<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 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: 0-20444
-------------
PLD TELEKOM INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<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 - 33,324,290 SHARES (APRIL 29, 1998)
1
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PLD TELEKOM INC.
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
Part I Financial Information
Item 1. Financial Statements
PLD Telekom Inc.
Consolidated Condensed Balance Sheets as of March 31, 1998 (Unaudited) and December 31, 1997.............. 3
Consolidated Condensed Statements of Operations (Unaudited) for the three months ended
March 31, 1998 and 1997................................................................................... 4
Consolidated Condensed Statements of Cash Flows (Unaudited) for the three months
ended March 31, 1998 and 1997............................................................................. 5
Notes to Consolidated Condensed Financial Statements (Unaudited) for
the three months ended March 31, 1998..................................................................... 6
NWE Capital (Cyprus) Ltd.
Consolidated Condensed Balance Sheets as of March 31, 1998 (Unaudited) and
December 31, 1997......................................................................................... 17
Consolidated Condensed Statements of Operations (Unaudited) for the three months ended
March 31, 1998 and 1997................................................................................... 18
Consolidated Condensed Statements of Cash Flows (Unaudited) for the three months ended
March 31, 1998 and 1997................................................................................... 19
Notes to the Consolidated Condensed Financial Statements (Unaudited) for the three months
ended March 31, 1998...................................................................................... 20
Technocom Limited and Subsidiaries
Consolidated Condensed Balance Sheets as of March 31, 1998 (Unaudited) and
March 31, 1997............................................................................................ 24
Consolidated Condensed Statements of Operations (Unaudited) for the three months
ended March 31, 1998 and 1997............................................................................. 25
Consolidated Condensed Statements of Cash Flows (Unaudited) for the three months
ended March 31, 1998 and 1997............................................................................. 26
Notes to the Consolidated Condensed Financial Statements (Unaudited) for the three
months ended March 31, 1998............................................................................... 27
Wireless Technology Corporations Limited
Consolidated Condensed Balance Sheets as of March 31, 1998 (Unaudited) and
December 31, 1997......................................................................................... 30
Consolidated Condensed Statements of Operations (Unaudited) for the three months
ended March 31, 1998 and 1997............................................................................. 31
Consolidated Condensed Statements of Cash Flows (Unaudited) for the three months
ended March 31, 1998 and 1997............................................................................. 32
Notes to the Consolidated Condensed Financial Statements (Unaudited) for the three
months ended March 31, 1998............................................................................... 33
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations .................. 34
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K........................................................................ 39
</TABLE>
2
<PAGE> 3
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PLD TELEKOM INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
MARCH 31, 1998 (UNAUDITED) AND DECEMBER 31, 1997
<TABLE>
<CAPTION>
March 31 Dec. 31
1998 1997
(Thousands of U.S. dollars)
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Current assets:
Cash and cash equivalents $ 17,145 $ 17,256
Trade receivables, net of allowances 17,174 17,078
Other receivables and prepaids 10,171 8,615
Inventory 2,978 2,802
Due from related parties 7,049 6,320
--------- ---------
Total current assets 54,517 52,071
Escrow funds 34,317 33,868
Property and equipment, net 139,156 134,998
Telecommunications licenses, net 76,350 78,837
Due from related parties 3,011 3,011
Other investments 6,131 7,036
Other assets 24,689 25,765
--------- ---------
Total assets $ 338,171 $ 335,586
========= =========
Liabilities and Shareholders' Equity:
Current liabilities:
Short-term borrowings 20,320 20,320
Accounts payable 12,169 13,597
Accrued liabilities 5,725 5,750
Due to related parties 5,345 5,336
Deferred revenues 2,317 3,128
Customer deposits 3,321 3,070
Other current liabilities 4,768 2,256
--------- ---------
Total current liabilities 53,965 53,457
Long-term debt 136,437 133,516
Minority interest 25,047 21,382
Shareholders' equity:
Preferred stock, par value $0.01 per share, authorized -
100,000,000, issued and outstanding - 446,884 4 4
Common stock, par value $0.01 per share, authorized -
100,000,000, issued and outstanding - 33,324,290 333 333
Additional paid-in capital 204,007 204,007
Accumulated deficit (81,622) (77,113)
--------- ---------
Total shareholders' equity 122,722 127,231
--------- ---------
Total liabilities and shareholders' equity $ 338,171 $ 335,586
========= =========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
3
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PLD TELEKOM INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED MARCH 31
<TABLE>
<CAPTION>
1998 1997
(Thousands of U.S. dollars, except share and per share data)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues:
Telecommunications $ 34,719 $ 23,380
Finance lease income 447 511
------------ ------------
35,166 23,891
Direct costs 10,796 8,521
------------ ------------
Gross profit 24,370 15,370
Operating expenses:
General and administrative 9,700 7,248
Depreciation 3,099 2,325
Amortization 2,692 2,028
Taxes other than income taxes 1,680 1,288
------------ ------------
17,171 12,889
------------ ------------
Operating income 7,199 2,481
Other income/(expense):
Share of loss from equity investments (210) (278)
Interest and other income 871 1,142
Interest expense (5,190) (4,269)
Amortization of deferred financing costs (401) (288)
Foreign exchange loss (116) (39)
Loss on disposal of investments and property and equipment -- (251)
------------ ------------
Earnings/(loss) before income taxes and minority interest 2,153 (1,502)
Income taxes 2,997 1,074
------------ ------------
Loss before minority interest (844) (2,576)
Minority interest 3,665 1,766
------------ ------------
Net loss ($4,509) ($4,342)
============ ============
Net loss per common share:
Basic ($0.14) ($0.14)
============ ============
Diluted ($0.14) ($0.14)
============ ============
Weighted average common shares outstanding 33,324,290 31,731,034
============ ============
</TABLE>
See accompanying notes to consolidated condensed financial statements.
4
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PLD TELEKOM INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31
<TABLE>
<CAPTION>
1998 1997
(Thousands of U.S. dollars)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($ 4,509) ($ 4,342)
Adjustments to reconcile net loss to net cash
provided by/(used in) operating activities:
Depreciation and amortization 6,192 4,641
Share of loss of equity investments 210 278
Accrued interest on senior discount notes 3,964 3,375
Minority interest 3,665 1,766
Other -- 253
Changes in operating assets and liabilities:
Decrease/(increase) in trade receivables, net of allowances (96) (2,061)
Decrease/(increase) in other receivables and prepaids (1,556) 849
Decrease/(increase) in inventory (176) 159
Change in due from or to related parties (720) (204)
Increase/(decrease) in accounts payable, accrued liabilities,
customer deposits and other current liabilities (668) 1,725
Increase/(decrease) in deferred revenue (811) 270
-------- --------
5,495 6,709
Cash flows from investing activities:
Capital expenditures (5,894) (13,902)
Escrow funds (449) (535)
Investments and other assets 1,164 (2,085)
-------- --------
(5,179) (16,522)
Cash flows from financing activities:
Payments on long-term indebtedness (427) --
Short-term debt borrowings -- 5,171
Issuance of common stock -- 95
-------- --------
(427) 5,266
-------- --------
Decrease in cash and cash equivalents (111) (4,547)
Cash and cash equivalents, beginning of period 17,256 40,674
-------- --------
Cash and cash equivalents, end of period $ 17,145 $ 36,127
======== ========
Supplemental disclosures:
Non-cash investing and financing activities:
Supplier financing $ 1,363 --
======== ========
Interest paid $ 532 $ 251
======== ========
Income taxes paid $ 2,885 $ 1,106
======== ========
</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 MONTHS ENDED MARCH 31, 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) 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 consolidated
financial statements include all adjustments (consisting primarily of normal
recurring accruals) necessary to present fairly the consolidated financial
position of the Company as of March 31, 1998 and the consolidated results of
operations and cash flows of the Company for the three months ended March 31,
1998 and 1997.
Certain information and footnote disclosures generally included in
consolidated 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 consolidated condensed financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997.
(b) Net loss per share. The Company adopted the provisions of
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS
128"), on December 31, 1997. SFAS 128 establishes standards for computing and
presenting earnings per share ("EPS") and supersedes APB Opinion No. 15.
