SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
--------------
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 0-9728
GST EQUIPMENT FUNDING, INC.
- --------------------------------------------------------------------------------
(Exact name of Registrant as Specified in its Charter)
Delaware 91-1785734
- --------------------------------------------------------------------------------
(State or Other Jurisdiction (IRS Employer Identification
of Incorporation or Organization) Number)
4001 Main Street, Vancouver, WA 98663
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (360) 906-7100
N/A
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL
INSTRUCTION H(1)(A) AND (B) OF FORM 10-Q AND IS
THEREFORE FILING THIS FORM 10-Q WITH THE
REDUCED DISCLOSURE FORMAT CONTEMPLATED THEREBY.
Indicate by check mark whether the Registrant (1) has 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
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest
<PAGE>
practicable date: At May 11, 1998, there were outstanding 100 shares of common
stock, $.01 par value per share, of the Registrant.
-1-
<PAGE>
GST EQUIPMENT FUNDING, INC.
INDEX
PAGE(S)
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
Balance Sheet - March 31, 1998 (unaudited)
and December 31, 1997 3
Statements of Operations - Three Months
Ended March 31, 1998 and period from March 5, 1997 (date of
inception) to March 31, 1997 (unaudited) 4
Statements of Cash Flows - Three Months
Ended March 31, 1998 and period from March 5, 1997 (date of
inception) to March 31, 1997 (unaudited) 5
Notes to Financial Statements (unaudited) 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (REDUCED DISCLOSURE
NARRATIVE) 7
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Required
PART II: OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 8
SIGNATURES 9
-2-
<PAGE>
GST EQUIPMENT FUNDING, INC.
BALANCE SHEETS
MARCH 31, 1998 (UNAUDITED) AND DECEMBER 31, 1997
(IN THOUSANDS)
March 31, 1998 December 31, 1997 (1)
-------------- ---------------------
ASSETS
Current assets:
Cash $ 916 $ 373
Restricted cash and investments 31,109 30,656
--------- ---------
Total current assets 32,025 31,029
Restricted investments 103,013 112,719
Notes receivable from parent 120,443 109,164
Interest receivable from parent 7,042 2,670
Deferred financing costs, net 8,918 8,994
--------- ---------
$ 271,441 $ 264,576
========= =========
LIABILITIES AND SHAREHOLDER'S DEFICIT
Current liabilities:
Accrued interest payable 14,630 5,852
Other payable to parent 1,968 1,260
--------- ---------
Total current liabilities 16,598 7,112
--------- ---------
Long term debt 265,000 265,000
Shareholder's deficit:
Common stock -- --
Additional paid-in capital 1,000 1,000
Deficit (11,157) (8,536)
--------- ---------
Total shareholder's deficit (10,157) (7,536)
--------- ---------
$ 271,441 $ 264,576
========= =========
(1) The information in this column was derived from GST Equipment Funding's
audited financial statements as of December 31, 1997.
See accompanying notes to financial statements.
-3-
<PAGE>
GST EQUIPMENT FUNDING, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
Period from
March 5, 1997
Three Months (date of
Ended March 31, inception) to
1998 March 31, 1997
--------------- -------------
Revenue:
Interest income $ 6,413 $--
Operating costs and expenses:
Interest expense 9,034 --
------- ---
Loss before income taxes (2,621) --
Income taxes -- --
------- ---
Net loss $(2,621) $--
======= ===
See accompanying notes to financial statements.
-4-
<PAGE>
GST EQUIPMENT FUNDING, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Period from
March 5, 1997
Three Months (date of
Ended March 31, inception) to
OPERATIONS: 1998 March 31, 1997
--------------- -------------
<S> <C> <C>
Net loss $ (2,621) $ --
Items not involving cash:
Amortization of deferred financing costs 256 --
Changes in non-cash operating working capital:
Interest receivable from parent (4,372) --
Accrued interest payable 8,778 --
Other payable to parent 708 --
-------- --------
Net cash used in operations 2,749 --
INVESTING:
Change in investments restricted for fixed asset purchases 8,011 --
Notes receivable from parent (11,279) --
-------- --------
Net cash used in investing activities (3,268) --
FINANCING:
Equity investment by parent -- 1
Change in investments restricted to finance interest payments 1,242 --
Deferred debt issuance costs (180) --
-------- --------
Cash provided by financing activities 1,062 --
-------- --------
Net increase (decrease) in cash and cash equivalents 543 1
Cash and cash equivalents at beginning of period 373 --
-------- --------
Cash and cash equivalents at end of period $ 916 $ 1
======== ========
</TABLE>
See accompanying notes to financial statements.
