-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Cy3A6IFBlx5hMZJ26znGapJNaDZaWQ9SBGv1gSKxI7FClL7uR9AjfWxLMesC7APr MVKdKyZ9+zj+/b5AHRM08A== 0000912057-00-014924.txt : 20000331 0000912057-00-014924.hdr.sgml : 20000331 ACCESSION NUMBER: 0000912057-00-014924 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 20000330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GST USA INC CENTRAL INDEX KEY: 0001010605 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 830310464 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 333-02260-01 FILM NUMBER: 586520 BUSINESS ADDRESS: STREET 1: 4001 MAIN STREET CITY: VANCOUVER STATE: WA ZIP: 98663 BUSINESS PHONE: 3609067100 MAIL ADDRESS: STREET 1: 4001 MAIN STREET CITY: VANCOUVER STATE: WA ZIP: 98663 10-Q/A 1 10-Q/A 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 June 30, 1999 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 333-02260-01 GST USA, INC. - -------------------------------------------------------------------------------- (Exact name of Registrant as Specified in its Charter) Delaware 83-0310464 ---------------------------- --------------------------- (State or Other Jurisdiction (IRS Employer Identification of Incorporation or Organization) Number) 4001 Main Street, Vancouver, WA 98663 -------------------------------------- -------- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including Area Code: (360) 356-7100 -------------- N/A - ------------------------------------------------------------------------------- (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM 10-Q WITH THE REDUCED DISCLOSURE FORMAT CONTEMPLATED THEREBY. Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- GST USA, INC. FORM 10-Q/A INDEX THIS REPORT ON FORM 10-Q/A CONSTITUTES AMENDMENT NO. 1 TO THE REGISTRANT'S REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1999, AND AMENDS, IN ITS ENTIRETY, PART I, ITEMS 1 AND 2, AND PART II, ITEM 6 OF SUCH REPORT AS ORIGINALLY FILED AUGUST 16, 1999. SEE NOTE 2 OF NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR A DISCUSSION OF THE BASIS FOR SUCH AMENDMENTS.
PAGE(S) ------- PART I: FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS: Condensed Consolidated Balance Sheets - June 30, 1999 and December 31, 1998 2 Condensed Consolidated Statements of Operations - Three and Six Months Ended June 30, 1999 and 1998 3 Condensed Consolidated Statements of Cash Flows - Six Months Ended June 30, 1999 and 1998 4 Notes to Condensed Consolidated Financial Statements 5-6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (REDUCED DISCLOSURE NARRATIVE) 7-9 PART II: OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 10 SIGNATURES 11
-1- GST USA, Inc. Condensed Consolidated Balance Sheets (In thousands) (Unaudited)
ASSETS JUNE 30, 1999 DECEMBER 31, 1998 (1) -------------------- ------------------- (As Restated) Current assets: Cash and cash equivalents $ 44,973 $ 85,884 Restricted investments 35,272 34,107 Accounts receivable, net 42,042 32,935 Investments 46 46 Inventory, net 1,454 1,485 Prepaid and other current assets 21,038 11,316 --------------------- ------------------- Total current assets 144,825 165,773 --------------------- ------------------- Restricted investments 119,710 247,257 Property and equipment 826,786 678,374 less accumulated depreciation (82,919) (62,522) --------------------- ------------------- 743,867 615,852 Other assets 136,872 138,773 less accumulated amortization (47,592) (38,877) --------------------- ------------------- 89,280 99,896 --------------------- ------------------- Total assets $ 1,097,682 $ 1,128,778 --------------------- ------------------- --------------------- ------------------- LIABILITIES AND SHAREHOLDER'S DEFICIT Current liabilities: Accounts payable $ 29,301 $ 26,229 Accrued expenses 39,623 36,621 Payable to parent 360,297 354,679 Deferred revenue 16,163 6,030 Current portion of capital lease obligations 6,539 5,649 Current portion of long-term debt 13,533 12,127 --------------------- ------------------- Total current liabilities 465,456 441,335 --------------------- ------------------- Capital lease obligations, less current portion 17,051 19,741 Long-term debt, less current portion 948,172 919,075 Shareholder's deficit: Common shares 78,462 78,462 Accumulated deficit (411,459) (329,835) --------------------- ------------------- (332,997) (251,373) --------------------- ------------------- Total liabilities and shareholder's deficit $ 1,097,682 $ 1,128,778 --------------------- ------------------- --------------------- -------------------
