<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to ____________________
COMMISSION FILE NUMBER: 0-27778
Premiere Technologies, Inc.
(Exact name of registrant as specified in its charter)
Georgia
(State or other jurisdiction of incorporation or organization)
59-3074176
(I.R.S. Employer Identification No.)
3399 Peachtree Road NE
The Lenox Building, Suite 600
Atlanta, Georgia 30326
(Address of principal executive offices, including zip code)
(404) 262-8400
(Registrant's telephone number including area code)
N/A
(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.
(1) Yes X No ___ (2) Yes X No ___
- -
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at May 10, 1999
----- ---------------------------
Common Stock, $0.01 par value 46,149,128 shares
<PAGE>
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q/A
Page
----
Explanatory Note
PART I FINANCIAL INFORMATION
Item 1 Financial Statements....................................... 4
Condensed Consolidated Balance Sheets
as of September 30, 1998 and December 31, 1997............. 4
Condensed Consolidated Statements of Operations
for the Three and Nine Month periods ended
September 30, 1998 and 1997................................ 5
Condensed Consolidated Statements of Cash Flows
for the Nine Month periods ended September 30,
1998 and 1997.............................................. 6
Notes to Condensed Consolidated Financial Statements....... 7
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations........................ 23
PART II OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K........................... 32
SIGNATURES............................................................. 33
EXHIBIT INDEX
2
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Explanatory Note
----------------
In February 1999, Premiere Technologies, Inc. (the "Company" or "Premiere")
announced that as a result of discussions with the Office of the Chief
Accountant of the Securities and Exchange Commission (the "Commission"),
Premiere is required to discontinue accounting for its acquisition of Xpedite
Systems, Inc. ("Xpedite") as a pooling-of-interests and to account for such
acquisition under the purchase method of accounting. The Office of the Chief
Accountant of the Commission determined that Premiere's postmerger share
repurchase program, completed in September 1998, was not implemented in
accordance with pooling requirements. No questions were raised regarding the
propriety of the original accounting of the merger with Xpedite. Premiere
previously disclosed this information in its Current Report on Form 8-K dated
February 17, 1999 and filed with the Commission on March 4, 1999.
The following interim financial statements included in this Form 10Q/A have been
restated to show the Xpedite acquisition under the purchase method of
accounting:
. Condensed Consolidated Balance Sheets as of September 30, 1998 and
December 31, 1997;
. Condensed Consolidated Statements of Operations for the Three and Nine
Month periods ended September 30, 1998 and 1997;
. Condensed Consolidated Statements of Cash Flows for the Nine Month
periods ended September 30, 1998 and 1997;
. Condensed Consolidated Balance Sheets as of June 30, 1998 and December
31, 1997;
. Condensed Consolidated Statements of Operations for the Three and Six
Month periods ended June 30, 1998 and 1997;
. Condensed Consolidated Statements of Cash Flows for the Six Month periods
ended June 30, 1998 and 1997;
. Condensed Consolidated Balance Sheets as of March 31, 1998 and December
31, 1997;
. Condensed Consolidated Statements of Operations for the Three Months
periods ended March 31, 1998 and 1997;
. Condensed Consolidated Statements of Cash Flows for the Three Month
periods ended March 31, 1998 and 1997.
You should read the unaudited interim financial statements and notes thereto
included in Item 1 of this Form 10-Q/A and Management's Discussion and Analysis
of Financial Condition and Results of Operations included in Item 2 of this Form
10-Q/A together with the Company's consolidated financial statements and notes
thereto and the Management's Discussion and Analysis of Financial Condition
included in the Company's Form 10-K/A filed with the Commission on April 1,
1999. Certain information in this Form 10-Q/A may be superseded by information
in the Company's Form 10-K/A.
3
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
-------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents............................................................. $ 35,314 $ 21,770
Marketable securities............................................................ 30,171 154,569
Accounts receivable, net......................................................... 61,317 20,719
Prepaid expenses and other....................................................... 11,843 6,941
Deferred income taxes, net....................................................... 52,201 25,715
--------- --------
Total current assets........................................................ 190,846 229,714
PROPERTY AND EQUIPMENT, NET....................................................... 133,011 63,577
OTHER ASSETS
Deferred income taxes, net....................................................... - 3,963
Strategic alliances and investments, net......................................... 60,211 51,895
Intangibles, net................................................................. 510,639 20,756
Other assets..................................................................... 17,147 11,203
--------- --------
$ 911,854 $381,108
========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses............................................ $ 115,935 $ 67,780
Revolving loan................................................................... 126,025 -
Current maturities of long-term debt and capital lease obligations............... 4,230 5,907
Accrued restructuring, merger costs and other special charges.................... 17,501 19,845
--------- --------
Total current liabilities................................................... 263,691 93,532
--------- --------
LONG-TERM LIABILITIES
Convertible subordinated notes................................................... 172,500 172,500
Long-term debt and capital lease obligations..................................... 11,531 3,291
Other accrued liabilities........................................................ 3,171 10,971
Deferred income taxes, net....................................................... 37,662 -
--------- --------
Total long-term liabilities................................................. 224,864 186,762
--------- --------
COMMITMENTS AND CONTINGENCIES (Note 10)
SHAREHOLDERS' EQUITY
Common stock, $0.01 par value; 150,000,000 shares authorized, 46,883,434 and
34,100,018 shares issued in 1998 and 1997, respectively, and 45,786,434 and
34,100,018 shares outstanding in 1998 and 1997, respectively................. 469 341
Additional paid-in capital....................................................... 555,723 180,084
Treasury stock, at cost.......................................................... (9,133) -
Note receivable, shareholder..................................................... (973) (973)
Cumulative translation adjustment................................................ 792 -
Accumulated deficit.............................................................. (123,579) (78,638)
--------- --------
Total shareholders' equity.................................................. 423,299 100,814
--------- --------
$ 911,854 $381,108
========= ========
</TABLE>
Accompanying notes are integral to these condensed consolidated financial
statements.
4
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PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 1998 AND 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------ ------------------------------
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
-------------- -------------- -------------- --------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES................................................ $121,540 $ 56,014 $327,876 $167,364
COST OF SERVICES........................................ 37,346 14,610 101,336 45,020
-------- -------- -------- --------
GROSS PROFIT............................................ 84,194 41,404 226,540 122,344
-------- -------- -------- --------
OPERATING EXPENSES
Selling, general and administrative.................... 64,160 25,772 175,768 78,367
Depreciation and amortization.......................... 29,308 4,454 70,512 12,326
Restructuring, merger costs and other special charges.. - 28,174 7,545 73,597
Acquired research and development...................... - - 15,500 -
Accrued settlement cost................................ - - 1,500 1,500
-------- -------- -------- --------
Total operating expenses.......................... 93,468 58,400 270,825 165,790
-------- -------- -------- --------
OPERATING LOSS.......................................... (9,274) (16,996) (44,285) (43,446)
-------- -------- -------- --------
OTHER INCOME (EXPENSE)
Interest, net.......................................... (4,520) (124) (9,942) (557)
Other, net............................................. 265 85 82 186
-------- -------- -------- --------
Total other income (expense)...................... (4,255) (39) (9,860) (371)
-------- -------- -------- --------
LOSS BEFORE INCOME TAXES................................ (13,529) (17,035) (54,145) (43,817)
INCOME TAX BENEFIT...................................... (2,300) (5,113) (9,204) (9,273)
-------- -------- -------- --------
NET LOSS................................................ $(11,229) $(11,922) $(44,941) $(34,544)
======== ======== ======== ========
BASIC NET LOSS PER SHARE................................ $ (0.24) $ (0.37) $ (1.03) $ (1.10)
======== ======== ======== ========
DILUTED NET LOSS PER SHARE.............................. $ (0.24) $ (0.37) $ (1.03) $ (1.10)
======== ======== ======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING
BASIC.................................................. 45,942 32,149 43,836 31,518
======== ======== ======== ========
DILUTED................................................ 45,942 32,149 43,836 31,518
======== ======== ======== ========
</TABLE>
Accompanying notes are integral to these condensed consolidated financial
statements.
5
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PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTH PERIODS ENDED SEPTEMBER 30, 1998 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997
--------- ----------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss................................................................ $(44,941) $ (34,544)
Adjustments to reconcile net loss to cash flows from
operating activities:
Depreciation and amortization....................................... 70,512 12,326
Loss on disposal of property and equipment.......................... (258) -
Deferred income taxes............................................... (23,635) (12,322)
Restructuring, merger costs and other special charges............... 7,545 73,597
Acquired research and development................................... 15,500 -
Accrued settlement cost............................................. 1,500 1,500
Payments for restructuring, merger costs and other special charges.. (17,243) (16,872)
Payments for accrued settlement costs............................... (1,291) -
Changes in assets and liabilities:
Accounts receivable, net............................................ (538) 891
Prepaid expenses and other.......................................... 3,855 (2,931)
Accounts payable and accrued expenses............................... 5,842 998
-------- ---------
Total adjustments.............................................. 61,789 57,187
-------- ---------
Net cash provided by operating activities...................... 16,848 22,643
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures.................................................... (49,973) (41,653)
Proceeds from disposal of property and equipment........................ 570 -
Redemption (purchase) of marketable securities, net..................... 124,398 (100,355)
Acquisitions............................................................ (42,946) (16,198)
Strategic alliances and investments..................................... (8,059) -
Other................................................................... 1,869 -
-------- ---------
Net cash provided by (used in) investing activities............ 25,859 (158,206)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments under borrowing arrangements, net.................... (13,873) (25,493)
Purchase of common stock................................................ (9,133) -
Proceeds from convertible subordinated notes............................ - 172,500
Debt issue costs........................................................ - (5,393)
Shareholder distributions, primarily S-Corporation distributions........ - (6,661)
Exercise of stock options, net of tax withholding payments.............. (5,531) 823
Other................................................................... (354) -
-------- ---------
Net cash (used in) provided by financing activities............ (28,891) 135,776
EFFECT OF EXCHANGE RATE CHANGES ON CASH.................................. (272) -
-------- ---------
NET INCREASE IN CASH AND EQUIVALENTS..................................... 13,544 213
CASH AND EQUIVALENTS, beginning of period................................ 21,770 15,936
-------- ---------
CASH AND EQUIVALENTS, end of period...................................... $ 35,314 $ 16,149
======== =========
</TABLE>
Accompanying notes are integral to these condensed consolidated financial
statements.
6
<PAGE>
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited interim condensed consolidated financial statements
have been prepared by management of Premiere Technologies, Inc. (the "Company"
or "Premiere") in accordance with rules and regulations of the Securities and
Exchange Commission ("SEC"). Accordingly, certain information and footnote
disclosures usually found in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted. In the
opinion of management of the Company, all adjustments (consisting only of normal
recurring adjustments, except as disclosed herein) considered necessary for a
fair presentation of the condensed consolidated financial statements have been
included. Preparing financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses. Examples include provisions for bad debts, carrying
values and useful lives assigned to goodwill and other long-lived assets and
accruals for restructuring costs and employee benefits. Actual results could
differ from those estimates. These interim condensed consolidated financial
statements should be read in conjunction with the Company's Annual Report on
Form 10-K/A for the year ended December 31, 1998, as amended.
In February 1999, Premiere announced that as a result of discussions with the
Office of the Chief Accountant of the Securities and Exchange Commission,
Premiere is required to discontinue accounting for its acquisition of Xpedite as
a pooling-of-interests and to account for such acquisition under the purchase
method of accounting. The Office of the Chief Accountant determined that
Premiere's post merger share repurchase program, completed in September 1998,
was not implemented in accordance with pooling requirements. No questions were
raised regarding the propriety of the original accounting of the merger with
Xpedite.
