UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A-1
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended DECEMBER 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE
REQUIRED)
For the transition period from _______ to ________
Commission File Number 33-92696
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VIATEL, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 13-3787366
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
800 Third Avenue, New York, New York 10022
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area
code: (212) 935-6800
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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None
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Securities registered pursuant to Section 12(g) of the Act:
None
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(Title of class)
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. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. [ X ]
[COVER PAGE 1 OF 2 PAGES]
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As of March 1, 1996, the aggregate market value, based on
the last sale thereof of the issuer's voting stock (Common Stock) held
by non-affiliates was approximately $22,402,177. For purposes of this
calculation, shares of Common Stock held by directors, officers and
stockholders whose ownership exceeds five percent of the Common Stock
outstanding at December 31, 1995 were excluded. Exclusion of shares
held by any person should not be construed to indicate that such
person possesses the power, direct or indirect, to direct or cause the
direction of management or policies of the issuer, or that such person
is controlled by or under common control of the issuer.
As of March 1, 1996, there were 16,104,202 shares of Common
Stock and 4,357,270 shares of Non-Voting Common Stock, outstanding,
respectively.
DOCUMENTS INCORPORATED BY REFERENCE
None.
[COVER PAGE 2 OF 2 PAGES]
<PAGE>
PART II
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Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
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The following is a discussion of the financial condition and
results of operations for the years ended December 31, 1995, 1994 and
1993. The discussion should be read in conjunction with the Company's
Consolidated Financial Statements and the notes related thereto.
OVERVIEW
During the year ended December 31, 1995, the Company
experienced growth of 23.0% and 71.5% in revenues and minutes,
respectively. Furthermore, the Company experienced a 1.8% improvement
on gross margins in comparison to the previous year. Despite these
positive trends, the Company's revenues and gross margins were below
its targeted goals. These shortfalls in the Company's anticipated
operating performance were primarily attributable to the delay in the
placing in operation of the replacement nodes (the "Nodes") for the
European Network. The Company believes that the European Network will
continue to reduce transmission costs as a percentage of
telecommunications revenue as volume of traffic on the European
Network increases due to the scale of economies inherent in a
predominantly fixed cost structure. The elimination of costly ITF
switched rates and expected declines in leased line rates are also
expected to positively impact the Company's overall gross margins.
The Company experienced delays in connecting the Nodes to
the European Network. These delays were primarily attributable to
connectivity delays by the local PTTs that have been substantially
remedied. The Nodes, which have become operational on an incremental
basis since August 1995, have resulted in improvements in both quality
and consistency of the voice and facsimile calls transmitted over the
European Network although, at the present time, consistency remains
below the Company's standards. To date, the European Network includes
switching and multiplexing equipment or Nodes in Amsterdam, Barcelona,
Brussels, Madrid, Milan, Paris and Rome, all connected by IPLCs to
London except for Barcelona, which is connected to Madrid with an in-
country leased line. The Company expects, based on its business plan,
that four to six additional nodes, including nodes in Frankfurt,
Antwerp and Rotterdam, will be connected to the European Network
during 1996. The foregoing expectation is based on the anticipated
delivery dates of required hardware and the dates as of which IPLCs
connecting such nodes to the Company's London hub and local
connectivity of such additional nodes is expected to be obtained. The
Company expects that the cost of each additional node will be
approximately $450,000. This timetable reflects a substantial delay
and a reduction in the schedule originally planned by the Company.
This delay is due to the quality problems affecting the European
Network that were experienced prior to the replacement of substantial
portions of the European Network discussed below and to delays in
obtaining local connectivity. The Company believes that significant
market share opportunities exist in its current node cities and has
revised its original deployment schedule accordingly. At the present
time, the Company is not able to definitively determine the other
additional nodes it will add during 1996 because the order of its
continued roll-out will be dependent upon customer calling patterns in
its initial European node cities (i.e. the Company will first add
nodes in those cities which are most frequently called from its
existing node cities). The Company is still in the process of
evaluating these calling patterns and determining the order of its
European roll-out. Once the Company decides to enter a particular
node city, it generally will take approximately six months to connect
the node to the European Network. This continued growth is contingent
on the Company's ability to improve upon the European Network's
consistency which has been impeded by factors such as IPLC micro-
interruptions, access problems and hardware/software failures leading
to dropped calls. The Company is currently taking steps to remedy
conditions that hamper the European Network's overall consistency.
Presently, there are two facilities-based providers of IPLCs in the
United Kingdom and the number of facilities-based providers is
expected to increase in 1996. As such, if the current facilities-
based providers are unable to provide IPLCs up to the Company's
quality and consistency standards, the Company anticipates that it
will be capable of finding alternative sources for its IPLC
requirements. Access problems are expected to be reduced as certain
equipment modifications are made. The Company is also making
refinements to its software.
The Company believes that the improvements in quality and
consistency, as well as the effect of establishing direct sales
organizations, were principal factors in the growth it experienced
during the fourth quarter of 1995. During the three months ended
December 31, 1995, the Company experienced a 54.9% and 127.1% increase
in telecommunications revenue and billable minutes, respectively, in
comparison to the corresponding three month period ended December 31,
1994. The larger growth in billable minutes as compared to the growth
in telecommunications revenue was due to a combination of a change in
the revenue mix which, in the three month period ended December 31,
1995, included a higher percentage of lower-priced European paid
access traffic and wholesale traffic and to reductions in rates
resulting from the Company's response to pricing reductions enacted by
the local PTTs. Paid access as a percentage of the Company's total
European minutes has risen to approximately 81% during the three
months ended December 31, 1995 from approximately 40% during the
corresponding three month period ended December 31, 1994.
Accordingly, the Company was able to maintain its gross margin despite
the decrease in revenue per billable minute due to a corresponding
decrease in its overall cost per minute resulting from changes in
access mix, the Company's shift to the predominantly fixed cost
structure inherent in the European Network and also to a continued
decline in U.S. switched international rates for outbound switched
services. Furthermore, the Company anticipates that the costs related
to significant components of its fixed cost structure, such as IPLCs,
will decline as European infrastructure competition evolves.
Developments such as these are expected to not only improve the
Company's margins but are also expected to help improve the Company's
competitive position in preparation for the expected deregulation of
the Western European telecommunications market in January 1998.
The previously mentioned shortfalls in the Company's
anticipated telecommunications revenue were mitigated by the Company's
ability to control discretionary costs necessary to support the
Company's anticipated growth such as curtailing the number of sales
people hired. Accordingly, the Company's operating loss and cash
outflows were minimized. The Company will continue to manage such
discretionary costs as management believes to be appropriate as it
continues to expand its direct sales organizations in Western Europe.
RESULTS OF OPERATIONS
Year ended December 31, 1995, Compared to Year Ended December 31, 1994
Telecommunications Revenue. Telecommunications revenue
increased by approximately 23.0% to $32.3 million on 25.9 million
billable minutes in 1995 from $26.3 million on 15.0 million billable
minutes in 1994. This growth in telecommunications revenue resulted
primarily from the use of direct sales organizations in Europe which
the Company began to establish in late 1994, the creation of a
wholesale business and growth experienced in the Company's revenue
derived from the Pacific Rim ($4.4 million in 1995 versus $2.0 million
in 1994). Part of this increase was offset by declining revenue per
billable minute. Average revenue per minute declined by 27.6% from
$1.70 in 1994 to $1.23 in 1995. The decrease was primarily due to a
change in the revenue mix, which in 1995 included a higher percentage
of lower-priced European traffic associated with the European Network
becoming operational and a higher percentage of wholesale traffic,
together with a reduction in rates as a result of the Company's
response to price reductions by PTTs. The Company's wholesale
business represented approximately 6.2% of telecommunications revenue
and approximately 21.6% of billable minutes for 1995.
Telecommunications revenue per billable minute from the sale of
services to non-wholesale customers decreased from $1.72 in 1994 to
$1.46 in 1995 while revenue per billable minute from the sale of
services to other carriers and resellers was $0.35 in 1995. The
number of customers billed rose 42.5% to 9,218 at December 31, 1995
from 6,469 at December 31, 1994.
European revenue increased as a percentage of total
telecommunications revenue from 29.4% in 1994 to 38.2% in 1995. Latin
American revenue declined from 49.4% to 37.6% of total
telecommunications revenue, in part because of the Company's current
focus on the deregulating western European market and a reduction in
Latin American revenues attributable to increased price competition
from other call back companies, blockage of lines by certain PTTs and
increases in the Pacific Rim and wholesale business. The Company is
currently undertaking several marketing initiatives to stimulate
revenue growth in Latin America.
