FORM 10Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
(Mark One)
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY
PERIOD ENDED June 30, 2000
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION
PERIOD FROM __________________ TO __________________
Commission file number 0-25194
FIRSTCOM CORPORATION
(Exact name of registrant as specified in charter)
TEXAS 87-0464860
(State of Incorporation) (IRS Employee Identification)
220 ALHAMBRA CIRCLE, SUITE 910
CORAL GABLES, FLORIDA 33134
(Address of principal executive offices) (Zip Code)
Registrant's telephone number:
(305) 459-6300
(Former name, former address and fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) filed all reports required by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period than 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 [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of August 4, 2000 - 31,769,225
NOTE: Page 1 of sequentially numbered pages.
1
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FIRSTCOM CORPORATION
INDEX
PART I FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
(unaudited)
Condensed Consolidated Balance Sheets - as of
June 30, 2000 and December 31, 1999(unaudited) 3
Condensed Consolidated Statements of Operations -
Six Months and Three Months Ended June 30, 2000 and 1999
(unaudited) 4
Condensed Consolidated Statement of Stockholders'
Deficit- Six Months Ended June 30, 2000
(unaudited) 5
Condensed Consolidated Statements of Cash Flows -
Six Months Ended June 30, 2000 and 1999
(unaudited) 6
Notes to Condensed Consolidated Financial Statements
(unaudited) 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results Of Operations 8
PART II OTHER INFORMATION
Signatures 19
Exhibit Index 20
<PAGE>
PART I FINANCIAL INFORMATION
FIRSTCOM CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(THOUSANDS OF US DOLLARS, EXCEPT SHARE DATA)
(Unaudited)
<TABLE>
<CAPTION>
6/30/00 12/31/99
----------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .............................................. $ 16,778 $ 12,986
Restricted cash ........................................................ 97 645
Restricted investments ................................................. 10,410 20,440
Accounts receivable, net ............................................... 14,223 11,041
Prepaid expenses and other current assets .............................. 5,928 2,775
--------- ---------
Total current assets ................................................... 47,436 47,887
Property, plant, and equipment, net .................................... 108,125 92,469
Intangible assets, net ................................................. 16,799 17,704
Deferred financing costs and other assets .............................. 13,661 14,050
--------- ---------
Total assets ........................................................... $ 186,021 $ 172,110
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Short-term bank debt ................................................... $ 10,663 $ 55
Vendor financing, current .............................................. 1,358 814
Current maturities of long-term debt ................................... 638 50
Lease obligations, current ............................................. 30 70
Accounts payable ....................................................... 12,694 12,653
Accrued interest ....................................................... 3,688 3,716
Other accrued expenses ................................................. 2,213 5,334
Deferred income taxes .................................................. 302 302
Other current liabilities .............................................. 2,452 1,220
--------- ---------
Total current liabilities .............................................. 34,038 24,214
Senior notes, net ...................................................... 133,692 133,197
Long-term bank debt .................................................... - 2,008
Vendor financing ....................................................... 5,760 4,050
Lease obligations, less current portion ................................ 133 142
Deferred income taxes .................................................. 2,134 2,228
Other Liabilities ...................................................... 5,019 239
--------- ---------
Total liabilities ...................................................... 180,776 166,078
Minority interest ...................................................... 2,925 3,012
Redeemable Preferred Stock, $.001 par value, authorized
10,000,000 shares, issued and outstanding 1,448,885 and 1,345,507 shares
as of June 30, 2000 and December 31, 1999,respectively .................. 12,527 11,720
STOCKHOLDERS' DEFICIT
Common stock, $.001 par value, authorized
50,000,000 shares, issued and outstanding
31,762,195 and 26,858,526 shares as of June 30, 2000 and December 31,
1999, respectively ..................................................... 32 27
Additional paid in capital ............................................. 91,557 68,476
Warrants ............................................................... 26,737 26,737
Accumulated deficit .................................................... (128,296) (95,057)
Cumulative translation adjustments ..................................... (237) (238)
--------- ---------
(10,207) (55)
Shareholder loans ...................................................... - (8,645)
--------- ---------
Total stockholders' deficit ............................................ (10,207) (8,700)
--------- ---------
Total liabilities and stockholders' deficit ............................ $ 186,021 $ 172,110
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
FIRSTCOM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(THOUSANDS OF US DOLLARS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, THREE MONTHS ENDED JUNE 30
------------------------------- --------------------------
2000 1999 2000 1999
------------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
Revenues:
Long Distance ............................ $ 14,610 $ 12,166 $ 7,960 $ 6,141
Internet and data ............... 11,485 5,920 6,386 3,664
------------- ------------ ----------- ----------
26,095 18,086 14,346 9,805
Operating expenses:
Cost of revenues: .......................... 11,941 11,785 6,632 5,757
Selling, general and administrative ........ 21,445 10,385 11,390 6,040
Non-cash compensation and
Consulting expenses ....................... 115 152 58 70
Depreciation and amortization .............. 6,261 2,703 3,325 1,811
Merger expense ............................. 6,443 - 306 -
------------- ------------ ----------- ----------
46,205 25,025 21,711 13,678
Loss from operations ....................... (20,110) (6,939) (7,365) (3,873)
Interest expense ........................... (11,731) (10,720) (5,877) (6,216)
Interest income ............................ 502 1,367 110 566
Other income/(expense), net ................ (1,081) (435) (1,351) (57)
------------- ------------ ----------- ----------
Net loss before income taxes and minority
interest expense $ (32,420) $ (16,727) $ (14,483) $ (9,580)
Income taxes ............................... (143) (252) (126) (252)
------------- ------------ ----------- ----------
Net loss before minority interest $ (32,563) $ (16,979) $ (14,609) $ (9,832)
Minority Interest 133 (62) 133 (62)
