Table of Contents
Delaware | 4812 | 20-0836269 | ||
(State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification No.) |
8144 Walnut Hill Lane Suite 800 Dallas, Texas 75231-4388 (214) 265-2550 | Roger D. Linquist Chief Executive Officer 8144 Walnut Hill Lane Suite 800 Dallas, Texas 75231-4388 (214) 265-2550 | |
(Address, including zip code, and telephone number, including area code, of agent for service) | (Name, address, including zip code, and telephone number, including area code, of registrant’s principal executive offices) |
Andrew M. Baker, Esq. William D. Howell, Esq. Baker Botts L.L.P. 2001 Ross Avenue Dallas, Texas 75201 (214) 953-6500 | Marc D. Jaffe, Esq. Rachel W. Sheridan, Esq. Latham & Watkins LLP 885 Third Avenue, Suite 1000 New York, New York 10022 (212) 906-1200 |
Proposed Maximum | ||||||
Title of Each Class | Aggregate | Amount of | ||||
of Securities to be Registered | Offering Price(1),(2) | Registration Fee | ||||
Common Stock, par value $0.0001 per share | $1,125,000,000.00 | $120,375.00 | ||||
(1) | Includes shares of common stock subject to an over-allotment option granted to the underwriters, if any. | |
(2) | Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(o) of the Securities Act. |
Table of Contents
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. |
Per Share | Total | |||||||
Public offering price | $ | $ | ||||||
Underwriting discounts | $ | $ | ||||||
Proceeds, before expenses, to us | $ | $ | ||||||
Proceeds to the selling stockholders | $ | $ |
Bear, Stearns & Co. Inc. |
Banc of America Securities LLC |
Merrill Lynch & Co. |
Morgan Stanley |
UBS Investment Bank |
Thomas Weisel Partners LLC |
Wachovia Securities |
Raymond James |
Page | ||||||||
1 | ||||||||
13 | ||||||||
40 | ||||||||
41 | ||||||||
42 | ||||||||
42 | ||||||||
43 | ||||||||
45 | ||||||||
47 | ||||||||
50 | ||||||||
94 | ||||||||
124 | ||||||||
130 | ||||||||
157 | ||||||||
161 | ||||||||
163 | ||||||||
167 | ||||||||
169 | ||||||||
172 | ||||||||
177 | ||||||||
177 | ||||||||
177 | ||||||||
178 | ||||||||
F-1 | ||||||||
Purchase Agreement | ||||||||
Registration Rights Agreement | ||||||||
Indenture | ||||||||
Supplemental Indenture | ||||||||
Subsidiaries of Registrant | ||||||||
Consent of PricewaterhouseCoopers LLP | ||||||||
Consent of Deloitte & Touche LLP |
i
Table of Contents
1
Table of Contents
• | Our fixed price calling plans, which provide unlimited usage within a local calling area with no long-term contracts; |
• | Our focus on densely populated markets, which provides significant operational efficiencies; |
• | Our leadership position as one of the lowest cost providers of wireless telephone services in the United States; |
2
Table of Contents
• | Our spectrum portfolio, which covers 9 of the top 12 and 14 of the top 25 most populous metropolitan areas in the United States; and |
• | Our advanced CDMA network, which is designed to provide the capacity necessary to satisfy the usage requirements of our customers. |
• | Target the underserved customer segments in our markets; |
• | Offer affordable, fixed price unlimited calling plans with no long-term service contract; |
• | Remain one of the lowest cost wireless telephone service providers in the United States; and |
• | Expand into new attractive markets. |
• | Our limited operating history; |
• | Competition from other wireline and wireless providers, many of whom have substantially greater resources than us; |
• | Our significant current debt levels of approximately $2.6 billion as of December 31, 2006, the terms of which may restrict our operational flexibility; |
• | Our need to supplement the proceeds from this offering with significant excess cash flows to meet the requirements for the build-out and launch of our Auction 66 Markets; and |
• | Increased costs which could result from higher customer churn, delays in technological developments or our inability to successfully manage our growth. |
3
Table of Contents
4
Table of Contents
Common stock offered by MetroPCS | shares | |
Common stock offered by the selling stockholders | shares | |
Common stock to be outstanding after this offering | shares | |
Use of proceeds | We estimate that the net proceeds to us from this offering after expenses will be approximately $ million, assuming an initial public offering price of $ per share, the midpoint of the range set forth on the cover page of this prospectus. We intend to use the net proceeds from this offering primarily to build-out our network and launch our services in certain of our recently acquired Auction 66 Markets as well as for general corporate purposes. See “Use of Proceeds.” | |
We will not receive any proceeds from the sale of shares of common stock by the selling stockholders. |
Proposed symbol |
Risk Factors | See “Risk Factors” beginning on page 13 for a discussion of some of the factors you should consider carefully before deciding to invest in our common stock. |
5
Table of Contents
6
Table of Contents
Nine Months Ended | ||||||||||||||||||||||||
Year Ended December 31, | September 30, | |||||||||||||||||||||||
2002 | 2003 | 2004 | 2005 | 2005 | 2006 | |||||||||||||||||||
(In Thousands, Except Per Share Data) | ||||||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||
Service revenues | $ | 102,293 | $ | 369,851 | $ | 616,401 | $ | 872,100 | $ | 631,209 | $ | 916,179 | ||||||||||||
Equipment revenues | 27,048 | 81,258 | 131,849 | 166,328 | 118,990 | 177,592 | ||||||||||||||||||
Total revenues | 129,341 | 451,109 | 748,250 | 1,038,428 | 750,199 | 1,093,771 | ||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Cost of service (excluding depreciation and amortization disclosed separately below) | 63,567 | 122,211 | 200,806 | 283,212 | 201,940 | 313,510 | ||||||||||||||||||
Cost of equipment | 106,508 | 150,832 | 222,766 | 300,871 | 210,529 | 330,898 | ||||||||||||||||||
Selling, general and administrative expenses (excluding depreciation and amortization disclosed separately below) | 55,161 | 94,073 | 131,510 | 162,476 | 116,206 | 171,921 | ||||||||||||||||||
Depreciation and amortization | 21,472 | 42,428 | 62,201 | 87,895 | 61,895 | 96,187 | ||||||||||||||||||
(Gain) loss on disposal of assets | (279,659 | ) | 392 | 3,209 | (218,203 | ) | (218,292 | ) | 10,763 | |||||||||||||||
Total operating expenses | (32,951 | ) | 409,936 | 620,492 | 616,251 | 372,278 | 923,279 | |||||||||||||||||
Income from operations | 162,292 | 41,173 | 127,758 | 422,177 | 377,921 | 170,492 | ||||||||||||||||||
Other expense (income): | ||||||||||||||||||||||||
Interest expense | 6,720 | 11,115 | 19,030 | 58,033 | 40,867 | 67,408 | ||||||||||||||||||
Accretion of put option in majority-owned subsidiary | — | — | 8 | 252 | 187 | 564 | ||||||||||||||||||
Interest and other income | (964 | ) | (996 | ) | (2,472 | ) | (8,658 | ) | (4,876 | ) | (15,106 | ) | ||||||||||||
Loss (gain) on extinguishment of debt | 703 | (603 | ) | (698 | ) | 46,448 | 46,448 | (244 | ) | |||||||||||||||
Total other expense | 6,459 | 9,516 | 15,868 | 96,075 | 82,626 | 52,622 | ||||||||||||||||||
Income before provision for income taxes and cumulative effect of change in accounting principle | 155,833 | 31,657 | 111,890 | 326,102 | 295,295 | 117,870 | ||||||||||||||||||
Provision for income taxes | (25,528 | ) | (16,179 | ) | (47,000 | ) | (127,425 | ) | (115,460 | ) | (47,245 | ) | ||||||||||||
Income before cumulative effect of change in accounting principle | 130,305 | 15,478 | 64,890 | 198,677 | 179,835 | 70,625 | ||||||||||||||||||
Cumulative effect of change in accounting principle, net of tax | — | (120 | ) | — | — | — | — | |||||||||||||||||
Net income | 130,305 | 15,358 | 64,890 | 198,677 | 179,835 | 70,625 | ||||||||||||||||||
Accrued dividends on Series D Preferred Stock | (10,619 | ) | (18,493 | ) | (21,006 | ) | (21,006 | ) | (15,711 | ) | (15,711 | ) | ||||||||||||
Accrued dividends on Series E Preferred Stock | — | — | — | (1,019 | ) | (263 | ) | (2,244 | ) | |||||||||||||||
Accretion on Series D Preferred Stock | (473 | ) | (473 | ) | (473 | ) | (473 | ) | (355 | ) | (355 | ) | ||||||||||||
Accretion on Series E Preferred Stock | — | — | — | (114 | ) | (30 | ) | (254 | ) | |||||||||||||||
Net income (loss) applicable to Common Stock | $ | 119,213 | $ | (3,608 | ) | $ | 43,411 | $ | 176,065 | $ | 163,476 | $ | 52,061 | |||||||||||
Basic net income (loss) per common share(1): | ||||||||||||||||||||||||
Income (loss) before cumulative effect of change in accounting principle | $ | 2.16 | $ | (0.10 | ) | $ | 0.55 | $ | 2.12 | $ | 2.02 | $ | 0.57 | |||||||||||
Cumulative effect of change in accounting principle, net of tax | — | (0.00 | ) | — | — | — | — | |||||||||||||||||
Basic net income (loss) per common share | $ | 2.16 | $ | (0.10 | ) | $ | 0.55 | $ | 2.12 | $ | 2.02 | $ | 0.57 | |||||||||||
Diluted net income (loss) per common share(1): | ||||||||||||||||||||||||
Income (loss) before cumulative effect of change in accounting principle | $ | 1.56 | $ | (0.10 | ) | $ | 0.46 | $ | 1.87 | $ | 1.74 | $ | 0.56 | |||||||||||
Cumulative effect of change in accounting principle, net of tax | — | (0.00 | ) | — | — | — | — | |||||||||||||||||
Diluted net income (loss) per common share | $ | 1.56 | $ | (0.10 | ) | $ | 0.46 | $ | 1.87 | $ | 1.74 | $ | 0.56 | |||||||||||
Weighted average shares(1): | ||||||||||||||||||||||||
Basic | 36,236,434 | 36,443,962 | 42,240,684 | 45,117,465 | 43,517,417 | 51,890,687 | ||||||||||||||||||
Diluted | 50,072,699 | 36,443,962 | 50,211,229 | 51,203,530 | 50,417,637 | 53,158,789 | ||||||||||||||||||
7
Table of Contents
Nine Months Ended | ||||||||||||||||||||||||
Year Ended December 31, | September 30, | |||||||||||||||||||||||
2002 | 2003 | 2004 | 2005 | 2005 | 2006 | |||||||||||||||||||
(Dollars, Customers and POPs in Thousands) | ||||||||||||||||||||||||
Other Financial Data: | ||||||||||||||||||||||||
Net cash (used in) provided by operating activities | $ | (50,672 | ) | $ | 112,605 | $ | 150,379 | $ | 283,216 | $ | 247,015 | $ | 284,688 | |||||||||||
Net cash used in investment activities | (88,311 | ) | (306,868 | ) | (190,881 | ) | (905,228 | ) | (789,109 | ) | (489,255 | ) | ||||||||||||
Net cash provided by (used in) financing activities | 157,039 | 201,951 | (5,433 | ) | 712,244 | 564,777 | 208,123 | |||||||||||||||||
Consolidated Operating Data: | ||||||||||||||||||||||||
Licensed POPs (at period end)(2) | 22,584 | 22,584 | 28,430 | 64,222 | 41,247 | 65,346 | ||||||||||||||||||
Covered POPs (at period end)(2) | 16,964 | 17,662 | 21,083 | 23,908 | 21,168 | 35,980 | ||||||||||||||||||
Customers (at period end) | 513 | 977 | 1,399 | 1,925 | 1,740 | 2,616 | ||||||||||||||||||
Adjusted EBITDA (Deficit)(3) | $ | (94,376 | ) | $ | 89,566 | $ | 203,597 | $ | 294,465 | $ | 224,826 | $ | 285,192 | |||||||||||
Adjusted EBITDA as a percentage of service revenues(4) | NM | 24.2 | % | 33.0 | % | 33.8 | % | 35.6 | % | 31.1 | % | |||||||||||||
Capital Expenditures | $ | 227,350 | $ | 117,731 | $ | 250,830 | $ | 266,499 | $ | 204,450 | $ | 453,864 | ||||||||||||
Core Markets Operating Data(5): | ||||||||||||||||||||||||
Licensed POPs (at period end)(2) | 22,584 | 22,584 | 24,686 | 25,433 | 25,320 | 25,769 | ||||||||||||||||||
Covered POPs (at period end)(2) | 16,964 | 17,662 | 21,083 | 21,263 | 21,168 | 22,194 | ||||||||||||||||||
Customers (at period end) | 513 | 977 | 1,399 | 1,872 | 1,740 | 2,174 | ||||||||||||||||||
Adjusted EBITDA (Deficit)(6) | $ | (94,376 | ) | $ | 89,566 | $ | 203,597 | $ | 316,555 | $ | 233,491 | $ | 364,585 | |||||||||||
Adjusted EBITDA as a percentage of service revenues(4) | NM | 24.2 | % | 33.0 | % | 36.4 | % | 37.0 | % | 43.9 | % | |||||||||||||
Capital Expenditures | $ | 227,350 | $ | 117,731 | $ | 250,830 | $ | 171,783 | $ | 157,153 | $ | 187,922 | ||||||||||||
Expansion Markets Operating Data(5): | ||||||||||||||||||||||||
Licensed POPs (at period end)(2) | — | — | 3,744 | 38,789 | 15,927 | 39,577 | ||||||||||||||||||
Covered POPs (at period end)(2) | — | — | — | 2,645 | — | 13,786 | ||||||||||||||||||
Customers (at period end) | — | — | — | 53 | — | 442 | ||||||||||||||||||
Adjusted EBITDA (Deficit)(6) | — | — | — | $ | (22,090 | ) | $ | (8,665 | ) | $ | (79,393 | ) | ||||||||||||
Capital Expenditures | — | — | — | $ | 90,871 | $ | 44,893 | $ | 256,531 |
Nine Months Ended | ||||||||||||||||||||||||
Year Ended December 31, | September 30, | |||||||||||||||||||||||
2002 | 2003 | 2004 | 2005 | 2005 | 2006 | |||||||||||||||||||
Average monthly churn(7)(8) | 4.4 | % | 4.6 | % | 4.9 | % | 5.1 | % | 5.0 | % | 4.7 | % | ||||||||||||
Average revenue per user (ARPU)(9)(10) | $ | 39.23 | $ | 37.49 | $ | 41.13 | $ | 42.40 | $ | 42.34 | $ | 42.91 | ||||||||||||
Cost per gross addition (CPGA)(8)(9)(11) | $ | 157.02 | $ | 100.46 | $ | 103.78 | $ | 102.70 | $ | 101.46 | $ | 116.56 | ||||||||||||
Cost per user (CPU)(9)(12) | $ | 37.68 | $ | 18.21 | $ | 18.95 | $ | 19.57 | $ | 19.15 | $ | 19.65 |
As of September 30, 2006 | ||||||||
Actual | As Adjusted(13) | |||||||
(In Thousands) | ||||||||
Balance Sheet Data: | ||||||||
Cash, cash equivalents & short-term investments | $ | 345,811 | ||||||
Property and equipment, net | 1,207,982 | |||||||
Total assets | 2,626,174 | |||||||
Long-term debt (including current maturities) | 1,102,594 | |||||||
Series D Cumulative Convertible Redeemable Participating Preferred Stock | 437,955 | |||||||
Series E Cumulative Convertible Redeemable Participating Preferred Stock | 50,294 | |||||||
Stockholders’ equity | 427,689 |
8
Table of Contents
(1) | See Notes 17 and 10 to the annual and interim consolidated financial statements, respectively, included elsewhere in this prospectus for an explanation of the calculation of basic and diluted net income (loss) per common share. The calculation of basic and diluted net income per common share for the year ended December 31, 2002 is not included in Note 17 to the annual consolidated financial statements. | |
(2) | Licensed POPs represent the aggregate number of persons that reside within the areas covered by our or Royal Street’s licenses. Covered POPs represent the estimated number of POPs in our markets that reside within the areas covered by our network. | |
(3) | Our senior secured credit facility calculates consolidated Adjusted EBITDA as: consolidated net incomeplus depreciation and amortization; gain (loss) on disposal of assets; non-cash expenses; gain (loss) on extinguishment of debt; provision for income taxes; interest expense; and certain expenses of MetroPCS Communications, Inc.minusinterest and other income and non-cash items increasing consolidated net income. |
We consider Adjusted EBITDA, as defined above, to be an important indicator to investors because it provides information related to our ability to provide cash flows to meet future debt service, capital expenditures and working capital requirements and fund future growth. We present this discussion of Adjusted EBITDA because covenants in our senior secured credit facility contain ratios based on this measure. If our Adjusted EBITDA were to decline below certain levels, covenants in our senior secured credit facility that are based on Adjusted EBITDA, including our maximum senior secured leverage ratio covenant, may be violated and could cause, among other things, an inability to incur further indebtedness and in certain circumstances a default or mandatory prepayment under our senior secured credit facility. Our maximum senior secured leverage ratio is required to be less than 4.5 to 1.0 based on Adjusted EBITDA plus the impact of certain new markets. In addition, consolidated Adjusted EBITDA is also utilized, among other measures, to determine management’s compensation levels. See “Executive Compensation.” Adjusted EBITDA is not a measure calculated in accordance with GAAP and should not be considered a substitute for operating income (loss), net income (loss), or any other measure of financial performance reported in accordance with GAAP. In addition, Adjusted EBITDA should not be construed as an alternative to, or more meaningful, than cash flows from operating activities, as determined in accordance with GAAP. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.” |
The following table shows the calculation of consolidated Adjusted EBITDA, as defined in our senior secured credit facility, for the years ended December 31, 2002, 2003, 2004 and 2005 and for the nine months ended September 30, 2005 and 2006. |
Year Ended December 31, | Nine Months Ended September 30, | |||||||||||||||||||||||
2002 | 2003 | 2004 | 2005 | 2005 | 2006 | |||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||
Calculation of Consolidated Adjusted EBITDA (Deficit): | ||||||||||||||||||||||||
Net income | $ | 130,305 | $ | 15,358 | $ | 64,890 | $ | 198,677 | $ | 179,835 | $ | 70,625 | ||||||||||||
Adjustments: | ||||||||||||||||||||||||
Depreciation and amortization | 21,472 | 42,428 | 62,201 | 87,895 | 61,895 | 96,187 | ||||||||||||||||||
(Gain) loss on disposal of assets | (279,659 | ) | 392 | 3,209 | (218,203 | ) | (218,292 | ) | 10,763 | |||||||||||||||
Non-cash compensation expense(a) | 1,519 | 5,573 | 10,429 | 2,596 | 3,302 | 7,750 | ||||||||||||||||||
Interest expense | 6,720 | 11,115 | 19,030 | 58,033 | 40,867 | 67,408 | ||||||||||||||||||
Accretion of put option in majority-owned subsidiary(a) | — | — | 8 | 252 | 187 | 564 | ||||||||||||||||||
Interest and other income | (964 | ) | (996 | ) | (2,472 | ) | (8,658 | ) | (4,876 | ) | (15,106 | ) | ||||||||||||
Loss (gain) on extinguishment of debt | 703 | (603 | ) | (698 | ) | 46,448 | 46,448 | (244 | ) | |||||||||||||||
Provision for income taxes | 25,528 | 16,179 | 47,000 | 127,425 | 115,460 | 47,245 | ||||||||||||||||||
Cumulative effect of change in accounting principle, net of tax(a) | — | 120 | — | — | — | — | ||||||||||||||||||
Consolidated Adjusted EBITDA (Deficit) | $ | (94,376 | ) | $ | 89,566 | $ | 203,597 | $ | 294,465 | $ | 224,826 | $ | 285,192 | |||||||||||
(a) | Represents a non-cash expense, as defined by our senior secured credit facility. |
9
Table of Contents
Nine Months Ended | ||||||||||||||||||||||||
Year Ended December 31, | September 30, | |||||||||||||||||||||||
2002 | 2003 | 2004 | 2005 | 2005 | 2006 | |||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||
Reconciliation of Net Cash (Used In) Provided By Operating Activities to Consolidated Adjusted EBITDA (Deficit): | ||||||||||||||||||||||||
Net cash (used in) provided by operating activities | $ | (50,672 | ) | $ | 112,605 | $ | 150,379 | $ | 283,216 | $ | 247,015 | $ | 302,638 | |||||||||||
Adjustments: | ||||||||||||||||||||||||
Interest expense | 6,720 | 11,115 | 19,030 | 58,033 | 40,867 | 67,408 | ||||||||||||||||||
Non-cash interest expense | (2,833 | ) | (3,073 | ) | (2,889 | ) | (4,285 | ) | (3,766 | ) | (3,702 | ) | ||||||||||||
Interest and other income | (964 | ) | (996 | ) | (2,472 | ) | (8,658 | ) | (4,876 | ) | (15,106 | ) | ||||||||||||
Provision for uncollectible accounts receivable | (359 | ) | (110 | ) | (125 | ) | (129 | ) | 38 | (64 | ) | |||||||||||||
Deferred rent expense | (2,886 | ) | (2,803 | ) | (3,466 | ) | (4,407 | ) | (3,091 | ) | (5,365 | ) | ||||||||||||
Cost of abandoned cell sites | (1,449 | ) | (824 | ) | (1,021 | ) | (725 | ) | (251 | ) | (2,069 | ) | ||||||||||||
Accretion of asset retirement obligation | — | (127 | ) | (253 | ) | (423 | ) | (103 | ) | (469 | ) | |||||||||||||
Loss (gain) on sale of investments | — | — | (576 | ) | 190 | (49 | ) | 1,875 | ||||||||||||||||
Provision for income taxes | 25,528 | 16,179 | 47,000 | 127,425 | 115,460 | 47,245 | ||||||||||||||||||
Deferred income taxes | (6,616 | ) | (18,716 | ) | (44,441 | ) | (125,055 | ) | (113,580 | ) | (41,792 | ) | ||||||||||||
Changes in working capital | (60,845 | ) | (23,684 | ) | 42,431 | (30,717 | ) | (52,838 | ) | (65,407 | ) | |||||||||||||
Consolidated Adjusted EBITDA (Deficit) | $ | (94,376 | ) | $ | 89,566 | $ | 203,597 | $ | 294,465 | $ | 224,826 | $ | 285,192 | |||||||||||
(4) | Adjusted EBITDA as a percentage of service revenues is calculated by dividing Adjusted EBITDA by total service revenues. | |
(5) | Core Markets include Atlanta, Miami, Sacramento and San Francisco. Expansion Markets include Dallas/Ft. Worth, Detroit, Tampa/Sarasota/Orlando and Los Angeles. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” |
(6) | Core and Expansion Markets Adjusted EBITDA is presented in accordance with SFAS No. 131 as it is the primary financial measure utilized by management to facilitate evaluation of our ability to meet future debt service, capital expenditures and working capital requirements and to fund future growth. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Operating Segments.” |
(7) | Average monthly churn represents (a) the number of customers who have been disconnected from our system during the measurement period less the number of customers who have reactivated service, divided by (b) the sum of the average monthly number of customers during such period. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Performance Measures.” A customer’s handset is disabled if the customer has failed to make payment by the due date and is disconnected from our system if the customer fails to make payment within 30 days thereafter. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Customer Recognition and Disconnect Policies.” | |
(8) | In the first quarter of 2006, based upon a change in the allowable return period from 7 days to 30 days, we revised our definition of gross additions to exclude customers that discontinue service in the first 30 days of service as churn. This revision has the effect of reducing deactivations and gross additions, commencing March 23, 2006, and reduces churn and increases CPGA. Churn computed under the original 7 day allowable return period would have been 5.2% for the nine months ended September 30, 2006. | |
(9) | Average revenue per user, or ARPU, cost per gross addition, or CPGA, and cost per user, or CPU, are non-GAAP financial measures utilized by our management to evaluate our operating performance. We believe these measures are important in understanding the performance of our operations from period to period, and although every company in the wireless industry does not define each of these measures in precisely the same way, we believe that these measures (which are common in the wireless industry) facilitate operating performance comparisons with other companies in the wireless industry. | |
(10) | ARPU — Average revenue per user, or ARPU, represents (a) service revenues less activation revenues,E-911, Federal Universal Service Fund, or FUSF, and vendor’s compensation charges for the measurement period, divided by (b) the sum of the average monthly number of customers during such period. We utilize ARPU to evaluate our per-customer service revenue realization and to assist in forecasting our future service revenues. ARPU is calculated exclusive of activation revenues, as these amounts are a component of our costs of acquiring new customers and are included in our calculation of CPGA. ARPU is also calculated exclusive of |
10
Table of Contents
E-911, FUSF and vendor’s compensation charges, as these are generally pass through charges that we collect from our customers and remit to the appropriate government agencies. |
Nine Months Ended | ||||||||||||||||||||||||
Year Ended December 31, | September 30, | |||||||||||||||||||||||
2002 | 2003 | 2004 | 2005 | 2005 | 2006 | |||||||||||||||||||
(In Thousands, Except Average Number of Customers and ARPU) | ||||||||||||||||||||||||
Calculation of ARPU: | ||||||||||||||||||||||||
Service revenues | $ | 102,293 | $ | 369,851 | $ | 616,401 | $ | 872,100 | $ | 631,209 | $ | 916,179 | ||||||||||||
Less: | ||||||||||||||||||||||||
Activation revenues | (3,018 | ) | (14,410 | ) | (7,874 | ) | (6,808 | ) | (4,988 | ) | (6,026 | ) | ||||||||||||
E-911, FUSF and vendor’s compensation charges | — | (6,527 | ) | (12,522 | ) | (26,221 | ) | (18,875 | ) | (29,222 | ) | |||||||||||||
Net service revenues | $ | 99,275 | $ | 348,914 | $ | 596,005 | $ | 839,071 | $ | 607,346 | $ | 880,931 | ||||||||||||
Divided by: | ||||||||||||||||||||||||
Average number of customers | 210,881 | 775,605 | 1,207,521 | 1,649,208 | 1,593,848 | 2,281,261 | ||||||||||||||||||