(1) The information in this column was derived from GST USA's audited financial statements as of December 31, 1998. See notes to condensed consolidated financial statements. -2- GST USA, Inc. Condensed Consolidated Statements of Operations (In thousands) (Unaudited)
THREE MONTHS SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, ----------------------------- ----------------------------- 1999 1998 1999 1998 ------------- ------------ ------------ ------------ (As Restated) (As Restated) Revenues: Telecommunications services $ 51,214 $ 37,737 $ 99,938 $ 66,917 Construction, facility sales and other 34,518 756 45,287 756 Product 1,157 1,034 2,239 1,898 ------------- ------------ ------------ ------------ Total revenues 86,889 39,527 147,464 69,571 ------------- ------------ ------------ ------------ Operating costs and expenses: Network expenses 32,776 25,825 64,475 46,953 Facilities administration and maintenance 4,265 3,701 9,400 7,656 Cost of construction revenues 20,027 200 25,865 200 Cost of product revenues 655 707 1,350 1,396 Selling, general and administrative 29,355 23,943 56,299 43,907 Depreciation and amortization 16,639 11,069 33,610 19,730 ------------- ------------ ------------ ------------ Total operating costs and expenses 103,717 65,445 190,999 119,842 ------------- ------------ ------------ ------------ Loss from operations (16,828) (25,918) (43,535) (50,271) ------------- ------------ ------------ ------------ Other expenses (income): Interest income (2,614) (6,785) (6,472) (11,718) Interest expense, net of amounts capitalized 21,211 19,256 43,077 34,688 Gain on sale of subsidiary shares --- --- --- (61,266) Other 1,291 492 1,484 494 ------------- ------------ ------------ ------------ 19,888 12,963 38,089 (37,802) ------------- ------------ ------------ ------------ Loss before income taxes (36,716) (38,881) (81,624) (12,469) ------------- ------------ ------------ ------------ Income tax expense --- --- --- --- ------------- ------------ ------------ ------------ Net loss $ (36,716) $ (38,881) $ (81,624) $ (12,469) ------------- ------------ ------------ ------------ ------------- ------------ ------------ ------------
See notes to condensed consolidated financial statements. -3- GST USA, Inc. Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited)
SIX MONTHS ENDED JUNE 30, ------------------------------------ 1999 1998 -------------- ---------------- (As Restated) Operations: Net loss $ (81,624) $ (12,469) Adjustments to reconcile net loss to net cash used in operations: Depreciation and amortization 36,111 22,144 Accretion and accrual of interest 23,377 16,490 Non-cash stock compensation and other expense 1,434 1,123 Loss on disposal of assets 1,755 38 Gain on sale of subsidiary shares --- (61,266) Changes in non-cash operating working capital: Accounts receivable, net (9,276) (6,575) Inventory 31 (137) Prepaid, other current and other assets, net (9,722) 1,289 Accounts payable and accrued liabilities 14,297 (6,250) Deferred revenue 10,133 6 -------------- ---------------- Cash used in operations (13,484) (45,607) -------------- ---------------- Investments: Acquisition of subsidiaries, net of cash acquired --- (35,471) Proceeds from sale of investments --- 328 Purchase of property and equipment (151,803) (80,458) Proceeds from sale of property and equipment --- 3,562 Purchase of other assets (177) (2,053) Change in investments restricted for the purchase of property and equipment 110,231 (254,335) Proceeds from the sale of subsidiary shares, net --- 85,048 Cash disposed of in sale of subsidiary --- (5,252) -------------- ---------------- Cash used in investing activities (41,749) (288,631) -------------- ---------------- Financing: Proceeds from long-term debt 1,040 299,874 Principal payments on long-term debt and capital leases (7,053) (4,526) Increase in payable to parent 4,184 10,776 Deferred debt financing costs --- (12,701) Change in investments restricted to finance interest payments 16,151 17,703 -------------- ---------------- Cash provided by financing activities 14,322 311,126 -------------- ---------------- Decrease in cash and cash equivalents (40,911) (23,112) Cash and cash equivalents, beginning of period 85,884 198,870 -------------- ---------------- Cash and cash equivalents, end of period $ 44,973 $ 175,758 -------------- ---------------- -------------- ----------------
