<PAGE> 1
UNITED STATES
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, 1997
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: 0-20444
PLD TELEKOM INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
DELAWARE 13-3950002
(State or other jurisdiction of incorporation of organization) (I.R.S. Employer Identification No.)
</TABLE>
680 FIFTH AVENUE, 24TH FLOOR, NEW YORK, NEW YORK 10019
(Address of principal executive offices and Zip Code)
(212) 262-6060
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
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 practicable date.
COMMON STOCK, $.01 PAR VALUE - 31,730,884 SHARES (JULY 31, 1997)
<PAGE> 2
PLD TELEKOM INC.
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
Part I Financial Information
Item 1. Financial Statements
Consolidated Condensed Statements of Operations (Unaudited) for the three and six months ended
June 30, 1997 and 1996...................................................................................3
Consolidated Condensed Balance Sheets as at June 30, 1997 (Unaudited) and December 31, 1996..............4
Consolidated Condensed Statements of Cash Flows (Unaudited) for the three and six months
ended June 30, 1997 and 1996.............................................................................5
Notes to Consolidated Condensed Financial Statements (Unaudited) for the three and six months ended June
30, 1997.................................................................................................6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations .............. 8
Part II Other Information
Item 4. Submission of Matters to a Vote of Security Holders ................................................15
Item 6. Exhibits and Reports on Form 8-K....................................................................15
</TABLE>
2
<PAGE> 3
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PLD TELEKOM INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE THREE AND
SIX MONTHS ENDED JUNE 30, 1997 AND 1996 (THOUSANDS OF U.S. DOLLARS, EXCEPT PER
SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues:
Telecommunications $ 25,892 $ 13,313 $ 49,272 $ 23,386
Finance lease income 497 165 1,008 276
------------ ------------ ------------ ------------
26,389 13,478 50,280 23,662
Direct costs 9,165 4,111 17,686 7,207
------------ ------------ ------------ ------------
Gross profit 17,224 9,367 32,594 16,455
Operating expenses:
General and administrative 8,850 4,408 16,098 9,703
Depreciation 2,405 1,209 4,730 2,411
Amortization of telecommunications licenses
and goodwill 2,031 1,233 4,059 2,416
Other taxes 1,304 620 2,592 1,015
------------ ------------ ------------ ------------
14,590 7,470 27,479 15,545
------------ ------------ ------------ ------------
Operating income 2,634 1,897 5,115 910
Share of loss from equity investments (269) (503) (547) (882)
Interest and other income 2,261 1,075 3,152 1,930
Interest on bank indebtedness (55) (446) (354) (742)
Interest on long - term debt (4,065) (1,237) (8,035) (1,237)
Amortization of deferred financing costs (288) (105) (576) (105)
Foreign exchange loss (120) (529) (159) (420)
------------ ------------ ------------ ------------
Earnings/(loss) before income taxes and minority interest 98 152 (1,404) (546)
Income taxes 2,366 526 3,440 1,354
------------ ------------ ------------ ------------
Loss before minority interest (2,268) (374) (4,844) (1,900)
Minority interest 1,457 434 3,223 531
------------ ------------ ------------ ------------
Net loss $ (3,725) $ (808) $ (8,067) $ (2,431)
============ ============ ============ ============
Net loss per common share $ (0.12) $ (0.03) $ (0.25) $ (0.08)
------------ ------------ ------------ ------------
Weighted average number of shares of common stock
outstanding (thousands) 31,731 31,507 31,731 31,507
</TABLE>
See accompanying notes to consolidated condensed financial statements.