ARPU | $ | 39.23 | $ | 37.49 | $ | 41.13 | $ | 42.40 | $ | 42.34 | $ | 42.91 | ||||||||||||
(11) | CPGA — Cost per gross addition, or CPGA, is determined by dividing (a) selling expenses plus the total cost of equipment associated with transactions with new customers less activation revenues and equipment revenues associated with transactions with new customers during the measurement period by (b) gross customer additions during such period. We utilize CPGA to assess the efficiency of our distribution strategy, validate the initial capital invested in our customers and determine the number of months to recover our customer acquisition costs. This measure also allows us to compare our average acquisition costs per new customer to those of other wireless broadband PCS providers. Activation revenues and equipment revenues related to new customers are deducted from selling expenses in this calculation as they represent amounts paid by customers at the time their service is activated that reduce our acquisition cost of those customers. Additionally, equipment costs associated with existing customers, net of related revenues, are excluded as this measure is intended to reflect only the acquisition costs related to new customers. The following table reconciles total costs used in the calculation of CPGA to selling expenses, which we consider to be the most directly comparable GAAP financial measure to CPGA: |
Nine Months Ended | ||||||||||||||||||||||||
Year Ended December 31, | September 30, | |||||||||||||||||||||||
2002 | 2003 | 2004 | 2005 | 2005 | 2006 | |||||||||||||||||||
(In Thousands, Except Gross Customer Additions and CPGA) | ||||||||||||||||||||||||
Calculation of CPGA: | ||||||||||||||||||||||||
Selling expenses | $ | 26,228 | $ | 44,006 | $ | 52,605 | $ | 62,396 | $ | 43,863 | $ | 72,796 | ||||||||||||
Less: | ||||||||||||||||||||||||
Activation revenues | (3,018 | ) | (14,410 | ) | (7,874 | ) | (6,809 | ) | (4,988 | ) | (6,026 | ) | ||||||||||||
Less: | ||||||||||||||||||||||||
Equipment revenues | (27,048 | ) | (81,258 | ) | (131,849 | ) | (166,328 | ) | (118,990 | ) | (177,592 | ) | ||||||||||||
Add: | ||||||||||||||||||||||||
Equipment revenue not associated with new customers | 482 | 13,228 | 54,323 | 77,011 | 55,324 | 80,571 | ||||||||||||||||||
Add: | ||||||||||||||||||||||||
Cost of equipment | 106,508 | 150,832 | 222,766 | 300,871 | 210,529 | 330,898 | ||||||||||||||||||
Less: | ||||||||||||||||||||||||
Equipment costs not associated with new customers | (4,850 | ) | (22,549 | ) | (72,200 | ) | (109,803 | ) | (77,910 | ) | (108,292 | ) | ||||||||||||
Gross addition expenses | $ | 98,302 | $ | 89,849 | $ | 117,771 | $ | 157,338 | $ | 107,828 | $ | 192,355 | ||||||||||||
Divided by: | ||||||||||||||||||||||||
Gross customer additions | 626,050 | 894,348 | 1,134,762 | 1,532,071 | 1,062,772 | 1,650,282 | ||||||||||||||||||
CPGA | $ | 157.02 | $ | 100.46 | $ | 103.78 | $ | 102.70 | $ | 101.46 | $ | 116.56 | ||||||||||||
11
Table of Contents
(12) | CPU — Cost per user, or CPU, is cost of service and general and administrative costs (excluding applicable non-cash compensation expense included in cost of service and general and administrative expense) plus net loss on equipment transactions unrelated to initial customer acquisition (which includes the gain or loss on sale of handsets to existing customers and costs associated with handset replacements and repairs (other than warranty costs which are the responsibility of the handset manufacturers)), divided by the sum of the average monthly number of customers during such period. CPU does not include any depreciation and amortization expense. Management uses CPU as a tool to evaluate the non-selling cash expenses associated with ongoing business operations on a per customer basis, to track changes in these non-selling cash costs over time, and to help evaluate how changes in our business operations affect non-selling cash costs per customer. In addition, CPU provides management with a useful measure to compare our non-selling cash costs per customer with those of other wireless providers. We believe investors use CPU primarily as a tool to track changes in our non-selling cash costs over time and to compare our non-selling cash costs to those of other wireless providers. Other wireless carriers may calculate this measure differently. The following table reconciles total costs used in the calculation of CPU to cost of service, which we consider to be the most directly comparable GAAP financial measure to CPU: |
Nine Months Ended | ||||||||||||||||||||||||
Year Ended December 31, | September 30, | |||||||||||||||||||||||
2002 | 2003 | 2004 | 2005 | 2005 | 2006 | |||||||||||||||||||
(In Thousands, Except Average Number of Customers and CPU) | ||||||||||||||||||||||||
Calculation of CPU: | ||||||||||||||||||||||||
Cost of service | $ | 63,567 | $ | 122,211 | $ | 200,806 | $ | 283,212 | $ | 201,940 | $ | 313,510 | ||||||||||||
Add: | ||||||||||||||||||||||||
General and administrative expense | 28,933 | 50,067 | 78,905 | 100,080 | 72,343 | 99,125 | ||||||||||||||||||
Add: | ||||||||||||||||||||||||
Net loss on equipment transactions unrelated to initial customer acquisition | 4,368 | 9,320 | 17,877 | 32,791 | 22,586 | 27,721 | ||||||||||||||||||
Less: | ||||||||||||||||||||||||
Non-cash compensation expense included in cost of service and general and administrative expense | (1,519 | ) | (5,573 | ) | (10,429 | ) | (2,596 | ) | (3,302 | ) | (7,750 | ) | ||||||||||||
Less: | ||||||||||||||||||||||||
E-911, FUSF and vendor’s compensation revenues | — | (6,527 | ) | (12,522 | ) | (26,221 | ) | (18,875 | ) | (29,222 | ) | |||||||||||||
Total costs used in the calculation of CPU | $ | 95,349 | $ | 169,498 | $ | 274,637 | $ | 387,266 | $ | 274,692 | $ | 403,384 | ||||||||||||
Divided by: | ||||||||||||||||||||||||
Average number of customers | 210,881 | 775,605 | 1,207,521 | 1,649,208 | 1,593,848 | 2,281,261 | ||||||||||||||||||
CPU | $ | 37.68 | $ | 18.21 | $ | 18.95 | $ | 19.57 | $ | 19.15 | $ | 19.65 | ||||||||||||
(13) | As adjusted to give effect to the following, as if they had occurred on September 30, 2006: (a) the completion of the senior notes offering and receipt of the net proceeds from the sale of the senior notes; (b) the entry into our senior secured credit facility and the borrowing of $1.6 billion thereunder; (c) the purchase of the Auction 66 licenses; (d) the application of the net proceeds from the sale of the senior notes and our net borrowings under the senior secured credit facility to repay all amounts owed under our existing first and second lien credit agreements and bridge credit facilities; and (e) the consummation of this offering at a price equal to the mid-point of the range. |
12
Table of Contents
13
Table of Contents
14
Table of Contents
15
Table of Contents
• | network coverage; | |
• | reliability issues, such as dropped and blocked calls and network availability; | |
• | handset problems; | |
• | lack of competitive regional and nationwide roaming and the inability of our customers to cost-effectively roam onto other wireless networks; | |
• | affordability; | |
• | supplier or vendor failures; |
16
Table of Contents
• | customer care concerns; | |
• | lack of early access to the newest handsets; | |
• | wireless number portability requirements that allow customers to keep their wireless phone number when switching between service providers; | |
• | our inability to offer bundled services or new services offered by our competitors; and | |
• | competitive offers by third parties. |
• | increased competition from existing competitors or new competitors; | |
• | higher than anticipated churn in our Core and Expansion Markets; | |
• | our inability to increase our network capacity in areas we currently cover and plan to cover in the Core and Expansion Markets to meet growing customer demand; | |
• | our inability to continue to offer products or services which prospective customers want; | |
• | our inability to increase the relevant coverage areas in our Core and Expansion Markets in areas that are important to our current and prospective customers; | |
• | changes in the demographics of our Core and Expansion Markets; and |
17
Table of Contents
• | adverse changes in the regulatory environment that may limit our ability to grow our customer base. |
• | rapid development and introduction of new technologies, products, and services, such as VoIP,push-to-talk services, orpush-to-talk, location based services, such as global positioning satellite, or |
18
Table of Contents
GPS, mapping technology and high speed data services, including streaming video, mobile gaming, video conferencing and other applications; |
• | substantial regulatory change due to the continuing implementation of the Telecommunications Act of 1996, which amended the Communications Act, and included changes designed to stimulate competition for both local and long distance telecommunications services and continued allocation of spectrum for, and relaxation of existing rules to allow existing licensees to offer, wireless services competitive with our services; | |
• | increased competition within established metropolitan areas from current and new entrants that may provide competing or alternative services; | |
• | an increase in mergers and strategic alliances that allow one telecommunications provider greater access to capital or resources or to offer increased services, access to wider geographic territory, or attractive bundles of services; and | |
• | the blurring of traditional dividing lines between, and the bundling of, different services, such as local telephone, long distance, wireless, video, data and Internet services. For example, several carriers appear to be positioning themselves to offer a “quadruple play” of services which includes telephone service, Internet access, video service and wireless service. |
19
Table of Contents
20
Table of Contents
21
Table of Contents
22
Table of Contents
23
Table of Contents
24
Table of Contents
• | increase our vulnerability to general adverse economic and industry conditions; |
• | require us to dedicate a substantial portion of our cash flow from operations to make interest and principal payments on our debt, limiting the availability of our cash flow to fund future capital expenditures for existing or new markets, working capital and other general corporate requirements; |
• | limit our flexibility in planning for, or reacting to, changes in our business and the telecommunications industry; | |
• | limit our ability to purchase additional spectrum, develop new metropolitan areas in the future or fund growth in our metropolitan areas; | |
• | place us at a competitive disadvantage compared with competitors that have less debt; and | |
• | limit our ability to borrow additional funds, even when necessary to maintain adequate liquidity. |
25
Table of Contents
• | incurring additional debt by MetroPCS Wireless and some of our other subsidiaries; | |
• | paying dividends, redeeming capital stock or making other restricted payments or investments; |
• | paying interest on any additional indebtedness incurred; |
• | selling or buying assets, properties or licenses; | |
• | developing assets, properties or licenses which we have or in the future may procure; | |
• | creating liens on assets; | |
• | participating in future FCC auctions of spectrum; | |
• | merging, consolidating or disposing of assets; | |
• | entering into transactions with affiliates; and | |
• | permitting subsidiaries (which does not include Royal Street and its subsidiaries) to pay dividends or make other payments. |
26
Table of Contents
27
Table of Contents
28
Table of Contents
29
Table of Contents
• | physical damage to outside plant facilities; | |
• | power surges or outages; | |
• | equipment failure; | |
• | vendor or supplier failures or delays; | |
• | software defects; | |
• | human error; | |
• | disruptions beyond our control, including disruptions caused by terrorist activities, theft, or natural disasters; and | |
• | failures in operational support systems. |
30
Table of Contents
31
Table of Contents
32
Table of Contents
33
Table of Contents
34
Table of Contents
35
Table of Contents
• | actual or anticipated fluctuations in our or our competitors operating results; | |
• | changes in or our failure to meet securities analysts’ expectations; | |
• | announcements of technological innovations; | |
• | entry of new competitors into our markets; | |
• | introduction of new products and services by us or our competitors; | |
• | significant developments with respect to intellectual property rights; | |
• | additions or departures of key personnel; | |
• | conditions and trends in the communications and high technology markets; | |
• | volatility in stock market prices and volumes, which is particularly common among securities of telecommunications companies; | |
• | general stock market conditions; | |
• | the general state of the U.S. and world economies; | |
• | the announcement, commencement, bidding and closing of auctions for new spectrum; and | |
• | actions occurring in and the outcome of litigation between Leap and us. |
36
Table of Contents
37
Table of Contents
• | authorize the issuance of preferred stock that can be created and issued by the board of directors without prior stockholder approval to increase the number of outstanding shares and deter or prevent a takeover attempt; | |
• | prohibit stockholder action by written consent, requiring all stockholder actions to be taken at a meeting of our stockholders; |
• | require shareholder meetings to only be called by the President or at the written request of a majority of the directors then in office and not the shareholders; |
• | prohibit cumulative voting in the election of directors, which would otherwise allow less than a majority of stockholders to elect director candidates; | |
• | provide that our board of directors is divided into three classes, each serving three-year terms; and | |
• | establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings. |
38
Table of Contents
39
Table of Contents
• | the highly competitive nature of our industry; | |
• | the rapid technological changes in our industry; | |
• | our ability to maintain adequate customer care and manage our churn rate; | |
• | our ability to sustain the growth rates we have experienced to date; | |
• | our ability to access the funds necessary to build and operate our Auction 66 Markets; | |
• | the costs associated with being a public company and our ability to comply with the internal control and reporting obligations of public companies; | |
• | our ability to manage our rapid growth, train additional personnel and improve our controls and procedures; | |
• | our ability to secure the necessary spectrum and network infrastructure equipment; | |
• | our ability to clear the Auction 66 Market spectrum of incumbent licensees; | |
• | our ability to adequately enforce or protect our intellectual property rights; | |
• | governmental regulation of our services and the costs of compliance and our failure to comply with such regulations; | |
• | our capital structure, including our indebtedness amounts; | |
• | changes in consumer preferences or demand for our products; | |
• | our inability to attract and retain key members of management; and | |
• | other factors described in this prospectus under “Risk Factors.” |
40
Table of Contents
41
Table of Contents
• | any applicable contractual restrictions limiting our ability to pay dividends; | |
• | our earnings and cash flows; | |
• | our capital requirements; | |
• | our financial condition; and | |
• | other factors our board of directors deems relevant. |
42
Table of Contents
• | the conversion of our outstanding shares of Series D and Series E preferred stock, including accrued but unpaid dividends as of September 30, 2006; | |
• | the entry into our senior secured credit facility, and the borrowing of $1.6 billion thereunder; | |
• | the consummation of the sale of our senior notes; | |
• | the repayment of all amounts owed under our first and second lien credit agreements and bridge credit facilities; and | |
• | the consummation of this offering at a price equal to the mid-point of the range and use of the net proceeds therefrom as set forth under “Use of Proceeds.” |
As of September 30, 2006 | ||||||||
Actual | As Adjusted | |||||||
(In Thousands) | ||||||||
Cash, cash equivalents and short-term investments | $ | 345,811 | ||||||
Long-Term Debt: | ||||||||
Senior secured first lien term loan | $ | 550,000 | — | |||||
Senior secured second lien term loan | 350,000 | — | ||||||
Bridge credit agreement | 200,000 | — | ||||||
Senior secured credit facility | — | 1,600,000 | ||||||
Senior notes | — | 1,000,000 | ||||||
Other | 2,594 | — | ||||||
Total Long-Term Debt | $ | 1,102,594 | $ | 2,600,000 | ||||
Series D Preferred Stock(1) | $ | 437,955 | $ | — | ||||
Series E Preferred Stock(2) | $ | 50,294 | $ | — | ||||
Stockholders’ Equity: | ||||||||
Preferred stock(3) | $ | — | $ | — | ||||
Common stock(4) | 5 | |||||||
Additional paid-in capital | 157,712 | |||||||
Retained earnings | 268,762 | |||||||
Accumulated other comprehensive income | 1,210 | 1,210 | ||||||
Total Stockholders’ Equity | $ | 427,689 | ||||||
Total Capitalization | $ | 2,018,532 | ||||||
(1) | Par value $0.0001 per share, 4,000,000 shares designated and 3,500,993 shares issued and outstanding, actual; no shares designated, issued or outstanding, pro forma as adjusted. |
43
Table of Contents
(2) | Par value $0.0001 per share, 500,000 shares designated and 500,000 shares issued and outstanding, actual; no shares designated, issued or outstanding, pro forma as adjusted. |
(3) | Par value $0.0001 per share, 25,000,000 shares authorized, 4,000,000 of which have been designated as Series D Preferred Stock and 500,000 of which have been designated as Series E Preferred Stock, no shares of preferred stock other than Series D&E Preferred Stock issued and outstanding, actual; 100,000,000 shares authorized but no shares issued or outstanding, pro forma as adjusted. |
(4) | Par value $0.0001 per share, 300,000,000 shares authorized and 52,071,221 shares issued and outstanding, actual; 1,000,000,000 shares authorized and issued and outstanding, pro forma as adjusted. The number of shares of common stock outstanding after this offer excludes: shares of our common stock issuable upon exercise of options outstanding as of , at a weighted average exercise price of per share, of which options to purchase shares were exercisable as of that date; shares of our common stock available for future grant under our equity compensation plans as of . |
44
Table of Contents
Assumed initial public offering price per share | $ | |||||||
Net tangible book value per share as of | $ | |||||||
Pro forma net tangible book value per share as of | ||||||||
Increase in net tangible book value per share attributable to new investors purchasing shares in this offering | ||||||||
Pro forma as adjusted net tangible book value per share after this offering | ||||||||
Dilution of pro forma net tangible book value per share to new investors | $ | |||||||
45
Table of Contents
Average | ||||||||||||||||||||
Shares Purchased | Total Consideration | Price | ||||||||||||||||||
Number | % | Amount | % | Per Share | ||||||||||||||||
Existing stockholders | % | % | $ | |||||||||||||||||
New investors | $ | |||||||||||||||||||
Total | 100.0 | % | 100.0 | % | ||||||||||||||||
• | the pro forma as adjusted percentage of shares of our common stock held by existing stockholders will decrease to approximately % of the total number of pro forma as adjusted shares of our common stock outstanding after this offering; and | |
• | the pro forma as adjusted number of shares of our common stock held by new public investors will increase to , or approximately % of the total pro forma as adjusted number of shares of our common stock outstanding after this offering. |
• | shares of our common stock issuable upon exercise of options outstanding as of , at a weighted average exercise price of per share, of which options to purchase shares were exercisable as of that date; and | |
• | shares of our common stock available for future grant under our equity compensation plans as of that date. |
46
Table of Contents
Nine Months | ||||||||||||||||||||||||||||
Year Ended December 31, | Ended September 30, | |||||||||||||||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | 2005 | 2006 | ||||||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||
Service revenues | $ | — | $ | 102,293 | $ | 369,851 | $ | 616,401 | $ | 872,100 | $ | 631,209 | $ | 916,179 | ||||||||||||||
Equipment revenues | — | 27,048 | 81,258 | 131,849 | 166,328 | 118,990 | 177,592 | |||||||||||||||||||||
Total revenues | — | 129,341 | 451,109 | 748,250 | 1,038,428 | 750,199 | 1,093,771 | |||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||
Cost of service (excluding depreciation and amortization disclosed separately below) | — | 63,567 | 122,211 | 200,806 | 283,212 | 201,940 | 313,510 | |||||||||||||||||||||
Cost of equipment | — | 106,508 | 150,832 | 222,766 | 300,871 | 210,529 | 330,898 | |||||||||||||||||||||
Selling, general and administrative expenses (excluding depreciation and amortization disclosed separately below) | 28,451 | 55,161 | 94,073 | 131,510 | 162,476 | 116,206 | 171,921 | |||||||||||||||||||||
Depreciation and amortization | 208 | 21,472 | 42,428 | 62,201 | 87,895 | 61,895 | 96,187 | |||||||||||||||||||||
(Gain) loss on disposal of assets | — | (279,659 | ) | 392 | 3,209 | (218,203 | ) | (218,292 | ) | 10,763 | ||||||||||||||||||
Total operating expenses | 28,659 | (32,951 | ) | 409,936 | 620,492 | 616,251 | 372,278 | 923,279 | ||||||||||||||||||||
�� | ||||||||||||||||||||||||||||
Income (loss) from operations | (28,659 | ) | 162,292 | 41,173 | 127,758 | 422,177 | 377,921 | 170,492 | ||||||||||||||||||||
Other expense (income): | ||||||||||||||||||||||||||||
Interest expense | 10,491 | 6,720 | 11,115 | 19,030 | 58,033 | 40,867 | 67,408 | |||||||||||||||||||||
Accretion of put option in majority-owned subsidiary | — | — | — | 8 | 252 | 187 | 564 | |||||||||||||||||||||
Interest and other income | (2,046 | ) | (964 | ) | (996 | ) | (2,472 | ) | (8,658 | ) | (4,876 | ) | (15,106 | ) | ||||||||||||||
Loss (gain) on extinguishment of debt | 7,109 | 703 | (603 | ) | (698 | ) | 46,448 | 46,448 | (244 | ) | ||||||||||||||||||
Total other expense | 15,554 | 6,459 | 9,516 | 15,868 | 96,075 | 82,626 | 52,622 | |||||||||||||||||||||
Income (loss) before provision for income taxes and cumulative effect of change in accounting principle | (44,213 | ) | 155,833 | 31,657 | 111,890 | 326,102 | 295,295 | 117,870 | ||||||||||||||||||||
Provision for income taxes | — | (25,528 | ) | (16,179 | ) | (47,000 | ) | (127,425 | ) | (115,460 | ) | (47,245 | ) | |||||||||||||||
Income (loss) before cumulative effect of change in accounting principle | (44,213 | ) | 130,305 | 15,478 | 64,890 | 198,677 | 179,835 | 70,625 | ||||||||||||||||||||
Cumulative effect of change in accounting, net of tax | — | — | (120 | ) | — | — | — | — | ||||||||||||||||||||
Net income (loss) | (44,213 | ) | 130,305 | 15,358 | 64,890 | 198,677 | 179,835 | 70,625 |
47
Table of Contents
Nine Months | ||||||||||||||||||||||||||||
Year Ended December 31, | Ended September 30, | |||||||||||||||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | 2005 | 2006 | ||||||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||||||
Accrued dividends on Series D Preferred Stock | (4,963 | ) | (10,619 | ) | (18,493 | ) | (21,006 | ) | (21,006 | ) | (15,711 | ) | (15,711 | ) | ||||||||||||||
Accrued dividends on Series E Preferred Stock | — | — | — | — | (1,019 | ) | (263 | ) | (2,244 | ) | ||||||||||||||||||
Accretion on Series D Preferred Stock | (494 | ) | (473 | ) | (473 | ) | (473 | ) | (473 | ) | (355 | ) | (355 | ) | ||||||||||||||
Accretion on Series E Preferred Stock | — | — | — | — | (114 | ) | (30 | ) | (254 | ) | ||||||||||||||||||
Net income (loss) applicable to Common Stock | $ | (49,670 | ) | $ | 119,213 | $ | (3,608 | ) | $ | 43,411 | $ | 176,065 | $ | 163,476 | $ | 52,061 | ||||||||||||
Nine Months | ||||||||||||||||||||||||||||
