SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 10-Q/A
(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, 1997
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OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 333-8807
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GST TELECOMMUNICATIONS, INC.
(Exact name of Registrant as Specified in its Charter)
CANADA NOT APPLICABLE
- ---------------------------- ----------------------------
(State or Other Jurisdiction (IRS Employer Identification
of Incorporation or Organization) Number)
4317 NE THURSTON WAY, VANCOUVER, WA 98662
- ---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (360) 254-4700
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N/A
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(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
<PAGE>
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: At May 14,
1997, there were outstanding 25,798,642 Common Shares, without par value, of the
Registrant.
<PAGE>
GST TELECOMMUNICATIONS, INC.
INDEX
Page(s)
-------
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
Consolidated Condensed Balance Sheet - March 31, 3
1997 (unaudited) and September 30, 1996
Consolidated Condensed Statements of Operations - 4
Three Months Ended March 31, 1997 and 1996, Six
Months ended March 31, 1997 and 1996 and 1995
(unaudited)
Consolidated Condensed Statements of Cash Flows - 5
Six Months Ended March 31, 1997 and 1996
(unaudited)
Notes to Consolidated Condensed Financial 6
Statements (unaudited)
PART II: OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 11
(a) Exhibits
*Exhibit 10.1 Employment Agreement dated March 11, 1997, by and
between GST USA, Inc. and Joseph Basile, Jr.
*Exhibit 10.2 Employment Agreement dated February 10, 1997, by and
between GST USA, Inc. GST Telecom Inc. and Daniel L.
Trampush
Exhibit 27 Financial Data Schedule
- -------------------
* Filed with the Registrant's initial filing of the Form 10-Q for the period
ended March 31, 1997.
SIGNATURES 12
2
<PAGE>
Part 1. Financial Information
GST Telecommunications, Inc.
CONSOLIDATED CONDENSED BALANCE SHEET
MARCH 31, 1997 (unaudited) and September 30, 1996
(in thousands)
<TABLE>
<CAPTION>
March 31, 1997 September 30, 1996 (1)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 37,073 $ 61,343
Restricted cash 11,261 16,000
Accounts receivable, net 15,407 9,472
Investments 2,000 5,176
Inventories 2,808 2,406
Prepaid expenses and other current assets 7,531 6,151
--------- ---------
Total current assets 76,080 100,548
--------- ---------
Property, plant and equipment 258,325 134,714
less accumulated depreciation (12,407) (7,139)
--------- ---------
245,918 127,575
Other assets 86,508 79,424
less accumulated amortization (10,560) (5,846)
--------- ---------
75,948 73,578
$ 397,946 $ 301,701
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 10,166 $ 12,443
Accrued liabilities 19,395 26,743
Current portion of capital lease obligations 723 722
Current portion of long term debt 1,650 4,832
Other current liabilities 355 726
--------- ---------
Total current liabilities 32,289 45,466
--------- ---------
Deferred compensation 158 158
Capital lease obligation, less current portion 1,628 1,453
Long term debt, less current portion 287,495 232,674
Minority interest in subsidiaries 11,661 182
Preference shares 50,000 --
Shareholders' equity
Common shares 124,457 72,647
Commitment to issue shares 5,009 25,454
Deficit (114,751) (76,333)
--------- ---------
Total shareholders' equity 14,715 21,768
--------- ---------
$ 397,946 $ 301,701
========= =========
</TABLE>
(1) The information in this column was derived from the Company's audited
financial statements as of September 30, 1996.
3
<PAGE>
GST TELECOMMUNICATIONS, INC.