"Earnings Per Share". SFAS 128 requires dual presentation of basic and diluted
EPS for net income on the face of the statement of operations and a separate
reconciliation of both EPS amounts. Basic EPS is computed by dividing income or
loss by the weighted average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock at the beginning of the period presented. Basic loss per
share for 1997 has been restated to give effect to SFAS 128 and was not
different from net loss per share measured under APB No. 15. Potentially
dilutive common stock equivalents totalling 967,000 and 1,621,000 for the
quarters ended March 31, 1997 and 1998, respectively, have not been included in
the computation of diluted net loss per common share because they were
antidilutive for the periods presented.
(c) Comprehensive income. Statement of Financial Accounting Standards
No. 130 (SFAS 130), "Reporting Comprehensive Income," was issued in June 1997.
SFAS 130 establishes standards for reporting and display of comprehensive income
and its components in a full set of general purpose financial statements. This
Statement requires that all items that are required to be recognized under
accounting standards as components of comprehensive income be reported in an
annual financial statement that is displayed with the same prominence as other
financial statements. The Company adopted SFAS 130 as of January 1, 1998. As
SFAS 130 only requires additional disclosures in the Company's consolidated
financial statements, its adoption did not have any impact on the Company's
consolidated position or results of operations.
(d) New pronouncements. SFAS No. 131 (SFAS 131), "Disclosure about
Segments of an Enterprise and Related Information," was issued in June 1997.
SFAS 131 establishes standards for the way public companies report information
about operating segments in annual financial statements and requires that those
companies report selected information about operating segments in interim
financial reports issued to shareholders. It also establishes standards for
related disclosures about products and services, geographic areas and major
customers. The Company will adopt SFAS 131 for its annual reporting in 1998.
(e) Reclassifications. Certain reclassifications have been made to the
prior year's financial statements to conform to the current year's presentation.
(2) 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"), ALTEL, formerly known as BECET International ("ALTEL"), and
Teleport-TP, 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.
(3) RESTRICTED CASH
Technocom Limited has entered into bank guarantees in connection
with certain of its telecommunications equipment supplier financing agreements.
The amount of the guarantees reduces automatically in accordance with
installments paid. The amount outstanding as of March 31, 1998 under these
supplier financing agreements secured by bank guarantees is approximately $3.2
million. In addition, pursuant to the terms of the Company's $149.5 million
private placement completed on June 12, 1996, $34.3 million remained in escrow
on March 31, 1998. These funds will be released in the future for
telecommunications equipment and investments in Russia and Kazakhstan.
6
<PAGE> 7
(4) CONTINGENCIES
(a) Under applicable Russian currency control regulations, the
Company's Russian 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 or have applied for all the
necessary licenses. Failure to receive the remaining licenses could result in
fines and penalties. Management does not believe that such fines and penalties
would be material.
(b) 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, although the Company
believes such amounts will not be material.
(c) At March 31, 1998, Technocom and PeterStar have commitments of
approximately $500,000 and $12.4 million, respectively, related to the
acquisition of telecommunications equipment. The PeterStar supply contract
provides for financing of the entire amount over approximately five years.
(d) While it has not had to do so historically, PeterStar anticipates
that it will have to begin paying local line rental charges to the Petersburg
Telephone Network in 1998. The exact fee, and the date from which charges will
be levied, have yet to be determined, but the Company does not believe that
such payments will have a material adverse effect on the Company's financial
position or results of operations.
(e) Teleport-TP currently utilizes capacity on three Intelsat
satellites for the provision of its international and domestic long distance
services, pursuant to a fifteen year contract signed with Intelsat in January
1993. The agreement requires quarterly payments of $616,500 for the remainder
of its term.
(5) SUBSEQUENT EVENTS
On April 19, 1998, the Company entered into separate agreements with
News America Incorporated ("News America"), a wholly owned subsidiary of News
Corporation Limited, and Cable and Wireless plc ("Cable & Wireless") regarding,
among other things, the acquisition by the Company of: (i) an additional 11%
interest in its subsidiary PeterStar from News America (after its acquisition
of such interest from Cable & Wireless); and (ii) a 50% interest in BELCEL, a
mobile telephone business in Belarus, together with certain intercompany
indebtedness from Cable & Wireless. In connection with these acquisitions, the
Company agreed to issue an aggregate of 4.2 million shares of its Common Stock
to News America and Cable & Wireless. In addition, Cable & Wireless and News
America entered into an agreement providing for the sale by Cable & Wireless to
News America of its complete stake in the Company (including the Common Stock
being issued by the Company to Cable & Wireless in exchange for the interest in
BELCEL) and a warrant to purchase 250,000 shares of Common Stock. The
transactions are conditioned on, among other things, clearance under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (which was
received on May 4, 1998) and approval of the acquisition of the additional
PeterStar interest by the shareholders of the Company. The Company currently
expects the transactions to close in June 1998.
(6) CONSOLIDATING CONDENSED FINANCIAL INFORMATION
NWE Capital (Cyprus) Limited ("NWE Cyprus"), Wireless Technology
Corporations Limited ("WTC"), BCL, PLD Asset Leasing Limited ("PLD Asset
Leasing") and PLD Capital Limited ("PLD Capital") (collectively, the "Subsidiary
Guarantors") have guaranteed the Company's Senior Notes and Convertible Notes
issued in June 1996. The following consolidating balance sheets as of March 31,
1998 and December 31, 1997 and consolidating statements of operations and cash
flows for the three months ended March 31, 1998 and 1997, depict the financial
position and results of operations and cash flows for the Company, presented
using the equity method of accounting for its subsidiaries, the combined
Subsidiary Guarantors, presented using the equity method of accounting, and the
combined non-guarantor subsidiaries together with consolidating eliminations to
arrive at the consolidated balance sheets, statements of operations and cash
flows of the Company and its subsidiaries. Each of the Subsidiary Guarantors are
wholly owned and their guarantees are full, unconditional and joint and several.
NWE Cyprus and WTC are holding companies and have no operations
independent of their subsidiaries. PLD Asset Leasing and PLD Capital are special
purpose holding companies incorporated in Cyprus which lease equipment to
non-guarantor subsidiaries. Separate financial statements for the Subsidiary
Guarantors are not presented because they are not material to investors.
7
<PAGE> 8
There can be no assurance that guarantees by the Subsidiary Guarantors,
all of which are incorporated in jurisdictions outside the United States, can be
enforced easily, if at all. Persons seeking to enforce these guarantees may
therefore need to do so outside the United States. The need to bring enforcement
actions in such other jurisdictions, and to comply with the laws of those
jurisdictions in relation thereto, may significantly complicate, delay or limit
enforcement of such guarantees.
In addition, the ability to enforce an "upstream" guarantee (or
guarantee by a subsidiary of a parent's obligations) is subject to some
uncertainty not only in the United States but also in other applicable
jurisdictions such as Cyprus and Russia, and may well be subject to similar
uncertainty in other jurisdictions where such guarantee may be sought to be
enforced against any Subsidiary Guarantor. Efforts have been made to minimize
the effect of any possible invalidity of the guarantees by limiting the extent
to which they may be enforced against a Subsidiary Guarantor to such amounts
which will not render the guarantees void, voidable or unenforceable, and, in
the case of PLD Asset Leasing and PLD Capital Limited, by limiting the
activities of each such subsidiary to its leasing, selling or investing
operations and in the case of PLD Asset Leasing, PLD Capital and NWE Cyprus by
limiting the ability of each such subsidiary to incur indebtedness. However,
there can be no assurance that such efforts have been successful.
Payments under the guarantee given by BCL may require a license from
the Russian Central Bank and may also (to the extent such payments are
considered to be interest) be subject to Russian withholding tax. While under
current law payments under the guarantees by PLD Asset Leasing, PLD Capital, WTC
and NWE Cyprus currently in existence may be made without the need for licenses
or withholding of tax, there can be no assurance that PLD Asset Leasing,
PLD Capital, WTC or NWE Cyprus will not encounter such problems hereafter.
Finally, the ability of a foreign claimant to enforce a judgement or
arbitral award obtained in respect of a guarantee outside those jurisdictions in
which the Subsidiary Guarantors are incorporated may be limited. For example,
some jurisdictions (i.e., Russia) generally only recognize foreign judgments or
arbitral awards pursuant to bilateral or multilateral treaty arrangements. In
addition, the local courts may have limited experience in the enforcement of
foreign judgments. The possible need to re-litigate in the jurisdiction in which
a Subsidiary Guarantor is located a judgment or arbitral award obtained
elsewhere in respect of its guarantee may significantly delay the enforcement of
such judgment or award.