Year Ended December 31, | Ended September 30, | |||||||||||||||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | 2005 | 2006 | ||||||||||||||||||||||
(In Thousands, Except Share and Per Share Data) | ||||||||||||||||||||||||||||
Basic net income (loss) per common share(1): | ||||||||||||||||||||||||||||
Income (loss) before cumulative effect of change in accounting principle | $ | (1.42 | ) | $ | 2.16 | $ | (0.10 | ) | $ | 0.55 | $ | 2.12 | $ | 2.02 | $ | 0.57 | ||||||||||||
Cumulative effect of change in accounting, net of tax | — | — | (0.00 | ) | — | — | — | — | ||||||||||||||||||||
Basic net income (loss) per common share | $ | (1.42 | ) | $ | 2.16 | $ | (0.10 | ) | $ | 0.55 | $ | 2.12 | $ | 2.02 | $ | 0.57 | ||||||||||||
Diluted net income (loss) per common share(1): | ||||||||||||||||||||||||||||
Income (loss) before cumulative effect of change in accounting principle | $ | (1.42 | ) | $ | 1.56 | $ | (0.10 | ) | $ | 0.46 | $ | 1.87 | $ | 1.74 | $ | 0.56 | ||||||||||||
Cumulative effect of change in accounting, net of tax | — | — | (0.00 | ) | — | — | — | — | ||||||||||||||||||||
Diluted net income (loss) per common share | $ | (1.42 | ) | $ | 1.56 | $ | (0.10 | ) | $ | 0.46 | $ | 1.87 | $ | 1.74 | $ | 0.56 | ||||||||||||
Weighted average shares(1): | ||||||||||||||||||||||||||||
Basic | 34,874,716 | 36,236,434 | 36,443,962 | 42,240,684 | 45,117,465 | 43,517,417 | 51,890,687 | |||||||||||||||||||||
Diluted | 34,874,716 | 50,072,699 | 36,443,962 | 50,211,229 | 51,203,530 | 50,417,637 | 53,158,789 | |||||||||||||||||||||
Other Financial Data: | ||||||||||||||||||||||||||||
Net cash (used in) provided by operating activities | $ | (32,401 | ) | $ | (50,672 | ) | $ | 112,605 | $ | 150,379 | $ | 283,216 | $ | 247,015 | $ | 284,688 | ||||||||||||
Net cash provided by (used in) investment activities | 24,183 | (88,311 | ) | (306,868 | ) | (190,881 | ) | (905,228 | ) | (789,109 | ) | (489,255 | ) | |||||||||||||||
Net cash provided by (used in) financing activities | 41,708 | 157,039 | 201,951 | (5,433 | ) | 712,244 | 564,777 | 208,123 |
48
Table of Contents
As of December 31, | As of September 30, | |||||||||||||||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | 2005 | 2006 | ||||||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||||||||||
Cash, cash equivalents & short-term investments | $ | 42,688 | $ | 60,724 | $ | 254,838 | $ | 59,441 | $ | 503,131 | $ | 338,204 | $ | 345,811 | ||||||||||||||
Property and equipment, net | 169,459 | 352,799 | 485,032 | 636,368 | 831,490 | 767,498 | 1,207,982 | |||||||||||||||||||||
Total assets | 324,008 | 554,705 | 898,939 | 965,396 | 2,158,981 | 1,946,785 | 2,626,174 | |||||||||||||||||||||
Long-term debt (including current maturities) | 48,548 | 51,649 | 195,755 | 184,999 | 905,554 | 754,279 | 1,102,594 | |||||||||||||||||||||
Series D Cumulative Convertible Redeemable Participating Preferred Stock | 123,331 | 294,423 | 378,926 | 400,410 | 421,889 | 416,476 | 437,955 | |||||||||||||||||||||
Series E Cumulative Convertible Redeemable Participating Preferred Stock | — | — | — | — | 47,796 | 46,981 | 50,294 | |||||||||||||||||||||
Stockholders’ equity (deficit) | (51,477 | ) | 69,397 | 71,333 | 125,434 | 367,906 | 295,028 | 427,689 |
(1) | See Notes 17 and 10 to the annual and interim consolidated financial statements, respectively, included elsewhere in this prospectus for an explanation of the calculation of basic and diluted net income (loss) per common share. The calculation of basic and diluted net income (loss) per common share for the years ended December 31, 2001 and 2002 are not included in Note 17 to the annual consolidated financial statements. |
49
Table of Contents
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
50
Table of Contents
51
Table of Contents
52
Table of Contents
53
Table of Contents
54
Table of Contents
September 30, | December 31, | |||||||
2006 | 2005 | |||||||
Expected dividends | 0.00 | % | 0.00 | % | ||||
Expected volatility | 45.00 | % | 50.00 | % | ||||
Risk-free interest rate | 4.76 | % | 4.24 | % | ||||
Expected lives in years | 5.00 | 5.00 | ||||||
Weighted-average fair value of options: | ||||||||
Granted at fair value | $ | 10.12 | $ | 10.32 | ||||
Weighted-average exercise price of options: | ||||||||
Granted at fair value | $ | 22.12 | $ | 21.39 |
55
Table of Contents
Weighted | Weighted | Weighted | ||||||||||||||
Number of | Average | Average | Average | |||||||||||||
Grants Made During | Options | Exercise | Market Value | Intrinsic Value | ||||||||||||
the Quarter Ended | Granted | Price | per Share | per Share | ||||||||||||
March 31, 2005 | 20,000 | $ | 18.94 | $ | 18.94 | $ | 0.00 | |||||||||
June 30, 2005 | — | — | — | — | ||||||||||||
September 30, 2005 | 1,640,795 | $ | 21.41 | $ | 21.41 | $ | 0.00 | |||||||||
December 31, 2005 | 285,383 | $ | 21.46 | $ | 21.46 | $ | 0.00 | |||||||||
March 31, 2006 | 956,663 | $ | 21.46 | $ | 21.46 | $ | 0.00 | |||||||||
June 30, 2006 | 178,175 | $ | 22.63 | $ | 22.63 | $ | 0.00 | |||||||||
September 30, 2006 | 139,475 | $ | 26.00 | $ | 26.00 | $ | 0.00 |
56
Table of Contents
• | Cell Site Costs. We incur expenses for the rent of cell sites, network facilities, engineering operations, field technicians and related utility and maintenance charges. | |
• | Intercarrier Compensation. We pay charges to other telecommunications companies for their transport and termination of calls originated by our customers and destined for customers of other networks. These variable charges are based on our customers’ usage and generally applied at pre-negotiated rates with other carriers, although some carriers have sought to impose such charges unilaterally. | |
• | Variable Long Distance. We pay charges to other telecommunications companies for long distance service provided to our customers. These variable charges are based on our customers’ usage, applied at pre-negotiated rates with the long distance carriers. |
57
Table of Contents
• | Core Markets, which include Atlanta, Miami, San Francisco, and Sacramento, are aggregated because they are reviewed on an aggregate basis by the chief operating decision maker, they are similar in respect to their products and services, production processes, class of customer, method of distribution, and regulatory environment and currently exhibit similar financial performance and economic characteristics. | |
• | Expansion Markets, which include Dallas/Ft. Worth, Detroit, Tampa/Sarasota/Orlando and Los Angeles, are aggregated because they are reviewed on an aggregate basis by the chief operating decision maker, they are similar in respect to their products and services, production processes, class of |
58
Table of Contents
customer, method of distribution, and regulatory environment and have similar expected long-term financial performance and economic characteristics. |
Nine Months | ||||||||||||
Ended September 30, | ||||||||||||
Reportable Operating Segment Data | 2006 | 2005 | Change | |||||||||
(In Thousands) | ||||||||||||
REVENUES: | ||||||||||||
Service revenues: | ||||||||||||
Core Markets | $ | 831,053 | $ | 631,208 | 32 | % | ||||||
Expansion Markets | 85,126 | 1 | ** | |||||||||
Total | $ | 916,179 | $ | 631,209 | 45 | % | ||||||
Equipment revenues: | ||||||||||||
Core Markets | $ | 149,200 | $ | 118,973 | 25 | % | ||||||
Expansion Markets | 28,392 | 17 | ** | |||||||||
Total | $ | 177,592 | $ | 118,990 | 49 | % | ||||||
OPERATING EXPENSES: | ||||||||||||
Cost of service (excluding depreciation and amortization disclosed separately below)(1): | ||||||||||||
Core Markets | $ | 244,636 | $ | 197,425 | 24 | % | ||||||
Expansion Markets | 68,874 | 4,515 | ** | |||||||||
Total | $ | 313,510 | $ | 201,940 | 55 | % | ||||||
Cost of equipment: | ||||||||||||
Core Markets | $ | 261,258 | $ | 210,431 | 24 | % | ||||||
Expansion Markets | 69,640 | 98 | ** | |||||||||
Total | $ | 330,898 | $ | 210,529 | 57 | % | ||||||
Selling, general and administrative expenses (excluding depreciation and amortization disclosed separately below)(1): | ||||||||||||
Core Markets | $ | 114,021 | $ | 112,137 | 2 | % | ||||||
Expansion Markets | 57,900 | 4,069 | ** | |||||||||
Total | $ | 171,921 | $ | 116,206 | 48 | % | ||||||
59
Table of Contents
Nine Months | ||||||||||||
Ended September 30, | ||||||||||||
Reportable Operating Segment Data | 2006 | 2005 | Change | |||||||||
(In Thousands) | ||||||||||||
Adjusted EBITDA (Deficit)(2): | ||||||||||||
Core Markets | $ | 364,585 | $ | 233,491 | 56 | % | ||||||
Expansion Markets | (79,393 | ) | (8,665 | ) | ** | |||||||
Depreciation and amortization: | ||||||||||||
Core Markets | $ | 80,467 | $ | 60,158 | 34 | % | ||||||
Expansion Markets | 13,381 | 721 | ** | |||||||||
Other | 2,339 | 1,016 | 130 | % | ||||||||
Total | $ | 96,187 | $ | 61,895 | 55 | % | ||||||
Stock-based compensation expense: | ||||||||||||
Core Markets | $ | 4,246 | $ | 3,302 | 29 | % | ||||||
Expansion Markets | 3,504 | — | ** | |||||||||
Total | $ | 7,750 | $ | 3,302 | 135 | % | ||||||
Income (loss) from operations: | ||||||||||||
Core Markets | $ | 269,735 | $ | 388,572 | (31 | )% | ||||||
Expansion Markets | (96,904 | ) | (9,635 | ) | ** | |||||||
Other | (2,339 | ) | (1,016 | ) | 130 | % | ||||||
Total | $ | 170,492 | $ | 377,921 | (55 | )% | ||||||
** | Not meaningful. The Expansion Markets reportable segment had no significant operations during 2005. | |
(1) | Cost of service and selling, general and administrative expenses include stock-based compensation expense. For the nine months ended September 30, 2006, cost of service includes $1.0 million and selling, general and administrative expenses includes $6.8 million of stock-based compensation expense. | |
(2) | Core and Expansion Markets Adjusted EBITDA (deficit) is presented in accordance with SFAS No. 131 as it is the primary financial measure utilized by management to facilitate evaluation of our ability to meet future debt service, capital expenditures and working capital requirements and to fund future growth. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Operating Segments.” |
• | Core Markets. Core Markets service revenues increased $199.9 million, or 32%, to $831.1 million for the nine months ended September 30, 2006 from $631.2 million for the nine months ended September 30, 2005. The increase in service revenues is primarily attributable to net additions of approximately 435,000 customers accounting for $157.8 million of the Core Markets increase, coupled with the migration of existing customers to higher price rate plans accounting for $42.1 million of the Core Markets increase. |
• | Expansion Markets. Expansion Markets service revenues were $85.1 million for the nine months ended September 30, 2006. These revenues are attributable to the launch of the Tampa/Sarasota metropolitan area in October 2005, the Dallas/Ft. Worth metropolitan area in March 2006 and the |
60
Table of Contents
Detroit metropolitan area in April 2006. Net additions in the Expansion Markets totaled approximately 442,000 customers. |
• | Core Markets. Core Markets equipment revenues increased $30.2 million, or 25%, to $149.2 million for the nine months ended September 30, 2006 from $119.0 million for the nine months ended September 30, 2005. The increase is attributable to higher priced handset models accounting for $17.0 million of the increase, coupled with the increase in gross customer additions during the year of approximately 118,000 customers for $13.2 million of the increase. |
• | Expansion Markets. Expansion Markets equipment revenues were $28.4 million for the nine months ended September 30, 2006. These revenues are attributable to approximately 470,000 gross customer additions due to the launch of the Tampa/Sarasota, Dallas/Ft. Worth and Detroit metropolitan areas. |
• | Core Markets. Core Markets cost of service increased $47.2 million, or 24%, to $244.6 million for the nine months ended September 30, 2006 from $197.4 million for the nine months ended September 30, 2005. The increase was primarily attributable to a $10.2 million increase in long distance costs, a $7.2 million increase in FUSF fees, a $5.4 million increase in cell site and switch facility lease expense, a $4.7 million increase in intercarrier compensation, a $4.8 million increase in customer service expense, and a $3.4 million increase in employee costs, all of which are a result of the 25% growth in our Core Markets customer base and the addition of approximately 335 cell sites to our existing network infrastructure. |
• | Expansion Markets. Expansion Markets cost of service increased $64.4 million to $68.9 million for the nine months ended September 30, 2006 from $4.5 million for the nine months ended September 30, 2005. The increase was attributable to the launch of the Tampa/Sarasota metropolitan area in October 2005, the Dallas/Ft. Worth metropolitan area in March 2006 and the Detroit metropolitan area in April 2006, which contributed net customer additions of approximately 389,300 customers during the nine months ended September 30, 2006. These activities resulted in a $15.4 million increase in cell site and switch facility lease expense, a $10.6 million increase in employee costs, a $8.7 million increase in intercarrier compensation, $5.0 million in customer service expense, $5.0 million in long distance costs and $2.1 million in billing expenses. |
• | Core Markets. Core Markets cost of equipment increased $50.8 million, or 24%, to $261.3 million for the nine months ended September 30, 2006 from $210.5 million for the nine months ended September 30, 2005. The increase is due to increased gross customer additions in our Core Markets, a 39% increase in sales of new handsets to our existing customers as well as an increase in the average handset cost per unit which related to an increase in sales of higher priced handset models during the first nine months of 2006. |
61
Table of Contents
• | Expansion Markets. Expansion Markets cost of equipment was $69.6 million for the nine months ended September 30, 2006. This cost is attributable to the sale of handsets to approximately 470,200 new customers as well as the sale of new handsets to existing customers in the Tampa/Sarasota, Dallas/Ft. Worth and Detroit metropolitan areas. |
• | Core Markets. Core Markets selling, general and administrative expenses increased $1.9 million, or 2%, to $114.0 million for the nine months ended September 30, 2006 from $112.1 million for the nine months ended September 30, 2005. Selling expenses increased by $7.0 million, or approximately 16% for the first nine months of 2006 compared to the nine months ended September 30, 2005. General and administrative expenses decreased $5.1 million, or approximately 7% for the nine months ended September 30, 2006 compared to the same period in 2005. The increase in selling expenses is primarily due to an increase in advertising and market research expenses which were incurred to support the growth in the Core Markets. This increase in selling expenses was offset by a decrease in general and administrative expenses, which were higher in 2005 because they included approximately $5.9 million in legal and accounting expenses associated with an internal investigation related to material weaknesses in our internal control over financial reporting as well as financial statement audits related to our restatement efforts. |
• | Expansion Markets. Expansion Markets selling, general and administrative expenses increased $53.8 million to $57.9 million for the nine months ended September 30, 2006 from $4.1 million for the nine months ended September 30, 2005. Selling expenses increased by $22.0 million for the first nine months of 2006 compared to the nine months ended September 30, 2005. This increase in selling expenses was related to marketing and advertising expenses associated with the launch of the Dallas/Ft. Worth and Detroit metropolitan areas. General and administrative expenses increased by $31.8 million for the nine months ended September 30, 2006 compared to the same period in 2005 due to labor, rent, legal and professional fees and various administrative expenses incurred in relation to the launch of the Dallas/Ft. Worth, Detroit and Tampa/Sarasota metropolitan areas and build-out expenses related to Orlando and Los Angeles. |
• | Core Markets. Core Markets depreciation and amortization expense increased $20.3 million, or 34%, to $80.5 million for the nine months ended September 30, 2006 from $60.2 million for the nine months ended September 30, 2005. The increase related primarily to an increase in network infrastructure assets placed into service between September 30, 2005 and September 30, 2006. We added approximately 335 cell sites in our Core Markets during this period to increase the capacity of our existing network and expand our footprint. | |
• | Expansion Markets. Expansion Markets depreciation and amortization expense increased $12.7 million to $13.4 million for the nine months ended September 30, 2006 from $0.7 million for the nine months ended September 30, 2005. The increase is attributable to network infrastructure assets placed into service as a result of the launch of the Tampa/Sarasota, Dallas/Ft. Worth and Detroit metropolitan areas. |
62
Table of Contents
Nine Months | ||||||||||||
Ended September 30, | ||||||||||||
Consolidated Data | 2006 | 2005 | Change | |||||||||
(In Thousands) | ||||||||||||
Loss (gain) on disposal of assets | $ | 10,763 | $ | (218,292 | ) | (105 | )% | |||||
(Gain) loss on extinguishment of debt | (244 | ) | 46,448 | (101 | )% | |||||||
Interest expense | 67,408 | 40,867 | 65 | % | ||||||||
Provision for income taxes | 47,245 | 115,460 | (59 | )% | ||||||||
Net income | 70,625 | 179,835 | (61 | )% |
63
Table of Contents
Reportable Operating Segment Data | 2005 | 2004 | Change | |||||||||
(In Thousands) | ||||||||||||
REVENUES: | ||||||||||||
Service revenues: | ||||||||||||
Core Markets | $ | 868,681 | $ | 616,401 | 41 | % | ||||||
Expansion Markets | 3,419 | — | ** | |||||||||
Total | $ | 872,100 | $ | 616,401 | 41 | % | ||||||
Equipment revenues: | ||||||||||||
Core Markets | $ | 163,738 | $ | 131,849 | 24 | % | ||||||
Expansion Markets | 2,590 | — | ** | |||||||||
Total | $ | 166,328 | $ | 131,849 | 26 | % | ||||||
OPERATING EXPENSES: | ||||||||||||
Cost of service (excluding depreciation and amortization disclosed separately below): | ||||||||||||
Core Markets | $ | 271,437 | $ | 200,806 | 35 | % | ||||||
Expansion Markets | 11,775 | — | ** | |||||||||
Total | $ | 283,212 | $ | 200,806 | 41 | % | ||||||
Cost of equipment: | ||||||||||||
Core Markets | $ | 293,702 | $ | 222,766 | 32 | % | ||||||
Expansion Markets | 7,169 | — | ** | |||||||||
Total | $ | 300,871 | $ | 222,766 | 35 | % | ||||||
Selling, general and administrative expenses (excluding depreciation and amortization disclosed separately below)(1): | ||||||||||||
Core Markets | $ | 153,321 | $ | 131,510 | 17 | % | ||||||
Expansion Markets | 9,155 | — | ** | |||||||||
Total | $ | 162,476 | $ | 131,510 | 24 | % | ||||||
Adjusted EBITDA (Deficit)(2): | ||||||||||||
Core Markets | $ | 316,555 | $ | 203,597 | 55 | % | ||||||
Expansion Markets | (22,090 | ) | — | ** | ||||||||
Depreciation and amortization: | ||||||||||||
Core Markets | $ | 84,436 | $ | 61,286 | 38 | % | ||||||
Expansion Markets | 2,030 | — | ** | |||||||||
Other | 1,429 | 915 | 56 | % | ||||||||
Total | $ | 87,895 | $ | 62,201 | 41 | % | ||||||
Stock-based compensation expense: | ||||||||||||
Core Markets | $ | 2,596 | $ | 10,429 | (75 | )% | ||||||
Expansion Markets | — | — | — | |||||||||
�� | ||||||||||||
Total | $ | 2,596 | $ | 10,429 | (75 | )% | ||||||
Income (loss) from operations: | ||||||||||||
Core Markets | $ | 219,777 | $ | 128,673 | 71 | % | ||||||
Expansion Markets | (24,370 | ) | — | ** | ||||||||
Other | 226,770 | (915 | ) | ** | ||||||||
Total | $ | 422,177 | $ | 127,758 | 230 | % | ||||||
64
Table of Contents
** | Not meaningful. The Expansion Markets reportable segment had no operations until 2005. | |
(1) | Selling, general and administrative expenses include stock-based compensation expense disclosed separately. | |
(2) | Core and Expansion Markets Adjusted EBITDA (deficit) is presented in accordance with SFAS No. 131 as it is the primary financial measure utilized by management to facilitate evaluation of our ability to meet future debt service, capital expenditures and working capital requirements and to fund future growth. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Operating Segments.” |
• | Core Markets. Core Markets service revenues increased $252.3 million, or 41%, to $868.7 million for the year ended December 31, 2005 from $616.4 million for the year ended December 31, 2004. The increase in service revenues is primarily attributable to net additions of approximately 473,000 customers accounting for $231.8 million of the Core Markets increase, coupled with the migration of existing customers to higher priced rate plans accounting for $20.5 million of the Core Markets increase. |
• | Expansion Markets. Expansion Markets service revenues were $3.4 million for the year ended December 31, 2005. These revenues are attributable to the launch of the Tampa/Sarasota metropolitan area in October 2005. Net additions in the Tampa/Sarasota metropolitan area totaled approximately 53,000 customers. |
• | Core Markets. Core Markets equipment revenues increased $31.9 million, or 24%, to $163.7 million for the year ended December 31, 2005 from $131.8 million for the year ended December 31, 2004. The increase in revenues was primarily attributable to an increase in sales to new customers of $32.6 million, a 60% increase over 2004. During the year ended December 31, 2005, Core Markets gross customer additions increased 30% to approximately 1,478,500 customers compared to 2004. | |
• | Expansion Markets. Expansion Markets equipment revenues were $2.6 million for the year ended December 31, 2005. These revenues are attributable to approximately 53,600 gross customer additions due to the launch of the Tampa/Sarasota metropolitan area in October 2005. |
• | Core Markets. Core Markets cost of service increased $70.6 million, or 35%, to $271.4 million for the year ended December 31, 2005 from $200.8 million for the year ended December 31, 2004. The increase was primarily attributable to a $12.9 million increase in intercarrier compensation, a $12.3 million increase in long distance costs, a $9.5 million increase in cell site and switch facility lease expense, a $5.6 million increase in customer service expense, a $3.9 million increase in billing expenses and $2.6 million increase in employee costs, which were a result of the 34% growth in our customer base and the addition of 315 cell sites to our existing network infrastructure. |
65
Table of Contents
• | Expansion Markets. Expansion Markets cost of service was $11.8 million for the year ended December 31, 2005. These expenses are attributable to the launch of the Tampa/Sarasota metropolitan area in October 2005, which contributed net additions of approximately 53,000 customers during 2005. Cost of service included employee costs of $4.1 million, cell site and switch facility lease expense of 3.4 million, repair and maintenance expense of $1.6 million and intercarrier compensation of $1.0 million. |
• | Core Markets. Core Markets cost of equipment increased $70.9 million, or 32%, to $293.7 million for the year ended December 31, 2005 from $222.8 million for the year ended December 31, 2004. The increase in cost of equipment is due to the 30% increase in gross customer additions during 2005 compared to the year ended December 31, 2004. | |
• | Expansion Markets. Expansion Markets cost of equipment was $7.2 million for the year ended December 31, 2005. This cost is attributable to the launch of the Tampa/Sarasota metropolitan area in October 2005, which resulted in approximately 53,600 activations during 2005. |
