Back to GetFilings.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to
-------------------
Commission File Number _____
IMPSAT Corporation
IMPSAT S.A.
(Exact name of registrants as specified in its charter)
Delaware 52-1910372
Argentina Not Applicable
(state or other jurisdiction (IRS employer identification
of incorporation or organization) number)
Alferez Pareja 256 (1107)
Buenos Aires, Argentina
(541) 362-4240
(Address, including zip code, and telephone number, including area
code, of registrants' principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
None
Title of each class Name of each exchange on which registered
Securities registered pursuant to Section 12(g) of the Act:
$125,000,000 12-1/8% Senior Guaranteed Notes due 2003 and the Guarantee
with respect thereto.
Indicate by check mark whether the registrants (1) have 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
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. YES X NO___
---
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 ]
State the aggregate market value of the voting stock held by
non-affiliates of the registrants.
As of December 31, 1996, IMPSAT Corporation had 77,750,640 shares of
Common Stock, $1.00 Par Value, outstanding.
PART I
Item 1. BUSINESS
General
IMPSAT Corporation (the "Company") is a leading provider of private
telecommunications network services in Latin America. The Company provides
private network integrated data and voice telecommunications services for
national and multinational companies, financial institutions, governmental
agencies and other business customers in Latin America. The Company believes
that it operates one of the largest shared hub VSAT networks in Latin America. A
substantial majority of the Company's revenues currently are derived from
Argentina and Colombia where it began commercial operations in October 1990 and
December 1992, respectively. The Company is an established provider of such
services in Venezuela and Ecuador, where it began operations in January 1993 and
January 1995, respectively, and recently has commenced commercial operations in
Mexico and the United States in August 1995 and February 1995, respectively.
Services are provided through the Company's advanced telecommunications networks
comprised of owned teleports, earth stations, fiber optic and microwave links,
and leased satellite and fiber optic capacity.
The Company has grown rapidly since the commencement of its operations
in Argentina in 1990. Its customer base has expanded from 125 customers in two
countries as of December 31, 1992 to 907 customers in six countries as of
December 31, 1996. During the same period, total revenues on a consolidated
basis have grown from $20.5 million to $128.4 million, and EBITDA has grown from
$0.7 million to $44.4 million.
The Company's primary strategy for further growth is to continue to
build on its reputation and market presence as the leading provider of private
telecommunications network services in Latin America. The key elements of the
Company's strategy include: (i) providing tailor-made solutions to meet the
particular telecommunications needs of its customers; (ii) delivering premium
services using state-of-the-art telecommunications technology that is updated
and improved on an ongoing basis, as well as round-the-clock customer support;
(iii) expanding the Company's revenue base by taking advantage of increasing
demand for new services from existing customers, increasing the
customer base in each of the countries in which it operates and, potentially,
expanding its operations into Brazil; and (iv) utilizing a mix of technologies
and suppliers.
The Company is a privately-held corporation, with two stockholders.
Seventy-five percent of the Company's common stock is controlled by the
Pescarmona Group, a prominent Argentine industrial group, and the remaining 25%
is controlled by STET International Netherlands NV ("STET International"), a
wholly-owned subsidiary of STET International SpA, the international
communications affiliate of the Italian telecommunications holding company STET
SpA ("STET"). In addition to its interest in the Company, STET owns holds a 32%
interest in Nortel Inversora, S.A., a holding company that owns 60% of the
equity of Telecom Argentina Stet-France Telecom S.A. ("Telecom Argentina"), the
public telephony operator in Northern Argentina. STET also owns interests in
telephone companies in Chile and Bolivia.
The Company's operations commenced in Argentina in 1990 under the name
IMPSAT S.A. ("IMPSAT Argentina"). The Company began operations outside of
Argentina with the establishment of IMPSAT S.A. ("IMPSAT Colombia") in 1991 and
the establishment of Telecomunicaciones IMPSAT S.A. ("IMPSAT Venezuela") in
1992. IMPSAT Argentina became a 51% owned subsidiary of IMPSAT Corporation on
July 5, 1996. New operating subsidiaries were created in Ecuador (IMPSATEL del
Ecuador S.A., hereinafter, "IMPSAT Ecuador") and Mexico (IMPSAT, S.A. de C.V.,
hereinafter, "IMPSAT Mexico") in 1994 and the United States (IMPSAT USA, Inc.,
hereinafter, "IMPSAT USA") in 1995.
The Company utilizes satellite, fiber optic cable and microwave links
and employs state-of-the-art technology in its network systems. Satellite
communication links, which constitute the core of the Company's private network
service infrastructure, are complemented and supported by terrestrial microwave
radio and fiber optic cable systems.
The principal services offered by the Company described below are
identified by their service marks:
VSAT. VSAT is a digital information transmission service which permits
communications between and among many remote locations and a central location
via satellite and a central earth station, known as a
-2-
Teleport. Teleports are currently located in Buenos Aires, Argentina; Bogota,
Colombia; Caracas, Venezuela; Quito, Ecuador; and Mexico City, Mexico.
VSAT generates the largest share of the Company's revenues from
services, accounting for approximately 49.9% and 43.4% of such revenues during
1995 and 1996, respectively. As of December 31, 1996, the Company had 3,476 VSAT
microstations installed throughout Latin America.
Dataplus. Dataplus is a high capacity digital information transmission
("SCPC") service designed for customers that require speedy transmission of
large quantities of information between relatively few fixed locations. Dataplus
is the second most significant of the Company's private telecommunications
network service offerings in terms of revenue generation. Dataplus accounted for
approximately 22.7% and 23.3% of the Company's revenues from services in 1995
and 1996, respectively. At December 31, 1996, the Company had a total of 704
Dataplus earth stations installed.
Teledatos Networks. Teledatos Networks are microwave and fiber optic
cable Metropolitan Area Networks ("MANs"). The Company's first Teledatos network
was established in Buenos Aires, Argentina in 1990. Other Teledatos networks now
exist in Cordoba, Mendoza, Rosario, Mar del Plata, Tucuman and La Plata,
Argentina; Bogota, Medellin, Cali and Barranquilla, Colombia; and Caracas,
Venezuela. At December 31, 1996, there were 1,172 connections in service on the
Teledatos networks.
Regional Teleports. Regional Teleports are earth stations linking
smaller MANs outside a country's capital to the Teleport in that country via
satellite. The first Regional Teleport was established in Mendoza, Argentina in
1991, and the Company now has Regional Teleports in Cordoba, Rosario, Tucuman,
La Plata and Mar del Plata in Argentina; Medellin, Cali and Barranquilla in
Colombia; and Guayaquil, Ecuador. Customers are connected to a Regional Teleport
through one of the Company's MANs, or by microwave radio or satellite links.
Difusat. Difusat is the Company's unidirectional Teleport-to-VSAT
broadcast service whereby a signal received by a Teleport is transmitted to
multiple locations. The source of the information to be broadcast is generally
connected to the Teleport through
-3-
a Teledatos network. The Teleport transmits the information to the receive-only
VSAT receptors via satellite. At December 31, 1996, the Company had installed
501 Difusat microstations.
Interplus. Interplus is an SCPC transmission service which provides
international transmission of data, voice and video. The Company currently
provides Interplus links among eleven countries -- Colombia, Venezuela, Bolivia,
Peru, Ecuador, Curacao, Mexico, Chile, Panama, the United States and Italy.
International private line services such as Interplus are traditionally provided
by local carriers in each country acting as correspondents and establishing
dedicated telecommunications links between their facilities. Due to its
widespread operational presence in Latin America, the Company is often able to
offer its Interplus service using its own facilities and personnel at both ends
of the private line circuit. To date, the Company has signed Interplus
correspondent agreements with carriers in Brazil, Curacao, Costa Rica, El
Salvador, Paraguay, and Uruguay. In addition, the Company is currently
negotiating correspondent agreements with carriers in Honduras, Bolivia and
Guatemala.
Global Fax. Global Fax is a fax store and forward service which
receives facsimile transmissions from customers, temporarily stores the data and
then retransmits it to designated addressees. In Argentina, as of December 31,
1996, the Company had 240 customers for this service and was handling
approximately 120,000 pages per month.
New Services. The principal new services and products developed and
commercialized during 1996 include Internet access services, Minidat,
videoconferencing and Conexia.
With respect to the Internet, the Company has taken a number of actions
regarding the expansion as a regional Internet access provider of dedicated and
dial-up connections between Latin America and the United States Internet
backbone. To this end, the Company is pursuing several avenues, including
entering into marketing agreements with local retail service providers and
establishing relationships with Internet service providers in the United States.
The Company has entered into agreements with several retail entities which will
market the Company's Internet access service to their customers, including
agreements with VideoCable
-4-
Comunicaciones S.A. (VCC), a leading Argentine cable company, Banco Mayo, an
Argentine commercial bank and Diario Uno, one of the principal newspapers in
Mendoza, Argentina and also directly markets Internet access to retail customers
in Argentina, Colombia, Venezuela and Ecuador. The Company intends to offer
Internet access services to new and existing customers, including universities,
institutions, governmental agencies and corporations. Services offered are
expected to include access software, electronic mail, network and worldwide web
site implementation and maintenance. In providing Internet access services, the
Company utilizes Interplus links between its Teleports in Latin America and
IMPSAT USA's leased teleport facilities in Florida and New Jersey, which then
provide connections to the United States Internet backbone through MCI
Communications Corporation, Sprint Corporation, Intermedia Communications and
UUNET.
In December 1996, the Company initiated a new service, called Minidat.
Minidat represents a lower cost alternative for satellite data transmission for
users that maintain a large quantity of transmission points but require only a
lower volume usage of satellite capacity. Minidat was established to meet the
data transmission requirements of customers operating point of sales systems,
automated teller machines, lottery ticket sales, reservation systems, wholesaler
and inventory control and management systems and entertainment facilities
(sports arenas, theaters, etc.). The Company's Minidat service is provided for a
lower monthly fee than its other services. The Company contemplates that it will
provide its Minidat customers with two pricing options, one in which the
customer purchases the remote terminals required to deliver the service and one
in which the Company provides the equipment (as is the case for the Company's
VSAT and Dataplus services).
Another new service option commenced in 1996 by the Company involves
the use of video teleconferencing, including interactive teleconferencing for
educational and training purposes. The Company contemplates that such services
would be provided to governmental, educational, national and international
businesses that desire to utilize interactive teleconferencing for educational,
training and conferencing purposes. The Company's videoconferencing services
will utilize VSAT and SCPC technology combined with specialized equipment for
connection to VCRs, television and PC monitors.
-5-
Finally, in 1996 IMPSAT Argentina introduced a new service called
Conexia for the private telecommunications network needs of customers such as
health management organizations (HMOs). Through the Conexia service, HMO
customers will be able to communicate among their different operating locations
(laboratories, supply facilities, clinics and hospitals) in a real time
environment, thereby increasing the efficiency of the operations. In connection
with the provision of the Conexia service, IMPSAT Argentina has created a
dedicated computer network at its Buenos Aires Teleport facility for Conexia
users.
The following table shows the Company's revenue breakdown by service
for the years ended December 31, 1995 and 1996:
Year ended December 31,
----------------------
1995 1996
----------------------
($ in thousands)
Service
VSAT............................ $ 52,756 $55,680
Dataplus........................ 23,953 29,962
Other (1)....................... 28,932 42,751
-------- --------
Total........................... $105,641 $128,393
======== ========
- --------------
(1) The figure for "Other" includes revenues from the Company's Teledatos
networks, Regional Teleports, Difusat, Interplus, Global Fax and
Internet services.
Customers
The Company's largest customers consist of major governmental agencies,
financial institutions and leading national and multinational corporations and
private sector companies, including YPF S.A., Reuters, Banco de Galicia y Buenos
Aires S.A. and Occidental Petroleum. As of December 31, 1996, the Company's ten
largest customers accounted for approximately 26.6% of the Company's revenues.
The percentage of revenues represented by the Company's ten largest customers at
December 31, 1995 was approximately 30%.
-6-
The Company's ten largest customers as of December 31, 1996 were: Banco
de la Nacion Argentina (BNA), a state-owned bank and the largest bank in
Argentina, with 525 branches throughout Argentina; Administracion Nacional de la
Seguridad Social (ANSeS), the Argentine Social Security Administration; Banco de
Galicia y Buenos Aires S.A., a private bank with 170 branches throughout
Argentina; Empresa Nacional de Correos y Telegrafos S.A. (ENCOTESA), the
Argentine national postal service; YPF S.A., which is engaged in hydrocarbon
exploitation and is the largest company in Argentina; Banco de Colombia, a
private bank headquartered in Bogota, Colombia and the second largest commercial
bank in Colombia; Gendarmeria Nacional Argentina (GNA), the Argentine
governmental agency charged with policing Argentina's borders; Gobierno de la
Provincia de Buenos Aires, an Argentine provincial government; Bansud S.A.
(formerly Banco del Sud), a private bank with approximately 120 branches in
Argentina and BANELCO S.A., a private company engaged in electronic banking
activities, with approximately 510 electronic banking posts in Argentina.
The following table sets forth the Company's customers by country as of
the dates indicated(1):
Number of customers
as of December 31,
--------------------
1995 1996
Country --------------------
Argentina(2)....................... 319 358
Colombia........................... 271 410
Venezuela.......................... 39 76
Ecuador............................ 25 44
Mexico............................. 2 10
USA................................ -- 9
------ ------
Total.............................. 656 907
====== ======
- -------------
(1) Totals presented do not include customers from the Company's new services
such as Internet, Global Fax and Minidat.
(2) The number of customers for IMPSAT Argentina is presented as of
November 30, 1995 and 1996.
-7-
Sales, Marketing and Customer Service
In addition to its salaried business unit personnel, the Company often
utilizes the services of third party sales representatives to assist in
generating sales and managing the contract process between the Company and
potential customers. Such third parties typically receive a commission and
royalties from the Company based on the value of the contract signed. To date
the practice of utilizing third party sales representatives in connection with
the generation and servicing of customer contracts has been employed
predominantly in the case of IMPSAT Argentina, although third party sales
representatives have also recently been utilized in connection with IMPSAT
Colombia's customer generation. With respect to the other countries in which the
Company currently operates, the Company principally has utilized its own sales
force for the generation and servicing of customer contracts. The Company
anticipates that it will continue to rely on such third party sales
representatives in connection with its operations in Argentina and, to a lesser
extent, Colombia and that it primarily will use its own sales force in other
countries in which it does business.
As of November 30, 1996, of IMPSAT Argentina's total customer base of
358, IMPSAT Argentina had entered into contracts with third party sales
representatives for approximately 10.3% of its customer contracts, including a
number of its largest contracts. Although the financial terms of IMPSAT
Argentina's contracts with the third party sales representatives vary based on
the customers involved and the particular assistance provided by the
representatives, the commissions paid to third party sales representatives equal
approximately 8.9% of IMPSAT Argentina's total revenues for 1996.
Competition
The Company's competitors fall into three broad categories. The first
category is comprised of the monopoly providers of public telephony services
("PTOs") in each of the countries in which it operates. The second category of
competitors is comprised of other companies, engaged in essentially the same
business as the Company, that operate competing VSAT and other satellite data
transmission businesses, along with other terrestrial telecommunications links.
The third category is comprised of companies that do not sell data
-8-
transmission services, but only the equipment for privately owned networks that
are operated and maintained by the customer. In addition, potential future
competitors include certain of the large international long distance carriers
which will be able to enter the local Latin American telecommunications markets
in the coming years as the monopolies granted to the PTOs expire.
Regarding the first group of competitors, the Company's further
expansion into the integrated private network systems market, along with
continued deregulation of the telecommunications industry in Latin America, will
bring the Company into direct competition with the PTOs. A number of PTOs in the
countries in which the Company operates have recently established and marketed
"large customer" or "grand user" business units in an attempt to provide
dedicated services to the type of customer that represents the Company's
targeted market. The Company believes that by establishing itself in the
short-term as a reliable, high-quality provider of private network systems it
will be able to maintain its current customers and successfully attract new
customers. The Company will consider strategic alliances and other cooperative
ventures with the PTOs in the area of private telecommunications network
services to take advantage of each partner's relative strengths.
With respect to the second category, i.e., current operators in the
data transmission sector of the telecommunications industry, the Company's
competitors, many of whom operate VSAT systems, include international satellite
providers such as COMSAT Corp. and local data transmission providers.
The third category of competitors are comprised of companies that do
not sell data transmission services, but merely supply the equipment necessary
for a customer to establish and maintain its own private network. The Company
believes that, with respect to this category of competitors, the Company
possesses significant competitive advantages by providing comprehensive
telecommunications services that offer the benefits of a private network while
freeing the customers from the burdens of operating and maintaining the network.
The Company believes that the principal barriers to entry for
prospective providers of private network services such as those offered by the
Company are and
-9-
will continue to be the development of the requisite understanding of customer
needs, and the technological and commercial experience and know-how to provide
quality services to meet those needs. The Company believes that its operating
experience as a pioneer in providing shared hub VSAT services, its position as
market leader and its significant existing network infrastructure in its
markets, and ability to offer a diversity of cost-efficient networking
solutions, will continue to provide it with significant competitive advantages.
Regulation
The Company is subject to regulation by the national telecommunications
authorities of the countries in which it operates, and its operations require
the procurement of permits and licenses from such authorities. While the Company
believes it has received all authorizations from regulatory authorities that are
required for it to offer its services in the countries in which it currently
operates, the current conditions governing the Company's service offerings may
be altered by future legislation or regulation. Such future legislation or
regulation could favorably or unfavorably affect the Company's business and
operations.