The Company experienced customer cancellations and non-
usage, or "churn" in the years ended December 31, 1995 and 1994. The
Company believes that this churn is primarily attributable to quality
problems with respect to calls terminated over the European Network's
previous configuration. The Company expects churn to diminish since
the Nodes for the European Network have become operational which has
resulted in improvements in both quality and consistency of the voice
and facsimile calls transmitted over the European Network. The Company
is unable to quantify or assess churn in relation to the European
Network's new configuration due to the lack of historical data. The
Company's ability to continue to minimize churn is contingent on
improving the European Network's consistency as described in the
Overview. Additionally, the Company is currently in the process of
expanding its local customer service departments. This will enable
the Company to be more responsive and proactive in respect to
addressing customer concerns and identifying customer needs.
Management believes that the establishment of strong local customer
service departments will help minimize churn, stimulate usage by
existing customers, and provide a key competitive advantage in the
marketplace.
Cost of Telecommunications Services. Cost of
telecommunications services increased to $27.6 million in 1995 from
$23.0 million in 1994 and, as a percentage of telecommunications
revenue, decreased to approximately 85.6% from 87.4% for the years
ended December 31, 1995 and 1994, respectively. The corresponding
increase in gross margin was primarily attributable to changes in
customer access methods and changes in service mix attributable to the
European Network becoming operational. Accordingly, the Company
experienced an approximately 32.0% decrease in average cost per
billable minute to $1.04 during 1995 from $1.53 during 1994. This
decrease, which more than offset the effect of the decline in average
revenue per billable minute, was attributable to a continued decline
in U.S. international rates for outbound switched minutes and to
increased traffic volume being routed through the European Network,
which was used to originate calls accounting for approximately 58.0%
of the Company's European-related call revenue during 1995. The
increased European Network utilization helped reduce costs associated
with intra-European and intercontinental telecommunications services
due to the predominantly fixed cost nature of the European Network.
On the other hand, during 1994, the Company's gross margin was
adversely affected by the delayed implementation of the European
Network. The Company had priced its services competitively with the
PTTs in Spain and Italy in anticipation of the European Network's
becoming operational; however, due to delays in the implementation of
the European Network, the Company realized significant losses on this
traffic as a result of having to route calls through ITF access
instead of through the European Network.
Increases in certain fixed costs related to expansion of the
Company's overall transmission capacity negatively impacted the
Company's gross margin for the year ended December 31, 1995. As a
result of obtaining additional IPLC capacity, the costs associated
with the European Network increased to approximately $2.0 million for
1995 (approximately 6.3% of revenue for such period) from
approximately $1.1 million for 1994 (approximately 4.1% of revenue for
such period). Additionally, the Company incurred costs associated
with obtaining redundant fiber optic capacity at the Omaha, Nebraska
facility totaling approximately $.5 million (approximately 1.7% of
revenue for 1995). The IPLCs represent a significant portion of the
Company's fixed costs and were underutilized as a result of the
incremental roll-out of the Nodes since August of 1995. The Company
believes that it will increase its utilization of the IPLCs and that
such increase will positively impact the overall gross margin as a
percentage of telecommunications revenue.
Selling Expenses. Selling expenses increased to $7.5
million in 1995 from $4.5 million in 1994 and, as a percentage of
telecommunications revenue, increased to approximately 23.1% from
approximately 17.0% for the years ended December 31, 1995 and 1994,
respectively. During 1994, these expenses were principally comprised
of commissions paid to independent sales representatives which
constituted 75.1% of all selling expenses in comparison to
approximately 31.5% for 1995. The increase in selling expenses and
change in expense structure is attributable to the Company's strategy
of establishing direct sales organizations to take greater control
over the marketing of its services and to provide a higher level of
customer service. The Company began to implement this strategy in
late 1994 and, as of December 31, 1995, had sales offices in Belgium,
France, Germany, the Netherlands, Italy and Spain. Accordingly,
salary related selling expenses increased to 48.5% of total selling
expenses for 1995 in comparison to approximately 7.7% for 1994. As a
percentage of telecommunications revenue, the use of direct sales
organizations is more costly than the use of independent sales
organizations during the start-up phase of a sales operation.
However, the Company anticipates that selling expenses, as a
percentage of telecommunications revenue, will decrease over time.
General and Administrative Expense. General and
administrative expense increased to $16.9 million in 1995 from $9.9 in
1994 and, as a percentage of telecommunications revenue, increased to
approximately 52.2% from approximately 37.5% for the years ended
December 31, 1995 and 1994, respectively. Beginning in the third
quarter of 1994, the Company invested significant funds in
establishing a physical presence in its various geographic markets in
Western Europe and in building an administrative infrastructure in its
United States and Western European offices. Such an effort entailed
significant expenditures for salary, rent, office and similar
expenses.
Depreciation and Amortization. Depreciation and
amortization expense, which includes depreciation of the Company's
network, increased to approximately $2.6 million in 1995 from
approximately $.8 million in 1994. The increase in such expense was
due primarily to the depreciation of the European Network which became
operational during October 1994 and the amortization of intangible
assets which principally related to acquired employee base and sales
force in place associated with the acquisition of independent sales
organizations in Italy and Barcelona, which occurred in December 1994,
as well as recognizing depreciation for additional switches and other
items placed in service during 1994 and 1995.
Equipment Impairment Loss. In connection with the
replacement of substantial portions of the European Network during
1995, the Company entered into the Termination Agreement with TMI.
Pursuant to the terms of such agreement, the Company prepaid the
remaining lease obligation of approximately $1.0 million, thereby
acquiring all of the equipment previously leased from TMI, most of
which equipment was subsequently redeployed. The Company recorded a
non-cash charge of approximately $.6 million in 1995, which
represented the original installation costs of such equipment and the
difference between the carrying value and the expected selling price
of the equipment not expected to be redeployed.
Interest. Interest expense for 1995 increased by
approximately $8.1 million from 1994 due to the accretion of non-cash
interest from the Notes. This expense was partially offset by
interest income of approximately $3.3 million for 1995 derived from
the investment of the net proceeds from such issuance in highly liquid
debt instruments.
YEAR ENDED DECEMBER 31, 1994, COMPARED TO YEAR ENDED DECEMBER 31, 1993
TELECOMMUNICATIONS REVENUE. Telecommunications revenue
increased by approximately 22.8% to $26.3 million on 15.1 million
billable minutes in 1994 from $21.4 million on 10.9 million billable
minutes in 1993. This growth in telecommunications revenue resulted
primarily from the Company's existing markets. Part of this increase
was offset by declining revenue per billable minute rates. Average
revenue per billable minute declined by approximately 9.1% from $1.87
in 1993 to $1.70 in 1994. The decrease was due primarily to a change
in the revenue mix, which in 1994 included a higher percentage of
lower priced intra-European traffic, and a reduction in rates in
response to price reductions by certain PTTs. The number of customers
billed rose approximately 17.9% to 6,469 at December 31, 1994 from
5,486 at December 31, 1993.
European revenues increased as a percentage of total
telecommunications revenue from 26% for 1993 to 29% in 1994. Latin
American revenues declined from 58% to 49% of total telecommunications
revenue, in part because of revenue increases in Europe and reduced
growth in Latin America attributable to increased price competition
from smaller call back companies, often with lower overhead, blockage
of lines by certain PTTs and regulatory issues in certain
jurisdictions.
The Company experienced customer cancellations and non-
usage, or "churn," during the years ended December 31, 1994 and 1993.
The Company believes that this churn, which has been approximately 1%
of the Company's total customer base per month, is substantially
attributable to two factors. In Brazil and Argentina, two of the
Company's largest markets, the international long distance
telecommunications markets are highly competitive and extremely price
sensitive. The Company was one of the first entrants in these markets
and its services are priced above smaller call back companies, which
often have lower overhead. The Company expects that the churn rates
in these markets will continue to be high. In Europe (primarily Spain
and Italy), the delay in bringing the European Network on line forced
the Company to raise its prices significantly in order to counter the
negative gross margins caused by the use of ITF access to transport
intra-European calls. The Company expects that churn in Europe will
decrease once voice transmission quality problems with respect to the
European Network are resolved.
COST OF TELECOMMUNICATIONS SERVICES. Cost of
telecommunications services increased to $23.0 million in 1994 from
$18.2 million in 1993 and, as a percentage of telecommunications
revenue, increased to approximately 87.4% in 1994 from approximately
84.9% in 1993. The Company had priced its services to be competitive
with the PTTs in Spain and Italy in anticipation of the European
Network becoming operational; however, due to delays in the
implementation of the European Network, the Company realized
significant losses on this traffic as a result of having to route
calls through ITF access instead of through the European Network. In
October 1994, the European Network became operational and was used to
originate approximately 48% of the Company's European call revenue
through the remainder of the year. This negative impact on gross
margins was partially offset by an approximately 8.4% decrease in
average cost per billable minute to $1.53 in 1994 from $1.67 in 1993.
This decrease was attributable to the migration in access from higher
cost per minute ITF access to callback access in Brazil and Argentina,
traffic being routed through the European Network and a general
decline in U.S. switched international rates for outbound services
attributable to the Company's successful negotiation of favorable
rates.
