Financial Results for the Three Months Ended March 31, 2006.MOSCOW -- Sistema AFK Sistema is a large Russian holding company, headed by business oligarch Vladimir Yevtushenkov. In March 2006, Yevtushenkov controlled 62% of the shares in Sistema.[1] (LSE LSE - Language Sensitive Editor :SSA (Serial Storage Architecture) A fault tolerant peripheral interface from IBM that transfers data at 80 and 160 Mbytes/sec. SSA uses SCSI commands, allowing existing software to drive SSA peripherals, which are typically disk drives. ), the largest private sector consumer services Consumer Services refers to the formulation, deformulation, technical consulting and testing of most consumer products, such as food, herbs, beverages, vitamins, pharmaceuticals, cosmetics, hair products, household cleaners, [paints, plastics, metals, waxes, coatings, minerals, company in Russia Russia, officially the Russian Federation, Rus. Rossiya, republic (2005 est. pop. 143,420,000), 6,591,100 sq mi (17,070,949 sq km). and the CIS Cis (sĭs), same as Kish (1.) (1) (CompuServe Information Service) See CompuServe. (2) (Card Information S , today announced its consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: US GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). financial results for the first quarter and three months ended March 31, 2006. HIGHLIGHTS --Consolidated revenues up 30% year on year to US$ 2.01 billion --OIBDA(a) up 21% year on year to US$ 774.8 million --Operating income up 11% year on year to US$ 470.0 million --Net income up 17% year on year to US$ 129.5 million Alexander Goncharuk, President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. , commented: "The first quarter saw double digit Noun 1. double digit - a two-digit integer; from 10 to 99 integer, whole number - any of the natural numbers (positive or negative) or zero; "an integer is a number that is not a fraction" revenue, OIBDA OIBDA Operating Income Before Depreciation & Amortization and operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. growth for the fifth straight quarter since Sistema became a publicly listed company listed company n → compañía cotizable listed company n → société cotée en Bourse listed company list n → . This continued strong performance reflected healthy growth in our telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. businesses as well as an increasing contribution from our non-telecommunications businesses including our Technology, Insurance and Banking divisions. Overall, non-telecommunications businesses contributed 15.1% of group operating income in the quarter, compared to less than 1% a year ago. This demonstrates both the strengthening market positions of our range of consumer-focused service businesses, as well as the success of our financial investments such as the acquisition of minority stakes in six energy companies in the Republic of Bashkortostan Bashkortostan (bäshkôr`tĭstän') or Bashkir Republic (băshkĭr`), constituent republic (1990 pop. ." FINANCIAL SUMMARY
US$ millions Q1 Q1
2006 2005
---------------------------------------------------- -------- --------
Consolidated Revenues 2,011.0 1,551.1
OIBDA 774.8 641.4
Operating Income 470.0 423.5
Net Income 129.5 110.5
OPERATING REVIEW Consolidated revenues for the first quarter of 2006 increased by 29.7% year on year to US$ 2.01 billion from US$ 1.55 billion for the same period of 2005. Sistema's revenue mix continued to reflect strong growth in the Group's non-telecommunications businesses, which accounted for 23.8% of consolidated revenues in the first quarter of 2006. The two largest non-telecommunications businesses - Technology and Insurance - contributed 8.5% and 6.4% of Group consolidated revenues, respectively. Sistema's OIBDA for the first quarter of 2006 increased by 20.8% year on year to US$ 774.8 million from US$ 641.4 million for the first three months of 2005, with the OIBDA margin decreasing to 38.5% from 41.4% a year ago. The Group's operating income for the first quarter grew by 11.0% year on year from US$ 423.5 million to US$ 470.0 million, and was positively impacted by the increased associated company associated company associate n → Partnerfirma f associated company n → società collegata income from equity participations, with the oil-producing and refining refining, any of various processes for separating impurities from crude or semifinished materials. It includes the finer processes of metallurgy, the fractional distillation of petroleum into its commercial products, and the purifying of cane, beet, and maple sugar companies in Bashkortostan contributing a US$ 57.2 million share of earnings for the period. Sistema's ownership stake in these assets increased in the fourth quarter of 2005 to over 20%(b) , and Sistema therefore now reports its share of earnings in these companies but does not consolidate Consolidate To combine the assets, liabilities, and other financial items of two or more entities into one. Notes: This term is generally used in the context of consolidated financial statements. any sales in its consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge . Net income for the first quarter was up 17.2% year on year from US$ 110.5 million in 2005 to US$ 129.5 million in the current year. Telecommunications
US$ millions Q1 Q1
2006 2005
---------------------------------------------------- -------- --------
