Exhibit 99.1
[LOGO OF PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED]
FOR IMMEDIATE RELEASE
CONTACT:
Jordan Darrow
PRIMUS Telecommunications
(212) 703-0116
jdarrow@primustel.com
PRIMUS TELECOMMUNICATIONS REPORTS FIRST QUARTER FINANCIAL RESULTS
McLean, Virginia -- May 3, 2001 -- PRIMUS Telecommunications Group,
Incorporated (Nasdaq: PRTL), a global facilities-based Total Service Provider
offering an integrated portfolio of data, Internet, e-commerce, hosted
applications and voice services, today announced results for the first quarter
of 2001.
"AFTER NEARLY FOUR YEARS OF CONSECUTIVE RECORD QUARTERLY RESULTS, OUR
FIRST QUARTER RESULTS DEMONSTRATE HOW CHALLENGING THE CURRENT MARKETPLACE FOR
COMMUNICATIONS SERVICES HAS BECOME," SAID K. PAUL SINGH, CHAIRMAN AND CHIEF
EXECUTIVE OFFICER OF PRIMUS. "WHILE PRIMUS SHOWED INCREASES IN MINUTES,
CUSTOMERS, AND DATA/INTERNET TRAFFIC, OUR REVENUES AND MARGINS CONTINUE TO BE
ADVERSELY IMPACTED DUE TO SIGNIFICANT PRICING PRESSURE FOR INTERNATIONAL AND
DOMESTIC SERVICES. THIS HAS BEEN EXACERBATED BY GLOBAL ECONOMIC WEAKNESS
RESULTING IN LESS SPENDING ON TELECOM RELATED PROJECTS, THE LENGTHENING OF
BUSINESS SALES CYCLES PARTICULARLY FOR HIGH-END DATA/HOSTING SERVICES, AND THE
SHUT-DOWN OF THE CAPITAL MARKETS WHICH HAS DESTABILIZED MANY CARRIERS AND
CUSTOMERS.
"To navigate effectively through these troubled waters, we believe we
have refined PRIMUS's operations to enhance cash flow generation and to bolster
the profitability of our core businesses. To this end, we have limited our
exposure to sub-scale businesses, reduced our general and administrative
expenditures, and lowered our capital expenditures while continuing to grow our
data businesses.
"Our first quarter performance included higher minutes of use for voice
services and an increase in data/Internet customers and usage as compared to the
fourth quarter of 2000. Excluding the results from a web design/consulting
business whose operations have been discontinued, our data/Internet/VoIP
revenues grew 89% over the corresponding quarter last year, and 9% over the
prior quarter. With our network and sales channels largely in place, our
emphasis going forward will be on filling the network with higher margin traffic
from customers using more services. We have also increased our focus on the
productivity of our sales force and sales channels. Given the initiatives we
have already implemented and those planned in the current quarter, I believe
PRIMUS is well positioned with relatively strong funding to work through the
current down cycle and prosper as favorable conditions ultimately return to the
market."
FIRST QUARTER FINANCIAL RESULTS
PRIMUS's net revenue in the first quarter of 2001 was $289 million,
before one-time charges described below, compared to $288 million in the first
quarter of 2000. Net revenue, before one-time charges, was derived
geographically as follows: 46% from North America; 29% from Europe; and 25% from
Asia Pacific. Net revenue by customer type was 73% retail (31% business and 42%
residential) and 27% carrier. Data/Internet and VoIP revenues accounted for 14%
of total revenues in the first quarter of 2001, and voice was 86% of total
revenues. Foreign exchange rate fluctuations did not impact first quarter
revenues materially in comparison to the fourth quarter of 2000, but did reduce
first quarter revenues by approximately $21 million dollars in comparison to
exchange rates in effect for the same period of 2000.
Gross margin (which is computed after accounting for bad debt) for the
first quarter of 2001, before one-time charges, was $80 million, which was 27.9%
of revenue, as compared to $81 million in the first quarter of 2000, and 28.0%
of revenue. Selling, general and administrative (SG&A) expenses in the first
quarter of 2001 were $84 million, before one-time charges, or 29.0% of net
revenue, compared with $79 million, or 27.5% of net revenue in the first quarter
of 2000. Earnings before interest, taxes, depreciation and amortization (EBITDA)
for the first quarter of 2001 was a loss of $(3.3) million, before one-time
charges, compared to positive $1.3 million in the first quarter of 2000.
