UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Month of September, 2014
Commission File Number 001-33085
RRsat Global Communications Network Ltd.
(Translation of registrant’s name into English)
RRsat Building
Hanegev Street
POB 1056
Airport City 70100
Israel (Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ____
Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ____
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant's "home country"), or under the rules of the home country exchange on which the registrant's securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant's security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
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If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-_
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This Form 6-K is being incorporated by reference into the Registrant’s Registration Statement on Form F-3 File No. 333-180580 and Registration Statements on Form S-8 File Nos. 333-140936, 333-175357, 333-183324 and 333-191111.
RRsat Global Communications Network Ltd.
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Exhibit 99.1
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Management’s Discussion and Analysis of Financial Condition and Results of Operations for the six months ended June 30, 2014
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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RRSAT GLOBAL COMMUNICATIONS NETWORK LTD.
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Title:
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General Counsel and Company Secretary
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Date: September 10, 2014
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Exhibit 99.1
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Management’s Discussion and Analysis of Financial Condition and Results of Operations for the six months ended June 30, 2014
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4
Exhibit 99.1
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Six Months Ended June 30, 2014 Compared to Six Months Ended June 30, 2013
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Six months ended
|
|
| |
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|
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|
| |
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(in thousands and as a percentage of
total revenues)
(Unaudited)
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|
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Revenues
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|
$ |
65,354 |
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|
|
100 |
% |
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$ |
58,743 |
|
|
|
100 |
% |
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Cost of revenues
|
|
|
50,424 |
|
|
|
77.2 |
|
|
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44,329 |
|
|
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75.5 |
|
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Gross profit
|
|
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14,930 |
|
|
|
22.8 |
|
|
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14,414 |
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|
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24.5 |
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Operating expenses:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Sales and marketing
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|
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6,274 |
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|
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9.6 |
|
|
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4,530 |
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|
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7.7 |
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General and administrative
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|
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5,137 |
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|
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7.9 |
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|
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5,199 |
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|
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8.9 |
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Total operating expenses
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11,411 |
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17.5 |
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9,729 |
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16.6 |
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Operating income
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|
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3,519 |
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|
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5.4 |
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|
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4,685 |
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|
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8.0 |
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Financial income (expenses), net
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|
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(370 |
) |
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(0.6 |
) |
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(269 |
) |
|
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(0.5 |
) |
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Income before taxes on income
|
|
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3,149 |
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|
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4.8 |
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|
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4,416 |
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|
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7.5 |
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Income taxes
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795 |
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1.2 |
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|
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1,112 |
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1.9 |
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Net income
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$ |
2,354 |
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|
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3.6 |
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$ |
3,304 |
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|
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5.6 |
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Revenues. Revenues were $65.4 million for the six months ended June 30, 2014, an increase of 11.3% from $58.7 million for the six months ended June 30, 2013. In terms of our six months revenue breakdown, revenues from our content management and distribution services amounted to $59.7 million and our mobile satellite services (MSS) contributed $5.7 million. This compares to $53.5 million and $5.2 million in the parallel period in 2013, representing growth of 12% and 10% respectively.
The main growth in our content management and distribution services derived primarily by the growth in content management and content preparation services and our core 24/7 permanent services.
Following is the six months revenue breakdown by the geographical location of our customers as a percentage of total revenues:
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Six months ended
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Region
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|
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Europe
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42 |
% |
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40 |
% |
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North America
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|
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28 |
% |
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|
30 |
% |
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Asia
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|
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13 |
% |
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11 |
% |
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Middle East other than Israel
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|
|
8 |
% |
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|
8 |
% |
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Israel
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|
|
6 |
% |
|
|
8 |
% |
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Rest of the world
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|
|
3 |
% |
|
|
3 |
% |
Cost of Revenues. Cost of revenues represents costs directly related to the operation of our network, including payments for network services (primarily satellite services and fiber capacity), salaries, teleports operational expenses and depreciation of facilities , transmission and playout equipment. The principal component of cost of revenues is the monthly fees paid to network service providers, such as satellite space segment and fiber network leases and teleport services. We lease our space segment capacity pursuant to long term contracts. Cost of revenues was $50.4 million for the six months ended June 30, 2014, an increase of 14% from $44.3 million for the six months ended June 30, 2013. As a percentage of total revenues, cost of revenues increased from 75.5% in the six months ended June 30, 2013 to 77.2% in the six months ended June 30, 2014.
Network services costs were $37.5 million in the six months ended June 30, 2014, an increase of $3.8 million, or 11%, from $33.7 million in the six months ended June 30, 2013. The $37.5 million network services costs incurred in the six months ended June 30, 2014 consist of $32.9 million of expenses related to our content management and distribution services, an increase of $2.9 million, or 10%, compared to the six months ended June 30, 2013, and $4.6 million of expenses related to the cost of MSS network and transmission services from third parties, an increase of $0.9 million, or 24.3%, compared to the six months ended June 30, 2013.