-5-
<PAGE>
GST EQUIPMENT FUNDING, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying financial statements of GST Equipment Funding, Inc.
("GST Funding") have been prepared in conformity with generally accepted
accounting principles. However, certain information or footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed, or omitted, pursuant to the
rules and regulations of the Securities and Exchange Commission. In the opinion
of management, the statements include all adjustments necessary (which are of a
normal and recurring nature) for the fair presentation of the results of the
interim periods presented. The results of operations for the periods presented
are not necessarily indicative of the results to be expected for the full fiscal
year or for subsequent periods. These financial statements should be read in
conjunction with the GST Funding's audited consolidated financial statements for
the three months ended December 31, 1997, as included in the GST Funding's
Transition Report on Form 10-K for the three month transition period ended
December 31, 1997.
2. NET INCOME (LOSS) PER SHARE AND SHAREHOLDER'S EQUITY
GST Funding does not have any equity instruments that are considered
common stock equivalents, and, as weighted average common shares total only 100
for the periods presented, all of which are owned by GST USA, Inc., income
(loss) per share data is meaningless and is not presented in the accompanying
consolidated condensed financial statements.
-6-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(REDUCED DISCLOSURE NARRATIVE).
OVERVIEW
GST Equipment Funding, Inc. ("GST Funding") was formed on March 5,
1997 for the purpose of issuing its 13-1/4% Senior Secured Notes due 2007 (the
"Secured Notes") in a private placement in May 1997 (the "Secured Notes
Offering") and to finance the purchase of telecommunications equipment. GST
Funding acts as purchasing agent for GST USA, Inc. ("GST USA") and sells to GST
USA the equipment it purchases with the proceeds from the Secured Notes
Offering. GST Funding has only a limited operating history.
As of March 31, 1998, GST Funding has purchased approximately $115.7
million of equipment and holds restricted investments of approximately $134.1
million restricted for the acquisition of equipment and the payment of interest.
All of such equipment has been sold to GST USA in exchange for intercompany
notes. Ultimately, such equipment is leased by GST USA to the various operating
subsidiaries of GST Telecommunications, Inc. ("GST").
OPERATIONS
The operations of GST Funding are limited to (i) purchasing
equipment, (ii) selling equipment, (iii) receiving payments under intercompany
notes, (iv) making payments of interest and principal on the Secured Notes, and
(v) fulfilling its obligations under the indenture relating to the Secured
Notes, the pledge agreement relating to the security interest in the Secured
Notes and the registration rights agreement relating to the Secured Notes. GST
Funding satisfied its obligations under such registration rights agreement in
November 1997, upon the consummation of an exchange offer for the Secured Notes.
LIQUIDITY AND CAPITAL RESOURCES
On May 13, 1997, GST Funding completed the Secured Notes Offering,
consisting of $265.0 million in Secured Notes. Of the $255.8 million of net
proceeds from the issuance of the Secured Notes, as of March 31, 1998
approximately $93.8 million had been used to purchase securities pledged to fund
the first six interest payments on the Secured Notes (the first such payment of
$16.4 million having been made in November 1997) and approximately $115.7
million had been used to purchase telecommunications equipment ($41.5 million of
which was used to refinance intercompany indebtedness). The indenture governing
the Secured Notes includes restrictive covenants which, among other items, limit
or restrict additional indebtedness incurred by GST Funding and GST, investment
in certain subsidiaries and the payment of dividends.
-7-
<PAGE>
PART II: OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
None
-8-
<PAGE>
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf of the
undersigned thereunto duly authorized.
Date: May 14, 1998 GST EQUIPMENT FUNDING, INC.
(Registrant)
/s/ Daniel L. Trampush
----------------------
Daniel L. Trampush,
(Vice President and Chief
Financial Officer)
-9-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the GST
Funding's Form 10-Q for the 3 month period ended March 31, 1998 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 915,706
<SECURITIES> 31,108,651
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 32,024,357
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 271,441,048
<CURRENT-LIABILITIES> 16,598,208
<BONDS> 265,000,000
<COMMON> 1
0
0
<OTHER-SE> (10,157,331)
<TOTAL-LIABILITY-AND-EQUITY> 271,441,048
<SALES> 0
<TOTAL-REVENUES> 6,413,620
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,033,873
<INCOME-PRETAX> (2,620,253)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,620,253)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,620,253)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