3
<PAGE> 4
PLD TELEKOM INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
AS AT JUNE 30, 1997 (UNAUDITED) AND DECEMBER 31, 1996
(THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
JUNE 30, 1997 DECEMBER 31, 1996
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $32,660 $40,674
Trade receivables, net of allowances 13,119 10,528
Other receivables and prepaids 4,818 3,522
Inventory 1,765 1,840
Due from related parties 4,060 4,408
------- -------
56,422 60,972
Escrow funds 41,872 40,984
Property and equipment 120,070 93,039
Telecommunications licenses 68,356 72,310
Other investments 8,071 24,094
Other assets 15,190 14,958
--------- --------
TOTAL ASSETS $309,981 $306,357
------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank indebtedness -- 15,829
Notes payable 5,600 --
Accounts payable and accrued liabilities 27,585 25,792
Due to related parties 5,118 4,039
Deferred revenue 1,819 1,078
Current portion of long-term debt 2,236 --
------- -------
Long-term debt 120,908 107,954
Minority interest 16,734 13,711
Shareholders' equity:
Capital stock:
Preferred stock, par value $0.01 per share, authorized- 31 31
100,000,000 shares, issued and outstanding - 446,884 shares
Common stock, par value $0.01 per share, authorized - 100,000,000
shares, issued and outstanding - 31,730,984
(December 31, 1996- 31,696,034) shares:
Share capital 317 180,878
Additional paid-in capital 180,655 --
Warrants 13,592 13,592
------- -------
194,595 194,501
Accumulated deficit (64,614) (56,547)
------- -------
129,981 137,954
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $309,981 $306,357
======== ========
</TABLE>
See accompanying notes to consolidated condensed financial statements
4
<PAGE> 5
PLD TELEKOM INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
CASH PROVIDED BY/(USED IN):
OPERATIONS :
Net loss $(3,725) $(808) $(8,067) $(2,431)
Non cash items
Depreciation and amortization 4,724 2,547 9,365 4,932
Share of loss of equity investments 269 503 547 882
Accrued interest on senior discount notes 3,468 1,072 6,843 1,072
Gain on sale of investment in SPMMTS (1,436) -- (1,436) --
Minority interest 1,457 434 3,223 532
Other -- -- 251 --
Deferred revenue 471 (812) 741 (718)
Changes in non-cash working capital (2,037) 6,624 (1,566) 4,375
-------- ------ -------- ------
Cash from operations 3,191 9,560 9,901 8,644
-------- ------ -------- ------
INVESTMENTS:
Property and equipment (18,108) (12,439) (32,010) (16,783)
Escrow funds (353) (46,120) (888) (46,120)
Proceeds on sale of investment in SPMMTS 17,615 -- 17,615 --
Other assets (386) (225) (844) (225)
Investment in Teleport -- 180 -- 1,647
-------- ------ -------- ------
(1,232) (58,604) (16,127) (61,481)
-------- ------ -------- ------
FINANCING:
Issue of senior discount and convertible notes -- 114,197 -- 114,197
Change in revolving credit facility -- (23,428) -- (14,500)
Increase in demand bank loans -- 1,524 5,171 1,730
Repayment of demand bank loans (21,000) -- (21,000) --
Short term investments 1,627 -- -- --
Issue of common shares -- -- 94 --
Deferred financing costs -- (6,979) -- (6,979)
Long-term supplier financing 8,347 -- 8,347 --
Notes payable 5,600 -- 5,600 --
Related company/shareholder advances -- (236) -- 202
-------- ------ -------- ------
(5,426) 85,078 (1,788) 94,650
-------- ------ -------- ------
Increase / (decrease) in cash and cash equivalents (3,467) 36,034 (8,014) 41,813
Cash and cash equivalents, beginning of period 36,127 21,455 40,674 15,676
-------- ------ -------- ------
Cash and cash equivalents, end of period $32,660 $57,489 $32,660 $57,489
====== ====== ====== ======
</TABLE>
See accompanying notes to consolidated condensed financial statements
5
<PAGE> 6
PLD TELEKOM INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) FOR THE THREE
AND SIX MONTHS ENDED JUNE 30, 1997
(1) BASIS OF PRESENTATION
The accompanying consolidated condensed financial statements are
unaudited and have been prepared by PLD Telekom Inc. (the "Company") pursuant to
the rules and regulations of the Securities and Exchange Commission (the "SEC").
In the opinion of management, the financial statements include all adjustments
(consisting primarily of normal recurring accruals) necessary to present fairly
the results of operations, financial position and cash flows of the Company as
at June 30, 1997 and for the three and six months ended June 30, 1997 and 1996.
Certain information and footnote disclosures generally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such SEC rules and
regulations. Results for the interim period are not necessarily indicative of
the results for a full year.
These financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1996.
