity,
rights-of-way, building access rights and any required governmental
authorizations, franchiser and permits; consistently deliver reliable services
and minimize system failures or shutdowns; successfully obtain necessary
regulatory approvals and manage changes in regulatory requirements; and other
factors discussed in our filings with the Securities and Exchange Commission.
Forward-looking statements included in this report speak only as of the date of
this report and we will not revise or update these statements to reflect events
or circumstances after the date of this report or to reflect the occurrence of
unanticipated events.
Unless otherwise indicated, all share numbers reflect the five-for-one split we
effected on February 25, 2000.
Introduction
We are a rapidly growing CLEC operating in France and Germany. We offer
traditional fixed wireline retail business telecommunications services to our
directly connected on-net customers and sell wholesale services to other
carriers. We also have established an Internet division to offer a full range of
Internet-related services through Internet data centers we are establishing in
France, Germany and the United Kingdom.
Prior to January 1, 2000, the functional currency for CompleTel Europe,
CompleTel Holding I B.V., CompleTel Holding II B.V. and CompleTel ECC B.V.was
the U.S. dollar and the functional currency for each of CompleTel Europe's
operating subsidiaries was the applicable local currency. Effective January 1,
2000, CompleTel Europe, CompleTel Holding I B.V., CompleTel Holding II B.V. and
CompleTel ECC B.V and each of their subsidiaries, except those in the U.K.,
utilized the euro as their functional currency. Additionally, we have elected to
use the euro as our financial reporting currency. As a result, we have restated
prior period amounts by translating prior period U.S. dollar amounts into the
euro. Our results of operations (accumulated deficit) for periods prior to
January 1, 1999 (introduction date for the euro) have been restated using the
January 1, 1999 exchange rate between the U.S. dollar and the euro.
Results of Operations
We have generated operating losses and negative cash flow from our operating
activities to date. As a result of our operating history, prospective investors
have limited operating and financial data about us upon which to base an
evaluation of our performance.
Revenues
For the quarter ended June 30, 2000, revenues totaled (Euro)5.5 million compared
to (Euro)0.3 million for the comparable period in 1999. For the six months ended
June 30, 2000 revenues totaled (Euro)8.5 million, compared to (Euro)0.3 million
in the comparable period in 1999. Since January 1998, we have developed and
refined our business plans, procured regulatory and governmental authorizations
for our 17 markets, raised capital, hired management and other key personnel,
designed, developed and begun installing our fiber optic metropolitan area
networks and operation support systems, obtained senior financing commitments
and negotiated equipment and facilities agreements.
11
<PAGE>
Operating Expenses
Our primary operating expenses consist of network costs, selling, general and
administrative expenses, including start-up costs, management fees to affiliate,
and depreciation and amortization expenses.
Network Costs
Network costs for the three and six month periods ended June 30, 2000 totaled
(Euro)5.6 million and (Euro)8.6 million, respectively, compared to (Euro)0.4
million and (Euro)0.5 million for the comparable periods in 1999. We expect
these costs will increase as we expand our networks and services. Our network
costs include costs such as interconnection costs, the cost of leasing high
capacity digital lines that interconnect our network with the networks of other
providers, the cost of leasing local loop lines that connect our customers to
our network, and switch site rent, operating and maintenance costs. We also
lease dark fiber and conduit to establish and augment our networks in certain
markets.
For the quarter ended June 30, 2000, our direct operating margin, which includes
network costs directly associated with our revenues such as interconnect costs,
totaled (Euro)2.8 million, or 50 percent. For the prior quarter, direct
operating margin was over 50 percent. For the three and six month periods ended
June 30, 2000, our gross margin, which includes all network costs, was
approximately break-even.
Selling, General and Administrative Expenses
Our selling, general and administrative expenses include selling and marketing
costs, customer care, billing, corporate administration, salaries and other
personnel costs and legal fees. For the three and six month periods ended June
30, 2000, selling, general and administrative expenses totaled (Euro)17.2
million and (Euro)30.4 million, respectively, compared to (Euro)6.1 million and
(Euro)9.6 million for the comparable periods in 1999. The (Euro)4 million
increase in the second quarter and the increase in the comparable 1999 period
are due to the rapid growth in the number of personnel and the expenses related
to wages and salaries.