SELLING EXPENSES. Selling expenses increased to $4.5
million in 1994 from $2.4 million in 1993 and, as a percentage of
telecommunications revenue, increased to approximately 17.0% in 1994
from approximately 11.2% in 1993. These expenses consisted primarily
of commissions paid to independent sales representatives in the
countries in which the Company did not operate its own direct sales
organizations. Commissions paid to these representatives ranged from
5% to 15% of telecommunications revenue, net of chargebacks for
amounts deemed uncollectible in the period the related services were
provided.
GENERAL AND ADMINISTRATIVE EXPENSE. General and
administrative expense increased to $9.9 million in 1994 from $6.1
million in 1993 and, as a percentage of telecommunications revenue,
increased to approximately 37.5% in 1994 from approximately 28.4% in
1993. A significant portion of the increase was attributable to
building an administrative infrastructure in the Company's New York,
Omaha and European offices and to hiring an experienced management
team. In addition, during 1994 the Company charged to operations,
current costs associated with the European Network which had been
capitalized prior to the European Network becoming operational.
DEPRECIATION AND AMORTIZATION. Depreciation and
amortization expense, which includes depreciation on the Company's
network, increased to $.8 million in 1994 from approximately $.1
million in 1993. The increase in such expense was due primarily to
the recognition of a full year of depreciation and amortization
expense with respect to the Omaha switching center, which was
purchased on October 1, 1993. In February 1994, the Company began to
depreciate the European Network, resulting in depreciation expense of
approximately $.3 million in 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company expects that the cash flow from operations will
continue to be negative until the last quarter of 1997 and believes
the $75.0 million in proceeds, net of $4.3 million in issuance costs
received from the issuance of the Notes and 4,357,270 shares of Class
A Stock in December 1994 will be sufficient to fund the operations and
capital requirements of the Company while the Company continues to
experience negative cash flow. The Notes were issued for
approximately $58.0 million and will fully accrete on a semi-annual
basis to their face value of $120.7 million on January 15, 2000 with
semiannual interest payments commencing on July 15, 2000 until
maturity on January 15, 2005. On December 31, 1995, the fair value of
the Notes was $67.3 million which approximates their accreted value.
The shares of Class A Stock were issued for gross proceeds of
approximately $17.0 million. The proceeds from the foregoing
issuances have been invested in highly liquid debt instruments, which
generated approximately $3.3 million in interest income for the year
ended December 31, 1995. These investments mature in accordance with
the Company's anticipated capital needs.
The ability of the Company to generate positive cash flow by
the last quarter of 1997 or at any other time and to meet its debt
service obligations will be dependent upon the future performance of
the Company, which, in turn, will be subject to the Company's
successful implementation of its European strategy, as well as to
financial, competitive, business, regulatory and other factors beyond
the Company's control. The Company expects that sufficient cash flows
will be generated from operations so that the Company will be able to
meet all of its debt service requirements for the foreseeable future.
If the Company is at any time unable to generate sufficient cash flow
from operations to meet its debt service requirements, it will be
required to refinance all or a portion of its indebtedness or raise
additional capital. There can be no assurance that any such
refinancing would be possible on terms that would be acceptable to the
Company or that any additional financing could be obtained.
The Company's operations have required substantial capital
investment for the funding of operating losses, the replacement of
equipment, and the continued development of the European Network. The
Company has also made significant investments in an administrative
infrastructure capable of managing the Company's growth, and the
development of direct sales organizations in Europe. The Company has
met these liquidity requirements historically through equity
investments, debt issuances and vendor financings.
The Company's net cash used in operating and investing
activities less investments in marketable securities was $30.1 million
for the year ended December 31, 1995. Net cash used in financing
activities from indebtedness payments was $2.3 million for the year
ended December 31, 1995. The Company's operating loss and cash
outflows for the year ended December 31, 1995 were minimized despite
falling short of telecommunications revenue and gross margin targets
because of management's ability to control discretionary costs. These
shortfalls in telecommunications revenue and gross margin targets are
expected to persist until European Network utilization is increased.
In the interim, the Company will continue to manage such discretionary
costs as it deems appropriate as it continues to fund the direct sales
organizations in Europe. Long term obligations, less current
maturities, increased by $7.3 million from December 31, 1994 to
December 31, 1995. This increase is primarily attributable to the
accretion of interest on the Notes. To date, the European Network
costs have been primarily funded by capital investment. On August 4,
1995, the Company entered into the Termination Agreement with TMI,
pursuant to which the Company prepaid the 8% existing capital lease
obligation of approximately $1,025,000, thereby acquiring all of the
equipment previously leased.
The Company's current monthly cash requirements are
approximately $1.5 million exclusive of capital expenditures which is
expected to decline over the course of the year. As of December 31,
1995, the Company has placed orders approximating $1.6 million to
purchase equipment for the nodes, other equipment, software, and the
continued development of the European Network. At the present time,
the Company has tentatively determined the roll-out of nodes for 1996
which is anticipated to be between four and six additional nodes and
will be chosen based upon customer calling patterns in the initial
European node cities (i.e. those cities which are most frequently
called from existing node cities). At this time, three specific
switching sites have been identified by the Company: Frankfurt,
Antwerp and Rotterdam. The Company expects the cost of additional
switches will be approximately $450,000. Based upon the foregoing,
management estimates capital expenditures will range between $5
million and $10 million in 1996. The Company may finance a portion of
the equipment to be purchased through a variety of methods, including
vendor financing. As of December 31, 1995, the Company had $35.1
million in cash and cash equivalents and highly liquid debt
instruments and $67.3 million in indebtedness.
The Company has incurred losses from operating activities in
each year of operation since its organization in 1991 and expects to
continue to incur operating losses for the next several years. The
Company has sustained operating losses totaling $47.6 million from the
time of its inception on February 26, 1991 through December 31, 1995.
The Company has exposure to fluctuations in foreign
currencies relative to the U.S. Dollar since the Company bills in
local currency in countries where the local currency is relatively
stable, while transmission costs are largely incurred in U.S. Dollars.
In countries with less stable currencies, such as Brazil, the Company
bills in U.S. Dollars. For the year ended December 31, 1995 and 1994,
approximately 46% and 33%, respectively, of the Company's revenues
were billed in currencies other than the U.S. Dollar. Furthermore,
the costs of substantially all of the Company's transmission equipment
(i.e. switches) related to the ongoing expansion of the European
Network have been and will continue to be U.S. Dollar denominated.
With the continued deployment of the European Network, a
substantial portion of the costs associated with the European Network,
such as local access charges and a portion of the leased line costs,
as well as a majority of local selling expenses, will be charged to
the Company in the same currencies as revenues. These developments are
creating a natural hedge against a portion of the Company's foreign
exchange exposure. To date, much of the funding necessary to
establish the local sales organizations has been derived from revenue
that was collected in local currencies. Consequently, the Company's
financial position as of December 31, 1995 and results of operations
for the year ended December 31, 1995 were not significantly impacted
by the weaknesses experienced by the U.S. Dollar in foreign markets.
The Company's foreign currency exposure, resulting from foreign
currency revenues in excess of foreign currency denominated costs,
will be managed in part through the use of hedging techniques as
considered necessary.
NEW ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board
issued Statement No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of" ("SFAS 121"),
effective for fiscal years beginning after December 15, 1995. The
Company will adopt SFAS 121 in the first quarter of 1996. Based on
current facts and circumstances, the Company believes that SFAS 121
will not adversely affect the Company.
In December 1995, the Financial Accounting Standards Board
issued Statement No. 123, "Accounting for Stock-Based Compensation"
("SFAS 123"), effective for years beginning after December 15, 1995.
Under SFAS 123, the Company may elect either a "fair value" based
method or the current "intrinsic value" based method of accounting for
its stock-based compensation arrangements. If the Company were to
elect the "intrinsic value" based method, the Company would be
required to disclose in the footnotes to the financial statements net
income and earnings per share computed under the "fair value" based
method. The Company will elect the "intrinsic value" based method.
Accordingly, the adoption of SFAS 123 will not impact the Company's
results of operations or financial condition.
<PAGE>
PART IV
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Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K.
(a) Financial Statements, Financial Statement Schedules and Exhibits.
(1) Financial Statements (all financial statements listed below are
of the Registrant and its consolidated subsidiaries).
- Independent Auditors' Report of KPMG Peat Marwick LLP.
- Consolidated Balance Sheets at December 31, 1995 and 1994.
- Consolidated Statements of Operations for the years ended
December 31, 1995, 1994 and 1993.
- Consolidated Statements of Stockholders' (Deficit) Equity
for the years ended December 31, 1995, 1994 and 1993.
- Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993.
-- Notes to Consolidated Financial Statements for the years
ended December 31, 1995, 1994 and 1993.
(2) Financial Statement Schedules.
- Schedule II - Valuation and Qualifying Accounts.
