STAR Telecom Announces Record Revenues and Earnings for the Third Quarter of 1998; Highlights: Revenues Increase 59%; Net Income Rises 366%
SANTA BARBARA, Calif.--(BUSINESS WIRE)--Nov. 11, 1998--STAR
Telecommunications, Inc. (Nasdaq:STRX), today announced record
revenues and earnings for its third quarter ended September 30, 1998.
Revenues in the third quarter totaled a record $164.3 million, a
59.1% increase over revenues of $103.3 million in the prior year's
quarter and STAR's thirteenth consecutive quarter of strong revenue
growth. Net income (unaudited) in the quarter rose to $4.0 million or
$0.09 per diluted share, a 366.0% increase over comparable net income
of $863,000 or $0.02 per diluted share, in the third quarter of 1997.
Revenues from U.S. wholesale operations climbed to $149.4 million
in the third quarter of 1998, an increase of 53.7% over revenues of
$96.9 million in the third quarter of 1997. Minutes of use generated
by U.S. wholesale customers rose to 475.1 million during the third
quarter of 1998, compared to 240.9 million minutes of U.S. wholesale
use in the comparable quarter of the prior year. Commercial revenue
grew to $8.2 million in the third quarter of 1998 compared to $6.4
million in the third quarter of 1997. Fully diluted shares outstanding
for the third quarter were 43,331,874.
For the nine months ended September 30, 1998, STAR's revenues
reached $425.5 million, an increase of 50.2% over revenues of $283.4
million for the same period in the prior year. Net income for the nine
months ended September 30, 1998 was $9.1 million, or $0.22 per diluted
share, compared to $3.7 million, or $0.12 per diluted share, for the
nine months ended September 30, 1997.
"STAR continues to deliver strong levels of revenue and earnings
growth as we take advantage of the opportunities that are emerging
throughout the telecommunications industry," said Chris Edgecomb,
STAR's Chairman and CEO. "We attained a high level of financial
performance and operational efficiency during the quarter by lowering
our costs of transport and by expanding our range of services.
Additionally, STAR's management and employees continue to find new
ways to leverage our strengths and discover new revenue opportunities
for the Company."
Network Development
STAR is nearing the completion of its domestic switching network
and installation has commenced for new switch sites in Atlanta,
Seattle and Chicago which management believes will be activated in the
first quarter of 1999. The Company has also recently announced fiber
capacity purchase agreements with IXC and Qwest. The combined fiber
purchases, $100 million of multiple OC-12 fiber rings to serve
metropolitan cities throughout the U.S., is expected to reduce the
Company's domestic transport costs by more than 50%.
During the quarter, STAR also announced the completion of its
interconnect with British Telecom which will enable STAR to expand its
service to cities throughout the U.K. The Company plans to open
additional sales offices in Bristol and Manchester during 1999. STAR
has also commenced the installation of four additional switch
facilities in Germany, along with engineering the construction of a
fiber network that will connect up to thirty-two cities within
Germany. Named Project Apollo, STAR Telecommunications Deutschland,
GmbH anticipates partial route activation in mid-to-late 1999, with
the full activation between all points of presence by mid-year 2000.
European Business Development
STAR Telecommunications Deutschland experienced rapid growth in
traffic volume and revenue during the quarter. During its first full
quarter of operating results, STAR's German subsidiary reported
revenues of $6.7 million.
Mr. Edgecomb commented, "I want to particularly compliment the
efforts of our European team. Our sales forces in the U.K. and Germany
have dramatically raised STAR's profile among Europe's largest telcos
in just a few quarters of operations. In addition to signing up
numerous telecom customers, these teams are actively leveraging STAR's
international proprietary network by marketing directly to blue chip
commercial customers on a multinational basis."
Acquisition Growth Strategy
In June of 1998, STAR announced the proposed acquisition of PT-1
Communications, Inc., the largest provider of prepaid calling card
services in the U.S. The acquisition, which was restructured as of
September 1998, will be completed through the issuance of 15.3 million
shares of STAR common stock and the payment of $19.5 million to the
PT-1 shareholders. Upon completion, the combined company's revenue mix
will be approximately 50% wholesale and 50% retail with an annual
revenue run rate exceeding $1 billion. By the year 2000, STAR
management anticipates achieving a revenue mix of 25% wholesale and
75% retail. The acquisition is expected to close in December, but
remains subject to regulatory and shareholder approvals.
For the quarter ending September 30, 1998, PT-1 Communications,
Inc. reported revenues of $129.2 million, operating income of $3.4
million, and net income of $2.0 million. PT-1's minutes of use for the
quarter ending September 30, 1998 reached 605.9 million.