We are assembling a large, locally based, direct sales force in our local and
regional markets and a national account team to service multiple location
customers and key account executives. To attract and retain a highly qualified
sales force, we offer our sales and customer-care personnel a highly competitive
compensation package. The number of employees increased from 197 as of June 30,
1999 to 564 as of June 30, 2000. On June 30, 2000, we had a sales force of 138
(including managers and administrators), compared to 59 on June 30, 1999. We
expect the number of sales and marketing personnel to continue to grow and our
selling, general and administrative costs to increase as we develop and expand
our operations.
We incurred amortization of stock-based compensation expense of approximately
(Euro)1.7 million and (Euro)3.3 million under our fixed stock option plan for
the three and six month periods ended June 30, 2000. This amount is based on
deferred compensation at the date of grant totaling approximately (Euro)31.9
million.
We incurred additional stock-based compensation expense of approximately
(Euro)42.4 million upon completion of our IPO due to the resulting vesting of
certain CompleTel LLC performance vesting units held by certain of our employees
in connection with a qualified public offering. This compensation expense is
based on an assumed IPO price of (Euro)17.50 per share. In addition, based upon
our value as indicated in the IPO, we recorded compensation expense and deferred
compensation in the quarter ended March 31, 2000, of approximately (Euro)24.0
million and (Euro)74.9 million, respectively, for performance vesting units that
will not vest as a result of the IPO but which may vest upon a qualified sale by
Madison Dearborn Partners or in May 2005 based on a deemed vesting date. The
additional deferred compensation is being amortized to expense over the
remaining vesting period to May 18, 2005 (deemed vesting date if not prior due
to a qualified sale by Madison Dearborn Partners). The recorded amount of
compensation expense and deferred compensation for these variable awards are
adjusted at each reporting date to reflect management's estimate of the number
of such units that will ultimately vest and the fair market value of those units
as of the end of the reporting period based on the then current market value of
ordinary shares. Accordingly, as of June 30, 2000, we reduced previously
recorded compensation expense and deferred
12
<PAGE>
compensation by approximately (Euro)7.5 million and (Euro)32.2 million,
respectively, based on the June 30, 2000 share price of CompleTel Europe N.V.
Management Fees to Affiliate
CompleTel LLC and its wholly-owned subsidiary, CableTel Management, Inc.,
CompleTel Europe, and each of the entities between CompleTel Europe and our
operating subsidiaries, incur overhead costs and expenses associated with their
holding company operations. Our operating subsidiaries bear their proportionate
share of these costs and expenses. The operating subsidiaries pay CableTel
Management, Inc. a management fee of 105% (103% for periods prior to the end of
January 1999) of all allocated costs, expenses, charges and disbursements that
CableTel Management, Inc. and CompleTel Europe incur in rendering services to
each of the companies. These services rendered are ordinary and necessary
general and administrative expenses of CompleTel Europe that were paid on its
behalf by CableTel Management, Inc. For the three and six month periods ended
June 30, 2000, we recorded (Euro)4.0 million and (Euro)6.1 million,
respectively, of related-party management fees compared to (Euro)1.0 million and
(Euro)1.9 million for the same periods of 1999.
Depreciation and Amortization
For the three and six-month periods ended June 30, 2000, we recorded
depreciation and amortization expense of (Euro)4.2 million and (Euro)7.2
million, respectively, compared to (Euro)0.3 million and (Euro)0.4 million for
the comparable periods in 1999. These increases are due to increases in network
and non-network related property and equipment. We started recording network
depreciation during the quarter ended June 30, 1999 when we initiated network
services.
Other Income and Expense
We incurred interest expense, net of (Euro)2.7 million of capitalized interest,
of (Euro)6.6 million during the quarter ended June 30, 2000. Interest expense
for the quarter ended June 30, 1999 totaled (Euro)2.7 million. For the six-month
periods ended June 30, 2000 and 1999, interest expense totaled (Euro)8.5
million, net of (Euro)4.0 million of capitalized interest, and (Euro)3.9
million, respectively. The interest expense recorded reflects interest on our
senior notes, the accretion of our senior discount notes and the amortization of
deferred financing costs. We capitalize a portion of our interest costs as part
of the construction cost of our networks, in accordance with Statement of
Financial Accounting Standards No. 34 "Capitalization of Interest Costs" ("SFAS
34").
Interest income totaled (Euro)9.1 million and (Euro)9.6 million for the three
and six month periods ended June 30, 2000, respectively, compared to (Euro)1.0
million and (Euro)1.5 million for the comparable periods in 1999. We have
applied for an exemption from regulations required by the Investment Company Act
of 1940. We expect the request for an exemption will be concluded in the third
quarter. As a result of the regulation, and until such time that we obtain an
exemption to remain in compliance with the investment requirements, as of June
30, 2000 we had invested approximately (Euro)502.9 million of our initial public
offering proceeds and our senior note proceeds in short-term maturities of U.S.
treasury bills. As a result of this investment, we have entered into forward
currency contracts for the amount of these investments to minimize our currency
exposure.