(3) Exhibits.
3.1 -- Certificate of Incorporation of the Company.*
3.2 -- Bylaws of the Company.*
4.1 -- Specimen of the Company's 15% Senior Discount Exchange Notes
due 2005 (the "New Notes").*
4.2 -- Indenture, dated as of December 15, 1994, between the
Company and United States Trust Company of New York, as
Trustee.*
4.3 -- Notes Registration Rights Agreement, dated as of December
15, 1994, between the Company and Morgan Stanley & Co.
Incorporated ("MS&Co.") in connection with the Company's 15%
Senior Discount Notes due 2005 (the "Old Notes").*
10.1 -- Employment Agreement, dated as of September 30, 1993, and as
further amended as of April 5, 1994, between the Company and
Martin Varsavsky.*
10.2 -- Employment Agreement, dated as of August 22, 1995, between
the Company and Michael Mahoney.
10.3 -- Placement Agreement, dated as of December 15, 1994, between
the Company and MS&Co.*
10.4 -- Common Stock Registration Rights Agreement, dated as of
December 15, 1994, among the Company, Martin Varsavsky, Juan
Manuel Aisemberg and MS&Co. in connection with the Company's
shares of non-voting Class A common stock.*
10.5 -- The Company's 1993 Flexible Stock Incentive Plan, dated as
of September 29, 1993.*
10.6 -- Carrier Contract, dated as of May 3, 1993, between the
Company and AT&T Corp.*
10.7 -- MCI Carrier Agreement, dated as of January 1, 1995, between
the Company and MCI Telecommunications Corporation.*
10.8 -- Mercury Carrier Services Agreement, dated as of March 1,
1994, between the Company and Mercury Communications
Limited.*
10.9 -- Provision and Management Facilities Agreement, dated as of
October 17, 1994, between the Company and Mercury
Communications Limited.*
10.10 -- Managed Telecommunications Network Agreement, dated as of
February 5, 1993, between the Company and TMI USA, Inc.
(Delaware).*
10.11 -- Representative Agreement, dated as of June 1, 1993, and as
amended as of April 19, 1995, between the Company and
Maximiliano Fernandez.*
10.12 -- Representative Agreement, dated as of April 23, 1993,
between the Company and Viatel de Colombia Comunicaciones
S.A.*
10.13 -- Stock Purchase Agreement, dated as of September 30, 1993, as
amended as of April 5, 1994, and as further amended as of
December 21, 1994, between the Company and S-C V-Tel
Investments, L.P.*
10.14 -- Stock Purchase Agreement, dated as of April 5, 1994, and as
amended as of December 21, 1994, between the Company and
COMSAT Investments, Inc.*
10.15 -- Stock Purchase Agreement, dated as of December 3, 1993,
between the Company and Herald L. Ritch.*
10.16 -- Stock Purchase Agreement, dated as of October 1, 1993,
between the Company and Robert Conrads.*
10.17 -- Stock Purchase Agreement, dated as of December 9, 1993,
between the Company and Robert Conrads.*
10.18 -- Warrant Agreement, dated as of April 5, 1994, between the
Company and COMSAT Investments, Inc.*
10.19 -- Shareholders' Agreement, dated as of April 5, 1994, and as
amended as of November 22, 1994, by and among the Company,
Martin Varsavsky, Juan Manuel Aisemberg and COMSAT
Investments, Inc.*
10.20 -- Warrant Agreement, dated as of September 30, 1993, between
the Company and S-C V-Tel Investments, L.P.*
10.21 -- Shareholders' Agreement, dated as of September 30, 1993, as
amended as of December 9, 1993 and as further amended as of
April 5, 1994, November 22, 1994 and December 21, 1994, by
and among the Company, Martin Varsavsky and S-C V-Tel
Investments, L.P.*
10.22 -- Purchase Agreement, dated as of December 8, 1994, between
the Company and ECI Telecom, Inc.*
10.23 -- Carrier Digital Services Agreement, dated as of November 29,
1994, between the Company and Norline Communications, Inc.*
10.24 -- Commercial Lease Agreement, dated as of November 1, 1993,
and Addendum, dated as of December 8, 1994, between the
Company and 123rd Street Partnership in connection with the
Company's premises located in Omaha, Nebraska.*
10.25 -- Sublease Agreement, dated as of July 6, 1993, between the
Company and Scali, McCabe, Sloves, Inc. in connection with
the Company's headquarters in New York, New York.*
10.26 -- Asset Purchase Agreement, dated as of August 27, 1993,
between the Company and Sitel Corporation.*
10.27 -- Memorandum of Understanding, dated as of August 4, 1994,
between the Company and TMI USA, Inc.*
10.28 -- Settlement Agreement, dated as of August 4, 1994, between
the Company and TMI USA, Inc.*
10.29 -- Release and Settlement Agreement, dated as of August 1,
1994, between the Company and AT&T Corp.*
10.30 -- Employment Agreement, dated July 1, 1995, between the
Company and Alan L. Levy.*
10.31 -- Termination Agreement, dated August 4, 1995, between the
Company and Telemedia International, Inc.*
10.32 -- Facilities Management and Services Agreement, dated as of
August 4, 1995, between Viatel U.K. Limited and Telemedia
International Ltd.*
10.33 -- Agreement of Lease, dated August 7, 1995, between the
Company and Joseph P. Day Realty Corp.*
12.1 -- Statement re computation of certain ratios.*
16.1 -- Letter re Change in Certifying Accountant.*
21.1 -- Subsidiaries of the Company.*
- ------------------
Incorporated herein by reference to the Company's Registration
Statement on Form S-4 (Registration No. 33-92696).
(b) Financial Statement Schedules.
Schedule II. Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are
not required, are inapplicable or have been disclosed in the notes to
the combined financial statements and therefore have been omitted.
(b) Reports on Form 8-K:
-------------------
There were no reports on Form 8-K filed during the quarter ended
December 31, 1995.
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
----
Independent Auditors' Report of KPMG Peat Marwick LLP F-2
Consolidated Balance Sheets as of December 31, 1995 and 1994 F-3
Consolidated Statements of Operations for the Years ended
December 31, 1995, 1994 and 1993 F-4
Consolidated Statements of Stockholders' (Deficit) Equity
for the Years ended December 31, 1995, 1994 and 1993 F-5
Consolidated Statements of Cash Flows for the Years ended
December 31, 1995, 1994 and 1993 F-6
Notes to Consolidated Financial Statements for the Years
ended December 31, 1995, 1994 and 1993 F-7
Financial statement schedule for each of the Years in the
three-year period ended December 31, 1995
II. Valuation and qualifying accounts F-17
All other schedules have been omitted because the required information
either is not applicable or is shown in the consolidated financial
statements or notes thereto.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Viatel, Inc. and Subsidiaries:
We have audited the consolidated financial statements of Viatel, Inc.
and Subsidiaries as listed in the accompanying index. In connection
with our audits of the consolidated financial statements, we also
audited the financial statement schedule as listed in the accompanying
index. These consolidated financial statements and financial
statement schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated
financial statements and financial statement schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of Viatel, Inc. and Subsidiaries as of December 31,
1995 and 1994, and the results of their operations and their cash
flows for each of the years in the three-year period ended December
31, 1995, in conformity with generally accepted accounting principles.
Also in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements
taken as a whole, presents fairly, in all material respects, the
information set forth therein.
KPMG PEAT MARWICK LLP
New York, New York
March 8, 1996
<PAGE>
<TABLE>
<CAPTION>
VIATEL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
1995 1994
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 8,934,914 $ 66,761,614
Marketable securities, current 25,004,050 -
Trade accounts receivable,
less allowance for doubtful
accounts of $473,000 and
$475,000, respectively 4,723,664 3,844,595
Other receivables 2,757,675 662,885
Prepaid expenses 742,803 263,353
------------ ------------
Total current assets 42,163,106 71,532,447
------------ ------------
Marketable securities, non-current 1,127,442 -
Property and equipment, net 15,715,121 6,933,462
Deferred financing and registration
fees, less accumulated amortization
of $364,000 and $14,000, respectively 3,431,540 3,321,015
Intangible assets, net 2,070,055 1,904,414
Other assets 1,106,182 232,132
------------ ------------
$ 65,613,446 $ 83,923,470
============ ============
Liabilities and Stockholders'
(Deficit) Equity
Current Liabilities:
Accrued telecommunication costs $ 11,056,235 $ 7,754,580
Accounts payable and other
accrued expenses 4,591,628 3,327,355
Commissions payable 300,655 233,558
Notes payable, current portion - 966,755
Current installments of obligations
under capital leases - 700,865
----------- ------------
Total current liabilities 15,948,518 12,983,113
----------- ------------
Long term liabilities:
Senior discount notes, less
discount of $53,416,992 and
$62,349,523, respectively 67,283,008 58,350,477
Accrued telecommunications
costs, less current portion - 999,463
Obligations under capital leases,
excluding current installments - 605,587
----------- ------------
Total long term liabilities 67,283,008 59,955,527
----------- ------------
Commitments and contingencies
Stockholders' (deficit) equity:
Common Stock, $.01 par value.
