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 JUNE 30, 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.
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(Exact name of Registrant as Specified in its Charter)
Delaware 91-1785734
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(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
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(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/ Yes No / /
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable date: At August
12, 1998, there were outstanding 100 shares of common stock, $.01 par value per
share, of the Registrant.
<PAGE>
GST EQUIPMENT FUNDING, INC.
INDEX
PAGE(S)
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
Balance Sheets - June 30, 1998 (unaudited)
and December 31, 1997 3
Statements of Operations - Three Months Ended
June 30, 1998 and 1997 and Six Months Ended
June 30, 1998 and period from March 5, 1997
(date of inception) to June 30, 1997
(unaudited) 4
Statements of Cash Flows - Six Months Ended
June 30, 1998 and period from March 5, 1997
(date of inception) to June 30, 1998
(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
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<PAGE>
GST EQUIPMENT FUNDING, INC.
BALANCE SHEETS
JUNE 30, 1998 (UNAUDITED) AND DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
------------- -----------------
ASSETS
<S> <C> <C>
Current assets
Cash and cash equivalents $ 3,968 $ 373
Restricted investments 31,601 30,656
----------- -----------
Total current assets 35,569 31,029
----------- -----------
Restricted investments 56,354 112,719
Notes receivable from parent 159,292 109,164
Interest receivable from parent 3,764 2,670
Deferred financing costs, net 8,676 8,994
----------- -----------
$ 263,655 $ 264,576
=========== ===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities
Accrued interest payable $ 5,852 $ 5,852
Other payable to parent 5,011 1,260
----------- -----------
Total current liabilities 10,863 7,112
----------- -----------
Long term debt 265,000 265,000
Shareholders' deficit
Common stock:
Authorized - 1,000 of $.01 par common shares;
issued and outstanding - 100 shares - -
Additional paid-in capital 1,000 1,000
Accumulated deficit (13,208) (8,536)
----------- -----------
Total shareholders' deficit (12,208) (7,536)
----------- -----------
$ 263,655 $ 264,576
=========== ===========
</TABLE>
(1) The information in this column was derived from the Company's audited
financial statements as of December 31, 1997.
See notes to financial statements.
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<PAGE>
GST EQUIPMENT FUNDING, INC.
STATEMENT OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30, Period from date
------------------------ ---------------------- of inception
(March 5, 1997)
1998 1997 1998 to June 30, 1997
------------------------ ---------------------- -------------------
<S> <C> <C> <C> <C>
Revenue:
Interest income $ 6,972 $ 2,954 $ 13,385 $ 2,954
Operating costs and expenses:
Interest expense 9,023 4,802 18,057 4,802
---------- ------------- --------------- --------------
Loss before income taxes (2,051) (1,848) (4,672) (1,848)
Income taxes - 1,004 - 1,004
---------- ------------- --------------- --------------
Net loss $ (2,051) $ (2,852) $ (4,672) $ (2,852)
========== ============= =============== ==============
</TABLE>
See notes to financial statements.
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<PAGE>
GST EQUIPMENT FUNDING, INC.
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Period from
Six Months date of inception
Ended June 30, (March 5, 1997)
1998 to June 30, 1997
------------------ ----------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net loss (4,672) (2,852)
Adjustments to reconcile net loss to net cash used
in operating activities:
Amortization of deferred financing costs 500 120
Changes in non-cash operating working capital:
Interest receivable from parent (1,094) (1,316)
Accrued interest payable - 4,682
Accrued income taxes payable to parent - 1,004
Other payable to parent 3,751 575
----------- ----------
Net cash used in operating activities (1,515) 2,213
CASH FLOWS FROM INVESTING ACTIVITIES
Change in investments restricted for fixed asset purchases 37,717 (110,214)
Notes receivable from parent (50,128) (54,264)
----------- ----------
Net cash used in investing activities (12,411) (164,478)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long term debt - 265,000
Equity investment by parent - 999
Change in investments restricted to finance interest payments 17,703 (94,547)
Deferred financing costs (182) (9,188)
----------- ----------
Net cash provided by financing activities 17,521 162,264
----------- ----------
Net increase in cash and cash equivalents 3,595 (1)
Cash and cash equivalents at beginning of period 373 1
----------- ----------
Cash and cash equivalents at end of period 3,968 -
=========== ==========
</TABLE>
See notes to financial statements.
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<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 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 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., loss per
share data is meaningless and is not presented in the accompanying consolidated
condensed financial statements.
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<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 13.25% senior secured notes due 2007 (the
"Secured Notes") and financing 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 proceeds from the sale of the Secured
Notes. GST Funding has only a limited operating history.
As of June 30, 1998, GST Funding has purchased approximately $145.9
million of equipment and holds restricted investments of approximately $88.0
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 sale of $265.0 million of
Secured Notes. Of the $255.8 million of net proceeds from the issuance of the
Secured Notes, as of June 30, 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 two payments totaling $33.9 million having been made as
of June 30, 1998) and approximately $145.9 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, GST USA and GST, investment in certain
subsidiaries and the payment of dividends.
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<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
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<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: AUGUST 13, 1998 GST EQUIPMENT FUNDING, INC.
(Registrant)
/S/ DANIEL L. TRAMPUSH
-------------------------------------
Daniel L. Trampush,
(Senior Vice President and Chief
Financial Officer)
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the GST
Funding's Form 10-Q for the quarter ended June 30, 1998 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 3,968,380
<SECURITIES> 31,600,683
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 35,569,063
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 263,654,462
<CURRENT-LIABILITIES> 10,863,063
<BONDS> 265,000,000
<COMMON> 1
0
0
<OTHER-SE> (12,208,602)
<TOTAL-LIABILITY-AND-EQUITY> 263,654,462
<SALES> 0
<TOTAL-REVENUES> 13,385,257
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,056,781
<INCOME-PRETAX> (4,671,524)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,671,524)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,671,524)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