• | Core Markets. Core Markets selling, general and administrative expenses increased $21.8 million, or 17%, to $153.3 million for the year ended December 31, 2005 from $131.5 million for the year ended December 31, 2004. Selling expenses increased by $6.3 million, or 12% for the year ended December 31, 2005 compared to 2004. General and administrative expenses increased by $15.5 million, or 20%, during 2005 compared to 2004. The significant increase in general and administrative expenses was primarily driven by increases in accounting and auditing fees of $4.9 million and increases in professional service fees of $3.6 million due to substantial legal and accounting expenses associated with an internal investigation related to material weaknesses in our internal control over financial reporting as well as financial statement audits related to our restatement efforts. We also experienced a $6.6 million increase in labor costs associated with new employee additions necessary to support the growth in our business. These increases were offset by a $7.8 million decrease in stock-based compensation expense. | |
• | Expansion Markets. Expansion Markets selling, general and administrative expenses were $9.2 million for the year ended December 31, 2005. Selling expenses were $3.5 million and general and administrative expenses were $5.7 million for 2005. These expenses are comprised of marketing and advertising expenses as well as labor, rent, professional fees and various administrative expenses associated with the launch of the Tampa/Sarasota metropolitan area in October 2005 and build-out of the Dallas/Ft. Worth and Detroit metropolitan areas. |
• | Core Markets. Core Markets depreciation and amortization expense increased $23.1 million, or 38%, to $84.4 million for the year ended December 31, 2005 from $61.3 million for the year ended December 31, 2004. The increase related primarily to an increase in network infrastructure assets placed into service during 2005, compared to the year ended December 31, 2004. We added 315 cell |
66
Table of Contents
sites in our Core Markets during the year ended December 31, 2005 to increase the capacity of our existing network and expand our footprint. |
• | Expansion Markets. Expansion Markets depreciation and amortization expense was $2.0 million for the year ended December 31, 2005. This expense is attributable to network infrastructure assets placed into service as a result of the launch of the Tampa/Sarasota metropolitan area. |
Consolidated Data | 2005 | 2004 | Change | |||||||||
(In Thousands) | ||||||||||||
Loss (gain) on disposal of assets | $ | (218,203 | ) | $ | 3,209 | ** | ||||||
(Gain) loss on extinguishment of debt | 46,448 | (698 | ) | ** | ||||||||
Interest expense | 58,033 | 19,030 | 205 | % | ||||||||
Provision for income taxes | 127,425 | 47,000 | 171 | % | ||||||||
Net income | 198,677 | 64,890 | 206 | % |
** | Not meaningful |
67
Table of Contents
2004 | 2003 | Change | ||||||||||
(In Thousands) | ||||||||||||
Revenues | ||||||||||||
Service revenues | $ | 616,401 | $ | 369,851 | 67 | % | ||||||
Equipment revenues | 131,849 | 81,258 | 62 | % | ||||||||
Cost of service (excluding depreciation and amortization disclosed separately below) | 200,806 | 122,211 | 64 | % | ||||||||
Cost of equipment | 222,766 | 150,832 | 48 | % | ||||||||
Selling, general and administrative expenses (excluding depreciation and amortization disclosed separately below) | 131,510 | 94,073 | 40 | % | ||||||||
Depreciation and amortization | 62,201 | 42,428 | 47 | % | ||||||||
Interest expense | 19,030 | 11,115 | 71 | % | ||||||||
Provision for income taxes | 47,000 | 16,179 | 191 | % | ||||||||
Net income | 64,890 | 15,358 | 323 | % |
68
Table of Contents
69
Table of Contents
Three Months Ended | ||||||||||||||||
March 31, | June 30, | September 30, | December 31, | |||||||||||||
2005 | 2005 | 2005 | 2005 | |||||||||||||
(In Thousands) | ||||||||||||||||
REVENUES: | ||||||||||||||||
Service revenues | $ | 196,898 | $ | 212,697 | $ | 221,615 | $ | 240,891 | ||||||||
Equipment revenues | 39,058 | 37,992 | 41,940 | 47,338 | ||||||||||||
Total revenues | 235,956 | 250,689 | 263,555 | 288,229 | ||||||||||||
OPERATING EXPENSES: | ||||||||||||||||
Cost of service (excluding depreciation and amortization expense shown separately below) | 63,735 | 65,944 | 72,261 | 81,272 | ||||||||||||
Cost of equipment | 68,101 | 65,287 | 77,140 | 90,342 | ||||||||||||
Selling, general and administrative expenses (excluding depreciation and amortization expense shown separately below) | 37,849 | 39,342 | 39,016 | 46,270 | ||||||||||||
Depreciation and amortization | 19,270 | 20,714 | 21,911 | 26,001 | ||||||||||||
Loss (gain) on disposal of assets | 1,160 | (224,901 | ) | 5,449 | 88 | |||||||||||
Total operating expenses | 190,115 | (33,614 | ) | 215,777 | 243,973 | |||||||||||
Income from operations | 45,841 | 284,303 | 47,778 | 44,256 | ||||||||||||
OTHER EXPENSE (INCOME): | ||||||||||||||||
Interest expense | 8,036 | 15,761 | 17,069 | 17,167 | ||||||||||||
Accretion of put option in majority-owned subsidiary | 62 | 62 | 62 | 64 | ||||||||||||
Interest and other income | (557 | ) | (1,215 | ) | (3,105 | ) | (3,781 | ) | ||||||||
Loss on extinguishment of debt | 867 | 45,581 | — | — | ||||||||||||
Total other expense | 8,408 | 60,189 | 14,026 | 13,450 | ||||||||||||
Income before provision for income taxes | 37,433 | 224,114 | 33,752 | 30,806 | ||||||||||||
Provision for income taxes | (14,633 | ) | (87,632 | ) | (13,196 | ) | (11,965 | ) | ||||||||
Net income | $ | 22,800 | $ | 136,482 | $ | 20,556 | $ | 18,841 | ||||||||
70
Table of Contents
Three Months Ended | ||||||||||||
March 31, | June 30, | September 30, | ||||||||||
2006 | 2006 | 2006 | ||||||||||
(In Thousands) | ||||||||||||
REVENUES: | ||||||||||||
Service revenues | $ | 275,416 | $ | 307,843 | $ | 332,920 | ||||||
Equipment revenues | 54,045 | 60,351 | 63,196 | |||||||||
Total revenues | 329,461 | 368,194 | 396,116 | |||||||||
OPERATING EXPENSES: | ||||||||||||
Cost of service (excluding depreciation and amortization expense shown separately below) | 92,489 | 107,497 | 113,524 | |||||||||
Cost of equipment | 100,911 | 112,005 | 117,982 | |||||||||
Selling, general and administrative expenses (excluding depreciation and amortization expense shown separately below) | 51,437 | 60,264 | 60,220 | |||||||||
Depreciation and amortization | 27,260 | 32,316 | 36,611 | |||||||||
Loss (gain) on disposal of assets | 10,365 | 2,013 | (1,615 | ) | ||||||||
Total operating expenses | 282,462 | 314,095 | 326,722 | |||||||||
Income from operations | 46,999 | 54,099 | 69,394 | |||||||||
OTHER EXPENSE (INCOME): | ||||||||||||
Interest expense | 20,885 | 21,713 | 24,811 | |||||||||
Accretion of put option in majority-owned subsidiary | 157 | 203 | 203 | |||||||||
Interest and other income | (4,572 | ) | (6,147 | ) | (4,386 | ) | ||||||
Gain on extinguishment of debt | (217 | ) | (27 | ) | — | |||||||
Total other expense | 16,253 | 15,742 | 20,628 | |||||||||
Income before provision for income taxes | 30,746 | 38,357 | 48,766 | |||||||||
Provision for income taxes | (12,377 | ) | (15,368 | ) | (19,500 | ) | ||||||
Net income | $ | 18,369 | $ | 22,989 | $ | 29,266 | ||||||
71
Table of Contents
Nine Months Ended | ||||||||||||||||||||
Year Ended December 31, | September 30, | |||||||||||||||||||
2003 | 2004 | 2005 | 2005 | 2006 | ||||||||||||||||
Customers: | ||||||||||||||||||||
End of period | 976,899 | 1,398,732 | 1,924,621 | 1,739,787 | 2,616,532 | |||||||||||||||
Net additions | 463,415 | 421,833 | 525,889 | 341,055 | 691,911 | |||||||||||||||
Churn: | ||||||||||||||||||||
Average monthly rate | 4.6 | % | 4.9 | % | 5.1 | % | 5.0 | % | 4.7 | % | ||||||||||
ARPU | $ | 37.49 | $ | 41.13 | $ | 42.40 | $ | 42.34 | $ | 42.91 | ||||||||||
CPGA | $ | 100.46 | $ | 103.78 | $ | 102.70 | $ | 101.46 | $ | 116.56 | ||||||||||
CPU | $ | 18.21 | $ | 18.95 | $ | 19.57 | $ | 19.15 | $ | 19.65 |
72
Table of Contents
73
Table of Contents
Three Months Ended | ||||||||||||||||||||||||||||
March 31, | June 30, | September 30, | December 31, | March 31, | June 30, | September 30, | ||||||||||||||||||||||
2005 | 2005 | 2005 | 2005 | 2006 | 2006 | 2006 | ||||||||||||||||||||||
Customers: | ||||||||||||||||||||||||||||
End of period | 1,567,969 | 1,645,174 | 1,739,787 | 1,924,621 | 2,170,059 | 2,418,909 | 2,616,532 | |||||||||||||||||||||
Net additions | 169,236 | 77,205 | 94,613 | 184,834 | 245,437 | 248,850 | 197,623 | |||||||||||||||||||||
Churn(1): | ||||||||||||||||||||||||||||
Average monthly rate | 4.3 | % | 5.1 | % | 5.6 | % | 5.2 | % | 4.4 | % | 4.5 | % | 5.0 | % | ||||||||||||||
ARPU | $ | 42.57 | $ | 42.32 | $ | 42.16 | $ | 42.55 | $ | 43.12 | $ | 42.86 | $ | 42.78 | ||||||||||||||
CPGA(1) | $ | 100.15 | $ | 101.63 | $ | 102.56 | $ | 105.50 | $ | 106.26 | $ | 122.20 | $ | 120.29 | ||||||||||||||
CPU | $ | 19.33 | $ | 18.50 | $ | 19.61 | $ | 20.67 | $ | 20.11 | $ | 19.78 | $ | 19.15 |
(1) | On January 23, 2006, we revised the terms of our return policy from 7 days to 30 days, and as a result we revised our definition of gross customer additions to exclude customers that discontinue service in the first 30 days of service. This revision, commencing March 23, 2006, reduces deactivations and gross customer additions, which reduces churn and increases CPGA. Churn computed under the original 7 day allowable return period would have been 4.5%, 5.2% and 5.7% for the three month periods ended March 31, 2006, June 30, 2006 and September 30, 2006, respectively. CPGA computed under the original 7 day allowable return period would have been $105.33, $113.11, and $110.43 for the three month periods ended March 31, 2006, June 30, 2006, and September 30, 2006, respectively. |
Nine Months | ||||||||||||||||||||
Year Ended December 31, | Ended September 30, | |||||||||||||||||||
2003 | 2004 | 2005 | 2005 | 2006 | ||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||
Core Markets Customers: | ||||||||||||||||||||
End of period | 976,899 | 1,398,732 | 1,871,665 | 1,739,441 | 2,174,264 | |||||||||||||||
Net additions | 463,415 | 421,833 | 472,933 | 340,709 | 302,599 | |||||||||||||||
Core Markets Adjusted EBITDA | $ | 89,566 | $ | 203,597 | $ | 316,555 | $ | 233,491 | $ | 364,585 | ||||||||||
Core Markets Adjusted EBITDA as a Percent of Service Revenues | 24.2 | % | 33.0 | % | 36.4 | % | 37.0 | % | 43.9 | % |
74
Table of Contents
Three Months Ended | ||||||||||||||||||||||||||||
March 31, | June 30, | September 30, | December 31, | March 31, | June 30, | September 30, | ||||||||||||||||||||||
2005 | 2005 | 2005 | 2005 | 2006 | 2006 | 2006 | ||||||||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||||||||||
Core Markets Customers: | ||||||||||||||||||||||||||||
End of period | 1,567,969 | 1,645,174 | 1,739,441 | 1,871,665 | 2,055,550 | 2,119,168 | 2,174,264 | |||||||||||||||||||||
Net additions | 169,236 | 77,205 | 94,267 | 132,224 | 183,884 | 63,618 | 55,096 | |||||||||||||||||||||
Core Markets Adjusted EBITDA | $ | 68,036 | $ | 84,321 | $ | 81,133 | $ | 83,064 | $ | 109,120 | $ | 127,182 | $ | 128,283 | ||||||||||||||
Core Markets Adjusted EBITDA as a Percent of Service Revenues | 34.6 | % | 39.6 | % | 36.6 | % | 35.0 | % | 41.2 | % | 45.2 | % | 45.0 | % |
Nine Months | ||||||||||||||||||||
Year Ended December 31, | Ended September 30, | |||||||||||||||||||
2003 | 2004 | 2005 | 2005 | 2006 | ||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||
Expansion Markets Customers: | ||||||||||||||||||||
End of period | — | — | 52,956 | 346 | 442,268 | |||||||||||||||
Net additions | — | — | 52,956 | 346 | 389,312 | |||||||||||||||
Expansion Markets Adjusted EBITDA (Deficit) | — | — | $ | (22,090 | ) | $ | (8,665 | ) | $ | (79,393 | ) |
75
Table of Contents
Three Months Ended | ||||||||||||||||||||||||||||
March 31, | June 30, | September 30, | December 31, | March 31, | June 30, | September 30, | ||||||||||||||||||||||
2005 | 2005 | 2005 | 2005 | 2006 | 2006 | 2006 | ||||||||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||||||||||
Expansion Markets Customers: | ||||||||||||||||||||||||||||
End of period | — | — | 346 | 52,956 | 114,509 | 299,741 | 442,268 | |||||||||||||||||||||
Net additions | — | — | 346 | 52,610 | 61,553 | 185,232 | 142,527 | |||||||||||||||||||||
Expansion Markets Adjusted EBITDA (Deficit) | $ | (901 | ) | $ | (2,105 | ) | $ | (5,659 | ) | $ | (13,425 | ) | $ | (22,685 | ) | $ | (36,596 | ) | $ | (20,112 | ) |
76
Table of Contents
Nine Months | ||||||||||||||||||||
Year Ended December 31, | Ended September 30, | |||||||||||||||||||
2003 | 2004 | 2005 | 2005 | 2006 | ||||||||||||||||
(In Thousands, Except Average Number of Customers and ARPU) | ||||||||||||||||||||
Calculation of Average Revenue Per User (ARPU): | ||||||||||||||||||||
Service revenues | $ | 369,851 | $ | 616,401 | $ | 872,100 | $ | 631,209 | $ | 916,179 | ||||||||||
Less: | ||||||||||||||||||||
Activation revenues | (14,410 | ) | (7,874 | ) | (6,808 | ) | (4,988 | ) | (6,026 | ) | ||||||||||
E-911, FUSF and vendor’s compensation charges | (6,527 | ) | (12,522 | ) | (26,221 | ) | (18,875 | ) | (29,222 | ) | ||||||||||
Net service revenues | $ | 348,914 | $ | 596,005 | $ | 839,071 | $ | 607,346 | $ | 880,931 | ||||||||||
Divided by: | ||||||||||||||||||||
Average number of customers | 775,605 | 1,207,521 | 1,649,208 | 1,593,848 | 2,281,261 | |||||||||||||||
ARPU | $ | 37.49 | $ | 41.13 | $ | 42.40 | $ | 42.34 | $ | 42.91 | ||||||||||
Three Months Ended | ||||||||||||||||
March 31, | June 30, | September 30, | December 31, | |||||||||||||
2005 | 2005 | 2005 | 2005 | |||||||||||||
(In Thousands, Except Average Number of Customers and ARPU) | ||||||||||||||||
Calculation of Average Revenue Per User (ARPU): | ||||||||||||||||
Service revenues | $ | 196,898 | $ | 212,697 | $ | 221,615 | $ | 240,891 | ||||||||
Less: | ||||||||||||||||
Activation revenues | (1,581 | ) | (1,656 | ) | (1,751 | ) | (1,821 | ) | ||||||||
E-911, FUSF and vendor’s compensation charges | (6,075 | ) | (6,286 | ) | (6,513 | ) | (7,346 | ) | ||||||||
Net service revenues | $ | 189,242 | $ | 204,755 | $ | 213,351 | $ | 231,724 | ||||||||
Divided by: Average number of customers | 1,481,839 | 1,612,932 | 1,686,774 | 1,815,288 | ||||||||||||
ARPU | $ | 42.57 | $ | 42.32 | $ | 42.16 | $ | 42.55 | ||||||||
77
Table of Contents
Three Months Ended | ||||||||||||
March 31, | June 30, | September 30, | ||||||||||
2006 | 2006 | 2006 | ||||||||||
(In Thousands, Except Average Number of Customers and ARPU) | ||||||||||||
Calculation of Average Revenue Per User (ARPU): | ||||||||||||
Service revenues | $ | 275,416 | $ | 307,843 | $ | 332,920 | ||||||
Less: | ||||||||||||
Activation revenues | (1,923 | ) | (1,979 | ) | (2,123 | ) | ||||||
E-911, FUSF and vendor’s compensation charges | (8,958 | ) | (10,752 | ) | (9,512 | ) | ||||||
Net service revenues | $ | 264,535 | $ | 295,112 | $ | 321,285 | ||||||
Divided by: Average number of customers | 2,045,110 | 2,295,249 | 2,503,423 | |||||||||
ARPU | $ | 43.12 | $ | 42.86 | $ | 42.78 | ||||||
Nine Months | ||||||||||||||||||||
Year Ended December 31, | Ended September 30, | |||||||||||||||||||
2003 | 2004 | 2005 | 2005 | 2006 | ||||||||||||||||
(In Thousands, Except Gross Customer Additions and CPGA) | ||||||||||||||||||||
Calculation of Cost Per Gross Addition (CPGA): | ||||||||||||||||||||
Selling expenses | $ | 44,006 | $ | 52,605 | $ | 62,396 | $ | 43,863 | $ | 72,796 | ||||||||||
Less: | ||||||||||||||||||||
Activation revenues | (14,410 | ) | (7,874 | ) | (6,808 | ) | (4,988 | ) | (6,026 | ) | ||||||||||
Less: | ||||||||||||||||||||
Equipment revenues | (81,258 | ) | (131,849 | ) | (166,328 | ) | (118,990 | ) | (177,592 | ) | ||||||||||
Add: | ||||||||||||||||||||
Equipment revenue not associated with new customers | 13,228 | 54,323 | 77,010 | 55,324 | 80,571 | |||||||||||||||
Add: | ||||||||||||||||||||
Cost of equipment | 150,832 | 222,766 | 300,871 | 210,529 | 330,898 | |||||||||||||||
Less: | ||||||||||||||||||||
Equipment costs not associated with new customers | (22,549 | ) | (72,200 | ) | (109,803 | ) | (77,910 | ) | (108,292 | ) | ||||||||||
Gross addition expenses | $ | 89,849 | $ | 117,771 | $ | 157,338 | $ | 107,828 | $ | 192,355 |
78
Table of Contents
Nine Months | ||||||||||||||||||||
Year Ended December 31, | Ended September 30, | |||||||||||||||||||
2003 | 2004 | 2005 | 2005 | 2006 | ||||||||||||||||
(In Thousands, Except Gross Customer Additions and CPGA) | ||||||||||||||||||||
Divided by: | ||||||||||||||||||||
Gross customer additions | 894,348 | 1,134,762 | 1,532,071 | 1,062,772 | 1,650,282 | |||||||||||||||
CPGA | $ | 100.46 | $ | 103.78 | $ | 102.70 | $ | 101.46 | $ | 116.56 | ||||||||||
Three Months Ended | ||||||||||||||||
March 31, | June 30, | September 30, | December 31, | |||||||||||||
2005 | 2005 | 2005 | 2005 | |||||||||||||
(In Thousands, Except Gross Customer Additions and CPGA) | ||||||||||||||||
Calculation of Cost Per Gross Addition (CPGA): | ||||||||||||||||
Selling expenses | $ | 14,115 | $ | 14,482 | $ | 15,266 | $ | 18,533 | ||||||||
Less: | ||||||||||||||||
Activation revenues | (1,581 | ) | (1,656 | ) | (1,751 | ) | (1,821 | ) | ||||||||
Less: | ||||||||||||||||
Equipment revenues | (39,058 | ) | (37,992 | ) | (41,940 | ) | (47,338 | ) | ||||||||
Add: | ||||||||||||||||
Equipment revenue not associated with new customers | 16,666 | 17,767 | 20,891 | 21,687 | ||||||||||||
Add: | ||||||||||||||||
Cost of equipment | 68,101 | 65,287 | 77,140 | 90,342 | ||||||||||||
Less: | ||||||||||||||||
Equipment costs not associated with new customers | (22,080 | ) | (24,881 | ) | (30,949 | ) | (31,893 | ) | ||||||||
Gross addition expenses | $ | 36,163 | $ | 33,007 | $ | 38,657 | $ | 49,510 | ||||||||
Divided by: | ||||||||||||||||
Gross customer additions | 361,079 | 324,777 | 376,916 | 469,299 | ||||||||||||
CPGA | $ | 100.15 | $ | 101.63 | $ | 102.56 | $ | 105.50 | ||||||||
79
Table of Contents
Three Months Ended | ||||||||||||
March 31, | June 30, | September 30, | ||||||||||
2006 | 2006 | 2006 | ||||||||||
(In Thousands, Except Gross Customer Additions and CPGA) | ||||||||||||
Calculation of Cost Per Gross Addition (CPGA): | ||||||||||||
Selling expenses | $ | 20,298 | $ | 26,437 | $ | 26,062 | ||||||
Less: | ||||||||||||
Activation revenues | (1,923 | ) | (1,979 | ) | (2,123 | ) | ||||||
Less: | ||||||||||||
Equipment revenues | (54,045 | ) | (60,351 | ) | (63,196 | ) | ||||||
Add: | ||||||||||||
Equipment revenue not associated with new customers | 24,864 | 26,904 | 28,802 | |||||||||
Add: | ||||||||||||
Cost of equipment | 100,911 | 112,005 | 117,982 | |||||||||
Less: | ||||||||||||
Equipment costs not associated with new customers | (35,364 | ) | (34,669 | ) | (38,259 | ) | ||||||
Gross addition expenses | $ | 54,741 | $ | 68,347 | $ | 69,268 | ||||||
Divided by: | ||||||||||||
Gross customer additions | 515,153 | 559,309 | 575,820 | |||||||||
CPGA | $ | 106.26 | $ | 122.20 | $ | 120.29 | ||||||
80
Table of Contents
Nine Months | ||||||||||||||||||||
Year Ended December 31, | Ended September 30, | |||||||||||||||||||
2003 | 2004 | 2005 | 2005 | 2006 | ||||||||||||||||
(In Thousands, Except Average Number of Customers and CPU) | ||||||||||||||||||||
Calculation of Cost Per User (CPU): | ||||||||||||||||||||
Cost of service | $ | 122,211 | $ | 200,806 | $ | 283,212 | $ | 201,940 | $ | 313,510 | ||||||||||
Add: | ||||||||||||||||||||
General and administrative expense | 50,067 | 78,905 | 100,080 | 72,343 | 99,125 | |||||||||||||||
Add: | ||||||||||||||||||||
Net loss on equipment transactions unrelated to initial customer acquisition | 9,320 | 17,877 | 32,791 | 22,586 | 27,721 | |||||||||||||||
Less: | ||||||||||||||||||||
Stock-based compensation expense included in cost of service and general and administrative expense | (5,573 | ) | (10,429 | ) | (2,596 | ) | (3,302 | ) | (7,750 | ) | ||||||||||
Less: | ||||||||||||||||||||
E-911, FUSF and vendor’s compensation revenues | (6,527 | ) | (12,522 | ) | (26,221 | ) | (18,875 | ) | (29,222 | ) | ||||||||||
Total costs used in the calculation of CPU | $ | 169,498 | $ | 274,637 | $ | 387,266 | $ | 274,692 | $ | 403,384 | ||||||||||
Divided by: | ||||||||||||||||||||
Average number of customers | 775,605 | 1,207,521 | 1,649,208 | 1,593,848 | 2,281,261 | |||||||||||||||
CPU | $ | 18.21 | $ | 18.95 | $ | 19.57 | $ | 19.15 | $ | 19.65 | ||||||||||
81
Table of Contents
Three Months Ended | ||||||||||||||||
March 31, | June 30, | September 30, | December 31, | |||||||||||||
2005 | 2005 | 2005 | 2005 | |||||||||||||
(In Thousands, Except Average Number of Customers and CPU) | ||||||||||||||||
Calculation of Cost Per User (CPU): | �� | |||||||||||||||
Cost of service | $ | 63,735 | $ | 65,944 | $ | 72,261 | $ | 81,272 | ||||||||
Add: | ||||||||||||||||
General and administrative expense | 23,734 | 24,860 | 23,750 | 27,737 | ||||||||||||
Add: | ||||||||||||||||
Net loss on equipment transactions unrelated to initial customer acquisition | 5,414 | 7,114 | 10,058 | 10,206 | ||||||||||||
Less: | ||||||||||||||||
Stock-based compensation expense included in general and administrative expense | (865 | ) | (2,100 | ) | (337 | ) | 706 | |||||||||
Less: | ||||||||||||||||
E-911, FUSF and vendor’s compensation revenues | (6,075 | ) | (6,286 | ) | (6,513 | ) | (7,346 | ) | ||||||||
Total costs used in the calculation of CPU | $ | 85,943 | $ | 89,532 | $ | 99,219 | $ | 112,575 | ||||||||
Divided by: | ||||||||||||||||
Average number of customers | 1,481,839 | 1,612,932 | 1,686,774 | 1,815,288 | ||||||||||||
CPU | $ | 19.33 | $ | 18.50 | $ | 19.61 | $ | 20.67 | ||||||||
Three Months Ended | ||||||||||||
March 31, | June 30, | September 30, | ||||||||||
2006 | 2006 | 2006 | ||||||||||
(In Thousands, Except Average Number of Customers and CPU) | ||||||||||||
Calculation of Cost Per User (CPU): | ||||||||||||
Cost of service | $ | 92,489 | $ | 107,497 | $ | 113,524 | ||||||
Add: | ||||||||||||
General and administrative expense | 31,139 | 33,827 | 34,158 | |||||||||
Add: | ||||||||||||
Net loss on equipment transactions unrelated to initial customer acquisition | 10,500 | 7,765 | 9,457 | |||||||||
Less: | ||||||||||||
Stock-based compensation expense included in cost of service and general and administrative expense | (1,811 | ) | (2,158 | ) | (3,781 | ) | ||||||
Less: | ||||||||||||
E-911, FUSF and vendor’s compensation revenues | (8,958 | ) | (10,752 | ) | (9,512 | ) | ||||||
Total costs used in the calculation of CPU | $ | 123,359 | $ | 136,179 | $ | 143,846 | ||||||
Divided by: | ||||||||||||
Average number of customers | 2,045,110 | 2,295,249 | 2,503,423 | |||||||||
CPU | $ | 20.11 | $ | 19.78 | $ | 19.15 | ||||||
82
Table of Contents
83
Table of Contents
84
Table of Contents
Nine Months | ||||||||||||||||||||
Year Ended December 31, | Ended September 30, | |||||||||||||||||||
2003 | 2004 | 2005 | 2005 | 2006 | ||||||||||||||||
(In Thousands) | ||||||||||||||||||||
Calculation of Consolidated Adjusted EBITDA: | ||||||||||||||||||||
Net income | $ | 15,358 | $ | 64,890 | $ | 198,677 | $ | 179,835 | $ | 70,625 | ||||||||||
Adjustments: | ||||||||||||||||||||
Depreciation and amortization | 42,428 | 62,201 | 87,895 | 61,895 | 96,187 | |||||||||||||||
Loss (gain) on disposal of assets | 392 | 3,209 | (218,203 | ) | (218,292 | ) | 10,763 | |||||||||||||
Stock-based compensation expense(1) | 5,573 | 10,429 | 2,596 | 3,302 | 7,750 | |||||||||||||||
Interest expense | 11,115 | 19,030 | 58,033 | 40,867 | 67,408 | |||||||||||||||
Accretion of put option in majority-owned subsidiary(1) | — | 8 | 252 | 187 | 564 | |||||||||||||||
Interest and other income | (996 | ) | (2,472 | ) | (8,658 | ) | (4,876 | ) | (15,106 | ) | ||||||||||
(Gain) loss on extinguishment of debt | (603 | ) | (698 | ) | 46,448 | 46,448 | (244 | ) | ||||||||||||
Provision for income taxes | 16,179 | 47,000 | 127,425 | 115,460 | 47,245 | |||||||||||||||
Cumulative effect of change in accounting principle, net of tax(1) | 120 | — | — | — | — | |||||||||||||||
Consolidated Adjusted EBITDA | $ | 89,566 | $ | 203,597 | $ | 294,465 | $ | 224,826 | $ | 285,192 | ||||||||||
(1) | Represents a non-cash expense, as defined by our senior secured credit facility. |
85
Table of Contents
Nine Months | ||||||||||||||||||||
Year Ended December 31, | Ended September 30, | |||||||||||||||||||
2003 | 2004 | 2005 | 2005 | 2006 | ||||||||||||||||
(In Thousands) | ||||||||||||||||||||
Reconciliation of Net Cash Provided by Operating Activities to Consolidated Adjusted EBITDA: | ||||||||||||||||||||
Net cash provided by operating activities | $ | 112,605 | $ | 150,379 | $ | 283,216 | $ | 247,015 | $ | 284,688 | ||||||||||
Adjustments: | ||||||||||||||||||||
Interest expense | 11,115 | 19,030 | 58,033 | 40,867 | 67,408 | |||||||||||||||
Non-cash interest expense | (3,073 | ) | (2,889 | ) | (4,285 | ) | (3,766 | ) | (3,702 | ) | ||||||||||
