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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
SEPTEMBER 17, 2002
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)
GOLDEN TELECOM, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-27423 51-0391303
(State of incorporation) (Commission File Number) (IRS Employer Identification No.)
REPRESENTATION OFFICE GOLDEN TELESERVICES, INC.
12 TRUBNAYA ULITSA
MOSCOW, RUSSIA 103045
(Address of principal executive office)
(011-7-501) 797-9300
(Registrant's telephone number, including area code)
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Golden Telecom, Inc. filed a Form 8-K dated September 17, 2002 with regard to
the acquisition of the remaining 50% ownership interest in EDN Sovintel LLC
without the required financial information. Accordingly, Golden Telecom, Inc. is
filing this Form 8-K/A to include that financial information.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On September 5, 2002, subject to the performance of certain Custody
Agreement conditions, subsidiaries of Golden Telecom, Inc. (the acquiring
subsidiaries together with Golden Telecom, Inc., the "Company" or "GTI")
finalized the acquisition of the 50% ownership interest in EDN Sovintel LLC
("Sovintel") previously held by Open Joint Stock Company Rostelecom
("Rostelecom"), bringing the Company's ownership in Sovintel to 100%. Pursuant
to the Ownership Interest Purchase Agreement dated March 13, 2002, by and among
the Company and Rostelecom and a Custody Agreement by and among the Company,
Rostelecom and ZAO Citibank ("Citibank"), the Company consummated the
transaction by effectively placing in escrow, under the terms of the Custody
Agreement, 4,024,067 million shares of GTI's common stock and a $46.0 million
non-interest bearing promissory note, payable on December 5, 2002, and by
providing a $10.0 million letter of credit. Upon the re-registration of
Sovintel's charter documents and the performance of certain conditions in the
Custody Agreement on September 17, 2002, the approximately 4,024,067 million
shares of GTI's common stock and the $46.0 million non-interest bearing
promissory note were released to Rostelecom and the $10.0 million letter of
credit became payable. The purchase price was determined through arms' length
negotiation between the Company and Rostelecom. For purposes of this
transaction, the 4,024,067 million shares were valued at $12.59 per share. The
total purchase price of approximately $113.0 million consisted of approximately
$50.7 million in GTI common stock, $10.0 million in cash consideration, $46.0
million in promissory note consideration which was recorded net of $0.7 million
discount, and direct transaction costs of approximately $7.0 million, including
an investment banking fee paid to Alfa Telecom Limited, a shareholder of the
Company. The Company has the ability and the intent to finance a portion of the
non-interest bearing promissory note with funds from borrowing on a $30.0
million credit facility from Citibank. Pursuant to a Shareholders' Agreement,
Rostelecom will be represented on the Company's Board of Directors. The Company
began to consolidate the financial position and results of operations of
Sovintel as of September 17, 2002. The Company was advised by Alfa Telecom
Limited, a shareholder of the Company, and LV Finance.
The acquisition of the remaining 50% of Sovintel will further strengthen
the Company's position in the key Moscow and St. Petersburg communications
markets, position the Company to realize future operating and cost synergies,
and allow GTI to offer a full suite of telecommunication services across broad
geographical markets in Russian and the CIS. Sovintel provides worldwide
communications services, principally to major hotels, business offices and
mobile communication companies through its telecommunications network in Russia,
including Moscow, St. Petersburg, Pskov, and Kaliningrad. The Company intends to
use the assets of Sovintel in the manner in which they were previously used.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of business acquired:
The balance sheets as of December 31, 2001 and 2000, and the related statements
of income, member' equity, and cash flow for each of the three years in the
period ended December 31, 2001 of EDN Sovintel LLC are incorporated by reference
to the Company's Annual Report on Form 10-K dated December 31, 2001 (Commission
File No. 0-27423).