The unaudited interim financial statements and notes thereto and Management's
Discussion and Analysis of Financial Condition and Results of Operations
included in Item 2 of this Form 10-Q/A should be read in conjunction with the
Company's consolidated financial statements and notes thereto and the
Management's Discussion and Analysis of Financial Condition included in the
Company's Form 10-K/A filed with the Commission on April 1, 1999. Certain
information in this Form 10-Q/A may be superseded by information in the
Company's Form 10-K/A.
2. SIGNIFICANT CHARGES AND COSTS
The Company recorded certain charges and costs of approximately $17.1 million
before income taxes in the nine month period ended September 30, 1998. Such
amount consists of approximately $8.4 million of charges associated with
uncollectible accounts receivable related principally to the bankruptcy of two
customers, approximately $2.3 million of start-up costs, primarily executive
compensation, incurred by its Orchestrate.com subsidiary, approximately $1.8
million related to asset impairments and other costs. Approximately $16.1
million of these nonrecurring charges and costs are included as selling, general
and administrative expenses in the accompanying condensed consolidated statement
of operations.
3. NEW ACCOUNTING PRONOUNCEMENTS
During 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard ("SFAS") No. 131, "Disclosures About Segments of
an Enterprise and Related Information" effective for fiscal years beginning
after December 15, 1997. Interim period reporting is not required in the
initial year of adoption. Management is currently studying the impact that SFAS
No. 131 will have on its financial statement disclosures.
4. NET INCOME (LOSS) PER SHARE
Net income (loss) per share is computed in accordance with SFAS No. 128,
"Earnings per Share." Basic and diluted net income (loss) per share are the same
in the three and nine month periods ended September 30, 1998 and 1997 because
both of the Company's potentially dilutive securities, convertible subordinated
notes and stock options, are antidilutive in all periods presented.
5. COMPREHENSIVE INCOME
7
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In 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income."
Comprehensive income represents the change in equity of a business during a
period, except for investments by owners and distributions to owners. Foreign
currency translation adjustments represent the Company's only component of other
comprehensive income for the three and nine month periods ended September 30,
1998 and 1997. Accordingly, total comprehensive income (loss) approximates net
income (loss) for such periods.
6. ACQUISITIONS
AMERICAN TELECONFERENCING SERVICES, LTD. ACQUISITION
In April 1998, the Company purchased all of the issued and outstanding common
stock of American Teleconferencing Services ("ATS"), a provider of full service
conference calling and group communication services. The shareholders of ATS
received an aggregate of approximately 712,000 shares of Premiere common stock
and cash consideration of approximately $22.1 million. Excess purchase price
over fair value of net assets acquired of approximately $47 million has been
recorded as goodwill and is being amortized on a straight-line basis over 40
years. This transaction has been accounted for as a purchase.
XPEDITE SYSTEMS, INC. ACQUISITION
On February 27, 1998, Premiere acquired Xpedite Systems, Inc. ("Xpedite"), a
worldwide leader in the enhanced document distribution business including, fax,
e-mail, telex and mailgram services. Premiere issued approximately 11.0 million
shares of its common stock in connection with this acquisition. This
transaction has been accounted for as a purchase. The purchase price of Xpedite
has been allocated as follows:
Operating and other tangible assets....................... $ 90,035
Customer lists............................................ 35,700
Developed technology...................................... 34,300
Acquired research and development......................... 15,500
Assembled workforce....................................... 7,500
Goodwill.................................................. 384,701
--------
Assets acquired........................................... 567,736
Less liabilities assumed.................................. 203,487
--------
$364,249
========
The valuation of intangible assets and acquired research and development were
based upon an independent appraisal. Acquired research and development costs
represent the value assigned to research and development projects in the
development stage which had not reached technological feasibility at the date of
acquisition or had no alternative future use. These costs were expensed at the
date of the acquisition.
The acquired research and development related to a project to develop a new job
monitor. This project was 50% complete as of the acquisition date and had not
yet completed a successful beta test. The primary high risk at valuation date
involved identifying and correcting the design flaws that would typically arise
during beta testing. Fair value was determined using an income approach.
Revenues from this new job monitor are anticipated beginning in 1999 and a
discount rate of 25% was used.
INTERNATIONAL ACQUISITIONS
During the second quarter of 1998, the Company acquired two electronic document
distribution companies located in Germany and Singapore. The aggregate purchase
price of these acquisitions was approximately $18 million in cash and
liabilities assumed. Both of the acquisitions were accounted for as purchases.
Excess purchase price over fair value of net assets acquired of approximately
$13 million has been recorded as goodwill and is being amortized on a straight-
line basis over forty years.
VOICECOM ACQUISITION
8
<PAGE>
During the third quarter of 1997, the Company acquired VoiceCom Systems, Inc.
("VoiceCom"), a provider of 800-based enhanced calling and voice messaging
services, through the issuance of approximately 446,000 shares of its common
stock. This transaction was accounted for as a pooling-of-interests, and the
Company's financial statements present for all periods the operations of
VoiceCom.
VOICE-TEL ACQUISITIONS
In June 1997, Premiere completed a series of acquisitions of Voice-Tel
Enterprises, Inc. and its affiliated entities (the "Voice-Tel Acquisitions").
The Company issued approximately 7.4 million shares of its common stock, paid
approximately $16.2 million in cash and assumed approximately $21.3 million in
indebtedness, net of cash acquired to complete the Voice-Tel Acquisitions.
Most of the transactions were structured as tax-free mergers or share exchanges
and were accounted for under the pooling-of-interests method of accounting.
Accordingly, the financial statements of the Company present for all periods the
operations of the Voice-Tel Acquisitions that were accounted for as pooling-of-
interests.
The Company purchased 15 of the Voice-Tel franchisees and the limited partner
interest in VTNLP for an aggregate of approximately $15.5 million in cash and
approximately 94,000 shares of its common stock. The excess of the purchase
price over the fair value of the net assets acquired is recorded as an
intangible asset.
The following unaudited pro forma consolidated results of operations for the
three and nine month periods ended September 30, 1998 and 1997 assumes the
acquisitions made by the Company in 1998 and 1997 which were accounted for as
purchases occurred on January 1, 1997. Pro forma adjustments consist of
amortization of intangible assets acquired, interest expense associated with
borrowings incurred in connection with the purchase and lost interest income
reflecting cash paid in the acquisitions (amounts in thousands).
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------- ------------------------------
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues $121,540 $120,065 $378,040 $351,801
Net income (loss) $(11,229) $(24,154) $(30,763) $(75,944)
Basic net income (loss) per share $ (0.24) $ (0.55) $ (0.67) $ (1.74)
Diluted net income (loss) per share $ (0.24) $ (0.55) $ (0.67) $ (1.74)
</TABLE>
7. RESTRUCTURING, MERGER COSTS AND OTHER SPECIAL CHARGES
The Company recorded restructuring, merger costs and other special charges of
approximately $7.5 million in the first quarter of 1998 to restructure the
operations of Premiere and Xpedite subsequent to their merger. Such costs
consist of severance associated with workforce reduction, lease termination
costs, costs to terminate certain contractual obligations and asset impairments.
Severance benefits have been provided for termination of 122 employees. These
actions resulted from management's plans to reduce sales, operations and
administrative headcount by exiting duplicative and underperforming operations.
Premiere has also provided for lease termination and clean-up costs associated
with these facilities and operations. In addition, the Company provided for
costs associated with commitments under certain advertising contracts from which
the Company was generating no incremental revenue and for costs to terminate
certain unfavorable reseller agreements. Although certain restructuring actions
were being contemplated at the acquisition date, definitive plans for such
actions were not formalized until after such date. Accordingly, there were no
exit costs included in the purchase allocation of Xpedite.
In connection with the VoiceCom acquisition, the Company recorded restructuring,
merger costs and other special charges of approximately $28.2 million before
income taxes in the third quarter of 1997. Such amounts consisted of transaction
costs, asset impairments, costs to terminate or restructure certain contractual
obligations and other costs. Transaction costs associated with the VoiceCom
acquisition were expensed as required by the pooling-of-interests method of
accounting. Other restructuring and special charges recorded in the third
quarter of 1997 result principally from management's plan to
9
<PAGE>
restructure VoiceCom's operations by reducing its workforce, exiting certain
facilities, discontinuing duplicative product offerings and terminating or
restructuring certain contractual obligations.
The Company recorded approximately $45.4 million of restructuring, merger costs
and other special charges in the second quarter of 1997 in connection with the
Voice-Tel Acquisitions. Those charges resulted from management's plan to
restructure the operations of the various Voice-Tel entities acquired by
Premiere under a consolidated business group model and discontinue its franchise
operations. This initiative involved substantial reduction in the administrative
workforce, abandoning duplicate facilities and assets and other costs necessary
to discontinue redundant business activities. The Company also recorded a $1.5
million charge for anticipated legal and settlement costs resulting from
bankruptcy proceedings of a customer, Communications Network Corporation. See
Note 10 for further information regarding this claim. Activity in accrued costs
for restructuring, merger costs and other special charges during the nine month
period ended September 30, 1998 is as follows (amounts in thousands):
<TABLE>
<CAPTION>
Accrued Costs First Accrued Costs
December 31, Quarter Costs September 30,
1997 Charge Incurred 1998
------------- ------- -------- -------------
<S> <C> <C> <C> <C>
Severance $ 6,201 $1,778 $ 3,332 $ 4,647
Asset impairments 10,831 707 3,148 8,390
Restructure or terminate contractual obligations 13,354 390 3,543 10,201
Transaction costs 4,940 833 4,750 1,023
Other costs, primarily to exit facilities and certain
activities 3,788 3,837 5,957 1,668
------- ------ ------- -------
$39,114 $7,545 $20,730 $25,929
======= ====== ======= =======
</TABLE>
Accrued costs of $8.4 million and $10.8 million are classified as reserves
against fixed assets at September 30, 1998 and December 31, 1997, respectively.
8. STRATEGIC ALLIANCES AND INVESTMENTS
Assets recorded as strategic alliances and investments at September 30, 1998 and
December 31, 1997 are as follows (amounts in thousands):
September 30, December 31,
1998 1997
------------- ------------
MCI WorldCom strategic alliance $29,972 $29,972
Intangible and other assets 12,700 18,500
Less accumulated amortization 3,736 1,878
------- -------
38,936 46,594
Equity investments 21,275 5,301
------- -------
$60,211 $51,895
======= =======
In November 1996, the Company entered into a strategic alliance agreement with
WorldCom, Inc. (predecessor to MCI WorldCom), the second largest long-distance
carrier in the United States. Under the agreement, MCI WorldCom is required,
among other things, to provide the Company with the right of first opportunity
to provide enhanced computer telephony products for a period of at least 25
years. In connection with this agreement, the Company issued to MCI WorldCom
2,050,000 shares of common stock valued at approximately $25.2 million (based on
an independent appraisal), and paid MCI WorldCom approximately $4.7 million in
cash. Current revenue levels under the strategic alliance agreement are
significantly below specified minimum payment levels in the agreement and the
minimum payments ceased at the end of September 1998. The Company periodically
reviews this asset for impairment. Based on such reviews, management currently
believes this asset is appropriately valued. Management will continue to review
this asset periodically, and there can be no assurance that future reviews will
not require a write-down in the carrying value of this asset.
Intangible assets and equity investments classified as strategic alliances and
investments consist of initiatives funded by the Company to further its
strategic plan. These investments and alliances involve emerging technologies,
such as the
10
<PAGE>
Internet, as well as marketing alliances and outsourcing programs designed to
reduce costs and develop new markets and distribution channels for the Company's
products. The Company made cash investments of approximately $8.1 million in the
first nine months of 1998 to acquire initial or increase existing equity
interests in various companies engaged in emerging technologies, such as the
Internet. Premiere's investments include minority equity interests in: WebMD, a
provider of internet-based services to the healthcare industry; USA.NET, a
leading provider of outsourced e-mail services; Intellivoice, an entity engaged
in developing internet-enabled communications products; VerticalOne, a network-
based services provider that increases frequency, duration, and quality of its
customers' visits to Web sites; and Webforia, a provider of Web services, tools
and communities that assist individuals in presenting high quality information
from the Internet. Management will continue to make such investments in the
future in complementary businesses and other initiatives that further its
strategic business plan. All equity investments held by the Company in other
organizations represent a less than 20 percent ownership and are being accounted
for under the cost method.