In January 1997, the Argentine government decreed a restructuring of
telephone rates which reduced rates for domestic long distance and international
telephone services by an estimated average of 25% and 42%, respectively.
Argentina's long distance and international telephone services are provided by
Telecom Argentina and Telefonica de Argentina S.A. ("Telefonica"), the PTOs in
northern and southern Argentina, respectively. On February 7, 1997, an Argentine
federal court suspended the rate restructuring until the court could rule more
broadly on the legality of the decree. The Company does not anticipate that any
such rebalancing would materially affect the Company's business or operations.
Employees
As of December 31, 1996, the Company employed a total of 620 persons,
of whom 254 were employed by IMPSAT Argentina and 175 were employed by IMPSAT
Colombia. The number of employees of the Company has generally increased and is
expected to continue to increase as a
-10-
result of the Company's expansion in the countries in which it operates and into
new countries. The Company does not have any long-term employment contracts with
any of its employees, including management, and none of its employees are
members of any union. The Company believes that its relations with its employees
are good.
Satellite Capacity
As of December 31, 1996, the Company had a total leased capacity of
253.03 MHz on six satellites. The Company has satellite leases on the Intelsat
706 and 709 satellites for 50.0 MHz and 115.0 MHz of capacity, respectively,
which are not scheduled to expire before April 1, 2000. The Company's leased
satellite capacity on the Intelsat satellites is leased both directly by the
Company's operating subsidiaries and through sub-leases with Intelsat
participants, such as the Argentine Comision Nacional de Telecomunicaciones
("CNT"). The Company also has leased 23 MHz of capacity on Nahuelsat's, ANIK A
satellite which will expire on March 1, 1998. The Company has 42.23 MHz of
leased capacity on PanAmSat's PAS-1 satellite until the end of the useful life
of the satellite (estimated to be December 31, 2001). The Company also entered
into an agreement at the end of December 1996 to lease 54 MHz of capacity on
PanAmSat's PAS-3 Satellite commencing in 1997. The Company currently has 1.10
MHz of capacity (with an option to lease up to 9 MHz of capacity) on Mexico's
Solidaridad-II satellite which expires on February 28, 1998. The Company's total
lease payments for satellite capacity totaled $10.9 million in 1995, and
increased to approximately $13.9 million in 1996. The Company anticipates that
it will contract for additional leased satellite capacity as needed to the
extent that the Company's business so requires.
In 1996 and 1997, IMPSAT Argentina acquired an aggregate 0.21% interest
in Intelsat for a total of $4.3 million. As a direct member of Intelsat, IMPSAT
Argentina currently leases 36 MHz of satellite capacity on Intelsat 709 directly
from Intelsat without being required to pay a 10% fee with respect to such
capacity to the CNT.
-11-
Recent Developments
Exchange Offer. On January 24, 1997, the Company completed an Exchange
Offer (the "Exchange Offer") for its 12 1/8% Senior Guaranteed Notes due 2003
(the "New Notes"), registered under the Securities Act of 1933, as amended,
pursuant to an effective registration statement (the "Registration Statement"),
for its outstanding, unregistered 12 1/8% Senior Guaranteed Notes due 2003 (the
"Old Notes") (the New Notes and the Old Notes collectively, the "Notes"). At the
expiration of the Exchange Offer, the Company had accepted Old Notes in
principal amount of $123,483,000 in exchange for a like principal amount of New
Notes.
BNA Contract. As noted under "Customers" above, the Company's largest
customer as of December 31, 1996 was Banco de la Nacion de Argentina, a
state-owned commercial bank with 525 branches throughout Argentina. Pursuant to
contracts with BNA, IMPSAT provides BNA with data transmission services through
525 VSAT microstations and 5 Dataplus earth stations. On December 27, 1996,
IMPSAT Argentina and BNA signed a one-year, noncancelable extension covering
private telecommunications network services provided by IMPSAT S.A. with respect
to 125 branches of BNA. The contract extension included the provision of
additional, value-added services by IMPSAT S.A. to BNA, including electronic
mail and exchange and clearing services, for use by BNA in all of its 527
branches.
BNA in the fourth quarter of 1996 solicited proposals through a public
bidding process for the private telecommunications network services covered by
its contract with IMPSAT Argentina scheduled to expire in the first quarter of
1997, which solicitation sought bids for the provision of such services for all
of BNA's 527 branches for a three-year term. BNA announced the opening of the
bids on January 6, 1997 and declared that Startel, S.A. ("Startel"), IMPSAT
Argentina's largest competitor, had submitted the lowest bid. Startel is a joint
venture between Telecom Argentina and Telefonica.
On January 10, 1997, IMPSAT Argentina filed a protest with BNA
regarding Startel's bid. IMPSAT Argentina's protest was based on a ruling of the
Federal Court of Appeals in Administrative Law Chamber No. 4 (the "Appeals
Court") on December 20, 1996, in which the Appeals Court affirmed the decision
of the Administrative Court of the First Instance (the "Administrative Court")
that the use by Startel of the
-12-
telecommunications infrastructure owned by its shareholders, Telefonica and
Telecom Argentina, for the provision of data transmission services violated the
Argentine telecommunications law, which prohibits companies providing public
telephony services from also providing data transmission services.
On February 28, 1997, BNA announced a pre-adjudication of the bid to
Startel. Under applicable Argentine public bidding procedures, such a pre-
adjudication is a preliminary action taken by the entity soliciting bids as an
indication of the party to whom the solicitation should be awarded. On March 8,
1997, IMPSAT Argentina filed a formal protest of such pre-adjudication with
Startel based on the Appeals Court ruling described in the preceding paragraph.
In light of the developments relating to the BNA bid, the Company is
unable currently to assess the effect of the bid results on the likelihood of
BNA's renewal of IMPSAT Argentina's expiring contract with BNA. IMPSAT Argentina
intends to pursue vigorously its protest of Startel's bid based on the ruling of
the Appeals Court regarding the legality of Startel's provision of services
using Telefonica and Telecom Argentina's public telephone networks and intends
to challenge the award of any contract to Startel if and when such a contract
were to be awarded by BNA to Startel. In the interim, the Company anticipates
that IMPSAT Argentina will continue providing services to BNA pursuant to its
existing contract. The loss of the BNA contract is likely to adversely affect
the Company's and IMPSAT Argentina's results of operations.
Startel. In 1994, IMPSAT Argentina filed a claim with the CNT that the
leasing by Telefonica and Telecom Argentina of capacity on their networks to
Startel, their joint venture company, for data transmission services violated
the Argentine telecommunications law, which prohibits companies providing public
telephony services from also providing data transmission services. The CNT ruled
in favor of IMPSAT Argentina in May 1995, but the CNT's ruling was overturned by
the Argentine Ministry of Economy and Public Works (the "Economy Ministry") in
August 1995. IMPSAT Argentina appealed the Economy Ministry's ruling in
September 1995 to the Administrative Court. The Administrative Court held in May
1996 that the Economy Ministry's ruling was contrary to law and ruled in favor
of IMPSAT Argentina. Startel appealed the Administrative Court's ruling to
Appeals Court. As
-13-
noted under "Recent Developments - BNA Contact," the Appeals Court on December
26, 1996 affirmed the ruling of the lower court. In February 1997, Telecom
Argentina and Telefonica filed an appeal with the Argentine Supreme Court
against the judgment of the Appeals Court, which appeal is pending.
IMPSAT Brazil. The Board of Directors of the Company is currently
discussing the terms of the contribution of the capital stock of IMPSAT
Comunicacoes Ltda., a company organized and existing under the laws of the
Republic of Brazil ("IMPSAT Brazil"), by Nevasa Holdings Ltd. ("Nevasa"), the
Company's majority shareholder, to the Company. IMPSAT Brazil had been
established in 1993 by Nevasa to apply for a value-added telecommunications
license in Brazil and to develop such business in Brazil with the understanding
between Nevasa and STET International that IMPSAT Brazil would be combined with
the Company at a later date when agreed upon by the shareholders. As of December
31, 1996, IMPSAT Brazil was providing private network telecommunications
services in Brazil to Shell de Brasil S.A., through six Dataplus earth stations.
There can be no assurance that IMPSAT Brazil will be contributed to the Company
nor of the terms upon which such contribution would be made.
Contribution of Minority Interest of IMPSAT Argentina. The Board of
Directors of the Company also is considering the contribution by Nevasa and STET
International to the Company of their combined direct 44.2% interests in IMPSAT
Argentina to the Company. If adopted by the Board and agreed to by Nevasa and
STET International, the Company's ownership of IMPSAT Argentina would increase
from 51.0% to 95.2% upon the completion of the contribution of capital. In
addition to Board and shareholder approval, the contribution would be subject to
compliance with the terms of the Indenture governing the Notes and other legal
requirements, and there can be no assurance that such event will occur.
Item 2. PROPERTIES
Teleports. The Company operates Teleports in Buenos Aires, Argentina;
Bogota, Colombia; Caracas, Venezuela; Quito, Ecuador; and Mexico City, Mexico.
Regional Teleports. As of December 31, 1996, the Company was operating
a total of ten Regional Teleports in major cities in Argentina, Colombia and
Ecuador.
-14-
Teledatos Networks. The Company has fiber optic and microwave MANs in
major cities in which it operates for connection with the Teleport or Regional
Teleport in such cities. Additionally, the Company manages and operates a fiber
optic network covering 186 route miles in Bogota, Colombia, pursuant to a joint
venture with Empresa de Telecomunicaciones de Santafe de Bogota, the Colombian
PTO that provides local telephone service in the Bogota, Colombia region. The
Teledatos networks, which as of December 31, 1996 were operating in a total of
twelve cities and covered a total of 2,658 square miles, permit efficient
connection to the Company's Teleports and Regional Teleports.
The Company also operates in Argentina a high capacity digital
microwave circuit that provides voice and data telecommunications links between
user sites in Buenos Aires and Mendoza.
Undersea Fiber Optic Cable Networks. The Company is a member of the
Americas-1 and Columbus-II undersea fiber optic cable consortia, and has
purchased an initial total of 2 Mbps capacity on both systems for use in its
Interplus service. If needed, more capacity may be purchased by the Company in
the future. Americas-1, which commenced commercial operation in December 1994,
is a 4,960 mile fiber optic cable system connecting Vero Beach, Florida in the
United States with the U.S. Virgin Islands, Trinidad, Brazil and Venezuela.
Americas-1 is owned by a consortium of 64 carriers from 42 countries and plans
to extend its links to Curacao and Argentina. Columbus-II, which commenced
service in mid-1994 and is owned by 56 telecommunications administrations in 40
countries, links Mexico, Florida, the U.S. Virgin Islands, Spain, Portugal and
Italy with about 7,440 miles of fiber optic cable.
Item 3. LEGAL PROCEEDINGS
The Company is involved in or subject to various other litigation and
legal proceedings incidental to the normal conduct of the Company's business,
including with respect to regulatory matters. In addition to the matters
described above under "Recent Developments - BNA Contract" and "Recent
Developments - Startel" the Company was involved in the following legal matters
in 1996:
-15-
DGI. In June 1996, as a result of certain controversies regarding a
contract between the Direccion General Impositiva ("DGI"), the Argentine
governmental agency charged with the collection of taxes, and another company, a
member of the Argentine legislature made public statements suggesting that
certain other contracts entered into by DGI, including DGI's contract with
IMPSAT Argentina, be reviewed. IMPSAT Argentina has not received any indication
that any review is being undertaken in respect of its contract with DGI, which
expired in the fourth quarter of 1996. In December 1996, IMPSAT Argentina and
DGI entered into a one-year extension of IMPSAT Argentina's contract with DGI.
IMPSAT Argentina believes that its contract with DGI was awarded in compliance
with applicable law and does not believe that such matter will have an adverse
effect on its financial condition or results of operations.
BNA. According to Argentine press reports during February 1996, the
General Auditor of the Argentine Republic commenced an investigation into the
manner in which BNA, a state-owned commercial bank which is IMPSAT Argentina's
largest customer, awarded contracts to its service providers, including IMPSAT
Argentina. Such reports stated that the General Auditor raised concerns
regarding the failure by BNA to follow its public bidding procedures in
selecting IMPSAT Argentina to provide it with private telecommunications network
services. IMPSAT Argentina has not received any formal or informal notice from
the General Auditor, BNA or any other person concerning such matter and does not
believe that such matter will have an adverse effect on its financial condition
or results of operations. IMPSAT Argentina believes that the award of its
contract by BNA and its dealings with BNA have been in full compliance with all
applicable legal norms. For a description of the current status of IMPSAT
Argentina's contracts with BNA, refer to "Recent Developments - BNA Contract."
ENCOTESA. In November 1996, IMPSAT Argentina filed suit against
ENCOTESA for amounts due and arising under IMPSAT Argentina's contracts with
ENCOTESA, the Argentine national postal service, totalling $5.1 million, plus
interest on such amounts. ENCOTESA was the Company's single largest delinquent
customer as of December 31, 1996. As of November 30, 1996, ENCOTESA accounted
for 54.3% of IMPSAT Argentina's receivables past due more than six months but
less than one year and for 46.3% of IMPSAT Argentina's receivables past due in
excess on one year. ENCOTESA, which was the Company's fourth largest customer as
of December 31, 1996, is
-16-
experiencing financial and operating difficulties, and the Argentine legislature
is currently debating the means to address ENCOTESA's difficulties, including
the possible privatization of the agency. IMPSAT Argentina is currently
discussing with ENCOTESA modifications to the amount of services being provided
under ENCOTESA's contracts with IMPSAT Argentina, which currently result in
monthly invoices of $218,000. IMPSAT Argentina at the end of 1996 began to
reserve 100% for all of its current invoices submitted to ENCOTESA. As of
November 30, 1996, the Company was providing ENCOTESA with 200 VSATs and
1 Dataplus earthstation, under contracts which are scheduled to expire in August
1997 and 1999, respectively. ENCOTESA has requested IMPSAT Argentina to remove
33 VSAT microstations from facilities where ENCOTESA is not utilizing such
equipment. On December 27, 1996, ENCOTESA filed its reply to IMPSAT Argentina's
claim. The court has not yet ruled upon IMPSAT Argentina's claim against
ENCOTESA. The Company will continue to assess the effect that the ENCOTESA
receivables situation will have on its results of operations, liquidity or
capital resources.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
Not Applicable.
PART II
Item 5 MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Not Applicable
Item 6. SELECTED FINANCIAL DATA
The following selected financial and other data are for the Company on
a consolidated basis and separately for IMPSAT Argentina and its consolidated
subsidiaries, in each case in accordance with U.S. GAAP. The Company's
subsidiaries use the U.S. dollar as their functional currency. The Company owns
less than a 100% equity interest in certain of its subsidiaries, including a 51%
equity interest in IMPSAT Argentina, a 74% equity interest in IMPSAT Colombia
and a 75% equity interest in IMPSAT Venezuela. The consolidated
-17-
financial data contained herein are presented as if IMPSAT Corporation owned its
current percentage of capital stock of its operating subsidiaries during all
periods, and as of all balance sheet dates, presented.
The fiscal year of the Company and all of its subsidiaries, other than
IMPSAT Argentina, ends on December 31, and IMPSAT Argentina's fiscal year ends
on November 30. The consolidated financial results of the Company for the years
ended December 31, 1992, 1993, 1994, 1995 and 1996 incorporate IMPSAT
Argentina's results for the twelve months ended November 30, 1992, 1993, 1994,
1995 and 1996, respectively.
The selected financial data for the Company and for IMPSAT Argentina
have been derived from the Company's consolidated financial statements and
IMPSAT Argentina's consolidated financial statements audited by Deloitte &
Touche LLP and Deloitte & Touche, Argentina, respectively, independent auditors,
whose reports thereon are included elsewhere in this Annual Report on Form 10-K.