The interim financial statements for the three and six months ended June 30,
2002 of EDN Sovintel LLC are incorporated by reference to the Company's
Quarterly Report on Form 10-Q dated June 30, 2002 (Commission File No. 0-27423).
(b) Pro forma financial statements:
The accompanying pro forma balance sheet as of June 30, 2002 and accompanying
pro forma statements of operations for the year ended December 31, 2001 and for
the six month period ended June 30, 2002 were prepared based on the Company's
interpretation of guidance issued by the United States Securities and Exchange
Commission ("SEC") (specifically Section 11.02 of Regulation S-X) to reflect the
salient aspects of the EDN Sovintel LLC ("Sovintel") business combination as if
it had occurred as of the pro forma dates referenced herein. As these financial
statements and related adjustments are pro forma in nature, the resulting
unaudited pro forma presentation is not necessarily indicative of results which
may have occurred if the business combination was transacted at a date different
than that which specifically occurred.
On September 17, 2002, subsidiaries of Golden Telecom, Inc. (referred to herein
as either "GTI" or the "Company") completed the acquisition of 50% of Sovintel
that the Company did not own from Open Joint Stock Company Rostelecom
("Rostelecom"), pursuant to an Ownership Interest Purchase Agreement, dated
March 13, 2002, by and among subsidiaries of the Company and Rostelecom,
bringing the Company's ownership in Sovintel to 100%.
The total purchase price of approximately $113.0 million consisted of
approximately $50.7 million in GTI's common stock, representing 4,024,067 newly
issued shares, $10.0 million in cash consideration, $46.0 million in promissory
note consideration (see discussion below), and direct transactions costs of
approximately $7.0 million, including an investment banking fee of approximately
$3.3 million paid to an affiliate of Alfa Telecom Limited, a shareholder of the
Company. The value of the common stock was determined based on the closing price
of the Company's common stock on September 3, 2002 in accordance with the
guidance set forth in Emerging Issues Task Force Technical Bulletin ("EITF")
1999-12, "Determination of the Measurement Date for the Market Price of Acquirer
Securities Issued in a Purchase Business Combination" ("EITF 99-12").
At closing, TeleRoss LLC ("TeleRoss"), a wholly-owned Russian subsidiary of the
Company, issued a three month $46.0 million non-interest bearing note payable to
Rostelecom in partial settlement of the acquisition of the remaining 50%
ownership interest. TeleRoss is required to settle the note, in full, on
December 5, 2002. This non-interest bearing note payable was recorded net of
$0.7 million discount representing imputed interest.
GOLDEN TELECOM, INC.
PRO FORMA BALANCE SHEET
AS OF JUNE 30, 2002
(IN THOUSANDS)
(UNAUDITED)
HISTORICAL
-------------------------
PRO FORMA
COMBINED
GOLDEN PRO FORMA GOLDEN
TELECOM SOVINTEL ADJUSTMENTS TELECOM
-------- -------- ----------- ---------
ASSETS
CURRENT ASSETS
Cash and cash equivalents ............... $ 51,679 $ 18,077 $(10,000)(A) $ 59,756
Investments available for sale .......... 1,998 -- -- 1,998
Accounts receivable, net ................ 24,514 18,765 -- 43,279
Prepaid expenses ........................ 6,275 2,424 -- 8,699
Other current assets .................... 10,151 8,264 (1,874)(K) 15,765
-------- -------- (776)(I) ---------
---------
TOTAL CURRENT ASSETS ...................... 94,617 47,530 (12,650) 129,497
Property and equipment, net ............... 98,278 66,228 (4,500)(H) 160,006
Investments in and advances to ventures ... 46,447 -- (48,680)(F) 754
2,987 (K)
Goodwill and intangible assets:
Goodwill, net ........................... 17,441 -- 52,099 (E) 69,540
Intangible assets, net .................. 35,962 1,745 20,171 (G) 57,878
-------- -------- -------- ---------
Net goodwill and intangible assets . 53,403 1,745 72,270 127,418
Restricted cash ........................... 1,984 -- -- 1,984
Other non-current assets .................. 8,215 3,056 (1,551)(I) 9,720
-------- -------- -------- ---------
TOTAL ASSETS .............................. $302,944 $118,559 $ 7,876 $ 429,379
======== ======== ======== =========
See accompanying notes to unaudited pro forma financial statements.