------------- ------------ ----------- ----------
Net Loss ................................... $ (32,430) $ (17,041) $ (14,476) $ (9,894)
============= ============ ========== ==========
Net basic and diluted loss per share ....... $ (1.06) $ (0.88) $ (0.46) $ (0.50)
============= ============ ========== ==========
Weighted average common shares outstanding.. 30,612,248 19,461,011 31,563,569 19,806,468
============= ============ ========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE>
FIRSTCOM CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
(THOUSANDS OF US DOLLARS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL CUMMULATIVE
------------------ PAID IN ACCUMULATED TRANSLATION SHAREHOLDER
SHARES AMOUNT CAPITAL WARRANTS DEFICIT ADJUSTMENT LOANS TOTAL
---------- ------ ---------- -------- ----------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1999..... 26,858,526 $27 $68,476 $26,737 $ (95,057) $(238) $(8,645) $ (8,700)
Exercise of stock options....... 4,903,669 5 17,926 -- 17,931
Repayment of Shareholder Loan... 8,674 8,674
Vesting of Stock Options........ 5,155 5,155
Interest on Shareholder Loan.... -- (29) (29)
Preferred Stock PIK Dividend.... (809) (809)
Translation Adjustment 1 1
Net Loss........................ (32,430) (32,430)
---------- ------ ---------- -------- ----------- ----------- ----------- --------
Balances at June 30, 2000........ 31,762,195 $32 $91,557 $26,737 $(128,296) $(237) $ (0) $(10,207)
========== ====== ========== ======== =========== =========== =========== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE>
FIRSTCOM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(THOUSANDS OF US DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
---------------------------
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ............................................... $(32,430) $(17,041)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization expense ................. 6,261 2,703
Amortization of deferred financing costs and
original issue discounts .............................. 886 934
Accretion of discount on restricted investments (723) (995)
Capitalized interest related to network
construction .......................................... (260) (1,532)
Deferred financing cost ............................... 697 --
Bad Debt Expense....................................... 711
Minority Interest expense ............................. 62
Non-cash compensation and consulting expense .......... 5,212 --
Changes in operating assets and liabilities:
Accounts receivable .................................. (3,185) (2,551)
Prepaid expenses and other current assets ............ (3,151) (990)
Intangible Assets..................................... 904 --
Other assets ......................................... (6) (142)
Accounts payable and accrued expenses ................ (3,104) 3,666
Other liabilities .................................... 5,925 1,366
-------- --------
Net cash used in operating activities .................. (22,263) (14,520)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of telecommunications network ................ (28,578) (18,390)
Increase(decrease)in restricted cash .................. (548) 21,433
Acquisition of Teleductgos, net ....................... -- (4,936)
-------- --------
Net cash used in investing activities .................. (29,126) (1,893)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Use of Restricted Investment........................... 10,031 10,500
Repayment of Shareholder Loans ........................ 8,645 --
Net proceeds from vendor financing .................... 2,449 557
Exercise of stock options ............................. 23,087 4,501
Payments under leasing obligations .................... (40) (83)
Convertible preferred stock issue-net 807 9,600
Net change in bank debt and promissory notes .......... 10,202 (3,569)
-------- --------
Net cash provided by financing activities .............. 55,181 21,506
-------- --------
Net increase in cash and cash
equivalents ............................................ 3,792 5,093
-------- --------
Cash and cash equivalents at beginning of year ......... 12,986 8,892
-------- --------
Cash and cash equivalents at end of period ............. $ 16,778 $ 13,985
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
6
<PAGE>
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN THOUSANDS OF DOLLARS)
BASIS OF PRESENTATION
The unaudited condensed consolidated financial statements included
herein have been prepared by FirstCom Corporation (the "Company"). The foregoing
statements contain all adjustments, consisting only of normal recurring
adjustments which are, in the opinion of the Company's management, necessary to
present fairly the consolidated financial position of the Company as of June 30,
2000, the consolidated results of its operations for the three and six month
periods ended June 30, 2000 and 1999, and its consolidated cash flows for the
six month periods ended June 30, 2000 and 1999.
Certain information and footnote disclosure normally included in
financial statements, prepared in accordance with generally accepted accounting
principles, have been condensed or omitted pursuant to the instructions, rules
and regulations prescribed by the Securities and Exchange Commission ("the
Commission"). Although the Company believes the disclosures provided are
adequate to make the information presented not misleading, it strongly
recommends that these unaudited condensed consolidated financial statements be
read in conjunction with the audited consolidated financial statements and the
footnotes thereto included in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1999.
NOTE 1 - TELECOMMUNICATIONS NETWORKS
Telecommunications networks are recorded at cost and are depreciated on
a straight-line method over the estimated useful lives of the related assets.
Construction, engineering, interest , labor costs and import and value added
taxes directly related to the development of the Company's networks are
capitalized. The Company begins depreciating these costs when the networks
become commercially operational.
Telecommunications networks consists of:
June 30, December 31,
2000 1999
--------- ------------
Telecommunications equipment ................ $114,012 $ 94,356
Telecommunications equipment pending
installation and construction in progress.... -- 1,260
Office equipment, furniture and vehicles .... 11,732 8,363
-------- --------
125,744 103,979
Less: accumulated depreciation .............. (17,619) (11,510)
-------- --------
$108,125 $ 92,469
======== ========
NOTE 2 - BANK DEBT
During February 2000, certain subsidiaries of the Company entered into
a term credit facility (the "Term Facility") with a bank. The significant
provisions of the Term Facility are as follows: (i) maximum amount available
$10,000, (ii) annual interest rate of Libor plus 6% or Prime plus 5%, (iii)
principal maturity date of January 2, 2001, (iii) interest payments on the
outstanding principal balance are due quarterly beginning June 30, 2000, (iv)
the Term Facility is collateralized by certain telecommunications equipment and
(v) mandatory prepayment provisions exist upon the occurrence of certain events
including a change of control, as defined in the Indenture. As of June 30,
2000, the Company had $10,000 outstanding under the Term Facility.