-18-
THE COMPANY
Year Ended December 31,
------------------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
(U.S.$ thousands except for ratios)
STATEMENT OF OPERATIONS DATA:
Net revenues from
services ................ $20,449 $37,695 $ 77,679 $105,641 $128,393
Costs and expenses:
Variable cost of
services ............. (6,073) (8,905) (12,770) (18,818) (21,494)
Satellite capacity ..... (1,285) (3,126) (7,734) (10,973) (13,925)
Salaries, wages and
benefits ............. (4,413) (7,756) (13,528) (22,220) (25,561)
Selling, general and
administrative ....... (8,015) (9,244) (19,148) (26,094) (23,030)
Depreciation and
amortization ......... (3,699) (6,324) (12,874) (20,653) (26,318)
------- ------- -------- -------- --------
Operating income:
(loss) .................... (3,036) 2,340 11,625 6,883 18,065
Other income (expenses):
Interest (expense)
income, net .......... 37 (6,220) (8,231) (15,677) (23,815)
Net gain on foreign
exchange ............. 340 1,518 1,352 1,838 910
Other income (expenses),
net .................. 1,032 (684) 599 511 1,035
------- ------- -------- -------- --------
Income (loss) before
income taxes and
minority interest ....... (1,627) (3,046) 5,345 (6,445) (3,175)
(Provision for) Benefit
from income taxes ....... 1,977 1,428 3,155 740 (3,542)
------- ------- -------- -------- --------
Income (loss) before
minority interest ....... 350 (1,618) 8,500 (5,705) (6,717)
Income attributable to
minority interest ....... (1,315) (1,218) (5,464) (1,712) (1,766)
------- ------- -------- -------- --------
Net income (loss) ......... $ (965) $(2,836) $ 3,036 $ (7,417) $ (8,483)
======= ======= ======== ======== ========
OTHER FINANCIAL DATA:
EBITDA (1) ................ $ 663 $ 8,664 $ 24,499 $ 27,536 $ 44,383
Ratio of earnings to
fixed charges (2) ....... -- -- 1.38x -- --
Ratio of EBITDA to
interest expense ........ 4.22x 1.30x 2.90x 1.67x 1.76x
-19-
As of December 31,
-------------------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
(U.S.$ thousands except for ratios)
BALANCE SHEET DATA:
Cash and cash
equivalents ............. $ 1,426 $ 7,130 $ 32,135 $ 6,216 $ 28,895
Total current assets ...... 13,657 26,344 57,948 36,906 73,774
Net property, plant
and equipment ........... 47,926 77,970 152,909 199,701 227,086
Total assets .............. 67,139 111,283 222,684 249,095 315,230
Total current
liabilities ............. 25,528 24,796 68,984 128,813 78,126
Total short-term debt and
current portion of
long-term debt .......... 14,924 11,246 48,047 97,510 42,874
Total long-term
debt, net ............... 2 35,152 59,437 30,200 156,230
Minority interest ......... 1,345 19,614 24,893 28,476 30,242
Stockholders' equity ...... 22,579 26,794 62,780 55,363 46,880
As of December 31,
---------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
OPERATING DATA:
VSAT microstations
installed ...................... 558 931 1,925 2,841 3,476
Dataplus earth stations
installed ...................... 42 129 271 443 704
Satellites linked ................ 3 3 4 4 6
Leased satellite
capacity (Mhz) ................. 30.0 51.5 128.4 198.3 253.0
Teleports ........................ 2 2 3 4 5
Teleport antennas ................ 5 10 16 22 23
Regional Teleports ............... 2 6 9 10 10
Teledatos Networks ............... 3 6 12 12 12
Customers ........................ 133 262 445 656 907
-20-
IMPSAT Argentina
Year Ended November 30,
---------------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
(U.S.$ thousands except for ratios)
STATEMENT OF OPERATIONS DATA:
Net revenues from
services .................. $20,379 $34,672 $ 63,999 $ 80,346 $85,145
Costs and expenses:
Variable cost of
services ............... (1,371) (2,956) (11,040) (11,083) (14,665)
Satellite capacity ....... (1,215) (2,262) (5,902) (8,358) (9,503)
Salaries, wages and
benefits ............... (3,589) (5,733) (9,567) (12,697) (12,590)
Selling, General and
administrative ......... (6,325) (5,425) (12,885) (17,814) (10,731)
Depreciation and
amortization ........... (3,667) (5,570) (10,719) (16,067) (18,786)
------- ------- -------- -------- -------
Operating income (loss) ..... 4,212 12,726 13,886 14,327 18,870
Other income (expenses):
Interest (expense)
income, net ............ 37 (5,453) (4,556) (10,384) (12,527)
Other income
(expense), net ........... 1,032 (468) (83) 523 638
------- ------- -------- -------- -------
Income before income
taxes and minority
interest .................. 5,281 6,805 9,247 4,466 6,981
(Provision for) Benefit
from income taxes ........... -- -- 3,220 -- (3,963)
------- ------- -------- -------- -------
Income before minority
interest .................. 5,281 6,805 12,467 4,466 3,018
(Income) Loss attributable
to minority interest ...... -- -- (3) 6 3
------- ------- -------- -------- -------
Net income .................. $ 5,281 $ 6,805 $ 12,464 $ 4,472 $ 3,021
======= ======= ======== ======== =======
-21-
OTHER FINANCIAL DATA:
EBITDA(1) ......................... 7,879 18,296 24,605 30,394 33,911
Ratio of earnings
to fixed charges(2) ............. 2.26x 2.24x 2.92x 1.37x 1.57x
Ratio of EBITDA to
interest expense ................ 4.22x 3.22x 5.17x 2.90x 3.53x
As of November 30,
-------------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
(U.S.$ thousands except for ratios)
BALANCE SHEET DATA:
Cash and cash equivalents ...... $ 1,422 $ 6,749 $ 514 $ 1,160 $ 1,882
Total current assets ........... 10,664 24,441 22,169 20,776 28,823
Net property, plant
and equipment ................ 40,264 58,393 118,024 140,205 143,430
Total assets ................... 51,666 83,650 144,504 165,945 174,239
Total current liabilities ...... 21,157 14,245 54,331 102,557 45,038
Total short-term debt and
current portion of
long-term debt ............... 14,924 3,867 37,275 70,998 25,512
Total long-term debt, net ...... 2 31,476 39,609 8,705 4,270
Long-term advances
from parent company .......... -- -- -- -- 69,719
Minority interest .............. -- -- 9 3 --
Stockholders' equity ........... 26,194 33,000 43,964 48,436 51,457
-22-
As of November 30,
----------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
OPERATING DATA:
VSAT microstations
installed ........................ 543 756 1,462 1,951 2,111
Dataplus earth stations
installed ........................ 40 114 236 355 398
Satellites linked .................. 2 3 4 4 6
Leased satellite
capacity (Mhz) ................... 25.0 31.0 96.0 148.0 148.0
Teleports .......................... 1 1 1 1 1
Teleport antennas .................. 4 8 11 12 12
Regional Teleports ................. 2 5 6 6 6
Teledatos Networks ................. 3 6 7 7 7
Customers .......................... 125 200 292 319 358
- --------
(1) EBITDA consists of operating income (loss) plus depreciation and
amortization and income taxes. EBITDA is presented because it is a measure
commonly used in the industry and to enhance an understanding of the
Company's operating results and is not intended to represent or be a
substitute for cash flow under generally accepted accounting principles.
(2) The ratio of earnings to fixed charges is computed by dividing operating
income before fixed charges (other than capitalized interest), by fixed
charges. Fixed charges consist of interest charges and amortization of debt
expense and discount or premium related to indebtedness. Earnings of the
Company were insufficient to cover fixed charges by approximately $4.3
million, $11.3 million, $5.2 million, $4.6 million and $7.1 million for the
years ended December 31, 1993 and 1995, for the nine months ended September
30, 1995 and 1996, and for the pro forma year ended December 31, 1995,
respectively. Earnings of IMPSAT Argentina were insufficient to cover fixed
charges by approximately $4.5 million for the year ended November 30, 1991.
(3) Total debt is the sum of short-term and long-term debt. Total
capitalization is the sum of total debt, minority interest and
stockholders' equity.
-23-
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
This Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements that involve risks and
uncertainties. Such forward looking statements are based upon current
expectations and actual results may differ significantly from the results
discussed in the forward-looking statements. Factors that might cause such a
difference include, but are not limited to, those discussed in this Form 10-K
and the Registration Statement on Form S-4 covering the Exchange Offer. Such
factors involve numerous risks and uncertainties that could cause actual results
to differ materially including, but not limited to, the effect of changing
economic conditions, business conditions and growth in the telecommunications
industry in Latin America, the Company's ability to maintain its lending
arrangements, or if necessary, access external sources of capital and accurately
forecasting capital expenditures. In addition, the Company's future results of
operations and financial condition may be adversely impacted by various factors
including, primarily, the level of the Company's revenues. Certain of these
factors are described in the description of the Company's business, operations
and financial condition contained in this Form 10-K. Assumptions relating to
budgeting, marketing, product development and other management decisions are
subjective in many respects and thus susceptible to interpretations and periodic
revisions based on actual experience and business developments, the impact of
which may cause the Company to alter its marketing, capital expenditure or other
budgets, which may in turn affect the Company's financial position and results
of operations. The Company does not undertake to publicly update or revise its
forward looking statements even if experience or future changes make it clear
that any projected results (expressed or implied) will not be realized.
-24-
Results of Operations
The following table presents the Company's results of operations as a
percentage of revenues:
Year Ended December 31,
---------------------------------------------------
1994 1995 1996
--------------- ---------------- -----------------
(U.S.$ thousands and % of consolidated revenues)
Revenues $77,679 100.0% $105,641 100.0% $128,393 100.0%
Variable costs of
services 12,770 16.4 18,818 17.8 21,494 16.7
Satellite capacity
cost 7,734 10.0 10,973 10.4 13,925 10.8
Salaries, wages,
and benefits 13,528 17.4 22,220 21.0 25,561 19.9
Selling, general and
administrative
expenses 19,148 24.7 26,094 24.7 23,030 17.9
Depreciation
and amortization 12,874 16.6 20,653 19.6 26,318 20.5
Interest expense, net 8,231 10.6 15,677 14.8 23,185 18.1
Net gain on
foreign exchange 1,352 1.7 1,838 1.7 910 0.7
Benefit from (provision
for) foreign income
taxes 3,155 4.1 740 0.7 (3,542) (2.8)
Net income (loss) 3,036 3.9 (7,417) (7.0) (8,483) (6.6)
1996 Compared to 1995
Revenues. Revenues for 1996 totalled $128.4 million, an increase of
$22.8 million, or 21.6%, from 1995. The increase in revenues reflects
principally a growth in revenues of IMPSAT Colombia, which totalled $35.1
million, representing an increase of $12.7 million, or 56.7%, from 1995.
Revenues at IMPSAT Argentina for 1996 totalled $85.1 million (an increase of
$4.7 million, or 5.9%, from 1995), revenues at IMPSAT Venezuela totalled $4.5
million for 1996 (an increase of $2.3 million from 1995), and revenues at IMPSAT
Ecuador totalled $2.8 million for 1996 (an increase of $2.2 million from 1995).
Revenue growth for 1996 is attributable to an increase in the number of
customers and services provided.
IMPSAT Colombia's customer base increased from 271 at December 31, 1995
to 410 at December 31, 1996. During 1996 IMPSAT Colombia installed 287 VSAT
microstations and 148 Dataplus earth stations for new and existing customers.
IMPSAT Venezuela also experienced growth in the number of customers and
-25-
services provided. In Venezuela, the number of customers increased from 39 at
December 31, 1995 to 76 at December 31, 1996, and IMPSAT Venezuela installed 96
VSAT microstations and 48 Dataplus earth stations for new and existing customers
during 1996. In Ecuador, the number of customers increased from 26 as of
December 31, 1995 to 44 as of December 31, 1996, and IMPSAT Ecuador installed 55
VSAT microstations and 5 Dataplus earth stations during 1996.
The operations at IMPSAT Argentina experienced slower growth than that
registered in the other principal countries in which the Company operates. The
number of customers at IMPSAT Argentina as of November 30, 1996 totalled 358,
compared with 319 customers as of November 30, 1995. During 1996, IMPSAT
Argentina installed 160 VSAT microstations and 43 Dataplus earth stations for
new and existing customers, as compared to 489 VSAT microstations and 119
Dataplus earth stations installed during 1995. The significant diminution in the
level of growth of IMPSAT Argentina's revenues and customer base is related to
the recession experienced in Argentina that commenced in 1995 and continued
through the first six months of 1996.
During periods of economic uncertainty certain customers of the Company
in Argentina and in other countries in which the Company operates have deferred
major corporate expenditures and business decisions, such as the contracting of
their telecommunications services. The Company anticipates that its geographic
diversification will provide some protection against economic downturns in any
particular country, although there can be no assurance in this regard.
Based on recently reported economic data by the Argentine government,
there are signs that indicate that the Argentine economy is in the process of
recovering from the recession experienced in 1995. The Argentine government
reported preliminary estimates of a full-year 1996 growth of GDP of 4.4% over
1995 levels. The Argentine government estimated that compared to the same
periods in 1995, GDP rose 4.8%, 6.7% and 9.2% in the second, third and fourth
quarters of 1996, respectively, and declined by 3.2% in the first quarter of
1996. The Company believes that a contribution of the improvement in Argentina's
economy should translate into an upward trend in the level of growth of IMPSAT
Argentina's revenues and customer base in 1997. However, due to its history of
instability and to inherent structural weakness, especially in the public
sector, Argentina's
-26-
economy is susceptible to pressures, including devaluation, inflation, recession
and other adverse economic effects. Any of the foregoing could have a material
adverse effect on the future results of operations and financial condition of
IMPSAT Argentina and the Company.
The Company continued in 1996 to experience a high rate of renewal
among its customers who completed the term of their initial contracts with the
Company. In 1996, the Company lost approximately 29 customers.
The Company's contracts with its customers generally provide for
payment in U.S. dollars or for payment in local currency linked to the exchange
rate at the time of payment between the local currency and the U.S. dollar.
Accordingly, inflationary pressures experienced in the Company's country of
operations did not have direct effect on the Company's revenues during 1996.
Nevertheless, inflation has in the past, and could in the future, adversely
affect the economies of the Company's countries of operations by, among other
things, increasing the cost of local capital and deterring capital inflows from
the United States and elsewhere.
Variable Cost of Services. The Company's variable cost of services for
1996 totalled $21.5 million, an increase of $2.7 million, or 14.4%, from the
Company's variable cost of services for 1995. Of total variable cost of
services, $14.3 million related to the operations of IMPSAT Argentina and $5.9
million related to the operations of IMPSAT Colombia, compared to variable cost
of services of $14.7 million at IMPSAT Argentina for 1995 and variable cost of
services of $3.7 million at IMPSAT Colombia for 1995.
The principal items comprising total variable cost of services are
installation costs and sales commissions paid to third party sales
representatives. Installation costs totalled $10.0 million for 1996, or 46.5% of
total variable cost of services. The Company utilizes the services of outside
providers of installation services in Argentina and Colombia and intends over
time to expand the practice of using outside providers in the other countries in
which it operates. Variable costs of services declined at IMPSAT Argentina
primarily as a result of fewer installations in 1996 due to a lower rate of
growth of new services
-27-
provided and new customers and increased at IMPSAT Colombia because of the rapid
growth experienced in that market in new installations and new customers.
Sales commissions paid to third party sales representatives totalled
$9.6 million for 1996, or 44.7% of the Company's total variable cost of services
during such period. The overwhelming amount of such sales commissions ($8.5
million, or 88.5% of total sales commissions) were paid to third party sales
representatives with respect to customers of IMPSAT Argentina. To date, the
practice of utilizing third party sales representatives in connection with the
generation and servicing of customer contracts has been employed predominantly
in the case of IMPSAT Argentina, although third party sales representatives have
also recently been utilized in connection with IMPSAT Colombia's customer
generation.
Satellite Capacity Cost. The Company's satellite lease payments for
1996 totalled $13.9 million, an increase of $2.9 million, or 26.4%, over
satellite lease payments for 1995. The Company's costs for satellite capacity
are directly related to the increase in the Company's customer and revenue
bases, and the Company has acquired additional leased satellite capacity as
needed to meet current and projected levels of business. Total leased satellite
capacity has increased from 198.3 MHz as of December 31, 1995 to 253.03 MHz as
of December 31, 1996.
Salaries, Wages and Benefits. Salaries, wages and benefits paid by the
Company for 1996 totalled $25.6 million, an increase of $3.3 million, or 15.0%
over the Company's expenses for salaries, wages and benefits during 1995. The
Company increased personnel headcount during 1996 in Colombia, Mexico,
Venezuela, Ecuador and the United States and decreased personnel in Argentina.
In the second quarter of 1996, IMPSAT Argentina reduced its technical support
staff by 17 persons, its sales workforce by 16 persons and its personnel
workforce by 11 persons, resulting in the payment of legally required severance
payments for such personnel of $713,000 in the second quarter of 1996. This
reduction in workforce was made possible by increases in productivity realized
as a result of IMPSAT Argentina's organizational restructuring in 1995. The
Company also effectuated a small decrease in the number of employees at Resis.
-28-
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the Company consist principally of publicity and
promotion costs; provision for doubtful accounts; fees and other remunerations;
travel and entertainment; rent; and plant services, telephone and energy
expenses.
The Company incurred selling, general and administrative ("SG&A")
expenses of $23.0 million for 1996, a decrease of $3.1 million, or 11.8%, from
SG&A expenses incurred by the Company during 1995. SG&A expenses at IMPSAT
Argentina for 1996 totalled $10.7 million, a decrease of $3.5 million, or 24.6%,
from SG&A expenses incurred by IMPSAT Argentina for 1995. SG&A expenses at
IMPSAT Colombia for 1996 totalled $4.3 million, an increase of $0.6 million, or
16.2%, from SG&A expenses incurred by IMPSAT Colombia for 1995.
Principal items of note with respect to SG&A expenses incurred by the
Company in 1996 include the following matters:
The Company's provisions for doubtful accounts, principally relating to
IMPSAT Argentina, increased from $0.4 million for 1995, or 487.3%, to $2.5 for
1996. The Company has increased its allowance for doubtful accounts as a result
of certain payment arrears experienced by a number of customers in Argentina.
The Company's current policy is to reserve 30% for accounts receivable in excess
of 180 days but less than one year, and 100% for all accounts receivable in
excess of 360 days; except with respect to ENCOTESA, as to which IMPSAT
Argentina as of November 30, 1996 had an allowance for doubtful accounts
receivable of $0.5 million with respect to a total of $3.7 million in accounts
receivable of 180 days or more. As noted above under "Legal Proceedings," IMPSAT
Argentina currently is provisioning 100% for all current invoices delivered to
ENCOTESA. As a percentage of gross total revenues, the Company's allowance for
doubtful accounts has increased from 1.1% of total revenues for 1995 to 2.8% of
total revenues for 1996. The Company believes that its reserve for doubtful
accounts is adequate.
The Company in 1996 commenced efforts to decrease and rationalize its
SG&A expenses. Those steps included a decrease in expenses such as corporate
travel expenses and a more efficient use of space requirements. IMPSAT
Corporation moved its executive offices from the office space which it leased in
the business district in downtown Buenos Aires and has centralized its personnel
-29-
at IMPSAT Argentina's new facility at its Buenos Aires Teleport. The move of
IMPSAT Corporation's headquarters personnel to the Buenos Aires Teleport
resulted in a savings of $300,000 annually in reduced rental expense in 1996 as
compared to 1995.