9. STOCK BASED COMPENSATION PLANS
Sharp declines in the market price of the Company's common stock during 1998
resulted in many outstanding employee stock options being exercisable at prices
that exceeded the then current market price, thereby substantially impairing the
effectiveness of such options as performance incentives. Consistent with the
Company's philosophy of using equity incentives to motivate and retain
management and employees, the Board of Directors determined it to be in the best
interests of the Company and its shareholders to restore the performance
incentives intended to be provided by employee stock options by repricing such
options to the then current market price. Consequently, on July 22, 1998, the
Board of Directors of the Company determined to reprice or regrant all employee
stock options which had exercise prices in excess of the closing price on such
date (other than those of Chief Executive officer Boland T. Jones, who requested
that his options not be repriced) to $10.25, which was the closing price of
Premiere's common stock on July 22, 1998. While the vesting schedules remain
unchanged, the repriced and regranted options are generally subject to a twelve-
month black-out period, during which the options may not be exercised. If
optionee's employment is terminated during the black-out period, he or she will
forfeit any repriced or regranted options that first vested during the twelve-
month period preceding his or her termination of employment. By imposing the
black-out and forfeiture provisions on the repriced and regranted options, the
Board of Directors intends to provide added incentive for the optionees to
continue service with the Company.
On July 22, 1998, the Board of Directors approved a new 1998 Stock Plan (the
"1998 Plan") that essentially mirrors the terms of the Company's existing Second
Amended and Restated 1995 Stock Plan (the "1995 Plan"), except that it is not
intended to be used for officers or directors. In addition, the 1998 Plan,
because it was not approved by the shareholders, does not provide for the grant
of incentive stock options. Under the 1998 Plan, 4,000,000 shares of Common
Stock are reserved for the grant of nonqualified stock options and other
incentive awards to employees and consultants of the Company. The objective of
the 1998 Plan is to provide the grantees with an incentive to achieve the
Company's objectives by encouraging their continued service and contribution.
In connection with the repricing of options, as discussed above, some of the
options currently outstanding under the 1995 Plan were cancelled and replaced
with market-value options under the 1998 Plan, thereby achieving greater
availability for the grant of incentive stock options and other performance
incentives under the 1995 Plan.
On June 23, 1998, the Company's Board of Directors declared a dividend of one
preferred stock purchase right (a "Right") for each outstanding share of the
Company's Common Stock. The dividend was paid on July 6, 1998, to the
shareholders of record on that date. Each Right entitles the registered holder
to purchase from the Company one one-thousandth of a share of Series C Junior
Participating Preferred Stock, par value $0.01 per share (the "Preferred
Shares"), at a price of sixty dollars ($60.00) per one-thousandth of a Preferred
Share, subject to adjustment. The description and terms of the Rights are set
forth in the Shareholder Protection Rights Agreement, as the same may be amended
from time to time, dated as of June 23, 1998, between the Company and SunTrust
Bank, Atlanta, as rights agent. The Rights may have certain anti-takeover
effects. The Rights will cause substantial dilution by a person or group that
attempts to acquire the Company on terms not approved by the Board of Directors
of the Company. However, the Rights should not interfere with any merger,
statutory share exchange or other business combination approved by the Board of
Directors since the Rights may be terminated by the Board of Directors at any
time on or prior to the close of business ten business days after announcement
by the Company that a person has become an acquiring person. Thus, the Rights
are intended to encourage persons who may seek to acquire control of the Company
to initiate such an acquisition through negotiations with the Board of
Directors. However, the effect of the Rights may be to discourage a third party
from making a partial tender offer or otherwise attempting to obtain a
substantial equity position in the equity securities of, or seeking to obtain
control of, the Company.
11
<PAGE>
10. COMMITMENTS AND CONTINGENCIES
LITIGATION
Since June 25, 1998, the Company and certain of its current and former officers
have been named as defendants in multiple shareholder class action lawsuits
filed in the United States District Court for the Northern District of Georgia.
Plaintiffs seek to represent a class of individuals who purchased or otherwise
acquired the Company's Common Stock from as early as February 11, 1997 through
June 10, 1998. Class members allegedly include those who purchased the
Company's Common Stock as well as those who acquired stock through a merger.
Plaintiffs allege the defendants made positive public statements concerning the
Company's growth and acquisitions. In particular, plaintiffs allege the
defendants spoke positively about the Company's acquisition of Voice-Tel,
Xpedite, ATS, TeleT and VoiceCom, as well as its venture with UniDial
Communications, Inc., its investment in USA.NET, Inc. and the commercial release
of Orchestrate. Plaintiffs allege these public statements were fraudulent
because the defendants knowingly failed to disclose that the Company allegedly
was not successfully consolidating and integrating these acquisitions. Alleged
evidence of scienter include sales by certain individual defendants during the
class period and the desire to keep the Common Stock price high so that future
acquisitions could be made using the Company's Common Stock. Plaintiffs allege
the truth was purportedly revealed on June 10, 1998, when the Company announced
it would not meet analysts' estimates of second quarter 1998 earnings because,
in part, of the financial difficulties experienced by a licensing customer and
by a strategic partner in the Company's enhanced calling services product group,
revenue shortfalls in its voice messaging product group, as well as other
unanticipated costs and one-time charges totaling approximately $17.1 million on
a pre-tax basis. Plaintiffs allege the Company admitted it had experienced
difficulty in achieving anticipated revenue and earnings from its voice
messaging product group, due to difficulties in consolidating and integrating
its sales function. Plaintiffs allege violation of Sections 10(b), 14(a) and
20(a) of the Securities Exchange Act of 1934 and Sections 11, 12 and 15 of the
Securities Act of 1933. The Company believes the alleged claims in these
lawsuits are without merit. The Company intends to defend these lawsuits
vigorously, but due to the inherent uncertainties of the litigation process and
the judicial system, the Company is unable to predict the outcome of this
litigation. If the outcome of any of this litigation is adverse to the Company,
it could have a material adverse effect on the Company's business, financial
condition and results of operations.
On June 28, 1996, AudioFAX IP LLC ("AudioFAX") filed a lawsuit against the
Company alleging that the Company infringed certain patents held by AudioFAX for
enhanced facsimile products. In the third quarter of 1996, the Company recorded
a charge to operations of $1.5 million for the estimated legal fees and other
costs to resolve this matter. On February 11, 1997, the Company entered into a
long-term, non-exclusive license agreement with AudioFAX settling this
litigation. Costs accrued in the third quarter of 1996 were adequate to cover
the actual costs of litigation. The final payment under the license agreement
was made in April 1998.
On August 6, 1996, CNC, a licensing customer of the Company, was placed into
bankruptcy (the "Bankruptcy Case") under Chapter 11 of the United States
Bankruptcy Code (the "Bankruptcy Code"). On August 23, 1996, CNC filed a motion
to intervene in a separate lawsuit brought by a CNC creditor in the United
States District Court for the Southern District of New York against certain
guarantors of CNC's obligations and to file a third-party action against
numerous entities, including such CNC creditor and Premiere Communications, Inc.
("PCI") for alleged negligent misrepresentations of fact in connection with an
alleged fraudulent scheme designed to damage CNC (the "Intervention Suit"). The
District Court has denied CNC's requests to intervene and to file a third party
action and has transferred the remainder of the Intervention Suit to the
Bankruptcy Case. Based upon the bankruptcy examiner's findings and the
subsequently appointed bankruptcy trustee's investigation of potential actions
directed at PCI, including an avoidable preference claim under the Bankruptcy
Code of an amount up to approximately $950,000, the bankruptcy trustee (the
"Trustee") and PCI have reached a tentative settlement on all issues, subject to
Bankruptcy Court approval. The terms of the proposed settlement have been
incorporated into a motion requesting approval of the settlement and a proposed
plan of reorganization (the "Plan") filed by the Trustee. On June 23, 1998, the
Bankruptcy Court approved the settlement whereby PCI obtained a release from the
Trustee and the Trustee dismissed the Intervention Suit in consideration of PCI
making a cash payment of $l.2 million to the Trustee. If the Plan is
subsequently approved by the Bankruptcy Court, PCI will make an additional cash
payment of up to $300,000 to the Trustee in consideration of PCI obtaining
certain allowed subordinated claims and the Court granting an injunction in
Premiere's favor against possible nuisance suits relating to the CNC business.
The Company has previously recorded a reserve for the settlement and Plan
payment.
12
<PAGE>
On January 21, 1997, Eric Bott, E.B. Elliott and Cost Recovery Systems, Inc.
("CRS") filed a complaint against the Company, PCI and the Company's then
president, Boland T. Jones, in the Superior Court of Fulton County, Georgia. In
December 1997, the Company, PCI and Mr. Jones entered into a settlement
agreement with Mr. Bott that settled and disposed of Mr. Bott's claims in
connection with this litigation. In August 1998, the Company, PCI and Mr. Jones
entered into a settlement agreement with Mr. Elliott and CRS which settled and
disposed of Mr. Elliott's and CRS's claims in connection with this litigation.
These settlements will not have a material adverse effect on the Company's
business, financial condition or results of operations.
On July 8, 1997, various limited partners purporting to act on behalf of
Telentry Research Limited Partnership, Telentry Development Limited Partnership,
Telentry XL Limited Partnership, Telentry Research Limited Partnership II and
Telentry Development Limited Partnership II (collectively, the "Telentry
Partnerships") filed a complaint in the Superior Court of New Jersey for Morris
County against Xpedite and two other defendants. The complaint alleges, inter
alia, that Xpedite is in breach of its obligations to make royalty payments
under a series of license agreements between Xpedite and the Telentry
Partnerships. In this action, the plaintiffs seek damages of approximately $2.0
million and an accounting of royalties. The Company believes that Xpedite has
meritorious defenses to the plaintiff's allegations and Xpedite will vigorously
defend the same, but due to the inherent uncertainties of the litigation process
and the judicial system, the Company is unable to predict the outcome of this
litigation. If the outcome of this litigation is adverse to Xpedite, it could
have a material adverse effect on the Company's business, financial condition
and results of operations.
On November 26, 1997, Wael Al-Khatib ("Al-Khatib"), the sole shareholder and
former president of CNC, and his company, Platinum Network Corp. ("Platinum")
(Al-Khatib and Platinum are collectively referred to herein as "Plaintiffs"),
filed a complaint against PCI, WorldCom Network Services, Inc. f/k/a WilTel,
Inc, ("WorldCom Network Services"), Bernard J. Ebbers, David F. Meyers, Robert
Vetera, Joseph Cusick, William Trower, Don Wilmouth, Digital Communications of
America, Inc., Boland Jones, Patrick Jones, and John Does I-XX (the
"Defendants") in the United States District Court for the Eastern District of
New York (the "Al-Khatib lawsuit"). Plaintiffs contend that PCI, certain
officers of PCI and the other Defendants engaged in a fraudulent scheme to
restrain trade in the debit card market nationally and in the New York debit
card sub-market and made misrepresentations of fact in connection with the
scheme. The Plaintiffs are seeking at least $250 million in compensatory
damages and $500 million in punitive damages from PCI and the other Defendants.