(2) CONTINUANCE OF THE COMPANY IN DELAWARE
On February 27, 1997, the shareholders of the Company at a special
meeting of shareholders approved a resolution authorizing the Company to
continue as a Delaware corporation under the Delaware General Corporation Law
and simultaneously discontinue the Company's existence in Ontario under the
Business Corporations Act (Ontario). The continuance was effective as of
February 28, 1997. Following the continuance, the Company's financial statements
are now prepared in accordance with accounting principles generally accepted in
the United States (U.S. GAAP). The comparative figures for the three month and
six month periods ended June 30, 1996 were previously prepared in accordance
with accounting principles generally accepted in Canada (Canadian GAAP). As a
consequence of the continuance to Delaware, the comparative figures have been
restated in accordance with U.S. GAAP.
(3) FUTURE ACTIVITIES
The Company's telecommunications businesses are developing rapidly in
an emerging economy which, by its nature, has an uncertain economic, political
and regulatory environment. The general risks of operating businesses in the
former Soviet Union include the possibility for rapid change in government
policies, economic conditions, the tax regime and foreign currency regulations.
In addition, Teleport-TP's satellite-based long distance network is at an early
stage of its development and operation and is therefore subject not only to the
general risks and uncertainties of operating in Russia, but also those involved
in the launching of a new telecommunications service. In addition, this
national long-distance service is being developed in various regions of Russia,
and its implementation, and results of operations, will therefore be affected
by, among other things, the often uncertain economic conditions and growth
rates in such regions.
Ultimate recoverability of the Company's investments in its operating
subsidiaries: PeterStar Company Limited ("PeterStar"), Baltic Communications
Limited ("BCL"), BECET International ("BECET"), and Teleport-TP ("Teleport") is
dependent upon each of these subsidiaries achieving and maintaining
profitability, which is dependent to a certain extent on the stabilization of
the economies of the former Soviet Union, the ability to maintain the necessary
telecommunications licenses and the ability to obtain adequate financing to meet
capital commitments.
(4) RESTRICTED CASH
Cash and cash equivalents includes cash on deposit of approximately
$2.8 million which secures accounts payable of Technocom Limited ("Technocom").
6
<PAGE> 7
(5) CONTINGENCIES
(a) The Company has paid certain costs on behalf of, and made
certain loans to, PeterStar, which resulted in an intercompany balance of
approximately $26.2 million at March 31, 1997. The recapitalization of PeterStar
in an amount of $14.5 million progressed during the quarter, with such funds
intended to be used to repay an equal amount of the advances, and the balance
of short-term loans was reduced from $4.2 million to approximately $2.0
million. Negotiations are also continuing as to the mechanism of repayment of
the remaining balance of $7.5 million.
(b) Under applicable Russian currency control regulations, the
Company's subsidiaries are required to have certain licenses from the Central
Bank of Russia to enable them to make payments of and accept receipts of hard
currency. While PeterStar and BCL have applied for all the necessary licenses,
some have been received and others are outstanding. Failure to receive the
necessary licenses could result in significant fines and penalties.
(c) Certain of the Company's Russian subsidiaries have accrued
profits and other taxes based on interpretations of the law which may ultimately
be disputed by the Russian taxation authorities. The exposure to additional
profits and other taxes, fines and penalties is not determinable.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This document contains certain forward-looking statements that are
subject to risks and uncertainties. Forward-looking statements include certain
information relating to political, social and economic conditions in the
countries of the former Soviet Union and the Commonwealth of Independent States,
the commencement of certain programs and the proposed offering of certain
services by the Company's operating subsidiaries, proposed changes in the
Company's corporate structure and centers of operations and interpretations and
actions of certain regulatory authorities, including in the United States,
Canada, Russia and Kazakstan, as well as information contained elsewhere in this
Report where statements are preceded by, followed by, or include the words
"believes," "expects," "anticipates," and similar expressions. For such
statements the Company claims the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995. Actual events or results may differ materially from those discussed
in forward-looking statements as a result of various factors, including without
limitation, those discussed elsewhere in this Report.
BASIS OF PRESENTATION
The Company's key interests at June 30, 1997 include a 60% equity
interest in PeterStar, which provides telecommunications services in St.
Petersburg, Russia; a 50% equity interest in BECET, which provides cellular
services in Kazakstan; and a 51% equity interest in Technocom which, through its
49% equity interest in Teleport, operates an international teleport in Moscow,
fiber optic networks in Moscow and its environs and a satellite-based long
distance network across Russia.