STAR's Chief Financial Officer Kelly Enos added, "Revenue and net
income growth remain solid as we continue to balance growth and
profitability. We continue to place an increasing percentage of
traffic on our proprietary international network, routing to 43
countries at quarter end. The effect of moving this traffic onto
proprietary lines is evidenced by our decreasing cost of services,
which represented less than 85% of revenue during the third quarter of
1998, compared to approximately 87% during the prior year's quarter.
Our strong revenue growth and prudent cost management resulted in
another strong cash flow quarter, with earnings before interest,
taxes, depreciation and amortization equaling $9.2 million. Our cash
and credit lines provide a very solid base to continue our aggressive
and successful expansion plans."
About STAR Telecommunications
STAR Telecommunications is a multinational long-distance provider
offering switched-voice services to long-distance carriers and
commercial customers throughout the world. STAR provides international
long distance service through a global network of digital switching
facilities and undersea fiber optic cable systems. STAR Telecom holds
domestic switching facilities in New York, Los Angeles, Dallas and
Miami, and international switching facilities in London, Frankfurt,
Hamburg, Dusseldorf and Munich. Visit STAR Telecom at www.startel.com.
Except for the historical information contained herein, this
press release contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, and are
subject to the safe harbors created thereby. The Company's future
actual results could differ materially from the forward-looking
statements discussed herein. A list of the factors that could cause
actual results to differ materially can be found in the documents the
Company files with the SEC, including those contained in STAR's
prospectus, and the Form 10-K for the year ended December 31, 1997
STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except for share data)
September 30, December 31,
1998 1997
------------- -------------
(Unaudited)
Current Assets:
Cash and cash equivalents $ 11,808 $ 1,903
Short-term investments 92,390 18,631
Accounts and notes receivable, net 80,721 46,675
Receivable from related parties 330 --
Other current assets 27,580 10,696
------------- -------------
Total current assets 212,829 77,905
------------- -------------
Property and equipment, net 113,851 35,959
Other assets 7,340 6,452
------------- -------------
Total assets $ 334,020 $ 120,316
============= =============
Current Liabilities:
Revolving lines of credit $ 5 $ 138
with stockholder
Current portion of long-term 7,595 3,259
obligations
Accounts payable and other 36,200 22,345
accrued expenses
Accrued network cost 52,464 38,403
------------- -------------
Total current liabilities 96,264 64,145
------------- -------------
Long-Term Liabilities:
Long-term obligations,
net of current portion 31,053 12,107
Other long-term liabilities 1,638 863
------------- -------------
Total long-term liabilities 32,691 12,970
------------- -------------
Stockholders' Equity:
Common Stock $.001 par value:
Authorized - 100,000,000 shares 42 35
Additional paid-in capital 194,138 41,662
Deferred compensation -- (30)
Other comprehensive income 219 --
Retained earnings 10,666 1,534
------------- -------------
Total stockholders' equity 205,065 43,201
============= =============
Total liabilities and
stockholders' equity $ 334,020 $ 120,316
============= =============
STAR TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ---------------------
1998 1997 1998 1997
--------------------- ---------------------
(Unaudited) (Unaudited)
Revenue $164,333 $103,297 $425,531 $283,374
Operating expenses:
Cost of services 139,324 90,100 363,794 246,712
Selling, general
and administrative
expenses 15,922 8,898 38,853 25,118
Depreciation and
amortization 3,439 1,227 8,055 3,040
Merger expense -- -- 314 --
--------- --------- --------- ---------
158,685 100,225 411,016 274,870
--------- --------- --------- ---------
Income from operations 5,648 3,072 14,515 8,504
--------- --------- --------- ---------
Other income (expense):
Interest income 1,839 293 3,511 367
Interest expense (740) (453) (2,080) (1,289)
Other 87 (794) (171) (1,499)
--------- --------- --------- ---------
1,186 (954) 1,260 (2,421)
--------- --------- --------- ---------
Income before provision
for income taxes 6,834 2,118 15,775 6,083
Provision for
income taxes 2,812 1,255 6,643 2,406
========= ========= ========= =========
Net income $4,022 $863 $9,132 $3,677
========= ========= ========= =========
Income before provision
for income taxes 2,118 6,083
Pro forma income taxes 1,137 2,718
========= =========
Pro forma net income $981 $3,365
========= =========
Basic income per share $0.10 $ 0.02 $ 0.23 $0.13
========= ========= ========= =========
Diluted income per share $0.09 $ 0.02 $ 0.22 $0.12
========= ========= ========= =========
Pro forma basic income
per share $ 0.03 $0.12
========= =========
Pro forma diluted income
per share $ 0.03 $0.11
========= =========
CONTACT:
STAR Telecommunications
Kelly Enos/Ben Helvey, 805/899-1962
or
Morgen-Walke Associates
Chris Danne/Todd Friedman, 415/296-7383
or Patricia Walsh, 212/850-5600
KEYWORD: CALIFORNIA
BW0234 NOV 11,1998
13:20 PACIFIC
16:20 EASTERN
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