Interest and other income | (996 | ) | (2,472 | ) | (8,658 | ) | (4,876 | ) | (15,106 | ) | ||||||||||
Provision for uncollectible accounts receivable | (110 | ) | (125 | ) | (129 | ) | 38 | (64 | ) | |||||||||||
Deferred rent expense | (2,803 | ) | (3,466 | ) | (4,407 | ) | (3,091 | ) | (5,365 | ) | ||||||||||
Cost of abandoned cell sites | (824 | ) | (1,021 | ) | (725 | ) | (251 | ) | (2,069 | ) | ||||||||||
Accretion of asset retirement obligation | (127 | ) | (253 | ) | (423 | ) | (103 | ) | (469 | ) | ||||||||||
Loss (gain) on sale of investments | — | (576 | ) | 190 | (49 | ) | 1,875 | |||||||||||||
Provision for income taxes | 16,179 | 47,000 | 127,425 | 115,460 | 47,245 | |||||||||||||||
Deferred income taxes | (18,716 | ) | (44,441 | ) | (125,055 | ) | (113,580 | ) | (41,792 | ) | ||||||||||
Changes in working capital | (23,684 | ) | 42,431 | (30,717 | ) | (52,838 | ) | (47,457 | ) | |||||||||||
Consolidated Adjusted EBITDA | $ | 89,566 | $ | 203,597 | $ | 294,465 | $ | 224,826 | $ | 285,192 | ||||||||||
86
Table of Contents
87
Table of Contents
88
Table of Contents
89
Table of Contents
90
Table of Contents
Payments Due by Period | ||||||||||||||||||||
Less | More | |||||||||||||||||||
Than 1 | 1 - 3 | 3 - 5 | Than 5 | |||||||||||||||||
Total | Year | Years | Years | Years | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Contractual Obligations(1): | ||||||||||||||||||||
Long-term debt, including current portion | $ | 902,690 | $ | 2,690 | $ | — | $ | — | $ | 900,000 | ||||||||||
Interest expense on long-term debt(2) | 487,383 | 83,175 | 166,000 | 166,000 | 72,208 | |||||||||||||||
Operating leases | 494,070 | 59,207 | 121,202 | 123,764 | 189,897 | |||||||||||||||
Total cash contractual obligations | $ | 1,884,143 | $ | 145,072 | $ | 287,202 | $ | 289,764 | $ | 1,162,105 | ||||||||||
(1) | Contractual obligations exclude obligations incurred in connection with the acquisition of licenses in Auction 66 which we were granted on November 29, 2006 for which we paid approximately $1.4 billion. | |
In November 2006, we (i) repaid all amounts owed under our Credit Agreements; (ii) entered into a new Senior Secured Credit Facility and borrowed $1.6 billion thereunder, and (iii) consummated the sale of $1.0 billion principal amount of 91/4% Senior Notes due 2014. | ||
(2) | Interest expense on long-term debt includes future interest payments on outstanding obligations under our Credit Agreements and microwave clearing obligations. The Credit Agreements bear interest at floating rates tied to a fixed spread to the London Inter Bank Offered Rate. The interest expense presented in this table is based on the rates at December 31, 2005 which were 8.25% for the First Lien Credit Agreement and 10.75% for the Second Lien Credit Agreement. |
91
Table of Contents
92
Table of Contents
93
Table of Contents
94
Table of Contents
95
Table of Contents
96
Table of Contents
Product | $30/Month | $35/Month | $40/Month | $45/Month | ||||
Unlimited local calling | X | X | X | X | ||||
Unlimited nationwide long distance calling(1) | X | X | ||||||
Unlimited domestic text messaging | X | |||||||
Unlimited picture messaging | X | |||||||
Enhanced voicemail | X | |||||||
3-way calling | X | |||||||
Caller ID | X | |||||||
Call waiting | X | |||||||
Additional calling features available | X | X | X |
(1) | Includes only the continental United States. |
97
Table of Contents
• | services provided through the Binary Runtime Environment for Wireless, or BREW, platform, including ringtones, games and content applications; | |
• | text messaging services (domestic and international), which allow the customer to send and receive alphanumeric messages that the handset can receive, store and display on demand; | |
• | multimedia messaging services, which allow the customer to send and receive messages containing photographs; and | |
• | mobile Internet browsing. |
98
Table of Contents
Annualized | ||||||||||||||||||||||||
POPs | POP | POP | Launch | |||||||||||||||||||||
Metropolitan Area | BTA | (’000s) | Density(2) | Growth(3) | MHz | Date | ||||||||||||||||||
Core Markets: | ||||||||||||||||||||||||
Georgia: | ||||||||||||||||||||||||
Atlanta, GA | 24 | 5,085.1 | 445 | 2.53% | 20 | Q1 2002 | ||||||||||||||||||
Gainesville, GA | 160 | 295.6 | 170 | 3.15% | 30 | Q1 2002 | ||||||||||||||||||
Athens, GA | 22 | 228.2 | 163 | 1.70% | 20 | Q1 2002 | ||||||||||||||||||
South Florida: | ||||||||||||||||||||||||
Miami-Fort Lauderdale, FL | 293 | 4,342.4 | 1,005 | 1.69% | 30 | Q1 2002 | ||||||||||||||||||
West Palm Beach, FL | 469 | 1,308.1 | 412 | 2.05% | 30 | Q1 2002 | ||||||||||||||||||
Fort Myers, FL | 151 | 729.5 | 191 | 2.61% | 30 | Q1 2004 | ||||||||||||||||||
Fort Pierce-Vero Beach, FL | 152 | 486.9 | 272 | 2.13% | 30 | Q1 2004 | ||||||||||||||||||
Naples, FL | 313 | 310.9 | 146 | 3.63% | 30 | Q1 2004 | ||||||||||||||||||
Northern California: | ||||||||||||||||||||||||
San Fran.-Oak.-S.J., CA | 404 | 7,458.9 | 540 | 0.57% | 20 | Q3 2002 | ||||||||||||||||||
Sacramento, CA | 389 | 2,326.4 | 138 | 2.65% | 30 | Q1 2002 | ||||||||||||||||||
Stockton, CA | 434 | 728.9 | 285 | 3.25% | 30 | Q1 2002 | ||||||||||||||||||
Modesto, CA | 303 | 587.8 | 150 | 2.79% | 15 | Q1 2005 | ||||||||||||||||||
Salinas-Monterey, CA | 397 | 429.0 | 128 | 1.21% | 30 | Q1 2002 | ||||||||||||||||||
Redding, CA | 371 | 299.9 | 18 | 1.47% | 30 | Q4 2006 | ||||||||||||||||||
Merced, CA | 291 | 262.7 | 75 | 2.53% | 15 | Q1 2005 | ||||||||||||||||||
Chico-Oroville, CA | 79 | 244.1 | 80 | 1.13% | 30 | Q1 2002 | ||||||||||||||||||
Eureka, CA | 134 | 155.5 | 34 | 0.18% | 15 | TBD | ||||||||||||||||||
Yuba City-Marysville, CA | 485 | 152.7 | 120 | 1.68% | 30 | Q1 2002 |
99
Table of Contents
Annualized | ||||||||||||||||||||||||
POPs | POP | POP | Launch | |||||||||||||||||||||
Metropolitan Area | BTA | (’000s) | Density(2) | Growth(3) | MHz | Date | ||||||||||||||||||
Expansion Markets: | ||||||||||||||||||||||||
Central and Northern Florida: | ||||||||||||||||||||||||
Tampa-St. Petersburg, FL | 440 | 2,869.4 | 566 | 1.59% | 10 | Q4 2005 | ||||||||||||||||||
Sarasota-Bradenton, FL | 408 | 694.3 | 343 | 1.97% | 10 | Q4 2005 | ||||||||||||||||||
Daytona Beach, FL | 107 | 548.6 | 311 | 1.92% | 20 | TBD | ||||||||||||||||||
Ocala, FL | 326 | 290.9 | 171 | 2.09% | 10 | TBD | ||||||||||||||||||
Jacksonville, FL(1) | 212 | 1,499.2 | 178 | 1.78% | 10 | TBD | ||||||||||||||||||
Lakeland-Winter Haven, FL(1) | 239 | 518.5 | 254 | 1.27% | 10 | Q4 2006 | ||||||||||||||||||
Melbourne-Titusville, FL(1) | 289 | 521.5 | 484 | 1.65% | 10 | TBD | ||||||||||||||||||
Gainesville, FL(1) | 159 | 336.5 | 90 | 0.92% | 10 | TBD | ||||||||||||||||||
Orlando, FL(1) | 336 | 1,960.2 | 415 | 2.54% | 10 | Q4 2006 | ||||||||||||||||||
Dallas/Ft. Worth: | ||||||||||||||||||||||||
Dallas/Ft. Worth, TX(4) | 101 | 5,878.4 | 687 | 2.56% | 10 | Q1 2006 | ||||||||||||||||||
Sherman-Denison, TX(5) | 418 | 188.2 | 66 | 0.99% | 10 | Q1 2006 | ||||||||||||||||||
Detroit: | ||||||||||||||||||||||||
Detroit, MI | 112 | 5,074.5 | 811 | 0.41% | 10 | Q2 2006 | ||||||||||||||||||
Southern California: | ||||||||||||||||||||||||
Los Angeles, CA(1) | 262 | 17,962.8 | 398 | 1.66% | 10 | Q2/Q3 2007 | ||||||||||||||||||
Bakersfield, CA | 28 | 737.6 | 89 | 1.95% | 10 | TBD |
(1) | License granted to Royal Street. | |
(2) | Calculated as number of POPs divided by square miles. | |
(3) | Estimatedaverage 2003-2008 annual population growth. | |
(4) | The Dallas/Ft. Worth license is comprised of the counties which make up CMA9. | |
(5) | Comprised of Grayson and Fannin counties only. |
100
Table of Contents
101
Table of Contents
Spectrum | ||||||||||||||
License | Purchase Price | MHz | Population | |||||||||||
REA 1 | Northeast | $ | 552,694,000 | 10 | 50,058,090 | |||||||||
REA 6 | West | 355,726,000 | 10 | 49,999,164 | ||||||||||
EA 10 | New York-No. New Jer.-Long Island, NY-NJ-CT-PA-MA-VT(1) | 363,945,000 | 10 | 25,712,577 | ||||||||||
EA 57 | Detroit-Ann Arbor-Flint, MI | 50,317,000 | 10 | 6,963,637 | ||||||||||
EA 127 | Dallas/Ft. Worth, TX-AR-OK | 49,766,000 | 10 | 7,645,530 | ||||||||||
EA 62 | Grand Rapids-Muskegon-Holland, MI | 7,920,000 | 10 | 1,881,991 | ||||||||||
EA 153 | Las Vegas, NV-AZ-UT(1) | 10,420,000 | 10 | 1,709,797 | ||||||||||
EA 88 | Shreveport-Bossier City, LA-AR | 622,000 | 10 | 573,616 |
(1) | Licenses overlap other Auction 66 licenses |
102
Table of Contents
103
Table of Contents
• | Customer Care. We have outsourcing contracts with two nationally recognized call center vendors. These call centers are staffed with professional and bilingual customer service personnel, who are available to assist our customers 24 hours a day, 365 days a year. We also provide automated voice response services to assist our customers with routine information requests. We believe providing quality customer service is an important element in overall customer satisfaction and retention, and we regularly review performance of our call center vendors. | |
• | Billing. We utilize a nationally recognized third-party billing platform, that bills, monitors and analyzes payments from our customers. We offer our customers the option of receiving web-based and short messaging service-based bills as well as traditional paper bills. We also offer our customers the option of automatic payment of their bills via credit or debit cards. Very few of our customers utilize paper bills and substantially all of our customers receive their bills through the short message service included with our wireless service. | |
• | Payment Processing. Customers may pay their bills by credit card, debit card, check or cash. We have over 2,000 locations where customers choosing to pay for their monthly service in cash can |
104
Table of Contents
make their payments. Many of these locations also serve as distribution points for our products and services making them convenient for customer payments. Customers may also make payments at any of the Western Union locations throughout our metropolitan service areas. |
• | Logistics. We outsource logistics associated with shipping handsets and accessories to our distribution channels to a nationally recognized logistics provider. |
105
Table of Contents
106
Table of Contents
107
Table of Contents
MetroPCS Subscriber Statistics | (In 000s) | |||||||||||||||||||||||
Net Additions | Subscribers | |||||||||||||||||||||||
Core | Expansion | Core | Expansion | |||||||||||||||||||||
Markets | Markets | Consolidated | Markets | Markets | Consolidated | |||||||||||||||||||
2004 | ||||||||||||||||||||||||
Q1 | 174 | — | 174 | 1,151 | — | 1,151 | ||||||||||||||||||
Q2 | 63 | — | 63 | 1,214 | — | 1,214 | ||||||||||||||||||
Q3 | 66 | — | 66 | 1,280 | — | 1,280 | ||||||||||||||||||
Q4 | 119 | — | 119 | 1,399 | — | 1,399 | ||||||||||||||||||
2005 | ||||||||||||||||||||||||
Q1 | 169 | — | 169 | 1,568 | — | 1,568 | ||||||||||||||||||
Q2 | 77 | — | 77 | 1,645 | — | 1,645 | ||||||||||||||||||
Q3 | 95 | — | 95 | 1,740 | — | 1,740 | ||||||||||||||||||
Q4 | 132 | 53 | 185 | 1,872 | 53 | 1,925 | ||||||||||||||||||
2006 | ||||||||||||||||||||||||
Q1 | 184 | 61 | 245 | 2,056 | 114 | 2,170 | ||||||||||||||||||
Q2 | 63 | 186 | 249 | 2,119 | 300 | 2,419 | ||||||||||||||||||
Q3 | 55 | 142 | 198 | 2,174 | 442 | 2,617 |
108
Table of Contents
109
Table of Contents
110
Table of Contents
111
Table of Contents
112
Table of Contents
113
Table of Contents
• | relationships between designated entities and other communications enterprises based on class of services, financial measures, or spectrum interests; | |
• | the need to include other agreements within the definition of impermissible material relationships; and | |
• | prohibiting entities or persons with net worth over a particular amount from being considered a DE. |
114
Table of Contents
115
Table of Contents
116
Table of Contents
117
Table of Contents
118
Table of Contents
119
Table of Contents
120
Table of Contents
121
Table of Contents
122
Table of Contents
123
Table of Contents
Name | Age | Position | ||||
Roger D. Linquist | 68 | President, Chief Executive Officer and Chairman of the Board of Directors | ||||
J. Braxton Carter | 48 | Senior Vice President and Chief Financial Officer | ||||
Douglas S. Glen | 49 | Senior Vice President, Corporate Operations | ||||
Thomas C. Keys | 48 | Senior Vice President, Market Operations, West | ||||
Christine B. Kornegay | 43 | Vice President, Controller and Chief Accounting Officer | ||||
Malcolm M. Lorang | 73 | Senior Vice President and Chief Technology Officer | ||||
John J. Olsen | 50 | Vice President and Chief Information Officer | ||||
Mark A. Stachiw | 45 | Senior Vice President, General Counsel and Secretary | ||||
Keith D. Terreri | 42 | Vice President, Finance and Treasurer | ||||
Robert A. Young | 56 | Executive Vice President, Market Operations, East | ||||
W. Michael Barnes | 64 | Director | ||||
C. Kevin Landry | 62 | Director | ||||
Arthur C. Patterson | 62 | Director | ||||
James N. Perry, Jr. | 46 | Director | ||||
John Sculley | 67 | Director | ||||
Walker C. Simmons | 35 | Director | ||||
James F. Wade | 50 | Director |
124
Table of Contents
125
Table of Contents
126
Table of Contents
• | overseeing, reviewing and evaluating our financial statements, the audits of our financial statements, our accounting and financial reporting processes, the integrity of our financial statements, our disclosure controls and procedures and our internal audit functions; | |
• | appointing, compensating, retaining and overseeing our independent accountants; | |
• | pre-approving permissible non-audit services to be performed by our independent accountants, if any, and the fees to be paid in connection therewith; |
127
Table of Contents
• | overseeing our compliance with legal and regulatory requirements and compliance with ethical standards adopted by us; | |
• | establishing and maintaining whistleblower procedures; | |
• | evaluating periodically our Code of Business Conduct and Ethics; and | |
• | conducting an annual self-evaluation. |
• | assisting in the process of identifying, recruiting, evaluating and nominating candidates for membership on our board of directors and the committees thereof; | |
• | developing processes regarding the consideration of director candidates recommended by stockholders and stockholder communications with our board of directors; | |
• | conducting an annual self-evaluation and assisting our board of directors and our other committees of the board of directors in the conduct of their annual self-evaluations; and | |
• | development and recommendation of corporate governance principles. |
• | developing and reviewing general policy relating to compensation and benefits; | |
• | reviewing and evaluating the compensation discussion and analysis prepared by management; | |
• | evaluating the performance of the chief executive officer and reviewing and making recommendations to our board of directors concerning the compensation and benefits of our chief executive officer, our directors and our other corporate officers; | |
• | overseeing our chief executive officer’s decisions concerning the performance and compensation of our other executive officers; | |
• | administering our stock option and employee benefit plans; | |
• | preparing an executive compensation report for publication in our annual proxy statement; and | |
• | conducting an annual self-evaluation. |
• | monitoring our present and future capital requirements and business opportunities; | |
• | overseeing, reviewing and evaluating our capital structure and our strategic planning and financial execution processes; and | |
• | making recommendations to our board regarding acquisitions, dispositions and our short and long-term operating plans. |
128
Table of Contents
129
Table of Contents
• | Attract and retain talented and experienced executives in the highly competitive and dynamic wireless communications industry; | |
• | Motivate and reward executives whose knowledge, skills and performance are critical to our success; | |
• | Align the interests of our executive officers and shareholders by motivating executive officers to increase shareholder value and rewarding executive officers when shareholder value increases; | |
• | Provide a competitive compensation package which is weighted heavily towards pay for performance, and in which total compensation is primarily determined by company/team and individual results and the creation of shareholder value; | |
• | Ensure fairness among the executive management team by recognizing the contributions each executive makes to our success; | |
• | Foster a shared commitment among executives by coordinating their company/team and individual goals; and | |
• | Compensate our executives to manage our business to meet our long-range objectives. |
130
Table of Contents
• | Data in proxy statement filings from wireless communications companies that we believe are comparable to us based on revenue and market capitalization or are otherwise relevant, including: |
• | Alltel Corp; |
• | Centennial Communications Corp.; |
• | Dobson Communications Corp.; | |
• | Leap Wireless International Inc.; |
• | Rural Cellular Corp; |
• | SunCom PCS Holding; and |
• | United States Cellular Corp. |
• | Published survey data from public and private companies to determine appropriate compensation levels based on revenue levels in general industry and the telecommunications industry. |
131
Table of Contents
• | Our business need for the executive officer’s skills; | |
• | The contributions that the executive officer has made or we believe will make to our success; | |
• | The transferability of the executive officer’s managerial skills to other potential employers; | |
• | The relevance of the executive officer’s experience to other potential employers, particularly in the telecommunications industry; and | |
• | The readiness of the executive officer to assume a more significant role with another potential employer. |
• | For 2006, the annual cash incentive plan award under the Bonus Opportunity Plan award was based on the following performance measures: |
• | Achievement of Operating Market Targets: |
• | Gross margin; | |
• | Adjusted EBITDA per average subscriber; |
• | Capital expenditures per ending subscriber at year-end; |
• | New Markets % of Build; and |
• | Discretionary component. |
• | Implementation of financial controls and Sarbanes-Oxley Act compliance; and |
132
Table of Contents
• | Individual performance measures, such as achievement of strategic objectives, and demonstration of our core values. |
• | For 2007, the annual cash incentive plan awards have been made pursuant to our Amended and Restated 2004 Equity Incentive Compensation Plan, or the 2004 Plan, and are based on the following performance measures: |
• | Operating markets: |
• | Gross margin; |
• | Adjusted EBITDA per average subscriber; |
• | Capital expenditures per ending subscriber at year-end; and |
• | Discretionary component. |
• | New Markets Build-out: |
• | Construction/market readiness goals for new markets; and |
• | Discretionary component. |
• | Individual performance measures, such as achievement of strategic objectives, and demonstration of our core values. |
133
Table of Contents
• | Allocation between long-term and currently paid out compensation: The compensation we currently pay consists of base pay and annual cash incentive compensation. The long-term compensation consists entirely of awards of stock options pursuant to our Second Amended and Restated 1995 Stock Option Plan, as amended, or the 1995 Plan, and our 2004 Plan. The allocation between long-term and currently paid out compensation is based on an analysis of how our peer companies, telecommunication industry and general industry use long-term and currently paid compensation to pay their executive officers. |
• | Allocation between cash and non-cash compensation: It is our policy to allocate all currently paid compensation in the form of cash and all long-term compensation in the form of awards of options to purchase our common stock. We consider competitive market analyses when determining the allocation between cash and non-cash compensation. |
• | Return of incentive pay: We have implemented a policy for the adjustment or recovery of awards if performance measures upon which they are based are materially restated or otherwise adjusted in a manner that will reduce the size of an award or payment. This policy includes the return by any executive officer any compensation based upon performance measures that require material restatement which are caused by such executive’s intentional misconduct or misrepresentation. |
134
Table of Contents
Element | Characteristics | Purpose | ||
Base salary | Fixed annual cash compensation; all executives are eligible for periodic increases in base salary based on performance; targeted at the median market pay level. | Keep our annual compensation competitive with the market for skills and experience necessary to meet the requirements of the executive’s role with us. | ||
Annual cash incentive awards | Performance-based annual cash incentive earned based on company/team and individual performance against target performance levels; targeted above the market median for outstanding performance achievement. | Motivate and reward for the achievement and over-performance of our critical financial and strategic goals. Amounts earned for achievement of target performance levels based on our annual budget is designed to provide a market-competitive pay package at median performance; potential for lesser or greater amounts are intended to motivate participants to achieve or exceed our financial and other performance goals and to not reward if performance goals are not met. | ||
Long-term equity incentive plan awards (stock options) | Performance-based equity award which has value to the extent our common stock price increases over time; targeted at the median market pay leveland/or competitive practices at peer companies. | Align interest of management with shareholders; motivate and reward management to increase the shareholder value of the company over the long term. Vesting based on continued employment will facilitate retention; amount realized from exercise of stock options rewards increased shareholder value of the company; provides change in control protection. | ||
Retirement savings opportunity | Tax-deferred plan in which all employees can choose to defer compensation for retirement. We provide no matching or other contributions; we do not allow employees to invest these savings in company stock. | Provide employees the opportunity to save for their retirement. Account balances are affected by contributions and investment decisions made by the employee. | ||
Health & welfare benefits | Fixed component. The same/comparable health & welfare benefits (medical, dental, vision, disability insurance and life insurance) are available for all full-time employees. | Provides benefits to meet the health and welfare needs of employees and their families. |
135
Table of Contents
136
Table of Contents
137
Table of Contents
EVP Market | Other | |||||||||||||||
2006 Pay Out Measures/Annual Cash Incentive Plan Components | CEO | CFO | Ops | NEOs | ||||||||||||
Company/team performance | 70 | % | 60 | % | 70 | % | 70 | % | ||||||||
• Gross Margin | ||||||||||||||||
• Adjusted EBITDA per average subscriber | ||||||||||||||||
• Capital expenditures per ending subscriber | ||||||||||||||||
• New market % of build | ||||||||||||||||
• Discretionary | ||||||||||||||||
Financial Controls/Sarbanes-Oxley Act compliance | 20 | % | 20 | % | 20 | % | 15 | % | ||||||||
Individual performance | 10 | % | 20 | % | 10 | % | 15 | % |
138
Table of Contents
All | ||||
2007 Pay Out Measures/Annual Cash Incentive Plan Components | NEOs | |||
Company/team performance | 70 | % | ||
• Operating Markets: | ||||
• Gross Margin | ||||
• Adjusted EBITDA per average subscriber | ||||
• Capital expenditures per ending subscriber | ||||
• Discretionary | ||||
• New market buildout: | ||||
• Construction/Market Readiness | ||||
• Discretionary Component | ||||
Individual performance | 30 | % |
2006 and 2007 Annual Cash Incentive Plan Award | ||||||
Level Based on Goal Achievement | ||||||