Revenues 1,534.2 1,242.4
OIBDA 692.8 634.0
Operating Income 398.8 423.5
Net Income 128.6 156.3
Revenues for the Telecommunications segment were up 23.5% year on year, which primarily reflected the growth in MTS' revenues. MTS (1) See Microsoft Transaction Server. (2) (Modular TV System) The stereo channel added to the NTSC standard, which includes the SAP audio channel for special use. 1. MTS - Message Transport System. 2. added 2.86 million subscribers during the first quarter of 2006, of which the majority were in the Russian Russian associated in some way with Russia. Russian blue a breed of cats with short, dense, silver-tipped blue-colored coat and vivid green eyes. and Ukrainian markets. The share of value added Value Added The enhancement a company gives its product or service before offering the product to customers. Notes: This can either increase the products price or value. services as a percentage of MTS' total revenues increased quarter on quarter in the first quarter by two percentage points to 14%. Telecommunications segment revenues accounted for 71.4% of Group revenues for the first quarter of 2006(c) , compared to 75.8% for the first quarter of 2005. Telecommunications segment OIBDA increased by 9.3% year on year, and the OIBDA margin for the first quarter of 2006 declined year on year from 51.0% to 45.2%. Net income decreased by 17.8% year on year, which reflected the decline in MTS earnings. The net income margin for the first quarter consequently declined from 12.6% to 8.4% year on year. MTS' consolidated revenues increased by 21.9% year on year from US$ 1.06 billion to US$ 1.29 billion(d). MTS' OIBDA for the period was US$ 581.0 million and the OIBDA margin decreased to 45.1%. MTS reported net income of US$ 184.4 million, compared to US$ 232.5 million for the first quarter of 2005. Comstar UTS' consolidated revenues increased by 22.1 % year on year to US$ 249.8 million in the first quarter of 2006 from US$ 204.6 million for the same period of 2005. This growth was primarily organic, with businesses acquired after March 31, 2005 contributing only US$ 8.4 million to Comstar UTS' total consolidated revenues in the first quarter of 2006. The company's OIBDA increased by 19.5% year on year to US$ 101.3 million from US $ 84.8 million in 2005. Net income was up 38.7% year on year from US$ 28.2 million to US$ 39.2 million. Comstar UTS (Universal Timesharing System) Amdahl's version of Unix System V. Release 4.0 is POSIX compliant. demonstrated robust growth across all subscriber subscriber, n the person, usually the employee, who represents the family unit in relation to the prepayment plan. Other family members are dependents. Also called certificate holders or enrollees. segments in its traditional fixed-line Refers to wired devices. For example, a fixed-line phone is a standard phone with the handset wired to the base unit in contrast to a portable phone or cellphone. communications business during the first quarter, with a 20.1% aggregate increase in revenues from these operations on a quarter-on-quarter basis. The positive trends in the alternative fixed-line business included a sharp rise in ADSL See DSL. ADSL - Asymmetric Digital Subscriber Line and pay-TV pay-TV n. A system for receiving television broadcasts by making subscription payments, as by renting a device that unscrambles the broadcaster's scrambled signal. Also called pay television. sales, with the cumulative share of these services as a proportion of Comstar UTS' total alternative fixed-line revenues more than doubling year on year from 8.0% to 17.5%. Comstar UTS completed its Initial Public Offering in February February: see month. 2006, which raised over US$ 1.06 billion, with net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). to the company amounting to US$ 0.98 billion. Technology
US$ millions Q1 Q1
2006 2005
-------------------------------------------------------- ------ ------
Revenues 282.4 194.3
OIBDA 60.6 17.4
Operating Income 59.4 14.6
Net Income 31.5 4.5
SITRONICS, the technology arm of Sistema, generated year on year revenue growth of 45.3% for the period, and, as a result, accounted for 13.1% of Group revenues, compared with 11.8% in the same period of 2005. The growth was primarily driven by the IT Services business, which accounted for 42.4% or US$ 119.8 million of segment revenue. OIBDA for the IT Services business increased by more than four times year on year to US$ 3.3 million, with net income increasing at a similar pace to US$ 2.9 million in the first quarter of 2006. This reflected the strong growth in higher margin systems integration business and the expansion into higher growth CIS markets. The Telecommunications Solutions business also showed significant year on year growth with revenues increasing by 78.4% to US$ 102.1 million and OIBDA increasing by over three times to US$ 53.7 million. Net income was up by more than three times to US$ 42.1 million in the first quarter. The Microelectronics microelectronics, branch of electronic technology devoted to the design and development of extremely small electronic devices that consume very little electric power. Solutions business generated 52.2% year on year revenue growth to US$ 22.4 million, with a sixfold sixfold Adjective 1. having six times as many or as much 2. composed of six