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
MARCH 31, 1997 AND 1996 (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Six Months
Ended March 31, Ended March 31,
------------------------------- -------------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue:
Telecommunication services $ 19,619 $ 7,000 $ 38,056 $ 11,534
Telecommunication products 5,073 1,343 9,853 3,328
------------ ------------ ------------ ------------
24,692 8,343 47,909 14,862
------------ ------------ ------------ ------------
Operating costs and expenses:
Network expenses 16,929 5,653 32,657 9,879
Facilities administration and maintenance 3,120 1,833 6,445 3,174
Cost of product revenues 1,863 865 3,684 1,670
Selling, general and administrative 15,391 6,298 30,623 10,780
Research and development 616 317 1,026 600
Depreciation and amortization 4,481 1,958 9,170 3,278
------------ ------------ ------------ ------------
42,400 16,924 83,605 29,381
------------ ------------ ------------ ------------
Loss from operations (17,708) (8,581) (35,696) (14,519)
------------ ------------ ------------ ------------
Other expenses (income)
Interest income (538) (2,128) (1,377) (2,397)
Interest expense 5,384 6,241 10,818 7,968
Loss from joint venture -- 375 -- 603
Other (6,928) 63 (6,820) 36
------------ ------------ ------------ ------------
(2,082) 4,551 2,621 6,210
------------ ------------ ------------ ------------
Loss before income taxes
and minority interest (15,626) (13,132) (38,317) (20,729)
------------ ------------ ------------ ------------
Income Taxes (118) (1) (114) (18)
Minority interest in loss of subsidiaries (40) 64 13 239
------------ ------------ ------------ ------------
(158) 63 (101) 221
Net loss $ (15,784) $ (13,069) $ (38,418) (20,508)
============ ============ ============ ============
Net loss per common and common
equivalent share $ (0.68) $ (0.72) $ (1.69) $ (1.13)
============ ============ ============ ============
Weighted average common and common
equivalent shares outstanding 23,158,334 18,263,335 22,692,602 18,161,068
============ ============ ============ ============
</TABLE>
4
<PAGE>
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
MARCH 31, 1997 AND MARCH 31, 1996 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months
Ended March 31,
------------------------------
1997 1996
------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (38,418) $ (20,508)
Adjustment to reconcile net income to net cash used in operating activities
Minority interest in loss of subsidiaries (13) (239)
Loss on investments in affiliates 585 603
Accretion of interest 8,824 6,509
Amortization and depreciation 9,909 3,278
Stock compensation 351 --
Issuance of stock for financing commitments -- 230
Gain on sale of subsidiary shares (7,424) --
Changes in non-cash operating working capital:
Receivables (2,976) 979
Inventory (402) (560)
Prepaid expenses and other (1,272) (1,658)
Accounts payable and accrued liabilities (3,900) (1,851)
Deferred revenue (121) (236)
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES (34,857) (13,453)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of subsidairy shares, net 27,365 --
Proceeds from sale of marketable securities 5,176 --
Purchase of marketable securities (2,000) (4,654)
Acquisition of subsidiaries, net of cash acquired (672) (178)
Acquisition of property and equipment (117,289) (21,386)
Purchase of other assets (10,143) (2,663)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (97,563) (28,881)
CASH FLOWS FROM FINANCING ACTIVITIES
Collection of warrants receivable 20,815 --
Issuance of common shares 1,650 1,572
Issuance of preference shares 50,000 --
Deferred financing costs (1,728) (7,989)
Principal payments on capital leases (350) (157)
Principal payments on long term debt (4,865) (390)
Proceeds from long term debt 42,628 179,625
--------- ---------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 108,150 172,661
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (24,270) 130,327
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 61,343 6,024
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 37,073 $ 136,351
========= =========
</TABLE>
5
<PAGE>
GST TELECOMMUNICATIONS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles. However, certain
information or footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed, or omitted, pursuant to the rules and regulations of the Securities
and Exchange Commission. In the opinion of management, the statements include
all the adjustments necessary (which are of normal and recurring nature) for the
fair presentation of the results of the interim period presented. These
financial statements should be read in conjunction with the Company's audited
consolidated financial statements for the year ended September 30, 1996, as
included in the Company's Annual Report on Form 10-K.