8
<PAGE> 9
There are no restrictions in the charter or other foundation documents
of the Subsidiary Guarantors which restrict their ability to pay dividends, and
each of such companies is a wholly owned, direct or indirect, subsidiary of the
Company. However, each such company's ability to pay dividends may be affected,
from time to time, by: (i) their own ability to generate sufficient cash from
their operations; (ii) the level of taxation, particularly corporate profits and
withholding taxes, in the jurisdictions in which they operate; and (iii)
exchange controls and currency repatriation restrictions in effect in the
jurisdictions in which they operate.
9
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PLD TELEKOM INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Consolidating Balance Sheet (Unaudited)
As of March 31, 1998
(in thousands)
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Subsidiaries Subsidiaries PLD
PLD (combined) (combined) Eliminations Consolidated
------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents 1,735 406 15,004 -- 17,145
Trade Receivables, net of allowances -- 1,482 15,692 -- 17,174
Other receivables and prepaids 1,221 160 8,790 -- 10,171
Inventory -- 260 2,718 -- 2,978
Due from related parties 600 1,313 5,136 -- 7,049
------- -------- -------- -------- --------
Total current assets 3,556 3,621 47,340 -- 54,517
Escrow funds 34,317 -- -- -- 34,317
Intercompany investments and advances 217,212 149,477 2,766 (369,455) --
Property and equipment, net 223 6,039 133,979 (1,085) 139,156
Telecommunications licenses, net -- -- -- 76,350 76,350
Due from related parties -- 3,011 -- -- 3,011
Other investments 3,000 7,594 3,642 (8,105) 6,131
Other assets 11,909 65 349 12,366 24,689
------- -------- -------- -------- --------
Total assets 270,217 169,807 188,076 (289,929) 338,171
======= ======== ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Short-term borrowings 19,420 -- 900 -- 20,320
Accounts payable 3 2,584 9,582 -- 12,169
Accrued liabilities 576 150 4,999 -- 5,725
Due to related parties -- 24 5,321 -- 5,345
Deferred revenue -- 4 2,313 -- 2,317
Customer deposits -- -- 3,321 -- 3,321
Other current liabilities 1,318 118 3,332 -- 4,768
------- -------- -------- -------- --------
Total current liabilities 21,317 2,880 29,768 -- 53,965
Long-term debt 126,178 -- 10,259 -- 136,437
Intercompany payables -- 43,869 39,229 (83,098) --
Minority interest -- -- -- 25,047 25,047
Commitments and contingencies -- -- -- -- --
Shareholders' equity:
Preferred stock 4 -- 40,000 (40,000) 4
Common stock 333 125,640 33,908 (159,548) 333
Additional paid-in capital 204,007 -- -- -- 204,007
Accumulated deficit (81,622) (2,582) 34,912 (32,330) (81,622)
------- -------- -------- -------- --------
Total shareholders' equity 122,722 123,058 108,820 (231,878) 122,722
------- -------- -------- -------- --------
Total liabilities and shareholders' equity 270,217 169,807 188,076 (289,929) 338,171
======= ======== ======== ======== ========
</TABLE>
10
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PLD TELEKOM INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Consolidating Balance Sheet
As of December 31, 1997
(in thousands)
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Subsidiaries Subsidiaries
Parent (combined) (combined) Eliminations Consolidated
----------- ----------------- ------------------ ---------------- ---------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents 5,513 241 11,502 -- 17,256
Trade Receivables, net of allowances -- 1,239 15,839 -- 17,078
Other receivables and prepaids 1,220 168 7,227 -- 8,615
Inventory -- 214 2,588 -- 2,802
Due from related parties 1,600 -- 4,720 -- 6,320
----------- ----------------- ------------------ ---------------- ---------------
Total current assets 8,333 1,862 41,876 -- 52,071
Escrow funds 33,868 -- -- -- 33,868
Intercompany investments and advances 210,844 148,295 2,615 (361,754) --
Property and equipment, net 191 6,181 129,780 (1,154) 134,998
Telecommunications licenses, net of amortization -- -- 622 78,215 78,837
Due from related parties 3,011 -- -- -- 3,011
Other investments 3,000 7,384 4,036 (7,384) 7,036
Other assets 11,971 2,846 803 10,145 25,765
----------- ----------------- ------------------ ---------------- ---------------
Total assets 271,218 166,568 179,732 (281,932) 335,586
=========== ================= ================== ================ ===============
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Short-term borrowings 19,420 -- 900 -- 20,320
Accounts payable 1,224 1,861 10,512 -- 13,597
Accrued liabilities 371 34 5,495 (150) 5,750
Due to related parties -- -- 6,394 (1,058) 5,336
Deferred revenue -- -- 3,128 -- 3,128
Customer deposits -- -- 3,070 -- 3,070
Other current liabilities 758 283 1,258 (43) 2,256
----------- ----------------- ------------------ ---------------- ---------------
Total current liabilities 21,773 2,178 30,757 (1,251) 53,457
Long-term debt 122,214 -- 11,302 -- 133,516
Intercompany payables -- 45,949 36,250 (82,199) --
Minority interest -- -- -- 21,382 21,382
Commitments and contingencies
Shareholders' equity:
Preferred stock 4 -- 40,000 (40,000) 4
Common stock 333 125,640 33,908 (159,548) 333
Additional paid-in capital 204,007 -- -- -- 204,007
Accumulated deficit (77,113) (7,199) 27,515 (20,316) (77,113)
----------- ----------------- ------------------ ---------------- ---------------
Total shareholders' equity 127,231 118,441 101,423 (219,864) 127,231
----------- ----------------- ------------------ ---------------- ---------------
Total liabilities and shareholders'
equity 271,218 166,568 179,732 (281,932) 335,586
=========== ================= ================== ================ ===============
</TABLE>
11
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::
PLD TELEKOM INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Consolidating Statement of Operations (Unaudited)
Three Months Ended March 31, 1998
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Subsidiaries Subsidiaries
Parent (combined) (combined) Eliminations Consolidated
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Telecommunications $ -- 2,242 32,477 -- 34,719
Finance lease income -- 210 447 (210) 447
Management fees 1,025 -- -- (1,025) --
------- ------------ ------------ ------------ ------------
Total revenues 1,025 2,452 32,924 (1,235) 35,166
Direct costs 1,144 9,652 -- 10,796
------- ------------ ------------ ------------ ------------
Gross profit 1,025 1,308 23,272 (1,235) 24,370
Operating expenses:
General and administrative 1,553 722 7,526 (101) 9,700
Depreciation (53) 208 2,944 -- 3,099
Amortization 1,248 1,221 79 144 2,692
Management fees -- -- 1,025 (1,025) --
Taxes other than income taxes 130 178 1,372 -- 1,680
------- ------------ ------------ ------------ ------------
Total operating expenses 2,878 2,329 12,946 (982) 17,171
------- ------------ ------------ ------------ ------------
Operating income/(loss) (1,853) (1,021) 10,326 (253) 7,199
Other income/(expense):
Share of income/(loss) from
equity investments 2,575 5,694 (210) (8,269) (210)
Interest and other income 515 136 220 -- 871
Interest expense (5,028) -- (372) 210 (5,190)
Amortization of deferred financing costs (401) -- -- -- (401)
Foreign exchange loss -- (73) (43) -- (116)
Loss on disposals (317) -- 400 (83) --
------- ------------ ------------ ------------ ------------
Earnings/(loss) before income taxes
and minority interest (4,509) 4,736 10,321 (8,395) 2,153
Income taxes -- 72 2,925 -- 2,997
------- ------------ ------------ ------------ ------------
Loss before minority interest (4,509) 4,664 7,396 (8,395) (844)
Minority interest -- -- -- 3,665 3,665
------- ------------ ------------ ------------ ------------
Net loss $(4,509) 4,664 7,396 (12,060) (4,509)
======= ============ ============ ============ ============
</TABLE>
12
<PAGE> 13
::
PLD TELEKOM INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Consolidating Statement of Operations (Unaudited)
Three Months Ended March 31, 1997
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Subsidiaries Subsidiaries
Parent (combined) (combined) Eliminations Consolidated
----------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Revenues:
Telecommunications $ -- 1,779 21,601 -- 23,380
Finance lease income -- 188 511 (188) 511
Management fees -- 562 -- (562) --
------- ------- ------- ------ -------
Total revenues -- 2,529 22,112 (750) 23,891
Direct costs -- 291 8,230 -- 8,521
------- ------- ------- ------ -------
Gross profit -- 2,238 13,882 (750) 15,370
Operating expenses:
General and administrative 610 1,160 5,769 (291) 7,248
Depreciation (69) 192 2,202 -- 2,325
Amortization 796 1,220 12 -- 2,028