See notes to condensed consolidated financial statements. -4- GST USA, INC. NOTES TO CONDENSED CONSOLIDATED 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 adjustments necessary (which are of a normal and recurring nature) for the fair presentation of the results of the interim periods presented. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full fiscal year or for subsequent periods. These financial statements should be read in conjunction with GST USA's audited consolidated financial statements for the fiscal year ended December 31, 1998 as included in GST USA's annual report on Form 10-K/A. 2. RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS FOR PRIOR PERIODS The Company has restated its result for the three and six month periods ended June 30, 1999 to reflect the following three changes: 1) For a certain construction contract involving both monetary and non-monetary events, the Company is restating construction revenue, cost of construction revenues and property and equipment to comply with Emerging Issues Task Force 86-29, "Nonmonetary Transactions." The Company had previously accounted for only the value of the net cash impact and believes that recording all portions of the contract on their relative fair values is a more appropriate treatment. 2) The Company is restating its cost of construction revenues related to conduit transactions in which it leases or sells certain conduits while retaining others for its own use. The Company believes that using a weighted average conduit cost for each conduit in the system, whether retained or sold/leased, is more appropriate than the incremental cost of the sold/leased conduits previously used. 3) The Company determined that certain software development costs were more appropriately expensed in accordance with American Institute of Certified Public Accountants Statement of Position 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." The effect of the restatement is as follows:
THREE MONTHS ENDED SIX MONTHS ENDED ---------------------------- ---------------------------- JUNE 30, 1999 JUNE 30, 1999 ---------------------------- ---------------------------- (AS REPORTED) (AS RESTATED) (AS REPORTED) (AS RESTATED) Construction, facility sales and other revenue $ 19,551 $ 34,518 $ 25,427 $ 45,287 Cost of construction revenues 6,954 20,027 9,468 25,865 Selling, general and administrative expense 28,161 29,355 54,407 56,299 Net loss (37,416) (36,716) (83,195) (81,624) Property and equipment 825,215 826,786 825,215 826,786 Accumulated deficit at June 30, 1999 (413,030) (411,459) (413,030) (411,459)
3. TRANSFER OF SUBSIDIARIES Effective January 1, 1999, GST USA's parent, GST Telecommunications, Inc. ("GST"), transferred the ownership of GST Action Telcom, Inc. (the "Transferred Subsidiary") to GST USA. The condensed consolidated financial statements included herein give effect to such transfer as if the Transferred Subsidiary was consolidated into GST USA as of the date of acquisition of the Transferred Subsidiary by GST. 4. BASIC AND DILUTED NET LOSS PER SHARE GST USA does not have equity instruments that are considered common stock equivalents, and, as weighted average common shares total only 20 and 10 for June 30, 1999 and December 31, 1998, respectively, all of which are owned by GST, income (loss) per share data is meaningless and is not presented in the accompanying condensed financial statements. -5- GST USA, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 5. SUPPLEMENTAL CASH FLOW INFORMATION
SIX MONTHS ENDED JUNE 30, ------------------------------ 1999 1998 ------------- ------------- (As Restated) Supplemental disclosure of cash flow information: Cash paid for interest $ 24,079 $ 27,336 Cash paid for income taxes --- --- Supplemental schedule of non-cash investing and financing activities: Recorded in business combinations: Assets --- 45,719 Liabilities --- 10,248 Disposition of subsidiary: Assets (1,373) 35,480 Liabilities 216 4,218 Minority interest --- 12,732 Amounts in accounts payable and accrued liabilities for the purchase of fixed assets at end of period 27,220 23,770 Assets acquired through capital leases 1,194 6,043
6. ACCRUED SEVERANCE In the fourth quarter of 1998, GST USA accrued $1,113 in severance related costs. The following table details activity related to the severance accrual. Accrual at December 31, 1998 $1,113 Payments (737) Adjustments (61) ------ Accrual at June 30, 1999 $ 315 ------ ------