NOTE 3 - MERGER EXPENSE
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During the six months ended June 30, 2000 the Company recognized
approximately $5,200 of non-cash expense related to the accelerated vesting of
un-vested stock options for certain former employees. Such expense is classified
in Merger Expense in the accompanying condensed statement of operations.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (THOUSANDS OF DOLLARS, EXCEPT SHARE, PER SHARE AND UNIT
AMOUNTS)
THE INFORMATION CONTAINED IN THIS DOCUMENT CONTAINS "FORWARD-LOOKING STATEMENTS"
THAT REFLECT THE COMPANY'S CURRENT EXPECTATIONS, HOPES, INTENTIONS, PLANS AND
STRATEGIES. THE WORDS OR PHRASES "IS EXPECTED," "WILL CONTINUE, "ANTICIPATES,"
"ESTIMATES," "EXPECTS," "PLANS," "INTENDS," OR SIMILAR EXPRESSIONS IN THIS
DOCUMENT ARE INTENDED TO IDENTIFY "FORWARD-LOOKING STATEMENTS" WITHIN THE
MEANING OF SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934 AND SECTION 27A OF
THE SECURITIES ACT OF 1933, AS ENACTED BY THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995. THERE CAN BE NO ASURANCE THAT SUCH FORWARD-LOOKING
STATEMENTS WILL PROVE TO HAVE BEEN CORRECT. IMPORTANT FACTORS THAT COULD CAUSE
ACTUAL RESULTS OF THE COMPANY TO DIFFER MATERIALLY FROM THE EXPECTATIONS THAT
MAY BE IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS INCLUDE, BUT ARE NOT LIMITED
TO, THE ECONOMIC ENVIRONMENT OF THE LATIN AMERICAN COUNTRIES IN WHICH THE
COMPANY OPERATES, CHANGES IN GOVERNMENTAL REGULATION, THE COMPANY'S LIQUIDITY
AND CAPITAL RESOURCES, COMPETITION, ACTUAL DEMAND FOR THE COMPANY'S SERVICES AND
THE OTHER FACTORS IDENTIFIED IN THIS DOCUMENT. THE COMPANY DOES NOT UNDERTAKE TO
UPDATE ANY SUCH FORWARD-LOOKING STATEMENTS. ALL STATEMENTS IN THIS DOCUMENT ARE
FORWARD-LOOKING STATEMENTS, EXCEPT FOR HISTORICAL INFORMATION CONTAINED IN THIS
DOCUMENT.
The following discussion and analysis should be read in conjunction
with the Company's unaudited consolidated financial statements and the notes
thereto appearing elsewhere in this document.
OVERVIEW
FirstCom's objective is to become a leading provider of broadband
communications services to business customers in key Latin American
business centers.
FirstCom Corporation ("FirstCom" or "Company") provides broadband
communications services primarily to business customers in four major
metropolitan business centers: Santiago, Chile; Lima/Callao, Peru; and Bogota
and Cali, Colombia. FirstCom primarily targets business customers,
communications carriers and high volume users by offering a wide range of
broadband communications services, including data, voice,video, audio and
Internet access. Specific service offerings vary depending on the concessions
FirstCom holds in each particular country, as well as local laws and regulations
and the infrastructure in each country.
FirstCom currently operates its own fiber optic networks in Santiago,
Chile, Lima/Callao, Peru, and Bogota and Cali, Colombia.
On November 1, 1999, FirstCom entered into an Agreement and plan of
Merger with AT&T Corp., AT&T Latin America Corp., an indirect wholly-owned
subsidiary of AT&T ("AT&T Latin America"), and Frantis, Inc., a Delaware
corporation ("Frantis"). The Merger Agreement provides for the merger (the
"Merger") of FirstCom with and into Frantis, which is a direct wholly owned
subsidiary of AT&T Latin America Corp. The Merger is subject to approval of
FirstCom's shareholders, among other conditions. FirstCom and AT&T Latin America
expect to complete the merger as soon as possible after the FirstCom
shareholders' special meeting, which is scheduled for August 28, 2000, if
FirstCom's shareholders approve the merger. For more information on the Merger,
see the Company's Definitive Proxy Statement dated July 27, 2000.
A summary of key operating metrics follows:
A SUMMARY OF KEY METRICS AS OF JUNE 30, 2000 FOLLOWS (UNAUDITED):
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<TABLE>
<CAPTION>
CHILE PERU COLOMBIA CORPORATE TOTAL
----- ---- -------- --------- -----
<S> <C> <C> <C> <C> <C>
NETWORK INSTALLATION
Route Kilometers - metropolitan area 343 1,346 977 2,666
Route Kilometers - domestic - - - -
Fiber Kilometers - metropolitan area 5,761 33,165 19,551 58,477
Fiber Kilometers - domestic - - - -
Buildings Connected 295 1,009 902 2,206
Ports Sold 1,610 1,131 2,056 4,797
Data & Dedicated Internet Customers 1,089 1,053 422 2,564
Employees 314 318 196 18 846
</TABLE>
Through FirstCom's Chilean subsidiaries, FirstCom currently provides
its corporate customers in Santiago with the following broadband communications
services:
/bullet/ high-quality voice and high-speed data communications services on a
private line basis, LAN to LAN interconnections, dedicated channels for
access to local information warehouses (e.g. credit bureaus, etc.),
remote terminal access, PBX to PBX connections, remote printing
capabilities, local and wide area network design, engineering,
installation, systems' integration and support services;
/bullet/ domestic and international long distance services, switched and
dedicated, in part, through FirstCom's own gateway switch and satellite
earth station, as well as through interconnections with other Chilean
long distance carriers; and
/bullet/ high-speed Internet access services.
Through its Peruvian subsidiary, FirstCom currently provides its
corporate customers in Lima and Callao with the following broadband
communications services:
/bullet/ high-quality voice and high-speed data communications services on a
private line basis, LAN to LAN interconnection and remote terminal
access;
/bullet/ domestic and international long distance services switched and
transported through interconnections with Telefonica del Peru;
/bullet/ local voice services switched and transported through Telefonica del
Peru (service to begin in the second half of 2000); and
/bullet/ high-speed Internet access services.
Through its Colombian operations, FirstCom currently provides its
corporate customers in Bogota and Cali with the following broadband
communications services:
/bullet/ high-quality voice and high-speed data communications services on a
private line basis, LAN to LAN interconnection and remote terminal
access; and
/bullet/ high-speed Internet access services.
FirstCom entered the Colombian market in February 1999 with the
acquisition of approximately 76% of Teleductos S.A., now known as FirstCom
Colombia S.A. ("FirstCom Colombia") and has a presence in Bogota and Cali. In
9
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November 1999 FirstCom increased its ownership of FirstCom Colombia to 86%.