Management fees 5 -- 557 (562) --
Taxes other than income taxes 85 97 1,106 -- 1,288
Total operating expenses ------- ------- ------- ------ -------
1,427 2,669 9,646 (853) 12,889
------- ------- ------- ------ -------
Operating income/(loss) (1,427) (431) 4,236 103 2,481
Other income/(expense):
Share of income/(loss) from equity investments 603 2,570 (278) (3,173) (278)
Interest and other income 607 -- 502 33 1,142
Interest expense (3,970) (203) (502) 406 (4,269)
Amortization of deferred financing costs (288) -- -- -- (288)
Foreign exchange loss 133 92 (264) -- (39)
Loss on disposals -- -- -- (251) (251)
------- ------- ------- ------ -------
Earnings/(loss) before income taxes
and minority interest (4,342) 2,028 3,694 (2,882) (1,502)
Income taxes -- 32 750 292 1,074
------- ------- ------- ------ -------
Loss before minority interest (4,342) 1,996 2,944 (3,174) (2,576)
Minority interest -- -- 121 1,645 1,766
------- ------- ------- ------ -------
Net loss $(4,342) 1,996 2,823 (4,819) (4,342)
======= ======= ======= ====== =======
</TABLE>
13
<PAGE> 14
PLD TELEKOM INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Consolidating Statement of Cash Flows (Unaudited)
Three Months Ended March 31, 1998
(in thousands)
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Subsidiaries Subsidiaries
Parent (combined) (combined) Eliminations Consolidated
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net cash provided by/(used in) operating activities 513 332 10,408 (5,758) 5,495
Cash flows from investing activities:
Capital expenditures (49) (74) (6,423) 652 (5,894)
Escrow funds (449) -- -- -- (449)
Investments and other assets (3,793) 650 (56) 4,363 1,164
------ ------------ ----------- ------------ ------------
Net cash used in investing activities (4,291) 576 (6,479) 5,015 (5,179)
------ ------------ ----------- ------------ ------------
Cash flows from financing activities:
Short-term borrowings/(repayments) -- -- (427) -- (427)
Issuance of stock -- -- -- -- --
Related party advances and other -- (743) -- 743 --
------ ------------ ------------ ------------ ------------
Net cash provided by financing activities -- (743) (427) 743 (427)
------ ------------ ------------ ------------ ------------
(Decrease)/Increase in cash and cash equivalents (3,778) 165 3,502 -- (111)
Cash and cash equivalents at beginning of period 5,513 241 11,502 -- 17,256
------ ------------ ------------ ------------ ------------
Cash and cash equivalents at end of period 1,735 406 15,004 -- 17,145
====== ============ ============ ============ ============
</TABLE>
14
<PAGE> 15
PLD TELEKOM INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Consolidating Statement of Cash Flows (Unaudited)
Three Months Ended March 31, 1997
(in thousands)
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Subsidiaries Subsidiaries
Parent (combined) (combined) Eliminations Consolidated
-------- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Net cash provided by/(used in) operating activities (907) (2,306) 5,422 4,500 6,709
Cash flows from investing activities:
Capital expenditures -- (86) (8,758) (5,058) (13,902)
Escrow funds (535) -- -- -- (535)
Investment and other assets (3,152) 694 (2,125) 2,498 (2,085)
------ ------ ------ ------ -------
Net cash used in investing activities (3,687) 608 (10,883) (2,560) (16,522)
------ ------ ------ ------ -------
Cash flows from financing activities:
Short-term borrowings/(repayments) -- -- 5,171 -- 5,171
Issuance of stock 95 -- -- -- 95
Related party advances and other -- 1,747 193 (1,940) --
------ ------ ------ ------ -------
Net cash provided by financing activities 95 1,747 5,364 (1,940) 5,266
------ ------ ------ ------ -------
(Decrease)/Increase in cash and cash equivalents (4,499) 49 (97) -- (4,547)
Cash and cash equivalents at beginning of period 7,271 331 33,072 -- 40,674
------ ------ ------ ------ -------
Cash and cash equivalents at end of period 2,772 380 32,975 -- 36,127
====== ====== ====== ====== =======
</TABLE>
15
<PAGE> 16
NWE CAPITAL (CYPRUS) LTD.
Consolidated Condensed Financial Statements
For the three months ended March 31, 1998
(Unaudited)
16
<PAGE> 17
NWE CAPITAL (CYPRUS) LTD.
Consolidated Condensed Balance Sheets
March 31, 1998 (unaudited) and December 31, 1997
(in thousands of U.S. dollars)
<TABLE>
<CAPTION>
ASSETS 1998 1997
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 10,490 7,849
Trade receivables, net of allowances 12,016 12,725
Other receivables and prepaids 2,472 3,266
VAT receivable 5,385 2,154
Due from related parties - 468
Inventory 2,671 2,566
-------- -------
Total current assets 33,034 29,028
Property and equipment, net 82,769 79,002
Telecommunications licenses, net 41,208 42,286
Other receivables 3,012 3,012
Goodwill, net 1,526 1,580
Other assets 285 280
-------- -------
Total assets $161,834 155,188
======== =======
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Bank indebtedness 900 900
Accounts payable 4,868 3,064
Accrued liabilities 4,559 3,044
Advances from other group companies 31,066 32,810
Due to related parties 553 818
Customer deposits and advances 5,346 5,978
Current portion of long term debt 3,863 3,988
-------- -------
Total current liabilities 51,155 50,602
-------- -------
Long term debt 11,089 12,458
Due to related parties 2,144 2,144
Minority interest 23,126 19,391
Commitments and contingencies (note 3)
Shareholder's equity:
Common stock, par value CYP 1 per share. Authorized
3,246,174 shares in 1998 and 1997; issued and outstanding
1,000 shares in 1998 and 1997 7,082 7,082
Contributed surplus 63,723 63,723
Accumulated surplus (deficit) 3,515 (212)
-------- -------
Total shareholder's equity 74,320 70,593
-------- -------
Total liabilities and shareholder's equity $161,834 155,188
======== =======
</TABLE>
See accompanying notes to consolidated condensed financial statements.
17
<PAGE> 18
NWE CAPITAL (CYPRUS) LTD.
Consolidated Condensed Statements of Operations (unaudited)
Three months ended March 31, 1998 and 1997
(in thousands of U.S. dollars)
<TABLE>
<CAPTION>
Three months ended
March 31
--------
1998 1997
---- ----
<S> <C> <C>
Telecommunications revenue $27,100 16,057
Direct costs 7,445 4,268
------- ------
Gross profit 19,655 11,789
Operating expenses:
General and administrative 5,246 4,030
Management fees 400 --
Depreciation 2,075 1,745
Amortization 1,234 1,234
Taxes other than income taxes 925 748
------- ------
Total operating expenses 9,880 7,757
Operating income 9,775 4,032
Other income/(expense):
Interest and other income 536 64
Interest on long term debt (229) (205)
Foreign exchange loss (110) (203)
------- ------
Income before income taxes
and minority interest 9,972 3,688
Income taxes 2,510 620
------- ------
Income before minority interest 7,462 3,068
Minority interest 3,735 1,919
------- ------
Net income $ 3,727 1,149
======= ======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
18
<PAGE> 19
NWE CAPITAL (CYPRUS) LTD.
Consolidated Condensed Statements of Cash Flows (unaudited)
Three months ended March 31, 1998 and 1997
(in thousands of U.S. dollars)
<TABLE>
<CAPTION>
Three months ended
March 31
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,729 1,149
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,309 2,979
Minority interest 3,735 1,919
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 709 (1,192)
Decrease (increase) in other receivables and prepaids 794 6
(Increase) decrease in VAT receivable (3,231) 360
(Decrease) increase in inventory (105) 163
Change in amounts due from and to related parties 203 96
(Decrease) increase in customer deposits and advances (632) 477
Increase (decrease) in accounts payable and accrued liabilities 2,270 (1,562)
------- ------
Net cash provided by
operating activities 10,781 4,395
------- ------
Cash flows from investing activities:
Capital expenditures (4,459) (4,499)
Other assets (109) 1
------- ------
Net cash used in investing activities (4,568) (4,498)
------- ------
Cash flows from financing activities:
Long term debt (2,111) (6,450)
Advances from other group companies (1,461) 6,829
------- ------
Net cash (used in)/provided by financing activities (3,572) 379
------- ------
Increase in cash and cash equivalents 2,641 276
Cash and cash equivalents at beginning of year 7,849 5,185
------- ------
Cash and cash equivalents at end of year $10,490 5,461
======= ======
Supplemental Information:
Non-cash investing and financing activities:
Purchase of equipment with PLD advances and under
long-term contracts $ 1,363 -
======= ======
Interest paid $ 19 -
======= ======
Income taxes paid $ 2,784 1,081
======= ======
</TABLE>
See accompanying notes to consolidated condensed financial statements.