GOLDEN TELECOM, INC.
PRO FORMA BALANCE SHEET
AS OF JUNE 30, 2002
(IN THOUSANDS)
(UNAUDITED)
HISTORICAL
------------------------
PRO FORMA
COMBINED
GOLDEN PRO FORMA GOLDEN
TELECOM SOVINTEL ADJUSTMENTS TELECOM
--------- -------- ----------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses .................. $ 31,505 $ 19,334 $ -- $ 50,839
Debt maturing within one year .......................... 1,747 -- -- 1,747
Current capital lease obligation ....................... 1,694 -- -- 1,694
Due to affiliates and related parties .................. 180 2,706 15,307 (B) 16,372
(1,821)(K)
Other current liabilities .............................. 7,376 1,090 (1,211)(I) 7,255
--------- -------- -------- ---------
TOTAL CURRENT LIABILITIES ................................ 42,502 23,130 12,275 77,907
Long-term debt, less current portion ..................... 2,612 -- -- 2,612
Long-term debt to affiliate .............................. -- -- 30,000 (B) 30,000
Long-term capital lease obligation, less current portion . 6,529 -- -- 6,529
Other non-current liabilities ............................ 12,983 4,017 (2,216)(I) 18,809
--------- -------- 4,025 (J) ---------
--------
TOTAL LIABILITIES ........................................ 64,626 27,147 31,809 135,857
Minority interest ........................................ 4,761 -- -- 4,761
SHAREHOLDERS' EQUITY
Preferred stock, $0.01 par value ....................... -- -- -- --
Common stock, $0.01 par value .......................... 251 -- 40 (D) 291
Treasury stock, at cost ................................ (25,000) -- (25,000)
Additional paid-in capital ............................. 418,157 -- 1,607 473,321
50,623 (D)
2,934 (K)
Accumulated earnings (deficit) ......................... (159,851) 91,412 (91,412)(L) (159,851)
--------- -------- -------- ---------
TOTAL SHAREHOLDERS' EQUITY ............................... 233,557 91,412 (36,208) 288,761
--------- -------- -------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ............... $ 302,944 $118,559 $ 7,876 $ 429,379
========= ======== ======== =========
See accompanying notes to unaudited pro forma financial statements.
GOLDEN TELECOM, INC.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2002
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
HISTORICAL
-----------------------
PRO FORMA
GOLDEN PRO FORMA COMBINED
TELECOM SOVINTEL ADJUSTMENTS GOLDEN TELECOM
-------- -------- ----------- --------------
REVENUE:
Telecommunication services .............................. $ 70,464 $ 64,617 $ (564)(P) $ 134,252
(265)(S)
Revenue from related parties ............................ 5,103 3,063 (7,926)(S) 240
-------- -------- ------- ---------
TOTAL REVENUE ............................................. 75,567 67,680 (8,755) 134,492
OPERATING COSTS AND EXPENSES:
Access and network services ............................. 32,926 37,578 (384)(P) 61,929
(8,191)(S)
Selling, general and administrative ..................... 19,924 8,123 -- 28,047
Depreciation and amortization ........................... 12,250 5,183 1,452 (M) 18,417
-------- -------- (468)(N) ---------
-------
TOTAL OPERATING COSTS AND EXPENSES ........................ 65,100 50,884 (7,591) 108,393
-------- -------- ------- ---------
INCOME (LOSS) FROM OPERATIONS ............................. 10,467 16,796 (1,164) 26,099
OTHER INCOME (EXPENSE):
Equity in earnings/(losses) of ventures ................. 487 -- (5,367)(Q) (4,880)
Interest income ......................................... 842 323 -- 1,165
Interest expense ........................................ (927) (802)(O) (1,729)
Foreign currency losses ................................. (507) (535) -- (1,042)
Minority interest ....................................... (227) -- -- (227)
-------- -------- ------- ---------
TOTAL OTHER INCOME (EXPENSE) .............................. (332) (212) (6,169) (6,713)
-------- -------- ------- ---------
Income (loss) before income taxes ......................... 10,135 16,584 (7,333) 19,386
Income taxes .............................................. 2,149 4,620 (472)(R) 6,297