7. ADOPTION OF NEW ACCOUNTING STANDARD In June 1999, the FASB issued Interpretation No. 43, "Real Estate Sales," an interpretation of FASB Statement No. 66, "Accounting for Sales of Real Estate." Interpretation No. 43 clarifies that the phrase ALL REAL ESTATE SALES, from Paragraph 1 of Statement No. 66, includes sales of real estate with property improvements or integral equipment that cannot be removed and used separately from the real estate without incurring significant costs. This Interpretation applies to all sales of real estate with property improvements or integral equipment entered into after June 30, 1999. GST USA is currently evaluating Interpretation No. 43 to determine the impact it will have on its financial statements. -6- ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Certain information included in this Quarterly Report may be deemed to include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve risk and uncertainty, such as information relating to expected capital expenditures and expected trends in operating losses and cash flows, as well as any statements preceded by, followed by, or that include the words "intends," "estimates," "believes," "expects," "anticipates," "should," "could," or similar expressions, and other statements contained herein regarding matters that are not historical facts. Although GST USA believes that its expectations are based on reasonable assumptions, it can give no assurance that its expectations will be achieved. The important factors that could cause actual results to differ materially from those in the forward-looking statements herein (the "Cautionary Statements") include, without limitation, risks associated with GST USA's operating losses, risks relating to GST USA's development and expansion and possible inability to manage growth, risks relating to GST USA's significant capital requirements, substantial indebtedness and possible inability to service its debt, risks relating to competition and regulatory developments, risks relating to implementing local and enhanced services, risks relating to its long distance business, as well as other risks referenced from time to time in GST USA's filings with the Securities and Exchange Commission, including Amendment No. 5 to Form S-4, as filed on August 4, 1999 and GST USA's Form 10-K/A for the fiscal year ended December 31, 1998. All subsequent written and oral forward-looking statements attributable to GST USA or persons acting on its behalf are expressly qualified in their entirety by the Cautionary Statements. GST USA does not undertake any obligation to release publicly any revisions to such forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. OVERVIEW GST USA is a wholly-owned subsidiary of GST Telecommunications, Inc. ("GST"). GST USA was formed to hold the capital stock of the consolidated operating subsidiaries of GST. GST USA, through its subsidiaries, provides a broad range of integrated telecommunications products and services, including enhanced data and Internet services and comprehensive voice services throughout the United States, with a robust presence in California and the West. GST USA continues to focus on its western regional strategy by anchoring its next generation networks in local markets and connecting them via long haul fiber networks. GST USA's products include local dial tone, long distance, Internet, data transmission and private line services. The following table highlights key statistical information about GST USA, as of June 30, 1999:
- ------------------------------------------------------- ----------------------------------------------------- Access Lines, sold this quarter 52,173 - ------------------------------------------------------- ----------------------------------------------------- Access Lines, installed this quarter 30,696 - ------------------------------------------------------- ----------------------------------------------------- Cities Served 48 - ------------------------------------------------------- ----------------------------------------------------- Route Miles, total 5,838 (86% owned, 14% leased) - ------------------------------------------------------- ----------------------------------------------------- Fiber Miles, total 286,500 (97% owned, 3% leased) - ------------------------------------------------------- ----------------------------------------------------- Collocations 92 - ------------------------------------------------------- ----------------------------------------------------- Buildings On-Net 715 - ------------------------------------------------------- ----------------------------------------------------- Class 4/5 Switches Operational 15 - ------------------------------------------------------- ----------------------------------------------------- -7- - ------------------------------------------------------- ----------------------------------------------------- Frame