Officer | At 100% (Target) | Maximum Performance | ||||
CEO | 100% of base salary | 200% of base salary | ||||
SVP and CFO | 75% of base salary | 150% of base salary | ||||
EVP, Market Ops | 75% of base salary | 150% of base salary | ||||
SVP, General Counsel and Secretary | 65% of base salary | 130% of base salary | ||||
SVP and CTO | 65% of base salary | 130% of base salary |
139
Table of Contents
140
Table of Contents
141
Table of Contents
142
Table of Contents
• | An extension of time to exercise vested stock options, if any; | |
• | Salary for the remaining term of the agreement, if any; |
• | Awards under the annual cash incentive plan paid at target for the remaining term of the agreement, if any; |
• | An amount equal to twelve months of his salary; |
• | An amount equal to twelve months of awards under the annual cash incentive plan paid at target; and |
• | A lump sum amount for health benefits equal to the COBRA premiums for the number of months in the remaining term of the agreement, if any, plus twelve months which is grossed up for federal income taxes less appropriate tax withholdings. |
• | Each outstanding option automatically accelerates so that each option becomes fully exercisable for all of the shares of the related class of common stock at the time subject to such option immediately before the corporation transaction; | |
• | All outstanding repurchase rights automatically terminate and the shares of common stock subject to those terminated rights immediately vest in full; |
143
Table of Contents
• | Immediately following a corporate transaction, all outstanding options terminate and cease to be outstanding, except to the extent assumed by the successor corporation and thereafter adjusted in accordance with the 1995 Plan; and | |
• | In the event of an “involuntary termination” of an optionee’s “service” with us within 18 months following a corporate transaction, any fully-vested options issued to such holder remain exercisable until the earlier of (i) the expiration of the option term, or (ii) the expiration of one year from the effective date of the involuntary termination. |
• | A merger or consolidation transferring greater than 50% of the voting power of our outstanding securities to a person or persons different from the persons holding those securities immediately prior to such transaction; or | |
• | The disposition of all or substantially all of our assets in a complete liquidation or dissolution; |
• | All “options” and “stock appreciation rights” then outstanding become immediately vested and fully exercisable; | |
• | All restrictions and conditions of all “restricted stock” and “phantom stock” then outstanding are deemed satisfied, and the “restriction period” or other limitations on payment in full with respect thereto are deemed to have expired, as of the date of the change in control; and | |
• | All outstanding “performance awards” and any “other stock or performance-based awards” become fully vested, deemed earned in full and are to be promptly paid to the participants as of the date of the change in control. |
• | Any “person” (a) other than us or any of our subsidiaries, (b) any of our or our subsidiaries’ employee benefit plans, (c) any “affiliate,” (d) a company owned, directly or indirectly, by our stockholders, or (e) an underwriter temporarily holding our securities pursuant to an offering of such securities, becomes the “beneficial owner,” directly or indirectly, of more than 50% of our voting stock; | |
• | A merger, organization, business combination or consolidation of us or one of our subsidiaries transferring greater than 50% of the voting power of our outstanding securities to a person or persons different from the persons holding those securities immediately prior to such transaction; | |
• | The disposition of all or substantially all of our assets, other than to the current holders of 50% or more of the voting power of our voting securities; | |
• | The approval by the shareholders of a plan for the complete liquidation or dissolution; or | |
• | The individuals who constitute our board on the effective date of the 2004 Plan (or any individual who was appointed to the board of directors by a majority of the individuals who constitute our board of directors as of the effective date of the 2004 Plan) cease for any reason to constitute at least a majority of our board of directors. |
144
Table of Contents
145
Table of Contents
Non-Equity | ||||||||||||||||||||
Option | Incentive Plan | |||||||||||||||||||
Awards | Compensation | |||||||||||||||||||
Name & Principal Position | Year | Salary | (3) | (4) | Total | |||||||||||||||
Roger D. Linquist — President and CEO | 2006 | $ | 466,923 | $ | 815,300 | $ | 1,282,223 | |||||||||||||
2005 | $ | 435,833 | $ | 527,840 | $ | 963,673 | ||||||||||||||
J. Braxton Carter — SVP/CFO | 2006 | $ | 287,404 | $ | 381,100 | $ | 668,504 | |||||||||||||
2005 | $ | 264,750 | $ | 238,280 | $ | 503,030 | ||||||||||||||
Robert A. Young — EVP Market Operations | 2006 | $ | 330,769 | $ | 426,900 | $ | 757,669 | |||||||||||||
2005 | $ | 310,750 | $ | 265,340 | $ | 576,090 | ||||||||||||||
Mark A. Stachiw — SVP/General Counsel and Secretary(1) | 2006 | $ | 223,173 | $ | 253,300 | $ | 476,473 | |||||||||||||
2005 | $ | 204,583 | $ | 136,740 | $ | 341,323 | ||||||||||||||
Malcolm M. Lorang — SVP/Chief Technology Officer(2) | 2006 | $ | 214,135 | $ | 239,100 | $ | 453,235 | |||||||||||||
2005 | $ | 202,250 | $ | 130,790 | $ | 333,040 |
(1) | Mr. Stachiw became a Senior Vice President during 2006. |
(2) | Mr. Lorang became a Senior Vice President during 2006. |
(3) | The value of the option awards for 2006 is determined using the fair value recognition provisions of SFAS 123(R), which was effective January 1, 2006. This table will be updated for these values in a subsequent amendment to this Form S-1. |
(4) | During 2005 and 2006, MetroPCS Communications awarded annual cash incentive bonuses pursuant to a written annual cash incentive plan. This plan provides for the award of annual cash bonuses based upon targets and maximum bonus payouts set by the board of directors at the beginning of each fiscal year. See “— Discussion of Summary Compensation and Plan-Based Awards Tables — Material Terms of Plan-Based Awards.” |
146
Table of Contents
All Other | ||||||||||||||||||||||||||||
Option | ||||||||||||||||||||||||||||
Awards: | Exercise | |||||||||||||||||||||||||||
Number of | or Base | |||||||||||||||||||||||||||
Grant | Estimated Future Payouts | Securities | Price of | |||||||||||||||||||||||||
Date | Under Non-Equity Incentive | Underlying | Option | |||||||||||||||||||||||||
Grant | Fair Value | Plan Awards(4) | Options | Awards | ||||||||||||||||||||||||
Name & Principal Position | Date | (3) | Threshold | Target | Maximum | (#) | ($/share) | |||||||||||||||||||||
Roger D. Linquist — | $ | 0 | $ | 480,000 | $ | 960,000 | — | — | ||||||||||||||||||||
President and CEO | 3/14/2006 | — | — | — | 171,300 | 21.46 | ||||||||||||||||||||||
12/22/2006 | — | — | — | 750,000 | 34.00 | |||||||||||||||||||||||
J. Braxton Carter — | $ | 0 | $ | 221,250 | $ | 442,500 | — | — | ||||||||||||||||||||
Senior VP/CFO | 3/14/2006 | — | — | — | 45,600 | 21.46 | ||||||||||||||||||||||
12/22/2006 | — | — | — | 200,000 | 34.00 | |||||||||||||||||||||||
Robert A. Young — | $ | 0 | $ | 255,000 | $ | 510,000 | — | — | ||||||||||||||||||||
Executive VP Market | 3/14/2006 | — | — | — | 76,200 | 21.46 | ||||||||||||||||||||||
Operations — East | 12/22/2006 | — | — | — | 200,000 | 34.00 | ||||||||||||||||||||||
Mark A. Stachiw — | $ | 0 | $ | 149,500 | $ | 299,000 | — | — | ||||||||||||||||||||
Senior VP/General | 3/14/2006 | — | — | — | 6,300 | 21.46 | ||||||||||||||||||||||
Counsel and | 3/14/2006 | — | — | — | 20,000 | 21.46 | ||||||||||||||||||||||
Secretary(1) | 12/22/2006 | — | — | — | 150,000 | 34.00 | ||||||||||||||||||||||
Malcolm M. Lorang — | $ | 0 | $ | 143,000 | $ | 286,000 | — | |||||||||||||||||||||
Senior VP/Chief | 3/14/2006 | — | — | — | 18,200 | 21.46 | ||||||||||||||||||||||
Technology | 3/14/2006 | — | — | — | 20,000 | 21.46 | ||||||||||||||||||||||
Officer(2) | 12/22/2006 | — | — | — | 50,000 | 34.00 |
(1) | Mr. Stachiw became a Senior Vice President during 2006. |
(2) | Mr. Lorang became a Senior Vice president during 2006. |
(3) | The value of the option awards for 2006 is determined using the fair value recognition provisions of SFAS 123(R) which was effective January 1, 2006. This table will be updated for these values in a subsequent amendment to this Form S-1. |
(4) | During 2005 and 2006 MetroPCS Communications awarded annual cash incentive bonuses pursuant to a written Bonus Opportunity Plan. This plan provides for the award of annual cash bonuses based upon targets and maximum bonus payouts set by the board of directors at the beginning of each fiscal year. See “— Discussion of Summary Compensation and Plan-Based Awards Tables — Material Terms of Plan-Based Awards.” The actual amount paid to each named executive officer pursuant to the Bonus Opportunity Plan for the fiscal year ended December 31, 2006 is set forth in the Summary Compensation Table under the column titled “Non-Equity Incentive Plan Compensation.” See “— Summary of Compensation.” |
147
Table of Contents
148
Table of Contents
149
Table of Contents
150
Table of Contents
• | incentivize and reward individuals whose accountability, performance and potential is critical to our success; | |
• | encourage long-term focus and provide a strong link to shareholder interests and foster a shared commitment to move the business towards our long-range objectives; | |
• | deliver a competitive “total reward” package to attract and retain staff in a highly competitive industry; and | |
• | create a direct link between company results and employee rewards. |
151
Table of Contents
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
Equity | ||||||||||||||||||||||||||||||||||||
Incentive | ||||||||||||||||||||||||||||||||||||
Equity | Plan | |||||||||||||||||||||||||||||||||||
Incentive | Awards: | |||||||||||||||||||||||||||||||||||
Awards: | Market | |||||||||||||||||||||||||||||||||||
Equity | Number | or Payout | ||||||||||||||||||||||||||||||||||
Incentive | Market | of | Value of | |||||||||||||||||||||||||||||||||
Plan | Value of | Unearned | Unearned | |||||||||||||||||||||||||||||||||
Awards; | Shares or | Shares, | Shares, | |||||||||||||||||||||||||||||||||
Number of | Number of | Number of | Number | Units of | Units or | Units or | ||||||||||||||||||||||||||||||
Securities | Securities | Securities | of Shares | Stock | Other | Other | ||||||||||||||||||||||||||||||
Underlying | Underlying | Underlying | Option | or Units of | that Have | Rights | Rights | |||||||||||||||||||||||||||||
Unexercised | Unexercised | Unexercised | Exercise | Option | Stock that | Not | that Have | that Have | ||||||||||||||||||||||||||||
Options (#) | Options (#) | Unearned | Price | Expiration | Have Not | Vested | Not | Not | ||||||||||||||||||||||||||||
Name | Exercisable(1) | Unexercisable(1) | Options (#) | (15) | Date | Vested (#) | ($) | Vested (#) | Vested ($) | |||||||||||||||||||||||||||
Roger D. Linquist | 8,385 | (2) | — | — | $ | 16.46 | 3/11/2014 | — | — | — | — | |||||||||||||||||||||||||
President and CEO | 173,600 | (3) | — | — | $ | 21.40 | 8/3/2015 | — | — | — | — | |||||||||||||||||||||||||
403 | (4) | 403 | (4) | — | $ | 21.46 | 12/30/2015 | — | — | — | — | |||||||||||||||||||||||||
171,300 | (11) | $ | 21.46 | 3/14/2016 | ||||||||||||||||||||||||||||||||
750,000 | (13) | $ | 34.00 | 12/22/2016 | ||||||||||||||||||||||||||||||||
J. Braxton Carter | 2,323 | (2) | — | — | $ | 16.46 | 3/11/2014 | — | — | — | — | |||||||||||||||||||||||||
SVP/CFO | 20,000 | (5) | — | — | $ | 18.94 | 3/31/2015 | — | — | — | — | |||||||||||||||||||||||||
55,019 | (3) | — | — | $ | 21.40 | 8/3/2015 | — | — | — | — | ||||||||||||||||||||||||||
1,172 | (3) | 1,509 | (3) | — | $ | 21.40 | 8/3/2015 | |||||||||||||||||||||||||||||
111 | (4) | 112 | (4) | — | $ | 21.46 | 12/30/2015 | |||||||||||||||||||||||||||||
— | 45,600 | (11) | $ | 21.46 | 3/14/2016 | |||||||||||||||||||||||||||||||
— | 200,000 | (14) | $ | 34.00 | 12/22/2016 | |||||||||||||||||||||||||||||||
Robert A. Young | 2,637 | (2) | — | — | $ | 16.46 | 3/11/2014 | — | — | — | — | |||||||||||||||||||||||||
EVP Market | 42,131 | (3) | 54,169 | (3) | — | $ | 21.40 | 8/3/2015 | — | — | — | — | ||||||||||||||||||||||||
Operations | 127 | (4) | 127 | (4) | — | $ | 21.46 | 12/30/2015 | — | — | — | — | ||||||||||||||||||||||||
— | 76,200 | (11) | $ | 21.46 | 3/14/2016 | |||||||||||||||||||||||||||||||
— | 200,000 | (14) | $ | 34.00 | 12/22/2016 | |||||||||||||||||||||||||||||||
Mark A. Stachiw | 40,000 | (6) | — | — | $ | 16.41 | 10/12/2014 | — | — | — | — | |||||||||||||||||||||||||
SVP/General Counsel | 12,500 | (7) | 27,500 | (7) | — | $ | 21.46 | 9/21/2015 | — | — | — | — | ||||||||||||||||||||||||
and Secretary | 5,536 | (4) | 5,536 | (4) | — | $ | 21.46 | 12/30/2015 | — | — | — | — | ||||||||||||||||||||||||
— | 6,300 | (11) | $ | 21.46 | 3/14/2016 | |||||||||||||||||||||||||||||||
— | 20,000 | (11) | $ | 21.46 | 3/14/2016 | |||||||||||||||||||||||||||||||
150,000 | (14) | $ | 34.00 | 12/22/2016 | ||||||||||||||||||||||||||||||||
Malcolm M. Lorang | 95,148 | (8) | — | — | $ | 0.23 | 7/1/2009 | — | — | — | — | |||||||||||||||||||||||||
SVP/Chief | 12,264 | (9) | — | — | $ | 4.70 | 7/1/2012 | — | — | — | — | |||||||||||||||||||||||||
Technology | 8,036 | (9) | — | — | $ | 5.76 | 7/1/2012 | — | — | — | — | |||||||||||||||||||||||||
Officer | 7,031 | (10) | — | — | $ | 4.70 | 10/30/2013 | — | — | — | — | |||||||||||||||||||||||||
15,469 | (10) | — | — | $ | 9.38 | 10/30/2013 | — | — | — | — | ||||||||||||||||||||||||||
7,687 | (2) | — | — | $ | 16.46 | 3/11/2014 | — | — | — | — | ||||||||||||||||||||||||||
22,900 | (3) | — | — | $ | 21.40 | 8/3/2015 | — | — | — | — | ||||||||||||||||||||||||||
2,863 | (4) | 2,863 | (4) | — | $ | 21.46 | 12/30/2015 | — | — | — | — | |||||||||||||||||||||||||
18,200 | (11) | $ | 21.46 | 3/14/2016 | ||||||||||||||||||||||||||||||||
20,000 | (11) | $ | 21.46 | 3/14/2016 | ||||||||||||||||||||||||||||||||
50,000 | (12) | $ | 34.00 | 12/22/2016 |
(1) | Unless otherwise noted, options vest over a period of four years as follows: twenty-five percent (25%) of the option vests on the first anniversary of service beginning on the “Vesting Commencement Date” (as defined in the Employee Non-Qualified Option Grant Agreement). The remainder vests upon the optionee’s completion of each additional month of service, in a series of thirty-six (36) successive, equal monthly installments beginning with the first anniversary of the Vesting Commencement Date. |
(2) | Options granted on March 11, 2004. Options repriced from $14.90 to $16.46 on December 28, 2005. |
(3) | Options granted on August 3, 2005. Twenty-five percent (25%) of the option vested on March 31, 2006 and the remainder vests upon the optionee’s completion of each additional month of service in a series of thirty-six (36) successive equal monthly installments. |
(4) | Options granted on December 30, 2005 and vest over a one-year period as follows: fifty percent (50%) of the underlying shares vest on January 1, 2006 and the remaining fifty percent (50%) of the shares vest on January 1, 2007. |
152
Table of Contents
(5) | Options granted on March 31, 2005. Twenty-five percent (25%) of the option vested on March 31, 2006 and the remainder vests upon the optionee’s completion of each additional month of service in a series of thirty-six (36) successive equal monthly installments. |
(6) | Options granted on October 12, 2004. Options repriced from $11.92 to $16.41 on December 28, 2005. |
(7) | Options granted on September 21, 2005. |
(8) | Options granted July 1, 1999 and vested ratably in a series of forty eight (48) successive equal monthly installments ending July 1, 2003. |
(9) | Options granted on July 1, 2002. Options repriced from $4.70 to $5.76 on December 28, 2005. |
(10) | Options granted on October 30, 2003. Twenty-five percent (25%) of the option vested on September 16, 2004 and the remainder vests upon the optionee’s completion of each additional month of service in a series of thirty-six (36) successive, equal monthly installments. Options repriced from $4.70 to $9.38 on December 28, 2005. |
(11) | Options granted on March 14, 2006. |
(12) | Options granted on December 22, 2006 and vest over a period of 2 years ending December 22, 2008. |
(13) | Options granted on December 22, 2006 and vest over a period of 3 years ending December 22, 2009. |
(14) | Options granted on December 22, 2006. |
(15) | See “— Discussion of Summary Compensation and Plan-Based Awards Tables — Option Repricing” for a discussion of the repricing of certain options granted to our named executive officers. |
Option Awards | Stock Awards | |||||||||||||||
Number of | Number of | |||||||||||||||
Shares | Shares | Value | ||||||||||||||
Acquired on | Value Realized | Acquired on | Realized | |||||||||||||
Exercise | on Exercise | Vesting | on Vesting | |||||||||||||
Name & Principal Position | (#) | ($) | (#) | ($) | ||||||||||||
Roger D. Linquist — President and CEO | — | — | — | — | ||||||||||||
J. Braxton Carter — SVP/CFO(1) | — | — | — | — | ||||||||||||
Robert A. Young — EVP Market Operations | — | — | — | — | ||||||||||||
Mark A. Stachiw — SVP/General Counsel and Secretary(1) | — | — | — | — | ||||||||||||
Malcolm M. Lorang — SVP/Chief Technology Officer(2) | — | — | — | — |
(1) | Mr. Stachiw became a Senior Vice President during 2006. |
(2) | Mr. Lorang became a Senior Vice President during 2006. |
153
Table of Contents
• | an annual retainer of $15,000, plus $2,000 if such member serves as the chairman of the finance, compensation or the nominating and governance committee of the board of directors and $5,000 if such member serves as chairman of the audit committee of the board of directors, which amount may be payable in cash, common stock, or a combination of cash and common stock; |
• | any payments of annual retainer made in common stock shall be for a number of shares that is equal to (a) the portion of the annual retainer to be paid in common stock divided by the fair market value of the common stock on the date of payment of the annual retainer (b) times three. | |
• | an initial grant of 40,000 options to purchase common stock plus an additional 10,000 or 3,000 options to purchase common stock if the member serves as the chairman of the audit committee or as chairman of any of the other committees of the board of directors, respectively; | |
• | an annual grant of 10,000 options to purchase common stock plus an additional 5,000 or 2,000 options to purchase common stock if the member serves as the chairman of the audit committee or as chairman of any of the other committees of the board of directors, respectively; | |
• | $1,500 for each in-person board of directors meeting and $750 for each telephonic meeting of the board of directors attended; | |
• | $1,500 for each in-person Committee Paid Event (as defined in our Non-Employee Director Remuneration Plan) and $750 for each telephonic Committee Paid Event attended and the chairman of the committee receives an additional $500 for each in-person Committee Paid Event and $250 for each telephonic Committee Paid Event attended. |
154
Table of Contents
Change in | ||||||||||||||||||||||||||||
Pension Value & | ||||||||||||||||||||||||||||
Non-qualified | ||||||||||||||||||||||||||||
Fees Earned | Non-Equity | Deferred | ||||||||||||||||||||||||||
or Paid | Stock | Option | Incentive Plan | Compensation | All Other | |||||||||||||||||||||||
Name | in Cash | Awards(1) | Awards(2) | Compensation | Earnings | Compensation | Total | |||||||||||||||||||||
W. Michael Barnes(3) | $ | 29,750 | $ | 59,981 | — | — | — | $ | 89,731 | |||||||||||||||||||
Harry F. Hopper, III(4) | $ | 13,250 | $ | 44,980 | — | — | — | $ | 58,230 | |||||||||||||||||||
Arthur C. Patterson(5) | $ | 44,250 | $ | 50,989 | — | — | — | $ | 95,239 | |||||||||||||||||||
John Sculley(6) | $ | 23,000 | $ | 50,960 | — | — | — | $ | 73,960 | |||||||||||||||||||
James F. Wade(7) | $ | 12,000 | $ | 50,989 | — | — | — | $ | 62,989 | |||||||||||||||||||
Walker C. Simmons(8) | $ | 5,250 | $ | 44,980 | — | — | — | $ | 50,230 | |||||||||||||||||||
C. Kevin Landry(9) | $ | 64,055 | $ | 0 | — | — | — | $ | 64,055 | |||||||||||||||||||
James N. Perry, Jr.(10) | $ | 45,250 | $ | 61,719 | — | — | — | $ | 106,969 |
(1) | Stock awards issued to members of the board of directors are recorded at market value on the date of issuance. |
(2) | The value of the option awards is determined using the fair value recognition provisions of SFAS 123(R), which was effective January 1, 2006. This table will be updated for these values in a subsequent amendment to this Form S-1. |
(3) | Includes 2,795 stock awards and 65,829 option awards outstanding as of December 31, 2006. |
(4) | Includes 2,096 stock awards and 0 option awards outstanding as of December 31, 2006. Mr. Hopper resigned as a director in May 2006. Mr Hopper’s resignation was not caused by a disagreement with us or management. |
(5) | Includes 2,376 stock awards and 125,508 option awards outstanding as of December 31, 2006. |
(6) | Includes 2,326 stock awards and 193,476 option awards outstanding as of December 31, 2006. |
(7) | Includes 2,376 stock awards and 98,435 option awards outstanding as of December 31, 2006. |
(8) | Includes 1,730 stock awards and 40,000 option awards outstanding as of December 31, 2006. Mr. Simmons previously served as a director from December 2004 until March 2005, when he resigned. Mr. Simmons’ resignation was not caused by a disagreement with us or management. Mr. Simmons was reappointed to the board in June 2006. |
(9) | Includes 0 stock awards and 50,000 option awards outstanding as of December 31, 2006. |
(10) | Includes 2,876 stock awards and 53,000 option awards outstanding as of December 31, 2006. |
(11) | The value of the option awards is determined using the fair value recognition provisions of SFAS 123(R), which was effective January 1, 2006. This table will be updated for these values in a subsequent amendment to this Form S-1 once the 2006 audit is complete. |
(a) | Represents the incremental fair value as calculated in accordance with SFAS 123 of certain previously awarded options which were repriced on December 28, 2005. |
155
Table of Contents
• | An extension of time to exercise vested stock options, if any; | |
• | Salary for the remaining term of the agreement, if any; |
• | Awards under the annual cash incentive plan paid at target for the remaining term of the agreement, if any; |
• | An amount equal to twelve months of his salary; |
• | An amount equal to twelve months of awards under the annual cash incentive plan paid at target; and |
• | A lump sum amount for health benefits equal to the COBRA premiums for the number of months in the remaining term of the agreement, if any, plus twelve months. |
156
Table of Contents
• | each of our directors; | |
• | each named executive officer; | |
• | all of our directors and executive officers as a group; | |
• | each person known by us to beneficially own more than 5% of the outstanding shares of our common stock, Series D Preferred Stock or Series E Preferred Stock; and | |
• | the selling stockholders |
157
Table of Contents
Common Stock | Shares of | Common Stock | ||||||||||||||||||
Beneficially Owned | Common | Beneficially Owned | ||||||||||||||||||
Prior to this Offering | Stock Being | After this Offering | ||||||||||||||||||
Number | Percentage | Offered | Number | Percentage | ||||||||||||||||
Directors and Named Executive Officers(1): | ||||||||||||||||||||
Roger D. Linquist(2) | 2,927,003 | 2.74 | % | |||||||||||||||||
J. Braxton Carter(3) | 96,298 | * | ||||||||||||||||||
Robert A. Young(4) | 83,122 | * | ||||||||||||||||||
Mark A. Stachiw(5) | 57,202 | * | ||||||||||||||||||
Malcolm M. Lorang(6) | 230,798 | * | ||||||||||||||||||
John Sculley(7) | 449,805 | * | ||||||||||||||||||
James F. Wade(8)(16) | 9,014,427 | 8.45 | % | |||||||||||||||||
Arthur C. Patterson(9) | 12,488,868 | 11.70 | % | |||||||||||||||||
W. Michael Barnes(10) | 60,573 | * | ||||||||||||||||||