Authorized 50,000,000 shares,
issued and outstanding
16,104,202 and 16,074,202
shares, respectively 161,042 160,742
Class A Common Stock, $.01 par
value. Authorized 10,000,000
shares, issued and outstanding
4,357,270 shares 43,573 43,573
Additional paid-in capital 30,030,805 29,914,105
Unearned compensation (78,000) -
Cumulative translation adjustment (164,676) 1,523
Accumulated deficit (47,610,824) (19,135,113)
------------ ------------
Total stockholders
(deficit) equity (17,618,080) 10,984,830
------------ ------------
$ 65,613,446 $ 83,923,470
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
VIATEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 1995, 1994 and 1993
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Telecommunications revenue $ 32,313,293 $ 26,267,741 $ 21,392,967
------------ ------------ ------------
Operating expenses:
Costs of
telecommunications
services 27,648,340 22,952,941 18,159,410
Selling expenses 7,467,874 4,458,910 2,389,314
General and administrative
expense 16,859,663 9,858,881 6,068,655
Depreciation and
amortization 2,636,787 789,359 110,892
Equipment impairment loss 560,419 - -
------------ ----------- -----------
Total operating expenses 55,173,083 38,060,091 26,728,271
Other income (expenses):
Interest income 3,281,926 213,611 21,432
Interest expense (8,856,317) (771,782) -
Share in loss of affiliate (41,530) (144,867) (141,903)
------------ ------------ -----------
Net loss $(28,475,711) $(12,495,388) $(5,455,775)
============ ============ ===========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
<TABLE>
VIATEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
Years Ended December 31, 1995, 1994 and 1993
Number of Class A
Common Common Class A
Stock Stock Common Common
Shares Shares Stock Stock
---------- --------- -------- -------
<S> <C> <C> <C>
Balance at January 1, 1993 9,628,000 - $ 96,280 $ -
Issuance of common stock and
warrants, net of $381,804
issue costs 2,547,406 - 25,474 -
Issuance of common stock 629,160 - 6,292 -
Issuance of common stock,
in lieu of payment of
services 38,667 - 386 -
Issuance of restricted
common stock 20,161 - 202 -
Net loss - - - -
---------- --------- -------- -------
Balance at December 31, 1993 12,863,394 - 128,634 -
Issuance of common stock
and warrants, net of
$412,338 issue costs 3,210,808 - 32,108 -
Issuance of Class A
common stock, net of
$977,132 issue costs - 4,357,270 - 43,573
Recognition of unearned
compensation - - - -
Foreign currency
translation adjustment - - - -
Net loss - - - -
---------- --------- -------- -------
Balance at December 31, 1994 16,074,202 4,357,270 160,742 43,573
Issuance of restricted
common stock 30,000 - 300 -
Foreign currency
translation adjustment - - - -
Net loss - - - -
---------- --------- -------- -------
Balance at December 31, 1995 16,104,202 4,357,270 $161,042 $43,573
========== ========= ======== =======
Additional Cumulative
Paid-in Unearned Translation
Capital Compensation Adjustment
------------- ------------ -----------
Balance at January 1, 1993 $ (51,383) $ - $ -
Issuance of common stock and
warrants, net of $381,804
issue costs 4,593,722 - -
Issuance of common stock 1,754,305 - -
Issuance of common stock,
in lieu of payment of
services 34,461 - -
Issuance of restricted
common stock 49,798 (36,100) -
Net loss - - -
------------ -------- --------
Balance at December 31, 1993 6,384,903 (36,100) -
Issuance of common stock
and warrants, net of
$412,338 issue costs 7,556,554 - -
Issuance of Class A
common stock, net of
$977,132 issue costs 15,972,648 - -
Recognition of unearned
compensation - 36,100 -
Foreign currency
translation adjustment - - 1,523
Net loss - - -
------------ -------- --------
Balance at December 31, 1994 29,914,105 - 1,523
Issuance of restricted
common stock 116,700 (78,000) -
Foreign currency
translation adjustment - - (166,199)
Net loss - - -
------------ -------- ---------
Balance at December 31, 1995 $ 30,030,805 $(78,000) $(164,676)
============ ========= ==========
Accumulated
Deficit Total
------------ ------------
Balance at January 1, 1993 $ (1,183,950) $ (1,139,053)
Issuance of common stock and
warrants, net of $381,804
issue costs - 4,619,196
Issuance of common stock - 1,760,597
Issuance of common stock,
in lieu of payment of
services - 38,847
Issuance of restricted
common stock - 13,900
Net loss (5,455,755) (5,455,755)
------------ ------------
Balance at December 31, 1993 (6,639,725) (162,288)
Issuance of common stock
and warrants, net of
$412,338 issue costs - 7,588,662
Issuance of Class A
common stock, net of
$977,132 issue costs - 16,016,221
Recognition of unearned
compensation - 36,100
Foreign currency
translation adjustment - 1,523
Net loss (12,495,388) (12,495,388)
------------ ------------
Balance at December 31, 1994 (19,135,113) 10,984,830
Issuance of restricted
common stock - 39,000
Foreign currency
translation adjustment - (166,199)
Net loss (28,475,711) (28,475,711)
------------ ------------
Balance at December 31, 1995 $(47,610,824) $(17,618,080)
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
VIATEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net Loss $(28,475,711) $(12,495,388)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Deferred financing and
registration costs (460,032) (3,335,015)
Equipment impairment loss 560,419 -
Depreciation and amortization 2,636,787 789,359
Interest expense on senior
discount notes 8,773,438 364,506
Accrued interest income on
marketable securities (714,468) -
Provision for losses on accounts
receivable 1,229,473 900,094
Share in loss of affiliate 41,530 144,867
Unearned compensation 39,000 36,100
Changes in assets and liabilities:
Increase in accounts receivable (2,127,611) (1,052,611)
Increase in prepaid expenses and
other receivables (2,593,863) (540,125)
Increase in other assets and
intangible assets (991,345) (9,273)
Increase in accrued tele-
communications costs, accounts
payable, accrued expenses and
commissions payable 3,592,930 3,626,126
------------ ------------
Net cash used in operating
activities (18,489,453) (11,571,360)
------------ ------------
Cash flows from investing activities:
Purchase of property, equipment
and software (11,377,850) (3,671,811)
Purchase of sales organizations - (1,171,320)
Purchase of Sitel assets - -
Purchase of marketable securities (55,495,423) -
Proceeds from maturity of marketable
securities 30,078,399 -
Investment in affiliate (262,214) (152,439)
------------ ------------
Net cash used in investing
activities (37,057,088) (4,995,570)
------------ ------------
Cash flows from financing activities:
Payments under capital leases (1,306,453) (620,979)
Repayment of notes payable (999,463) (3,000,000)
Proceeds from issuance of senior
discount notes - 57,999,971
Proceeds from issuance of Class A
Common Stock - 16,016,221
Proceeds from issuance of Common
Stock and warrants - 7,588,662
Borrowings on notes payable - 3,000,000
------------ ------------
Net cash (used in) provided
by financing activities (2,305,916) 80,983,875
------------ ------------
Effects of exchange rate changes on cash 25,757 17,212
------------ ------------
Net (decrease) increase in cash and
cash equivalents (57,826,700) 64,434,157
Cash and cash equivalents at
beginning of year 66,761,614 2,327,457
------------ ------------
Cash and cash equivalents at end of year $ 8,934,914 $ 66,761,614
============ ============
Supplemental disclosures of cash
flow information:
Interest Paid $ 58,040 $ 425,608
============ ============
Equipment acquired under capital
lease obligations $ - $ 595,000
============ ============
Common Stock issued in lieu of
payment for services $ - $ -
============ ============
1993
-------------
Cash flows from operating activities:
Net Loss $ (5,455,775)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Deferred financing and
registration costs -
Equipment impairment loss -
Depreciation and amortization 110,892
Interest expense on senior
discount notes -
Accrued interest income on
marketable securities -
Provision for losses on accounts
receivable 703,000
Share in loss of affiliate 141,903
Unearned compensation 13,900
Changes in assets and liabilities:
Increase in accounts receivable (2,728,373)
Increase in prepaid expenses and
other receivables (223,354)
Increase in other assets and
intangible assets (76,937)
Increase in accrued tele-
communications costs, accounts
payable, accrued expenses and
commissions payable 6,072,247
------------
Net cash used in operating
activities (1,442,497)
------------
Cash flows from investing activities:
Purchase of property, equipment
and software (1,090,102)
Purchase of sales organizations -
Purchase of Sitel assets (1,553,350)
Purchase of marketable securities -
Proceeds from maturity of marketable
securities -
Investment in affiliate (305,257)
------------
Net cash used in investing
activities (2,948,709)
------------
Cash flows from financing activities:
Payments under capital leases (51,258)
Repayment of notes payable -
Proceeds from issuance of senior
discount notes -
Proceeds from issuance of Class A
Common Stock -
Proceeds from issuance of Common
Stock and warrants 6,379,793
Borrowings on notes payable -
------------
Net cash (used in) provided
by financing activities 6,328,535
------------
Effects of exchange rate changes on cash -
------------
Net (decrease) increase in cash and
cash equivalents 1,937,329
Cash and cash equivalents at
beginning of year 390,128 ------------
Cash and cash equivalents at end of year $ 2,327,457
============
Supplemental disclosures of cash
flow information:
Interest Paid $ -
============
Equipment acquired under capital
lease obligations $ 1,479,411
============
Common Stock issued in lieu of
payment for services $ 38,847
============
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
VIATEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(1) Summary of Significant Account Policies
(a) Description of Business
Viatel, Inc. (the ''Company'') provides value added telecommunications
services primarily to businesses operating internationally. In order
to effectuate a reincorporation in the State of Delaware, VIA USA,
Ltd. (a predecessor Colorado corporation) merged with and into its
wholly owned subsidiary, Viatel, Inc., on October 11, 1994. The
surviving entity, Viatel, Inc., has reflected all assets and
liabilities at historical cost.
