SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of Earliest Event Reported): August 12, 1998 PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED (Exact Name of Registrant as Specified in Charter) Delaware 0-29-092 54-1708481 (State or Other (Commission File Number) (IRS Employer Jurisdiction of Identification No.) Incorporation) 1700 Old Meadow Road, McLean, Virginia 22102 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (703) 902-2800 Item 5. Other Events. On August 12, 1998, Primus Telecommunications Group, Incorporated ("Primus") issued a press release announcing its financial results for the second quarter of 1998. A copy of the press release is attached hereto as Exhibit 99.1 and incorporated herein by reference. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. (a) Not Applicable. (b) Not Applicable. (c) Exhibits. 99.1 Press Release Dated August 12, 1998 By Primus Telecommunications Group, Incorporated. Announcing Second Quarter of 1998 Financial Results SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED Date: August 12, 1998 By: /s/ Neil L. Hazard Neil L. Hazard Executive Vice President and Chief Financial Officer EXHIBIT INDEX Exhibit Number Description 99.1 Press Release Dated August 12, 1998 By Primus Telecommunications Group, Incorporated. Announcing Second Quarter of 1998 Financial Results
CONTACT: - ------- Neil Hazard The Financial Relations Board ----------------------------- Executive Vice President (212) 661-8030 PRIMUS Telecommunications Group, Investors: Jordan Darrow Incorporated Media: Alan Goldsand (703) 902-2800 General: Jeff Bogart PRIMUS TELECOMMUNICATIONS REPORTS SECOND QUARTER RESULTS -REVENUE AND GROSS MARGIN SET NEW RECORD HIGHS-- MCLEAN, VA., AUGUST 12 1998 -- PRIMUS Telecommunications Group, Incorporated (Nasdaq: PRTL), a global facilities-based telecommunications company, today announced record revenue and gross margin for the second quarter and six months ended June 30, 1998 Net revenue for the second quarter was a record $99.5 million, compared with $70.0 million for the second quarter of 1997, an increase of 42 percent. Gross margin for the second quarter also reached a record high of $15.3 million, compared with $5.9 million for the second quarter of 1997, an increase of 162 percent. As a percentage of net revenue, gross margin for the second quarter represented 15.4 percent, up from 8.4 percent for the second quarter of 1997. EBITDA loss improved to $(3.6) million from $(7.3) million for the second quarter of 1997. The Company's net operating loss for the second quarter of 1998 improved to $(8.1) million compared with $(9.0) million for the year-ago period. The net loss for the second quarter was $(14.8) million, or $(0.68) per basic and diluted share, compared with a net loss of $(8.9) million, or $(0.50) per basic and diluted share, for the second quarter of 1997. The weighted average number of basic and diluted common shares outstanding this quarter was 21,828,633 as compared to 17,778,731 for the second quarter of 1997. The quarter ending share total was 27,870,860. Commenting on the second-quarter results, K. Paul Singh, Chairman and Chief Executive Officer for PRIMUS, said: "The second quarter witnessed significant accomplishments in implementing PRIMUS's strategy to become one of the premier global carriers. We consummated the acquisition of TresCom, which extends PRIMUS's network into Latin American markets and positions us to achieve a $0.5 billion annual revenue run rate in the third quarter. We successfully closed a $150 million senior notes offering as our most recent step in funding our ambitious global network deployment strategy. We inaugurated operations in Continental Europe with the introduction of our gateway switch in Frankfurt, Germany. Our operations in Australia, which is our most mature market, turned EBITDA positive for the quarter, which moves us toward our goal of becoming EBITDA positive Company-wide in the fourth quarter. Our EBITDA loss improved sequentially over the first quarter of 1998 by $0.4 million. Along with our revenue growth and continued gross margin improvements, these accomplishments have contributed to producing --MORE-- PRIMUS TELECOMMUNICATIONS -- 2 another strong quarter." "In Europe, net revenue increased 203 percent in the second quarter of 1998 from the second quarter of 1997 to $13.9 million, resulting primarily from additional wholesale traffic being carried through our expanding network," commented Neil L. Hazard, PRIMUS's Executive Vice President and Chief Financial Officer. "In Australia, net revenue increased seven percent to $65.6 million, in Australian dollars, due to stronger retail residential and business sales as well as