Depreciation and Amortization. The Company's depreciation and
amortization for 1996 totalled $26.3 million, an increase of $5.7 million, or
27.5%, compared to depreciation and amortization for 1995. Depreciation and
amortization for IMPSAT Argentina totalled $18.8 million for 1996, an increase
of $2.7 million, or 16.8%, compared to 1995.
The increase in depreciation and amortization is related principally to
the growth in the Company's private telecommunications network systems and the
expansion of its facilities. Depreciation and amortization will continue to
increase in future periods as the Company anticipates continued expansion of its
private telecommunications network systems.
Interest Expense, Net. The Company's net interest expense for 1996
totalled $23.2 million, comprising interest expense of $25.2 million and
interest income of $2.0 million. Net interest expense increased $7.5 million, or
47.8%, from net interest expense for 1995. IMPSAT Argentina's net interest
expense for 1996 totalled $13.4 million ($9.6 million of which relates to loans
from third parties and $3.8 million of which relates to intercompany loans from
the proceeds of the Notes), a decrease of $3.0 million, or 28.8%, from net
interest expense for 1995. Net interest expense at IMPSAT Colombia for 1996
totalled $7.3 million ($7.0 million of which relates to loans from third parties
and $0.3 million of which relates to intercompany loans from the proceeds of the
Notes), an increase of $1.2 million, or 19.7%, from IMPSAT Colombia's net
interest expense for 1995. Interest expense with respect to intercompany loans
are eliminated in the Company's Consolidated Statement of Operations.
The increase in net interest expense reflects increased indebtedness of
the Company, which grew from $127.7 million as of December 31, 1995 to $199.1
million as of December 31, 1996. In addition, during the period between the
consummation of the offering of the Notes and the maturity dates for the
indebtedness refinanced with the proceeds of the Notes, the Company has been
required to incur the interest expense on the existing
-30-
indebtedness as well as that on the Notes, which additional interest expense has
been offset only partially by the receipt of interest income on the Company's
cash balances being held pending repayment. As of November 30, 1996, total
outstanding indebtedness at IMPSAT Argentina equalled $101.3 million (including
parent company advances of $71.5 million from the proceeds of the Notes),
compared to $79.7 million as of November 30, 1995. Total outstanding
indebtedness at IMPSAT Colombia as of December 31, 1996 equalled $35.9 million
(including parent company advances of $13.0 million from the proceeds of the
Notes), compared to $43.6 million as of December 31, 1995. The average interest
rate on the Company's indebtedness for 1996 was 15.4%, compared to an average
interest rate of 14.1% for 1995.
Net Gain (Loss) on Foreign Exchange. The Company recorded a net gain on
foreign exchange for 1996 of $0.9 million due to a decrease in the Company's
indebtedness denominated in Venezuelan bolivars as a result of the devaluation
of the Venezuelan bolivar against the U.S. dollar.
Benefit From (Provision for) Foreign Income Taxes. The Company recorded
an provision for foreign income taxes for 1996 of $4.3 million, a decrease of
$2.8 million from the benefit for foreign income taxes recorded for 1995. The
provision for foreign income taxes reflects the income taxes owed by the
Company's operating subsidiaries in their countries of operation. For 1996,
IMPSAT Argentina recorded a provision of $4.0 million, and IMPSAT Colombia
recorded a provision of $1.6 million. During 1996, IMPSAT Argentina had
available net operating loss carryforwards of $3.2 million which was applied
towards its income tax liability for 1996. See Note 8 to the Company's
consolidated financial statements and Note 9 to IMPSAT Argentina's consolidated
financial statements.
Net Loss. For 1996, the Company incurred a net loss of $8.5 million, an
increase of $1.1 million, or 14.9%, compared to the Company's net loss of $7.4
million for 1995. The Company's net loss as a percentage of total net revenues
for 1996 declined to 6.6% of total net revenues from a loss of 7.0% of total
revenues for 1995. The Company's net loss for 1996 is primarily related to the
costs of the Company's operations in Venezuela (a net loss of $1.2 million after
deduction for minority interests), Ecuador (a net loss of $1.1 million), Mexico
(a net loss of $2.0
-31-
million), as well as management services provided, and overhead expenses
incurred by IMPSAT Corporation of $5.4 million. Such losses were offset by
IMPSAT Argentina's net income for 1996 of $3.0 million, of which the Company's
interest after deduction for minority interests totalled $1.5 million and IMPSAT
Colombia's net income of $2.2 million for 1996, of which the Company's interest
after deduction for minority interests totalled $1.8 million. The increase in
the Company's net loss for 1996 is primarily attributable to increased interest
expenses associated with the Company's higher levels of indebtedness and the use
of IMPSAT Argentina's net operating loss carryforwards.
The losses recorded at the Company's newer and less established
subsidiaries in Venezuela, Ecuador and Mexico reflect the pattern experienced in
the results of IMPSAT Argentina and IMPSAT Colombia in their initial years of
operation. In these cases, the Company's subsidiaries have been established with
a full complement of technical, sales and other personnel required to meet the
needs of such entities' potential customer bases in order to provide from the
outset the level of quality and service which the Company strives to provide to
all of its customers. As a result, such subsidiaries have had relatively high
costs per current revenue and customer bases. In addition, the historical
results of the Company's newer subsidies have been affected by the incurrence of
financing costs relating to the establishment of the main Teleport in each
country prior to the generation of significant customer revenues.
1995 Compared to 1994
Revenues. Revenues for 1995 totalled $105.6 million, an increase of
$28.0 million, or 36.0%, from 1994. The increase in revenues reflected
principally growth in revenues of IMPSAT Argentina ($80.3 million, representing
an increase of $16.3 million, or 25.5%, from 1994) and of IMPSAT Colombia ($22.4
million, representing an increase of $9.7 million, or 75.7%, from 1994), as the
Company's operations in Argentina and Colombia continued to expand during 1995.
The growth in the Company's revenues in 1995 reflected both growth in
the number of customers and growth in the amount of services provided to
existing customers. The number of customers grew from 445 at December 31, 1994,
to 656 at December 31, 1995. During
-32-
1995, IMPSAT Argentina's customer base expanded from 292 to 319 customers and
IMPSAT Argentina installed 489 VSAT microstations and 119 Dataplus earth
stations for existing and new customers. Revenue for IMPSAT Argentina did not
increase as much as the Company had anticipated, principally because of the
economic recession experienced in Argentina in 1995. IMPSAT Colombia increased
its customer base from 135 to 271 during 1995 and installed 371 VSAT
microstations and 36 Dataplus earth stations for existing and new customers in
1995. Substantially all of the customers of IMPSAT Argentina that completed the
term of their original contracts with IMPSAT Argentina during 1995 entered into
renewal contracts.
In addition to general service revenues, IMPSAT Argentina recorded
revenues of $2.2 million in 1995 as a result of the sale to YPF S.A. of VSAT
microstations and Dataplus earth stations in connection with the implementation
of YPF's contract with IMPSAT Argentina, of which $0.7 million was recorded as a
gain of the sale of such equipment. Unlike the Company's other customers, YPF
preferred to own the ground-based portions of the private telecommunications
network systems infrastructure utilized by IMPSAT to provide such services to
YPF. The Company does not anticipate that a substantial number of additional
customers will seek to own their customer-site located infrastructure.
Variable Cost of Services. The Company's variable cost of services for
1995 totalled $18.8 million, an increase of $6.0 million, or 46.9%, from the
Company's variable cost of services for 1994. Of the total variable cost of
services, $14.7 million related to the operations of IMPSAT Argentina and $3.6
million to IMPSAT Colombia. IMPSAT Argentina's variable cost of services in 1995
represented an increase of $3.6 million, or 32.7%, over IMPSAT Argentina's
variable cost of services for 1994.
Sales commissions paid to third party sales representatives in 1995
totalled $8.3 million, or 44.2% of the Company's total variable cost of services
in 1995. Installation costs totalled $5.8 million in 1995, or 30.9% of the
Company's total variable cost of services.
Satellite Capacity Cost. The Company's Satellite lease payments
totalled $11.0 million in 1995, an increase of $3.2 million, or 41.6%, over its
satellite lease payments during 1994.
-33-
Salaries, Wages and Benefits. The Company's salaries, wages and
benefits expenses totalled $22.2 million in 1995, an increase of 64.4%, or $8.7
million, over salaries, wages and benefits expense incurred in 1994. The
increase in salaries, wages and benefits in 1995 reflected principally increased
personnel expense incurred in connection with the establishment of a management
infrastructure for IMPSAT Corporation and of the operations of IMPSAT Ecuador
and IMPSAT Mexico. In addition, the Company recorded an expense of $1.5 million
in 1995 for consultants' fees and related charges in connection with the
restructuring of personnel with respect to the implementation of the Company's
business unit concept.
Selling, General and Administrative Expenses. The Company incurred SG&A
expenses of $26.1 million for 1995, an increase of $6.9 million, or 36.3%, from
SG&A expenses incurred by the Company in 1994. SG&A expenses at IMPSAT Argentina
in 1995 totalled $14.2 million, an increase of $1.3 million, or 10.1%, from
1994.
The Company's reserve for uncollectible receivables, as of December 31,
1995, related principally to IMPSAT Argentina and totalled $1.1 million, an
increase of $0.4 million, or 58.7%, from the Company's reserve for uncollectible
receivables as of December 31, 1994. The increase was attributable to the
provisions for doubtful accounts of $0.8 million less write-offs of $0.4
million.
The significant increase in SG&A expenses in 1995 resulted from the
establishment of operations at the IMPSAT Corporation level, as well as Resis,
and from the creation of an infrastructure to support an expected growth in
customers and revenues.
Depreciation and Amortization. The Company's depreciation and
amortization in 1995 totalled $20.7 million, an increase of $7.8 million, or
60.4%, compared to depreciation and amortization in 1994. Depreciation and
amortization for IMPSAT Argentina in 1995 totalled $16.1 million, an increase of
$5.3 million, or 49.9%, compared to 1994.
Interest Expense, Net. The Company's net interest expense for 1995
totalled $15.7 million, comprising interest expense of $16.5 million and
interest income of $0.8 million. Net interest expense increased $7.4 million, or
90.5%, compared to the
-34-
Company's net interest expense for 1994. IMPSAT Argentina's net interest expense
totalled $10.4 million and increased $5.9 million, or 129.9%, compared to IMPSAT
Argentina's net interest expense for 1994.
The increase in net interest expense reflects both increased
outstanding indebtedness of the Company, which increased from $107.5 million as
of December 31, 1994 to $127.7 million as of December 31, 1995, an increase of
18.8%, and to higher interest costs with respect to such indebtedness. The
Company substantially increased its level of indebtedness throughout the second
half of 1994 and throughout 1995 in order to develop and commence the operations
of its private telecommunications network systems in Colombia and Venezuela and
also incurred significant indebtedness to expand its operations and customer
base in Argentina. Total outstanding indebtedness of the Company equalled $69.4
million at June 30, 1994, and $81.7 million at September 30, 1994. Net interest
expense of IMPSAT Colombia for 1995 totalled $6.0 million, an increase of $3.0
million, or 97.7%, compared to net interest expense for 1994. In addition, the
adverse economic effects in Argentina in the first half of 1995 as a result of
the Mexican peso crisis in December 1995, resulted in the Company's having to
pay higher rates of interest on portions of its short-term debt. During the
first two quarters of 1995, IMPSAT Argentina was required to pay interest on its
short-term debt at rates as high as 30% on an annual basis. While the Argentine
banking sector stabilized during the second half of 1995 and interest rates
declined from the extraordinarily high rates experienced in the first half of
1995, interest rates for IMPSAT Argentina's short-term debt nonetheless remained
high in 1995. The average interest rate on the Company's indebtedness for 1995
was 14.1%, compared to an average interest rate of 11.0% for 1994.
Net Gain (Loss) on Foreign Exchange. The Company recorded a net gain on
foreign exchange in 1995 of $1.8 million, an increase of $0.5 million from the
net gain on foreign exchange recorded by the Company in 1994, as the devaluation
of the Colombian peso and the Venezuelan bolivar, resulted in a decrease in U.S.
dollar terms of the Company's net liabilities for indebtedness denominated in
such currencies.
Benefit From (Provision For) Foreign Income Taxes. The Company recorded
a benefit from foreign income taxes in 1995 of $0.7 million, a decrease of $2.4
million, from the benefit from foreign income taxes
-35-
recorded in 1994. The benefit from foreign income taxes reflects the difference
in treatment for certain preoperating costs and with respect to net operating
loss carryforwards. See Note 8 to the Company's consolidated financial
statements.
Net Income (Loss). For 1995, the Company incurred a net loss of $7.4
million, compared to net income of $3.0 million for 1994. The principal reasons
for the Company's net loss for 1995 related to the costs of $5.4 million
associated with the establishment of operations at the IMPSAT Corporation level
and thereafter to the costs of management services provided, and overhead
expenses incurred by IMPSAT Corporation and to the organizational and start-up
costs of the Company's operations in Ecuador (a net loss of $1.3 million) and
Mexico (a net loss of $1.2 million). In addition, the Company's operations in
Venezuela recorded a net loss of $1.7 million for 1995, which after deduction
for minority interests resulted in a net loss of $1.3 million for the Company.
For 1995, IMPSAT Argentina recorded net income of $4.4 million, of which the
Company's interest therein after reduction for minority interests totalled $2.2
million. During the same period, IMPSAT Columbia recorded a net loss of $0.2
million, which after deduction for minority interests resulted in a loss of $0.1
million for the Company. IMPSAT Argentina's net income decreased $8.0 million
between 1995 and 1994, principally as a result of the recession in Argentina,
increases in selling expenses and interest expenses described above and an
increase in depreciation and amortization.
Liquidity and Capital Resources
The Company's operations have required significant capital expenditures
for the development and construction of its private telecommunications network
systems in each country in which it operates. The Company anticipates that it
will continue to incur significant capital expenditures in the next several
years in connection with the expected growth of its existing operations
currently in the commercial stages (Argentina, Colombia, Venezuela and Ecuador),
with the planned development of its operations now primarily in the build-out
stage (principally Mexico) and in the future with the planned establishment of
operations in Brazil.
-36-
The ability of the Company to continue the expansion of its private
telecommunications network systems at their current rates of expansion and to
meet its debt service obligations will be dependent upon the future performance
of the Company, including the ability of the Company to obtain additional debt
financing and potential equity financing. While the Company anticipates that it
will generate sufficient cash flows from operations to be able to meet all of
its current debt service requirements over the next several years, the Company's
ability to maintain its planned program of capital expenditures will be
dependent on its ability to obtain additional sources of financing. If the
Company is unable to obtain such additional sources of financing, it will not be
able to maintain its historical levels of growth and market position in each of
the countries in which it operates, which could have an adverse effect on the
business and prospects of the Company.
As set forth in its consolidated statements of cash flow, the Company
generated $9.8 million in net cash flow from operating activities for 1996,
compared to $18.9 million for 1995. The decrease in net cash flow for 1996 from
operating activities was primarily attributable to the decrease in trade
payables (0.4 million in 1996, versus an increase in trade payables of $8.4
million in 1995), an increase in non-trade receivables ($6.7 million versus an
increase of $0.5 million in 1995), and a decrease in other long-term liabilities
($2.5 million compared to a decrease of $0.4 million in 1995). Financing
activities provided $66.5 million in cash flow in 1996, representing a increase
of $44.4 million from 1995. Such increase is primarily attributable to the
proceeds of the Notes. During 1996, the Company used $53.7 million in net cash
flow in investing activities, compared to $66.9 million for 1995. The decrease
in net cash used in 1996 for investing activities resulted principally from a
decrease in purchases of property, plant and equipment ($53.7 million in 1996
versus $66.8 million in 1995) as the Company's rate of installation of private
telecommunications network infrastructure declined in light of the recession
experienced in Argentina.
At December 31, 1996, the Company had a cash balance of $28.9 million.
At that date, the Company's consolidated total debt was $199.1 million,
approximately $42.9 million of which was short-term debt (including the current
portion of long-term debt). As
-37-
of December 31, 1996, approximately $11.0 million of the Company's long-term
debt was scheduled to mature in 1997, approximately $8.1 million in 1998,
approximately $7.6 million in 1999 and approximately $140.5 million in the year
2000 and thereafter.
The Company intends to meet its future capital requirements from cash
flow from operations, from additional lines of credit and from future private or
public offerings of securities of IMPSAT Corporation and/or any of its
subsidiaries. Subject to market conditions, the Company is presently considering
an equity offering of approximately $75 to $100 million, to be made to the
public by means of a prospectus forming part of an effective registration
statement under the Securities Act of 1933, as amended. The Company anticipates
that it will require approximately $45 million of new capital during 1997, of
which approximately $25 million would contemplate refinancing of short-term
indebtedness, including under IMPSAT Argentina's Global Commercial Paper
Program, and $20 million would be additional indebtedness for the Company's
subsidiaries outside of Argentina for capital expenditures and working capital
purposes. As of November 30, 1996 IMPSAT Argentina had outstanding $20.0 million
of commercial paper issued under its $25.0 million Global Commercial Paper
Program, with maturities of up to 360 days and anticipates being able to access
the Euro commercial paper market as its outstanding commercial paper comes due.
In the event that the Company were unable to access such additional financing at
commercially reasonable rates or on commercially reasonable terms, it would be
required to defer or cease additional planned capital expenditures.