The consolidated financial information for the first half of 1997
differs from the first half of 1996 by reflecting:
(i) the Company's acquisition of 100% of the outstanding shares of
BCL in April 1996; and
(ii) the acquisition by Technocom of a controlling voting interest
in Teleport effective December 31, 1996. Teleport is now
accounted for as a subsidiary rather than using the equity
method.
Effective February 28, 1997, the Company was continued as a Delaware
corporation and as a result its financial statements are now prepared in
accordance with U.S. GAAP. The interim financial statements for the three months
and six months ended June 30, 1996 were prepared in accordance with Canadian
GAAP. As a consequence of the continuance to Delaware, the financial statements
for these comparative periods have been restated in accordance with U.S. GAAP.
The most substantial difference between Canadian and U.S. GAAP in the case of
the Company is that U.S. GAAP does not permit the capitalization of
pre-operating costs of PeterStar and BECET.
RESULTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 1997 VERSUS THREE AND SIX MONTHS ENDED JUNE
30, 1996
PLD TELEKOM INC. -- CONSOLIDATED
Overview. The Company reported a net loss of $3.7 million, or $0.12 per
share, and operating income of $2.6 million, on total revenues (consisting of
operating revenues plus interest and other income) of $28.7 million for the
three months ended June 30, 1997, compared with a net loss of $0.8 million, or
$0.03 per share, and operating income of $1.9 million, on total revenues of
$14.6 million during the same period in 1996. Consolidated EBITDA increased
more than 70% to $6.7 million for the three months ended June 30, 1997 from
$3.9 million for the same period in 1996.
8
<PAGE> 9
For the six months ended June 30, 1997, the Company reported a net loss
of $8.1 million, or $0.25 per share, and operating income of $5.1 million, on
total revenues of $53.4 million, compared with a net loss of $2.4 million, or
$0.08 per share, and operating income of $0.9 million, on total revenues of
$25.6 million during the same period in 1996. Consolidated EBITDA increased
143% to $13.2 million for the six months ended June 30, 1997 from $5.4 million
for the same period in 1996.
The increase in net loss for the three and six months ended June 30,
1997 is due primarily to the interest charge on long-term debt for the quarter
of $4.1 million and for the six months of $8.0 million. In the three and six
months ended June 30, 1996, the interest charge on long-term debt totaled $1.2
million.
Revenues. Consolidated operating revenues increased by 96% to $26.4
million for the three months ended June 30, 1997 from $13.5 million for the same
period in 1996. For the six months ended June 30, 1997, consolidated operating
revenues increased by 112% to $50.3 million, from $23.7 million for the same
period in 1996. The increase in operating revenues for both periods is
attributable primarily to strong revenue growth in PeterStar and BECET, and the
consolidation of revenues from BCL as of April 1, 1996 and from Teleport as of
January 1, 1997.
Direct costs. Direct costs increased 123% to $9.2 million for the three
months ended June 30, 1997 from $4.1 million for the same period in 1996. Direct
costs as a percentage of operating revenues for the three months ended June 30,
1997 were 34.7% compared with 30.5% for the same period in 1996.
For the six months ended June 30, 1997, direct costs increased 145% to
$17.7 million from $7.2 million for the same period in 1996. Direct costs as a
percentage of operating revenues for the six months ended June 30, 1997 were
35.2% compared with 30.5% for the same period in 1996.
The increase in direct costs as a percentage of operating revenues is
attributable primarily to the inclusion of Teleport during the period, which had
direct costs of $6.3 million on sales of $8.8 million (72%). Removing the impact
of the inclusion of Teleport's costs, direct costs in the remaining businesses
have been reducing gradually to 26% of operating revenues.
General and administrative costs. General and administrative costs
include the day-to-day expenses in all subsidiary operations as well as
corporate expenses. General and administrative costs increased by 101% to $8.9
million in the three months ended June 30, 1997 from $4.4 million in the same
period in 1996. For the six months ended June 30, 1997, general and
administrative costs increased by 66% to $16.1 million from $9.7 million in the
same period in 1996.
These increases in general and administrative costs reflect the
continued growth in the scale and extent of the operating businesses and
Technocom's acquisition of a controlling stake in Teleport (which added $0.8
million and $1.5 million for the three and six month periods, respectively).