Pursuant to the local rules of the District Court, PCI has filed a letter
stating the reasons it believes the lawsuit should be dismissed. On May 1,
1998, PCI filed a motion to dismiss for failure to state a claim and such motion
to dismiss is currently pending. The individual PCI defendants, Mr. Boland
Jones and Mr. Patrick Jones, filed a separate motion to dismiss based upon lack
of personal jurisdiction, and such motion to dismiss is currently pending. The
Company believes that PCI has meritorious defenses to the Plaintiffs'
allegations and PCI will vigorously defend the same, but due to the inherent
uncertainties of the litigation process and the judicial system, the Company is
unable to predict the outcome of this litigation. If the outcome of this
litigation is adverse to PCI, it could have a material adverse effect on the
Company's business, financial condition and results of operations.
On February 23, 1998, Rudolf R. Nobis and Constance Nobis filed a complaint in
the Superior Court of Union County, New Jersey against 15 named defendants
including Xpedite and certain of its alleged current and former officers,
directors, agents and representatives. The plaintiffs allege that the 15 named
defendants and certain unidentified "John Doe defendants" engaged in wrongful
activities in connection with the management of the plaintiffs' investments with
Equitable Life Assurance Society of the United States and/or Equico Securities,
Inc. (collectively "Equitable"). More specifically, the complaint asserts
wrongdoing in connection with the plaintiffs' investment in securities of
Xpedite and in unrelated investments involving insurance-related products. The
defendants include Equitable and certain of its current or former
representatives. The allegations in the complaint against Xpedite are limited
to plaintiffs' investment in Xpedite. The plaintiffs have alleged that two of
the named defendants, allegedly acting as officers, directors, agents or
representatives of Xpedite, induced the plaintiffs to make certain investments
in Xpedite but that the plaintiffs failed to receive the benefits that they were
promised. The plaintiffs allege that Xpedite knew or should have known of
alleged wrongdoing on the part of other defendants. The plaintiffs' claims
against Xpedite include breach of contract, breach of fiduciary duty, unjust
enrichment, conversion, fraud, conspiracy, interference with economic advantage
and liability for ultra vires acts. The plaintiffs seek an accounting of the
corporate stock in Xpedite, compensatory damages of approximately $4.85 million,
plus $200,000 in "lost investments," interest and/or dividends that have accrued
and have not been paid, punitive damages in an unspecified amount, and for
certain equitable relief, including a request for Xpedite to issue 139,430
shares of common stock in the plaintiffs' names, attorneys' fees and costs and
such other and further relief as the Court deems just and equitable. Xpedite has
filed an answer denying the material allegations of the complaint and asserting
various affirmative defenses and intends to file a motion to stay the
proceedings against it during the court-
13
<PAGE>
ordered arbitration between the plaintiffs and the non-Xpedite related
defendants. The Company believes that Xpedite has meritorious defenses to the
plaintiffs' allegations and Xpedite will vigorously defend the same, but due to
the inherent uncertainties of the litigation process and the judicial system,
Premiere is unable to predict the outcome of this litigation. If the outcome of
this litigation is adverse to Xpedite, it could have a material adverse effect
on the Company's business, financial condition and results of operations.
On or about May 27, 1998, the Telephone Company of Central Florida ("TCCF"), a
user of the Company's network management system, filed for protection under
Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the
Middle District of Florida. WorldCom Network Services and the Company are two of
the largest creditors in this bankruptcy case. In August 1998, WorldCom Network
Services filed a separate lawsuit in the Federal District Court for the Middle
District of Florida against certain insiders of TCCF alleging payment of
improper distributions to the insiders in excess of $1.0 million and asserting a
constructive trust claim against the amounts received by the insiders. On
October 14, 1998, the Bankruptcy Court approved TCCF's motion requesting
authority to hire counsel for the purpose of pursuing certain alleged claims
against WorldCom Network Services and the Company, alleging service problems
with WorldCom Network Services and the Company. No lawsuit has been filed by
TCCF. Due to the inherent uncertainties of the litigation process and the
judicial system, and the lack of specificity of the nature of the claims which
may be asserted by TCCF, the Company is not able to predict with certainty
whether a lawsuit will be filed by TCCF or, if such a lawsuit is filed, whether
the outcome of such litigation will be adverse to the Company. If TCCF pursues
its alleged claims through litigation that is not resolved in the Company's
favor, it could have a material adverse effect on the Company's business,
financial condition and results of operations.
On July 30, 1998, Xfer Communications ("Xfer") filed a lawsuit against VoiceCom
in the United States District Court for the Eastern District of Michigan,
alleging breach of contract, tortious interference with business relationships,
fraudulent inducement, and misappropriation of trade secrets allegedly in
connection with the solicitation by VoiceCom of certain telecommunication
customer accounts of Xfer. The plaintiff seeks to recover actual damages in an
amount alleged to be in excess of $100,000, together with costs, interest,
attorneys' fees and punitive damages. The Company believes that VoiceCom has
meritorious defenses to the plaintiff's allegations and VoiceCom will vigorously
defend the same, but due to the inherent uncertainties of the litigation process
and the judicial system, the Company is unable to predict the outcome of this
litigation. If the outcome of this litigation is adverse to VoiceCom, it could
have a material adverse effect on the Company's business, financial condition
and results of operations.
On September 30, 1998, Acculock, Inc. filed a complaint against PCI in the
District Court of Tarrant County, Texas, 342nd Judicial District. In its
complaint, the plaintiff alleges breach of contract, fraud and negligent
misrepresentation arising out of an alleged contractual relationship with PCI
relating to the marketing of the Premiere WorldLink key holder program. The
plaintiff seeks to recover economic damages alleged to be not less than
$250,000, together with costs, interest, attorneys' fees and punitive damages.
The plaintiff also seeks mental anguish damages of an unspecified amount. On
November 5, 1998, PCI removed the case to the United States District Court for
the Northern District of Texas, Fort Worth Division, and filed a motion to
dismiss the lawsuit, which motion is pending. The Company believes that PCI has
meritorious defenses to the Plaintiffs' allegations and PCI will vigorously
defend the same, but due to the inherent uncertainties of the litigation process
and the judicial system, Premiere is unable to predict the outcome of this
litigation. If the outcome of this litigation is adverse to PCI, it could have
a material adverse effect on the Company's business, financial condition or
results of operations.
On November 4, 1998, APA Excelsior III L.P., APA Excelsior III Offshore L.P.,
APA/Fostin Pennsylvania Venture Capital Fund, CIN Venture Nominees Limited,
Stuart A. Epstein and David Epstein, plaintiffs, filed a complaint against the
Company and certain of its current and former officers and directors,
defendants, in the United States District Court for the Southern District of New
York. Plaintiffs were shareholders of Xpedite who acquired Premiere common
stock as a result of the merger between Premiere and Xpedite in November 1997.
Plaintiffs' allegations are based on the representations and warranties made by
Premiere in the prospectus and the registration statement related to the merger,
the merger agreement and other documents incorporated by reference regarding the
Company's roll-out of its Orchestrate product, the Company's relationship with
customers Amway and Digitec and the Company's 800-based calling card service. In
their complaint, plaintiffs allege causes of action against the Company for
breach of contract; against all defendants for negligent misrepresentation,
violation of Section 11 of the Securities Act of 1933, as amended ("Securities
Act") and violation of Section 12(a)(2) of the Securities Act; and, against the
individual defendants for violation of Section 15 of the Securities Act.
Plaintiffs seek undisclosed damages together with pre- and post-judgment
interest, recission or recissory damages, punitive damages, costs and attorneys'
fees. The Company believes it has meritorious
14
<PAGE>
defenses to the Plaintiffs' allegations and will vigorously defend the same, but
due to the inherent uncertainties of the litigation process and the judicial
system, the Company is unable to predict the outcome of this litigation. If the
outcome of this litigation is adverse to the Company, it could have a material
adverse effect on the Company's business, financial condition and results of
operations.
15
<PAGE>
11. RESTATEMENT OF XPEDITE ACQUISITION
In February 1999, Premiere announced that as a result of discussions with the
Office of the Chief Accountant of the Securities and Exchange Commission,
Premiere is required to discontinue accounting for its acquisition of Xpedite as
a pooling-of-interests and to account for such acquisition under the purchase
method of accounting. The Office of the Chief Accountant determined that
Premiere's post merger share repurchase program, completed in September 1998,
was not implemented in accordance with pooling requirements. No questions were
raised regarding the propriety of the original accounting of the merger with
Xpedite.
The following Condensed Consolidated Balance Sheets as of June 30, 1998, March
31, 1998 and December 31, 1997, the Condensed Consolidated Statements of
Operations for the three and six month periods ended June 30, 1998 and 1997 and
Condensed Consolidated Statements of Operations for the three month periods
ended March 31, 1998 and 1997 and the Condensed Consolidated Statements of Cash
Flows for the six month periods ended June 30, 1998 and 1997 and the Condensed
Consolidated Statements of Cash Flows for the three month periods ended March
31, 1998 and 1997 have been restated to reflect the Xpedite acquisition under
the purchase method of accounting.
16
<PAGE>
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1998 AND DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
---------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents.............................................................. $ 47,009 $ 21,770
Marketable securities............................................................. 51,988 154,569
Accounts receivable, net.......................................................... 59,306 20,719
Prepaid expenses and other........................................................ 13,957 6,941
Deferred income taxes, net........................................................ 45,157 25,715
--------- --------
Total current assets......................................................... 217,417 229,714
PROPERTY AND EQUIPMENT, NET........................................................ 123,163 63,577
OTHER ASSETS
Deferred income taxes, net........................................................ - 3,963
Strategic alliances and investments, net.......................................... 62,264 51,895
Intangibles, net.................................................................. 527,194 20,756
Other assets...................................................................... 9,698 11,203
--------- --------
$ 939,736 $381,108
========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses............................................. $ 120,291 $ 67,780
Revolving loan.................................................................... 129,332 -
Current maturities of long-term debt and capital lease obligations................ 4,209 5,907
Accrued restructuring, merger costs and other special charges..................... 21,230 19,845
--------- --------
Total current liabilities.................................................... 275,062 93,532
--------- --------
LONG-TERM LIABILITIES
Convertible subordinated notes.................................................... 172,500 172,500
Long-term debt and capital lease obligations...................................... 12,188 3,291
Other accrued liabilities......................................................... 2,835 10,971
Deferred income taxes, net........................................................ 37,537 -
--------- --------
Total long-term liabilities.................................................. 225,060 186,762
--------- --------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, $0.01 par value; 150,000,000 shares authorized and 46,507,395
and 34,100,018 shares issued in 1998 and 1997, respectively, and $46,208,865
and 34,100,018 outstanding, in 1998 and 1997, respectively...................... 465 341
Additional paid-in capital........................................................ 555,015 180,084
Treasury stock, at cost........................................................... (2,618) -
Note receivable, shareholder...................................................... (973) (973)
Cumulative translation adjustment................................................. 75 -
Accumulated deficit............................................................... (112,350) (78,638)
--------- --------
Total shareholders' equity................................................... 439,614 100,814
--------- --------
$ 939,736 $381,108
========= ========
</TABLE>
Accompanying notes are integral to these condensed consolidated financial
statements.