The Company anticipates accessing additional lines of credit from
financial institutions in the countries in which it operates. The Company also
anticipates requesting certain lines of credit from certain multilateral
financial institutions and bilateral export credit agencies including
Corporacion Andina de Fomento ("CAF") and the Inter-American Investment
Corporation ("IIC"). In addition, the Company's budget anticipates the use of
financial and commercial leasing facilities for the provision of equipment, and
the Company is in the stage of preliminary negotiations with several U.S-based
commercial lenders for such facilities. There can be no assurance that any such
financings will be consummated.
-38-
The Company's projected capital requirements described in the preceding
paragraphs do not take into account the establishment of operations and
development of private telecommunications network systems in Brazil. As
described in "Recent Developments - IMPSAT Brazil," the Company currently
anticipates the establishment of commercial operations in Brazil in 1997. The
Company's budget contemplates that the Company will need approximately $10
million to $20 million for the period from 1997 to 1998 for the adequate
build-out of a private telecommunications network system in Brazil over that
period of time. The Company currently expects that the funds necessary for the
establishment of such operations would be obtained through a combination of the
net proceeds of the Company's planned equity offering and/or additional debt
facilities. There can be no assurance that the Company will be able to access
the additional financing required for any future Brazilian operations.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and financial statements schedules are set
forth at pages F-1 to F-22 of this report.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
Item 10. Directors and Officers
The Certificates of Incorporation of IMPSAT Corporation and IMPSAT
Argentina, respectively, provide for an eight-member Board of Directors. The
directors of the Company and IMPSAT Argentina, respectively, will hold office
until the next annual meeting of their respective stockholders and until
successors of such directors have been elected and qualified, or until their
earlier death, resignation or removal.
-39-
The President of IMPSAT Corporation is elected at the annual meeting of
stockholders. The other officers are elected at the annual meetings of the Board
of Directors. All officers hold office until their successors are elected and
qualified, or until their earlier death, resignation or removal. The Chairman of
the Board of Directors of IMPSAT Argentina is elected at the regular annual
meeting of the Board of Directors. Officers of IMPSAT Argentina are appointed by
its Board of Directors.
Set forth below are the names, ages and positions of directors and
executive officers of the Company and IMPSAT Argentina as of December 31, 1996.
The officers designated as Vice Presidents of the Company are employees of
Resis, a wholly-owned subsidiary of the Company, which provides services to the
Company pursuant to a management services agreement with the Company.
Name Age Position
---- --- --------
Directors
Enrique M. Pescarmona....... 55 Chairman of the Board;
Director of IMPSAT Argentina
Ricardo A. Verdaguer........ 46 President and Chief Executive
Officer; Chairman of the Board
of Directors of IMPSAT
Argentina
Roberto Vivo................ 43 Director, Deputy Chief
Executive Officer and Vice
President, Marketing; Director
of IMPSAT Argentina
Alexander Rivelis........... 56 Director and Vice President,
International Development
Lucas Pescarmona............ 26 Director
Sofia Pescarmona............ 23 Director
Renato De Rimini............ 45 Director
Girolamo Di Genova.......... 57 Director
-40-
Executive Officers
Hector Alonso............... 39 Chief Operating Officer
Guillermo Jofre............. 41 Vice President, Finance
Guillermo V. Pardo.......... 46 Vice President, Planning
Jose R. Torres.............. 38 Vice President, Administration,
Chief Accounting Officer;
Director of IMPSAT Argentina
Luca Minzolini.............. 35 Vice President, Control
Management
Norberto Daniel Musante..... 39 Vice President, Operations
Giulio Masserano............ 44 Vice President, New Business
Alejandro Suarez del Cerro.. 43 Vice President, Technology
Rafael Carchak Canes........ 47 President and Director of
IMPSAT Argentina
Claudio Albanese............ 49 Director of IMPSAT Argentina
Archimede Del Vecchio....... 55 Director of IMPSAT Argentina
Pedro O. Mayol.............. 57 Director of IMPSAT Argentina
Jorge Marine................ 34 Manager, Administration of
IMPSAT Argentina
Maria Zavalski.............. 31 Manager, Marketing of IMPSAT
Argentina
Horacio Sajoux.............. 44 President of IMPSAT Colombia
Susana Gregori.............. 39 Chairman of the Board of
Directors and President of
IMPSAT Venezuela
Diego N. Rausei............. 46 President of IMPSAT Mexico
Mariano Torre Gomez......... 45 President of IMPSAT Ecuador
Richard Horner.............. 45 President of IMPSAT USA
Federico Saurina............ 45 President of Teledatos S.A., a
wholly-owned subsidiary of
IMPSAT Argentina
-41-
Biographies of Directors and Executive Officers
Information with respect to the business experience and the
affiliations of the directors and executive officers of the Company is set forth
below.
Enrique M. Pescarmona has been Chairman of the Board of Directors of
IMPSAT Corporation since September 1994 and a member of the Board of Directors
of IMPSAT Argentina since March 1994. Mr. Pescarmona is also Chairman of CORIM
and Industrias Metalurgicas Pescarmona S.A.I.C. y F. ("IMPSA"). He is a director
of Lagarde, S.A. (a wine company), Ingenieria y Computacion S.A. ("ICSA") (a
manufacturer of electronic components), La Mercantil Andina S.A. (an insurance
company), Puerto Seco S.A. (a manufacturer of automobile parts), Buenos Aires al
Pacifico San Martin S.A. and Ferrocarriles Mesopotomico General Urquiza S.A.
(Argentine railway companies); and is Vice President of Henri Lagarde S.A. (an
agribusiness). Mr. Pescarmona is an electromechanical engineer with a master's
degree in economics and business administration from the University of Navarra
in Spain.
Ricardo A. Verdaguer has been President, Chief Executive Officer and a
member of the Board of Directors of IMPSAT Corporation since September 1994. Mr.
Verdaguer also has served as President of IMPSAT Argentina since April 1988
until February 1990 and has served as Chairman of the Board of Directors of
IMPSAT Argentina since 1990. Mr. Verdaguer served in a number of management
positions with IMPSA from 1976 to 1988, including as Manager of the Contracts
and Construction Department and Manager of the Commercial Department. Mr.
Verdaguer holds a degree in electromechanical engineering from Ingenieria de la
Universidad Juan Agustin Maza, Mendoza.
Roberto Vivo has been Deputy Chief Executive Officer, Vice President,
Marketing and a member of the Board of Directors of IMPSAT Corporation since
September 1994. Mr. Vivo has also served as Marketing Director of IMPSAT
Argentina from April 1988 to December 1994 and as a member of the Board of
Directors of IMPSAT Argentina since 1988 to the present. Mr. Vivo also serves as
Chairman of the Board of Directors of FAICSA, an Argentina company engaged in
public construction projects. Mr. Vivo holds a degree in business administration
from Universidad Argentina de la Empresa.
-42-
Alexander Rivelis has been Vice President of International Development
and a member of the Board of Directors of IMPSAT Corporation since December
1994. Mr. Rivelis also serves as a member of the Board of Directors of IMPSAT
USA. Mr. Rivelis served as President of IMPSAT USA from 1995 to March 1996,
President of IMPSAT Colombia from 1991 to 1993, and has held a variety of
managerial positions with companies in the Pescarmona group from 1978 through
1990. Mr. Rivelis holds a degree in electrical and mechanical engineering from
the University of Rosario, Argentina.
Lucas Enrique Pescarmona, the son of Enrique M. Pescarmona, has been a
member of the Board of Directors of IMPSAT Corporation since February 1996. From
1993 to 1995 he held positions in the Buenos Aires, Argentina office of Arthur
Andersen & Co. In 1995 he transferred to Tecnologica em Componentes Automotivas
Ltda., a Brazilian manufacturer of automotive parts that is part of the
Pescarmona group, as senior investment analyst in Brazil. Mr. Pescarmona is also
a member of the Board of Directors of Puerto Seco S.A., a company within the
Pescarmona group. Mr. Pescarmona holds degrees in Economics and Political
Science from the University of Pittsburgh and is currently completing a master
of business administration degree at SDA Bocconi in Milan.
Sofia Pescarmona, the daughter of Enrique M. Pescarmona, has been a
member of the Board of Directors of IMPSAT Corporation since February 1996. Ms.
Pescarmona has worked in the marketing area of IMPSAT Corporation since January
1995. Prior to this, since August 1994, Ms. Pescarmona worked as an accounts
assistant in the sales department of IMPSAT Argentina. Ms. Pescarmona holds a
degree in International Relations from Tufts University.
Renato De Rimini has been a member of the Board of Directors of IMPSAT
Corporation since December 1994. Mr. De Rimini previously held senior positions
with Telecom Italia with responsibility for the Latin America region and has
been in charge of business acquisition projects for STET International in Latin
America and in particular in Bolivia, Chile, Brazil and Argentina. Mr. De Rimini
currently holds the position of Director, Business Operations, with STET
International. Mr. De Rimini is a member of the Board of Directors of Entel
Bolivia, Intelcom San Marino and International Communications Holland. Mr. De
Rimini holds a degree in telecommunications engineering.
-43-
Girolamo Di Genova has been a member of the Board of Directors of
IMPSAT Corporation since February 1996. Mr. Di Genova joined SIP, now Telecom
Italia, in 1967 and has since held several positions in the company, the latest
of which are: Regional Director in Venice (1986-89); Head of the Strategic
Planning (1989-91); Head of the Information Technologies (1991-92) and since
January 1993 Head of the Business Division of Telecom Italia. He is a member of
the boards of various companies of the IRI-STET Group, and he was a member of
the Technical Superior Council of Parti e Telegrafi, an Italian PTO. Mr. Di
Genova holds a degree in electronic engineering and has completed postgraduate
studies in telecommunications at the Balileo Ferraris Institute, Turin, Italy.
Hector Alonso has been Chief Operating Officer of IMPSAT Corporation
beginning in September 1996 and was President of IMPSAT Colombia from September
1993 to August 1996. Prior to joining IMPSAT Colombia, Mr. Alonso had 14 years
of experience in a variety of senior management positions with companies in the
Pescarmona group. Mr. Alonso holds a degree in industrial engineering from
Universidad Argentina de la Empresa.
Guillermo Jofre has been Vice President, Finance of IMPSAT Corporation
since May 1995. Prior to joining the Company, Mr. Jofre was Executive Vice
President of Banque Indosuez in Argentina from 1993 to 1995, and has had
approximately ten years of experience in management positions with companies in
Argentina, Germany and Switzerland. Presently, Mr. Jofre also serves as a member
of the Board of Directors of the investment fund Bemberg Inversiones S.A. Mr.
Jofre holds a degree in public accounting from University of Cordoba and an MBA
from Imede of Switzerland.
Guillermo V. Pardo has been Vice President, Planning of IMPSAT
Corporation since January 1995. Mr. Pardo was previously Managing Director of
the Guido Di Tella companies and has had over 20 years of experience in finance
positions in a number of companies in Argentina and Spain. Mr. Pardo is
currently a member of the Board of Directors of IMPSAT Argentina, FAICSA and the
Fundacion Torcuato Di Tella. Mr. Pardo holds a degree in business administration
from Universidad de Buenos Aires.
-44-
Jose R. Torres has been Vice President, Administration and Chief
Accounting Officer of IMPSAT Corporation since January 1995 and a Director of
IMPSAT Argentina since 1990. Mr. Torres served as external auditor of the
Mendoza Stock Exchange from 1982 to 1983. Mr. Torres previously worked as
assistant finance manager of IMPSA and as finance manager of IMPSAT Argentina
until December 1994. Mr. Torres holds a degree in public accounting from
Universidad Nacional de Cuyo.
Luca Minzolini has been Vice President, Control Management of IMPSAT
Corporation since December 1995. Prior to joining the Company, Mr. Minzolini had
10 years of experience in various management positions with the ENI Group,
including as Control Manager of Enichem Elastomers America Inc. from 1992 to
1995. Mr. Minzolini holds a degree in Business Administration from the
University of Rome, Italy and is a public accountant.
Norberto Musante has been Vice President, Operations of IMPSAT
Corporation since January 1995. Mr. Musante has held a number of management
positions in the Operations area of IMPSAT Argentina from 1990 to 1995. From
1980 to 1990, Mr. Musante was Chief of the Logistic Department of Sisteval S.A.,
a company engaged in the maintenance of radar systems and naval communications.
Mr. Musante holds a degree in electrical engineering from Universidad
Tecnologica Nacional.
Giulio Masserano has been Vice President, New Business of IMPSAT
Corporation since January 1995. Previously, Mr. Masserano has served as
Marketing Manager for IMPSAT Argentina from 1993 to 1994. Prior to joining the
Company, Mr. Masserano served in a number of management positions with STET and
its affiliates since 1985, including project leader for regulated and value
added services, and marketing expert for international projects related to
satellite activities. Mr. Masserano holds a degree in electronic engineering
from Universidad la Sapienza, Rome, Italy.
Alejandro Suarez del Cerro has been Vice President, Technology of
IMPSAT Corporation since January 1995. Previously, Mr. Suarez del Cerro has held
a number of management positions with IMPSAT Argentina, including the positions
of Technical Project Leader from 1988 to 1990, Technical Manager from 1990 to
1991 and Development Manager from 1991 to 1994. Mr. Suarez del
-45-
Cerro holds a degree in electronic engineering from Universidad de Buenos Aires.
Rafael Carchak Canes has been President and a Director of IMPSAT
Argentina since May 1995. Prior to joining the Company, Mr. Carchak served in a
variety of management positions with Eveready over a 15 year period, including
Operations Manager of Eveready Argentina from 1990 to 1992, and as President of
Eveready Argentina from 1992, in which position Mr. Carchak had responsibility
for Eveready's operations in Argentina, Paraguay and Chile. Mr. Carchak holds a
degree in engineering from Universidad Nacional de Buenos Aires.
Claudio Albanese has been a member of the Board of Directors of IMPSAT
Argentina since March 1996. Since September 1994, Mr. Albanese has been chairman
of Telemedia International, Inc. (TMI). Mr. Albanese was Deputy General Manager
of ITALCABLE-Servizi Cablegrafici Radiotelegrafici e Radioelettrici S.p.A.
("ITALCABLE") from 1993 to 1994 and Managing Director of British Telecom (Italy)
from 1988 to 1993. Mr. Albanese holds a degree in electronics.
Archimede Del Vecchio has been a member of the Board of Directors of
IMPSAT Argentina since March 1995. Mr. Del Vecchio, an engineer, previously held
executive positions with ITALCABLE and Telemedia International, Inc. (TMI). He
is presently International Manager with Telecom Italia S.p.A.
Pedro O. Mayol has been a member of the Board of Directors of IMPSAT
Argentina since 1990. He also serves as a member of the Board of Directors of
several other Argentine corporations, including Lagarde S.A., ICSA, Puerto Seco
S.A., La Mercantil Andina S.A., CORIM and IMPSA. Mr. Mayol, who is a brother-in-
law of Enrique Pescarmona, is an architect.
Jorge Marine joined the Company as Manager, Administration in June
1995. Previously, Mr. Marine was employed as a Manager, Administration and
Finance by BNL Inversiones, a company within the Banca Nazionale del Lavoro
group. Mr. Marine is a public accountant.
Maria Zavalski joined IMPSAT Argentina as Marketing Manager in April
1994. Prior to joining IMPSAT Argentina she was employed by IBM Argentina as an
accounts executive in the marketing division. Ms. Zavalski holds a degree in
business administration.
-46-
Horacio Sajoux has been President of IMPSAT Colombia since September
1996. Previously, Mr. Sajoux held several management positions with IMPSAT
Colombia, including General Director of Teledatos S.A., the joint venture entity
formed by IMPSAT Colombia and ETB; Vice President, Commercial and Technology;
and Commercial Manager and Director of Technology. Prior to joining IMPSAT
Colombia in 1992, Mr. Sajoux was employed in a number of management positions at
IMPSAT Argentina beginning in 1989. Mr. Sajoux received a degree in
Electromechanical Engineering from Universidad Nacional de Buenos Aires.
Susana Gregori has been President of IMPSAT Venezuela since September
1996 and before that from 1993 to November 1995. Ms. Gregori has also been
Chairman of the Board of Directors of IMPSAT Venezuela since November 1995. Ms.
Gregori holds a degree in industrial engineering from Universidad Nacional de
Cuyo.
Diego Nicasio Rausei has been President of IMPSAT Mexico since
September 1994. Starting in 1980, Mr. Rausei has previously held various senior
management positions with companies of the Pescarmona group. Mr. Rausei holds a
degree in chemical engineering from Universidad del Litoral.
Mariano Torre Gomez has been President of IMPSAT Ecuador since June
1994. Mr. Torre has served in a variety of positions involving engineering,
production, planning, business development and new markets for companies in the
Pescarmona group over a period of 17 years. Mr. Torre served four years at
IMPSAT Argentina in the Commercial and New Licenses Departments. Mr. Torre holds
a degree in engineering from Universidad Tecnologica Nacional. Mr. Torre has
recently been appointed President of IMPSAT Venezuela and will be transferring
from IMPSAT Ecuador to IMPSAT Venezuela in April 1996.
Richard Horner has been President of IMPSAT USA since July 1995. Prior
to joining IMPSAT USA, Mr. Horner was South American Sales Manager for
Scientific-Atlanta Network Systems Group from 1991 to 1995, where he was
responsible for commercialization of satellite-based network products to both
PTOs and emerging private sector carriers. Mr. Horner holds a degree in
electrical engineering from University of Kansas and a degree in Latin American
studies from the University of Texas.