Depreciation. Depreciation increased 99% to $2.4 million during the
three months ended June 30, 1997 from $1.2 million during the same period in
1996. For the six months ended June 30, 1997, depreciation increased 96% to $4.7
million from $2.4 million during the same period of 1996. The increases in
depreciation reflect an increase in the asset base of approximately 100% between
June 30, 1996 and June 30, 1997, due primarily to further capital expenditure as
the build-out of the PeterStar and BECET networks continues, as well as the
inclusion of Teleport.
Amortization. The Company continues to amortize the difference between
the purchase price and the fair value of the net assets acquired for its
interests in PeterStar, BECET, and-as of January 1, 1997-Teleport on a
straight line basis. The charge for the three months ended June 30, 1997 was
$2.0 million compared to $1.2 million for the same period in 1996. For the six
months ended June 30, 1997, the amortization charge was $4.1 million compared to
$2.4 million for the same period in 1996. Amortization for Teleport of $0.6
million for the three month period ended June 30, 1996 and $1.0 million for the
six month period ended June 30, 1996, was included in share of loss from equity
investments, as Teleport was accounted for by the equity method. As of January
1, 1997, the results of Teleport are
9
<PAGE> 10
consolidated, and therefore amortization of the Teleport licenses is included in
amortization of telecommunications licenses and goodwill.
Interest and other income. On June 12, 1996, the Company completed a
$149.5 million private placement (the "June 1996 Placement") consisting of (i)
123,000 units consisting of $123 million aggregate principal amount at stated
maturity of 14% Senior Discount Notes due 2004 (the "Senior Notes"), together
with Warrants to purchase a total of 4,182,000 Common Shares; and (ii) $26.5
million aggregate principal amount of 9% Convertible Notes (the "Convertible
Notes"). Under the terms of the June 1996 Placement, $46 million was deposited
into an escrow account for subsequent disbursement into telecommunications
equipment or telecommunications companies in Russia and Kazakstan. All funds yet
to be disbursed continue to be invested in short-term reverse repurchase
agreements secured by U.S. treasury bonds. These investments, together with
interest earned on other cash deposits and miscellaneous other income, produced
total interest and other income for the three months ended June 30, 1997 of $2.3
million and for the six months ended June 30, 1997 of $3.2 million. Other income
for the three months ended June 30, 1997 included a $1.4 million gain on the
Company's sale of its investment in SPMMTS in June 1997, for aggregate proceeds
of $17.2 million. Interest and other income in the three and six months ended
June 30, 1996 of $1.1 million and $1.9 million, respectively, was comprised
mainly of interest income.
Interest on long-term debt. The debt instruments issued in the June
1996 Placement represent entirely new indebtedness of the Company and resulted
in an interest charge on long-term debt of $4.1 million for the three months
ended June 30, 1997, consisting of non-cash interest accruals on the Senior
Notes of $3.5 million and interest on the Convertible Notes of $0.6 million. For
the six months ended June 30, 1997, these debt instruments resulted in an
interest charge on long-term debt of $8.0 million, consisting of non-cash
interest accruals on the Senior Notes of $6.8 million and interest on the
Convertible Notes of $1.2 million. The interest charge for the three months and
six months ended June 30, 1996 was $1.2 million, consisting primarily of
non-cash interest accruals on the Senior Notes.
Income taxes. The income tax charge for the three months ended June 30,
1997 was $2.4 million compared with $0.5 million during the same period in 1996.
For the six months ended June 30, 1997, the income tax charge was $3.4 million
compared with $1.4 million during the same period in 1996. The provision for
income taxes relates substantially to current income taxes in the Company's
Russian and Kazak businesses and reflects the substantially improved
profitability of these subsidiaries.
PETERSTAR
PeterStar had net income of $3.5 million and an operating profit of
$5.4 million on operating revenues of $12.3 million for the three months ended
June 30, 1997, compared to net income of $2.0 million and an operating profit of
$2.4 million on operating revenues of $7.0 million for the same period in 1996.
EBITDA increased 121% to $6.2 million for the three months ended June 30, 1997
from $2.8 million for the same period in 1996.
For the six months ended June 30, 1997, PeterStar had net income of
$6.6 million and an operating profit of $9.1 million on operating revenues of
$22.3 million, compared to net income of $3.1 million and an operating profit of
$4.0 million on operating revenues of $13.0 million for the same period in 1996.
EBITDA increased 111% to $10.8 million for the six months ended June 30, 1997
from $5.1 million for the same period in 1996.