parts Adverb by six times as many or as much Adj. 1. increase in OIBDA to US$ 6.7 million. Net income increased to US$ 3.3 million, compared with a net loss of US$ 1.2 million in the first quarter of 2005. Consumer electronics segment revenues grew by 12.2% year on year to US$ 33.2 million in the first quarter of 2006 from US$ 29.6 million for the first quarter of 2005. However, a US$ 3.0 million loss at the OIBDA level reflected a fall in demand for Liquid Crystal Display liquid crystal display (LCD) Optoelectronic device used in displays for watches, calculators, notebook computers, and other electronic devices. Current passed through specific portions of the liquid crystal solution causes the crystals to align, blocking the passage of light. monitors in the first quarter of 2006, as well as the renewal of the range of Concern SITRONICS products, which led to a decrease in margins due to the discounted selling of legacy model electronic appliances. Real Estate
US$ millions Q1 Q1
2006 2005
---------------------------------------------------------- ----- -----
Revenues 15.7 5.5
Operating Income (0.4) 1.7
Net Income (5.8) (0.5)
Revenues for Sistema Hals Hals , Frans 1580?-1666. Dutch painter of genre scenes and portraits, such as The Laughing Cavalier (1624). Noun 1. , the real estate division of Sistema, rose by 185.5% year on year in the first quarter to US$ 15.7 million. The net loss increased from US$ 0.5 million in the first quarter of 2005 to US$ 5.8 million in the first quarter of 2006 due to an increase in administrative expenses, primarily driven by a larger pipeline of construction projects, as well as a US$ 3.7 million negative currency translation effect, which compared with a net gain of US$ 0.5 million for the same period 2005. Insurance
US$ millions Q1 Q1
2006 2005
-------------------------------------------------------- ------ ------
Revenues 138.4 96.6
Gross Premiums Written 226.6 201.3
Net Premiums Earned 121.4 91.3
Net Income 6.4 2.8
Key Ratios
Loss ratio 48.5% 52.5%
Expense Ratio 38.8% 33.4%
Combined Ratio 87.3% 85.9%
Revenues for ROSNO, the insurance division of Sistema, increased by 43.3% year on year in the first quarter. Gross premiums written When a non-life insurance company closes a contract to provide insurance against loss, the revenues (premiums) expected to be received over the life of the contract are called gross premiums written. increased by 12.6% to US$ 226.6 million in the first quarter, which primarily reflected the 51% year on year growth in Voluntary Medical Insurance premiums; a 53% increase in Motor Own Damage premiums; and a 24% increase in obligatory obligatory /ob·lig·a·to·ry/ (ob-lig´ah-tor?e) obligate. obligatory unavoidable; something that is bound to occur. third-party motor liability insurance. Allianz-Rosno Asset Management increased its third party assets under management Assets Under Management (AUM) is a term used by financial services companies in the mutual fund and money management or investment management business to gauge how much money they are managing. to US$ 160.2 million, and now has total assets under management of US$ 594.1 million. Driven by strong insurance and investment results, segment net income increased by 128.6% year on year to US$ 6.4 million in the first quarter. Banking
US$ millions Q1 Q1
2006 2005
---------------------------------------------------------- ----- -----
Revenues 44.1 22.5
Operating Income 8.7 2.5
Net Income 5.9 1.0
MBRD, the banking division of Sistema, reported 96.0% year on year growth in revenues to US$ 44.1 million in the quarter. The growth was driven by the doubling of the bank's loan portfolio and a healthy increase in commission income resulting from the continued strong development of the retail banking operations. Net income for the first quarter consequently grew substantially from US$ 1.0 million in 2005 to US$ 5.9 million in the current year. Retail
US$ millions Q1 Q1
2006 2005
---------------------------------------------------------- ----- -----
Revenues 56.0 18.2
OIBDA (2.9) 1.8
Operating Income (3.1) 1.5
Net Income (5.0) 0.6
Detsky Mir, the specialist children's goods retailer, more than tripled its revenues year on year to $56.0 million. The business' OIBDA declined year on year in the first quarter from a profit of US$ 1.8 million to a loss of US$ 2.9 million, which was due to a significant increase in the number of rented outlets and a resulting increase in selling, general and administrative expenses. The development of the wholesale business through S-Toys and NeuKoln, which were acquired in 2005, has temporarily depressed Depressed A description of a market, security, or product that is experiencing weak demand and lowering prices. Notes: A depressed market, security, or product implies that prices and volume are low. There are many reasons for a depressed market, security, or product. gross margins on a blended blend v. blend·ed or blent , blend·ing, blends v.tr. 1. To combine or mix so that the constituent parts are indistinguishable from one another: basis. Gross margins in the wholesale business are typically lower than in retail and range between 1% and 5%. In addition, the gross margins achieved at the new retail stores are still relatively low compared to those achieved at the flagship This article is about the lead ship, store, or product of a group. For other uses, see Flagship (disambiguation). A flagship is the ship used by the commanding officer of a group of naval ships. store in the Moscow city centre. Net income for the first quarter of 2006 therefore declined year on year from a profit of US$ 0.6 million in the first quarter of 2005 to a net loss of US$ 5.0 million in the current year. Detsky Mir has acquired and opened thirty six new retail stores since the first quarter of 2005. These stores contributed US$ 13.1 million in new sales, or 23.4% of segment revenues, while the wholesale business accounted for US$ 20.4 million or 36.4% of the total revenue for the segment. Media