-47-
Federico Saurina has been President of Teledatos, S.A., a wholly-owned
subsidiary of IMPSAT Argentina responsible for the Global Fax business since
1994. Mr. Saurina served as Manager of Regional Teleports of IMPSAT Argentina
from 1991 to 1994, and as Purchasing Manager of Cielos del Sur-Austral Lineas
Aereas from 1989 to 1991. Mr. Saurina holds a degree in electromechanical
engineering from Universidad J.A. Maza, Mendoza.
Item 11. EXECUTIVE COMPENSATION
The following tables set forth the compensation paid or accrued to the
chief executive officer and the three other most highly compensated executive
officers receiving over $100,000 per year for services rendered of each of the
Company and IMPSAT Argentina during fiscal year 1996. No bonuses were paid by
the Company or IMPSAT Argentina to such executive officers during fiscal year
1996. The Company and IMPSAT Argentina do not maintain any long-term incentive
plans and do not grant stock appreciation rights, stock options or restricted
stock awards.
Summary Compensation Table
Name and
Principal Position Annual Compensation
- ------------------- ------------------------------------
Other Annual
The Company Year Salary Bonus Compensation
----------- ---- ------ ----- -------------
Ricardo A. Verdaguer
President and
Chief Executive Officer....... 1996 $207,646 $-- $--
Enrique M. Pescarmona
Chairman of the Board......... 1996 $371,651 $-- $--
Roberto Vivo
Director, Deputy Chief
Executive Officer and
Vice President, Marketing..... 1996 $173,657 $-- $--
Jose R. Torres
Vice President, Administration
Chief Accounting Officer...... 1996 $126,241 $-- $--
-48-
IMPSAT Argentina
Rafael Carchak Canes
President and
Chief Executive Officer....... 1996 $196,400 $-- $--
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table and the accompanying notes set forth certain
information concerning the beneficial ownership of IMPSAT Corporation's and
IMPSAT Argentina's common stock as of December 31, 1996 by (i) each person who
owned of record, or was known to own beneficially, more than five percent of
IMPSAT Corporation's Common Stock, (ii) each director, (iii) each executive
officer and (iv) all directors and executive officers as a group. Except as
otherwise indicated, each person listed in the table has informed the Company
that such person has (i) sole voting and investment power with respect to such
person's shares of Common Stock and (ii) record and beneficial ownership with
respect to such person's shares of Common Stock.
Name and Address of Beneficial Owner Shares Percent
- ------------------------------------ ------- -------
IMPSAT Corporation
Beneficial Owners of more than 5%
Nevasa Holdings Ltd.(1) 58,312,980 75.00%
17 Dame Street
Dublin 2, Ireland
STET International Netherlands NV(2) 19,437,660 25.00%
6-8 Hoeckenrode
Amsterdam, The Netherlands
Directors and Executive Officers(1) 0 0%
All Directors and Officers
as a Group (26 persons)(1) 0 0%
IMPSAT Argentina
Invertel S.A.(3) 2,613 51.0%
Viamonte 1526
Buenos Aires, Argentina
-49-
Nevasa Holdings Ltd.(1) 1,519 29.7%
17 Dame Street
Dublin 2, Ireland
STET International Netherlands NV(2) 590 11.5%
6-8 Hoeckenrode
Amsterdam, The Netherlands
Directors and Executive Officers(1) 0 0%
All Directors and Officers
as a Group (10 persons)(1) 0 0%
- --------------
(1) Nevasa Holdings Ltd. ("Nevasa") is controlled by CORIM, Militello
Ltd. and Rotling International Corporation. CORIM, an Argentine corporation
that holds an 82.54% equity interest in Nevasa, is controlled by Mr. Enrique
Pescarmona, Chairman of the Board of Directors of IMPSAT Corporation, and
other members of the Pescarmona family and is a holding company for
businesses engaged in a variety of activities including property, casualty
and other insurance, heavy-steel capital goods, manufacturing auto parts,
cargo transportation and environmental services. Militello Ltd., a British
Virgin Islands corporation, holds an 11.62% equity interest in Nevasa and is
itself controlled by Mr. Roberto Vivo, Deputy Chief Executive Officer of
IMPSAT Corporation. Rotling International Corporation, a British Virgin
Islands corporation, holds a 5.84% equity interest in Nevasa and is itself
controlled by Mr. Ricardo Verdaguer, President and Chief Executive Officer
of IMPSAT Corporation.
(2) STET International Netherlands NV ("STET International") is a
wholly-owned subsidiary of STET International SpA. STET International SpA is
in turn held 51% by STET SpA ("STET"), 37% by Telecom Italia and 12% by
Telecom Italia Mobile, each of which are controlled by IRI-Instituto per la
Ricostruzione Industriale SpA.
(3) The Company holds a 99.9% equity interest in Invertel S.A.
The shareholders of IMPSAT Corporation and IMPSAT Argentina have
entered into shareholders agreements relating to the joint management of IMPSAT
Corporation and IMPSAT Argentina. The shareholders agreements provide STET with
veto rights with respect to certain significant corporate actions and provides
STET with the right of first refusal with respect to sales of IMPSAT Argentina's
capital stock.
-50-
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company in the normal course of its business provides private
telecommunications network services to companies in which CORIM, members of the
Pescarmona family, STET and entities affiliated with the Suramericana Group (as
defined in the following paragraph) have an interest. Total telecommunications
services provided to companies in which CORIM or other members of the Pescarmona
family have an interest during 1996 totalled approximately $0.9 million. Total
telecommunications services provided to companies affiliated with the
Suramericana Group for 1996 totalled approximately $ 0.9 million.
The Company holds a 74.2% equity interest in IMPSAT Colombia, of which
8.9% is held directly and 65.3% held indirectly through Colinvertel S.A., a
holding company in which the Company holds a 71.7% equity interest. Suramericana
de Seguros and Suramericana de Capitalizacion insurance and finance companies,
respectively, (Suramericana de Seguros, Suramericana de Capitalizacion and
affiliated entities being referred to as the "Suramericana Group"), together
hold a 27% equity interest in Colinvertel. The Suramericana Group also holds a
25% interest in IMPSAT Veneezuela.
The following is a description of the most significant of transactions
between the Company and its subsidiaries and entities affiliated with Nevasa,
STET and the Suramericana Group. Although the Company believes that transactions
with its affiliates are generally conducted on an arm's length basis, conflicts
of interest are inherent in such transactions.
IMPSAT Argentina telecommunications services to Industrias Metalurgicas
Pescarmona S.A.I.C. y F. ("IMPSA"), a company controlled by CORIM that produces
heavy steel capital goods, including hydromechanical equipment and cranes, and
through subsidiaries, engages in other businesses including cargo
transportation, auto parts manufacture and environmental services. Total
telecommunications services provided to IMPSA for 1996 equalled $314,000.
IMPSAT Argentina provides telecommunications services to Puerto Seco,
S.A. ("Puerto Seco"), a company controlled by CORIM and IMPSA that produces wire
-51-
harnesses for automobile electrical systems and coil springs for automobile
suspension systems in Argentina and Brazil. Total telecommunications services
provided to Puerto Seco for 1996 equalled $81,000.
IMPSAT Argentina provides telecommunications services to Buenos Aires
al Pacifico San Martin S.A. ("BAPSA"), a company controlled by CORIM and IMPSA
that operates the San Martin Railway between Buenos Aires and the Cuyo region in
central-western Argentina and provides cargo transportation services along the
San Martin Railway. Total telecommunications services provided to BAPSA for 1996
equalled $277,000.
IMPSAT Argentina provides telecommunications services to La Mercantil
Andina S.A., an insurance company owned by CORIM and members of the Pescarmona
family. Total telecommunications services provided to La Mercantil Andina S.A.
for 1996 equalled $124,000.
IMPSAT Argentina provides telecommunications services to Lagarde S.A.,
a company owned by members of the Pescarmona family that owns and operates a
winery in the Mendoza area of Argentina. Total telecommunications services
provided to Lagarde S.A. for 1996 equalled $60,000.
IMPSAT Colombia provides telecommunications services to several
companies within the Suramericana Group, including Suramericana de Seguros, an
insurance company. Corporacion Financiera Nacional y Suramericana S.A.
("Corfinsura"), a financial institution, Susalud, a health services company,
Proteccion S.A., a pension fund, Suleasing, a finance company, and
Sufinanciamento, a finance company. During 1996, the total amount of
telecommunications services rendered to Suramericana de Seguros equalled
$843,000.
In addition, in the normal course of business the Company enters into
transactions with companies in which CORIM, members of the Pescarmona family or
the Suramericana Group had an interest. The following is a description of the
most significant of such transactions.
La Mercantil Andina acts from time to time as an insurance broker and
an insurer for IMPSAT Argentina. IMPSAT Argentina paid premiums to La Mercantil
Andina S.A. totaling $143,510 during 1996.
-52-
In connection with the purchase of telecommunications equipment from
Hughes Network Services pursuant to a financing from Citibank, N.A. that is
guaranteed by The Export-Import Bank of the United States, IMPSA International
Inc., a wholly-owned subsidiary of IMPSA located in Pittsburgh, Pennsylvania,
acted as supplier of such equipment to IMPSAT Argentina and received a
commission of 3% of the total value of the equipment subject to the Eximbank
financing. The total commissions paid by IMPSAT Argentina to IMPSA International
Inc. in connection with such transactions for 1996 equalled $160,000.
The Company receives technical assistance from Telecom Italia and
ITALCABLE, companies within the STET group and affiliates of STET International,
which assistance consists of the seconding of three employees from Telecom
Italia and ITALCABLE to the Company. Total payments to Telecom Italia and
ITALCABLE for such services for 1996 equalled $417,000.
IMPSAT Argentina received a loan of $5 million from IMPSA for a period
of 30 days in March 1996 in connection with the refinancing of certain
commercial paper of IMPSAT Argentina. The loan, which bore interest at a rate of
15% per annum, was repaid with the proceeds of the issuance of a subsequent
series of commercial paper of IMPSAT Argentina.
In December 1995, Mr. Vivo advanced IMPSAT Argentina $792,000. The
loan, which bore interest at a rate of 9.5% per annum, was repaid in May 1996.
In December 1995, a company affiliated with Mr. Verdaguer advanced
IMPSAT Argentina $720,000. The loan, which bore interest at a rate of 13.8% per
annum, was repaid in May 1996. The interest rates on the loans to IMPSAT
Argentina from IMPSA, Mr. Vivo and Mr. Verdaguer were comparable to or less than
prevailing market rates. Corfinsursa and Sufinanciamento are creditors of IMPSAT
Colombia. As of December 31, 1996, IMPSAT Colombia was indebted to Corfinsura
for indebtedness in the amount of $6.7 million and was indebted to
Sufinanciamento in the amount of $76,000.
Suramericana de Seguros acts from time to time as an insurance broker
and an insurer for IMPSAT Colombia. IMPSAT Colombia paid premiums to Suramerica
de Seguros totalling $135,000 for 1996.
-53-
Certain other companies within the Suramericana group, including
Suleasing S.A. and Suleasing Panama, provide financial leasing services to
IMPSAT Colombia. The total payments by IMPSAT Colombia under leases from such
companies were $1.2 million during 1996.
-54-
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) List of Financial Statements
Consolidated Financial Statements of IMPSAT Corporation and Subsidiaries
Consolidated Balance Sheets as of December 31, 1995 and 1996
Consolidated Statements of Operations for the Years Ended December 31,
1994, 1995 and 1996
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1994, 1995 and 1996
Consolidated Statements of Cash Flows for the Years Ended December 31,
1994, 1995 and 1996
Consolidated Financial Statements of IMPSAT S.A. and Subsidiaries
Consolidated Balance Sheets as of November 30, 1995 and 1996
Consolidated Statements of Income for the Years Ended November 30, 1994,
1995 and 1996
Consolidated Statements of Stockholders' Equity for the Years Ended
November 30, 1994, 1995 and 1996
Consolidated Statements of Cash Flows for the Years Ended November 30,
1994, 1995 and 1996
(a)(2) List of Schedules. All schedules for which provision is made in the
applicable accounting regulations of the Commission are omitted because they are
not applicable, or the information is included in the financial statements
included herein.
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the year ended
December 31, 1996.
-55-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, each of the registrants has duly caused this
report to be signed on its behalf by the undersigned thereunto duly authorized,
in the City of Buenos Aires in the Republic of Argentina, March 31, 1997.
IMPSAT Corporation
By: /s/ Ricardo A. Verdaguer
-------------------------------
Ricardo A. Verdaguer,
President and Chief
Executive Officer
Date: March 31, 1997
IMPSAT S.A.
By: /s/ Rafael Carchak Canes
-------------------------------
Rafael Carchak Canes,
President
Date: March 31, 1997
-56-
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below (each, a "Signatory") constitutes and appoints Guillermo Jofre and
Jose R. Torres (each, an "Agent," and collectively, "Agents") or either of them,
his true and lawful attorney-in-fact and agent, each with full power of
substitution and resubstitution, for and in his name, place and stead, in any
and all capacities, to sign this Report and any and all amendments thereto and
to file the same, with all exhibits thereto, and all other documents in
connection therewith, with the Securities and Exchange Commission. Each
Signatory further grants to the Agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary, in the judgment of such Agent, to be done in connection with any such
signing and filing, as full to all intents and purposes as he might or could do
in person, and hereby ratifies and confirms all that said Agents, or any of
them, or their or his other substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report has been signed by the following persons in the capacities
and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Enrique M. Pescarmona Chairman of the Board of March 31, 1997
Directors of IMPSAT
Corporation
/s/ Guillermo Jofre Vice President, Finance March 31, 1997
of IMPSAT Corporation
/s/ Jose R. Torres Vice President, Adminis- March 31, 1997
tration and Chief Account-
ing Officer of IMPSAT
Corporation
-57-
/s/ Roberto Vivo Director, Deputy Chief March 31, 1997
Executive Officer and
Vice President, Marketing
of IMPSAT Corporation
/s/ Alexander Rivelis Director and Vice Presi- March 31, 1997
dent, International Develop-
ment of IMPSAT Corporation
/s/ Lucas Pescarmona Director of IMPSAT March 31, 1997
Corporation
Sofia Pescarmona Director of IMPSAT March 31, 1997
Corporation
Renato De Rimini Director of IMPSAT March 31, 1997
Corporation
Girolamo Di Genova Director of IMPSAT March 31, 1997
Corporation
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below (each, a "Signatory") constitutes and appoints Guillermo Jofre,
Jose R. Torres and Richard Horner (each, an "Agent," and collectively, "Agents")
and each or any of them, his true and lawful attorney-in-fact and agent, each
with full power of substitution and resubstitution, for and in his name, place
and stead, in any and all capacities, to sign this Report and any and all
amendments thereto and to file the same, with all exhibits thereto, and all
other documents in connection therewith, with the Securities and Exchange
Commission. Each Signatory further grants to the Agents, and each of them, full
power and authority to do and perform each and every act and thing requisite and
necessary, in the judgment of such Agent, to be done in connection with any such
signing and filing, as full to all intents and purposes as he might or could do
in person, and hereby
-58-
ratifies and confirms all that said Agents, or any of them, or their or his
other substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report has been signed by the following persons in the capacities
and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Ricardo A. Verdaguer Chairman of the Board of March 31, 1997
Directors of IMPSAT
Argentina
/s/ Enrique M. Pescarmona Director of IMPSAT March 31, 1997
Argentina
/s/ Roberto Vivo Director of IMPSAT March 31, 1997
Argentina
Pedro Mayol Director of IMPSAT March 31, 1997
Argentina
/s/ Rafael Carchak Canes Director of IMPSAT March 31, 1997
Argentina
/s/ Jose R. Torres Director of IMPSAT March 31, 1997
Argentina (principal
financial officer)
Archimede Del Vecchio Director of IMPSAT March 31, 1997
Argentina
Claudio Albanese Director of IMPSAT March 31, 1997
Argentina
-59-
/s/ Jorge I. Marine Manager, Administration March 31, 1997
of IMPSAT Argentina
(principal accounting
officer)
/s/ Richard Horner Attorney-in-Fact March 31, 1997
-60-
INDEPENDENT AUDITORS' REPORT
To the Shareholders of IMPSAT Corporation:
We have audited the accompanying consolidated balance sheets of IMPSAT
Corporation and its subsidiaries (the "Company") as of December 31, 1996 and
1995, and the related consolidated statements of operations, stockholders'
equity and of cash flows for each of the three years ended December 31, 1996.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements 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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by the 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, such consolidated financial statements present fairly, in all
material respects, the financial position of IMPSAT Corporation and its
subsidiaries at December 31, 1996 and 1995, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.