19
<PAGE> 20
NWE CAPITAL (CYPRUS) LTD.
Notes to Consolidated Condensed Financial Statements (unaudited)
Three months ended March 31, 1998
(1) BASIS OF PRESENTATION
The accompanying consolidated condensed financial statements are
unaudited and have been prepared by NWE Capital (Cyprus) Ltd. (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 consolidated
financial position of the Company as at March 31, 1998 and the
consolidated results of operations and cash flows of the Company for the
three months ended March 31, 1998 and 1997.
Certain information and footnote disclosures generally included in
consolidated 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 consolidated condensed financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
for the fiscal year ended December 31, 1997.
(2) 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.
Ultimate recoverability of the Company's investments in its operating
subsidiaries, PeterStar Company Limited ("PeterStar"), Wireless
Technology Corporations Limited ("WTC") and C.P.Y. Yellow Pages Limited
("Yellow Pages") are 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.
20
<PAGE> 21
NWE CAPITAL (CYPRUS) LTD.
Notes to Consolidated Condensed Financial Statements (unaudited), continued
(3) COMMITMENTS AND CONTINGENCIES
(a) RUSSIAN TAXATION
PeterStar and ALTEL (formerly known as BECET International)
subsidiaries have accrued profits and other taxes based on
interpretations of the law which may ultimately be disputed by the
local taxation authorities. Management believes that the exposure
to additional profits and other taxes, fines and penalties will
not have a material adverse effect on the financial position or
results of operations of the Company.
(b) PURCHASE COMMITMENTS
At March 31, 1998, PeterStar has commitments of approximately
$12.4 million related to the acquisition of telecommunications
equipment. The PeterStar supply contract provides for financing of
the entire amount over approximately five years.
(c) MANAGEMENT SERVICES
On January 1, 1998, PLD entered into a two year agreement with
ALTEL, under which PLD would provide certain consulting,
informational services, management support services and personnel
expertise. The agreement provides for a fee of $25,000 per
month plus 3.4% of monthly gross revenues.
ALTEL has negotiated an agreement with its other shareholder
effective January 1, 1998 with a two year term. The shareholder
will provide certain consulting services, management support
services and personnel expertise. Payments under this agreement
are 300,000 tenge per month plus 1.0% of monthly gross revenues.
21
<PAGE> 22
NWE CAPITAL (CYPRUS) LTD.
Notes to Consolidated Condensed Financial Statements (unaudited), continued
(3), CONTINUED
(d) GUARANTEE
In June 1996, PLD issued senior discount notes and convertible
subordinated notes with an aggregate principal amount of $149.5
million. The Company is a guarantor of the debt under the terms of
the related indentures.
(e) LINE RENTAL
While is has not had to do so historically, PeterStar anticipates
that it will have to begin paying local line rental charges to the
Petersburg Telephone System in 1998. The exact fee, and the date
from which charges will be levied, have yet to be determined, but
the Company does not believe that such payments will have a
material adverse effect on the Company's financial position or
results of operations.
22
<PAGE> 23
Technocom Limited and Subsidiaries
CONSOLIDATED CONDENSED BALANCE SHEETS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
23
<PAGE> 24
Technocom Limited and subsidiaries
CONSOLIDATED CONDENSED BALANCE SHEETS
As at March 31, 1998 (Unaudited) and December 31, 1997
<TABLE>
<CAPTION>
(Thousands of United States Dollars) MARCH 31, December 31,
1998 1997
<S> <C> <C>
US$ US$
ASSETS
CURRENT ASSETS:
Cash and cash equivalents 4,385 4,671
Trade receivables, net of allowances 3,677 2,942
Other receivables 1,824 2,806
Due from related parties 5,954 5,591
------ ------
TOTAL CURRENT ASSETS 15,840 16,010
Property and equipment, net 51,084 50,656
Telecommunications licenses, net 1,966 2,005
Due from related parties 1,912 2,253
Other investments and assets, net 930 1,307
------ ------
TOTAL ASSETS 71,732 72,231
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable 10,694 11,410
Accrued liabilities 879 1,590
Due to related parties 20,029 18,693
Deferred taxes 468 549
------ ------
TOTAL CURRENT LIABILITIES 32,070 32,242
Other liabilities 289 337
Due to related parties 835 336
Supplier financing 2,900 3,327
SHAREHOLDERS' EQUITY
Capital stock 1 1
Preference shares, par value $1.00 per share, authorized,
issued and fully paid - 1,000 shares
Ordinary shares, par value IR(pound)1 per share,
authorized - 1,000 shares, issued and fully
paid - 199 shares
Share premium 40,390 40,390
Accumulated deficit (4,753) (4,402)
------ ------
TOTAL SHAREHOLDERS' EQUITY 35,638 35,989
------ ------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 71,732 72,231
====== ======
</TABLE>
See accompanying notes to the consolidated condensed financial statements
24
<PAGE> 25
Technocom Limited and subsidiaries
Consolidated Condensed Statements of Operations (Unaudited) For the three months
ended 31 March 31, 1998 and 1997
<TABLE>
<CAPTION>
(Thousands of United States Dollars)
1998 1997
US$ US$
<S> <C> <C>
REVENUES:
Telecommunications 5,377 5,544
Finance lease income 447 610
------ ------
TOTAL REVENUES 5,824 6,154
DIRECT COSTS 2,178 3,780
------ ------
GROSS PROFIT 3,646 2,374
OPERATING EXPENSES:
General and administrative 2,430 1,869
Depreciation 854 423
Amortization 65 23
------ ------
TOTAL OPERATING EXPENSES 3,349 2,315
OPERATING INCOME FROM CONTINUING OPERATIONS 297 59
OTHER (EXPENSES)/INCOME:
Share of losses of equity investments (210) (278)
Interest income 81 436
Interest expenses (143) (350)
------ ------
INCOME/(LOSS) BEFORE TAXATION AND
MINORITY INTEREST 25 (133)
Income taxes (377) (128)
------ ------
LOSS BEFORE MINORITY INTEREST (352) (261)
Minority interest - (120)
------ ------
NET LOSS (352) (381)
====== ======
</TABLE>
See accompanying notes to the consolidated condensed financial statements
25
<PAGE> 26
Technocom Limited and subsidiaries
Consolidated Condensed Statements of Cash Flows (Unaudited)
For the three months ended March 31, 1998 and 1997
<TABLE>
<CAPTION>
(Thousands of United States Dollars)
1998 1997
US$ US$
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss (352) (381)
Adjustments to reconcile net loss
to net cash provided by/(used in) operating activities:
Depreciation and amortization 919 446
Share of loss of equity investments 210 278
Minority interest - 121
Changes in operating assets and liabilities:
Increase in trade receivables (735) (450)
Decrease/(increase) in other receivables 772 (88)
Changes in due from/to related parties 1,813 906
(Decrease)/increase in accounts payable
and deferred taxes (797) 602
Decrease in accrued liabilities (711) (1,684)
Decrease in other liabilities (48) -
------ ------
CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES 1,071 (250)
CASH FLOWS FROM FINANCING ACTIVITIES
Payment on long-term indebtedness (427) -
Proceeds from bank borrowings - 5,171
------ ------
CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (427) 5,171
CASH FLOWS FROM INVESTMENT ACTIVITIES
Capital expenditures (782) (4,368)
Other investments and assets (148) 212
------ ------
CASH USED IN INVESTMENT ACTIVITIES (930) (4,156)
(Decrease)/increase in cash and cash equivalents (286) 765
Cash and cash equivalents at beginning of period 4,671 27,997
------ ------
CASH AT CASH EQUIVALENTS AT END OF PERIOD 4,385 28,762
====== ======
Supplemental disclosure:
Interest paid 50 251
====== ======
Income taxes paid - -
====== ======
</TABLE>
See accompanying notes to the consolidated condensed financial statements
26
<PAGE> 27
Technocom Limited and subsidiaries
Notes to Consolidated Condensed Financial Statements (Unaudited)
For the three months ended March 31, 1998
(1) BASIS OF PRESENTATION
The accompanying consolidated condensed financial statements are unaudited
and have been prepared by Technocom Limited (the `Company') pursuant to
the rules and regulations of the Securities and Exchange Commission (the
`SEC'). In the opinion of management, the consolidated financial
statements include all adjustments necessary to present fairly the
consolidated financial position of the Company as of March 31, 1998 and
the consolidated results of operations and cash flows of the Company for
the three months ended March 31, 1998 and 1997.