US$ millions Q1 Q1
2006 2005
---------------------------------------------------------- ----- -----
Revenues 19.8 32.4
OIBDA 3.7 0.2
Operating Income 0.1 (1.4)
Net Income (1.7) 3.1
Sistema Mass Media, the media division of Sistema, reported a 38.9% year on year decline in revenues in the first quarter following the disposal of non-core loss-making subsidiaries in 2005. The segment's operating profitability consequently improved from a loss of US$ 1.4 million in 2005 to a profit of US$ 0.1 million in the current year. Net income declined from a profit of US$ 3.1 million in the first quarter of 2005 to a net loss of US$ 1.7 million in the first quarter of 2006 resulting from the absence of significant disposal effects in 2006. Approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. US$ 13.8 million of the total segment revenues of US$ 19.8 million in the first quarter of 2006 were generated from companies acquired in 2005 and 2006, while US$ 29.8 million of the first quarter 2005 revenues of US$ 32.4 million were accounted for by companies subsequently disposed dis·pose v. dis·posed, dis·pos·ing, dis·pos·es v.tr. 1. To place or set in a particular order; arrange. 2. of, or transferred to other reporting segments. For example, MTU-Intel and Golden Line, which were subsequently included in the Telecommunications division, contributed approximately US$ 22.2 million of segment revenues in the first quarter of 2005. FINANCIAL HIGHLIGHTS Cash Flow Sistema generated cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses of US$ 256.5 million in the first quarter of 2006, which compared with US$ 515.4 million for the first quarter of 2005. The decrease is primarily related to the growth in loans outstanding to banks issued by MBRD, whereas the corresponding increase in debt financing Debt Financing When a firm raises money for working capital or capital expenditures by selling bonds, bills, or notes to individual and/or institutional investors. In return for lending the money, the individuals or institutions become creditors and receive a promise to repay secured by the bank is included in cash inflow in·flow n. 1. The act or process of flowing in or into: an inflow of water; an inflow of information. 2. from financing activities. Net cash used in investing activities was US$ 864.6 million in the first quarter of 2006 and primarily reflected capital expenditure in the Telecommnications division, as well as the purchase of businesses for a total combined consideration of US$ 320.7 million. These purchases included the acquisitions of 100% of United Cable Networks, 8.03% of MGTS MGTS Message Generator Traffic Simulator MGTS Message Generation Test System , and 20% of Cosmos cosmos (kŏz`məs), any plant of the tropical American genus Cosmos of the family Asteraceae (aster family). C. bipinnatus, Hotel. Capital expenditure, excluding acquisitions, totaled US$ 393.8 million for the first quarter of 2006, compared to US$ 455.0 million for the first quarter of 2005, whereas the proportion of capital expenditure accounted for by the telecommunications division decreased year on year from 95.0% to 90.1%. Cash flow from financing activities Cash Flow from Financing Activities A category in the cash flow statement that accounts for external activities such as issuing cash dividends, adding or changing loans, or issuing and selling more stock. amounted to US$ 1.23 billion in the quarter and primarily reflected the proceeds from the Comstar UTS Initial Public Offering, which took place in February 2006. Net debt was US$ 3.5 billion at the end of the first quarter of 2006, compared with US$ 1.92 billion as at 31 March 2005. ACQUISITIONS AND DIVESTITURES In the Telecommunications segment, Comstar UTS made an unconditional HEIR, UNCONDITIONAL. A term used in the civil law, adopted by the Civil Code of Louisiana. Unconditional heirs are those who inherit without any reservation, or without making an inventory, whether their acceptance be express or tacit. Civ. Code of Lo. art. 878. UNCONDITIONAL. purchase offer to the holders of common shares of MGTS in December December: see month. 