-------- -------- ------- ---------
Income (loss) before cumulative effect of
a change in accounting principle ..................... 7,986 11,964 (6,861) 13,089
Cumulative effect of a change in accounting
principle, net of tax effect of $0 ................... 974 -- -- 974
-------- -------- ------- ---------
NET INCOME (LOSS) ......................................... $ 8,960 $ 11,964 $(6,861) $ 14,063
======== ======== ======= =========
Basic earnings per share of common stock:
Income before cumulative effect of
a change in accounting principle ................ $ 0.36 $ 0.49
Cumulative effect of a change in
accounting principle ............................ 0.04 0.04
-------- ---------
Net income per share - basic ........................ $ 0.40 $ 0.53
======== =========
Weighted average common shares - basic .................... 22,593 4,024 26,617
======== ======= =========
Diluted earnings per share of common stock:
Income before cumulative effect of
a change in accounting principle ................ $ 0.35 $ 0.48
Cumulative effect of a change in
accounting principle ............................ 0.04 0.04
-------- ---------
Net income per share - diluted ...................... $ 0.39 $ 0.52
======== =========
Weighted average common shares - diluted .................. 23,062 4,024 27,086
======== ======= =========
See accompanying notes to unaudited pro forma financial statements.
GOLDEN TELECOM, INC.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2001
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
HISTORICAL
-------------------------
PRO FORMA
GOLDEN PRO FORMA COMBINED
TELECOM SOVINTEL ADJUSTMENTS GOLDEN TELECOM
--------- --------- ----------- --------------
REVENUE:
Telecommunication services .............................. $ 128,407 $ 108,363 $ (1,128)(P) $ 235,347
(295)(S)
Revenue from related parties ............................ 11,631 7,343 (15,193)(S) 3,781
--------- --------- -------- ---------
TOTAL REVENUE ............................................. 140,038 115,706 (16,616) 239,128
OPERATING COSTS AND EXPENSES:
Access and network services ............................. 63,685 63,909 (768)(P) 111,338
(15,488)(S)
Selling, general and administrative ..................... 48,935 13,025 -- 61,960
Depreciation and amortization ........................... 41,398 9,025 2,904 (M) 52,391
(936)(N)
Impairment charge ....................................... 31,291 -- -- 31,291
--------- --------- -------- ---------
TOTAL OPERATING COSTS AND EXPENSES ........................ 185,309 85,959 (14,288) 256,980
--------- --------- -------- ---------
INCOME (LOSS) FROM OPERATIONS ............................. (45,271) 29,747 (2,328) (17,852)
OTHER INCOME (EXPENSE):
Equity in earnings/(losses) of ventures ................. 8,155 -- (10,554)(Q) (2,399)
Interest income ......................................... 3,161 321 -- 3,482
Interest expense ........................................ (2,384) (12) (2,067)(O) (4,463)
Foreign currency losses ................................. (647) (355) -- (1,002)
Minority interest ....................................... (117) -- -- (117)
--------- --------- -------- ---------
TOTAL OTHER INCOME (EXPENSE) .............................. 8,168 (46) (12,621) (4,499)
--------- --------- -------- ---------
Income (loss) before income taxes ......................... (37,103) 29,701 (14,949) (22,351)
Income taxes .............................................. 1,902 7,490 (1,055)(R) 8,337
--------- --------- -------- ---------
NET INCOME (LOSS) ......................................... $ (39,005) $ 22,211 $(13,894) $ (30,688)
========= ========= ======== =========
Net loss per share-basic .................................. $ (1.65) $ (1.11)
========= =========
Weighted average common shares-basic ...................... 23,605 4,024 27,629
========= ======== =========
Net loss per share-diluted ................................ $ (1.65) $ (1.11)
========= =========
Weighted average common shares-diluted .................... 23,605 4,024 27,629
========= ======== =========
GOLDEN TELECOM, INC.