17
<PAGE>
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
THREE AND SIX MONTH PERIODS ENDED JUNE 30, 1998 AND 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------- ----------------------
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
---------- ---------- ----------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES................................................ $121,435 $ 55,980 $206,336 $111,350
COST OF SERVICES........................................ 37,620 15,163 63,990 30,410
-------- -------- -------- --------
GROSS PROFIT............................................ 83,815 40,817 142,346 80,940
-------- -------- -------- --------
OPERATING EXPENSES
Selling, general and administrative.................... 76,379 26,838 111,608 52,595
Depreciation and amortization.......................... 28,666 4,219 41,204 7,872
Restructuring, merger costs and other special charges.. - 45,423 7,545 45,423
Acquired research and development...................... - - 15,500 -
Accrued settlement cost................................ - 1,500 1,500 1,500
-------- -------- -------- --------
Total operating expenses.......................... 105,045 77,980 177,357 107,390
-------- -------- -------- --------
OPERATING LOSS.......................................... (21,230) (37,163) (35,011) (26,450)
-------- -------- -------- --------
OTHER INCOME (EXPENSE)
Interest, net.......................................... (3,942) (105) (5,422) (433)
Other, net............................................. (71) 21 (183) 101
-------- -------- -------- --------
Total other income (expense)...................... (4,013) (84) (5,605) (332)
-------- -------- -------- --------
LOSS BEFORE INCOME TAXES................................ (25,243) (37,247) (40,616) (26,782)
INCOME TAX BENEFIT...................................... (4,291) (6,583) (6,904) (4,160)
-------- -------- -------- --------
NET LOSS................................................ $(20,952) $(30,664) $(33,712) $(22,622)
======== ======== ======== ========
BASIC NET LOSS PER SHARE................................ $ (0.45) $ (0.96) $ (0.79) $ (0.71)
======== ======== ======== ========
DILUTED NET LOSS PER SHARE.............................. $ (0.45) $ (0.96) $ (0.79) $ (0.71)
======== ======== ======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING
BASIC.................................................. 46,074 32,020 42,784 31,963
======== ======== ======== ========
DILUTED................................................ 46,074 32,020 42,784 31,963
======== ======== ======== ========
</TABLE>
Accompanying notes are integral to these condensed consolidated financial
statements.
18
<PAGE>
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1998 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997
----------- ----------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss............................................................ $(33,712) $(22,622)
Adjustments to reconcile net loss to cash flows from
operating activities:
Depreciation and amortization....................................... 41,204 7,872
Deferred income taxes.............................................. (16,498) (5,691)
Restructuring, merger costs and other special charges............... 7,545 45,423
Acquired research and development................................... 15,500 -
Accrued settlement cost............................................. 1,500 1,500
Payments for restructuring, merger costs and other special charges.. (13,657) (13,190)
Changes in assets and liabilities:
Accounts receivable, net............................................ 899 (2,528)
Prepaid expenses and other.......................................... 2,576 (107)
Accounts payable and accrued expenses............................... 8,910 (2,477)
-------- --------
Total adjustments.............................................. 47,979 30,802
-------- --------
Net cash provided by operating activities...................... 14,267 8,180
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures................................................ (31,688) (12,855)
Proceeds from disposal of property and equipment.................... 107 -
Redemption (purchase) of marketable securities, net................. 102,581 36,104
Acquisitions........................................................ (39,900) (16,198)
Strategic alliances and investments................................. (8,019) -
Other............................................................... 105 -
-------- --------
Net cash provided by investing activities...................... 23,186 7,051
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments under borrowing arrangements, net................ (6,741) (17,306)
Purchase of common stock............................................ (2,619) -
Proceeds from convertible subordinated notes........................ - 145,105
Debt issue costs.................................................... (35) -
Shareholder distributions, primarily S-Corporation distributions.... - (5,161)
Exercise of stock options, net of tax withholding payments.......... (2,150) 235
Other............................................................... (319) (1,694)
-------- --------
Net cash (used in) provided by financing activities............ (11,864) 121,179
EFFECT OF EXCHANGE RATE CHANGES ON CASH.............................. (350) -
-------- --------
NET INCREASE IN CASH AND EQUIVALENTS................................. 25,239 136,410
CASH AND EQUIVALENTS, beginning of period............................ 21,770 15,936
-------- --------
CASH AND EQUIVALENTS, end of period.................................. $ 47,009 $152,346
======== ========
</TABLE>
Accompanying notes are integral to these condensed consolidated financial
statements.
19
<PAGE>
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1998 AND DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
----------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents...................................................... $ 29,053 $ 21,770
Marketable securities..................................................... 124,723 154,569
Accounts receivable, net.................................................. 59,790 20,719
Prepaid expenses and other................................................ 11,054 6,941
Deferred income taxes, net................................................ 36,162 25,715
-------- --------
Total current assets................................................ 260,782 229,714
PROPERTY AND EQUIPMENT, NET................................................ 106,517 63,577
OTHER ASSETS
Deferred income taxes, net................................................ - 3,963
Strategic alliances and investments, net.................................. 62,608 51,895
Intangibles, net.......................................................... 479,949 20,756
Other assets.............................................................. 10,138 11,203
-------- --------
$919,994 $381,108
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses..................................... $115,815 $ 67,780
Revolving loan............................................................ 130,600 -
Current maturities of long-term debt and capital lease obligations........ 3,697 5,907
Accrued restructuring, merger costs and other special charges............. 25,745 19,845
-------- --------
Total current liabilities........................................... 275,857 93,532
-------- --------
LONG-TERM LIABILITIES
Convertible subordinated notes............................................ 172,500 172,500
Long-term debt and capital lease obligations.............................. 2,818 3,291
Other accrued liabilities................................................. 3,070 10,971
Deferred income taxes, net................................................ 31,991 -
-------- --------
Total long-term liabilities......................................... 210,379 186,762
-------- --------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, $0.01 par value; 150,000,000 shares authorized,
45,294,423 and 34,100,018 shares issued and outstanding, respectively.. 453 341
Additional paid-in capital................................................ 524,943 180,084
Note receivable, shareholder.............................................. (973) (973)
Cumulative translation adjustment......................................... 733 -
Accumulated deficit....................................................... (91,398) (78,638)
-------- --------
Total shareholders' equity.......................................... 433,758 100,814
-------- --------
$919,994 $381,108
======== ========
</TABLE>
Accompanying notes are integral to these condensed consolidated financial
statements.
20
<PAGE>
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
THREE MONTH PERIODS ENDED MARCH 31, 1998 AND 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended
----------------------
March 31, March 31,
1998 1997
---------- ----------
(Unaudited)
<S> <C> <C>
REVENUES................................................ $ 84,901 $55,370
COST OF SERVICES........................................ 26,370 15,247
-------- -------
GROSS PROFIT............................................ 58,531 40,123
-------- -------
OPERATING EXPENSES
Selling, general and administrative.................... 35,229 25,757
Depreciation and amortization.......................... 12,538 3,653
Restructuring, merger costs and other special charges.. 7,545 -
Acquired research and development...................... 15,500 -
Accrued settlement cost................................ 1,500 -
-------- -------
Total operating expenses........................... 72,312 29,410
-------- -------
OPERATING INCOME (LOSS)................................. (13,781) 10,713
-------- -------
OTHER INCOME (EXPENSE)
Interest, net.......................................... (1,480) (328)
Other, net............................................. (112) 80
-------- -------
Total other income (expense)....................... (1,592) (248)
-------- -------
INCOME (LOSS) BEFORE INCOME TAXES....................... (15,373) 10,465
INCOME TAX PROVISION (BENEFIT).......................... (2,613) 2,423
-------- -------
NET INCOME (LOSS)....................................... $(12,760) $ 8,042
======== =======
BASIC NET INCOME (LOSS) PER SHARE....................... $ (0.32) $ 0.25
======== =======
DILUTED NET INCOME (LOSS) PER SHARE..................... $ (0.32) $ 0.23
======== =======
WEIGHTED AVERAGE SHARES OUTSTANDING
BASIC.................................................. 39,493 31,907
======== =======
DILUTED................................................ 39,493 35,526
======== =======
</TABLE>
Accompanying notes are integral to these condensed consolidated financial
statements.
21
<PAGE>
PREMIERE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTH PERIODS ENDED MARCH 31, 1998 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997
----------- ---------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss............................................................ $(12,760) $ 8,042
Adjustments to reconcile net loss to cash flows from
operating activities:
Depreciation and amortization....................................... 12,538 3,653
Deferred income taxes.............................................. (7,784) 1,893
Restructuring, merger costs and other special charges............... 7,545 -
Acquired research and development................................... 15,500 -
Accrued settlement cost............................................. 1,500 -
Payments for restructuring, merger costs and other special charges.. (8,539) -
Changes in assets and liabilities:
Accounts receivable, net............................................ (5,236) (1,487)
Prepaid expenses and other.......................................... (241) (1,766)
Accounts payable and accrued expenses............................... 5,697 (4,320)
-------- -------
Total adjustments............................................... 20,980 (2,027)
-------- -------
Net cash provided by operating activities....................... 8,220 6,015
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures................................................ (13,644) (5,844)
Proceeds from disposal of property and equipment.................... 107 -
Redemption of marketable securities, net............................ 29,846 2,154
Acquisitions........................................................ (883) -
Strategic alliances and investments................................. (3,000) -
Other............................................................... - -
-------- -------
Net cash provided by (used in) investing activities............. 12,426 (3,690)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments under borrowing arrangements..................... (4,458) (3,087)
Proceeds from issuance of note payable.............................. - 1,550
Debt issue costs.................................................... (35) -
Shareholder distributions, primarily S-Corporation distributions.... - (2,943)
Exercise of stock options, net of tax withholding payments.......... (8,551) -
Other............................................................... (319) 44
-------- -------
Net cash (used in) provide by financing activities.............. (13,363) (4,436)
-------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH.............................. - -
-------- -------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS...................... 7,283 (2,111)
CASH AND EQUIVALENTS, beginning of period............................ 21,770 15,936
-------- -------
CASH AND EQUIVALENTS, end of period.................................. $ 29,053 $13,825
======== =======
</TABLE>
Accompanying notes are integral to these condensed consolidated financial
statements.
22
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Premiere Technologies, Inc. (the "Company" or "Premiere") is a leading provider
of enhanced communications services designed to simplify everyday communications
of both businesses and individuals. Premiere provides its innovative solutions
for simplifying communications through two strategic business units: Corporate
Enterprise Solutions ("CES"), which targets Fortune 1000 and other large
companies; and Emerging Enterprise Solutions ("EES"), which targets smaller
fast-track companies and individuals. CES's services include: Premiere Document
Distribution, which provides enhanced electronic document distribution services;
Premiere Corporate Messaging, which provides 800-based enhanced calling card
services; Premiere Interactive Voice Response, which provides various IVR
applications; and Premiere Conferencing, which provides a full range of
conferencing services. EES's services include: Premiere Internet-Based
communications services, featuring Orchestrate(R) by Premiere, which integrates
the Company's service offerings by allowing customers to access such services
through a computer or telephone; Premiere Voice and Data Messaging, which
provides customers access to one of the largest "voice intranets" in the world;
and Premiere Enhanced Calling Services, which provides long distance and
enhanced 800-based services.
Premiere's revenues are generally based on usage. In addition to usage fees,
local access Voice and Data Messaging services, certain of Premiere's Enhanced
Calling Services and the Orchestrate(R) suite of products contain fixed monthly
fees.
Cost of services consists primarily of the cost of long distance transmission
and other telecommunications related charges incurred in providing Premiere's
services.
Selling, general and administrative expenses include salaries and wages
associated with customer service, operations, research and development, direct
sales, marketing and administrative functions, sales commissions, direct
marketing and advertising costs, travel and entertainment expenses, bad debt
expense, rent and facility expense, professional and consulting fees, property
taxes and other operating and administrative expenses.
Depreciation and amortization includes depreciation of computer and
telecommunications equipment and amortization of intangible assets. The Company
provides for depreciation using the straight-line method of depreciation over
the estimated useful lives of the assets, with the exception of leasehold
improvements which are depreciated on a straight-line basis over the shorter of
the term of the lease or the estimated useful life of the assets. Intangible
assets being amortized include capitalized software development costs, goodwill,
customer lists, assembled work force, and the MCI WorldCom strategic alliance
agreement.
`EBITDA', as used below, is defined as the sum of net income or loss and, to the
extent deducted in determining net income or loss for such period, net interest
expense, income taxes, depreciation and amortization.