the addition of Internet and data services. In U.S. dollar terms, net revenue in Asia-Pacific decreased 7 percent from the second quarter of 1997 to $43.8 million due to a decrease in the Australian dollar exchange rates. In North America, net revenue increased a strong $23.4 million in the second quarter to $41.8 million, which was a 128 percent increase over second quarter 1997. The North America revenue included $7.6 million of TresCom revenue for the 22 days in June since the acquisition date." "This quarter witnessed an evolution of the regional mix of our revenue base where for the first time the Asia-Pacific region accounted for less than half of our revenues," added Hazard. "We expect this trend to become even more pronounced as TresCom revenues are consolidated with PRIMUS revenues for subsequent quarters." "The improvement in PRIMUS's gross margin, which is calculated after bad debts, is primarily due to an increase in our on-net traffic in Australia both from the migration of our existing business customers and the addition of new residential and business customers," Hazard said. Selling, general, and administrative (SG&A) expenses for the second quarter were $19.0 million, or 19 percent of net revenue, compared with $13.2 million, or 19 percent of net revenue, for the second quarter 1997. SG&A increased by $3.6 million versus the first quarter of 1998, primarily due to additional marketing and sales expenses and the additional SG&A from the Company's acquisitions of Hotkey Internet Services Pty Ltd., an Internet service provider in Australia, and Eclipse Telecommunications Pty Ltd., a data communications service provider to Australian retail business markets, and TresCom. Net revenue for the first half of 1998 was a record $179.5 million, compared with $129.1 million for the first half of 1997, an increase of 39 percent. Gross margin for the first half also reached a record high of $26.7 million, compared with $9.9 million for the first half of 1997, an increase of 170 percent. As a percentage of net revenue, gross margin for the second half represented 14.9 percent, up from 7.6 percent for the first half of 1997. EBITDA loss improved to $(7.7) million from $(12.2) million for the first half of 1997. The Company's net operating loss for the first half of 1998 increased to $(15.6) million from $(14.6) million for the year-ago period. The net loss for the first half of 1998 was $(27.1) million, or $(1.30) per basic and diluted share, compared with a net loss of $(13.8) million, or $(0.78) per basic and diluted share, for the first half of 1997. The weighted average number of basic and diluted common shares outstanding for the first half of 1998 was 20,778,692, compared with 17,778,731 for the first half of 1997. As of June 30, 1998, the Company held cash and investments of $265 million, which includes the proceeds of the Company's $150 million senior notes offering in May. Capital --MORE-- PRIMUS TELECOMMUNICATIONS -- 3 expenditures during the second quarter were $25 million for continued network expansion including international fiber capacity, switch equipment, and back office support systems. The Company completed its acquisition of TresCom on June 9, 1998, in exchange for 7.8 million shares of common stock valued at approximately $138 million. "With the proceeds from the senior notes offering, PRIMUS has accelerated the buildout of its global network," said Singh. "PRIMUS's gross property, plant and equipment investment is now $125 million, which places PRIMUS among the top of our peer group. PRIMUS now has one of the most extensive global networks linking major financial centers around the world." PRIMUS Telecommunications Group, Incorporated is a global facilities-based telecommunications company providing domestic and international long-distance voice, data, private network and value-added services. The Company provides services through an extensive global network of owned and leased transmission facilities, international gateway switches, and a variety of operating agreements that allow the Company to deliver traffic worldwide. Founded in 1994 and based in McLean, Va., the Company now serves over 350,000 corporate, small- and medium-sized business, residential and wholesale customers located in the North America, Caribbean, Latin America, Europe and the Asia-Pacific regions of the world. News and information are available at the Company's Website at http:/www.PRIMUStel.com. - ----------------------- To receive additional information on PRIMUS Telecommunications Group, Incorporated via fax at no charge, dial 1-800-PRO-INFO and enter code PRTL. ### (FINANCIAL TABLES FOLLOW) A registration statement relating to an exchange