C. Kevin Landry(11)(18) | 14,125,118 | 13.24 | % | |||||||||||||||||
James N. Perry, Jr.(12)(17) | 14,088,382 | 13.20 | % | |||||||||||||||||
Walker C. Simmons(13) | — | — | ||||||||||||||||||
All directors and executive officers as a group (12 persons) | 53,621,596 | 50.25 | % |
Common Stock | Shares of | Common Stock | ||||||||||||||||||
Beneficially Owned | Common | Beneficially Owned | ||||||||||||||||||
Prior to this Offering | Stock Being | After this Offering | ||||||||||||||||||
Number | Percentage | Offered | Number | Percentage | ||||||||||||||||
Beneficial Owners of More Than 5%: | ||||||||||||||||||||
Accel Partners, et al(14) | 12,014,788 | 11.26 | % | |||||||||||||||||
428 University Ave. Palo Alto, CA 94301 | ||||||||||||||||||||
First Plaza Group Trust(15) | 7,823,783 | 7.33 | % | |||||||||||||||||
One Chase Manhattan Plaza, 17th Floor New York, NY 10005 | ||||||||||||||||||||
M/C Venture Partners, et al(16)(8) | 9,014,427 | 8.45 | % | |||||||||||||||||
75 State Street Boston, MA 02109 | ||||||||||||||||||||
Madison Dearborn Capital Partners IV, | 14,088,382 | 13.20 | % | |||||||||||||||||
L.P.(17)(12) Three First National Plaza, Suite 3800 Chicago, IL 60602 | ||||||||||||||||||||
TA Associates, et al(18)(11) | 14,125,118 | 13.24 | % | |||||||||||||||||
John Hancock Tower — 56th Floor 200 Clarendon Street Boston, MA 02116 |
* | Represents less than 1% | |
(1) | Unless otherwise indicated, the address of each person is c/o MetroPCS Communications, Inc., 8144 Walnut Hill Lane, Suite 800, Dallas, Texas 75231. | |
(2) | Includes 182,388 shares of common stock issuable upon exercise of options granted under our equity compensation plans, 1,507,624 shares of common stock held directly by Mr. Linquist, and 1,236,991 shares of common stock held by Baltimore 8801 X Ltd. Partners, a partnership in which Mr. Linquist is a general partner. | |
(3) | Includes 78,514 shares of common stock issuable upon exercise of options granted under our equity compensation plans. | |
(4) | Includes 40,882 shares of common stock issuable upon exercise of options granted under our equity compensation plans. | |
(5) | Includes 57,202 shares of common stock issuable upon exercise of options granted under our equity compensation plans. |
158
Table of Contents
(6) | Includes 171,398 shares of common stock issuable upon exercise of options granted under our equity compensation plans. | |
(7) | Includes 183,669 shares of common stock issuable upon exercise of options granted under our equity compensation plans and 67,913 shares of common stock issuable upon the conversion of Series D Preferred Stock, which includes 14,158 shares issuable pursuant to accrued dividends. | |
(8) | Includes 8,915,395 shares of common stock issuable upon the conversion of Series D Preferred Stock, which includes 1,850,718 shares issuable pursuant to accrued dividends, and 94,419 shares of common stock issuable upon exercise of options granted under our equity compensation plans. All shares attributed to Mr. Wade are owned directly by M/C Venture Investors, LLC, M/C Venture Partners IV, LP, M/C Venture Partners V, LP, and Chestnut Venture Partners LP, with which Mr. Wade is affiliated and may be deemed to be a member of a “group” (hereinafter referred to as M/C Venture Partners, et al) underSection 13d-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and may be deemed to share votingand/or investment power with respect to the shares owned by such entities. Mr. Wade disclaims beneficial ownership of such shares, except to the extent of his interest in such shares arising from his interests in M/C Venture Partners, et al. | |
(9) | Includes 112,508 shares of common stock issuable upon exercise of options granted to Mr. Patterson under our equity compensation plans and 2,796 shares of common stock held directly by Mr. Patterson. All other shares attributed to Mr. Patterson, including 3,609 shares of common stock issuable upon exercise of stock options granted under our equity compensation plans and 4,422,149 shares of common stock issuable upon the conversion of Series D Preferred Stock, which includes 918,038 shares issuable pursuant to accrued dividends, are owned directly by Accel Internet Fund III L.P., Accel Investors ’94 L.P., Accel Investors ’99 L.P., Accel IV L.P., Accel Keiretsu L.P., Accel VII L.P., ACP Family Partnership L.P., Ellmore C. Patterson Partners, BrandyTrust Private Equity Partners L.P., Brandywine-Anne Hyde Patterson c/o A.O. Choate, Brandywine-Anne Hyde Patterson Trust U/A 1-31-23, Brandywine-Caroline Choate de Chazal Trust U/A 2-10-56, Brandywine-David C. Patterson U/A 2-10-56, Brandywine-Jane C. Beck Trust U/A 2-10-56, Brandywine-Michael E. Patterson Trust U/A 2-10-56, Brandywine-Robert E. Patterson Trust U/A 2-10-56 and Brandywine-Thomas HC Patterson Trust U/A 2-10-56, with which Mr. Patterson is affiliated and may be deemed to be a member of a “group” underSection 13d-3 of the Exchange Act and may be deemed to share votingand/or investment power with respect to the shares owned by such entities. Mr. Patterson disclaims beneficial ownership of such shares, except to the extent of his interest in such shares arising from his interests in Accel Partners, et al. | |
(10) | Includes 54,489 shares of common stock issuable upon exercise of options granted under our equity compensation plans. | |
(11) | Includes 18,332 shares of common stock issuable upon exercise of stock options granted to Mr. Landry under our equity compensation plans. All other shares attributed to Mr. Landry, including 5,368,858 shares of common stock issuable upon the conversion of Series D Preferred Stock, which includes 1,099,268 shares issuable pursuant to accrued dividends, and 986,350 shares of common stock issuable upon the conversion of Series E Preferred Stock, which includes 60,426 shares of common stock issuable pursuant to accrued dividends are owned directly by TA Atlantic and Pacific V L.P., TA Investors II L.P., TA IX L.P., TA Strategic Partners Fund A L.P., TA Strategic Partners Fund B L.P. and TA/Atlantic and Pacific IV L.P., with which Mr. Landry is affiliated and may be deemed to be a member of a “group” (hereinafter referred to as TA Associates, et al) underSection 13d-3 of the Exchange Act and may be deemed to share votingand/or investment power with respect to the shares owned by such entities. Mr. Landry disclaims beneficial ownership of such shares, except to the extent of his interest in such shares arising from his interests in TA Associates, et al. | |
(12) | Includes 14,444 shares of common stock issuable upon exercise of options granted to Mr. Perry under our equity compensation plans. All other shares attributed to Mr. Perry, including 5,351,813 shares of common stock issuable upon the conversion of Series D Preferred Stock, which includes 1,095,304 shares issuable pursuant to accrued dividends, 986,352 shares of common stock issuable upon the conversion of Series E Preferred Stock, which includes 60,426 shares of common stock issuable pursuant to accrued dividends, and 3,611 shares of common stock issuable upon exercise of options granted under our equity compensation plans are held directly by Madison Dearborn Capital Partners IV, L.P., with which Mr. Perry is affiliated and may be deemed to be a member of a “group” (hereinafter referred to as Madison Dearborn Capital Partners IV, L.P., et al) underSection 13d-3 of the Exchange Act and may be deemed to share votingand/or investment power with respect to the shares owned by such entities. Mr. Perry disclaims beneficial ownership of such shares, except to the extent of his interest in such shares arising from his interests in Madison Dearborn Capital Partners IV, L.P., et al. | |
(13) | Walker Simmons does not own any shares or retain options granted under our equity compensation plans. | |
(14) | Accel Partners, et al (consisting of Accel Internet Fund III L.P., Accel Investors ’94 L.P., Accel Investors ’99 L.P., Accel IV LP, Accel Keiretsu L.P., Accel VII L.P., ACP Family Partnership L.P. and Ellmore C. Patterson Partners), may be deemed to be a “group” underSection 13d-3 of the Exchange Act. Includes 4,422,149 shares of common stock issuable upon the conversion of Series D Preferred Stock, which includes 918,038 shares issuable pursuant to accrued dividends, 116,117 shares of common stock issuable upon exercise of options granted under our equity compensation plans, 112,508 of which are held directly by Arthur C. Patterson, as discussed in Note 9 above. | |
(15) | Includes 6,480,480 shares of common stock issuable upon the conversion of Series D Preferred Stock, which includes 279,049 shares issuable pursuant to accrued dividends. | |
(16) | M/C Venture Partners, et al (consisting of M/C Venture Investors, LLC, M/C Venture Partners IV, LP, M/C Venture Partners V, LP, and Chestnut Venture Partners LP) may be deemed to be a “group” underSection 13d-3 of the Exchange Act. Includes an aggregate of 94,419 shares of common stock issuable upon exercise of options granted under our equity compensation plans and |
159
Table of Contents
8,915,395 shares of common stock issuable upon the conversion of Series D Preferred Stock, which includes 1,850,718 shares issuable pursuant to accrued dividends. | ||
(17) | Includes 18,055 shares of common stock issuable upon exercise of options granted under our equity compensation plans, 14,444 of which are held directly by Mr. Perry, 5,351,813 shares of common stock issuable upon the conversion of Series D Preferred Stock, which includes 1,095,304 shares issuable pursuant to accrued dividends, and 986,352 shares of common stock issuable upon the conversion of Series E Preferred Stock, which includes 60,426 shares of common stock issuable pursuant to accrued dividends. | |
(18) | TA Associates, et al (consisting of TA Atlantic and Pacific V L.P., TA Investors II L.P., TA IX L.P., TA Strategic Partners Fund A L.P., TA Strategic Partners Fund B L.P. and TA/Atlantic and Pacific IV L.P.) may be deemed to be a “group” underSection 13d-3 of the Exchange Act. Includes 18,332 shares of common stock issuable upon exercise of options granted under our equity compensation plans and held directly by Mr. Landry, 5,368,858 shares of common stock issuable upon the conversion of Series D Preferred Stock, which includes 1,099,268 shares issuable pursuant to accrued dividends, and 986,350 shares of common stock issuable upon the conversion of Series E Preferred Stock, which includes 60,426 shares of common stock issuable pursuant to accrued dividends. |
160
Table of Contents
161
Table of Contents
162
Table of Contents
• | shares of common stock, par value $0.0001 per share; and | |
• | shares of preferred stock, par value $0.0001 per share. |
• | 75% of the fair market value of the common stock being redeemed, if the holder caused the FCC violation; or | |
• | 100% of the fair market value of the common stock being redeemed, if the FCC violation was not caused by the holder. |
163
Table of Contents
164
Table of Contents
• | before such time the board of directors of the corporation approved either the business combination or the transaction in which the person became an interested stockholder; | |
• | upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested person owns at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding shares owned by persons who are directors and also officers of the corporation and by certain employee stock plans; or | |
• | at or after such time the business combination is approved by the board of directors of the corporation and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 662/3% of the outstanding voting stock of the corporation that is not owned by the interested stockholder. |
• | who, together with affiliates and associates, owns 15% or more of the corporation’s outstanding voting stock; or | |
• | who is an affiliate or associate of the corporation and, together with his or her affiliates and associates, has owned 15% or more of the corporation’s outstanding voting stock within three years. |
• | eliminate the personal liability of directors for monetary damages resulting from breaches of fiduciary duty to the extent permitted by Delaware law, except (i) for any breach of a director’s duty of loyalty to the company or its stockholders, (ii) for acts or omissions not in good faith or which involved intentional misconduct or a knowing violation of law, or (iii) for any transaction from which the director derived an improper personal benefit; and | |
• | indemnify directors and officers to the fullest extent permitted by Delaware law, including in circumstances in which indemnification is otherwise discretionary. |
165
Table of Contents
166
Table of Contents
• | 1.0% of the number of then outstanding shares of common stock, which will equal approximately shares after the consummation of this offering; or | |
• | the average weekly trading volume of the common stock during the four calendar weeks preceding the filing of the Form 144 with respect to such sale. |
167
Table of Contents
168
Table of Contents
• | banks, insurance companies or other financial institutions; | |
• | U.S. expatriates; | |
• | tax-exempt organizations; | |
• | tax-qualified retirement plans; | |
• | dealers in securities or currencies; | |
• | traders in securities that elect to use amark-to-market method of accounting for their securities holdings; or | |
• | persons that will hold common stock as a position in a hedging transaction, “straddle” or “conversion transaction” for tax purposes. |
• | a citizen or resident of the United States; | |
• | a corporation (including any entity treated as a corporation for U.S. federal income tax purposes) or partnership (including any entity treated as a partnership for U.S. federal income tax purposes) created or organized under the laws of the United States or of any political subdivision of the United States; | |
• | an estate the income of which is subject to U.S. federal income taxation regardless of its source; or | |
• | a trust, (i) the administration of which is subject to the primary supervision of a U.S. court and one or more U.S. persons have the authority to control all substantial decisions of the trust, or other trusts considered U.S. persons for U.S. federal income tax purposes, or (ii) that has a valid election in effect to be treated as a U.S. person. |
169
Table of Contents
• | the gain is effectively connected with thenon-U.S. holder’s conduct of a trade or business in the U.S. or, if a tax treaty applies, attributable to a U.S. permanent establishment maintained by suchnon-U.S. holder; | |
• | thenon-U.S. holder is a nonresident alien individual present in the United States for 183 days or more in the taxable year of the disposition and certain other requirements are met; or | |
• | we are a “United States real property holding corporation” or “USRPHC” for U.S. federal income tax purposes at any time during the shorter of the period during which you hold our common stock or the five-year period ending on the date you dispose of our common stock and either (i) thenon-U.S. holder has not held more than 5% of our outstanding common stock at any time during such period, or (ii) our common stock ceases to be regularly traded on an established securities market. |
170
Table of Contents
171
Table of Contents
Number of | ||||
Underwriter | Shares | |||
Bear, Stearns & Co. Inc. | ||||
Banc of America Securities LLC | ||||
Merrill Lynch, Pierce, Fenner & Smith Incorporated | ||||
Morgan Stanley & Co. Incorporated | ||||
UBS Securities LLC | ||||
Thomas Weisel Partners LLC | ||||
Wachovia Capital Markets, LLC | ||||
Raymond James | ||||
Total | ||||
172
Table of Contents
Total | ||||||||||||
Per | No | Full | ||||||||||
Share | Exercise | Exercise | ||||||||||
Public offering price | $ | $ | $ | |||||||||
Underwriting discounts | $ | $ | $ | |||||||||
Proceeds, before expenses, to MetroPCS | $ | $ | $ | |||||||||
Proceeds, before expenses, to the selling stockholders | $ | $ | $ |
173
Table of Contents
• | Over-allotment involves syndicate sales in excess of the offering size, which creates a syndicate short position. | |
• | Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum. | |
• | Syndicate covering transactions involve purchases of the common stock in the open market after the distribution has been completed in order to cover syndicate short positions. | |
• | Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the common stock originally sold by the syndicate member is purchased in a syndicate covering transaction to cover syndicate short positions. |
174
Table of Contents
• | it has not made or will not make an offer of shares to the public in the United Kingdom within the meaning of section 102B of the Financial Services and Markets Act 2000 (as amended) (FSMA) except to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities or otherwise in circumstances which do not require the publication by us of a prospectus pursuant to the Prospectus Rules of the Financial Services Authority (FSA); | |
• | it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of section 21 of FSMA) to persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 or in circumstances in which section 21 of FSMA does not apply to us; and | |
• | it has complied with and will comply with all applicable provisions of FSMA with respect to anything done by it in relation to the shares in, from or otherwise involving the United Kingdom. |
• | to legal entities which are authorised or regulated to operate in the financial markets or, if not so authorised or regulated, whose corporate purpose is solely to invest in securities; |
175
Table of Contents
• | to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts; or | |
• | in any other circumstances which do not require the publication by the issuer of a prospectus pursuant to Article 3 of the Prospectus Directive. |
176
Table of Contents
177
Table of Contents
178
Table of Contents
Page | ||||
Audited Consolidated Financial Statements: | ||||
F-2 | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-7 | ||||
F-9 | ||||
F-10 | ||||
Unaudited Interim Condensed Consolidated Financial Statements: | ||||
F-52 | ||||
F-53 | ||||
F-54 | ||||
F-55 |
F-1
Table of Contents
MetroPCS Communications, Inc.
Dallas, Texas
August 8, 2006 (January 3, 2007 as to Note 19)
F-2
Table of Contents
February 25, 2004, except for “Restatement of Consolidated Financial Statements” under Note 2 for which the date is May 5, 2006 and for “Earnings Per Share” under Note 2 and Note 17 and “Guarantor Subsidiaries” under Note 19 for which the date is December 20, 2006
F-3
Table of Contents
2005 | 2004 | |||||||
(In Thousands, Except Share and Per Share Information) | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 112,709 | $ | 22,477 | ||||
Short-term investments | 390,422 | 36,964 | ||||||
Inventories, net | 39,431 | 33,717 | ||||||
Accounts receivable (net of allowance for uncollectible accounts of $2,383 and $2,323 at December 31, 2005 and 2004, respectively) | 16,028 | 9,101 | ||||||
Prepaid expenses | 21,430 | 7,023 | ||||||
Deferred charges | 13,270 | 9,225 | ||||||
Deferred tax asset | 2,122 | 3,574 | ||||||
Security deposits | 72 | 25,007 | ||||||
Other current assets | 16,618 | 9,470 | ||||||
Total current assets | 612,102 | 156,558 | ||||||
Property and equipment, net | 831,490 | 636,368 | ||||||
Restricted cash and investments | 2,920 | 2,293 | ||||||
Long-term investments | 5,052 | — | ||||||
PCS licenses | 681,299 | 154,144 | ||||||
Microwave relocation costs | 9,187 | 9,566 | ||||||
Other assets | 16,931 | 6,467 | ||||||
Total assets | $ | 2,158,981 | $ | 965,396 | ||||
CURRENT LIABILITIES: | ||||||||
Accounts payable and accrued expenses | $ | 174,220 | $ | 105,541 | ||||
Current maturities of long-term debt | 2,690 | 14,310 | ||||||
Deferred revenue | 56,560 | 40,424 | ||||||
Other current liabilities | 2,147 | 2,745 | ||||||
Total current liabilities | 235,617 | 163,020 | ||||||
Long-term debt, net | 902,864 | 170,689 | ||||||
Deferred tax liabilities | 146,053 | 73,101 | ||||||
Deferred rents | 14,739 | 10,331 | ||||||
Redeemable minority interest | 1,259 | 1,008 | ||||||
Other long-term liabilities | 20,858 | 21,403 | ||||||
Total liabilities | 1,321,390 | 439,552 | ||||||
COMMITMENTS AND CONTINGENCIES (See Note 10) | ||||||||
SERIES D CUMULATIVE CONVERTIBLE REDEEMABLE PARTICIPATING PREFERRED STOCK, par value $0.0001 per share, 4,000,000 shares designated, 3,500,993 shares issued and outstanding at December 31, 2005 and 2004; Liquidation preference of $426,382 and $405,376 at December 31, 2005 and 2004, respectively | 421,889 | 400,410 | ||||||
SERIES E CUMULATIVE CONVERTIBLE REDEEMABLE PARTICIPATING PREFERRED STOCK, par value $0.0001 per share, 500,000 shares designated, 500,000 shares issued and outstanding at December 31, 2005; Liquidation preference of $51,019 at December 31, 2005 | 47,796 | — | ||||||
STOCKHOLDERS’ EQUITY: | ||||||||
Preferred stock, par value $0.0001 per share, 25,000,000 and 5,000,000 shares authorized at December 31, 2005 and 2004, 4,000,000 of which have been designated as Series D Preferred Stock and 500,000 of which have been designated as Series E Preferred Stock; no shares of preferred stock other than Series D & E Preferred Stock (presented above) issued and outstanding at December 31, 2005 and 2004 | — | — | ||||||
Common Stock, par value $0.0001 per share, 300,000,000 shares authorized, 51,775,698 and 43,431,927 shares issued and outstanding at December 31, 2005 and 2004, respectively | 5 | 4 | ||||||
Additional paid-in capital | 149,594 | 88,493 | ||||||
Subscriptions receivable | — | (98 | ) | |||||
Deferred compensation | (178 | ) | (3,331 | ) | ||||
Retained earnings | 216,702 | 40,637 | ||||||
Accumulated other comprehensive income (loss) | 1,783 | (271 | ) | |||||
Total stockholders’ equity | 367,906 | 125,434 | ||||||
Total liabilities and stockholders’ equity | $ | 2,158,981 | $ | 965,396 | ||||
F-4
Table of Contents
2005 | 2004 | 2003 | ||||||||||
(In Thousands, Except Share | ||||||||||||
and Per Share Information) | ||||||||||||
REVENUES: | ||||||||||||
Service revenues | $ | 872,100 | $ | 616,401 | $ | 369,851 | ||||||
Equipment revenues | 166,328 | 131,849 | 81,258 | |||||||||
Total revenues | 1,038,428 | 748,250 | 451,109 | |||||||||
OPERATING EXPENSES: | ||||||||||||
Cost of service (exclusive of depreciation and amortization expense of $81,196, $57,572 and $39,379, shown separately below) | 283,212 | 200,806 | 122,211 | |||||||||
Cost of equipment | 300,871 | 222,766 | 150,832 | |||||||||
Selling, general and administrative expenses (exclusive of depreciation and amortization expense of $6,699, $4,629 and $3,049, shown separately below) | 162,476 | 131,510 | 94,073 | |||||||||
Depreciation and amortization | 87,895 | 62,201 | 42,428 | |||||||||
(Gain) loss on disposal of assets | (218,203 | ) | 3,209 | 392 | ||||||||
Total operating expenses | 616,251 | 620,492 | 409,936 | |||||||||
Income from operations | 422,177 | 127,758 | 41,173 | |||||||||
OTHER EXPENSE (INCOME): | ||||||||||||
Interest expense | 58,033 | 19,030 | 11,115 | |||||||||
Accretion of put option in majority-owned subsidiary | 252 | 8 | — | |||||||||
Interest income | (8,658 | ) | (2,472 | ) | (996 | ) | ||||||
Loss (gain) on extinguishment of debt | 46,448 | (698 | ) | (603 | ) | |||||||
Total other expense | 96,075 | 15,868 | 9,516 | |||||||||
Income before provision for income taxes and cumulative effect of change in accounting principle | 326,102 | 111,890 | 31,657 | |||||||||
Provision for income taxes | (127,425 | ) | (47,000 | ) | (16,179 | ) | ||||||
Income before cumulative effect of change in accounting principle | 198,677 | 64,890 | 15,478 | |||||||||
Cumulative effect of change in accounting principle, net of tax | — | — | (120 | ) | ||||||||
Net income | 198,677 | 64,890 | 15,358 | |||||||||
Accrued dividends on Series D Preferred Stock | (21,006 | ) | (21,006 | ) | (18,493 | ) | ||||||
Accrued dividends on Series E Preferred Stock | (1,019 | ) | — | — | ||||||||
Accretion on Series D Preferred Stock | (473 | ) | (473 | ) | (473 | ) | ||||||
Accretion on Series E Preferred Stock | (114 | ) | — | — | ||||||||
Net income (loss) applicable to common stock | $ | 176,065 | $ | 43,411 | $ | (3,608 | ) | |||||
F-5