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 consolidated condensed financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
for the fiscal year ended December 31, 1997.
(2) BUSINESS OPERATIONS AND FUTURE ACTIVITIES
The Company was incorporated under the laws of the Republic of Ireland in
January 1992. The Company's principal activity is the provision of
telecommunications services in Russia. The Company conducts its business
activities directly and through a number of subsidiaries and other
affiliates, most of which are incorporated in Russia. The Company
established a registered foreign representative office in Russia in
October 1995.
The Company operates 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
possibilities of rapid change in government policies, economic conditions,
the tax regime and foreign currency regulations. In addition, its
satellite-based long distance network is at an early stage of its
development and operation.
Ultimate recoverability of the Company's investments is dependent upon
each of the subsidiaries achieving and maintaining profitability, which is
dependent to a certain extent on a 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.
27
<PAGE> 28
Technocom Limited and subsidiaries
Notes to Consolidated Condensed Financial Statements (Unaudited)
For the three months ended March 31, 1998
(3) COMMITMENTS AND CONTINGENCIES
The Company's Russian Subsidiary, Teleport-TP, currently utilizes capacity
on three Intelsat satellites for the provision of its international and
domestic long distance services, pursuant to a fifteen year contract
signed with Intelsat in January 1993. The agreement requires quarterly
payments of $616,500 for the remainder of its term.
As of March 31, 1998 the Company has commitments of approximately $500,000
related to the acquisition of telecommunications equipment.
The Company and certain of its 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, in the opinion of
the Company's directors, will not have a material adverse effect on the
financial position or results of operations of the Company.
There are no material pending legal proceedings to which the Company or
any of its property is subject.
The Company has entered into bank guarantees under certain of its
telecommunications equipment supplier financing agreements. The amount of
the guarantees reduce automatically in accordance with installments paid.
The amounts outstanding at March 31, 1998 amounted to $3,240,000.
28
<PAGE> 29
WIRELESS TECHNOLOGY CORPORATIONS LIMITED
Consolidated Condensed Financial Statements
For the three months ended March 31, 1998
(Unaudited)
29
<PAGE> 30
WIRELESS TECHNOLOGY CORPORATIONS LIMITED
Consolidated Condensed Balance Sheets
March 31, 1998 (Unaudited) and December 31, 1997
(thousands of United States dollars)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1998 1997
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 7,892 5,294
Trade receivables, net of allowance 3,754 3,462
Inventory 1,473 1,640
Prepaid expenses and other current assets 487 798
------- -------
Total current assets 13,606 11,194
Property and equipment, net 23,476 23,362
Telecommunications license, net 23,166 23,693
------- -------
Total assets $60,248 58,249
======= =======
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 1,352 1,197
Due to related parties 1,490 1,875
Customer deposits and advances 3,323 3,070
Income tax payable 34 58
------- -------
Total current liabilities 6,199 6,200
------- -------
Commitments and contingencies (note 3)
Minority interest 5,746 4,489
Shareholder's equity:
Common stock, par value of $1 per share,
authorized - 20,001,000 shares, issued and
outstanding - 20,000,002 shares 20,000 20,000
Contributed capital 30,803 30,803
Accumulated deficit (2,500) (3,243)
------- -------
Total shareholder's equity 48,303 47,560
------- -------
Total liabilities and shareholder's equity $60,248 58,249
======= =======
</TABLE>
See accompanying notes to consolidated condensed financial statements.
30
<PAGE> 31
WIRELESS TECHNOLOGY CORPORATIONS LIMITED
Consolidated Condensed Statements of Operations
For the three months ended March 31, 1998 and 1997 (Unaudited)
(thousands of United States dollars)
<TABLE>
<CAPTION>
Three months ended
March 31,
1998 1997
---- ----
<S> <C> <C>
Telecommunications revenues $9,549 6,067
Direct costs 1,948 1,432
------ ------
Gross profit 7,601 4,635
Operating expenses:
General and administrative 2,313 1,760
Management fees 400 262
Depreciation and amortization 1,388 1,443
Taxes other than income tax 135 74
------ ------
Total operating expenses 4,236 3,539
------ ------
Operating income 3,365 1,096
Other income (expense):
Interest and other income 91 29
Foreign exchange loss (110) (119)
------ ------
Net income before income tax and
minority interest 3,346 1,006
Income tax 1,346 141
------ ------
Net income before minority interest 2,000 865
Minority interest 1,257 689
------ ------
Net income $ 743 176
====== ======
</TABLE>
See accompanying notes to consolidated condensed financial statements.
31
<PAGE> 32
WIRELESS TECHNOLOGY CORPORATIONS LIMITED
Consolidated Condensed Statements of Cash Flows (Unaudited)
For the three months ended March 31, 1998 and 1997
(thousands of United States dollars)
<TABLE>
<CAPTION>
Three months ended
March 31,
1998 1997
---- ----
<S> <C> <C>
Cash flows provided by operating activities:
Net income $ 743 176
Adjustments to reconcile net income to net cash
provided operating activities:
Depreciation and amortization 1,388 1,443
Gain on disposal (15) -
Bad debt expense 180 150
Minority interest 1,257 689
Changes in operating assets and liabilities:
Increase in trade receivables (472) (465)
Decrease (increase) in inventory 167 (30)
Decrease (increase) in prepaid expenses
and other current assets 311 (177)
Increase (decrease) in accounts payable
and accrued liabilities 155 (1,547)
(Decrease) increase in due to related parties (385) 243
Increase in customer deposits and advances 253 347
(Decrease) increase in income tax payable (24) 236
------ ------
Net cash provided by operating activities 3,558 1,065
------ ------
Cash flows used in investing activities - purchase of
property and equipment (960) (574)
------ ------
Cash flows from financing activities - -
------ ------
Increase in cash and cash equivalents 2,598 491
Cash and cash equivalents at beginning of period 5,294 2,733
------ ------
Cash and cash equivalents at end of period $7,892 3,224
====== ======
Supplemental disclosures:
Interest paid $ - -
====== ======
Income taxes paid $1,361 838
====== ======
</TABLE>
See accompanying notes to consolidated condensed financial statements.
32
<PAGE> 33
WIRELESS TECHNOLOGY CORPORATIONS LIMITED
Notes to the Consolidated Condensed Financial Statements
For the three months ended March 31, 1998 and 1997
(1) BASIS OF PRESENTATION
The accompanying consolidated condensed financial statements are
unaudited and have been prepared by Wireless Technology Corporations
Limited ("WTC" or "the Company") pursuant to the rules and regulations of
the Securities and Exchange Commission (the "SEC"). In the opinion of
management, the consolidated financial statements include all adjustments
(consisting primarily of normal recurring accruals) necessary to present
fairly the consolidated financial position of the Company as of March 31,
1998 and the consolidated results of operations and cash flows of the
Company for the three months ended March 31, 1998 and 1997.
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 consolidated financial statements should be read in conjunction
with the consolidated financial statements and notes thereto for the
fiscal year ended December 31, 1997.
(2) FUTURE ACTIVITIES
The Company's results are dependent the ability of its subsidiary, ALTEL,
formerly known as BECET International ("ALTEL"), to retain existing
subscribers, to attract new subscribers, and to control operating
expenses. ALTEL's cellular telecommunications system is developing in an
emerging economy which, by its nature, has an uncertain economic,
political, and regulatory environment. The general risks of operating
businesses in Kazakhstan include the possibility for rapid changes in
government policies, economic conditions, the tax regime, and foreign
currency regulations.
Ultimate recoverability of the Company's investment in ALTEL is
dependent upon ALTEL maintaining profitability, which is dependent on the
stability of the economy of Kazakhstan, the ability to maintain the
necessary telecommunications licenses, and the ability to obtain adequate
financing to meet capital requirements.