Foreign Exchange Rates
Our revenues, costs, assets and liabilities are, for the most part, denominated
in euros, which is our functional currency, effective January 1, 2000.
Therefore, we are exposed to changes in currency exchange rates due to our U.S.
dollar denominated debt and investments. The notes which we issued in February
1999 expose us to exchange rate fluctuations as the payment of principal and
interest on the notes will be made in U.S. dollars, and a substantial portion of
our future cash flow used to service these payments will be denominated in local
currencies, including the euro. While we intend to take steps to minimize
exchange rate risks, we cannot assure you that we will not be materially
adversely affected by variations in currency exchange rates.
We adopted the euro as our functional and reporting currency effective January
1, 2000.
13
<PAGE>
Net Loss
Our net loss during the three and six month periods ended June 30, 2000 was
(Euro)27.1 million and (Euro)124.4 million, respectively, compared to losses
during the similar periods in 1999 of (Euro)9.7 million and (Euro)14.9 million,
respectively. The increases were primarily the result of non-cash compensation
charges and substantial start-up costs of the operating subsidiaries.
Adjusted EBITDA
Since the commencement of our operations, we have experienced significant
operating losses and negative Adjusted EBITDA, as set forth below. We expect to
continue to generate significant operating losses and negative Adjusted EBITDA
in each of our markets as we develop, construct and expand our business, until
we have established a sufficient revenue-generating customer base in each
market.
We expect to experience increasing consolidated operating losses and negative
cash flows from operations as we expand our operations and enter new markets,
even if and after we have achieved positive cash flow from operations in our
initial markets. The following table summarizes our Adjusted EBITDA calculation
for the periods indicated (amounts in thousands of euros).
<TABLE>
<CAPTION>
Six Months Ended
---------------------------------
June 30, June 30
2000 1999
-------------- -------------
<S> <C> <C>
Net Loss (Euro)(124,377) (Euro)(14,941)
Interest expense (net of interest income and capitalized interest) (1,047) 2,431
Income taxes - -
Depreciation and amortization 7,177 388
Non-cash compensation expense 64,229 206
Foreign exchange loss and other expense 18,451 246
Gain on early extinguishment of debt (1,053) -
------- -------
Negative Adjusted EBITDA (Euro)(36,620) (Euro)(11,670)
======= =======
</TABLE>
In view of our highly leveraged capital structure, we consider Adjusted EBITDA
to be an important performance measure. Adjusted EBITDA consists of net earnings
(loss) before interest expense, interest income, income taxes, non-cash
compensation expense, depreciation and amortization and other non-cash charges,
including foreign currency exchange rate gains and losses. Conceptually,
Adjusted EBITDA measures the amount of income generated each period that could
be used to service debt, because it is independent of the actual leverage
employed by the business; but Adjusted EBITDA ignores funds needed for capital
expenditures, income taxes and expansion. Some investment analysts track the
relationship of Adjusted EBITDA to total debt as one measure of financial
strength. However, Adjusted EBITDA does not represent cash provided or used by
operating activities and you should not consider Adjusted EBITDA in isolation or
as a substitute for measures of performance prepared in accordance with U.S.
generally accepted accounting principles.
You also should be aware that Adjusted EBITDA may differ significantly from cash
flows from operating activities as reflected in a statement of cash flows
prepared in accordance with U.S. generally accepted accounting principles. Cash
from operating activities is net of interest and taxes paid and is a more
comprehensive determination of periodic income on a cash, rather than accrual,
basis and is exclusive of non-cash items of income and expenses such as
depreciation and amortization. In contrast, Adjusted EBITDA is derived from
accrual basis income and is not adjusted for changes in working capital.
Consequently, Adjusted EBITDA is not affected by the timing of receivable
collections or when accrued expenses are paid. We are not aware of any uniform
standards for determining Adjusted EBITDA. Presentations of Adjusted EBITDA may
not be calculated consistently by different companies in the same or similar
businesses. As a result, our reported Adjusted EBITDA may not be comparable to
similarly titled measures used by other companies.
14
<PAGE>
Statements of Cash Flows
------------------------
We had cash and cash equivalents of (Euro)550.4 million as of June 30, 2000, an
increase of (Euro)493.3 million from (Euro)57.1 million as of December 31, 1999.