2005. The offer price was set at RUR 490 (equivalent to US$ 17.6 as at March 31, 2006) per one common share of MGTS. Shareholders of MGTS could accept this offer within 30 days of receipt of official notification. In February 2006, Comstar UTS announced the results of its public share purchase offer to MGTS common stock shareholders. During the first two months of 2006, Comstar UTS acquired 3,363,332 MGTS ordinary shares, representing 4.21% of the outstanding ordinary shares, for a total cash consideration of RUR 1,600 million (equivalent to US$ 57.6 million as at March 31, 2006). In March 2006, Comstar UTS purchased an additional 3.82% of MGTS common stock from minority shareholders for US$ 71.5 million. As a result, Comstar UTS' voting power and ownership interest in MGTS have increased to 63.7% and 53.0% respectively. In the Insurance segment, ROSNO acquired a 51% stake in Medexpress, which is a provider of voluntary medical insurance in the North-western region of the Russian Federation Russian Federation: see Russia. , for a cash consideration of US$ 6.6 million. The Group plans to further develop Medexpress' operations and use its distribution as an additional sales channel for ROSNO products. In the Mass Media segment, Sistema Mass Media and ECU ECU See: European Currency Unit ECU See European Currency Unit (ECU). GEST GEST - Generic Expert System Tool acquired 90% and 10% respectively of JIR JIR Juventud de Izquierda Revolucionaria JIR Journal of Irreproducible Results JIR Journal of Improbable Results JIR Jumper for Infra Red Broadcast and JIR Inc., which are the owners of 100% of United Cable Networks ("UCN UCN Universidad Católica del Norte (Chile) UCN University College of the North (The Pas, Manitoba, Candad) UCN Ultra Cold Neutron UCN Unión del Centro Nacional "), for a total cash consideration of US$ 145.9 million. This included the refinancing Refinancing An extension and/or increase in amount of existing debt. of the debt previously obtained by JIR Broadcast and JIR Inc. UCN is a pay-TV and broadband service provider An ISP, telephone company, cable company or other carrier that offers high-speed communications to homes and businesses, typically for Internet access. Cable modems, DSL and T1 lines are the common technologies. See broadband, cable modem, DSL and T1. in Russia, which operates in 17 metropolitan areas throughout the Russian Federation and has 724,000 subscribers. In January January: see month. 2006, Sistema Mass Media acquired GK Sendi, which is an internet provider Internet provider - Internet Service Provider in Nizhny Novgorod Nizhny Novgorod (nyēsh`nyī nôf`gərəd), formerly Gorky or Gorki, city (1989 pop. , and Informservis, which is a cable television operator in the same region, for a combined total cash consideration of US$ 6.3 million. The Group intends to use these acquisitions to further develop its digital TV and broadband networks  This article or section needs copy editing for grammar, style, cohesion, tone and/or spelling.You can assist by [ editing it] now. in the regions. In the Retail segment, Detsky Mir completed the acquisition of 99% of Tireks Development, which owns a 30% stake in Group subsidiary Dom Dom (dōm), peak, 14,942 ft (4,554 m) high, Valais canton, S Switzerland, in the Mischabelhörner group. It is the highest peak entirely in Switzerland. Igrushki, for a cash consideration of US$ 2.4 million in March 2006. In the Corporate and Other segment, Intourist Intourist (Russian: Интурист, contraction of иностранный турист, 'foreign tourist') is a purchased a 20% equity interest in Cosmos Hotel for approximately US$ 20.0 million in March 2006. Upon completion of this transaction, Intourist became the controlling shareholder in Cosmos Hotel with a 61.8% shareholding. Additionally, in the Corporate and Other segment, Concern RTI RTI - Return from interrupt acquired a 50% plus one share interest in UralEleketro, and a 100% stake in UralElektro-K, for a combined cash consideration of US$ 5.4 million in March 2006. Both companies manufacture electronic equipment. RECENT EVENTS FOLLOWING THE END OF THE REPORTING PERIOD On June June: see month. 30, 2006, SITRONICS, the technology division of the Group, announced the acquisition of a 51% stake in Intracom Telecom for EUR EUR In currencies, this is the abbreviation for the Euro. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 120 million. The acquisition is aimed at strengthening SITRONICS' positions in the Telecommunications Solutions business, giving the company access to Intracom Telecom's highly complementary product range and customer base. OTHER INFORMATION Conference call information The company will host a conference call today at 18.00 (Moscow local time), 15.00 (London London, city, Canada London, city (1991 pop. 303,165), SE Ont., Canada, on the Thames River. The site was chosen in 1792 by Governor Simcoe to be the capital of Upper Canada, but York was made capital instead. London was settled in 1826. local time), 10.00 (New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of local time). To participate in the conference call, please dial the following numbers:
UK: +44 (0)20 7138 0828
US: +1 718 354 1152
A replay facility will also be made available and may be accessed by dialing the following numbers and entering the replay access code - 4239229#
UK: +44 (0)20 7806 1970
US: +1 718 354 1112