RESULTS OF OPERATIONS (Amounts in US$000)
FOR THE SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO THE SIX MONTHS ENDED JUNE 30,
1999
REVENUES. Consistent with the six months period ended June 30, 1999,
during the six months period ended June 30, 2000, the majority of the Company's
revenues were derived primarily from its operations in Chile. However, as a
result of the acquisitions of FirstCom Internet, FirstCom Colombia and the
completion of the ATM/IP networks in Chile and Peru, long distance revenues
dropped from 67% of total revenues for the six months ended June 30, 1999 to
--56% of total revenues for the six months ended June 30, 2000. The Company
expects revenues to increase over the next few years due to the expansion of its
operations in Peru, Chile and Colombia.
The Company's revenues were $26,095 for the six months ended June
30, 2000 as compared to $18,086 for the six months ended June 30, 1999. Long
distance revenues increased from $12,166 for the six months ended June 30,
1999 to $14,610 for the six months ended June 30, 2000. These revenues were
generated through the sale of approximately 75.3 million and 53.5 million
minutes for the six months ending June 30, 2000 and 1999, respectively,
resulting in an average revenue per minute of approximately $0.19 and $0.23,
respectively. The increased long distance revenue was driven by the initiation
of long distance services in Peru. The decrease in the revenue per minute is due
to an increased mix of domestic long distance traffic and decreases in tariffs
for wholesale long distance traffic. Internet and data service revenue increased
significantly from $5,920 for the six months ended June 30, 1999 to $11,485
for the six months ended June 30, 2000. This increase was attributable to the
acquisition of FirstCom Colombia and FirstCom Internet in Chile and the
initiation of Internet and data services over the Company's ATM/IP network in
Peru and Chile.
The following table details the Company's revenue mix by country:
SIX MONTHS ENDED
JUNE 30, 2000 JUNE 30, 1999
-------------- --------------
Chile 56% 80%
Peru 28% 2%
Colombia 16% 18%
--- ---
100% 100%
=== ===
COST OF REVENUES. For the six months ended June 30, 2000 cost of
revenues related principally to long distance services and included access
charges paid to local exchange carriers and transmission payments to other
carriers. Cost of revenues also included payments for rights of way related to
the Company's fiber optic networks and license royalty payments related to
telecommunication services in Peru and Colombia.
The Company's cost of revenues was $11,941 for the six months ended
June 30, 2000 as compared to $11,785 for the six months ended June 30, 1999.
Additionally, the Company's gross margin increased from 35% for the six months
ended June 30, 1999 to 54% for the six month ended June 30, 2000. The increase
in gross margin and decrease in cost of revenues is attributable to the
significant growth in the higher margin data and Internet services.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses consist principally of salaries, wages and related
liabilities, advertising and marketing costs, professional fees related to
legal, recruiting, accounting, and travel. The Company expects selling,
general and administrative expenses to increase over time as it continues to
expand its operations.
The Company's selling, general and administrative expenses were $21,445
for the six months ended June 30, 2000 as compared to $10,385 for the six
months ended June 30, 1999. This increase was primarily attributable to the
hiring of additional personnel related to the growth of the Peruvian and Chilean
operations, the acquisition of FirstCom Colombia and increased marketing efforts
in Chile and Peru. At June 30, 2000 the Company and its subsidiaries had 846
employees compared to 551 at June 30, 1999.
NON CASH COMPENSATION AND CONSULTING. The expense of $115 and $152 for
the six months ended June 30, 2000 and 1999, respectively, represents the
fair value of options granted to consultants for services provided during such
periods.
MERGER COSTS. Merger costs of $6,443 for the six months ended June 30,
2000 represents incremental expenses and fees incurred in connection with the
pending merger transaction between the Company and AT&T Latin America. Included
in such merger costs are approximately $5,200 of non-cash expense related to the
accelerated vesting of un-vested stock options for certain former employees.
DEPRECIATION AND AMORTIZATION. The Company depreciates its
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telecommunications networks and intangible assets on a straight line basis over
their estimated useful lives. The Company believes that depreciation and
amortization expense will continue to increase with the expansion of its
operations.
The Company's depreciation and amortization was $6,261 for the six
months ended June 30, 2000 as compared to $2,703 for the six months ended June
30, 1999. This increase was primarily attributable to increased investment in
the Company's telecommunications networks and the placement in service of such
assets.
INTEREST EXPENSE. The Company currently incurs interest expense on the
outstanding Notes (as defined below), bank debt, promissory notes, and vendor
financing. Interest expense has been reduced for amounts capitalized related to
the Company's construction of its fiber optic networks. Interest costs reported
with respect to the Company's Notes include amortization of (i) deferred
financing costs and (ii) original issue discount related to detachable warrants.
The Company's interest expense was $11,731 for the six months ended
June 30, 2000 as compared to $10,720 for the six months ended June 30, 1999. The
increase in interest expense is due to the decrease in capitalized interest.
During the six months ended June 30, 1999 and June 30, 2000 the company
capitalized $1,532 and $260, respectively, of interest costs related to the
Company's fiber optic network.
INTEREST INCOME AND OTHER. The Company currently earns interest income
on cash and cash equivalents, restricted cash, and restricted investments.
The Company's interest income and other was $502 for the six months
ended June 30, 2000 as compared to $1,367 for the six months ended June 30,
1999. This decrease was primarily attributable to a reduction in restricted cash
and investments.
INCOME TAXES. The Company is subject to federal, state and foreign
income taxes and with the exception of its Colombian operations, has incurred no
liability for such taxes due to net operating losses incurred.
The Company's income tax expense for the six months ended June 30, 2000
was $143. This expense related solely to the Company's operations in Colombia.
FOR THE THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THE THREE MONTHS ENDED JUNE
30, 1999
REVENUES. Consistent with the three months period ended June 30, 1999,
during the three months period ended June 30, 2000 the majority of the Company's
revenues were derived primarily from its operations in Chile. However, as a
result of the acquisitions of FirstCom Internet, FirstCom Colombia and the
completion of the ATM/IP networks in Chile and Peru, long
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distance revenues dropped from 63% of total revenues for the three months ended
June 30, 1999 to 55% of total revenues for the three months ended June 30, 2000.