Details of the change in cash and cash equivalents are set forth in the table
below.
<TABLE>
<CAPTION>
Six Months Ended
---------------------------------
June 30, June 30,
2000 1999
--------------- --------------
<S> <C> <C>
Cash flows from operating activities (Euro) (38,432) (Euro) (12,610)
Cash flows from investing activities (151,392) (27,067)
Cash flows from financing activities 677,751 115,413
Effect of exchange rates on cash 5,377 4,948
-------- -------
Net increase in cash and cash equivalents 493,304 80,684
Cash and cash equivalents at beginning of period 57,115 1,472
-------- -------
Cash and cash equivalents at end of period (Euro) 550,419 (Euro) 82,156
======== =======
</TABLE>
Cash Flows from Operating Activities
During the six months ended June 30, 2000, we used (Euro)38.4 million in
operating activities, a (Euro)25.8 million increase from the (Euro)12.6 million
used in operating activities for the comparable period in 1999. This increase
was primarily related to the substantial organization and start-up costs
incurred during the development of our networks. Our development efforts
increased significantly since the first half of 1999.
Cash Flows from Investing Activities
We used approximately (Euro)151.4 million of cash in investing activities during
the six months ended June 30, 2000, compared to a use of (Euro)27.1 million for
the similar period in 1999. The increase was primarily due to investment of our
initial public offering proceeds during the first quarter of 2000 and the
purchase of approximately (Euro)78 million of securities that are currently
pledged as security for the Senior Notes (see Liquidity and Capital Resources
below).
Cash Flows from Financing Activities
We had approximately (Euro)677.8 million of cash flows from financing activities
during the six months ended June 30, 2000, compared to (Euro)115.4 million for
the similar period in 1999. The increase was due to the net proceeds from our
initial public offering and our senior note offering less approximately
(Euro)14.9 million used to repurchase a portion of our existing senior discount
notes. Cash flows from financing activities during the first quarter of 1999
resulted from proceeds from our senior discount note offering and equity
contributions from our parent.
Liquidity and Capital Resources
-------------------------------
The telecommunications business is capital intensive. We have needed and will
continue to need large amounts of capital to fund capital expenditures, working
capital, debt service, and operating losses. As of June 30, 2000, we had
(Euro)628.7 million of cash and short-term investments and net working capital
of (Euro)569.6 million.
In January 2000, we executed an agreement for a (Euro)265 million senior secured
credit facility with Goldman Sachs International and Paribas as co-arrangers of
the facility. As of June 30, 2000, we had no borrowings outstanding under the
facility. In April 2000, we entered into a suspension agreement with the co-
arrangers and other parties whereby we agreed not to borrow funds under the
credit facility in exchange for their agreement to suspend the application of
substantially all of the representations, covenants and events of default. See
Note 5 of the Notes to Unaudited Consolidated Financial Statements included
elsewhere in this report for a discussion of this agreement.
15
<PAGE>
In April 2000, we completed an offering of an aggregate (Euro)200 million 14%
senior notes due 2010 (the "Senior Notes"). A portion of the proceeds were used
to repurchase $27.0 million ((Euro)27.6 million ) principal amount at maturity
of our existing senior discount notes. We lent approximately (Euro)78.0 million
of the net proceeds to a wholly-owned subsidiary which used the funds to invest
in a portfolio of securities which is pledged as security for the Senior Notes.
The proceeds of these pledged securities will be used to make the first six
interest payments on the Senior Notes. The remaining proceeds from the Senior
Notes offering will be used to (i) fund the further deployment of our networks
in existing markets and an additional six cities in France and Germany, (ii)
fund the expansion of our Internet-related services, (iii) develop complementary
local access systems, (iv) fund net operating losses and (v) for general and
corporate purposes.
Capital Expenditures
During the quarters ended June 30, 2000 and 1999, we made capital expenditures
of (Euro)60.7 million and (Euro)15.5 million, respectively, for property and
equipment necessary to deploy networks in our initial markets. For the six-month
periods ended June 30, 2000 and 1999, we made capital expenditures totaling
(Euro)95.2 million and (Euro)27.1 million, respectively. We also used capital
during these periods to fund our operating losses.
The Company is currently implementing its business plan to deploy and operate
metropolitan area networks ("MANs") in 17 cities in France and Germany and
provide Internet-related services in these cities and the United Kingdom. The
Company believes it has fully funded its current business plan to construct MANs
in these 17 cities and provide these Internet-related services.