For further information, please visit www.sistema.com. (a)OIBDA is a non-GAAP measure. It is defined as operating income before depreciation and amortization. OIBDA can be reconciled rec·on·cile v. rec·on·ciled, rec·on·cil·ing, rec·on·ciles v.tr. 1. To reestablish a close relationship between. 2. To settle or resolve. 3. to the Group's consolidated statements by adding back depreciation and amortization to operating income. (b)Equity investees include: Bashneft, UNPZ, Novoil, Ufaneftekhim, Ufaorgsintez (c)Here and further, in the comparison of period-to-period results of operations, in order to analyze an·a·lyze v. 1. To examine methodically by separating into parts and studying their interrelations. 2. To separate a chemical substance into its constituent elements to determine their nature or proportions. 3. changes, developments and trends in revenues by reference to individual segment revenues, revenues are presented on an aggregated basis, which is revenues after elimination of intra-segment (between entities in the same segment) transactions, but before inter-segment (between entities in different segments) eliminations. Amounts attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to individual companies, where appropriate, are shown prior to both intra-segment and inter-segment eliminations. (d)Financial results of MTS and Comstar may vary from the earlier reported stand alone financial results due to differences in accounting principles and consolidation effects. Sistema is the largest private sector consumer services company in Russia and the CIS, with over 60 million customers. Sistema develops and manages market-leading businesses in selected service-based industries, including telecommunications, technology, insurance, banking, real estate, retail and media. Founded in 1993, the company reported revenues of US$ 7.6 billion for the full year 2005 and US$ 2.0 billion for the first quarter of 2006, and total assets of US$ 13.1 billion as at December 31, 2005 and US$ 14.9 billion as at March 31, 2006. Sistema's shares are listed under the symbol "SSA" on the London Stock Exchange London Stock Exchange London marketplace for securities. It was formed in 1773 by a group of stockbrokers who had been doing business informally in local coffeehouses. , under the symbol "AFKS" on the Russian Trading System Russian Trading System (RTS) An electronic system in Russia, like the Nasdaq system on which the majority of Russian equities trading is conducted. (RTS (Request To Send) An RS-232 signal sent from the transmitting station to the receiving station requesting permission to transmit. Contrast with CTS. 1. (operating system) RTS - run-time system. 2. ), and under the symbol "SIST" on the Moscow Stock Exchange (MSE MSE Mouse (computer) MSE Materials Science & Engineering MSE Mean Squared Error MSE Mean Square Error MSE Master of Science in Engineering MSE Manufacturing Systems Engineering MSE Mechanically Stabilized Earth ). Some of the information in this press release may contain projections or other forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. regarding future events or the future financial performance of Sistema. You can identify forward looking statements by terms such as "expect," "believe," "anticipate," "estimate," "intend," "will," "could," "may" or "might" the negative of such terms or other similar expressions. We wish to caution you that these statements are only predictions and that actual events or results may differ materially. We do not intend to update these statements to reflect events and circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or occurring after the date hereof here·of adv. Of this. hereof Adverb Formal or law of or concerning this Adv. 1. hereof - of or concerning this; "the twigs hereof are physic" or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in our projections or forward-looking statements, including, among others, general economic conditions, our competitive environment, risks associated with operating in Russia, rapid technological and market change in our industries, as well as many other risks specifically related to Sistema and its operations.
JSFC SISTEMA AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 2006 (unaudited) and December 31, 2005
(Amounts in thousands of U.S. dollars, except share amounts)
March 31, December
2006 31, 2005
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 1,101,682 $ 482,647
Short-term investments 704,959 594,196
Loans to customers and banks, net 912,138 568,502
Insurance-related receivables 207,962 149,589
Accounts receivable, net 596,656 442,643
Prepaid expenses, other receivables and other
current assets, net 559,343 578,152
VAT receivables 458,648 495,191
Inventories and spare parts, net 543,596 482,909
Deferred tax assets, current portion 142,085 123,681
-----------------------
Total current assets 5,227,069 3,917,510
-----------------------
Property, plant and equipment, net 6,100,079 5,876,124
Advance payments for non-current assets 281,100 233,761
Investments in affiliated companies 948,235 914,203
Other investments 150,000 150,000
Intangible assets, net 2,017,169 1,832,246
Debt issuance costs, net 76,690 82,662
Deferred tax assets 48,531 33,472
Other non-current assets 45,004 50,872
-----------------------
TOTAL ASSETS 14,893,877 13,090,850
=======================
CURRENT LIABILITIES:
Accounts payable 535,926 594,816
Bank deposits and notes issued 548,228 496,829
Insurance-related liabilities 545,317 412,328
Taxes payable 161,897 125,474
Deferred tax liabilities, current portion 31,172 28,149
Accrued expenses and other current liabilities 1,187,328 993,344
Short-term notes payable 524,515 637,769
Current portion of long-term debt 676,846 520,310
-----------------------
Total current liabilities 4,211,229 3,809,019
-----------------------
LONG-TERM LIABILITIES:
Capital lease obligations 5,178 6,682