The preparation of financial statements in conformity with generally accepted
accounting principles ("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 reported amounts of revenues and expenses during the reporting
period. Actual results could differ from estimates. The following discussion
and analysis provides information which management believes is relevant to an
assessment and understanding of the Company's consolidated results of operations
and financial condition. This discussion should be read in conjunction with the
unaudited consolidated condensed financial statements and notes thereto included
in this Form 10-Q/A.
In February 1999, Premiere announced that as a result of discussions with the
Office of the Chief Accountant of the Securities and Exchange Commission,
Premiere is required to discontinue accounting for its acquisition of Xpedite
Systems, Inc. ("Xpedite") as a pooling-of-interests and to account for such
acquisition under the purchase method of accounting. The Office of the Chief
Accountant determined that Premiere's post merger share repurchase program,
completed in September 1998, was not implemented in accordance with pooling
requirements. No questions were raised regarding the propriety of the original
accounting of the merger with Xpedite. The following discussion and analysis
presents the Xpedite Acquisition in February 1998 under the purchase method of
accounting.
23
<PAGE>
The unaudited interim financial statements and notes thereto and Management's
discussion and Analysis of Financial Condition and Results of Operations
included in Item 2 of this Form 10-Q/A should be read in conjunction with the
Company's consolidated financial statements and notes thereto and the
Management's Discussion and Analysis of Financial Condition included in the
Company's Form 10-K/A filed with the Commission on April 1, 1999. Certain
information in this Form 10-Q/A may be superseded by information in the
Company's Form 10-K/A.
ANALYSIS OF OPERATING RESULTS
Overview
The Company has achieved substantial growth since its initial public offering
during the first quarter of 1996. Revenues grew from $167.4 million for the
nine months ended September 30, 1997 to $327.9 million for the nine months ended
September 30, 1998, an increase of 95.9%. Similarly, EBITDA, before
restructuring, merger costs and other special charges, acquired research and
development and accrued settlement costs, grew from $44.2 million for the nine
months ended September 30, 1997 to $50.9 million for the same period in 1998, an
increase of 15.2%.
Premiere has achieved growth in revenues and EBITDA, before restructuring,
merger costs and other special charges, acquired research and development and
accrued settlement costs, by pursuing its mission to become the world's leading
provider of innovative solutions to simplify everyday communications of both
businesses and individuals. Since going public, the Company has pursued an
aggressive acquisition strategy to expand its service offerings and means of
distribution. Significant acquisitions in 1998 included Xpedite, a leading
provider of electronic document distribution services, and American
Teleconferencing Services, Ltd. ("ATS"), a full-service provider of conferencing
services. In 1997, the Company acquired Voice-Tel Enterprises, Inc. and its
affiliated entities and VoiceCom Systems, Inc. ("VoiceCom"). The acquisitions
of the Voice-Tel entities provided Premiere with the ability to offer voice
messaging services on a local access basis over an international private network
utilizing frame relay and Internet protocols. In connection with the
acquisition of VoiceCom, Premiere assumed a significant base of large corporate
customers. During 1996, the Company acquired TeleT Communications, LLC
("TeleT"), an enterprise engaged in computer telephony software development.
TeleT provided Premiere with the foundation of its Orchestrate(R) suite of
product offerings.
Analysis
Premiere's financial statements reflect the results of operations of Xpedite and
ATS from the date of their respective acquisitions. These acquisitions have
been accounted for under the purchase method of accounting. Premiere's
financial statements have been restated for all periods presented to reflect the
Voice-Tel and VoiceCom acquisitions, which have been accounted for as poolings-
of-interests. The following discussion and analysis is prepared on that basis.
Consolidated revenues increased 95.9% to $327.9 million in the nine month period
ended September 30, 1998. Revenue growth resulted principally from the
acquisition of Xpedite in February 1998 and ATS in April 1998 and from strategic
partner programs, including Premiere's private label calling card programs with
American Express, DeltaTel and MBNA, which experienced significant increases in
new subscribers. Revenue growth was offset in part by revenue losses resulting
from the bankruptcy of two wholesale Enhanced Calling Services customers in the
second quarter of 1998 and management's decision to discontinue certain
unprofitable prepaid calling card programs.
Consolidated gross profit margins were 69.3% and 73.9% for the three month
periods ended September 30, 1998 and 1997, respectively, and 69.1% and 73.1% for
the nine month periods ended September 30, 1998 and 1997, respectively. Gross
profit margins declined in 1998 due to changes in Premiere's revenue mix
resulting principally from the acquisition of Xpedite in February 1998. Gross
profit margins for Premiere's Document Distribution services are generally lower
than that of Premiere's other services. Generally, Premiere has experienced
favorable trends in per unit telecommunications costs by aggressively leveraging
increasing minute volumes to negotiate quantity discounts with
telecommunications carriers. Such costs have also been favorably affected by
general industry trends in which long distance transport and the cost of local
access services have decreased as a result of increased capacity and competition
among long distance and local exchange carries.
Selling, general and administrative costs as a percent of revenue were 52.8% and
46.0% for the three month periods ending September 30, 1998 and 1997,
respectively, and 53.6% and 46.8% for the nine month periods ended September 30,
1998 and 1997, respectively. Contributing to the increase in selling, general
and administrative costs as a percent of
24
<PAGE>
revenues in 1998 as compared with 1997 was approximately $16.1 million of costs
recorded in the second quarter of 1998. Such costs consist of approximately $8.4
million of bad debt expense recorded in response to the bankruptcies of two
customers, $1.8 million of asset write-offs and other costs. The acquisition of
ATS in April 1998 also contributed to an increase in selling, general and
administrative costs in proportion to revenues because the service delivery
processes of ATS include relatively higher labor costs as compared with
Premiere's other services. In addition, Premiere aggressively expanded its
management infrastructure in 1998 to more effectively support continued growth
in its business. These actions included hiring additional senior level managers
and expanding its corporate headquarters facilities.
Depreciation and amortization was $29.3 million and $4.5 million, or 24.1% and
8.0%, of revenues, in the three month periods ended September 30, 1998 and 1997,
respectively, and $70.5 million and $12.3 million, or 21.5% and 7.4% of
revenues, in the nine month periods ended September 30, 1998 and 1997,
respectively. Increases in depreciation and amortization in 1998 resulted mainly
from amortization of intangible assets acquired in the purchases of Xpedite and
ATS.
Net interest expense increased to $4.5 million and $9.9 million in the three and
nine month periods ended September 30, 1998, respectively, from $0.1 million and
$0.6 million of net interest expense in the same periods of 1997. Net interest
expense increased in 1998 due primarily to interest associated with $132.3
million of debt assumed in the acquisition of Xpedite in February 1998.
Substantially all of the debt assumed in the acquisition of Xpedite was
associated with a short-term revolving loan facility maintained by Xpedite. Also
contributing to the increase in net interest expense in 1998 was the reduction
in cash and marketable securities balances to fund operations and strategic
initiatives thereby lowering interest income.
Restructuring, merger costs and other special charges incurred in the nine month
periods ended September 30, 1998 and 1997, were $7.5 million compared to $73.6
million, respectively. The nature of these costs are described more fully under
"Restructuring, Merger Costs and Other Special Charges" which follows and
Note 7---Restructuring, Merger Costs and other Special Charges in the Notes to
Condensed Consolidated Financial Statements.
Accrued settlement costs were $1.5 million in each of the nine month periods
ended September 30, 1998 and 1997. See Note 10 --- Commitments and
Contingencies in the Notes to Condensed Consolidated Financial Statements for a
discussion of the nature of such costs.
The Company expensed approximately $15.5 million in the three month period ended
March 31, 1998 reflecting costs associated with a research and development
project acquired in the Xpedite acquisition. These costs were valued based upon
an independent appraisal. The acquired research and development related to a
project to develop a new job monitor. This project was 50% complete as of the
acquisition date and had not yet completed a successful beta test. The primary
high risk at valuation date involved identifying and correcting the design flaws
that would typically arise during beta testing. Fair value was determined using
an income approach. Revenues from this new job monitor are anticipated beginning
in 1999 and a discount rate of 25% was used for valuation purposes.
In 1998, the Company's effective income tax rate varied from the statutory rate
primarily as a result of non-deductible goodwill amortization associated with
its acquisitions accounted for under the purchase method of accounting. In
1997, the Company's effective income tax rate varied from the statutory rate due
to certain non-taxable investment income and income of certain Voice-Tel
entities which had elected to be treated as S Corporations or partnerships under
U.S. tax law prior to their acquisition by the Company.
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its growth through cash generated by operations, by
issuing subordinated convertible indebtedness in June and July 1997 and from the
proceeds of its initial public offering in March 1996. Cash provided by
operations was $16.8 million and $22.6 million for the nine month periods ended
September 30, 1998 and 1997, respectively. Excluding payments made for
restructuring, merger costs, accrued settlement costs and other special charges,
cash provided by operations was $35.4 million and $39.5 million for the nine
month periods ended September 30, 1998 and 1997, respectively. Operating cash
flow declined on higher revenues in 1998, primarily as a result of revenue
losses in Premiere's EES group and continued investment by the Company to expand
its management infrastructure to support continued growth. Premiere's working
capital ratio was .7 to 1 at September 30, 1998 as compared with 2.5 to 1 at
December 31, 1997. The decline in working capital resulted principally from
borrowings of approximately $126.0
25
<PAGE>
million outstanding at September 30, 1998 under the revolving loan facility
which Premiere assumed in the Xpedite acquisition. In addition, Premiere
liquidated approximately $124.4 million of short-term investment balances in
1998 to fund operating and strategic initiatives. Xpedite's revolving loan
facility was due in December 1998 and was classified as a current liability. If
borrowings under this facility were excluded from current liabilities,
Premiere's current ratio would have been 1.4 to 1 at September 30, 1998.
Investing activities provided cash of approximately $25.9 million and used cash
of $158.2 million in the nine month periods ended September 30, 1998 and 1997,
respectively. The principal source of cash from investing activities in 1998
was the liquidation of approximately $124.4 million of short-term investments to
fund various operating and strategic initiatives. Premiere made capital
expenditures of $50.0 million and $41.7 million in the nine month periods ended
September 30, 1998 and 1997, respectively. Significant capital programs in 1998
included construction costs and equipment purchases associated with the
Company's network expansion program, development costs incurred in connection
with the Company's introduction of Internet-enabled communications services and
operating infrastructure expansion in support of new business growth.
Management anticipates that these expenditures will continue to increase in the
future as the Company upgrades and expands the operational infrastructure of
both its existing computer telephony network and integrates the networks of its
acquired companies. Significant investing activities in the nine month period
ended September 30, 1997 included investment of proceeds associated with
Premiere's $172.5 million convertible subordinated debt issuance.
Premiere paid approximately $42.9 million to fund acquisition activity in the
nine month period ended September 30, 1998. Premiere paid cash of approximately
$22.1 million to acquire ATS in April 1998. Shareholders of ATS also received
approximately 712,000 shares of Premiere common stock in connection with the
acquisition. Remaining cash paid for acquisitions in 1998 is associated with
three individually insignificant acquisitions including two Document
Distribution businesses located in Germany and Singapore and a company engaged
in marketing long distance calling cards to college students in the United
States. The Company paid cash of approximately $8.1 million in the nine month
period ended September 30, 1998 to acquire initial or increase existing equity
interests in various companies engaged in emerging technologies, such as the
Internet. Premiere's investments include minority equity investments accounted
for under the cost method of accounting in: WebMD, a leading full service
Internet healthcare Web site; USA.NET, a leading electronic messaging company;
Intellivoice, an entity engaged in developing voice activation and other
technologies; VerticalOne, a network-based services provider that increases
frequency, duration, and quality of visits to customers' Web sites; and
Webforia, a provider of Web services, tools and communities that assist
individuals in the process of researching, organizing and presenting high
quality information from the Internet. Management intends to continue to make
such investments in the future in complementary businesses and other initiatives
that further its strategic business plan. Premiere paid approximately $16.2
million of cash in connection with the Voice-Tel acquisitions in the nine month
period ended September 30, 1997.