The actual amount and timing of the Company's future capital requirements may
differ materially from the Company's current estimates, and additional financing
may be required in the event of departures from the Company's business plans and
projections, including those caused by unforeseen delays, cost overruns,
engineering design changes, demand for the Company's services that varies from
that expected by the Company, and adverse regulatory, technological or
competitive developments. The Company may also require additional capital (or
require financing sooner than anticipated) if it alters the schedule or targets
of its roll-out plan in response to regulatory, technological or competitive
developments (including additional market developments and new opportunities in
and outside of its target markets). The Company intends to evaluate potential
joint ventures, strategic alliances, and acquisition opportunities on an ongoing
basis as they arise, and the Company may require additional financing if it
elects to pursue any such opportunities. The Company also may be required to
seek additional financing if it elects to provide complementary
telecommunications services or deploy networks in other Western European markets
beyond its target markets. Sources of additional financing may include
commercial bank borrowings, vendor financing and/or the private or public sale
of equity or debt securities.
Majority Owner
--------------
CompleTel Europe is majority owned by CompleTel LLC, a Delaware limited
liability company. CompleTel LLC currently intends to begin the distribution of
CompleTel Europe N.V. ordinary shares beneficially owned by CompleTel LLC's
members, through optional redemptions of their fully vested units, beginning at
the end of the third quarter 2000, subject to limitations imposed by applicable
Dutch law and Delaware law. Upon all units becoming fully vested, CompleTel LLC
currently intends to permit the optional redemption of such units and initiate
the liquidation process.
16
<PAGE>
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Investment Portfolio and Interest Rate Sensitivity
Our investment policy is limited by the indentures for our outstanding notes and
our senior secured credit facility. We are restricted to investing in financial
instruments with a maturity of one year or less (with certain limited
exceptions). We are required to utilize investments that meet high credit
quality standards, such as obligations of the U.S. government or any European
Economic Community member government or any agency thereof guaranteed by the
country, certificates of deposits, money market deposits, and commercial paper
with a rating of A-1 or P-1. When and if we terminate the suspension of our
credit facility, we would be required to enter into an interest rate hedging
program with respect to 50% of every tranche of (Euro)50 million borrowed to
mitigate foreign currency exchange rate risk.
Interest income earned on our investment portfolio is affected by changes in
short-term interest rates. We are thus exposed to market risk related to changes
in market interest rates. To date, we have managed these risks by monitoring
market rates and the duration of our investments.
Impact of Foreign Currency Rate Changes
Our operations are not significantly exposed to changes in currency exchange
rates because our revenues, costs, assets and liabilities are, for the most
part, denominated in euros. However, the senior discount notes which we issued
in February 1999 expose us to exchange rate fluctuations as the payment of
principal and interest on the notes will be made in dollars, and a substantial
portion of our future cash flows used to service these payments will be
denominated in euros. In addition, because of the issues surrounding our desire
to not be considered an investment company under the Investment Company Act of
1940, we must invest a substantial portion of our available cash in U.S.
government treasury bills with various short-term maturities. Accordingly, we
have executed certain forward currency contracts in order to hedge our risk
against foreign currency fluctuations between the U.S. dollar and the euro.
While we intend to take steps to minimize exchange rate risks, we cannot assure
you that we will not be materially adversely affected by variations in currency
exchange rates.
Our operating subsidiaries' monetary assets and liabilities are subject to
foreign currency exchange risk if purchases of network equipment and services
are denominated in currencies other than the subsidiary's own functional
currency. However, the majority of such purchases to date have been based on
each subsidiary's functional currency.
The spot rates for the euro are shown below expressed in dollar per one euro.
December 31, 1998 $1.181/(1)/
June 30, 1999 $1.033
December 31, 1999 $1.007
June 30, 2000 $0.951
----------------------
/(1)/ Based on the exchange rate as of January 4, 1999, the date on which the
Euro Noon Buying Rate was first quoted.
We intend to manage exchange rate risk by incurring financing liabilities
denominated in the currency of the country of operations. In addition, we intend
to adopt hedging strategies to manage our exposure to foreign currency exchange
rate risk.