The 76% and 72% increase in operating revenues for the three and six
months ended June 30, 1997, respectively, reflect a 94% increase in line
penetration from approximately 35,000 at June 30, 1996 to approximately 68,000
at June 30, 1997.
PeterStar's average revenue per line has decreased as its customer base
is shifting from the high margin niche market of international joint ventures to
a lower margin predominantly Russian business market. In addition, as
development of the Vassilievski Island project progresses, the added residential
customers on the PeterStar network will contribute lower revenue per line than
the business customers. General and administrative costs in PeterStar rose to
$3.6 million for the six months ended June 30, 1997, from $2.7 million for the
same period in 1996, an increase of 33%, reflecting the virtual doubling in the
size of the PeterStar business over that period.
10
<PAGE> 11
TECHNOCOM
Technocom, which includes the results of Teleport, had a net loss of
$0.7 million and an operating loss of $0.9 million on operating revenues of
$5.0 million for the three months ended June 30, 1997, compared to a net loss
of $0.1 million and an operating loss of $0.3 million on operating revenues of
$0.2 million for the same period in 1996.
For the six months ended June 30, 1997, Technocom had a net loss of
$1.4 million and an operating loss of $1.1 million on operating revenues of
$11.1 million, compared to negligible net income and an operating loss of $0.4
million on operating revenues of $0.5 million for the same period in 1996.
The increase in operating revenues from 1996 was derived primarily from
the consolidation of Teleport in the financial statements of Technocom.
TELEPORT
Teleport had a net loss of $1.0 million and an operating loss of $0.5
million on operating revenues of $3.7 million for the three months ended June
30, 1997. For the six months ended June 30, 1997, Teleport had a net loss of
$0.7 million and an operating loss of $0.2 million on operating revenues of
$8.8 million. Teleport financial results were not consolidated during the same
period in 1996.
While showing significant growth over its performance in 1996,
Teleport's operating revenues have been depressed for the three and six months
ended June 30, 1997 due primarily to the delayed roll-out of its satellite-based
long distance network resulting from the slow growth in the economy in various
regions of the Russian Federation and delays caused by regulatory uncertainties
and the logistics involved in the implementation of the network. The Company
currently expects to experience fewer logistical and regulatory delays during
the second half of 1997, but no assurances can be made that additional such
delays will not be encountered. In addition, Teleport's future results will
continue to be affected by the poor economic conditions in some of the regions
where the network is being rolled-out.
BECET
BECET had net income of $1.7 million and an operating profit of $2.6
million on operating revenues of $6.7 million for the three months ended June
30, 1997, compared to net income of $1.0 million and an operating profit of $1.1
million on operating revenues of $4.4 million for the same period in 1996.
EBITDA increased to $3.3 million for the three months ended June 30, 1997 from
$1.3 million for the same period in 1996.
For the six months ended June 30, 1997, BECET had net income of $3.0
million and an operating profit of $4.1 million on operating revenues of $12.8
million, compared to net income of $1.1 million and an operating profit of $1.4
million on operating revenues of $8.2 million for the same period in 1996.
EBITDA increased to $5.7 million for the six months ended June 30, 1997 from
$2.3 million for the same period in 1996.
The increase in operating revenues (52% for the three months and 56%
for the six months ended June 30, 1997) is attributable to an increase in the
number of BECET's subscribers from approximately 4,900 at June 30, 1996 to 8,900
at June 30, 1997, an increase of 82%. As with PeterStar, the average revenue per
line has decreased as BECET's customer base increasingly consists of Kazak
businesses and individuals rather than foreign joint ventures. BECET's results
for 1997 to date have also been adversely affected by weak economic growth in
the cities and regions of Kazakstan outside of Almaty, a trend which may
continue for the balance of 1997. General and administrative expenses increased
in the six months ended June 30, 1997 to $3.3 million compared to $2.5 million
in the same period in 1996.
11
<PAGE> 12
During April 1997, it was reported that the Daewoo Corporation
("Daewoo") of South Korea had won through a tender process a 40% stake in
Kazaktelekom, the state owned entity which operates the national public
telephone network in Kazakstan. The Company and Kazaktelekom each own 50% of
BECET. The Company is not yet in a position to assess the impact of this sale on
its business, but a significant change in the government's attitude toward BECET
or the management direction of Kazaktelekom could have a material adverse effect
on the Company.