(b) Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All significant inter-
company balances and transactions have been eliminated in
consolidation. Investments in affiliates in which the Company has
significant influence but does not exercise control are accounted for
under the equity method.
(c) Cash and Cash Equivalents
The Company's policy is to maintain its uninvested cash at minimum
levels. Cash equivalents, which include highly liquid debt
instruments purchased with a maturity of three months or less, were
$3,116,218 and $63,111,992 at December 31, 1995 and 1994,
respectively.
(d) Revenue
The Company records telecommunications revenue as earned, at the time
services are provided.
(e) Cost of Telecommunication Services and Selling Expenses
Cost of telecommunications service are recognized as incurred and
consist of charges for switched long distance services and costs of
leased lines. Selling expenses included commissions to sales
representatives in the countries in which the Company does not operate
its own sales organizations. Commission expense is recorded net of
chargebacks for amounts deemed uncollectible in the period the related
services are provided.
(f) Property and Equipment
Property and equipment consist principally of telecommunications
related equipment such as switches, remote nodes and related computer
software and is stated at cost. Equipment acquired under capital
leases is stated at the present value of the future minimum lease
payments.
<PAGE>
VIATEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
December 31, 1995, 1994 and 1993
(1) Summary of Significant Accounting Policies - (Continued)
Depreciation is provided using the straight-line method over the
estimated useful lives of the related assets. Leasehold improvements
are amortized over the life of the lease or useful life of the
improvement, whichever is shorter. The estimated useful lives are as
follows:
Communications system 5 to 7 years
Leasehold improvements 2 to 5 years
Furniture, equipment and other 5 years
Maintenance and repairs are expensed as incurred.
(g) Intangible Assets
Goodwill, which represents the excess of purchase price over fair
value of net assets acquired, is amortized on a straight-line basis
over the expected periods to be benefited, seven years.
Acquired employee base and sales force in place represents the
intangible assets associated with the acquisition of independent sales
organizations and is being amortized over three years.
Deferred financing fees represent debt financing costs which are being
amortized over the term of the related debt.
The costs of all other intangible assets are being amortized over
their useful lives, ranging from one to five years.
The Company's intangible assets are assessed for recoverability at
least quarterly. The Company assesses the recoverability of its
intangible assets by determining whether the amortization of the
goodwill balance over its remaining life can be recovered through
projections of undiscounted future operating cash flows of the related
intangible assets. The amount of intangible asset impairment, if any,
is measured based on projected discounted future operating cash flows
using a discount rate reflecting the Company's average cost of funds.
The assessment of the recoverability of intangible assets will be
impacted if estimated future operating cash flows are not achieved.
(h) Income Taxes
Effective January 1, 1993, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes." Under the asset and liability method of Statement 109,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or
settled. Under Statement 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income or
expense in the period that includes the enactment date. Adoption of
Statement 109 did not have a material impact on the financial
statements of the Company.
<PAGE>
VIATEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
December 31, 1995, 1994 and 1993
(1) Summary of Significant Accounting Policies - (Continued)
(i) Foreign Currency Translation
Foreign currency assets and liabilities are translated using the
exchange rates in effect at the balance sheet date. Results of
operations are translated using the average exchange rates prevailing
throughout the year. The effects of exchange rate fluctuations on
translating foreign currency assets and liabilities into U.S. dollars
are accumulated as part of the foreign currency translation adjustment
in stockholders' equity. Gains and losses from foreign currency
transactions are included in general and administrative expense in the
period in which they occur. For the years ending December 31, 1995,
1994 and 1993, the Company experienced $107,846 and $15,324 in foreign
exchange transaction gains and $62,558 in foreign exchange transaction
losses, respectively.
(j) Concentration of Credit Risk
Financial instruments that potentially subject the Company to
concentration of credit risk consist primarily of temporary cash
investments and trade receivables. The Company restricts investment
of temporary cash investments to financial institutions with high
credit standing. Credit risk on trade receivables is minimized as a
result of the large and diverse nature of the Company's worldwide
customer base.
(k) Reclassifications
Certain reclassifications have been made to the prior year's financial
statements to conform to the current year's presentation.
(l) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could differ
from those estimates.
(m) Additional Accounting Policies
Additional accounting policies are incorporated into the notes herein.
<PAGE>
VIATEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
December 31, 1995, 1994 and 1993
(2) Acquisitions
During December 1994, the Company acquired all of the issued and
outstanding stock of two of its independent sales organizations.
These acquisitions have been accounted for under the purchase method
of accounting and, accordingly, the aggregate purchase price of
$1,171,320 has been allocated to the assets acquired and liabilities
assumed, based upon their estimated fair values as of the acquisition
date. Additionally, the results of operations of these organizations
are included in the consolidated statements of operations from dates
of acquisition. Included among the assets acquired are intangible
assets which principally relate to the acquired employee base and
sales force in place which will be amortized over three years, which
corresponds to the estimated remaining service lives of the employee
base and sales force. The allocation of the aggregate purchase price
is summarized as follows:
Current assets $ 161,486
Current liabilities (232,865)
Property and equipment 102,922
Intangible and other assets acquired 1,139,777
----------
Total purchase price $1,171,320
==========
Due to the nature of the organizations acquired, pro forma revenue
would equal reported revenue and the pro forma net loss would be
$194,007 and $48,387 higher than the reported net loss for the years
ended December 31, 1994 and 1993, respectively, assuming the
acquisitions occurred on January 1, 1993.
(3) Investments in Debt Securities
Management determines the appropriate classification of its
investments in debt securities at the time of purchase and reevaluates
such determination at each balance sheet date. These investments are
diversified among high credit quality securities in accordance with
the Company's investment policy. Debt securities that the Company has
both the intent and ability to hold to maturity are carried at
amortized cost. Debt securities for which the Company does not have
the intent or ability to hold to maturity are classified as available
for sale. Securities available for sale are carried at fair value,
with the unrealized gains and losses, net of tax, reported in a
separate component of stockholders' equity. At December 31, 1995, the
Company had no investments that qualified as trading.
The amortized cost of debt securities classified as held to maturity
and available for sale are adjusted for amortization of premiums and
accretion of discounts to maturity over the estimated life of the
security. Such amortization and interest are included in interest
income.
<PAGE>
VIATEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
December 31, 1995, 1994 and 1993
(3) Investments in Debt Securities - (Continued)
The following is a summary of the fair value of securities held to
maturity and securities available for sale at December 31, 1995:
<TABLE>
<CAPTION>
Securities Securities
Held to Available
Maturity for Sale Total
---------- ----------- -----------
<S> <C> <C> <C>
Money market instruments $1,402,562 $ - $ 1,402,562
Federal agencies obligations - 5,786,796 5,786,796
Corporate debt securities - 18,942,134 8,942,134
---------- ----------- -----------
Total $1,402,562 $24,728,930 $26,131,492
========== =========== ===========
</TABLE>
The fair value of each investment approximates the amortized cost,
and, therefore, there are no unrealized gains or losses as of December
31, 1995.
The fair value of debt securities held to maturity and securities
available for sale at December 31, 1995 by contractual maturity are
shown below:
<TABLE>
<CAPTION>
Securities Securities
Held to Available
Maturity for Sale Total
----------- ----------- ---------
<S> <C> <C> <C>
Due within one year $1,402,562 $23,601,488 $25,004,050
Due after one year through
two years - 1,127,442 1,127,442
---------- ----------- -----------
Total $1,402,562 $24,728,930 $26,131,492
========== =========== ===========
</TABLE>
Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties.