17
<PAGE>
PART II. OTHER INFORMATION
Item 6(a) Exhibits
Exhibit No. Description
----------- -----------
10.1(1) Amended Employment Agreement by and between CableTel Management,
Inc. and William H. Pearson, dated June 30, 2000
10.2(1) Amended Employment Agreement by and between CableTel Management,
Inc. and David Lacey dated June 30, 2000
10.3(1) Amended Employment Agreement by and between CableTel Management,
Inc. and James E. Dovey dated June 30, 2000
10.4(1) Amended and Restated Executive Securities Agreement by and between
CompleTel LLC and Martin Rushe dated as of January 15, 2000
10.5(1) Amended and Restated Executive Securities Agreement by and between
CompleTel LLC and Hansjorg Rieder dated as of May 26, 1999
10.6(2) German License Certificate Class 4 for the Provision of Voice
Telephony Services on the Basis of Self-operated Telecommunications
Networks for Cities in the Administrative District of Leipzig dated
July 7, 2000
10.7(2) German License Certificate Class 3 for the Operation of
Transmission Lines for the Offer of Telecommunications Services for
the Public by the Licensee or other Parties for Cities in the
Administrative District of Leipzig dated July 7, 2000
10.8(2) German License Certificate Class 3 for the Operation of
Transmission Lines for the Offer of Telecommunications Services for
the Public by the Licensee or other Parties for Cities in the
Administrative District of Dresden dated July 7, 2000
10.9(2) German License Certificate Class 3 for the Operation of
Transmission Lines for the Offer of Telecommunications Services for
the Public by the Licensee or other Parties for Cities in the
Administrative Districts of Karlsruhe and Rheinhessen-Pfalz dated
July 7, 2000
10.10(2) German License Certificate Class 3 for the Operation of
Transmission Lines for the Offer of Telecommunications Services for
the Public by the Licensee or other Parties for the State of
Hamburg, Cities in the State of Schleswig-Holstein and Cities in
the Administrative District of Luneburg dated July 7, 2000
10.11(2) German License Certificate Class 4 for the Provision of Voice
Telephony Services on the Basis of Self-operated Telecommunications
Networks for Cities in the Administrative District of Stuttgart
dated July 7, 2000
10.12(2) German License Certificate Class 4 for the Provision of Voice
Telephony Services on the Basis of Self-operated Telecommunications
Networks for Cities in the Administrative District of Dresden dated
July 7, 2000
10.13(2) German License Certificate Class 4 for the Provision of Voice
Telephony Services on the Basis of Self-operated Telecommunications
Networks for the State of Hamburg, Cities in the State of
Schleswig-Holstein and Cities in the Administrative District of
Luneburg dated July 7, 2000
10.14(2) German License Certificate Class 4 for the Provision of Voice
Telephony Services on the Basis of Self-operated Telecommunications
Networks for Cities in the Administrative Districts of Karlsruhe
and Rheinhessen-Platinate dated July 7, 2000
10.15(2) German License Certificate Class 3 for the Operation of
Transmission Lines for the Offer of Telecommunications Services for
the Public by the Licensee or other Parties for Cities in the
Administrative District of Stuttgart dated July 7, 2000
10.16(2) Amendment to German License Certificate Class 3 for the Operation
of Transmission Lines Offered for Telecommunications Services for
the Public by the Licensee or Others for Cities in the
Administrative District of Darmstadt and Cities in the State of
Rhineland-Palatinate dated July 7, 2000
10.17(2) Amendment to German License Certificate Class 4 for Voice Telephony
Services on the Basis of Self-operated Telecommunications Networks
for Cities in the Administrative District of Darmstadt and Cities
in the State of Rhineland-Palatinate dated July 7, 2000
27.1 Financial Data Schedule
___________
18
<PAGE>
(1) Previously filed as an exhibit to the Registrants' Registration Statement on
Form S-4, file number 333-41126, filed with the Securities and Exchange
Commission on July 11, 2000 and incorporated herein by reference.
(2) Previously filed as an exhibit to Amendment No. 1 to the Registrants'
Registration Statement on Form S-4, file number 333-41126, filed with the
Securities and Exchange Commission on July 21, 2000 and incorporated herein
by reference.
Item 6(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K on April 7, 2000, announcing the
Company's agreement on April 6, 2000 to sell an aggregate of euro 200 million
principal amount of its 14 % senior notes due 2010.
19
<PAGE>
SIGNATURE
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, thereunto duly authorized.
COMPLETEL EUROPE N.V.
(Registrant)
Date: August 14, 2000 /s/ William H. Pearson
----------------------------------------
William H. Pearson
President and Chief Executive Officer
Date: August 14, 2000 /s/ David E. Lacey
----------------------------------------
David E. Lacey
Chief Financial Officer
20