The Company expects revenues to increase over the next few years due to the
expansion of its operations in Peru, Chile and Colombia.
The Company's revenues were $14,346 for the three months ended June
30, 2000 as compared to $9,805 for the three months ended June 30, 1999. Long
distance revenues increased from $6,141 for the three months ended June 30,
1999 to $7,960 for the three months ended June 30, 2000. These revenues were
generated through the sale of approximately 39.5 million and 26.9 million
minutes for the three months ending June 30, 2000 and 1999, respectively,
resulting in an average revenue per minute of approximately $0.20 and $0.23,
respectively. The increased long distance revenue was driven by the initiation
of long distance services in Peru. The decrease in the revenue per minute is due
to an increased mix of domestic long distance traffic and decreases in tariffs
for wholesale long distance traffic. Internet and data service revenue increased
significantly from $3,664 for the three months ended June 30, 1999 to $6,386
for the three months ended June 30, 2000. This increase was attributable to the
acquisition of FirstCom Colombia and FirstCom Internet in Chile and the
initiation of Internet and data services over the Company's ATM/IP network in
Peru and Chile.
The following table details the Company's revenue mix by country:
THREE MONTHS ENDED
JUNE 30, 2000 JUNE 30, 1999
-------------- -------------
Chile 55% 75%
Peru 31% 3%
Colombia 14% 22%
--- ---
100% 100%
=== ===
COST OF REVENUES. For the three months ended June 30, 2000 cost of
revenues related principally to long distance services and included access
charges paid to local exchange carriers and transmission payments to other
carriers. Cost of revenues also included payments for rights of way related to
the Company's fiber optic networks and license royalty payments related to
telecommunication services in Peru and Colombia.
The Company's cost of revenues was $6,632 for the three months ended
June 30, 2000 as compared to $5,757 for the three months ended June 30, 1999.
Additionally, the Company's gross margin increased from 41% for the three months
ended June 30, 1999 to 54% for the three month ended June 30, 2000. The increase
in gross margin and decrease in cost of revenues is attributable to the
significant growth in the higher margin data and Internet services.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses consist principally of salaries, wages and related
liabilities, advertising and marketing costs, professional fees related to
legal, recruiting, accounting, and travel. The Company expects selling,
general and administrative expenses to increase over time as it continues to
expand its operations.
The Company's selling, general and administrative expenses were $11,390
for the three months ended June 30, 2000 as compared to $6,040 for the three
months ended June 30, 1999. This increase was primarily attributable to the
hiring of additional personnel related to the growth of the Peruvian and Chilean
operations, the acquisition of FirstCom Colombia and increased marketing efforts
in Chile and Peru. At June 30, 2000 the Company and its subsidiaries had 846
employees compared to 551 at June 30, 1999.
NON CASH COMPENSATION AND CONSULTING. The expense of $58 and $70 for
the three months ended June 30, 2000 and 1999, respectively, represents the
fair value of options granted to consultants for services provided during such
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<PAGE>
periods.
MERGER COSTS. Merger costs of $306 for the three months ended June 30,
2000 represents incremental expenses and fees incurred in connection with the
pending merger transaction between the Company and AT&T Latin America.
DEPRECIATION AND AMORTIZATION. The Company depreciates its
telecommunications networks and intangible assets on a straight line basis over
their estimated useful lives. The Company believes that depreciation and
amortization expense will continue to increase with the expansion of its
operations.
The Company's depreciation and amortization was $3,325 for the three
months ended June 30, 2000 as compared to $1,811 for the three months ended June
30, 1999. This increase was primarily attributable to increased investment in
the Company's telecommunications networks and the placement in service of such
assets.
INTEREST EXPENSE. The Company currently incurs interest expense on the
outstanding Notes (as defined below), bank debt, promissory notes, and vendor
financing. Interest expense has been reduced for amounts capitalized related to
the Company's construction of its fiber optic networks. Interest costs reported
with respect to the Company's Notes include amortization of (i) deferred
financing costs and (ii) original issue discount related to detachable warrants.
The Company's interest expense was $5,877 for the three months ended
June 30, 2000 as compared to $6,216 for the three months ended June 30, 1999.
During the three months ended June 30, 2000 the company capitalized
$260 of interest costs related to the Company's fiber optic network.
INTEREST INCOME AND OTHER. The Company currently earns interest income
on cash and cash equivalents, restricted cash, and restricted investments.
The Company's interest income was $110 for the three months
ended June 30, 2000 as compared to $566 for the three months ended June 30,
1999. This decrease was primarily attributable to a reduction in restricted cash
and investments.
INCOME TAXES. The Company is subject to federal, state and foreign
income taxes and with the exception of its Colombian operations, has incurred no
liability for such taxes due to net operating losses incurred.
The Company's income tax expense for the three months ended June 30,
2000 was $126. This expense related to the Company's operations in Colombia.
LIQUIDITY AND CAPITAL RESOURCES
On October 27, 1997, the Company consummated a private offering (the
"Senior Note Offering") of 150,000 Units (the "Units") consisting of $150,000
aggregate principal amount of 14% Notes due October 27, 2007 (the "Notes") and
5,250,000 Unit Warrants to purchase 5,250,000 shares of common stock of the
Company at an exercise price of $4.40 per share. In addition, UBS Securities
LLC, the initial purchaser of the Units in the Senior Note Offering, was granted
2,250,000 warrants to acquire 2,250,000 shares of common stock of the Company at
an exercise price of $4.40 per share.
Approximately $57,000 of the proceeds were invested in an escrow fund
(referred to herein on the Company's balance sheet as "Restricted Investments")
for payment of interest on the Notes through October 27, 2000. Under certain
circumstances, Restricted Investments may be used for repayment of principal of
the Notes. Restricted investments were reduced by $10,500 on each of April 27
and October 27 during 1999 and $10,500 on April 27, 2000 to pay interest on the
Notes. Approximately $62,000 of the proceeds were deposited in an account
controlled by a trustee (referred to on the Company's balance sheet as
"Restricted Cash") for payment of Permitted Expenditures, as defined in the
Indenture Agreement between the Company and State Street Bank, as Trustee (the
"Indenture"). As of June 30, 2000 the Company had invested approximately $62,000
of the Restricted Cash into
13
<PAGE>
its telecommunications networks and operations in Peru, Chile and Colombia.