NOTES TO PRO FORMA FINANCIAL STATEMENTS
JUNE 30, 2002
(UNAUDITED)
NOTE 1 ALLOCATION OF PURCHASE PRICE
The acquisition of the remaining 50% of Sovintel was accounted for as a purchase
business combination in accordance with accounting principles generally accepted
in the United States of America ("US GAAP").
As the transaction reflected acquisition of the remaining 50% interest in
Sovintel which was not previously owned by the Company, the Company has recorded
the net assets of Sovintel at 50% of their estimated fair values and 50% of
historical US GAAP carrying values.
The following is the actual condensed balance sheet of Sovintel as of the
September 17, 2002 acquisition date, reflecting preliminary purchase price
accounting adjustments to the net assets acquired:
SEPTEMBER 17, 2002
------------------
(IN THOUSANDS)
ASSETS:
Current assets ............................ $ 42,830
Property and equipment, net ............... 64,124
Telecommunications service contracts
intangible assets, net ................. 14,742
Contract based customer relationship
intangible assets, net ................. 6,350
Licenses, net ............................. 562
Other intangible assets, net .............. 300
Goodwill .................................. 52,099
Other assets .............................. 12,080
---------
Total assets ............................ $ 193,087
=========
LIABILITIES:
Current liabilities ....................... $ 24,351
Non-current liabilities ................... 7,057
---------
Net assets .............................. $ 161,679
=========
Less: previous carrying value of the
Company's equity method investment
in Sovintel ............................. (48,680)
---------
Total purchase consideration and
acquisition costs ......................... $ 112,999
=========
Consideration and acquisition costs:
Cash consideration ........................ $ 10,000
Promissory note consideration, net of ..... 45,307
discount
GTI shares consideration .................. 50,663
Direct transaction costs .................. 7,029
---------
Total purchase consideration and
acquisition costs ......................... $ 112,999
=========
Purchase price allocation will be finalized upon completion of valuation of
certain tangible assets. When final, the Company does not expect any significant
changes to the amounts presented herein. The excess purchase price over the fair
value of the net tangible and intangible assets acquired of approximately $52.1
million has been assigned to goodwill and is not deductible for tax purposes. In
accordance with SFAS No. 141, Business Combinations and SFAS No. 142 Goodwill
and Other Intangible Assets, the Company will not amortize the goodwill recorded
in connection with the acquisition of the remaining 50% of Sovintel. The
goodwill will be tested for impairment at least annually.
GOLDEN TELECOM, INC.
NOTES TO PRO FORMA FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2002
(UNAUDITED)
NOTE 2 PRO FORMA BALANCE SHEET ADJUSTMENTS
The accompanying unaudited pro forma balance sheet includes the adjustments
necessary to give effect to the business combination as if it had occurred on
June 30, 2002 and to reflect the allocation of the acquisition cost to the
estimated fair value of tangible and intangible assets acquired and liabilities
assumed as noted above, including the elimination of Sovintel's equity accounts.
As discussed above, an element of the business combination consideration was
paid in the form of GTI shares, and was valued based upon the guidance of EITF
99-12. Goodwill amounts computed as of the actual September 17, 2002 closing
date were a function of both this share price determination and the resulting
tangible and intangible net assets existing as of September 17, 2002. During the
preparation of the accompanying unaudited pro forma balance sheet as of June 30,
2002, these allocated goodwill amounts, and other purchase accounting
adjustments, have been assumed to be consistent as of both the September 17,
2002 actual closing date and the June 30, 2002 pro forma closing date as set
forth herein.