Significant cash outflows for financing activities included repayment of
approximately $13.9 million of indebtedness in the nine month period ended
September 30, 1998. In addition, Premiere executed a stock repurchase program
in 1998 under which the Company repurchased approximately 1.1 million shares of
its common stock for approximately $9.1 million. The Company's principal
financing activities in the nine month period ended September 30, 1997 consisted
of the issuance of convertible subordinated notes of $172.5 million. Premiere
also repaid approximately $25.5 million of indebtedness in the nine month period
ended September 30, 1997 assumed in connection with the Voice-Tel and VoiceCom
acquisitions. Cash distributions to shareholders of VoiceCom and certain Voice-
Tel companies, primarily S Corporations, used $6.7 million in the nine month
period ended September 30, 1997. Such distributions were made in periods prior
to the Voice-Tel and VoiceCom acquisitions and were made primarily to reimburse
S Corporation shareholders for taxes paid on the proportionate share of taxable
income of such companies they were required to report in their individual income
tax returns.
At September 30, 1998, the Company's principal commitments involved indebtedness
under its revolving loan facility which was to mature on December 16, 1998,
lease obligations and minimum purchase requirements under supply agreements with
telecommunications providers. Effective December 16, 1998, Premiere amended and
restated the revolving loan facility it assumed in connection with the Xpedite
acquisition for a period of one year. This arrangement provides for borrowings
of up to $150 million and contains certain covenants which require the Company
to maintain minimum earnings and interest coverage ratios and achieve certain
revenue levels, in addition to other covenants. Compliance under these loan
covenants requires that Premiere attain certain revenue and earnings growth
rates or reduce indebtedness in order to satisfy the minimum ratio requirements
required under this arrangement. The Company is in compliance under all such
agreements at September 30, 1998.
26
<PAGE>
Management believes that cash and marketable securities on-hand of approximately
$65.5 million and cash generated by operating activities will be adequate to
fund growth in the Company's existing businesses for the next twelve months.
Management is currently studying alternatives in connection with an initiative
to expand and upgrade its network infrastructure. Management believes this
initiative will better enable the Company to integrate its various products
across a common network platform. This initiative is also designed to reduce
operating costs by allowing for more cost efficient routing of transmission
volumes and network management and improve the Company's ability to leverage
company-wide transmission volumes for quantity purchasing benefits. Management
also anticipates the initiative will improve customer service and support
activities by improving the Company's ability to implement and monitor
consistent procedures and practices in this area. The execution of this
initiative may require the Company to seek additional funding by lease or other
borrowing arrangement. In addition, the upgrade of the Company's network may
reduce the utility of certain equipment and other assets which are currently
used in the Company's network operations. To the extent that this initiative
impairs the carrying value of existing assets, the Company may be required to
record a charge to operations to reduce the carrying value of such assets.
RESTRUCTURING, MERGER COSTS AND OTHER SPECIAL CHARGES
Premiere recorded restructuring, merger costs and other special charges of
approximately $7.5 million in the nine month period ended September 30, 1998 to
restructure certain operating activities of Premiere and Xpedite subsequent to
their merger. Such costs consist of severance associated with workforce
reduction, lease termination costs, costs to terminate certain contractual
obligations and asset impairments. Severance benefits have been provided for
termination of 122 employees. These actions resulted from management's plans to
reduce sales, operations and administrative headcount by exiting duplicative and
underperforming operations. Premiere has also provided for lease termination
and clean-up costs associated with these facilities and operations. In
addition, the Company provided for costs associated with commitments under
certain advertising contracts from which the Company was generating no
incremental revenue and for costs to terminate certain unfavorable reseller
agreements. Although certain restructuring actions were being contemplated at
the acquisition date, definitive plans for such actions were not formalized
until after such date. Accordingly, there were no exit costs included in the
purchase price allocation of Xpedite.
In connection with the VoiceCom acquisition, the Company recorded restructuring
and other special charges of approximately $28.2 million in the third quarter of
1997. Such amounts consisted of transaction costs, asset impairments, costs to
terminate or restructure certain contractual obligations and other costs.
Transaction costs associated with the VoiceCom acquisition were expensed as
required by the pooling-of-interests method of accounting. Other restructuring
and special charges recorded in the third quarter of 1997 result principally
from management's plan to restructure VoiceCom's operations by reducing its
workforce, exiting certain facilities, discontinuing duplicative product
offerings and terminating or restructuring certain contractual obligations.
The Company recorded approximately $45.4 million of restructuring and other
special charges before income taxes in the second quarter of 1997 in connection
with the Voice-Tel acquisitions. Those charges result from management's plan to
restructure the operations of the Voice-Tel entities under a consolidated
business group model and discontinue its franchise operations. This initiative
involves substantial reduction in the administrative workforce, abandoning
duplicative facilities and assets and other costs necessary to discontinue
redundant business activities.
THE YEAR 2000 ISSUE
The term "Year 2000 issue" is a general term used to describe the various
problems that may result from the improper processing of dates and date-
sensitive calculations by computers and other machinery as the Year 2000 is
approached and reached. These problems generally arise from the fact that most
of the world's computer hardware and software has historically used only two
digits to identify the year in a date, often meaning that the computer will fail
to distinguish dates in the "2000s" from dates in the "1900s." These problems
may also arise from other sources as well, such as the use of special codes and
conventions in software that make use of the date field.
The Company's State Of Readiness. The Company has formed a Year 2000 Executive
- --------------------------------
Committee comprised of members of senior management and a Year 2000 Task Force
comprised of project leaders for each of the Company's operating subsidiaries
and key corporate functional areas. The Year 2000 Executive Committee and the
Task Force are charged
27
<PAGE>
with evaluating the Company's Year 2000 issue and taking appropriate actions so
that the Company will incur minimal disruption from the Year 2000 issue ("Year
2000 ready"). The Year 2000 Task Force is currently developing and implementing
a comprehensive initiative (the "Initiative") to make the Company's necessary
software applications and/or systems ("Software Applications") and hardware
platforms ("Hardware Platforms") Year 2000 ready. The Initiative covers the
following seven phases: (i) inventory of all appropriate Software Applications
and Hardware Platforms, (ii) assessment of appropriate repair requirements,
(iii) repair or replacement of Software Applications and Hardware Platforms,
where appropriate, (iv) researching and/or testing of appropriate individual
Software Applications and Hardware Platforms to determine correct manipulation
of dates and date-related data regarding the Year 2000 issue, (v) certification
by users or testers within the Company that such Software Applications and
Hardware Platforms appropriately handle dates and date-related data regarding
the Year 2000 issue, (vi) appropriate system integration testing of multiple
Software Applications and Hardware Platforms to determine correct manipulation
of dates and date-related data regarding the Year 2000 issue, and (vii)
creation of commercially reasonable contingency plans in the event certain Year
2000 readiness efforts fail. The Company is aware that some of its Hardware
Platforms contain embedded microprocessors and it has included the repair or
replacement of such embedded microprocessors as part of the Initiative.
The Company retained a nationally recognized independent consultant
("Consultant") to assist in assessing and recommending revisions to the
Initiative, and such recommendations have been taken into consideration in
developing the Initiative. The Company will periodically review its progress
with respect to the Initiative as the Year 2000 is approached and reached. This
periodic review by the Company will include additional adjustments to the
Initiative, as required.
The Company has materially completed the first six phases of the Initiative for
certain of its Software Applications and Hardware Platforms. While each of the
Company's operating subsidiaries is at a different stage of completion of the
Initiative, the Initiative calls for a majority of the Company's operating
subsidiaries to complete the first six phases of the Initiative by June 30,
1999. In one operating subsidiary, one operational challenge not related to Year
2000 has the potential to delay the completion of software deployment in one
subsystem into the third quarter of 1999. Two contingency plans are being
pursued in parallel with the primary initiative to insure that there is minimal
impact on customers' use of the Company's services. In another subsidiary, the
implementation of a new enhanced customer care system has been rescheduled until
after the completion of the summer peak usage season. As a contingency plan, the
existing system will also be adopted for Year 2000. The system integration
testing of Software Applications and Hardware Platforms required by phase (vi)
of the Initiative has begun with respect to some of the Company's business
activities. The Initiative calls for initiation of final testing throughout the
Company by no later than the end of the second quarter of 1999.
In the process of assessing the Year 2000 readiness of Software Applications and
Hardware Platforms as required by phase (ii) of the Initiative, the Company has
communicated with many of its suppliers of Software Applications and Hardware
Platforms to determine (1) whether the Software Applications and Hardware
Platforms provided to the Company will correctly manipulate dates and date-
related data as the Year 2000 is approached and reached, and (2) whether the
suppliers will solve their Year 2000 problems in order to continue providing the
Company products and services as the Year 2000 is approached and reached. The
Company has received verification that the majority of suppliers' Software
Applications and Hardware Platforms, with appropriate "version modification,"
will correctly manipulate dates and date-related data as the Year 2000 is
approached and reached. If a supplier informs the Company that it will not
appropriately rectify its Year 2000 issues, then the Company will use that
information to develop appropriate contingency plans as required by phase (vii)
of the Initiative. As a general matter, the Company may be vulnerable to a
supplier's inability to remedy its own Year 2000 issues. Other than the
Company's own remediation efforts, there can be no assurance that the Software
Applications and Hardware Platforms supplied by third parties on which the
Company's business relies will correctly manipulate dates and date-related data
as the Year 2000 is approached and reached. Such failures could have a material
adverse effect on the Company's financial condition and results of operations.
To operate its business, the Company relies upon providers of telecommunication
services, government agencies, utility companies, and other third party service
providers ("External Providers"), over which it can assert little control. If
the inability of any of these entities to correct their Year 2000 issues results
in a failure to provide the Company services, the Company's operations may be
materially adversely impacted and may result in a material adverse effect on the
Company's business, financial condition and results of operations. The Company
depends upon telecommunications carriers to conduct its business and is heavily
dependent upon the ability of such telecommunications carriers to correctly fix
their Year 2000 issues. If telecommunications carriers and other External
Providers do not appropriately rectify their Year 2000 issues, the Company's
ability to conduct its business may be materially impacted, which could result
in a material adverse effect on the Company's business, financial condition and
results of operations.
28
<PAGE>
A significant portion of the Company's business is conducted outside of the
United States. External Providers located outside of the United States may face
significantly more severe Year 2000 issues than similar entities located in the
United States. If such External Providers located outside the United States are
unable to rectify their Year 2000 issues, the Company may be unable to
effectively conduct the international portion of its business, which could
result in a material adverse effect on the Company's business, financial
condition and results of operations.
Costs to Address the Company's Year 2000 Issues. Thus far the majority of the
- ------------------------------------------------
work on the Initiative has been performed by the Company's employees and
subcontractors, which has limited the cost spent to date. The Company estimates
that the total historical and future costs of implementing the Initiative will
be approximately $7 million, the majority of which relate to capital
expenditures. However, because the Initiative may undergo changes as a result
of many factors, including but not limited to, the results of any phase of the
Initiative, the Company's periodic review of its progress or recommendations of
the Consultant, the Company's estimate of the total cost of implementation may
be revised as the Initiative progresses. In the event such costs need to be
revised, such revised costs could have a material adverse effect on the
Company's financial condition and results of operations. The Company will fund
the costs of implementing the Initiative from cash flows. The Company has not
deferred any specific information technology project as a result of the
implementation of the Initiative. The Company does not expect that the
opportunity cost of implementation of the Initiative will have a material effect
on the financial condition of the Company or its results of operations.