During the first quarter of 2001, PRIMUS took one-time charges totaling
$27 million, which included the following: (1) approximately $9 million
additional sales allowance (which is deducted from gross revenues to arrive at
actual net revenues) to write-off bad debts from "dot-com" customers associated
with an acquired web design/consulting business whose operations were
discontinued during the first quarter, and from business and carrier customers
who have become financially distressed and unlikely to pay their bills; (2)
severance pay and employee termination costs included in SG&A of approximately
$1 million in connection with an 11% workforce reduction of total full-time
employees begun during the first quarter; (3) the write-off of goodwill and
software costs of $2 million associated with several of PRIMUS's acquisitions
and interests in other companies; and (4) the write-off of PRIMUS's investment
in Pilot Network Services for $15 million which has become permanently impaired.
An additional $1 million of termination and severance costs is expected to be
expensed in the second quarter related to the workforce reduction. After giving
effect to these one-time charges, PRIMUS's actual net revenues for the first
quarter of 2001 were $280 million, gross margin was $72 million, or 25.6% of net
revenue, SG&A was $85 million, and EBITDA was negative $(13.2) million.
During January 2001, PRIMUS purchased $5 million of its high yield debt
securities in the open market and $33 million of its convertible debt securities
for approximately $12 million in cash. In addition, the Company converted
approximately $130 million of its convertible debt to equity for a total of 8.3
million shares. These transactions reduced PRIMUS's debt by approximately $168
million in the first quarter and resulted in an extraordinary gain of $106
million.
Including this extraordinary gain, PRIMUS earned $13.7 million in the
first quarter 2001, or $0.27 per share, compared with a net loss of $(43.3)
million, and $(1.14) loss per basic and diluted share for the first quarter of
2000.
FINANCIAL GUIDANCE
While the current overall market conditions in general and the troubled
state of the telecommunications sector in particular only permit limited
short-range visibility, the Company still believes it can meet its previous
guidance for the full year 2001 of net revenues in the range of $1.1 billion to
$1.2 billion, with data/Internet/VoIP revenues growing at an estimated annual
rate of between 35% and 45%. The Company believes that an EBITDA goal of $10
million to $15 million for the full year 2001, before one-time charges, is still
attainable. As a result of cash flow generation and cost saving initiatives, the
Company expects to return to EBITDA profitability in the second quarter on net
revenues in a range similar to the first quarter.
LIQUIDITY AND CAPITAL RESOURCES
PRIMUS ended the first quarter of 2001 with cash of $304 million.
Capital expenditures during the first quarter were approximately $36 million for
fiber optic cable capacity, switching and networking equipment, data center
equipment, and back office systems. The Company received $10 million in an
equity investment from a strategic partner, and spent approximately $12 million
to purchase various debt securities in the open market. The Company paid
approximately $34 million in interest payments during the quarter, approximately
$4 million in debt principal payments under capital leases, and used
approximately $19 million in working capital and EBITDA losses during the first
quarter. Gross property, plant and equipment at the end of the first quarter was
$609 million.
"We have reduced our capital expenditure program for the year 2001 to a
range of $140 million to $170 million, including the first quarter's actual
expenditure," stated Neil L. Hazard, Executive Vice President and Chief
Financial Officer. "We continue to believe that our current level of liquidity,
supplemented by remaining vendor financing, a reduced capital expenditure
program, and savings from reductions in SG&A, should fund our business plan
through the second quarter of 2002."
The Company continues to believe that additional vendor financing,
investments from strategic partners, secured lines of credit, and private equity
investments are potential sources of additional funding for the Company. The
Company and/or its subsidiaries will evaluate on a continuing basis the most
efficient use of the Company's capital, including investment in the Company's
network and systems, lines of business, potential acquisitions, and, depending
upon market conditions, purchasing, refinancing or otherwise retiring certain of
the Company's outstanding debt and/or equity securities in the open market or by
other means to the extent permitted by its existing covenant restrictions.