Adjustments included in the June 30, 2002 pro forma balance sheet are summarized
as follows:
(A) Cash consideration of $10.0 million was paid at closing.
(B) Promissory note consideration of $46.0 million was issued at closing. This
promissory note has been recorded net of an imputed discount of
approximately $0.7 million. Prior to closing, a subsidiary of the Company
executed a $30.0 million debt facility with ZAO Citibank providing for
both the Company's ability and intent to refinance a portion of the
promissory note on a long-term basis. Accordingly, $30.0 million of the
promissory note has been reflected as a long-term obligation with
remaining amounts being reflected as a current obligation in the
accompanying pro forma balance sheet.
(D) An element of the purchase price was paid in the form of GTI shares
consideration, representing 4,024,067 shares with an assigned value of
$50.7 million.
(E) The Company recorded $52.1 million in goodwill on the transaction.
(F) Prior to closing the transaction, the Company accounted for its previous
50% interest in Sovintel using the equity method of accounting. Upon
closing this transaction, Sovintel is now was fully consolidated. This pro
forma adjustment reflects the elimination of the previous 50% equity
method investment in Sovintel included in the Company's June 30, 2002
balance sheet.
(G) The Company has assigned approximately $12.9 million to telecommunications
service contracts intangible assets, approximately $6.4 million to
contract based customer relationship intangible assets, approximately $0.6
million to licenses, and approximately $0.3 million to other identified
intangible assets. These identified intangible assets will be amortized
over a weighted-average period of approximately seven years, and are
non-deductible for Russian tax purposes. The preliminary allocation was
based on an independent third party appraisal of the related intangible
assets. The value assigned to the intangible assets reflects 50% of the
appraised value, corresponding to the 50% of Sovintel currently purchased.
GOLDEN TELECOM, INC.
NOTES TO PRO FORMA FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2002
(UNAUDITED)
(H) Property and equipment's estimated fair market value was computed using
the net current replacement cost valuation method. The preliminary value
assigned to property and equipment in the accompanying pro forma balance
sheet represents 50% of these estimated fair values and 50% of net
historical book values.
(I) The Company has eliminated approximately $3.4 million in previously
recorded Sovintel deferred revenues and approximately $2.3 million of
previously recorded Sovintel deferred costs. These purchase accounting
adjustments relate to previous connection fee deferrals in accordance with
Staff Accounting Bulletin No. 101 ("SAB 101"). The purchase price
accounting adjustments were made under the guidance provided by EITF
2001-03, "Accounting in a Business Combination for Deferred Revenue of an
Acquiree". Amounts eliminated reflect 50% of such amounts previously
recorded by Sovintel.
(J) The Company has recorded a pro forma adjustment to deferred taxes which
consists of the following (amounts in thousands of USD):
Property and equipment adjustment -
Note 2(H)................................ $ (4,500)
Deferred revenue and cost adjustment -
Note 2 (I)............................... 1,100
Intangible asset adjustment - Note 2 (G)... 20,171
--------
Total adjustments to timing differences.... 16,771
Russian statutory tax rate................. 24%
---------
Pro forma deferred tax liability
adjustment............................... $ 4,025
========
(K) Elimination entries related to operational activity between Sovintel and
the Company.
(L) Elimination of Sovintel equity accounts upon consolidation.
NOTE 3 PRO FORMA STATEMENTS OF OPERATIONS ADJUSTMENTS
The unaudited pro forma statements of operations include adjustments necessary
to give effect to the merger as if it had occurred on January 1, 2001.