There were no changes in the classification of any securities held to
maturity or securities available for sale from the time of purchase to
the time of maturity or sale.
<PAGE>
VIATEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
December 31, 1995, 1994 and 1993
(4) Property and Equipment
Property and equipment consists of the following as of December 31:
<TABLE>
<CAPTION>
1995 1994
----------- ----------
<S> <C> <C>
Communications system $13,997,966 $5,495,396
Leasehold improvements 1,062,742 107,331
Furniture, equipment and other 2,755,600 960,678
Construction in progress 679,935 1,142,835
----------- ----------
18,496,243 7,706,240
Less accumulated depreciation
and amortization 2,781,122 772,778
----------- ----------
$15,715,121 $6,933,462
=========== ==========
</TABLE>
At December 31, 1995 and 1994, construction in progress represents a
portion of the current expansion of the European Network. As of
December 31, 1995, $508,600 of interest has been capitalized with
respect to this project.
(5) Intangible Assets
Intangible assets consist of the following as of December 31:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Acquired employee base &
sales force in place $1,607,225 $1,091,451
Goodwill 474,065 474,065
Purchased software 661,999 418,756
Other 133,834 67,668
---------- ----------
2,877,123 2,051,940
Less accumulated amortization 807,068 147,526
---------- ----------
$2,070,055 $1,904,414
========== ==========
</TABLE>
(6) Long Term Liabilities
(a) Senior Discount Notes
On December 21, 1994, the Company issued $120,700,000, representing
the aggregate principal amount, of 15% senior unsecured discount notes
due January 15, 2005 for approximately $58,000,000. The notes will
fully accrete on a semiannual compounding basis to face value on
January 15, 2000 with semiannual interest payments commencing July 15,
2000 until maturity.
<PAGE>
VIATEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
December 31, 1995, 1994 and 1993
(6) Long Term Liabilities - (Continued)
(a) Senior Discount Notes - (Continued)
The notes are redeemable at the Company's option, in whole or in part,
at any time on or after January 15, 2000 until maturity at redemption
prices that range from 110% to 100% of the notes' face value plus
accrued interest. In addition, at any time prior to January 15, 1998,
the Company may redeem up to $42,245,000 of the face value of the
notes with the proceeds of one or more public equity offerings at 115%
of the then accreted value of the notes, plus accrued interest, if
any, to the redemption date. Upon a change of control, the Company is
required to make an offer to purchase the notes at a purchase price
equal to 101% of their accreted value, plus accrued interest, if
any. The notes contain certain covenants that, among other things,
limit the ability of the Company and certain of its subsidiaries to
incur indebtedness, make pre-payments of certain indebtedness and pay
dividends.
On December 31, 1995, the Company estimated the fair value of these
notes to be $67,300,000 which approximates its accreted value. The
estimate is based on quoted market prices for the notes.
(b) Note Payable - MCI
On January 28, 1994, the Company converted $2,666,755 of its
outstanding balance to MCI Telecommunications Corporation as of
December 31, 1993 to a 7% note secured by the Company's accounts
receivable. At December 31, 1994, $966,755 was outstanding under this
note and was included in notes payable, current. At December 31,
1995, the note was no longer outstanding.
(7) Stockholders' Equity
During 1993, the Company increased the number of its authorized shares
of voting, no par value Common Stock from 100 to 20,000,000. In
addition, the Board of Directors authorized a recapitalization of the
amount of its issued and outstanding Common Stock by means of a 96,666
2/3 to 1 stock split. On March 21, 1994, the Company increased the
number of its authorized shares of no par value Common Stock from
20,000,000 to 50,000,000. On October 11, 1994, the Company changed
its voting Common Stock from no par value to $.01 par value per share.
All Common Stock and additional paid-in capital amounts have been
restated to reflect these changes.
In lieu of cash payments for call switching, initial screening,
account establishment and billing services, the Sitel Corporation
received 2% of the issued and outstanding Common Stock of the Company
based on a market valuation of $10,000,000. Of these shares, 80% were
issued and outstanding at December 31, 1992 and the remaining 20% was
issued during February 1993.
On October 1, 1993 the Company issued 2,547,406 shares of its Common
Stock for $5,000,000 and warrants to purchase additional shares of
Common Stock. As of December 31, 1995, the warrants have expired and
are no longer exercisable. Additionally, certain rights of the
Company to repurchase a portion of the shares have expired. Certain
of such shares are subject to certain registration rights in the event
of public offerings by the Company.
<PAGE>
VIATEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
December 31, 1995, 1994 and 1993
(7) Stockholders' Equity - (Continued)
On April 5, 1994, the Company issued 3,210,808 shares of its Common
Stock for $8,000,000 and warrants to purchase additional shares of
Common Stock. As of December 31, 1995, the warrants have expired and
are no longer exercisable. Additionally, certain rights of the
Company to repurchase a portion of the shares have expired. Certain of
such shares are subject to certain registration rights in the event of
public offerings by the Company.
On December 16, 1994, the Company authorized the creation of
10,000,000 shares of non-voting, $.01 par value, Class A Common Stock.
On December 21, 1994, 4,357,270 shares of Class A Common Stock were
issued for net proceeds of $16,016,221. Each share of Class A Common
Stock will automatically convert after October 15, 1995 into one share
of Common Stock upon the earlier of an initial public offering of the
Common Stock or the third anniversary of its initial sale by the
Company. Except for voting and the above described anti-dilution
rights, the rights of holders are substantially identical to those of
Common Stockholders.
(8) Income Taxes
The statutory Federal tax rates for the years ended December 31, 1995,
1994 and 1993 were 35%. The effective tax rates were zero for the
years ended December 31, 1995, 1994 and 1993 due to the Company
incurring net operating losses for which no tax benefit was recorded.
For Federal income tax purposes, the Company has unused net operating
loss carryforwards of approximately $37,804,000 expiring in 2007
through 2010. The availability of the net operating loss
carryforwards to offset income in future years may be restricted if
the Company undergoes an ownership change, which may occur as a result
of future sales of Company stock and other events.
The tax effect of temporary differences that give rise to significant
portions of the deferred tax assets are as follows:
<TABLE>
<CAPTION>
December 31,
-------------------------
1995 1994
----------- ------------
<S> <C> <C>
Accounts receivable principally due to
allowance for doubtful accounts $ 166,000 $ 356,000
OID Interest not deductible in
current period 2,933,000 -
Net operating loss carryforwards 13,231,000 6,271,000
----------- -----------
Total gross deferred tax assets 16,330,000 6,627,000
Less valuation allowance (16,330,000) (6,627,000)
----------- -----------
Net deferred tax assets $ - $ -
=========== ===========
</TABLE>
<PAGE>
VIATEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
December 31, 1995, 1994 and 1993
(8) Income Taxes - (Continued)
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all
of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary
differences become deductible. Management considers the scheduled
reversal of deferred tax liabilities, projected future taxable income,
and tax planning in making these assessments. During 1995, 1994 and
1993, the valuation allowance increased by $9,703,000, $4,267,000 and
$1,978,000, respectively.
(9) Segment Data
The information below summarizes export sales by geographic area.
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Latin America $12,093,771 $12,914,289 $12,492,542
Europe - 7,720,166 5,589,202
Africa 1,207,225 1,832,547 1,761,965
Asia / Pacific Rim 4,375,412 2,061,246 652,532
Middle East 554,139 1,449,093 559,387
Other 369,425 290,400 337,339
----------- ----------- -----------
$18,599,972 $26,267,741 $21,392,967
=========== =========== ===========
</TABLE>
In late 1994, the European Network became operational and the
Company began to establish direct sales organizations within Europe.
For the year ended December 31, 1995, revenue, operating loss, capital
expenditures and depreciation expense from this geographic segment
were approximately $11,601,000, $11,076,000, $9,959,000 and $243,000,
respectively. Identifiable assets as of December 31, 1995 for this
geographic segment were approximately $10,216,000. For December 31,
1994 and for the year then ended, revenue, results from operations,
capital expenditures, depreciation expense and identifiable assets for
this geographic segment were not significant.
(10) Stock Incentive Plan
During 1993, the Board of Directors approved the 1993 Flexible Stock
Incentive Plan (the "Stock Incentive Plan") under which "non-
qualified" stock options ("NQSOs") to acquire shares of Common Stock
may be granted to employees, directors and consultants of the Company
and "incentive" stock options ("ISOs") to acquire shares of Common
Stock may be granted to employees, including non-employee directors.
The Stock Incentive Plan also provides for the grant of stock
appreciation rights ("SARs") and shares of restricted stock to the
Company's employees, directors and consultants.