BCL
BCL had net income of $0.1 million and an operating profit of $0.1
million on operating revenues of $1.9 million for the three months ended June
30, 1997, compared to net income of $0.1 million and an operating profit of $0.2
million on operating revenues of $1.6 million for the same period in 1996.
EBITDA was $0.3 million for both periods.
For the six months ended June 30, 1997, BCL had net income of $0.5
million and an operating profit of $0.4 million on operating revenues of $3.7
million. From the acquisition of BCL on April 1, 1996 to June 30, 1996, BCL had
net income of $0.1 million and an operating profit of $0.2 million on operating
revenues of $1.6 million. EBITDA was $0.9 million for the six months ended June
30, 1997, compared to $0.3 million for the period April 1, 1996 to June 30,
1996.
12
<PAGE> 13
LIQUIDITY AND CAPITAL RESOURCES
The Company continues to focus on the emerging telecommunications
markets in the Russian Federation and Kazakstan. Investment in
telecommunications assets, property and equipment has continued during the first
six months of 1997. Capital expenditures in the six months ended June 30, 1997
can be summarized as follows:
<TABLE>
<CAPTION>
CAPITAL EXPENDITURE
COMPANY IN PERIOD EXPLANATION
<S> <C> <C>
PeterStar $14.4 million New switching equipment and transmission capacity
BECET $1.8 million Investment in cellular telecommunications network and
related support infrastructure
Technocom $15.8 million Expenditures on Teleport long distance network
</TABLE>
Capital expenditures are financed through a combination of cash
balances existing at the beginning of 1997, each subsidiary's own internally
generated cash flow, bank or supplier financing, equipment leasing arrangements
between the Company and the subsidiary, intercompany debt arrangements, and by
the escrow funds from the June 1996 Placement. More specifically, the
Vassilievski Island development in PeterStar is largely being financed through a
5-year supplier financing with Lucent Technologies, while $5.6 million of the
Teleport network has been financed through the issue of promissory notes
carrying interest at "all-in" rates of 8.4% and 11.2%. The proceeds of the sale
of the Company's stake in SPMMTS will also be used, in the future, for the
financing of capital expenditures.
Effective February 28, 1997, the Company continued from Ontario into
Delaware and, in connection therewith, has moved its executive offices to the
United States. The benefits of the continuance are anticipated to include
improved access to the U.S. capital markets, reduced costs of financing and
streamlining of management and operations. The costs of the continuance,
including the costs of changing the jurisdiction of incorporation of the Company
and those involved in setting up executive offices in the United States, have
amounted to less than $750,000. In addition, upon the change of jurisdiction,
the Company became potentially subject to two distinct tax charges as a
consequence of ceasing to be an Ontario corporation: (i) it will be deemed to
have disposed of all of its assets at their fair market value as of the date of
continuance and the Canadian federal tax authorities will assess tax on any
income and net taxable capital gains arising thereby; and (ii) it will be
subject to an additional tax on the amount by which the fair market value of the
Company's assets, net of liabilities, exceeds the paid-up capital of the
Company's issued and outstanding shares at a rate (based on certain factual
assumptions) of 5%. Based on management's analysis and advice received to date,
the Company believes that no tax will be due. However, there can be no assurance
that the Canadian federal tax authorities will conclude that no Canadian federal
taxes are due as a result of the continuance or that the amount of Canadian
federal taxes claimed or found to be due will not be significant.
The Company's consolidated balance sheet at June 30, 1997 reflects
total assets of $310.0 million, as compared to $306.4 million at December 31,
1996. Total assets at June 30, 1997 were comprised of $56.4 million in current
assets (including $32.7 million of cash and cash equivalents), $120.1 million in
property and equipment, $68.4 million in telecommunications licenses related to
PeterStar, BECET and Teleport, other assets and investments of $23.2 million and
escrow funds of $41.9 million. Cash and cash equivalents included the proceeds
of the sale of the Company's investment in SPMMTS. The escrow funds were
acquired as part of the net proceeds of the June 1996 Placement and are to be
disbursed principally for telecommunications equipment to be used in PeterStar
and Technocom's operating subsidiaries and for the development of new value
added services. Total indebtedness of $126.5 million as a percentage of total
assets, was 40.8% at June 30, 1997. The corresponding figures at December 31,
1996 were $123.8 million and 40.4%.