2. NET LOSS PER COMMON AND COMMON EQUIVALENT SHARE
Net loss per common and common equivalent share is computed
using the weighted average number of common and dilutive common equivalent
shares assumed to be outstanding during the period. Common equivalent shares
consist of options and warrants to purchase common shares.
3. INVENTORIES
Inventories, net of reserves, stated at the lower of cost or
market consist of:
March 31, 1997 September 30, 1996
---------------- -------------------
Raw Material $ 1,187 $ 378
Work in Progress 307 346
Finished Goods 374 317
Refurbished inventory held for sale 940 1,365
---------------- -------------------
Total Inventories 2,808 2,406
================ ===================
4. SHAREHOLDERS' EQUITY
Shares authorized and outstanding are as follows:
March 31, 1997 September 30, 1996
---------------- ---------------------
Common Shares, no par value 23,612,077 21,257,697
Unlimited number of
common shares authorized
6
<PAGE>
5. SUPPLEMENTAL CASH FLOW INFORMATION
As a result of an acquisition, the Company recorded $3,837
in assets and $379 in liabilities during the six months ended March 31, 1997.
The Company purchased $524 in assets via capital leases during the six months
ended March 31, 1996. Accounts payable and accrued liabilities include $15,303
in fixed asset purchases at March 31, 1997. During the six months ended March
31, 1997, the Company made $1,605 in interest payments
6. ACCOUNTING CHANGE
Effective January 1, 1997, the Company increased the
estimated depreciable life of its telecommunications networks from 10 to 20
years and decreased the estimated depreciable life of certain equipment from 10
to five years. These estimates were changed to better reflect the estimated
period during which these assets will remain in service and result in useful
lives which are more consistent with industry practice. The changes in estimates
of depreciable lives were made on a prospective basis, beginning January 1,
1997. The effect of this change was to decrease depreciation expense and net
loss for the three months ended March 31, 1997 by $311.
7. RECENT DEVELOPMENTS
In February 1997 NACT Telecommunications, Inc. ("NACT") (a
subsidiary of the Company) completed an initial public offering of its common
stock pursuant to which the Company and NACT sold one million and two million
shares, respectively, of NACT's common stock, resulting in gross proceeds to the
Company and NACT of $10 million and $20 million, respectively. The Company
recognized a $7.4 million gain on the sale of NACT common stock. As a result of
this transaction, the Company's interest in NACT decreased from 100% to 63%.
Also in February 1997, the Company completed a private
placement of $50 million in redeemable preferred shares (the "Preferred
Shares"). The Preferred Shares, which are convertible at any time after February
28, 2000 at an imputed price of $11.375 per share, will not pay dividends in
cash, except to the extent cash dividends are paid on Common Shares. In
addition, the liquidation and redemption prices of the Preferred Shares will
accrete at a semi-annual rate of 11.875%. Under certain circumstances, the
Preferred Shares will also be subject to mandatory conversion or redemption.
In May 1997, the Company issued $265 million in senior
secured notes due May 1, 2007. The notes bear interest at a rate of 13.25% with
semi-annual interest payments due beginning November 1, 1997. Approximately
$93.8 million of the proceeds have been set aside to fund the first six
scheduled interest payments. The remainder of the net proceeds will be used to
purchase and install telecommunications equipment.
7
<PAGE>
8.