Deloitte & Touche LLP
Miami, Florida
February 25, 1997
F-1
IMPSAT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995 (In Thousands of U.S. Dollars)
- --------------------------------------------------------------------------------
ASSETS 1996 1995
- ------ ---- ----
CURRENT ASSETS:
Cash and cash equivalents $ 28,895 $ 6,216
Trade accounts receivable, net 28,112 21,587
Other receivables 12,699 6,441
Prepaid expenses 4,068 2,662
---------- ---------
Total current assets 73,774 36,906
---------- ---------
PROPERTY, PLANT AND EQUIPMENT, Net 227,086 199,701
--------- ---------
NON-CURRENT ASSETS:
License and permit costs, net 2,413 2,785
Deferred income taxes, net 4,812 7,824
Deferred financing costs, net 4,760
Othere non-current assets 2,385 1,879
---------- ---------
Total non-current assets 14,370 12,488
--------- ---------
TOTAL $ 315,230 $ 249,095
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Account payable - trade $ 19,250 $ 19,641
Short-term debt 31,852 60,335
Current portion of long-term debt 11,022 37,175
Accrued liabilities 11,708 5,538
Other liabilities 4,294 6,124
---------- ---------
Total current liabilities 78,126 128,813
---------- ---------
LONG-TERM DEBT, NET 156,230 30,200
---------- ---------
OTHER LONG-TERM LIABILITIES 3,752 6,243
---------- ---------
COMMITMENTS AND CONTINGENCIES (Note 9)
MINORITY INTEREST 30,242 28,476
---------- ---------
STOCKHOLDERS' EQUITY:
Common stock, $1 par value; and 77,750,640
and 51,300,000 shares authorized , issued and
outstanding at December 31, 1996 and 1995,
respectively 77,750 51,300
Capitalization - IMPSAT Argentina 13,360
Accummulated deficit (30,870) (9,297)
--------- ---------
Total stockholder's equity 46,880 55,363
--------- ---------
TOTAL $ 315,230 $ 249,095
========= =========
See notes to consolidated financial statements
F-2
IMPSAT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995 and 1994 (In Thousands of U.S. Dollars)
- --------------------------------------------------------------------------------
1996 1995 1994
---- ---- ----
NET REVENUES FROM SERVICES $ 128,393 $ 105,641 $ 77,679
---------- ---------- ---------
COST AND EXPENSES:
Variable cost of services 21,494 18,818 12,770
Satellite capacity cost 13,925 10,973 7,734
Salaries, wages and benefits 25,561 22,220 13,528
Selling, general and administrative 23,030 26,094 19,148
Depreciation and amortization 26,318 20,653 12,874
---------- ---------- ---------
Total cost and expenses 110,328 98,758 66,054
---------- ---------- ---------
Operating income 18,065 6,883 11,625
---------- ---------- ---------
OTHER INCOME (EXPENSES):
Interest expense, net (23,185) (15,677) (8,231)
Net gain on foreign exchange 910 1,838 1,352
Other income, net 1,035 511 599
---------- ---------- ---------
Total other income (expense) (21,240) (13,328) (6,280)
---------- ---------- ---------
(LOSS) INCOME BEFORE INCOME TAXES AND MINORITY INTEREST (3,175) (6,445) 5,345
(PROVISION FOR) BENEFIT FROM INCOME TAXES (3,542) 740 3,155
---------- ---------- ---------
(LOSS) INCOME BEFORE MINORITY INTEREST (6,717) (5,705) 8,500
INCOME ATTRIBUTE TO MINORITY INTEREST (1,766) (1,712) (5,464)
---------- ----------- ---------
NET (LOSS) INCOME $ (8,483) $ (7,417) $ 3,036
========== ========== =========
F-3
See notes to consolidated financial statements
IMPSAT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (In Thousands of U.S. Dollars)
- --------------------------------------------------------------------------------
Capitalization
-----------------------------------
Company
-------------------- Accumulated
Combined Minority
Shares Amount Subsidiaries Deficit Total Interest
------ ------ ------------ ------- ----- --------
BALANCE AT DECEMBER 31, 1993 $33,302 $(6,508) $26,794 $19,613
Dividends declared - Argentina (765) (765) (735)
Additional capitalization - Venezuela 1,650 1,650 550
Initial capitalization - others 107 107
Initial capitalization - corp.:
Columbia exchange 12,070 $12,070 (13,056) 986
Venezuela exchange 7,165 7,165 (8,536) 1,371
Other exchanges 107 107 (107)
Additional capital contribution 31,958 31,958 31,958
Net income for the year 3,036 3,036 5,464
BALANCE AT DECEMBER 31, 1994 51,300 51,300 13,360 (1,880)(*) 62,780 24,892
Additional capitalization - Venezuela 1,872
Net loss for the year (7,417) (7,417) 1,712
--------- --------- -------- -------- -------- -------
BALANCE AT DECEMBER 31, 1995 51,300 51,300 13,360 (9,297)(*) 55,363 28,476
IMPSAT Argentina exhange 26,450 26,450 (13,360) (13,090)
Net loss for the year (8,483) (8,483) 1,766
--------- --------- -------- -------- -------- --------
BALANCE AT DECEMBER 31, 1996 77,750 $ 77,750 $ -- (30,870)(*) $ 46,880 $ 30,242
======== ======== ======== ======== ========= ========
(*) Includes an appropriation of retained earnings amounting to $150, $449 and
$1,254 in 1994, 1995 and 1996 to comply with legal reserve requirements in
Argentina.
See notes to consolidated financial statements.
F-4
IMPSAT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 and 1994 (In Thousands of U.S. dollars)
- --------------------------------------------------------------------------------
1996 1995 1994
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (8,483) $ (7,417) $ 3,036
Adjustments to reconcile net (loss)income to net cash
provided by operating activities:
Amortization and depreciation 26,318 20,653 12,874
Deferred income tax provision (benefit) 3,012 (936) (3,483)
Income attributable to minority interest 1,766 1,712 5,464
Changes in assets and liabilities:
Increase in trade accounts receivable, net (6,525) (5,940) (1,178)
(Increase) decrease in prepaid expenses (1,406) 1,513 (2,724)
Increase in other receivables and other non-current assets (6,647) (446) (4,317)
(Decrease) increase in accounts payable - trade (41) 8,444 3,280
Decrease in accrued and other liabilities 4,340 1,658 4,142
Decrease in other long-term liabilities (2,491) (347) 163
-------- -------- -------
Net cash provided by operating activities 9,843 18,894 17,257
-------- -------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (53,648) (66,796) (87,023)
Capitalized preoperating costs (33) (114) (580)
-------- -------- -------
Net cash used by investing activities (53,681) (66,910) (87,603)
-------- -------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (payments on) borrowings from short-term debt (28,483) 15,533 34,306
Capital contribution from minority interest 1,872 28,224
Proceeds from long-term debt, net of deferred financing costs 132,888 8,545 (1,444)
Repayments of long-term debt (37,888) (3,853) 34,265
-------- -------- -------
Net cash provided by financing activities 66,517 22,097 95,351
-------- -------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 22,679 (25,919) 25,005
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 6,216 32,135 7,130
-------- -------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 28,895 $ 6,216 $ 32,135
======== ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 19,413 $ 16,498 $ 7,358
======== ======== ========
Foreign income taxes paid $ 186 $ 244
======== ========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
ACTIVITIES:
Equipment in transit $ 350 $ 264 $ 518
======== ======== ========
See notes to consolidated financial statements
F-5
IMPSAT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In Thousands of U.S. dollars)
- --------------------------------------------------------------------------------
1. BACKGROUND AND EVOLUTION
IMPSAT Corporation, a Delaware holding company (the "Company"), is a
privately-held corporation which provides and operates private networks of
integrated data and voice telecommunications systems in a number of countries in
Latin America. The Company's principal line of business comprises the provision
of data transmission services for large national and multinational companies,
financial institutions, and governmental agencies and other business customers
in Latin America. The Company provides its services through its owned advanced
telecommunications networks comprised of teleports, earth stations, fiber optic
and microwave link and leased satellite and fiber optic capacity.
The Company was formed in August 1994 for the purpose of combining operating
entities in Argentina, Colombia and Venezuela, which were previously controlled
by common ownership. The original operating entity was established in Argentina
in 1990 under the name of IMPSAT S.A. ("IMPSAT Argentina"). Thereafter,
operating entities were established in Colombia in 1992 ("IMPSAT Colombia") and
in Venezuela in 1993 ("IMPSAT Venezuela").
As part of the formation of the Company, a shareholder of the Company
contributed its ownership in the operating entities in Colombia and Venezuela in
exchange for common stock. At the same time, cash was contributed by four
shareholders in exchange for common stock. In July 1996, shareholders of IMPSAT
Argentina exchanged a 51% ownership interest in IMPSAT Argentina for 26,450,640
shares of common stock of the Company.
Since the establishment of the Company, new operating subsidiaries have been
created in Mexico, Ecuador, Peru and the United States. Accordingly, the
Company's operating subsidiaries at December 31, 1996 are as follows:
Operating
Ownership Income
Country Operating Subsidiaries Percentage Total Assets Revenues (Loss)
------- ---------------------- ---------- ------------ -------- ------
Argentina Impsat S.A. 51.0% $ 173,534 $ 85,101 $ 15,125
Colombia Impsat S.A. 74.2 70,501 35,116 10,693
Venezuela Telecomunicaciones Impsat S.A. 75.0 23,718 4,496 (2,438)
Mexico Impsat S.A. de C.V. 99.9 7,043 198 (2,005)
Ecuador Impsatel del Ecuador S.A. 100.0 9,795 2,802 (965)
USA Impsat USA, Inc. 100.0 997 472 (440)
------------ ----------- ----------
Subtotal for operating subsidiaries 285,588 128,185 19,970
Parent company and others 29,642 208 (1,905)
------------ ----------- ----------
Consolidated total $ 315,230 $ 128,393 $ 18,065
============ =========== =========
In addition, the Company owns other subsidiaries which serve as intermediaries
or provide support functions to the Company and its operating subsidiaries. They
are Resis Ingenieria, S.A. (Argentina) and ISCH Ltd. (Liechtenstein).
F-6
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation - The financial statements for the year ended December 31,
1996 are presented on a consolidated basis as a result of the exchange for 51%
of IMPSAT Argentina described in Note 1. The financial statements for the years
ended December 31, 1995 and 1994 are presented on a combined basis by virtue of
common ownership, as described in Note 1. IMPSAT Argentina has been consolidated
on the basis of its fiscal year-end, November 30. All significant intercompany
transactions and balances have been eliminated.
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 revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents - Cash and cash equivalents are highly liquid
investments, including short-term investments and time deposits with maturities
of three months or less at the time of purchase. Cash equivalents and short-term
investments are stated at cost, which approximates market value.
Revenue Recognition - The Company provides services to its customers pursuant to
contracts which range from six months to five years but generally are for three
years. The customer generally pays an engineering fee, an installation charge
and a monthly fee based on the number of microsystems installations. The fees
stipulated in the contracts are denominated in U.S. dollars equivalents.
Services are billed on a monthly, predetermined basis, which coincides with when
the services are rendered. No single customer accounted for greater than 10% of
total revenue from services for each of the three years ended December 31, 1996.
Property, Plant and Equipment Costs - Property, plant and equipment are recorded
at cost and depreciated using the straight-line method over the following
estimated useful lives:
Buildings and improvements 20-25 years
Operating communications equipment 5-10 years
Furniture, fixtures and other equipment 2-10 years
License and Permit Costs - License and permit costs, such as legal cost,
regulatory fees and application costs incurred to obtain and make functional the
operating licenses in each respective country were capitalized and are being
amortized on the straight-line basis over periods not to exceed ten years. The
Company reviews the carrying value of its license and permit costs on an ongoing
basis. If such review indicates that these values may not be recoverable, the
Company's carrying value will be reduced to its estimated fair value. The
amounts capitalized, by operating subsidiaries, at December 31 are as follows:
F-7
1996 1995
---- ----
IMPSAT Colombia $ 3,020 $ 3,020
IMPSAT Ecuador 287 287
IMPSAT Mexico 293 293
IMPSAT USA 147 114
------- --------
Total costs capitalized 3,747 3,714
Less: accumulated amortization (1,334) (929)
------- --------
Unamortized balance $ 2,413 $ 2,785
======= ========
Income Taxes - Deferred income taxes result from temporary differences in the
recognition of expenses for tax and financial reporting purposes and are
accounted for in accordance with Financial Accounting Standards Board Statement
No. 109 ("SFAS No. 109"), Accounting for Income Taxes, which requires the
liability method of computing deferred income taxes. Under the liability method,
deferred taxes are adjusted for tax rate changes as they occur.
Deferred Financing Costs - Debt issuance costs and transaction fees, which are
associated with the issuance of the senior guaranteed notes (see Note 7) are
being amortized (and charged to interest expense) over the term of the related
notes on a method which approximates the level yield method.
Foreign Currency Translation - The Company's subsidiaries use the U.S. dollar as
the functional currency. Accordingly, the financial statements of the
subsidiaries were remeasured. The effects of foreign currency transactions and
of remeasuring the financial position and results of operations into the
functional currency are included as net gain on foreign exchange.
Fair Value of Financial Instruments - The Company's financial instruments
include receivables, payables, short and long-term debt. The fair value of such
financial instruments have been determined using available market information
and interest rates as of December 31, 1996.
At December 31, 1996, the fair value of the 12-1/8% Senior Guaranteed Notes due
2003 was approximately $132,000 compared to the carrying value of $125,000. The
fair value of all other financial instruments were not materially different from
their carrying value.
Reclassifications - Certain amounts in the 1995 consolidated financial
statements have been reclassified to conform with the 1996 presentation.
F-8
3. TRADE ACCOUNTS RECEIVABLE
Trade accounts receivable, by operating subsidiaries, at December 31 are
summarized as follows:
1996 1995
---- ----
IMPSAT Argentina $ 23,883 $ 17,182
IMPSAT Colombia 5,846 5,046
IMPSAT Venezuela 1,331 304
Others 637 185
-------- --------
Total 31,697 22,717
Less: allowance for doubtful accounts (3,585) (1,130)
-------- --------
Trade accounts receivable, net $ 28,112 $ 21,587
======== ========
The Company's subsidiaries provide trade credit to their customers in the normal
course of business. The collection of a substantial portion of the trade
receivables are susceptible to changes in the Latin American economies and
political climates. Prior to extending credit, the customers' financial history
is analyzed.
The activity for the allowance for doubtful accounts at December 31 is as
follows:
1996 1995 1994
---- ---- ----
Beginning balance $1,130 $ 712 $ 296
Provision for doubtful accounts 2,455 418 416
------ ------ ------
Ending balance $3,585 $1,130 $ 712
====== ====== ======
4. OTHER RECEIVABLES
Other receivables consist primarily of refunds or credits pending from local
governments for taxes other than income and other miscellaneous amounts due to
the Company and its operating subsidiaries as follows at December 31:
1996 1995
---- ----
IMPSAT Argentina $ 4,291 $ 2,342
IMPSAT Colombia 3,696 2,308
IMPSAT Venezuela 2,224 546
IMPSAT Ecuador 494 345
Others 1,994 900
------- -------
Total $12,699 $ 6,441
======= =======
F-9
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31 consisted of:
1996 1995
---- ----
Land $ 1,478 $ 1,478
Building and improvements 22,604 20,398
Operating communications equipment 258,593 209,317
Furniture, fixtures and other equipment 11,311 9,168
--------- ----------
Total 293,986 240,361
Less: accumulated depreciation (73,046) (47,155)
--------- ----------
Total 220,940 193,206
Deposit on purchase of equipment and in transit 6,146 6,495
--------- ----------
Property, plant and equipment, net $ 227,086 $ 199,701
========= ==========
The recap of accumulated depreciation at December 31 is as follows:
1996 1995 1994
---- ---- ----
Beginning balance $ 47,155 $ 27,188 $ 12,381
Depreciation expense 25,913 20,268 12,602
Other additions 2,205
Disposals (22) (301)
--------- --------- ------
Ending balance $ 73,046 $ 47,155 $ 27,188
========== ========= ========
6. SHORT-TERM DEBT
The Company's short-term debt at December 31 is detailed as follows:
1996 1995
---- ----
Commercial paper (9% to 11%) $ 20,000 $ 5,000
Short-term credit facilities, denominated in U.S. dollars;
interest rates ranging from 8% to 15%;
IMPSAT Argentina 327 31,808
IMPSAT Colombia 3,345 4,616
IMPSAT Venezuela 1,400 256
IMPSAT Ecuador 53 2,080
Short-term credit facilities, denominated in local
currencies; local interest rates;
IMPSAT Colombia (32% to 36%) 5,700 14,545
IMPSAT Venezuela (29% to 32%) 1,027 2,030
--------- ----------
Total short-term debt $ 31,852 $ 60,335
========= ==========
F-10
7. LONG-TERM DEBT
The Company's long-term debt at December 31 is detailed as follows:
1996 1995
---- ----
12-1/8% Senior Guaranteed Notes due 2003 $ 125,000
Term notes payable:
IMPSAT Colombia; with maturities through 2002 collateralized by
equipment with a carrying value of approximately $14,000 and the
assignment of customer contracts totalling approximately $12,000
denominated in:
U.S. dollars (interest rates 8% - 13.30%) 25,324 $ 23,472
Local currency (interest rates 16.35% - 21%) 1,551 1,008
IMPSAT Argentina (8%), maturing
semiannually through 1998, collateralized
by stock of a subsidiary and other assets 4,374 6,120
IMPSAT Venezuela (10.5%), maturing
during 2001 5,922
Negotiable obligations due 1996
30,000
Eximbank notes payable (6.56%), maturing
semiannually through 1999 5,081 6,775
--------- --------
Total long-term debt 167,252 67,375
Less: current portion (11,022) (37,175)
--------- --------
Long-term debt, net $ 156,230 $ 30,200
========= ========
The scheduled maturities of long-term debt at December 31, 1996 are as follows:
Fiscal Year
-----------
1997 $ 11,022
1998 8,162
1999 7,579
2000 5,774
2001 and thereafter 134,715
-------
Total $ 167,252
==========
The Senior Guaranteed Notes and some of the term notes payable for IMPSAT
Colombia and IMPSAT Venezuela contain certain covenants requiring certain
financial ratios, limiting the incurrence of additional indebtedness and capital
expenditures, and restricting the ability to pay dividends.
F-11
8. INCOME TAXES
For the years ended December 31, 1996, 1995 and 1994, the provision for
(benefits from) income taxes, all of which are for foreign taxes, consist of a
current provision of $530, $196 and $328, respectively, and a deferred provision
of $3,012 and a deferred benefit of $936 and $3,483 respectively. The foreign
statutory tax rates range from 20% to 35% depending on the particular country.