The ability of the Company to make scheduled payments with respect to
its indebtedness, including interest on the Notes after October 27, 2000, will
depend upon, among other things, (i) its ability to implement its business plan,
and to expand its operations and to successfully develop its customer base in
its target markets, (ii) the ability of the Company's subsidiaries to remit cash
to the Company in a timely manner and (iii) the future operating performance of
the Company and its subsidiaries. Each of these factors is, to a large extent,
subject to economic, financial, competitive, regulatory and other factors, many
of which are beyond the Company's control. The Company expects that it will
continue to generate cash losses for the foreseeable future. The Company has
deposited cash in escrow funds representing interest payments with respect to
the Notes through October 2000. However, no assurance can be given that the
Company will be successful in developing and maintaining a level of cash flow
from operations sufficient to permit it to pay the principal of, and the
interest on the Notes after such time, or with respect to its other
indebtedness. If the Company is unable to generate sufficient cash flow from
operations to service its indebtedness, including the Notes, it may have to
modify its growth plans, restructure or refinance its indebtedness or seek
additional capital. There can be no assurance that (i) any of these strategies
can be effected on satisfactory terms, if at all, in light of the Company's high
leverage or (ii) any such strategy would yield sufficient proceeds to service
the Company's indebtedness, including the Notes. Any failure by the Company to
satisfy its obligations with respect to the Senior Notes at maturity or prior
thereto would constitute a default under the indenture and could cause a default
under other agreements governing current or future indebtedness of the Company.
On July 28, 2000 the Company commenced a cash tender offer for the
outstanding Notes and solicitation of consents for amendments to the Notes and
the related indenture. Notes validly tendered and accepted for purchase will be
purchased at a price resulting from a yield equal to 50 basis points plus the
yield of the 5.750% U.S. Treasury Note due October 31, 2002 as of 2:00 p.m., New
York time, on the second business day immediately preceding the expiration date
of the tender offer, plus accrued and unpaid interest to, but not including the
date of payment, less a consent payment of $40 per $1,000 principal amount of
the Notes.
FirstCom has received duly executed and unrevoked consents to the
proposed amendments to the indenture under which the Notes were issued from
holders of a majority of the principal amount at maturity of the Notes
outstanding. As of the expiration of the consent period at 11:59 p.m., New York
City time, on August 10, 2000, $150,000,000 in aggregate principal amount of the
Notes had been tendered and consents had been delivered, representing 100% of
the total Notes outstanding.
As described in FirstCom's Offer to Purchase and Consent Solicitation,
FirstCom solicited consents to permit the Merger and to make certain amendments
to the indenture under which the Notes were issued, including the elimination of
substantially all of the restrictive covenants and certain of the events of
default. The closing of the tender offer and consent solicitation by FirstCom is
conditioned on, among other things, the receipt of valid tenders, with consents,
of at least a majority in aggregate principal amount of the outstanding Notes.
The tender offer and consent solicitation are also subject to the completion of
the Merger. The time at which the tender offer expires is 11:59 p.m., New York
City time, on August 24, 2000, unless extended.
Substantially all of the Company's assets are held by its subsidiaries
and substantially all of the Company's sales are derived from operations of such
subsidiaries. Future acquisitions may be made through present or future
subsidiaries of the Company. Accordingly, the Company's ability to pay the
principal of, and interest and liquidated damages, if any, when due, on the
Notes is dependent upon the earnings of its subsidiaries and the distribution of
sufficient funds from its subsidiaries. The Company's subsidiaries will have no
obligation, contingent or otherwise, to make funds available to the Company for
payment of the principal of, and interest and liquidated damages on, if any, the
Notes. In addition, the ability of the Company's subsidiaries to make such funds
available to the Company may be restricted by the terms of such subsidiaries'
current and future indebtedness, the availability of such funds and the
applicable laws of the jurisdictions under which such subsidiaries are
organized. Furthermore, the Company's subsidiaries will be permitted under the
14
<PAGE>
terms of the Indenture to incur indebtedness that may severely restrict or
prohibit the making of distributions, the payment of dividends or the making of
loans by such subsidiaries to the Company. The failure of the Company's
subsidiaries to pay dividends or otherwise make funds available to the Company
could have a material adverse effect upon the Company's ability to satisfy its
debt service requirements including its ability to make payments on the Notes.
On November 11, 1998 a subsidiary of the Company entered into a
financing arrangement (the "First Vendor Financing") with one of the Company's
significant equipment vendors. The terms of the First Vendor Financing are as
follows: (i) maximum amount available $10,000 (ii) interest rate of LIBOR plus
5.5%, (iii) the Company may draw on the facility until December 31, 2000, (iv)
draws under the facility shall be repaid in 20 consecutive quarterly principal
and interest payments, (v) the First Vendor Financing is collateralized by the
equipment being financed. On July 28, 1999 the Company increased the maximum
amount available under the First Vendor Financing from $10,000 to $29,500. As of
June 30, 2000 the Company had approximately $7,100 outstanding under the First
Vendor Financing.
On December 24, 1998 a subsidiary of the Company entered into a
financing arrangement (the "Second Vendor Financing") with another one of the
Company's significant equipment vendors. The terms of the Second Vendor
Financing are as follows: (i) maximum amount available $10,000 (ii) interest
rate of Libor plus 4%, (iii) the Company may draw on the facility until December
31, 2000, (iv) draws under the facility shall be repaid in 20 consecutive
quarterly principal and interest payments beginning on March 31, 2001, (v)
interest only quarterly payments shall be made for each draw from the respective
date of funding through December 31, 2000, (vi) the Second Vendor Financing will
be collateralized by the equipment being financed. As of June 30, 2000 the
Company had no amounts outstanding under the Second Vendor Financing.