GST USA, INC. (A)
CONSOLIDATED CONDENSED BALANCE SHEET
MARCH 31, 1997 (UNAUDITED) AND SEPTEMBER 30, 1996
(IN THOUSANDS)
(STATED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
March 31, 1997 September 30, 1996
<S> <C> <C>
ASSETS
Current assets $ 56,811 $ 77,506
Non-current assets 290,317 168,882
--------- ---------
TOTAL ASSETS $ 347,128 $ 246,388
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 94,240 $ 34,286
Non-current liabilities 264,128 210,243
Minority interest 11,661 182
--------- ---------
Total liabilities 370,029 244,711
--------- ---------
--------- ---------
Total shareholders' equity (22,901) 1,677
--------- ---------
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 347,128 $ 246,388
========= =========
</TABLE>
(A) GST USA, Inc. ("GUS") is a wholly-owned subsidiary of the Company. The
summarized financial information of GUS is as of and for the three months ended
March 31, 1997 and the comparable 1996 period. The total outstanding
indebtedness of GUS includes its senior discount notes with an accreted value of
$ 190.1 million as of March 31, 1997, which the Company fully and
unconditionally guaranteed. Separate financial statements and other disclosures
concerning GUS are not presented because management has determined that such
information is not materially different than the information already provided.
8
<PAGE>
GST USA, INC.
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1997 AND 1996 (UNAUDITED)
(IN THOUSANDS)
(STATED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
Three Months Six Months
Ended March 31, Ended March 31,
----------------------------------- ------------------------------------------
1997 1996 1997 1996
--------------- ------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Revenue $ 16,088 $ 8,343 $ 31,249 $ 14,862
Operating costs and expenses $ 33,935 $ 16,409 $ 65,897 $ 28,498
--------------- ------------- ----------------- ---------------
Loss from operations $ (17,847) $ (8,066) $ (34,648) $ (13,636)
Other expenses $ 4,485 $ 3,963 $ 1,521 $ 5,123
--------------- ------------- ----------------- ---------------
Net Loss $ (13,362) $ (12,029) $ (33,127) $ (18,759)
=============== ============= ================= ===============
</TABLE>
9
<PAGE>
GST USA, INC.
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31, 1997 AND 1996 (UNAUDITED)
(IN THOUSANDS)
(STATED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
Six Months
Ended March 31,
----------------------------------
1997 1996e
--------------- --------------
<S> <C> <C>
Cash used in operations $ (33,496) $ (12,713)
Cash used in investing (94,166) (27,027)
Cash provided by financing 107,791 151,706
--------------- --------------
Increase in cash and cash equivalents (19,871) 111,966
Cash and cash equivalents, beginning of period 41,420 3,894
--------------- --------------
Cash and cash equivalents, end of period $ 21,549 $ 115,860
=============== ==============
</TABLE>
10
<PAGE>
PART II: OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27 Financial Data Schedule
11
<PAGE>
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf of the
undersigned thereunto duly authorized.
Date: August 4, 1997 GST TELECOMMUNICATIONS, INC.
-------------- (Registrant)
/S/ DANIEL L. TRAMPUSH
-------------------------------------
Daniel L. Trampush,
(Senior Vice President and Chief
Financial Officer)
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the Company's Form 10-Q for the quarter ended March 31, 1997 and is
qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> MAR-31-1997
<CASH> $48,334,406
<SECURITIES> 2,000,000
<RECEIVABLES> 17,173,542
<ALLOWANCES> (1,767,273)
<INVENTORY> 2,807,972
<CURRENT-ASSETS> 76,079,915
<PP&E> 258,324,684
<DEPRECIATION> (12,407,179)
<TOTAL-ASSETS> 397,946,114
<CURRENT-LIABILITIES> 32,288,720
<BONDS> 213,853,569
124,456,840
50,000,000
<COMMON> 0
<OTHER-SE> 5,008,818
<TOTAL-LIABILITY-AND-EQUITY> 397,946,114
<SALES> 47,908,833
<TOTAL-REVENUES> 47,908,833
<CGS> 36,340,979
<TOTAL-COSTS> 83,605,492
<OTHER-EXPENSES> (8,184,259)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,818,368
<INCOME-PRETAX> (38,311,960)
<INCOME-TAX> 0
<INCOME-CONTINUING> (38,311,960)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (38,417,344)
<EPS-PRIMARY> (1.69)
<EPS-DILUTED> (1.69)
</TABLE>