Risks Presented by Year 2000 Issues. Until system integration testing is
- -----------------------------------
substantially complete, the Company cannot fully estimate the risks of its Year
2000 issue. As a result of system integration testing, the Company may identify
business activities that are at risk of Year 2000 disruption. The absence of
any such determination at this point represents only the status currently in the
implementation of the Initiative, and should not be construed to mean that there
is no business activity which is at risk of a Year 2000 related disruption. It
is possible that one or more disruptions to a major business activity could have
a material adverse effect on the Company's business, financial condition and
results of operations. In addition, as noted above, many of the Company's
business critical External Providers may not appropriately address their Year
2000 issues, the result of which could have a material adverse effect on the
Company's business, financial condition and results of operations.
The Company's Contingency Plans. The Initiative includes the development of
- -------------------------------
commercially reasonable contingency plans for business activities that are
susceptible to a substantial risk of a disruption resulting from a Year 2000
related event. Because the Company has not fully assessed its risk from
potential Year 2000 failures, the Company has not yet developed detailed
contingency plans specific to Year 2000 events for any business activity. The
Company is aware of the possibility that certain business activities may be
hereafter identified as at risk. Consistent with the Initiative, the Company is
developing contingency plans for such business activities as and if such
determinations are made.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (the "FASB") issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS No. 133"). SFAS No. 133 establishes accounting and reporting
standards for derivatives and hedging. It requires that all derivatives be
recognized as either assets or liabilities at fair value and establishes
specific criteria for the use of hedge accounting. The Company's required
adoption date is January 1, 2000. SFAS No. 133 is not to be applied
retroactively to financial statements of prior periods. The Company expects
no material adverse effect to its financial position upon adoption of SFAS No.
133.
"Statement of Position ("SOP") 98-1, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use," provides guidance on
accounting for the costs of computer software developed or obtained for internal
use and is required to be adopted no later than the Company's 1999 fiscal year.
Also, in June 1998, the American Institute of Certified Public Accountants
issued SOP 98-5, "Reporting on the Costs of Start-up Activities." SOP 98-5
requires costs of start-up activities and organizational costs, as defined, to
be expensed as incurred. The Company expects no material adverse effect to its
financial position upon adoption of SOP 98-1 or SOP 98-5.
FORWARD-LOOKING STATEMENTS
When used in this Form 10-Q/A and elsewhere by management or Premiere from time
to time, the words "believes," "anticipates," "expects," "will" and similar
expressions are intended to identify forward-looking statements concerning
Premiere's operations, economic performance and financial condition. These
include, but are not limited to, forward-looking statements about Premiere's
business strategy and means to implement the strategy, Premiere's objectives,
the amount of future capital expenditures, the likelihood of Premiere's success
in developing and introducing new products and services and expanding its
business, and the timing of the introduction of new and modified products and
services. For those statements, Premiere claims the protection of the safe
harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995. These statements are based on a number of
assumptions and estimates which are inherently subject to significant risks and
uncertainties, many of which are beyond the control of Premiere, and reflect
future business decisions which are subject to change. A variety of factors
could cause actual results to differ materially from those anticipated in
Premiere's forward-looking statements, including the following factors:
. factors described from time to time in the Company's press releases,
reports and other filings made with the Securities and Exchange
Commission;
29
<PAGE>
. Premiere's ability to manage its growth and to respond to rapid
technological change and risk of obsolescence of its products, services
and technology;
. market acceptance of new products and services, including Orchestrate(R);
. development of effective marketing, pricing and distribution strategies
for new products and services, including Orchestrate(R);
. competitive pressures among communications services providers may
increase significantly;
. costs or difficulties related to the integration of businesses, if any,
acquired or that may be acquired by Premiere may be greater than
expected;
. expected cost savings from past or future mergers and acquisitions may
not be fully realized or realized within the expected time frame;
. revenues following past or future mergers and acquisitions may be lower
than expected;
. operating costs or customer loss and business disruption following past
or future mergers and acquisitions may be greater than expected;
. the success of Premiere's strategic relationships, including the amount
of business generated and the viability of the strategic relationships,
including the amount of business generated and the viability of the
strategic partners, may not meet expectations;
. possible adverse results of pending or future litigation;
. risks associated with interruption in Premiere's services due to the
failure of the platforms and network infrastructure utilized in providing
its services;
. risks associated with the Year 2000 issue, including Year 2000 problems
that may arise on the part of third parties which may effect Premiere's
operations;
. risks associated with expansion of Premiere's international operations;
. general economic or business conditions, internationally, nationally or
in the local jurisdiction in which Premiere is doing business, may be
less favorable than expected;
. legislative or regulatory changes may adversely affect the business in
which Premiere is engaged; and
. changes in the securities markets may negatively impact Premiere.
Premiere cautions that these factors are not exclusive. Consequently, all of
the forward-looking statements made in this Form 10-Q/A and in documents
incorporated in this Form 10-Q/A are qualified by these cautionary statements.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this Form 10-Q/A. Premiere takes
on no obligation to publicly release the results of any revisions to these
forward-looking statements that may be made to reflect events or circumstances
after the date of this Form 10-Q/A, or the date of the statement, if a different
date.
30
<PAGE>
PART II. OTHER INFORMATION
31
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K [Need restated financial data schedules
for all periods]
(a) Exhibits
Exhibit Exhibit
Number Description
- ------ -----------
27.1 Restated Financial Data Schedule for the Three and Nine Month Periods
Ended September 30, 1998.
27.2 Restated Financial Data Schedule for the Three and Nine Month Periods
Ended September 30, 1997.
27.3 Restated Financial Data Schedule for the Three and Six Month Periods
Ended June 30, 1998.
27.4 Restated Financial Data Schedule for the Three and Six Month Periods
Ended June 30, 1997.
27.5 Restated Financial Data Schedule for the Three Month Period Ended
March 31, 1998.
27.6 Restated Financial Data Schedule for the Three Month Period Ended
March 31, 1997.
32
<PAGE>
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 by the
undersigned thereunto duly authorized.
May 13, 1999 PREMIERE TECHNOLOGIES, INC.
- ------------
Date
/s/ Harvey A. Wagner
-------------------------------------------
Harvey A. Wagner
Executive Vice President of Finance and
Administration and Chief Financial Officer
(Principal Financial and Accounting Officer
and duly authorized signatory of the
Registrant)
33
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Exhibit
Number Description
- ------ -----------
27.1 Restated Financial Data Schedule for the Three and Nine Month Periods
Ended September 30, 1998.
27.2 Restated Financial Data Schedule for the Three and Nine Month Periods
Ended September 30, 1997.
27.3 Restated Financial Data Schedule for the Three and Six Month Periods
Ended June 30, 1998.
27.4 Restated Financial Data Schedule for the Three and Six Month Periods
Ended June 30, 1997.
27.5 Restated Financial Data Schedule for the Three Month Period Ended
March 31, 1998.
27.6 Restated Financial Data Schedule for the Three Month Period Ended
March 31, 1997.
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PREMIERE
TECHNOLOGIES, INC. FOR THE PERIOD ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
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<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-START> JUL-01-1998 JAN-01-1998
<PERIOD-END> SEP-30-1998 SEP-30-1998
<CASH> 35,314 35,314
<SECURITIES> 30,171 30,171
<RECEIVABLES> 69,908 69,908
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<CURRENT-ASSETS> 190,846 190,846
<PP&E> 223,164 223,164
<DEPRECIATION> (90,153) (90,153)
<TOTAL-ASSETS> 911,854 911,854
<CURRENT-LIABILITIES> 263,691 263,691
<BONDS> 0 0
0 0
0 0
<COMMON> 469 469
<OTHER-SE> 422,830 422,830
<TOTAL-LIABILITY-AND-EQUITY> 911,854 911,854
<SALES> 121,540 327,876
<TOTAL-REVENUES> 121,540 327,876
<CGS> 37,346 101,336
<TOTAL-COSTS> 37,346 101,336
<OTHER-EXPENSES> 93,468 270,825
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (4,520) (9,942)
<INCOME-PRETAX> (13,529) (54,145)
<INCOME-TAX> (2,300) (9,204)
<INCOME-CONTINUING> (11,229) (44,941)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (11,229) (44,941)
<EPS-PRIMARY> (0.24) (1.03)
<EPS-DILUTED> (0.24) (1.03)
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<ARTICLE> 5
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PREMIERE
TECHNOLOGIES, INC. FOR THE PERIOD ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
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<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> JUL-01-1997 JAN-01-1997
<PERIOD-END> SEP-30-1997 SEP-30-1997
<CASH> 4,693 4,693
<SECURITIES> 62,645 62,645
<RECEIVABLES> 7,676 7,676
<ALLOWANCES> (671) (671)
<INVENTORY> 0 0
<CURRENT-ASSETS> 79,780 79,780
<PP&E> 24,999 24,999
<DEPRECIATION> (3,888) (3,888)
<TOTAL-ASSETS> 143,444 143,444
<CURRENT-LIABILITIES> 15,003 15,003
<BONDS> 0 0
0 0
0 0
<COMMON> 241 241
<OTHER-SE> 127,693 127,693
<TOTAL-LIABILITY-AND-EQUITY> 143,444 143,444
<SALES> 56,014 167,364
<TOTAL-REVENUES> 56,014 167,364
<CGS> 14,610 45,020
<TOTAL-COSTS> 14,610 45,020
<OTHER-EXPENSES> 58,400 165,790
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (124) (557)
<INCOME-PRETAX> (17,035) (43,817)
<INCOME-TAX> (5,113) (9,273)
<INCOME-CONTINUING> (11,922) (34,544)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (11,922) (34,544)
<EPS-PRIMARY> (0.37) (1.10)
<EPS-DILUTED> (0.37) (1.10)
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<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PREMIERE
TECHNOLOGIES, INC. FOR THE PERIOD ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-START> APR-01-1998 JAN-01-1998
<PERIOD-END> JUN-30-1998 JUN-30-1998
<CASH> 47,009 47,009
<SECURITIES> 51,988 51,988
<RECEIVABLES> 72,999 72,999
<ALLOWANCES> (13,693) (13,693)
<INVENTORY> 0 0
<CURRENT-ASSETS> 217,417 217,417
<PP&E> 208,619 208,619
<DEPRECIATION> (85,456) (85,456)
<TOTAL-ASSETS> 939,736 939,736
<CURRENT-LIABILITIES> 275,062 275,062
<BONDS> 0 0
0 0
0 0
<COMMON> 465 465
<OTHER-SE> 439,149 439,149
<TOTAL-LIABILITY-AND-EQUITY> 939,736 939,736
<SALES> 121,435 206,336
<TOTAL-REVENUES> 121,435 206,336
<CGS> 37,620 63,990
<TOTAL-COSTS> 37,620 63,990
<OTHER-EXPENSES> 105,045 177,357
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (3,942) (5,422)
<INCOME-PRETAX> (25,243) (40,616)
<INCOME-TAX> (4,291) (6,904)
<INCOME-CONTINUING> (20,952) (33,712)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (20,952) (33,712)
<EPS-PRIMARY> (0.45) (0.79)
<EPS-DILUTED> (0.45) (0.79)
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<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PREMIERE
TECHNOLOGIES, INC. FOR THE PERIOD ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
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<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> APR-01-1997 JAN-01-1997
<PERIOD-END> JUN-30-1997 JUN-30-1997
<CASH> 152,346 152,346
<SECURITIES> 31,796 31,796
<RECEIVABLES> 17,329 17,329
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 221,530 221,530
<PP&E> 103,755 103,755
<DEPRECIATION> (50,508) (50,508)
<TOTAL-ASSETS> 325,156 325,156
<CURRENT-LIABILITIES> 67,285 67,285
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0 0
0 0
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PREMIERE
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</LEGEND>
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0
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PREMIERE
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ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
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0
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</TABLE>