On June 30, 1999, the Company issued 1,250,000 shares of 15%
Convertible Redeemable Preferred Stock (the "Preferred Stock") for an aggregate
amount of $10,000. The Preferred Stock is convertible at any time at the option
of the holders into the Company's common stock on a one for one basis, subject
to adjustment. The 15% dividend is payable in kind until June 30, 2001, after
which it will be payable in cash. Beginning June 30, 2001, if the closing price
of the Company's common stock ,as quoted on the NASDAQ Stock Market, exceeds $15
per share for 30 consecutive trading days, the Preferred Stock is automatically
converted into the Company's common stock. The holders of the Preferred Stock
also have certain preemptive, redemption, anti-dilution, tag along and
registration rights.
FirstCom and AT&T Latin America have been in discussions with the
holders of the Preferred Stock regarding the possible conversion of the
outstanding shares of Preferred Stock into FirstCom common shares shortly before
the Merger. Those discussions contemplate that, in connection with this
conversion, FirstCom will accelerate all future paid-in-kind dividends on the
Preferred Stock.
On August 4, 1999, the Company converted $5,000 of outstanding
promissory notes into 500,000 shares of the Company's common stock.
During December 1999, one of the Company's Chilean subsidiaries
obtained a $1,400 working capital revolving credit facility (the "Working
Capital Facility") from a local bank. The Working Capital Facility is
denominated in UF's ( a published inflation adjusted unit used in financing
transactions in Chile)and bears interest at the prevailing market rates at the
time of each draw down. As of December 31, 1999, there were no amounts
outstanding under the Working Capital Facility.
As a result of the October 1999 sale of 800,000 shares of the Company's
common stock to Patricio E. Northland during January 2000 the Company received
related proceeds of approximately $8,600.
During February 2000, certain subsidiaries of the Company entered into
a term credit facility (the "Term Facility") with a bank. The significant
provisions of the Term Facility are as follows: (i) maximum amount available
15
<PAGE>
$10,000, (ii) annual interest rate of Libor plus 6% or Prime plus 5%, (iii)
principal maturity date of January 2, 2001, (iii) interest payments on the
outstanding principal balance are due quarterly beginning June 30, 2000, (iv)
the Term Facility is collateralized by certain telecommunications equipment and
(v) mandatory prepayment provisions exist upon the occurrence of certain events
including a change of control, as defined in the Indenture. As of June 30,
2000, the Company had $10,000 outstanding under the Term Facility.
Assuming completion of the Merger, FirstCom and AT&T Latin America
estimate that they will have cash requirements of approximately $725 million
during 2000 and the first half of 2001. AT&T Latin America and FirstCom had
spent and aggregate of $40 million of that amount through March 31, 2000. It
expects to use the remaining amount to develop and expand its communications
networks and services and fund working capital needs, operating losses and debt
service obligations. AT&T Latin America expects that its funding needs to
implement its growth strategy will continue at a somewhat higher level from
mid-2001 through the end of 2002. As of March 31, 2000, AT&T Latin America had
not made any contractual commitments for capital expenditures and had
approximately $1.7 million in debt service obligations (including obligations
under capital leases)for the remainder of 2000 for debt outstanding at that
date. AT&T Latin America expects that capital expenditures and debt service
obligations will increase in the future in connection with the cash requirements
described above.
To fund its cash requirements following the Merger, AT&T Latin America
needs to raise funds in addition to cash on hand, amounts available under a $100
million credit facility provided by AT&T Corp. and committed vendor financing.
AT&T Latin America expects to raise the additional amounts needed principally
through new vendor financing and an equity offering. On August 8, 2000 AT&T
Latin America filed a registration statement with the Securities and Exchange
Commission relating to a proposed public offering of 35 million shares of its
Class A common stock. The offering is subject to the completion of the Merger.
It may also issue debt at some point after the merger, depending on prevailing
market conditions. AT&T Latin America is not sure it will be able to raise
sufficient funds on acceptable terms or at all. Inability to raise sufficient
funds could affect its ability to meet its debt service and other obligations
and would affect its ability to carry out its growth strategy. If AT&T Latin
America does not obtain additional financing by the end of the third quarter of
2000, it will have to postpone most of its capital expenditures until financing
is obtained. This would detract from its time to market and its ability to
pursue its growth strategy.
AT&T Latin America's cash needs in the next several years will be
affected by several factors. Among them are:
- the amount of cash generated by its business operations;
- whether it changes its plans for building and expanding its
networks; and
- whether it uses cash, issues common stock or increase its debt
to complete acquisitions and ventures, such as the possible
collaboration with AT&T Global Network Services, beyond those
currently anticipated.
As part of its business strategy, the Company intends to continue to
evaluate potential acquisitions, joint ventures and strategic alliances in
companies that own existing networks or companies that provide services that
complement the Company's existing businesses. The Company continues to consider
potential acquisitions from time to time. New sources of capital such as credit
facilities and other borrowings, and additional debt and equity issuances, will
be necessary to fund any material acquisitions and similar strategic
investments.
A summary of the Company's value of common stock issued and common
stock and common stock equivalents outstanding as of June 30, 2000 and the pro
forma effect on the Company's equity capitalization upon the exercise of all
common stock equivalents outstanding at June 30, 2000 is as follows:
16
<PAGE>
<TABLE>
<CAPTION>
OPTIONS HELD BY OTHER INCREMENTAL
ACTUAL AT MANAGEMENT AND SENIOR NOTE OPTIONS AND AS
JUNE 30, 2000 DIRECTORS (4) WARRANTS (5) WARRANTS (6) ADJUSTED (7)
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Shares of Common Stock 31,762,195 8,229,166 222,000 600,000 9,051,166
Value of Common Stock
Issued (1) (2)
Par Value $31,708 $8,229 $222 $600 $9,051
Additional Paid in Capital $91,556,538 $54,077,765 $976,578 $1,471,400 $56,525,743
----------------------------------------------------------------------------------------
$91,588,246 $54,085,994 $976,800 $1,472,000 $56,534,794
========================================================================================
Per Share (3) $2.88 $6.57 $4.40 $2.45 $6.25
<FN>
(1) The closing price of the Common Stock on June 30, 2000 was $15.063. The
exercise of stock options and warrants as shown above assumes full vesting
of all stock options and warrants.