offer for certain of the company's debt securities was filed by PRIMUS with the Securities and Exchange Commission and declared effective on July 16, 1998. This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state. The statements in this release that are forward looking statements are based on current expectations and are not strictly historical statements, which may differ materially from actual results. Not strictly historical statements include, without limitation, those regarding management's plans, objectives and strategy for future operations, product plans and performance, management's assessment of market factors, and future financial performance. Among factors that could cause actual results to differ materially are changes in business conditions; changes in the telecommunications industry and the general economy; competition; changes in service offerings; risks associated with PRIMUS's limited operating history, entry into developing markets, and managing rapid growth including the integration of TresCom's operations; and risks associated with international operations (including foreign currency translation risks), dependence on effective information systems, and development of the network. These factors are discussed more fully in PRIMUS's public filings, including its most recent 10K and 10Q filings and the prospectus dated July 16, 1998, filed with the Securities and Exchange Commission. PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED CONDENSED CONSOLIDATED FINANCIAL DATA STATEMENT OF OPERATIONS DATA (UNAUDITED) (In thousands, except per share amounts)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 1998 1997 1998 1997 ------------ ------------ ------------- --------------- NET REVENUE $ 99,475 $ 70,045 $179,526 $129,081 COST OF REVENUE 84,126 64,178 152,848 119.212 ------------ ------------ ------------- --------------- GROSS MARGIN 15,349 5,867 26,678 9,869 ------------ ------------ ------------- --------------- OPERATING EXPENSES Selling, general and administrative 18,990 13,206 34,367 22,035 Depreciation and amortization 4,433 1,669 7,911 2,466 ------------ ------------ ------------- --------------- Total operating expenses 23,423 14,875 42,278 24,501 ------------ ------------ ------------- --------------- LOSS FROM OPERATIONS (8,074) (9,008) (15,600) (14,632) INTEREST EXPENSE (9,605) (526) (16,780) (677) INTEREST INCOME 2,886 474 5,270 1,259 OTHER INCOME (EXPENSE) - 230 - 349 ------------ ------------ ------------- --------------- LOSS BEFORE INCOME TAXES (14,793) (8,830) (27,110) (13,701) INCOME TAXES - 45 - 81 ------------ ------------ ------------- --------------- NET LOSS $(14,793) $ (8,875) $(27,110) $(13,782) ============ ============ ============= =============== BASIC AND DILUTED NET LOSS PER COMMON SHARE $ (0.68) $ (0.50) $ (1.30) $ (0.78) ============ ============ ============= =============== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (BASIC AND DILUTED) 21,829 17,779 20,779 17,779 ============ ============ ============= =============== OTHER DATA: - ----------- EBITDA $ (3,641) $ (7,339) $ (7,689) $(12,166) ============ ============ ============= =============== PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED CONDENSED CONSOLIDATED FINANCIAL DATA BALANCE SHEET DATA (UNAUDITED) JUNE 30, 1998 (In thousands)
Cash, cash equivalents and restricted investments $265,047 Accounts receivable, net 97,491 Other current assets 14,563 --------------------- Total current assets 377,101 Property and equipment, net 112,428 Intangible assets, net 205,228 Other assets 19,868 TOTAL ASSETS $714,625 ====================== Accounts payable and accrued expenses $139,373 Current portion of long-term obligations 19,998 Accrued interest 12,887 Other current liabilities 2,861 ---------------------- Total current liabilities 175,119 Non current portion of long-term obligations 385,204 Other liabilities 528 ---------------------- TOTAL LIABILITIES 560,851 Stockholder's equity 153,774 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $714,625 ======================
OPERATIONAL DATA (THREE MONTHS ENDED JUNE 30, 1998) - ----------------------------------------------------------------------------------------- Minutes of Long-Distance Use ('000s) ---------------------------------------- Region Net Revenue ($000s) Total International Domestic - ----------------------------------------------------------------------------------------- North America $41,782 147,619 111,029 36,590 Europe 13,906 67,291 49,028 18,263 Asia-Pacific 43,787 94,801 29,865 64,936 -------- ------- ------- ------- Total $99,475 309,711 189,922 119,789 - -----------------------------------------------------------------------------------------