(3) COMMITMENTS AND CONTINGENCIES
The Company's parent, PLD Telekom Inc.("PLD"), issued senior discount
notes and convertible subordinated notes with an aggregate principal
amount of $149.5 million in June 1996. The Company, along with other PLD
subsidiaries, is a guarantor of the debt securities under the terms of
the related indentures.
33
<PAGE> 34
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 Kazakhstan, 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 March 31, 1998 include a 60% equity
interest in PeterStar, which provides telecommunications services in St.
Petersburg, Russia; a 50% equity interest in ALTEL, which provides cellular
services in Kazakhstan; and a 80.4% equity interest in Technocom which, through
its 49% equity interest in Teleport-TP, operates an international teleport in
Moscow, fiber optic networks in Moscow and its environs and a satellite-based
long distance network across Russia.
EBITDA is used as a measure of operating performance and is defined as
earnings (or loss) from continuing operations before income taxes and minority
interest plus net interest (interest expense less interest and other income)
plus depreciation and amortization. It is presented as supplemental disclosure
because it assists in understanding the Company's operating results. EBITDA,
however, may not be comparable to similarly titled measures of other companies
and should not be considered in isolation or as a substitute for net income,
cash flow provided by operating activities or other income or cash flow data
prepared in accordance with generally accepted accounting principles or as a
measure of a company's profitability or liquidity.
Certain of the Company's subsidiaries pay management fees to their
shareholders, including the Company. The figures presented for the subsidiaries
reflect all payments of such fees -- ie, management fees are included in
operating expenses in the same way as other expenses of the subsidiary.
Profitability measures -- EBITDA, operating profit and net income -- are
therefore quoted after accounting for such payments.
34
<PAGE> 35
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 VERSUS THREE MONTHS ENDED MARCH 31, 1997
Overview. The Company reported a net loss of $4.5 million ($0.14 per
share) and operating income of $7.2 million on revenues of $35.2 million for the
three months ended March 31, 1998 compared to a net loss of $4.3 million ($0.14
per share) and operating income of $2.5 million on revenues of $23.9 million
reported in first quarter of 1997. EBITDA of $12.7 million reported in the first
quarter of 1998 compared with $6.3 million in the first quarter of 1997.
The $4.5 million 1998 first quarter loss incorporated after-tax profit
contributions of $6.2 million from PeterStar, $2.5 million from ALTEL (formerly
BECET International) and corporate interest income of $0.7 million, inclusive
of interest income received from subsidiaries, offset by a net loss of $0.4
million at Technocom, corporate general and administrative expenses of $1.8
million (net of management fees received from subsidiaries), interest on
corporate bank indebtedness and long-term debt of $5.0 million, corporate
amortization and depreciation charges of $3.0 million, and minority interest
charges of $3.7 million.
Revenues. Revenues increased 47.2% from $23.9 million in the first
quarter of 1997 to $35.2 million in the first quarter of 1998 primarily as a
result of strong revenue growth at PeterStar and ALTEL which together accounted
for 77% of the Company's consolidated revenues.
The following table shows the Company's consolidated revenues by
principal operating subsidiary for the three months ended March 31, 1998 and
1997 and the percentage growth in revenues between the periods:
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended %
March 31, 1998 March 31, 1997 Change Over
($ million) % ($ million) % Prior Period
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PeterStar 17.5 49.7% 10.0 41.8% 75.0%
Altel 9.6 27.3% 6.1 25.5% 57.4%
Technocom 5.8 16.5% 6.0 25.1% -3.3%
BCL 2.2 6.3% 1.8 7.5% 22.2%
Other 0.1 0.2% 0.0 0.0% 0.0%
-------------------------------------------------------------------------
35.2 100.0% 23.9 100.0% 47.3%
</TABLE>
Management expects overall revenues to continue to grow at a relatively
high rate in the near term. The extent of unsatisfied demand and a lack of
competition in many of the markets in which the Company currently operates will
continue to sustain this growth rate. As the build-out of Teleport-TP's
pan-Russian satellite-based network continues throughout 1998, Technocom's
revenues are expected to provide a larger contribution to the Company's
consolidated revenues.
Gross profit. Gross profit increased 58.4% to $24.4 million for the
three months ended March 31, 1998 from $15.4 million recorded in the first three
months of 1997. As a percentage of revenues, gross profit increased to 69.3%
from 64.3% a year earlier. Gross profits, as a percentage of revenues, are
expected to remain relatively stable over the near term as gradual tariff
reductions experienced at the operating level have generally been offset by
reductions in carrier charges with the operating companies' carriers.
General and administrative expenses. General and administrative
expenses, which include salaries and sales and marketing expenses in all five of
the Company's operating subsidiaries, together with corporate office overhead,
increased 34.7% to $9.7 million for the three months ended March 31, 1998 from
$7.2 million recorded in the first three months of 1997. As a percentage of
revenues, general and administrative expenses decreased to 27.5% in the first
quarter of 1998 from 30.3% in the first quarter of 1997 reflecting continued
leveraging of the Company's fixed operating costs. This downward trend, as a
percentage of revenues, is likely to continue in the near future.
Depreciation. Depreciation increased 34.8% to $3.1 million in the first
quarter of 1998 compared to $2.3 million incurred in the first quarter of 1997
reflecting the investment of over $40.0 million in property and equipment over
the past 12 months. Depreciation will continue to grow in absolute terms as
approximately $44.2 million has been budgeted for capital expenditures over the
course of 1998. Depreciation represented 8.8% of revenues for the three months
ended March 31, 1998 compared to 9.7% a year earlier and is expected to decrease
as a percentage of revenues as the Company nears completion of the first
35
<PAGE> 36
phase build-out of its core networks.
Amortization expense. In the first quarter of 1998, the Company
incurred total amortization charges of $3.1 million compared to $2.3 million
incurred in the first quarter of 1997. Of this amount, $2.5 million related to
the amortization of telecommunications licenses held by PeterStar, ALTEL and
Teleport-TP and $0.4 million related to amortization of deferred finance costs.
Deferred finance costs relating to the June 1996 offering are being amortized
over 8 years, the term of the Senior Notes, while deferred finance costs
relating to the November 1997 issuance will be fully amortized during 1998.
The increase in amortization expense in the first quarter of 1998 was
primarily due to the acquisition by the Company in November 1997 of an
additional 29.65% interest in Technocom for consideration, including
acquisition costs, of $33.3 million. This resulted in additional amortization
charges of $0.7 million. The additional excess of purchase price over
identifiable, tangible assets of $27.1 million arising on the acquisition was
allocated to goodwill and telecommunications licenses. The value allocated to
goodwill ($11.1 million) is being amortized over 20 years and the value
allocated to Teleport-TP's licenses ($16.0 million) is being amortized over its
remaining term which expires in 2004.
PeterStar and ALTEL's telecommunications licenses expire in 2004 and
2009, respectively, and their values, recorded on the Company's consolidated
balance sheet, are being amortized over their remaining terms. The Company does
not anticipate any problems renewing the telecommunications licenses currently
held by any of these companies upon their expiry.
Interest expense. Interest expense of $5.2 million in the first quarter
of 1998 compared with $4.3 million incurred in the first quarter of 1997 and
consisted of interest on bank indebtedness and short-term borrowings of $0.6
million, interest accreted on the Senior Notes of $4.0 million and
interest accrued on the Convertible Notes of $0.6 million. Interest on
the Senior Notes becomes payable semi-annually commencing June 1999 while
interest on the Convertible Notes is currently paid semi-annually.
Interest and other income. Interest and other income of $0.9 million in
the first quarter of 1998 compared with $1.1 million earned in the first quarter
of 1997 and included $0.4 million earned on the Company's funds held in escrow.
Income taxes. The income tax charge for the three months ended March
31, 1998 was $3.0 million compared with $1.1 million during the same period in
1997. The provision for income taxes relates substantially to current income
taxes in the Company's Russian and Kazak businesses and reflects the improved
profitability of these subsidiaries.