As discussed above, an element of the business combination consideration was
paid in the form of GTI shares, and was valued based upon the guidance of EITF
99-12. Goodwill amounts computed as of the actual September 17, 2002 closing
date was a function of both this share price determination and the resulting
tangible and intangible net assets existing as of September 17, 2002. During the
preparation of the accompanying unaudited pro forma statement of operations,
these allocated goodwill amounts, and other purchase price adjustments, have
been assumed to be consistent as of both the September 17, 2002 actual closing
date and the January 1, 2001 pro forma closing date as set forth herein.
Adjustments included in the pro forma statement of operations are summarized as
follows:
(M) Amortization of intangible assets over estimated useful lives (average 7
years).
(N) Effect of purchase accounting adjustments to fixed assets on depreciation
expense.
GOLDEN TELECOM, INC.
NOTES TO PRO FORMA FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2002
(UNAUDITED)
(O) Interest expense on debt assumed. Specifically, it is assumed that $30.0
million in refinanced debt was outstanding for the entire year ended
December 31, 2001 and for the six months ended June 30, 2002. Remaining
portions of the promissory note of $16 million is assumed to be
outstanding for the three month period of the promissory note.
(P) Elimination of connection fee revenues and costs associated with the
deferred revenue adjustment referenced in Note 1 (I) above.
(Q) Elimination of previously recorded equity in earnings of Sovintel.
(R) The following is a pro forma tax computation based on a Russian statutory
rate of 24% applied to the incremental variation of reported net earnings,
exclusive of the following implied permanent differences (amounts in
thousands of USD):
2001 2002
----------- --------
(IN THOUSANDS)
Combined pre-tax net income (loss),
previously reported....................... $ (7,402) $ 26,719
Pro forma combined pre-tax net
income (loss), reported herein............ (22,351) 19,386
--------- --------
Net change in reported pre-tax income ...... $ 14,949 $ 7,333
Less - permanent taxation differences:
Equity in earnings of Sovintel........... $(10,554) $ (5,367)
Transactions costs, deductible in USA.... 7,000 --
Valuation allowance, transaction costs... (7,000) --
--------- --------
Net change in taxable items................. $ 4,395 $ 1,966
Russian statutory tax rate.................. 24% 24%
--------- ---------
Incremental reduction (increase) in taxes... $ 1,055 $ 472
========== ========
(S) Elimination entries related to operational activity between Sovintel and
the Company.
(c) Exhibits
DESIGNATION DESCRIPTION OF EXHIBIT
----------- ----------------------
2.1* Ownership Interest Purchase Agreement dated March 13, 2002,
by and among SFMT-CIS, OOO TeleRoss (wholly-owned
subsidiaries of Golden Telecom, Inc.) and OAO Rostelecom.
10.1* Registration Rights Agreement dated September 5, 2002, by
and among Golden Telecom, Inc. and OAO Rostelecom.
10.2* Subscription Agreement dated September 5, 2002, by and among
Golden Telecom, Inc. and OAO Rostelecom.
10.3* Standstill Agreement dated as of September 5, 2002, by and
among Golden Telecom, Inc., OAO Rostelecom, Alfa Telecom
Limited, Capital International Global Emerging Markets
Private Equity Fund, L.P., Cavendish Nominees Limited and
First NIS Regional Fund SICAV.
10.4* Shareholders Agreement dated as of September 5, 2002, by and
among Golden Telecom, Inc., OAO Rostelecom, Alfa Telecom
Limited, Capital International Global Emerging Markets
Private Equity Fund, L.P., Cavendish Nominees Limited and
First NIS Regional Fund SICAV.
------------------------
* Incorporated by reference to the Company's current report on Form 8-K dated
September 17, 2002 (Commission File No. 0-27423).
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GOLDEN TELECOM, INC.
(Registrant)
By: /s/ DAVID STEWART
-------------------------------------
Name: David Stewart
Title: Chief Financial Officer and Treasurer
(Principal Financial Officer)
Date: November 15, 2002