* * *
PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED (NASDAQ: PRTL) IS A GLOBAL
FACILITIES-BASED TOTAL SERVICE PROVIDER OFFERING BUNDLED DATA, INTERNET, DIGITAL
SUBSCRIBER LINE (DSL), E-COMMERCE, WEB HOSTING, ENHANCED APPLICATION, VIRTUAL
PRIVATE NETWORK (VPN), VOICE AND OTHER VALUE-ADDED SERVICES. THE COMPANY OWNS
AND OPERATES AN EXTENSIVE GLOBAL BACKBONE NETWORK OF OWNED AND LEASED
TRANSMISSION FACILITIES, INCLUDING OVER 300 IP POINTS-OF-PRESENCE (POPS)
THROUGHOUT THE WORLD, OWNERSHIP INTERESTS IN OVER 23 UNDERSEA FIBER OPTIC CABLE
SYSTEMS, 23 INTERNATIONAL GATEWAY AND DOMESTIC SWITCHES, A SATELLITE EARTH
STATION AND A VARIETY OF OPERATING RELATIONSHIPS THAT ALLOW THE COMPANY TO
DELIVER TRAFFIC WORLDWIDE. PRIMUS HAS BEEN EXPANDING ITS E-COMMERCE AND INTERNET
CAPABILITIES WITH THE DEPLOYMENT OF A GLOBAL STATE-OF-THE-ART BROADBAND FIBER
OPTIC ATM+IP NETWORK. FOUNDED IN 1994 AND BASED IN MCLEAN, VA, THE COMPANY
SERVES CORPORATE, SMALL- AND MEDIUM-SIZED BUSINESSES, RESIDENTIAL AND DATA, ISP
AND TELECOMMUNICATION CARRIER CUSTOMERS PRIMARILY LOCATED IN THE NORTH AMERICA,
EUROPE AND ASIA PACIFIC REGIONS OF THE WORLD. NEWS AND INFORMATION ARE AVAILABLE
AT THE COMPANY'S WEB SITE AT WWW.PRIMUSTEL.COM.
###
(FINANCIAL TABLES FOLLOW)
THE STATEMENTS IN THIS RELEASE ARE "FORWARD LOOKING STATEMENTS" WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934. SUCH STATEMENTS ARE BASED ON CURRENT
EXPECTATIONS, ARE NOT STRICTLY HISTORICAL STATEMENTS, AND MAY DIFFER MATERIALLY
FROM ACTUAL RESULTS. FORWARD LOOKING STATEMENTS INCLUDE WITHOUT LIMITATION,
THOSE REGARDING MANAGEMENT'S PLANS, GOALS, EXPECTATIONS, GUIDANCE, OBJECTIVES,
STRATEGY, AND TIMING FOR FUTURE OPERATIONS AND PRODUCTS SUCH AS ROLL-OUT OF OUR
NETWORK OR DATA CENTERS, PRODUCT PLANS AND PERFORMANCE, PREDICTIONS OR
EXPECTATIONS OF FUTURE GROWTH, MANAGEMENT'S ASSESSMENT OF MARKET FACTORS, THE
AVAILABILITY OF FINANCING AND FUTURE FINANCIAL PERFORMANCE. AMONG FACTORS THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY ARE CHANGES IN BUSINESS
CONDITIONS; CHANGES IN THE TELECOMMUNICATIONS OR INTERNET INDUSTRY OR THE
GENERAL ECONOMY OR CAPITAL MARKETS; DSL, INTERNET AND TELECOM COMPETITION;
CHANGES IN SERVICE OFFERINGS OR BUSINESS STRATEGIES; INABILITY TO LEASE SPACE
FOR DATA CENTERS AT COMMERCIALLY REASONABLE RATES; DIFFICULTY IN PROVISIONING
VOICE OVER IP SERVICES; CHANGES IN THE REGULATORY SCHEMES AND REGULATORY
ENFORCEMENT IN THE MARKETS IN WHICH WE OPERATE; RESTRICTIONS ON OUR ABILITY TO
FOLLOW CERTAIN STRATEGIES OR COMPLETE CERTAIN TRANSACTIONS AS A RESULT OF OUR
CAPITAL STRUCTURE OR DEBT COVENANTS; THE POSSIBLE INABILITY TO RAISE CAPITAL
WHEN NEEDED, OR AT ALL; RISKS ASSOCIATED WITH PRIMUS'S LIMITED DSL, INTERNET AND
WEB-HOSTING EXPERIENCE AND EXPERTISE, ENTRY INTO DEVELOPING MARKETS, THE
POSSIBLE INABILITY TO HIRE AND/OR RETAIN QUALIFIED SALES, TECHNICAL AND OTHER
PERSONNEL, PARTICULARLY AS WE CONTINUE TO ATTEMPT TO GROW OUR DATA-CENTRIC
SERVICES, AND MANAGING RAPID GROWTH; AND RISKS ASSOCIATED WITH INTERNATIONAL
OPERATIONS (INCLUDING FOREIGN CURRENCY TRANSLATION RISKS); DEPENDENCE ON
EFFECTIVE INFORMATION SYSTEMS; DEPENDENCE ON THIRD PARTIES TO ENABLE US TO
EXPAND AND MANAGE OUR GLOBAL NETWORK AND OPERATIONS; AND DEPENDENCE ON THE
IMPLEMENTATION AND PERFORMANCE OF PRIMUS'S GLOBAL ATM+IP COMMUNICATIONS NETWORK.