There is no provision or benefit for U.S. income taxes, as the Company has net
operating loss carryforwards. Deferred taxes result from temporary differences
in the capitalization policies of preoperating costs and net operating loss
carryforwards. The composition of net deferred tax assets at December 31 is as
follows:
1996 1995
---- ----
Deferred tax assets:
Preoperating costs:
IMPSAT Colombia $ 2,038 $ 2,188
IMPSAT Venezuela 1,695 1,731
IMPSAT Ecuador 85 143
Net operating loss carryforwards:
IMPSAT Argentina 3,220
IMPSAT Colombia 900 2,039
IMPSAT Venezuela 4,625 1,946
IMPSAT Mexico 1,741 879
IMPSAT Ecuador 684
Company and IMPSAT USA 255
Other:
IMPSAT Colombia 273
--------- --------
Gross deferred tax assets 12,296 12,146
--------- --------
Deferred tax liabilities:
IMPSAT Argentina (742)
IMPSAT Mexico (337) (85)
--------- --------
Gross deferred tax liabilities (1,079) (85)
--------- ---------
Less: valuation allowance (6,405) (4,237)
--------- ---------
Net deferred tax assets $ 4,812 $ 7,824
======== ========
As there is no assurance that the Company will generate sufficient earnings to
utilize its available tax assets, a valuation allowance has been established to
offset deferred tax assets.
F-12
9. COMMITMENTS AND CONTINGENCIES
The Company leases satellite capacity with annual rental commitments of
approximately $13,100. In addition, the Company has commitments to purchase
communications equipment amounting to approximately $11,200 and was obligated
under letter of credits amounting to approximately $433 at December 31, 1996.
The Company is a third party guarantor of up to 75% of a $6,000 credit facility
provided to IMPSAT Venezuela by a regional development fund. At December 31,
1996, the balance outstanding on the credit facility amounted to approximately
$5,900.
In the normal course of business, the Company faces challenges to its various
licenses and rights to operate on an exclusive basis. The Company vigorously
defends such challenges; however, there can be no assurance that the Company
will ultimately prevail.
* * * * * *
F-13
INDEPENDENT AUDITORS' REPORT
To the Stockholders of IMPSAT S.A.:
We have audited the accompanying balance sheets of IMPSAT S.A.(the "Company") as
of November 30, 1996 and 1995, and the related statements of income, of
stockholders' equity and of cash flow for each of the three years ended November
30, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statement based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
in the United States of America. 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 the 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, such financial statements present fairly, in all material
respects, the financial position of IMPSAT S.A. at November 30, 1996 and 1995,
and the results of its operations and its cash flows for each of the years then
ended in conformity with accounting principles generally accepted in the United
States of America.
DELOITTE & TOUCHE
Buenos Aires, Argentina
February 7, 1997
F-14
IMPSAT S.A.
BALANCE SHEETS
NOVEMBER 30, 1996 and 1995 (In thousands of U. S. Dollars)
- --------------------------------------------------------------------------------
1996 1995
---- ----
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,882 $ 1,160
Trade accounts receivable, net 20,389 16,072
Receivables from affiliated companies 429 --
Other receivables 4,290 2,342
Prepaid expenses 1,833 1,202
---------- -----------
Total current assets 28,823 20,776
---------- -----------
PROPERTY, PLANT AND EQUIPMENT, NET 143,430 140,205
---------- -----------
NON-CURRENT ASSETS:
Deferred income taxes 3,220
Other non-current assets 1,986 1,744
---------- -----------
Total non-current assets 1,986 4,964
---------- -----------
TOTAL $ 174,239 $ 165,945
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payables - trade $ 12,311 $ 16,033
Short-term debt 20,327 36,808
Advances from affiliated companies 2,125 7,313
Current portion of long-term debt 5,185 34,190
Accrued liabilities 2,210 4,372
Deferred income taxes 743
Other liabilities 2,137 3,841
---------- ----------
Total current liabilities 45,038 102,557
---------- ----------
LONG-TERM DEBT, NET 4,270 8,705
---------- ----------
OTHER LONG-TERM LIABILITIES 3,755 6,244
---------- ----------
ADVANCES FROM PARENT COMPANY, LONG-TERM 69,719 --
COMMITMENTS AND CONTINGENCIES (Note 10)
---------- ----------
MINORITY INTEREST -- 3
---------- ----------
STOCKHOLDERS' EQUITY:
Common Stock; 5,123 shares authorized,
issued, and outstanding 3 3
Paid-in capital 26,191 $ 26,191
Retained earnings 25,263 22,242
---------- ----------
Total stockholders' equity 51,457 48,436
---------- ----------
TOTAL $ 174,239 $ 165,945
========== ==========
See notes to financial statements.
F-15
IMPSAT S.A.
STATEMENTS OF INCOME
YEARS ENDED NOVEMBER 30, 1996, 1995 and 1994 (In thousands of U. S. Dollars)
- --------------------------------------------------------------------------------
1996 1995 1994
---- ---- ----
NET REVENUES FROM SERVICES $ 85,145 $ 80,346 $ 63,999
-------- -------- --------
COSTS AND EXPENSES:
Variable cost of services 14,665 11,083 11,040
Satellite capacity cost 9,503 8,358 5,902
Salaries, wages and benefits 12,590 12,697 9,567
Selling, general and administrative 10,731 17,814 12,885
Depreciation and amortization 18,786 16,067 10,719
-------- -------- --------
Total cost and expenses 66,275 66,019 50,113
-------- -------- --------
Operating income 18,870 14,327 13,886
-------- -------- --------
OTHER INCOME (EXPENSES):
Interest expense, net (12,527) (10,384) (4,556)
Other income, net 638 523 (83)
------- ------- -------
Total other income (expenses) (11,889) (9,861) (4,639)
------- ------- -------
INCOME BEFORE INCOME TAXES AND MINORITY INTEREST 6,981 4,466 9,247
(PROVISION FOR) BENEFIT FROM INCOME TAX (3,963) 3,220
------- ------- -------
INCOME BEFORE MINORITY INTEREST 3,018 4,466 12,467
INCOME ATTRIBUTABLE TO MINORITY INTEREST 3 6 (3)
------- ------- -------
NET INCOME $ 3,021 $ 4,472 $12,464
======== ======= ===========
See notes to financial statements.
F-16
IMPSAT S.A.
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994(In thousands of U. S. Dollars)
- --------------------------------------------------------------------------------
Common Stockholders'
---------------------------------------
Paid-in Retained Minority
Common Stock Capital Earnings Total Interest
------------ ------- -------- ----- --------
BALANCE AT NOVEMBER 30, 1993 $ 3 $26,191 $ 6,806 $33,000
Dividends declared (1,500) (1,500)
Capital contribution $ 6
Net income 12,464 12,464 3
------------- ----------- -------------- ------ ----------- -------------
BALANCE AT NOVEMBER 30, 1994 3 26,191 17,770 (*) 43,964 9
Net income 4,472 4,472 (6)
------------- ----------- -------------- ------ ----------- -------------
BALANCE AT NOVEMBER 30, 1995 3 26,191 22,242 (*) 48,436 3
Net income 3,021 3,021 (3)
============= =========== ============== ====== =========== =============
BALANCE AT NOVEMBER 30, 1996 $ 3 $ 26,191 $ 25,263 (*) $ 51,457 -
============= =========== ============== ====== =========== =============
(*) includes an appropriation of retained earnings, amounting to $295, $881
and $1,254 in 1994, 1995 and 1996, respectively, to comply with legal
reserve requirements in Argentina.
See notes to financial statements.
F-17
IMPSAT S.A.
STATEMENTS OF CASH FLOWS
YEARS ENDED NOVEMBER 30, 1996, 1995 and 1994 (In thousands of U. S. Dollars)
- --------------------------------------------------------------------------------
1996 1995 1994
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,021 $ 4,472 $12,464
Adjustment to reconcile net income to net cash
provided by operating activities:
Amortization and depreciation 18,786 16,067 10,719
Deferred income tax provision (benefit) 3,963 (3,220)
Minority interest (3) (6) 3
Changes in assets and liabilities:
(Increase) decrease in trade accounts
receivable, net (4,746) (2,840) 427
(Increase) decrease in prepaid expenses (631) 2,408 (2,361)
(Increase) decrease in other receivable
assets and other non-current assets (2,190) 1,017 (2,056)
(Decrease) increase in accounts payable - (8,910) 6,048 4,788
trade
(Decrease) increase in accrued and other (3,866) 878 1,372
liabilities
(Decrease) increase in other long-term
liabilities (2,489) (347) 162
---------- ----------- -----------
Net cash provided by operating activities 2,935 27,697 22,298
---------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (22,011) (37,984) (69,832)
---------- ----------- -----------
Net cash used in investing activities (22,011) (37,984) (69,832)
---------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (payments of) borrowings from short-term debt (16,481) 2,778 30,913
Increase (decrease) in advances
from/to affiliates 69,719 8,114 (248)
Repayments of long - term debt (33,440) (750) (750)
Proceeds from long - term debt 791 11,378
Capital contributions 6
---------- ----------- -----------
Net cash provided by operating activities 19,798 10,933 41,299
---------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 722 646 (6,235)
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR 1,160 514 6,749
========== =========== ===========
CASH AND CASH EQUIVALENTS AT END OF THE
YEAR $ 1,882 $ 1,160 $ 514
========== =========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 10,613 $ 9,208 $ 3,958
========== =========== ===========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Equipment in transit $ 350 $ 264 $ 518
========== =========== ===========
See to consolidated financial statements.
F-18
IMPSAT S.A.
NOTES TO FINANCIAL STATEMENTS (in thousands of U. S. dollars)
- --------------------------------------------------------------------------------
1. BACKGROUND
IMPSAT S.A. provides and operates private networks of integrated data and voice
telecommunications systems in Argentina. IMPSAT S. A.'s principal line of
business comprises the provision of data transmission services for large
national and multinational companies, financial institutions, governmental
agencies and other business customers in Argentina. It provides its services
through its owned advanced telecommunications networks comprised of teleports,
earth stations, fiber optic and microwave links and leased satellite capacity.
During July 1996, IMPSAT S.A. became a 51% owned subsidiary of IMPSAT
Corporation, a Delaware holding company (the "Parent Company").
On November 18, 1996, IMPSAT S.A. and its subsidiaries, Teledatos S.A. and
Satelnet S.A., merged and the subsidiaries ceased operations. The merger was
ratified by the shareholders of IMPSAT S.A. on January 20, 1997. The financial
statements recognize the effect of the merger.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents -- Cash and cash equivalents are highly liquid
investments, including short-term investments and time deposits with maturities
of three months or less at the time of purchase. Cash equivalents and short-term
investments are stated at cost, which approximates market value.
Revenue Recognition -- IMPSAT S. A. provides services to its customers pursuant
to contracts which range from six months to five years but generally are for
three years. The customer generally pays an engineering fee, an installation
charge and a monthly fee based on the number of microsystems installations. The
fees stipulated in the contracts are denominated in U.S. dollars. Services are
billed on a monthly, predetermined basis, which coincides with when the services
are rendered. For the year ended November 30, 1996, IMPSAT S. A. had one
customer that represented approximately 15% net revenue from services. No single
customer accounted for greater than 10% of total revenue from services for the
years ended November 30, 1995 and 1994.
F-19
Property, Plant and Equipment -- Property, plant and equipment are recorded at
cost and depreciated using the straight-line method over the following estimated
useful lives:
Building and improvement 20-25 years
Operating communications equipment 5-10 years
Furniture, fixtures and other equipment 2-10 years
Income Taxes -- Deferred income taxes result from timing differences in the
recognition of expenses for tax and financial reporting purposes and are
accounted for in accordance with Financial Accounting Standards Board (the
"FASB") Statements of Financial Accounting Standards ("SFAS") No. 109,
Accounting for Income Taxes, which required the liability method of computing
deferred income taxes. Under the liability method, deferred taxes are adjusted
for tax rate changes as they occur.
Foreign Currencies Translation -- The translation of these consolidated
financial statements into U.S. dollars has been made following the guidelines of
SFAS No. 52, Foreign Currency Translation. Major operations of IMPSAT S. A.
are stated in U.S. dollars. Accordingly, the U.S. dollar has been designated
as the functional currency. Local currency denominated transactions
are remeasured into the functional currency. Accordingly, fixed
assets and stockholders account have been translated into U.S. dollars taking
into account the exchange rate prevailing at each transaction date. Monetary
assets and liabilities are translated using the year-end exchange. Profit and
loss accounts were translated using average exchange rates for the periods in
which they were accrued, except for the consumption of non-monetary assets for
which their respective dollar translated costs were considered.
Fair Value of Financial Instruments -- IMPSAT S. A.'s financial instruments
include receivables, payables, short and long-term debt. The fair value of such
financial instruments have been determined based on market interest rates as of
November 30, 1996. The fair values were not materially different than their
carrying (or contract) values.
Long-Lived Assets -- IMPSAT S. A. adopted the provisions of SFAS No. 121
effective December 1, 1995. Long-lived assets are reviewed on an ongoing basis
for impairment. Estimated fair value is calculated using discounted cash flow
methods and other valuation techniques.
3. TRADE ACCOUNTS RECEIVABLE
The detail of trade accounts receivable at November 30 is as follows:
s 1996 1995
---- ----
Trade accounts receivable $ 23,883 $ 17,182
Less: allowance for doubtful accounts (3,494) (1,110)
--------- --------
Trade accounts receivable, net $ 20,389 $ 16,072
========= ========
IMPSAT S. A. provides trade credit to its customers in the normal course of
business. Prior to extending credit, the customers' financial history is
analyzed.
The activity for the allowance for doubtful account at November 30, is as
follows:
1996 1995 1994
---- ---- ----
Beginning balance $1,110 $ 712 $296
Provision for doubtful accounts 2,384 398 416
------ ------ ----
Ending balance $3,494 $1,110 $712
====== ====== ====
F-20
4. OTHER RECEIVABLES
Other receivables consist primarily of refunds or credits pending from local
government for taxes other than income and other miscellaneous amounts due to
IMPSAT S. A.
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at November 30, consists of:
1996 1995
---- ----
Building installations and improvements $ 15,962 $ 15,583
Operating communications equipment 175,199 153,106
Furniture, fixtures and other equipment 7,836 6,714
--------- --------
Total 198,997 175,403
Less: accumulated depreciation (59,245) (40,477)
--------- --------
Total 139,752 134,926
Deposit on purchase of equipment and in transit 3,678 5,279
--------- --------
Property, plant and equipment, net $ 143,430 $140,205
========= ========
The recap of accumulated depreciation at November 30, is as follows:
1996 1995 1994
---- ---- ----
Beginning balance $ 40,477 $ 24,712 $ 11,790
Depreciation expense 18,786 16,067 10,719
Other addition 2,203
Disposals (18) (302)
-------- -------- --------
Ending balance $ 59,245 $ 40,477 $ 24,712
======== ======== ========
6. SHORT-TERM DEBT
IMPSAT S. A.'s short-term debt at November 30, is detailed as follows:
1996 1995
---- ----
Commercial paper (9% to 11%) $ 20,000 $ 5,000
Short-term credit facilities, denominated in
U.S. dollars, interest rates ranging from 8% to 15% 327 31,808
-------- --------
Total short-term debt $ 20,327 $ 36,808
======== ========
IMPSAT S. A. has historically refinanced its short-term credit facilities on an
annual basis.
F-21
7. LONG-TERM DEBT
IMPSAT S. A.'s long-term debt at November 30, is detailed as follows:
1996 1995
---- ----
Term notes payable (8%) maturing
semiannually through 1998, collateralized
by stock of a subsidiary and other assets $ 4,374 $ 6,120
Negotiable Obligations, due 1996 30,000
Eximbank notes payable (6.56%)
maturing semiannually through 1999 5,081 6,775
------- -------
Total long-term debt (9,455) 42,895
Less: current portion (5,185) (34,190)
------- -------
Long-term debt, net $ 4,270 $ 8,705
======= ========
The scheduled maturities of debt and credit facilities at November 30, 1996 are
as follows:
Fiscal year: Amount
------------ ------
1997 $5,185
1998 1,693
1999 1,694
2001 883
------
Total $9,455
======
8. ADVANCES FROM PARENT COMPANY
During 1996, IMPSAT S.A. received advances totalling approximately $70,000
from its Parent Company. These advances bear interest at 12 1/8% and are due
2003.
9. INCOME TAXES
The provision for income taxes for 1996 consist of $742 in current taxes and
$3,220 in deferred taxes resulting from the utilization of net operating
loss carryforward benefits. The benefit for income taxes in 1994 represents
the carryforward benefits for operating losses available to the subsidiaries of
IMPSAT S.A. The statutory tax rate in Argentina is 33%. IMPSAT S.A.'s current
provision for income taxes for years 1994 and 1995 amounted to $2,774 and
$1,340, respectively. Such amounts are offset by deferred tax benefits
resulting from the realization of carryforward operating losses.
10. COMMITMENTS AND CONTINGENCIES
IMPSAT S. A. leases satellite capacity with annual rental commitments of
approximately $9,000 through the year 2000. In addition, IMPSAT S. A. has
commitments to purchase communications equipment amounting to approximately
$9,500 at November 30, 1996.
IMPSAT S. A. is guarantor on the $125,000,000, 12 1/8% Senior Guaranteed Notes
Due 2003 issued on July 30, 1996 by the Parent Company.
In the normal course of business, IMPSAT S. A. faces challenges to its various
licenses and rights to operate on an exclusive basis, which it vigorously
defends. There can be no assurance it will ultimately prevail on these
challenges.
F-22