Relay Switches Operational 24 - ------------------------------------------------------- ----------------------------------------------------- ATM Switches Operational 35 - ------------------------------------------------------- ----------------------------------------------------- Customers 107,425 - ------------------------------------------------------- ----------------------------------------------------- Interconnection Agreements 13 - ------------------------------------------------------- ----------------------------------------------------- Employees 1,258 - ------------------------------------------------------- -----------------------------------------------------
We recently discovered errors in previous disclosures of fiber miles and route miles. We are currently reviewing our network records and these numbers reflect our best estimate based on our review to date. These numbers reflect a downward restatement of approximately 985 route miles and 20,882 fiber miles. RESULTS OF OPERATIONS REVENUES. Total revenue for the three month and six month periods ended June 30, 1999 increased $47.4 million, or 119.8%, and $77.9 million, or 112.0%, respectively, over the comparable three and six month periods ended June 30, 1998. Telecommunications services revenues for the three and six month periods ended June 30, 1999 increased $13.5 million, or 35.7%, and $33.0 million, or 49.3%, respectively, over the comparable three and six month periods ended June 30, 1998. The increase in telecommunications services revenues resulted from increased local, long distance, data, and Internet services revenue as GST USA launched new products and entered new markets. GST USA is bundling these products to provide better access and services to its customers. In addition, for the six-month period ended June 30, 1999, the increase was also attributable to 1998 strategic acquisitions, including the acquisition of ICON Communications, Corp. Reciprocal compensation, which GST USA recognizes based on interconnection agreements, totaled $1.5 million and $2.2 million for the three and six month periods ended June 30, 1999, respectively, as compared to $0 for both the three and six month periods ended June 30, 1998. Construction, facility sales and other revenue for the three and six month periods ended June 30, 1999 increased $33.8 million and $44.5 million, respectively, over the comparable three and six month periods ended June 30, 1998. The increase in construction, facility sales and other revenue was attributable to revenue from several agreements to sell or lease conduit and fiber capacity to other carriers. Product revenue for the three and six month periods ended June 30, 1999 increased $.1 million, or 11.9%,and $.3 million, or 18.0%, respectively, over the three and six month periods ended June 30, 1998. OPERATING EXPENSES. Total operating expenses for the three and six month periods ended June 30, 1999 increased $38.3 million, or 58.5%, and $71.2 million, or 59.4%, respectively, over the comparable three and six month periods ended June 30, 1998. Network expenses, which include direct local and long distance circuit costs, were 64.0% and 64.5%, respectively, of telecommunications services revenues for the three and six month periods ended June 30, 1999 compared to 68.4% and 70.2% for the comparable periods in the previous year. The decrease in network expenses as a percentage of telecommunications services revenue resulted primarily from an increase in traffic carried on GST USA's network. Facilities administration and maintenance expenses for the three and six month periods ended June 30, 1999 were 8.3% and 9.4%, respectively, of telecommunications services revenues compared to 9.8% and 11.4% for the comparable periods ended June 30, 1998. The decrease in these expenses as a percentage of telecommunications services revenues primarily results from the inclusion of revenues from strategic acquisitions, substantially all of which are not generated on GST USA's networks. Cost of construction revenues for the three and six month periods ended June 30, 1999 were $20.0 million and $25.9 million, respectively, an increase of $19.8 million and $25.7 million over the comparable periods in the previous year. The increase was caused by the increase in construction, facility sales and other revenue. For the three and six month periods ended June 30, 1999, cost of construction revenues were 58.0% and 57.1%, respectively, of construction revenues, compared to 26.5% for both the three and