Long-term debt 3,399,435 3,202,629
Subscriber prepayments, net of current portion 158,161 163,897
Deferred tax liabilities 235,010 237,916
Postretirement benefits 16,482 16,217
-----------------------
Total long-term liabilities 3,814,266 3,627,341
-----------------------
Deferred revenue 130,219 125,700
-----------------------
TOTAL LIABILITIES 8,155,714 7,562,060
-----------------------
Minority interests in equity of subsidiaries 2,965,503 2,295,147
Commitments and contingencies - -
SHAREHOLDERS' EQUITY:
Share capital (68,325,000 shares authorized,
9,650,000 shares issued, par value 90 RUR) 30,057 30,057
Treasury stock (44,564 shares) (50,892) -
Additional paid-in capital 1,932,019 1,479,743
Retained earnings 1,825,754 1,696,276
Accumulated other comprehensive income 35,722 27,567
-----------------------
TOTAL SHAREHOLDERS' EQUITY 3,772,660 3,233,643
-----------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $14,893,877 $13,090,850
=======================
JSFC SISTEMA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended March 31, 2006 and 2005 (unaudited)
(Amounts in thousands of U.S. dollars)
Three months ended
March 31,
2006 2005
(unaudited) (unaudited)
Sales $ 1,845,084 $ 1,445,447
Revenues from financial services 165,884 105,610
-----------------------
TOTAL REVENUES 2,010,968 1,551,057
-----------------------
Cost of sales exclusive of depreciation and
amortization shown separately below (803,622) (573,158)
Financial services related costs (109,129) (76,160)
-----------------------
TOTAL COST OF SALES (912,751) (649,318)
-----------------------
GROSS PROFIT 1,098,217 901,739
-----------------------
Selling, general and administrative expenses (356,893) (269,013)
Depreciation and amortization (304,805) (217,834)
Other operating expenses, net (40,336) (7,065)
Equity in net income of investees 73,798 15,268
Net gain on disposal of subsidiaries - 454
-----------------------
OPERATING INCOME 469,981 423,549
-----------------------
Interest income 17,902 10,436
Interest expense (74,643) (62,882)
Currency exchange and translation gain/(loss) 23,085 (2,854)
-----------------------
Income before income tax and minority
interests 436,325 368,249
Income tax expense (152,169) (113,546)
Income before minority interests 284,156 254,703
-----------------------
Minority interests (154,678) (144,221)
-----------------------
NET INCOME 129,478 110,482
=======================
JSFC JSFC Joint Stock Financial Corporation JSFC Johnson Space Flight Center JSFC Joint Space Fundamentals Course JSFC Joint Strike Fighter Competition JSFC Java System Foundation Classes JSFC JavaServer Faces Compilation SISTEMA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 2006 and 2005 (unaudited)
(Amounts in thousands of U.S. dollars)
Three months ended
March 31,
2006 2005
(unaudited) (unaudited)
OPERATING ACTIVITIES:
Net income $ 129,478 $ 110,482
Adjustments to reconcile net income to net
cash provided by operations:
Depreciation and amortization 304,805 217,834
Gain on disposal of property, plant and
equipment (600) (1,492)
Minority interests 154,678 144,221
Equity in net income of investees (73,798) (15,268)
Deferred income tax benefit (37,129) (18,980)
Provision for doubtful accounts
receivable 37,610 21,414
Inventory obsolescence charge 4,643 953
Changes in operating assets and liabilities,
net of effects from purchase of businesses:
Trading securities (93,577) (212,675)
Loans to banks (139,775) 114,031
Insurance-related receivables (49,651) (71,325)
Accounts receivable (188,304) (28,184)
VAT receivable 36,543 (7,353)
Prepaid expenses, other receivables and
other current assets 29,062 (43,833)
Inventories and spare parts (57,854) (1,301)
Accounts payable (63,539) 52,483
Insurance-related liabilities 119,643 169,692
Taxes payable 35,122 28,456
Accrued expenses, subscriber prepayments
and other liabilities 108,920 55,444
Postretirement benefit obligation 265 801
----------- -----------
Net cash provided by operations 256,542 515,400
----------- -----------
INVESTING ACTIVITIES:
Purchase of property, plant and equipment (320,034) (379,824)
Purchase of intangible assets (73,812) (75,186)
Purchase of businesses, net of cash acquired (320,698) (12,743)
Purchase of long-term investments - (31,148)
Purchase of short-term investments (124,965) (685,016)
Proceeds from sale of short-term investments 109,705 4,003
Proceeds from sale of property, plant and
equipment 662 1,582
Net increase in loans to customers (135,507) (39,014)
----------- -----------
Net cash used in investing activities (864,649) (1,217,346)
----------- -----------
FINANCING ACTIVITIES:
(Principal payments on)/proceeds from short-
term borrowings, net (113,725) 3,327
Net (decrease)/increase in deposits from
customers (14,427) 32,020
Net increase in bank promissory notes issued 22,732 22,318
Proceeds from capital transactions of
subsidiaries 1,032,917 -
Purchase of treasury stock (50,892) -
Proceeds from long-term borrowings, net of
debt issuance costs 436,613 568,792
Principal payments on long-term borrowings (84,572) (129,000)
Principal payments on capital lease
obligations (1,504) (3,385)
Proceeds from issuance of common stock - 1,284,649
----------- -----------
Net cash provided by financing
activities $ 1,227,142 $ 1,778,721
----------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS $ 619,035 $ 1,076,775
