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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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) February 10, 1998
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Commission File Number: 0-23172
NETWORK LONG DISTANCE, INC.
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(Exact Name of Registrant as Specified in its Charter)
DELAWARE 77-1122018
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
11817 CANON BLVD., SUITE 600
NEWPORT NEWS, VIRGINIA 23606
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Address of Principal Executive Offices, Including Zip Code
757-873-1040
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(Registrant's Telephone Number, Including Area Code)
ITEM 5. OTHER EVENTS
Attached as Exhibit 99.1 is a press release issued by Network Long Distance,
Inc. dated February 10, 1998 which is hereby incorporated by reference herein.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(C) EXHIBITS
99.1 Press Release dated February 10, 1998
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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.
NETWORK LONG DISTANCE, INC.
Dated: February 11, 1998 By: /s/ Thomas G. Keefe
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Chief Financial Officer
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EXHIBIT INDEX
Exhibit
Number Description
- -------- -----------
99.1 Press Release dated February 10, 1998
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NEWS RELEASE
EXHIBIT 99.1
Network Long Distance Reports Fiscal Third Quarter Results; Revenue Increased
25%; EBITDA Before Special Charges $1.6 million.
Newport News, Va., Feb. 10 - - Network Long Distance, Inc. (NASDAQ: NTWK)
announced today results for its fiscal third quarter ended December 31, 1997.
Third quarter revenues were $26.1 million, representing a 25% increase over
revenues of $20.9 million for the quarter ended December 31, 1996. The increase
included the results from Eastern Telecom International Corporation (ETI)
acquired by Network on May 7, 1997. ETI was accounted for as a purchase, and
its results are not included in the earlier quarter or nine month period ended
December 31, 1996.
Results for both quarters and nine month periods ended December 31, 1997 and
1996 include the effects of Network's merger with National Teleservice, Inc.
(NTI) on May 12, 1997 in a transaction accounted for as a pooling-of-interests.
Before accounting for special charges, earnings before interest, taxes,
depreciation and amortization (EBITDA) for the fiscal third quarter 1997 were
$1,642,000. This compares to an EBITDA loss of $954,000 in the quarter ended
December 31, 1996.
SPECIAL CHARGES
During the third fiscal quarter ended December 31, 1997, current management
initiated a review of expected future cash flows associated with certain
customer base acquisitions made by the Company under prior management. Certain
of these customer bases were the subject of a similar review during the fiscal
year ended March 31, 1997. Revenues currently generated by these former
acquisitions represented less than 9% of the Company's total revenues during the
quarter. Due to higher than anticipated customer attrition within these
acquired customer bases, management determined that the carrying value of such
customer bases had been impaired and, accordingly, reduced their carrying value
pursuant to Statement of Financial Accounting Standards No. 121 via a non-cash
charge of $3,733,000. After accounting for this charge and past charges made
during the Company's fiscal year ended March 31, 1997, the remaining carrying
value of intangibles for all customer base acquisitions made under prior
management is $1,503,000 - approximately equaling the present value of their
expected future cash flows -- and reflects management's expectation that these
customer bases will continue to experience attrition at rates higher than the
Company's other customers.
In addition, the Company reported charges of $292,000 in the quarter ended
December 31, 1997 stemming primarily from the planned disposition of certain
assets related to past acquisitions.
Expenses of $271,000, primarily from increases in severance, legal expenses,
billing, and other integration expenses related to the ETI and NTI mergers, were
also reported in the 3rd quarter.
The Company reported a net loss after taxes for the third fiscal quarter 1997 --
after taking into account the $4,296,000 charges referred to above -- of
$4,382,000 or $(0.34) per share. This compares to a third quarter 1996 net loss
of $5,000,000, or $(0.54) per share, as restated to reflect the NTI pooling.
YEAR-TO-DATE SUMMARY
For the nine months ended December 31, 1997, Network Long Distance reported
revenue of $78.5 million, up 24% from revenues of $63.4 million for the nine
month period ended December 31, 1996.
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Net loss for the nine months ended December 31, 1997 was $6,110,000, or $(0.49)
per share. These results include merger expenses and related charges of
$2,496,000, a non-cash provision to reduce the carrying values of certain assets
of $4,025,000, and a $1,100,000 non-cash charge for stock compensation expense.
For the nine months ended December 31, 1996, the reported loss was $4,114,000 or
$(0.45) per share, as restated to reflect the NTI pooling.
Earnings for the nine months ended December 31, 1997 before interest, taxes,
depreciation, amortization (EBITDA) and non-recurring charges - - a commonly
used measure of cash flow in the telecommunications industry - - were
$5,632,000. The comparable measure for the nine month period ended December 31,
1996 was $2,020,000.
Network Long Distance, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statement of Operations
(In thousands, except per share amounts)
Three and Nine Months Ended December 31, 1997
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues (A) $26,085 $20,906 $78,464 $63,430
Transmission costs 16,479 13,970 49,227 41,954
------- ------- ------- -------
Gross Profit 9,606 6,936 29,237 21,476
------- ------- ------- -------
Selling, general and
administrative expense (A) 7,964 7,890 23,605 19,456
Depreciation and amortization 1,208 673 3,337 1,768
Merger expenses and related non-
recurring charges (B) 271 0 2,497 0
Provision to reduce carrying value
of certain assets (C) 4,025 4,050 4,025 4,050
Non-recurring stock
compensation charge 0 0 1,100 0
------- ------- ------- -------
Operating Income (3,862) (5,677) (5,327) (3,798)
Interest (income) expense (net) 104 135 336 450
Other (income) expense 69 0 (100) 19
------- ------- ------- -------
Income (loss) before taxes (3,897) (5,812) (5,563) (4,267)
Income tax expense (benefit) 485 (812) 547 (153)
------- ------- ------- -------
Net Loss $(4,382) $(5,000) $(6,110) $(4,114)
------- ------- ------- -------
------- ------- ------- -------
Net Income per share - Basic and
diluted $(0.34) $(0.54) $(0.49) $(0.45)
Weighted average common shares
outstanding 12,836 9,201 12,404 9,158
EBITDA before merger expenses,
provision to reduce carrying
value of certain assets, non-
cash stock compensation
charge and other income and
expense (D) $1,642 $(954) $5,632 $2,020
</TABLE>
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Network Long Distance, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Statement of Operations
Three and Nine Months Ended December 31, 1997
A. Amounts shown for both Revenues and Selling, general and administrative
Expenses include excise taxes of $4,260,000 and $3,334,000 for the nine
months ended Dec. 31, 1997 and 1996 respectively, and $1,445,000 and
$1,129,000 for the three months ended Dec. 31, 1997 and 1996 respectively.
B. Non-recurring merger and acquisition related charges consist primarily of
advisor fees, legal expenses, regulatory costs, headquarters relocation
expenses, employee severance expenses resulting from the mergers and
surplus facilities charges.
C. Charges pursuant to Statement of Financial Accounting Standards No. 121
(SFAS-121), "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of."
D. EBITDA (earnings before interest, taxes, depreciation and amortization) is
a cash flow measurement commonly used in the telecommunications industry.
It is not recognized as a measurement of performance under generally
accepted accounting principles, and should not be considered as an
alternative to net income or cash flow.
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