The following table compares the results of operations of the Company's
principal operating subsidiaries for the three months ended March 31, 1998 with
the three months ended March 31, 1997:
<TABLE>
<CAPTION>
PeterStar ALTEL Technocom BCL
Three Months Ended Three Months Ended Three Months Ended Three Months Ended
March 31 March 31 March 31 March 31
(Unaudited, thousands of U.S. dollars) 1998 1997 1998 1997 1998 1997 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues 17.5 10.0 9.6 6.1 5.8 6.1 2.2 1.8
Gross profit - $ 12.0 7.3 7.6 4.6 3.7 2.1 1.1 1.5
Gross profit - % 68.6% 73.0% 79.2% 75.4% 63.8% 34.4% 50.0% 83.3%
Operating income/(loss) - $ 7.1 3.7 3.9 1.5 0.3 (0.2) 0.0 0.3
Operating income - % 40.6% 37.0% 40.6% 24.6% 5.2% n/a 0.0% 16.7%
Net income/(loss) - $ 6.2 3.1 2.5 1.4 (0.4) (0.6) 0.0 0.5
Net income - % 35.4% 31.0% 26.0% 23.0% n/a n/a 0.0% 27.8%
EBITDA - $ 8.8 4.3 4.6 2.4 1.0 0.0 0.1 0.9
EBITDA - % 50.3% 43.0% 47.9% 39.3% 17.2% 0.0% 4.5% 50.0%
% PLD ownership 60.0% 60.0% 50.0% 50.0% 80.4% 50.8% 100.0% 100.0%
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
For the three months ended March 31, 1998, a total of $5.5 million in
cash was generated from operations, $5.2 million was used in investing
activities and $0.4 million was used to pay down supplier financing. Investments
during the quarter on telecommunications equipment and infrastructure included
$3.3 within PeterStar, $1.0 million within ALTEL and $0.8 within Teleport-TP.
As at March 31, 1998, the Company had working capital, not including
funds held in escrow, of $0.6 million compared to a working capital deficit of
$1.4 million at the end of 1997.
Funds held in escrow at March 31, 1998 increased to $34.3 million from
$33.9 million at the end of 1997 reflecting interest earned on these funds
during the period. During the quarter, the Company was successful in amending
the indentures governing the release of the escrow funds to broaden the range of
transactions for which the Company may draw such funds to finance the capital
expenditure needs of its operating subsidiaries. The indentures were also
amended to revise certain covenants relating to corporate indebtedness, the
guarantee of subsidiary debt and the
36
<PAGE> 37
establishment of U.S. special purpose subsidiaries. Subsequent to March 31,
1998, the Company drew down $8 million from escrow which will be used towards
funding, in part, the $44.2 million in planned capital expenditures for the
group in 1998.
As at March 31, 1998, the Company reported consolidated total assets of
$338.2 million, up from $335.6 million at December 31, 1997, which consisted of
$54.5 million in current assets, (including $17.1 million in cash and cash
equivalents), $139.2 million in property and equipment, $76.4 million in
unamortized telecommunications licenses relating to PeterStar, ALTEL and
Teleport-TP, escrow funds of $34.3 million and other assets and investments of
$33.8 million including $11.0 million in goodwill, net of amortization, relating
to the Company's November 1997 acquisition of an additional 29.65% interest in
Technocom.
Long-term indebtedness of $136.4 million, consisting primarily of the
Company's Senior and Convertible Notes, as a percentage of total assets, was
40.3% at March 31, 1998 compared to $133.5 million or 39.8% of total assets at
December 31, 1997.
Shareholders' equity of $122.7 million at March 31, 1998 compared with
$127.2 million at December 31, 1997 and consisted of $204.3 million in common
stock and additional paid-in capital offset by the Company's deficit of $81.6
million. The Company's ratio of long-term indebtedness to equity at March 31,
1998 was 111.2% compared to 104.9% at December 31, 1997.
Under the terms of the Company's $123.0 million Senior Note offering
placed in June 1996, the Company is required to raise $20.0 million in an equity
financing by May 31, 1998. If the Company fails to do so, the annual interest
rate on the Senior Notes automatically increases to 14.5% until the end of the
semi-annual interest period in which an offering is completed. The obligation to
raise $20.0 million by May 31, 1998 is also a requirement under the terms of the
$12.32 million Series A and $3.1 million Series B Revolving Credit Notes issued
in November 1997 in connection with the Company's additional investment in
Technocom. Should the Company not raise $20.0 million in equity prior to May 31,
1998, the annual interest rate on the 12% Series A and B Notes, which mature on
December 30, 1998 and September 30, 1998, respectively, will automatically
increase to 15%, commencing June 1, 1998. The Company is also required under the
terms of the Revolving Credit Notes to reduce the aggregate commitments of such
Notes by $1 million on July 31, 1998 and on the last day of each month
thereafter.
Although the Company does not expect to have completed an equity
financing by May 31, 1998, it is expected that such a financing will be
completed later this year with proceeds used to pay off the Revolving Credit
Notes. The Company's operations will continue to be financed with the Company's
existing cash balances, escrow funds, internally generated cash flow from
operations and supplier financing. However, to the extent that the Company
experiences lower than expected revenues, higher operating costs, or higher
development costs associated with the build-out of the PeterStar, ALTEL or
Teleport-TP networks, the Company may be required to seek additional debt or
equity financing for operations.
In addition, the Company is constantly assessing acquisition
opportunities throughout the C.I.S. which would complement and add value to the
Company's existing businesses. To the extent that the Company enters into any
agreements to acquire or invest in additional companies operating in the C.I.S.,
additional debt and equity financing may be required. There can be no assurance
that such financing can or will be obtained on satisfactory terms.
37
<PAGE> 38
SUBSEQUENT EVENTS
On April 19, 1998, the Company entered into separate agreements with
News America Incorporated ("News America"), a wholly owned subsidiary of News
Corporation Limited, and Cable and Wireless plc ("Cable & Wireless") regarding,
among other things, the acquisition by the Company of: (i) an additional 11%
interest in its subsidiary PeterStar from News America (after its acquisition
of such interest from Cable & Wireless); and (ii) a 50% interest in BELCEL, a
mobile telephone business in Belarus, together with certain intercompany
indebtedness from Cable & Wireless. In connection with these acquisitions, the
Company agreed to issue an aggregate of 4.2 million shares of its Common Stock
to News America and Cable & Wireless. In addition, Cable & Wireless and News
America entered into an agreement providing for the sale by Cable & Wireless to
News America of its complete stake in the Company (including the Common Stock
being issued by the Company to Cable & Wireless in exchange for the interest in
BELCEL) and a warrant to purchase 250,000 shares of Common Stock. The
transactions are conditioned on, among other things, clearance under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (which was
received on May 4, 1998) and approval of the acquisition of the additional
PeterStar interest by the shareholders of the Company. The Company currently
expects the transactions to close in June 1998.
News Corporation Limited, one of the largest media companies in the
world with total assets of $32.7 billion and total annual revenues in excess of
$12 billion as of December 31, 1997, manages diversified global operations in
the U.S., the U.K., Australia, Latin America and the Pacific Basin. These
operations include: the production and distribution of motion pictures and
television programming; television, satellite and cable broadcasting; the
publication of newspapers, magazines, books and promotional free-standing
inserts; the development of digital broadcasting, conditional access and
subscription management systems; and the provision of computer information
services.
38
<PAGE> 39
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
39
<PAGE> 40
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: May 15, 1998 By: /s/ SIMON EDWARDS
--------------------------
Simon Edwards
Senior Vice President, Chief Financial
Officer and Treasurer
40
<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 MARCH 31, 1998 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 THREE MONTH
PERIOD ENDED MARCH 31, 1998 CONTAINED THEREIN.
</LEGEND>
<CIK> 0000890568
<NAME> PLD TELEKOM INC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 17,145
<SECURITIES> 0
<RECEIVABLES> 20,511
<ALLOWANCES> 337
<INVENTORY> 2,978
<CURRENT-ASSETS> 54,517
<PP&E> 165,609
<DEPRECIATION> 26,453
<TOTAL-ASSETS> 338,171
<CURRENT-LIABILITIES> 53,965
<BONDS> 126,178
0
4
<COMMON> 333
<OTHER-SE> 122,385
<TOTAL-LIABILITY-AND-EQUITY> 338,171
<SALES> 0
<TOTAL-REVENUES> 35,166
<CGS> 0
<TOTAL-COSTS> 10,796
<OTHER-EXPENSES> 17,171
<LOSS-PROVISION> 372
<INTEREST-EXPENSE> 5,190
<INCOME-PRETAX> 2,153
<INCOME-TAX> 2,997
<INCOME-CONTINUING> (4,509)
<DISCONTINUED> 0
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<CHANGES> 0
<NET-INCOME> (4,509)
<EPS-PRIMARY> (.14)
<EPS-DILUTED> (.14)
</TABLE>