THESE FACTORS ARE DISCUSSED MORE FULLY IN PRIMUS'S PUBLIC FILINGS, INCLUDING ITS
MOST RECENT 10Q AND 10K FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION.
READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING
STATEMENTS WHICH SPEAK ONLY AS OF THE DATE THESE STATEMENTS WERE MADE. PRIMUS
DISCLAIMS ANY INTENTION OR OBLIGATION TO UPDATE OR REVISE ANY FORWARD-LOOKING
STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.
PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
THREE MONTHS ENDED
MARCH 31,
------------------------------
2001 2000
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NET REVENUE $280,005 $287,953
COST OF REVENUE 208,362 207,435
---------- ----------
GROSS MARGIN 71,643 80,518
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OPERATING EXPENSES
Selling, general and administrative 84,873 79,267
Depreciation and amortization 36,471 22,170
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Total operating expenses 121,344 101,437
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LOSS FROM OPERATIONS (49,701) (20,919)
INTEREST EXPENSE (31,207) (29,942)
INTEREST AND OTHER INCOME (EXPENSE) (11,489) 7,609
---------- ----------
LOSS BEFORE INCOME TAXES (92,397) (43,252)
INCOME TAXES - -
---------- ----------
LOSS BEFORE EXTRAORDINARY ITEM (92,397) (43,252)
GAIN ON EARLY EXTINGUISHMENT OF DEBT 106,095 -
---------- ----------
NET INCOME (LOSS) $ 13,698 $(43,252)
========== ==========
NET INCOME (LOSS) PER COMMON SHARE:
Basic and diluted
Loss before extraordinary item $ (1.84) $ (1.14)
Gain on early extinguishment of debt 2.11 -
---------- ----------
Net income (loss) $ 0.27 $ (1.14)
========== ==========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 50,230 37,824
========== ==========
Other Data:
EBITDA $(13,230) $ 1,251
========== ==========
Note: First quarter 2001 results include one-time charges totaling $27 million
with the impact detailed as follows: Net Revenue - $9 million; Selling,
General and Administrative - $1 million; Depreciation and Amortization -
$2 million; and Other Income - $15 million.
PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
CONDENSED CONSOLIDATED FINANCIAL DATA
(in thousand)
BALANCE SHEET DATA
(unaudited)
MARCH 31, 2001
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Cash and cash equivalents $ 303,651
Accounts receivable, net 194,051
Other current assets 50,280
--------------
TOTAL CURRENT ASSETS 547,982
Property and equipment, net 481,858
Intangible assets 526,158
Other assets 38,233
--------------
TOTAL ASSETS $1,594,231
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Accounts payable $ 140,270
Accrued interconnection costs 110,560
Accrued expenses and other current liabilities 77,348
Accrued interest 31,086
Current portion of long-term obligations 21,136
--------------
TOTAL CURRENT LIABILITIES 380,400
Non-current portion of long-term obligations 1,078,804
Other liabilities 8,003
--------------
TOTAL LIABILITIES 1,467,207
Stockholders' equity 127,024
--------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,594,231
==============
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Operational Data
(Three Months Ended March 31, 2001)
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Minutes of Long Distance Use
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Region Net Revenue Total International Domestic
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North America $125,378 1,082,540 516,265 566,275
Europe 82,424 670,111 386,998 283,113
Asia Pacific 72,203 243,316 57,301 186,015
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Total $280,005 1,995,967 960,564 1,035,403
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