Shareholders' equity of $130.0 million at June 30, 1997 consisted of
$181.0 million in common stock and $13.6 million ascribed to the Warrants issued
in the June 1996 Placement, offset by the Company's deficit of $64.6
13
<PAGE> 14
million. The Company's ratio of total indebtedness to equity at June 30, 1997
was 97.3% compared with 89.7% at December 31, 1996.
At June 30, 1997, the Company had a working capital surplus of $14.1
million reflecting a small portion of the net proceeds of the June 1996
Placement which were not placed in escrow and the proceeds from the sale of the
Company's investment in SPMMTS. This compares to a working capital surplus of
$14.2 million at December 31, 1996. The working capital and escrow funds, which
totaled $55.9 million at June 30, 1997, are to be used to implement the
business plans of the operating subsidiaries into 1998, although the Company's
ability to access these funds freely is restricted since the funds in escrow
can only be accessed after compliance with a number of conditions, including
ensuring that the funds are only used for certain designated purposes and that
certain safeguards are in place.
To the extent that: (i) actual cash flows from operations are below the
Company's estimates as a result of lower than expected revenues per line or
higher operating costs; or (ii) development costs of the build-out of the
PeterStar, BECET and Teleport networks exceed current estimates, the Company may
be required to seek additional debt or equity financing. There can be no
assurance that such financing will be available, or that it can be obtained on
equal or more favorable terms than current financing arrangements.
14
<PAGE> 15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's annual meeting of stockholders was held on June 12, 1997.
At this meeting, stockholders of the Company approved the following:
1. Election of ten directors; and
2. The amendment and restatement of the Company's Stock Option
Plan and its renaming as the PLD Telekom Inc. Equity
Compensation Plan.
The number of votes cast for, and withheld from, each nominee are set
forth below:
<TABLE>
<CAPTION>
For Withheld
--- --------
<S> <C> <C>
Dr. Boris Antoniuk 25,666,058 108,233
Edward Charles Dilley 25,666,058 109,833
Simon Edwards 25,666,058 93,264
James R.S. Hatt 25,666,058 93,064
David L. Heavenridge 25,666,058 92,264
Gennadiy Kudriavtsev 25,666,058 109,033
Dr. Vladimir Kvint 25,666,058 104,433
Timothy P. Lowry 25,666,058 105,233
Robert Smith 25,666,058 93,164
David M. Stovel 25,666,058 94,814
</TABLE>
The number of votes cast for, and against, and the number of
abstentions in the matter of the amendment and restatement of the Company's
Stock Option Plan were: For, 19,256,270; Against, 923,285; Abstain, 77,165.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
A report on Form 8-K (Item 5 - Other Events) was filed by the Company
with the SEC on July 10, 1997 reporting the Company's sale of its stake in
SPMMTS.
15
<PAGE> 16
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.
PLD TELEKOM INC.
Date: August 14, 1997 By: /s/ Simon Edwards
-------------------------
Simon Edwards
Senior Vice President, Chief Financial
Officer and Treasurer
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PLD TELEKOM
INC.'S FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q AND THE CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS (UNAUDITED) FOR PLD TELEKOM INC. AT AND FOR THE SIX MONTH
PERIOD ENDED JUNE 30, 1997 CONTAINED THEREIN.
</LEGEND>
<CIK> 0000890568
<NAME> PLD TELEKOM INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 32,660
<SECURITIES> 0
<RECEIVABLES> 15,721
<ALLOWANCES> 2,602
<INVENTORY> 1,765
<CURRENT-ASSETS> 56,422
<PP&E> 137,696
<DEPRECIATION> 17,626
<TOTAL-ASSETS> 309,981
<CURRENT-LIABILITIES> 42,358
<BONDS> 120,908
0
31
<COMMON> 317
<OTHER-SE> 194,247
<TOTAL-LIABILITY-AND-EQUITY> 309,981
<SALES> 0
<TOTAL-REVENUES> 50,280
<CGS> 17,686
<TOTAL-COSTS> 17,686
<OTHER-EXPENSES> 27,479
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,389
<INCOME-PRETAX> (1,404)
<INCOME-TAX> 3,440
<INCOME-CONTINUING> (8,067)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,067)
<EPS-PRIMARY> (0.25)
<EPS-DILUTED> (0.25)
</TABLE>