<PAGE>
VIATEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
December 31, 1995, 1994 and 1993
(10) Stock Incentive Plan - (Continued)
The Stock Incentive Plan provides for the issuance of up to a maximum
of 1,750,000 shares of Common Stock and is currently administered by
the Board of Directors. Under the Stock Incentive Plan, the option
price of any ISO may not be less than the fair market value of a share
of Common Stock on the date on which the option is granted. The
option price of an NQSO may be less than the fair market value on the
date the NQSO is granted if the Board of Directors so determines. An
ISO may not be granted to a "ten percent stockholder" (as such term is
defined in Section 422A of the Internal Revenue Code) unless the
exercise price is at least 110% of the fair market value of the Common
Stock and the term of the option may not exceed five years from the
date of grant. Common Stock subject to a restricted stock purchase or
bonus agreement is transferable only as provided in such agreement.
The maximum term of each stock option granted to persons other than
ten percent stockholders is ten years from the date of grant.
As of December 31, 1995, 1994 and 1993, options to purchase 745,123,
596,514 and 121,014 shares of Common Stock were outstanding
respectively, at exercise prices ranging from $0.50 to $3.90 per
share. As of December 31, 1995, no SARs have been granted.
Stock option activity under the Stock Plan is shown below:
<TABLE>
<CAPTION>
Option Price
-------------------------
Number Per Share Total
of Shares Average Price
--------- --------- -----------
<S> <C> <C> <C>
Shares under option
at January 1, 1993
Granted 121,014 $0.50 $ 60,507
-------- ----- ----------
Shares under option
at December 31, 1993 121,014 $0.50 $ 60,507
Granted 475,500 $2.49 $1,183,995
-------- ----- ----------
Shares under option
at December 31, 1994 596,514 $2.09 $1,244,502
Granted 291,500 $3.90 $1,136,850
Forfeitures (142,891) $2.65 $ (378,809)
-------- ----- ----------
Shares under option
at December 31, 1995 745,123 $2.69 $2,002,543
======== ===== ==========
</TABLE>
As of December 31, 1995, 1994 and 1993, options exercisable under the
Stock Incentive Plan were 461,553, 377,482 and 60,507, respectively.
Prior to the adoption of the Stock Incentive Plan, 8,871 options were
granted. As of December 31, 1995, 1994 and 1993, these options were
outstanding and fully vested, subject to early termination under
certain conditions and are exercisable at $.50 per share through
December 31, 2002.
The exercise price of all options was equal to the fair market value
of the Common Stock at the date of grant.
<PAGE>
VIATEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
December 31, 1995, 1994 and 1993
(10) Stock Incentive Plan - (Continued)
In addition, prior to the adoption of the Stock Incentive Plan, the
Board of Directors authorized the issuance of up to 350,000 shares of
Common Stock as compensation to employees and consultants of the
Company. Pursuant to this authorization, the Company issued 20,542
shares in 1993 in partial payment of a finders fee in connection with
a purchase of Common Stock by a principal stockholder of the Company.
(11) Equipment Impairment Loss
On August 4, 1995, the Company entered into an agreement (the
"Termination Agreement")with TMI USA (Delaware), Inc. (''TMI'') which
terminated its existing agreements. Pursuant to the terms of the
Termination Agreement, the Company prepaid the existing capital lease
obligation of $1,025,000, thereby acquiring all of the equipment previously
leased from TMI. The capital lease obligation was payable over a three year
term expiring on December 31, 1996. In addition, on August 4, 1995, the
Company entered into a short-term facilities management agreement with TMI
effective through August 31, 1996, pursuant to which TMI will perform
maintenance, equipment housing, site preparation, network extension and
other similar services for the European Network under its present
configuration. Thereafter, the Company will manage the European Network
using its own personnel rather than a third party provider.
As a result of the Termination Agreement, the Company has written off
the costs relating to the original installation of such equipment.
With respect to the equipment which will not be redeployed, the
Company expects to recover a portion of the carrying value of such
equipment. Accordingly, the Company has recognized non-cash charges
of approximately $560,000 which represent the original installation
costs of such equipment and the difference between the carrying value
and the expected selling price of the equipment not expected to be
redeployed.
(12) Commitments and Contingencies
(a) Leases
At December 31, 1995, the Company was committed under non-cancelable
operating leases for the rental of office space and data processing
equipment.
The Company's future minimum operating lease payments are as follows:
1996 $ 1,062,388
1997 962,466
1998 909,238
1999 768,818
2000 688,376
Thereafter 742,195
---------------
$ 5,133,481
===============
<PAGE>
VIATEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
December 31, 1995, 1994 and 1993
(12) Commitments and Contingencies - (Continued)
(a) Leases - (Continued)
Total rent expense amounted to $948,826, $935,267 and $420,713 for the
years ended December 31, 1995, 1994 and 1993, respectively.
On August 4, 1995, the Company entered into a termination agreement
with a vendor, pursuant to which the Company prepaid the 8% existing
capital lease obligation of approximately $1,025,000, thereby
acquiring all of the equipment previously leased.
(b) Carrier Contracts
The Company has entered into contracts to purchase transmission
capacity from various domestic and foreign carriers. By committing to
purchase minimum volumes of transmission capacity from carriers, the
Company is able to obtain guaranteed rates which are more favorable
than those offered in the marketplace. The minimum purchase
commitments are $8,300,000 for the year ending December 31, 1996.
(c) Purchase Commitments
The Company is continually upgrading and expanding the European
Network and the Omaha, Nebraska switching facility. In connection
therewith, the Company has entered into purchase commitments to expend
approximately $1,200,000. The Company has also entered into purchase
commitments of approximately $400,000 in connection with financial and
administrative software upgrades.
(d) Employment Contracts
The Company has employment contracts with certain officers at amounts
generally equal to such officers' current levels of compensation. The
Company's remaining commitments at December 31, 1995 for the next
three years under such contracts aggregates approximately $916,000.
(e) Litigation
As a result of the Company's transition to direct sales organizations
in Europe, two of its former independent sales representatives, in
France and in Spain, have asserted breach of contract and certain
other claims. Arbitration proceedings in respect to these claims are
currently under way or pending. The aggregate amount of damages
sought by the representatives is $8.8 million. The Company believes
that it has meritorious defenses against the claims alleged by the
representatives and intends to vigorously pursue all such defenses but
the outcomes can not be predicted. The Company believes that any
possible awards in these suits would not be in excess of $1 million in
the aggregate.
(13) Regulatory Matters
The Company is subject to regulation in countries in which it does
business. The Company believes that an adverse determination as to
the permissibility of the Company's services under the laws and
regulations of any such country would not have a material adverse
long-term effect on its business.
<PAGE>
VIATEL, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Additions
Balance at charged to
beginning costs and Deductions/
Description of period expenses Write-Offs
- -------------------------------- ---------- ---------- -----------
<S> <C> <C> <C>
Reserves and allowances deducted
from asset accounts:
Allowances for uncollectible
accounts receivable
Year ended December 31, 1993 $ 77,000 $ 703,000 $ 444,000
Year ended December 31, 1994 $336,000 $ 900,000 $ 761,000
Year ended December 31, 1995 $475,000 $1,229,000 $1,231,000
Allowance for asset impairment
Year ended December 31, 1995 - $ 560,000 -
Balance at
Other at end
Description changes of period
- -------------------------------- ---------- ----------
Reserves and allowances deducted
from asset accounts:
Allowances for uncollectible
accounts receivable
Year ended December 31, 1993 - $336,000
Year ended December 31, 1994 - $475,000
Year ended December 31, 1995 - $473,000
Allowance for asset impairment
Year ended December 31, 1995 - $560,000
</TABLE>
<PAGE>
SIGNATURES
-----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Form 10-K/A-
1 to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: October 14, 1996 VIATEL, INC.
By: /s/ Martin Varavsky
----------------------------
Martin Varsavsky
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Form 10-K/A-1 has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated:
SIGNATURES TITLE DATE
- ---------- ----- ----
/s/ Martin Varsavsky Chairman of the Board October 14, 1996
- ---------------------- and Chief Executive
Martin Varsavsky Officer; Director
(Principal Executive
Officer)
/s/ Michael J. Mahoney President, Chief October 14, 1996
- ---------------------- Operating Officer;
Michael J. Mahoney Director
/s/ Allan L. Shaw Vice President, October 14, 1996
- ---------------------- Finance; Chief
Allan L. Shaw Financial Officer
(Principal Financial
and Accounting Officer);
Treasurer; Director
- ---------------------- Director October 14, 1996
Antonio Carro
/s/ Paul G. Pizzani Director October 14, 1996
- ----------------------
Paul G. Pizzani
/s/ W. James Peet Director October 14, 1996
- ----------------------
W. James Peet
<PAGE>
Supplemental Information to be Furnished With Reports
Filed Pursuant to Section 15(d) of the Act by Registrants Which
Have Not Registered Securities Pursuant to Section 12 of the Act
The registrant did not furnish its security holders with either
an annual report covering the registrant's last fiscal year or a proxy
statement, form of proxy or other proxy soliciting material with
respect to any annual or other meeting of security holders.