six month periods ended June 30, 1998. Consistent with the comparable periods in 1998, cost of product revenues for the three and six month periods ended June 30, 1999 were $.7 million and $1.4 million, respectively. For the three and six month periods ended June 30, 1999 cost of product revenues were 56.6% and 60.3%, respectively, of product revenues, compared to 68.4% and 73.6% for the comparable three and six month periods ended June 30, 1998. -8- Selling, general and administrative expenses for the three and six month periods ended June 30, 1999 increased $5.4 million, or 22.6%, and $12.4 million, or 28.2%, respectively, as compared to the three and six month periods ended June 30, 1998. The increase is due primarily to the expansion of GST USA's local and enhanced services operations, which resulted in additional marketing, management information and sales staff, and to selling, general and administrative expenses related to companies acquired in 1998. In addition, GST USA had increased litigation costs related to its legal proceedings. See "Legal Proceedings" in "Part II: Other Information." As a percentage of total revenue, selling, general and administrative expenses for the three and six months ended June 30, 1999 were 33.8% and 38.2%, respectively, compared to 60.6% and 63.1%, respectively, for the three and six months ended June 30, 1998. Depreciation and amortization for the three and six month periods ended June 30, 1999 increased $5.6 million, or 50.3%, and $13.9 million, or 70.3%, respectively, as compared to the three and six months periods ended June 30, 1998. The increase is attributable to newly-constructed networks and related equipment being placed into service and to the amortization of intangible assets related to companies acquired by GST USA in 1998. GST USA expects that depreciation will continue to increase as it expands its networks and longhaul fiber optic facilities and installs additional switches. Depreciation and amortization expense was 19.1% and 22.8% of total revenue for the three and six months ended June 30, 1999 compared to 28.0% and 28.4% for the comparable three and six month periods ended June 30, 1998. OTHER EXPENSES/INCOME. For the three and six month periods ended June 30, 1999, GST USA recorded net other expense of $19.9 million and $38.1 million, respectively, compared to net other expense of $13.0 million and net other income of $37.8 million for the comparable three and six month periods ended June 30, 1998, respectively. For the six months ended June 30, 1998, net other income includes a $61.3 million gain resulting from GST USA's sale of its remaining 63% interest in NACT Telecommunications, Inc. (the "Nact Sale"). Excluding such gain, net other expense would have increased $14.6 million for the six month period ended June 30, 1999 as compared to the same period in the previous year. The increase in net other expense related primarily to increased interest expense resulting from the issuance in May, 1998 of $500.0 million principle amount at maturity of 10.5% senior secured discount notes. NET INCOME/LOSS. Net loss for the three month period ended June 30, 1999 decreased $2.2 million, or 5.6%, to $36.7 million from $38.9 million for the three months ended June 30, 1998. Net loss for the six month period ended June 30, 1999 increased $69.1 million, or 554.6%, to $81.6 million from $12.5 million for the six month period ended June 30, 1998. Excluding the $61.3 million gain on the NACT Sale, net loss would have increased $7.8 million for the six months ended June 30, 1999 as compared to the six months ended June 30, 1998. Such increase primarily relates to increased interest expense. -9- PART II: OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit 27 Financial Data Schedule (b) Reports on Form 8-K None. -10- 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: March 29, 2000 GST USA, INC. (Registrant) /s/ Daniel L. Trampush ------------------------------------- Daniel L. Trampush, (Senior Vice President and Chief Financial Officer) -11- EX-27 2 EX-27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GST USA'S FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS DEC-31-1999 JUN-30-1999 44,973,000 35,272,000 45,085,000 (3,043,000) 1,454,000 144,825,000 826,786,000 (82,919,000) 1,097,682,000 465,456,000 824,607,000 65,603,000 0 240,212,000 (332,997,000) 1,097,682,000 147,464,000 147,464,000 91,690,000 190,999,000 (4,988,000) 0 43,077,000 (81,624,000) 0 (81,624,000) 0 0 0 (81,624,000) 0 0
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