Sales and Marketing Expenses. Sales and marketing expenses increased 38.5% to $6.3 million, or 9.6% of revenues, in the six months ended June 30, 2014 compared to $4.5 million, or 7.7% of revenues, in the six months ended June 30, 2013. The increase in sales and marketing expenses derived from activities we are performing in order to implement our growth strategy such as geographic expansion and upper tier penetration costs.
General and Administrative Expenses. General and administrative expenses decreased 1.2% to $5.1 million, or 7.9% of revenues, in the six months ended June 30, 2014 compared to $5.2 million, or 8.9% of revenues, in the six months ended June 30, 2013.
Our operating expenses include certain variable costs that vary directly, or substantially directly, with the volume of our revenues, mainly commissions paid to our agents and our direct sales force. The increase in operating expenses is mainly due to the JCA acquisition completed in September 2013.
Financial Income (Expenses), Net. Financial expenses, net were $0.4 million in the six months ended June 30, 2014, compared to financial income, net, of $0.3 million in the six months ended June 30, 2013, mainly driven by changes in fair value of derivatives.
Income Taxes. Income taxes were $0.8 million in the six months ended June 30, 2014, a decrease of $0.3 million from $1.1 million in the six months ended June 30, 2013. The decrease was due to the decrease in income before taxes on income from $4.4 million in the six months ended June 30, 2013 to $3.1 million in the six months ended June 30, 2014.
Net Income. Net income was $2.4 million in the six months ended June 30, 2014, a decrease of 29% from $3.3 million in the six months ended June 30, 2013. The decrease is primarily due to lower utilization of satellite capacity available on the company’s global network. In addition, foreign currency fluctuations had a negative impact during the six months ended June 30, 2014, especially movements of the U.S dollar against the Euro and NIS.
Segment Results. For the six months ended June 30, 2014, our total revenues included $59.7 million of revenues derived from our content management and distribution services, an increase of $6.2 million, or 12%, compared to the six months period ended June 30, 2013. For the six months ended June 30, 2014 our total revenues included $5.7 million of revenues derived from our MSS business, an increase of $0.5 million, or 10%, compared to the six months period ended June 30, 2013.
The gross profit of our content management and distribution services increased by $1.0 million or 7.4% to $14.2 million or 23.9% of revenues for the six months ended June 30, 2014, compared to $13.3 million or 24.8% of revenues for the six months ended June 30, 2013.
The gross profit of our MSS business decreased by $0.5 million or 40% to $0.7 million or 12% of revenues in the six months ended June 30, 2014, compared to $1.1 million or 21.7% of revenues in the six months ended June 30, 2013.
Liquidity and Capital Resources
Cash and Cash Equivalents. Cash and cash equivalents were $12.7 million at June 30, 2014, and $17.0 million at June 30, 2013. The decrease from June 30, 2013 to June 30, 2014 was primarily attributable to a decrease in net cash provided by operating activities, as described below.
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Six months ended June 30,
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| |
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(unaudited in thousands)
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|
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Statement of Cash Flows Data:
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|
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|
|
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Net cash provided by operating activities
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|
$ |
4,227 |
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|
$ |
10,742 |
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Net cash used in investing activities
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(3,813 |
) |
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(3,097 |
) |
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Net cash used in financing activities
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(1,908 |
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|
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(2,775 |
) |
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Translation adjustment on cash and cash equivalents
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27 |
|
|
|
- |
|
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Increase (decrease) in cash and cash equivalents
|
|
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(1,467 |
) |
|
|
4,870 |
|
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Cash and cash equivalents — beginning of year
|
|
|
14,165 |
|
|
|
12,133 |
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Cash and cash equivalents — end of period
|
|
$ |
12,698 |
|
|
$ |
17,003 |
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Operating Activities
For the six months ended June 30, 2014, net cash provided by operating activities was $4.2 million, a decrease of $6.5 million from $10.7 million of net cash provided by operating activities for the six months ended June 30, 2013. Our cash flow from operating activities were negatively impacted due to an increase of working capital of $3.5 million in the first half of 2014, compared with a decrease of working capital of $1.9 million in the first half of 2013. For the six months ended June 30, 2014 the increase in working capital was mainly due to an increase in accounts receivable, and a decrease in deferred income, compared to the six months ended June 30, 2013.
Investing Activities
During the six months ended June 30, 2014 we used $3.8 million, net, for investing activities compared to $3.0 million in the first half of 2013. The increase in investing activities was mainly due to the securities available for sale in the first half of 2014 compared to the parallel period in 2013.
Financing Activities
During the six months ended June 30, 2014 and 2013, we paid dividends to our shareholders in the amount of $1.9 million and $2.8 million, respectively.
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