(2) Value of Common Stock represents the proceeds from the Company's issuance
of Common Stock and Common Stock equivalents, and is comprised of par value
and additional paid in capital, as stated in the Company's consolidated
historical financial statements.
(3) Represents the amount in (2) per share of Common Stock.
(4) Represents the increase to the Company's value of Common Stock issued upon
the exercise of all stock options (vested and not vested) held by the
Company's management and directors and the Company's receipt of the
exercise price as of June 30, 2000.
(5) Represents the increase to the Company's value of Common Stock issued upon
the exercise of all warrants (vested and not vested) that were issued in
connection with the Notes and are outstanding and the Company's receipt of
the exercise price as of June 30, 2000.
(6) Represents the increase to the Company's value of Common Stock issued upon
the exercise of all other stock options and warrants (vested and not
vested) outstanding and the Company's receipt of the exercise price as of
June 30, 2000.
(7) Represents the combined increase to the Company's value of Common Stock
issued of (4), (5) and (6) above.
</FN>
</TABLE>
Net cash used in operating activities for the six months ended June 30,
2000 was $22,263, compared to $14,520 for the same period in 1999. This amount
represented cash used to fund the Company's net loss for the period.
Net cash used in investing activities for the six months ended June 30,
2000 was $29,126, compared to $1,893 for the same period in 1999. This amount
primarily represented the Company's continued build-out of its fiber-optic
network as it connects new, offset by the use of restricted cash to fund such
items. The growth of the Company's fiber networks was evidenced as route
kilometers and buildings connected increased from approximately 1,757 km and
1,091 buildings as of December 31, 1999 to approximately 2,666 km and 2,206
buildings as of June 30, 2000.
Net cash provided by financing activities for the six months ended June
30, 2000 was $55,181, compared to $21,506 for the same period in 1999. The
Company received significant funding during this period from (a) the exercise of
stock options and warrants and (b) bank and vendor financing and (c) the
repayment of a shareholder loan.
IMPACT OF YEAR 2000
In the prior year, the Company discussed the nature and progress of its
plans to become Year 2000 ready. In late 1999, the Company completed its
remediation and testing of systems. As a result of those planning and
implementation efforts, the Company experienced no significant disruptions in
mission critical information technology and non-information technology systems
and believes those systems successfully responded to the Year 2000 date change.
17
<PAGE>
The Company expensed approximately $63 during 1999 in connection with
remediating its systems. The Company is not aware of any material problems
resulting from Year 2000 issues, either with its products, its internal systems,
or the products and services of third parties. The Company will continue to
monitor its mission critical computer applications and those of its suppliers
and vendors throughout the year.
INFLATION AND EXCHANGE RATES
Inflation and exchange rate variations may have substantial effects on
the Company's results of operations and financial condition. Generally, the
effects of inflation in many Latin American countries, including Chile, Peru and
Colombia, have been offset in part by a devaluation of the local countries'
currencies relative to the U.S. dollar. Nevertheless, the devaluation of each
country's currency may have an adverse effect on the Company.
A substantial portion of the Company's purchases of capital equipment
and interest on the Notes is payable in U.S. dollars. To date, the Company has
not had significant foreign currency exposure with third parties and generally
intends to be paid for its services in U.S. dollars or in local currencies with
a pricing adjustment that is structured to protect the Company against the risk
of fluctuations in exchange rates. As a result, the Company has not entered into
foreign currency hedging transactions. In the future, if third party foreign
currency exposure increases, the Company may enter into hedging transactions in
order to mitigate any related financial exposure. However, a portion of sales to
customers of the Company will be denominated in local currencies, and
substantial or continued devaluation in such currencies relative to the U.S.
dollar could have a negative effect on the ability of customers of the Company
to absorb the costs of devaluation. This could result in the Company's customers
seeking to renegotiate their contracts with the Company or, failing satisfactory
renegotiation, defaulting on such contracts.
In addition, from time to time, Latin American countries have
experienced shortages in foreign currency reserves and restrictions on the
ability to expatriate local earnings and convert local currencies into U.S.
dollars. Also, currency devaluations in one country may have adverse effects in
another country, as in late 1994 and 1995, when several Latin American countries
were adversely impacted by the devaluation of the Mexican peso. Any devaluation
of local currencies in the country where the Company operates, or restrictions
on the expatriation of earnings or capital from such countries, could have a
material adverse effect on the business, results of operations and financial
condition of the Company.
NET OPERATING LOSS CARRYFORWARDS
At December 31, 1999 the Company has net tax operating loss
carryforwards of approximately $85,000 for U.S. income tax purposes and
approximately $46,900 for foreign income tax purposes. The U.S. carryforwards
are available to offset future taxable income, if any, and expire for U.S.
income tax purposes in the years 2007 through 2019, subject to limitation under
Section 382 of the Internal Revenue Code. The foreign net operating loss
carryforwards related (1) to Peru, of $15,300 expire in the years 2000 through
2003 and (2) to Chile, of $31,500, do not expire.
EFFECTS OF NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement
of Accounting Standards No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND
HEDGING ACTIVITIES (the "Statement"). The Company has adopted the Statement
effective January 1, 2000. The Statement requires the recognition of all
derivatives on the Company's consolidated balance sheet at fair value. The
Company does not anticipate that the adoption of this Statement will have a
significant effect on its results of operations or financial position.
18
<PAGE>
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The exhibits listed below are filed as part of this Report.
EXHIBIT DESCRIPTION
------- -----------
27 Financial Data Schedule for the six months
ended June 30, 2000
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf be the
undersigned, thereunto duly authorized.
FIRSTCOM CORPORATION
/s/ Patricio E. Northland August 10, 2000
--------------------------- ---------------
Patricio E. Northland Date
Chairman of the Board,
President, and Chief Executive Officer
(Principal Executive Officer)
/s/ Patricio E. Northland August 10, 2000
--------------------------- ---------------
Patricio E. Northland Date
Acting Chief Financial Officer
19
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
------- -----------
27 Financial Data Schedule for the six months
ended June 30, 2000
20