CASH AND CASH EQUIVALENTS, beginning of the
period 482,647 503,747
----------- -----------
CASH AND CASH EQUIVALENTS, end of the period $ 1,101,682 $ 1,580,522
=========== ===========
JSFC SISTEMA AND SUBSIDIARIES - CONSOLIDATED HIGHLIGHTS - BUSINESS
SEGMENTS AND OTHER CONSOLIDATED FINANCIAL INFORMATION
(Amounts in thousands of U.S. dollars)
Three months ended
March 31, 2006 Telecommunications Technology Insurance Banking
------------------- ------------------ ---------- --------- ----------
Net sales to
external customers
(a) 1,531,486 171,015 128,962 36,922
Intersegment sales 2,695 111,383 9,412 7,201
Income/(loss) from
equity affiliates 19,890 7 (45) -
Interest income 11,347 836 - -
Interest expense (48,430) (3,850) - -
Net interest
revenue (b) - - - 9,032
Depreciation and
amortization (293,982) (1,275) (476) (326)
Operating
income/(loss) 398,848 59,360 24,441 8,706
Income tax expense (109,219) (14,191) (7,423) (2,411)
Income/(loss)
before minority
interests 266,849 42,656 12,438 6,295
Investments in
affiliated
companies 222,215 - - 17,749
Segment assets 10,894,817 884,099 724,048 1,552,524
Cash and cash
equivalents 1,024,979 155,804 81,969 107,983
Indebtedness (c) (3,121,238) (240,763) (194) (210,000)
Capital
expenditures 355,031 12,879 1,666 6,000
Three months
ended March 31, Mass Real Corporate
2006 Media Estate Retail and Other Total
----------------- --------- --------- -------- ----------- -----------
Net sales to
external
customers (a) 16,288 13,384 56,003 56,908 2,010,968
Intersegment
sales 3,480 2,365 5 2,615 139,156
Income/(loss)
from equity
affiliates - - - 53,946 73,798
Interest income 67 995 459 6,392 20,096
Interest expense (560) (1,458) (1,422) (22,742) (78,462)
Net interest
revenue (b) - - - - 9,032
Depreciation and
amortization (3,519) (612) (230) (4,385) (304,805)
Operating
income/(loss) 132 (351) (3,100) 55,487 543,523
Income tax
expense (836) (1,554) (339) (16,196) (152,169)
Income/(loss)
before minority
interests (1,765) (6,023) (4,588) 30,583 346,445
Investments in
affiliated
companies 487 960 - 706,824 948,235
Segment assets 257,456 418,063 154,541 2,169,744 17,055,292
Cash and cash
equivalents 4,268 20,088 3,127 131,527 1,529,745
Indebtedness (c) (219,490) (214,857) (73,043) (1,596,912) (5,676,497)
Capital
expenditures 8,356 6,054 127 3,733 393,846
Three months ended
March 31, 2005 Telecommunications Technology Insurance Banking
------------------- ------------------ ---------- --------- ----------
Net sales to
external customers
(a) 1,228,307 137,185 89,160 16,452
Intersegment sales 14,046 57,147 7,276 6,025
Income from equity
affiliates 13,892 - 213 -
Interest income 7,194 151 - -
Interest expense (42,428) (2,446) - -
Net interest
revenue (b) - - - 2,794
Depreciation and
amortization (210,475) (2,852) (336) (248)
Operating
income/(loss) 423,543 14,577 10,270 2,546
Income tax expense (99,130) (2,837) (4,086) (1,242)
Income/(loss)
before minority
interests 290,856 9,447 5,126 2,109
Investments in
affiliated
companies 186,343 - - 16,518
Segment assets 7,884,725 306,910 649,530 1,248,756
Cash and cash
equivalents 755,647 24,894 138,452 487,990
Indebtedness (c) (2,486,215) (107,696) (517) (161,987)
Capital
expenditures 432,237 1,784 3,753 1,600
(a) - Interest income and expenses of the Insurance and Banking
segments are presented as revenues from financial services in the
Group's consolidated financial statements.
(b) - The Banking segment derives a majority of its revenue from
interest. In addition, management primarily relies on net interest
revenue, not the gross revenue and expense amounts, in managing that
segment. Therefore, only the net amount is disclosed.
(c) - Represents the sum of short-term and long-term debt, including
vendor financing, and capital lease obligations.
Three months ended Mass Real Corporate
March 31, 2005 Media Estate Retail and Other Total
------------------- -------- --------- -------- ---------- -----------
Net sales to
external customers
(a) 30,369 5,468 18,207 25,909 1,551,057
Intersegment sales 2,036 - - 1,880 88,410
Income from equity
affiliates 560 - 16 587 15,268
Interest income - 280 2 4,693 12,320
Interest expense (149) (1,234) (254) (22,762) (69,273)
Net interest
revenue (b) - - - - 2,794
Depreciation and
amortization (1,545) (492) (272) (1,614) (217,834)
Operating
income/(loss) (1,383) 1,695 1,537 (9,368) 443,417
Income tax expense (578) (725) (392) (4,556) (113,546)
Income/(loss)
before minority
interests 3,013 467 966 (32,889) 279,095
Investments in
affiliated
companies 1,912 102 519 42,866 248,260
Segment assets 96,493 194,973 53,238 1,860,173 12,294,797
Cash and cash
equivalents 14,449 2,180 720 454,541 1,878,873
Indebtedness (c) (49,844) (176,855) (10,803) (992,267) (3,986,184)
Capital
expenditures 3,159 9,769 159 2,549 455,010
(a) - Interest income and expenses of the Insurance and Banking
segments are presented as revenues from financial services in the
Group's consolidated financial statements.
(b) - The Banking segment derives a majority of its revenue from
interest. In addition, management primarily relies on net interest
revenue, not the gross revenue and expense amounts, in managing that
segment. Therefore, only the net amount is disclosed.
(c) - Represents the sum of short-term and long-term debt, including
vendor financing, and capital lease obligations
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