Table of Contents
2005 | 2004 | 2003 | ||||||||||
(In Thousands, Except Share | ||||||||||||
and Per Share Information) | ||||||||||||
Net income | $ | 198,677 | $ | 64,890 | $ | 15,358 | ||||||
Other comprehensive income: | ||||||||||||
Unrealized losses onavailable-for-sale securities, net of tax | (28 | ) | (240 | ) | (72 | ) | ||||||
Unrealized gain on cash flow hedging derivative, net of tax | 1,914 | — | — | |||||||||
Reclassification adjustment for losses included in net income, net of tax | 168 | 41 | — | |||||||||
Comprehensive income | $ | 200,731 | $ | 64,691 | $ | 15,286 | ||||||
Net income (loss) per common share: (See Note 17) | ||||||||||||
Basic | ||||||||||||
Income (loss) before cumulative effect of change in accounting principle | $ | 2.12 | $ | 0.55 | $ | (0.10 | ) | |||||
Cumulative effect of change in accounting principle, net of tax | — | — | (0.00 | ) | ||||||||
Net income (loss) per common share — basic | $ | 2.12 | $ | 0.55 | $ | (0.10 | ) | |||||
Diluted | ||||||||||||
Income (loss) before cumulative effect of change in accounting principle | $ | 1.87 | $ | 0.46 | $ | (0.10 | ) | |||||
Cumulative effect of change in accounting principle, net of tax | — | — | (0.00 | ) | ||||||||
Net income (loss) per common share — diluted | $ | 1.87 | $ | 0.46 | $ | (0.10 | ) | |||||
Weighted average shares: | ||||||||||||
Basic | 45,117,465 | 42,240,684 | 36,443,962 | |||||||||
Diluted | 51,203,530 | 50,211,229 | 36,443,962 | |||||||||
F-6
Table of Contents
Accumulated | ||||||||||||||||||||||||||||||||
Additional | Other | |||||||||||||||||||||||||||||||
Number | Paid-In | Subscriptions | Deferred | Retained | Comprehensive | |||||||||||||||||||||||||||
of Shares | Amount | Capital | Receivable | Compensation | Earnings | Income (Loss) | Total | |||||||||||||||||||||||||
(In Thousands, Except Share Information) | ||||||||||||||||||||||||||||||||
BALANCE, December 31, 2002 | 36,423,302 | $ | 3 | $ | 89,811 | $ | (86 | ) | $ | (2,199 | ) | $ | (18,132 | ) | $ | — | $ | 69,397 | ||||||||||||||
Exercise of Class B Common Stock options | 65,000 | — | 15 | — | — | — | — | 15 | ||||||||||||||||||||||||
Exercise of Class C Common Stock options | 5,946 | — | 28 | — | — | — | — | 28 | ||||||||||||||||||||||||
Exercise of Class C Common Stock warrants | 225,450 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Accrued interest on subscriptions receivable | — | — | 6 | (6 | ) | — | — | — | — | |||||||||||||||||||||||
Deferred compensation | — | — | 7,528 | — | (7,528 | ) | — | — | — | |||||||||||||||||||||||
Amortization of deferred compensation expense | — | — | — | — | 5,573 | — | — | 5,573 | ||||||||||||||||||||||||
Accrued dividends on Series D Preferred Stock | — | — | (18,493 | ) | — | — | — | — | (18,493 | ) | ||||||||||||||||||||||
Accretion on Series D Preferred Stock | — | — | (473 | ) | — | — | — | — | (473 | ) | ||||||||||||||||||||||
Net income | — | — | — | — | — | 15,358 | — | 15,358 | ||||||||||||||||||||||||
Unrealized loss onavailable-for-sale securities, net of reclassification adjustment and tax | — | — | — | — | — | — | (72 | ) | (72 | ) | ||||||||||||||||||||||
BALANCE, December 31, 2003 | 36,719,698 | $ | 3 | $ | 78,422 | $ | (92 | ) | $ | (4,154 | ) | $ | (2,774 | ) | $ | (72 | ) | $ | 71,333 | |||||||||||||
Exercise of Common Stock options | 211,976 | — | 416 | — | — | — | — | 416 | ||||||||||||||||||||||||
Exercise of Common Stock warrants | 6,500,340 | 1 | 43 | — | — | — | — | 44 | ||||||||||||||||||||||||
Reverse stock split — fractional shares redeemed | (87 | ) | — | — | — | — | — | — | — | |||||||||||||||||||||||
Accrued interest on subscriptions receivable | — | — | 6 | (6 | ) | — | — | — | — | |||||||||||||||||||||||
Deferred stock-based compensation | — | — | 9,606 | — | (9,606 | ) | — | — | — | |||||||||||||||||||||||
Amortization of deferred stock-based compensation expense | — | — | — | — | 10,429 | — | — | 10,429 | ||||||||||||||||||||||||
Accrued dividends on Series D Preferred Stock | — | — | — | — | — | (21,006 | ) | — | (21,006 | ) | ||||||||||||||||||||||
Accretion on Series D Preferred Stock | — | — | — | — | — | (473 | ) | — | (473 | ) | ||||||||||||||||||||||
Net income | — | — | — | — | — | 64,890 | — | 64,890 | ||||||||||||||||||||||||
Unrealized loss onavailable-for-sale securities, net of reclassification adjustment and tax | — | — | — | — | — | — | (199 | ) | (199 | ) | ||||||||||||||||||||||
BALANCE, December 31, 2004 | 43,431,927 | $ | 4 | $ | 88,493 | $ | (98 | ) | $ | (3,331 | ) | $ | 40,637 | $ | (271 | ) | $ | 125,434 |
F-7
Table of Contents
Accumulated | ||||||||||||||||||||||||||||||||
Additional | Other | |||||||||||||||||||||||||||||||
Number | Paid-In | Subscriptions | Deferred | Retained | Comprehensive | |||||||||||||||||||||||||||
of Shares | Amount | Capital | Receivable | Compensation | Earnings | Income (Loss) | Total | |||||||||||||||||||||||||
(In Thousands, Except Share Information) | ||||||||||||||||||||||||||||||||
Common Stock issued | 26,479 | — | 483 | — | — | — | — | 483 | ||||||||||||||||||||||||
Exercise of Common Stock options | 7,556,557 | 1 | 8,604 | — | — | — | — | 8,605 | ||||||||||||||||||||||||
Exercise of Common Stock warrants | 760,735 | — | 605 | — | — | — | — | 605 | ||||||||||||||||||||||||
Accrued interest on subscriptions receivable | — | — | 5 | (5 | ) | — | — | — | — | |||||||||||||||||||||||
Proceeds from repayment of subscriptions receivable | — | — | — | 103 | — | — | — | 103 | ||||||||||||||||||||||||
Forfeiture of unvested stock compensation | — | — | (2,887 | ) | — | 2,887 | — | — | — | |||||||||||||||||||||||
Deferred stock-based compensation | — | — | 2,330 | — | (2,330 | ) | — | — | — | |||||||||||||||||||||||
Amortization of deferred stock-based compensation expense | — | — | — | — | 2,596 | — | — | 2,596 | ||||||||||||||||||||||||
Accrued dividends on Series D Preferred Stock | — | — | — | — | — | (21,006 | ) | — | (21,006 | ) | ||||||||||||||||||||||
Accrued dividends on Series E Preferred Stock | — | — | — | — | — | (1,019 | ) | — | (1,019 | ) | ||||||||||||||||||||||
Accretion on Series D Preferred Stock | — | — | — | — | — | (473 | ) | — | (473 | ) | ||||||||||||||||||||||
Accretion on Series E Preferred Stock | — | — | — | — | — | (114 | ) | — | (114 | ) | ||||||||||||||||||||||
Tax benefits from the exercise of Common Stock options | — | — | 51,961 | — | — | — | — | 51,961 | ||||||||||||||||||||||||
Net income | — | — | — | — | — | 198,677 | — | 198,677 | ||||||||||||||||||||||||
Unrealized losses onavailable-for-sale securities, net of tax | — | — | — | — | — | — | (28 | ) | (28 | ) | ||||||||||||||||||||||
Reclassification adjustment for losses included in net income, net of tax | — | — | — | — | — | — | 168 | 168 | ||||||||||||||||||||||||
Unrealized gain on cash flow hedging derivative, net of tax | — | — | — | — | — | — | 1,914 | 1,914 | ||||||||||||||||||||||||
BALANCE, December 31, 2005 | 51,775,698 | $ | 5 | $ | 149,594 | $ | — | $ | (178 | ) | $ | 216,702 | $ | 1,783 | $ | 367,906 | ||||||||||||||||
F-8
Table of Contents
2005 | 2004 | 2003 | ||||||||||
(In Thousands) | ||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||
Net income | $ | 198,677 | $ | 64,890 | $ | 15,358 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Cumulative effect of change in accounting principle | — | — | 120 | |||||||||
Depreciation and amortization | 87,895 | 62,201 | 42,428 | |||||||||
Provision for uncollectible accounts receivable | 129 | 125 | 110 | |||||||||
Deferred rent expense | 4,407 | 3,466 | 2,803 | |||||||||
Cost of abandoned cell sites | 725 | 1,021 | 824 | |||||||||
Non-cash compensation expense | 2,596 | 10,429 | 5,573 | |||||||||
Non-cash interest expense | 4,285 | 2,889 | 3,073 | |||||||||
(Gain) loss on disposal of assets | (218,203 | ) | 3,209 | 392 | ||||||||
Loss (gain) on extinguishment of debt | 46,448 | (698 | ) | (603 | ) | |||||||
(Gain) loss on sale of investments | (190 | ) | 576 | — | ||||||||
Accretion of asset retirement obligation | 423 | 253 | 127 | |||||||||
Accretion of put option in majority-owned subsidiary | 252 | 8 | — | |||||||||
Deferred income taxes | 125,055 | 44,441 | 18,716 | |||||||||
Changes in assets and liabilities: | ||||||||||||
Inventories | (5,717 | ) | (16,706 | ) | (7,745 | ) | ||||||
Accounts receivable | (7,056 | ) | (714 | ) | (1,041 | ) | ||||||
Prepaid expenses | (2,613 | ) | (1,933 | ) | (182 | ) | ||||||
Deferred charges | (4,045 | ) | (2,727 | ) | (1,645 | ) | ||||||
Other assets | (5,580 | ) | (2,243 | ) | (4,131 | ) | ||||||
Accounts payable and accrued expenses | 41,204 | (31,304 | ) | 21,305 | ||||||||
Deferred revenue | 16,071 | 10,317 | 14,264 | |||||||||
Other liabilities | (1,547 | ) | 2,879 | 2,859 | ||||||||
Net cash provided by operating activities | 283,216 | 150,379 | 112,605 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||
Purchases of property and equipment | (266,499 | ) | (250,830 | ) | (117,731 | ) | ||||||
Change in prepaid purchases of property and equipment | (11,800 | ) | — | — | ||||||||
Proceeds from sale of property and equipment | 146 | — | 6 | |||||||||
Purchase of other assets | — | — | (35 | ) | ||||||||
Purchase of investments | (739,482 | ) | (158,672 | ) | (209,149 | ) | ||||||
Proceeds from sale of investments | 386,444 | 307,220 | 22,650 | |||||||||
Change in restricted cash and investments | (107 | ) | (1,511 | ) | 953 | |||||||
Purchase of FCC licenses | (503,930 | ) | (62,025 | ) | — | |||||||
Deposit to FCC for licenses | — | (25,000 | ) | (1,500 | ) | |||||||
Proceeds from sale of FCC licenses | 230,000 | — | — | |||||||||
Microwave relocation costs | — | (63 | ) | (2,062 | ) | |||||||
Net cash used in investing activities | (905,228 | ) | (190,881 | ) | (306,868 | ) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||
Change in book overdraft | (565 | ) | 5,778 | 824 | ||||||||
Payment upon execution of cash flow hedging derivative | (1,899 | ) | — | — | ||||||||
Proceeds from 103/4% Senior Notes Due 2011 | — | — | 145,500 | |||||||||
Proceeds from Credit Agreements | 902,875 | — | — | |||||||||
Proceeds from Bridge Credit Agreement | 540,000 | — | — | |||||||||
Proceeds from short-term notes payable | — | 1,703 | — | |||||||||
Debt issuance costs | (29,480 | ) | (164 | ) | (876 | ) | ||||||
Repayment of debt | (754,662 | ) | (14,215 | ) | (9,077 | ) | ||||||
Proceeds from minority interest in majority-owned subsidiary | — | 1,000 | — | |||||||||
Proceeds from repayment of subscriptions receivable | 103 | — | — | |||||||||
Proceeds from issuance of preferred stock, net of issuance costs | 46,662 | 5 | 65,537 | |||||||||
Proceeds from exercise of stock options and warrants | 9,210 | 460 | 43 | |||||||||
Net cash provided by (used in) financing activities | 712,244 | (5,433 | ) | 201,951 | ||||||||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 90,232 | (45,935 | ) | 7,688 | ||||||||
CASH AND CASH EQUIVALENTS, beginning of period | 22,477 | 68,412 | 60,724 | |||||||||
CASH AND CASH EQUIVALENTS, end of period | $ | 112,709 | $ | 22,477 | $ | 68,412 | ||||||
F-9
Table of Contents
1. | Organization and Business Operations: |
2. | Summary of Significant Accounting Policies: |
F-10
Table of Contents
• | allowance for uncollectible accounts receivable; | |
• | valuation of inventories; | |
• | estimated useful life of assets; | |
• | impairment of long-lived assets and indefinite-lived assets; | |
• | likelihood of realizing benefits associated with temporary differences giving rise to deferred tax assets; | |
• | reserves for uncertain tax positions; | |
• | estimated customer life in terms of amortization of certain deferred revenue; and | |
• | valuation of Common Stock. |
F-11
Table of Contents
2005 | 2004 | |||||||
Prepaid vendor purchases | $ | 11,801 | $ | — | ||||
Prepaid rent | 6,347 | 4,065 | ||||||
Prepaid maintenance and support contracts | 1,393 | 609 | ||||||
Prepaid insurance | 1,020 | 1,855 | ||||||
Other | 869 | 494 | ||||||
Prepaid expenses | $ | 21,430 | $ | 7,023 | ||||
2005 | 2004 | |||||||
Construction-in-progress | $ | 98,078 | $ | 25,460 | ||||
Network infrastructure | 905,924 | 712,745 | ||||||
Office equipment | 17,059 | 9,139 | ||||||
Leasehold improvements | 16,608 | 12,145 | ||||||
Furniture and fixtures | 4,000 | 2,444 | ||||||
Vehicles | 118 | — | ||||||
1,041,787 | 761,933 | |||||||
Accumulated depreciation | (210,297 | ) | (125,565 | ) | ||||
Property and equipment, net | $ | 831,490 | $ | 636,368 | ||||
F-12
Table of Contents
F-13
Table of Contents
F-14
Table of Contents
F-15
Table of Contents
2005 | 2004 | 2003 | ||||||||||
Net income (loss) applicable to Common Stock — as reported | $ | 176,065 | $ | 43,411 | $ | (3,608 | ) | |||||
Add: Amortization of deferred compensation determined under the intrinsic method for employee stock awards, net of tax | 1,584 | 6,036 | 2,725 | |||||||||
Less: Total stock-based employee compensation expense determined under the fair value method for employee stock awards, net of tax | (3,227 | ) | (5,689 | ) | (1,642 | ) | ||||||
Net income (loss) applicable to Common Stock — pro forma | $ | 174,422 | $ | 43,758 | $ | (2,525 | ) | |||||
Basic net income (loss) per common share: | ||||||||||||
As reported | $ | 2.12 | $ | 0.55 | $ | (0.10 | ) | |||||
Pro forma | $ | 2.10 | $ | 0.55 | $ | (0.07 | ) | |||||
Diluted net income (loss) per common share: | ||||||||||||
As reported | $ | 1.87 | $ | 0.46 | $ | (0.10 | ) | |||||
Pro forma | $ | 1.86 | $ | 0.46 | $ | (0.07 | ) | |||||
F-16
Table of Contents
2005 | 2004 | |||||||
Beginning asset retirement obligations | $ | 1,893 | $ | 1,115 | ||||
Liabilities incurred | 1,206 | 525 | ||||||
Accretion expense | 423 | 253 | ||||||
Ending asset retirement obligations | $ | 3,522 | $ | 1,893 | ||||
F-17
Table of Contents
F-18
Table of Contents
3. | Majority-Owned Subsidiary: |
F-19
Table of Contents
4. | Short-Term Investments: |
2005 | ||||||||||||||||
Gross | Gross | Aggregate | ||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
United States government and agencies | $ | 28,999 | $ | — | $ | (241 | ) | $ | 28,758 | |||||||
Auction rate securities | 333,819 | — | — | 333,819 | ||||||||||||
Corporate bonds | 27,788 | 57 | — | 27,845 | ||||||||||||
Total short-term investments | $ | 390,606 | $ | 57 | $ | (241 | ) | $ | 390,422 | |||||||
2004 | ||||||||||||||||
Gross | Gross | Aggregate | ||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
United States government and agencies | $ | 29,995 | $ | — | $ | (366 | ) | $ | 29,629 | |||||||
Auction rate securities | 5,300 | — | — | 5,300 | ||||||||||||
Corporate bonds | 2,074 | — | (39 | ) | 2,035 | |||||||||||
Total short-term investments | $ | 37,369 | $ | — | $ | (405 | ) | $ | 36,964 | |||||||
Aggregate | ||||||||
Amortized | Fair | |||||||
Cost | Value | |||||||
Less than one year | $ | 95,156 | $ | 95,030 | ||||
Due in 1 - 2 years | 2,000 | 1,942 | ||||||
Due in 2 - 5 years | — | — | ||||||
Due after 5 years | 293,450 | 293,450 | ||||||
Total | $ | 390,606 | $ | 390,422 | ||||
5. | Derivative Instruments and Hedging Activities: |
F-20
Table of Contents
6. | Intangible Assets: |
Microwave | ||||||||
Relocation | ||||||||
PCS Licenses | Costs | |||||||
Balance at December 31, 2003 | $ | 90,619 | $ | 10,000 | ||||
Additions | 63,525 | 63 | ||||||
Reductions | — | (497 | ) | |||||
Balance at December 31, 2004 | $ | 154,144 | $ | 9,566 | ||||
Additions | 528,930 | — | ||||||
Reductions | (1,775 | ) | (379 | ) | ||||
Balance at December 31, 2005 | $ | 681,299 | $ | 9,187 | ||||
F-21
Table of Contents
F-22
Table of Contents
7. | Accounts Payable and Accrued Expenses: |
2005 | 2004 | |||||||
Accounts payable | $ | 29,430 | $ | 19,540 | ||||
Book overdraft | 9,920 | 10,486 | ||||||
Accrued accounts payable | 69,611 | 40,524 | ||||||
Accrued liabilities | 7,590 | 5,382 | ||||||
Vendor purchase commitment | — | 5,091 | ||||||
Payroll and employee benefits | 12,808 | 6,941 | ||||||
Accrued interest | 17,578 | 4,393 | ||||||
Taxes, other than income | 23,211 | 13,184 | ||||||
Income taxes | 4,072 | — | ||||||
Accounts payable and accrued expenses | $ | 174,220 | $ | 105,541 | ||||
8. | Long-Term Debt: |
2005 | 2004 | |||||||
FCC notes | $ | — | $ | 33,409 | ||||
Senior Notes | — | 150,000 | ||||||
Microwave relocation obligations | 2,690 | 4,061 | ||||||
Credit Agreements | 900,000 | — | ||||||
Total | 902,690 | 187,470 | ||||||
Less: original issue discount | — | (2,471 | ) | |||||
Add: unamortized premium on debt | 2,864 | — | ||||||
Total debt | 905,554 | 184,999 | ||||||
Less: current maturities | (2,690 | ) | (14,310 | ) | ||||
Total long-term debt | $ | 902,864 | $ | 170,689 | ||||
For the Year Ending December 31, | ||||
2006 | $ | 2,690 | ||
2007 | — | |||
2008 | — | |||
2009 | — | |||
2010 | — | |||
Thereafter | 900,000 | |||
Total | $ | 902,690 | ||
F-23
Table of Contents
F-24
Table of Contents
• | incur additional indebtedness and, in the case of our restricted subsidiaries, issue preferred stock; | |
• | create liens on their assets; | |
• | pay dividends or make other restricted payments; | |
• | make investments; | |
• | enter into transactions with affiliates; | |
• | sell or make dispositions of assets; | |
• | place restrictions on the ability of subsidiaries to pay dividends or make other payments to MetroPCS, Inc.; | |
• | engage in certain business activities; and | |
• | merge or consolidate. |
F-25
Table of Contents
F-26
Table of Contents
9. | Concentrations: |
10. | Commitments and Contingencies: |
For the Year Ending December 31, | ||||
2006 | $ | 59,207 | ||
2007 | 60,205 | |||
2008 | 60,997 | |||
2009 | 61,533 | |||
2010 | 62,231 | |||
Thereafter | 189,897 | |||
Total | $ | 494,070 | ||
F-27
Table of Contents
11. | Series D Cumulative Convertible Redeemable Participating Preferred Stock: |
F-28
Table of Contents
• | the per share liquidation value, plus | |
• | the greater of: | |
• | the amount of all accrued and unpaid dividends and distributions on such share, and | |
• | the amount that would have been paid in respect of such share had it been converted into Common Stock immediately prior to the event that triggered payment of the liquidation preference, net of the liquidation value of the Series D Preferred Stock and the Series E Cumulative Convertible Redeemable Participating Preferred Stock, par value $0.0001 per share, (“Series E Preferred Stock”). |
12. | Series E Cumulative Convertible Redeemable Participating Preferred Stock: |
F-29
Table of Contents
13. | Capitalization: |
F-30
Table of Contents
14. | Stock Option Plan: |
F-31
Table of Contents
2005 | 2004 | 2003 | ||||||||||
Expected dividends | 0.00 | % | 0.00 | % | 0.00 | % | ||||||
Expected volatility | 50.00 | % | 55.00 | % | 68.01 | % | ||||||
Risk-free interest rate | 4.24 | % | 3.22 | % | 2.82 | % | ||||||
Expected lives in years | 5.00 | 5.00 | 5.00 | |||||||||
Weighted-average fair value of options: | ||||||||||||
Granted at below fair value | $ | — | $ | 8.64 | $ | 5.52 | ||||||
Granted at fair value | $ | 10.32 | $ | 7.93 | $ | — | ||||||
Weighted-average exercise price of options: | ||||||||||||
Granted at below fair value | $ | — | $ | 13.37 | $ | 4.70 | ||||||
Granted at fair value | $ | 21.39 | $ | 15.74 | $ | — |
F-32
Table of Contents
2005 | 2004 | 2003 | ||||||||||||||||||||||
Weighted | Weighted | Weighted | ||||||||||||||||||||||
Average | Average | Average | ||||||||||||||||||||||
Exercise | Exercise | Exercise | ||||||||||||||||||||||
Shares | Price | Shares | Price | Shares | Price | |||||||||||||||||||
Outstanding, beginning of year | 10,816,285 | $ | 2.76 | 10,352,394 | $ | 1.82 | 9,555,770 | $ | 1.55 | |||||||||||||||
Granted | 1,946,178 | $ | 21.39 | 890,506 | $ | 14.28 | 1,012,425 | $ | 4.70 | |||||||||||||||
Exercised | (7,556,557 | ) | $ | 1.13 | (211,976 | ) | $ | 1.96 | (70,946 | ) | $ | 0.60 | ||||||||||||
Forfeited | (371,836 | ) | $ | 12.11 | (214,639 | ) | $ | 6.07 | (144,855 | ) | $ | 4.70 | ||||||||||||
Outstanding, end of year | 4,834,070 | $ | 12.54 | 10,816,285 | $ | 2.76 | 10,352,394 | $ | 1.82 | |||||||||||||||
Options exercisable at year-end | 3,661,859 | 10,816,285 | 10,352,394 | |||||||||||||||||||||
Options vested at year-end | 2,232,110 | 8,992,324 | 8,296,724 | |||||||||||||||||||||
Options Outstanding | Options Vested | |||||||||||||||||||
Weighted | Weighted | Weighted | ||||||||||||||||||
Average | Average | Average | ||||||||||||||||||
Number of | Contractual | Exercise | Number of | Exercise | ||||||||||||||||
Exercise Price | Shares | Life | Price | Shares | Price | |||||||||||||||
$ 0.23 - $ 1.00 | 320,667 | 6.43 | $ | 0.34 | 320,667 | $ | 0.34 | |||||||||||||
$ 4.70 - $ 4.70 | 1,557,089 | 5.73 | $ | 4.70 | 1,499,297 | $ | 4.70 | |||||||||||||
$ 5.40 - $18.94 | 1,058,536 | 7.91 | $ | 11.85 | 346,980 | $ | 11.36 | |||||||||||||
$20.00 - $21.46 | 1,897,778 | 9.67 | $ | 21.42 | 65,166 | $ | 21.41 | |||||||||||||
4,834,070 | 2,232,110 | |||||||||||||||||||
F-33
Table of Contents
15. | Employee Benefit Plan: |
16. | Income Taxes: |
2005 | 2004 | 2003 | ||||||||||
Current: | ||||||||||||
Federal | $ | (233 | ) | $ | 197 | $ | (4,721 | ) | ||||
State | 2,603 | 2,502 | 2,184 | |||||||||
2,370 | 2,699 | (2,537 | ) | |||||||||
Deferred: | ||||||||||||
Federal | 114,733 | 39,056 | 16,230 | |||||||||
State | 10,322 | 5,245 | 2,486 | |||||||||
125,055 | 44,301 | 18,716 | ||||||||||
Provision for income taxes | $ | 127,425 | $ | 47,000 | $ | 16,179 | ||||||
F-34
Table of Contents
2005 | 2004 | |||||||
Deferred tax assets: | ||||||||
Start-up costs capitalized for tax purposes | $ | 866 | $ | 2,772 | ||||
Net operating loss carry forward | 85,152 | 50,933 | ||||||
Net basis difference in PCS licenses | 1,428 | 6,440 | ||||||
Revenue deferred for book purposes | 5,007 | 3,704 | ||||||
Interconnect accrual | 256 | 445 | ||||||
Allowance for uncollectible accounts | 1,272 | 1,060 | ||||||
Deferred rent expense | 5,747 | 4,063 | ||||||
Deferred compensation | 2,818 | 6,397 | ||||||
Accrued property tax | 69 | 324 | ||||||
Asset retirement obligation | 347 | 215 | ||||||
Accrued board of directors fees | 35 | 27 | ||||||
Inventory capitalization | 81 | 38 | ||||||
Accrued vacation | 603 | 556 | ||||||
Inventory reserve | 38 | — | ||||||
Partnership interest | 392 | — | ||||||
Other | 79 | 67 | ||||||
Total deferred tax assets | 104,190 | 77,041 | ||||||
Deferred tax liabilities: | ||||||||
Depreciation | (157,083 | ) | (141,132 | ) | ||||
Deferred cost of handset sales | (4,867 | ) | (3,407 | ) | ||||
Amortization of original issue discount | — | (927 | ) | |||||
Prepaid maintenance contracts and other | (297 | ) | (152 | ) | ||||
Prepaid insurance | (374 | ) | (685 | ) | ||||
Prepaid collateral | (276 | ) | (97 | ) | ||||
Gain deferral related to like kind exchange | (83,699 | ) | — | |||||
Other comprehensive income | (1,331 | ) | — | |||||
Other | — | (26 | ) | |||||
Total deferred tax liabilities | (247,927 | ) | (146,426 | ) | ||||
Subtotal | (143,737 | ) | (69,385 | ) | ||||
Valuation allowance | (194 | ) | (142 | ) | ||||
Net deferred tax liability | $ | (143,931 | ) | $ | (69,527 | ) | ||
F-35
Table of Contents
2005 | 2004 | |||||||
Current deferred tax asset | $ | 2,122 | $ | 3,574 | ||||
Non-current deferred tax liability | (146,053 | ) | (73,101 | ) | ||||
Net deferred tax liability | $ | (143,931 | ) | $ | (69,527 | ) | ||
F-36
Table of Contents
2005 | 2004 | 2003 | ||||||||||
U.S. federal income tax provision at statutory rate | $ | 114,136 | $ | 39,117 | $ | 11,080 | ||||||
Increase (decrease) in income taxes resulting from: | ||||||||||||
State income taxes, net of federal income tax impact | 10,865 | 5,187 | 2,407 | |||||||||
Change in valuation allowance | 52 | 58 | 50 | |||||||||
Provision for tax uncertainties | 2,274 | 2,561 | 2,410 | |||||||||
Permanent items | 98 | 15 | 125 | |||||||||
Other | — | 62 | 107 | |||||||||
Provision for income taxes | $ | 127,425 | $ | 47,000 | $ | 16,179 | ||||||
F-37
Table of Contents
17. | Net Income (Loss) Per Common Share: |
2005 | 2004 | 2003 | ||||||||||
Basic EPS — Two Class Method: | ||||||||||||
Net income | $ | 198,677 | $ | 64,890 | $ | 15,358 | ||||||
Accrued dividends and accretion: | ||||||||||||
Series D Preferred Stock | (21,479 | ) | (21,479 | ) | (18,966 | ) | ||||||
Series E Preferred Stock | (1,133 | ) | — | — | ||||||||
Net income (loss) applicable to common stock | $ | 176,065 | $ | 43,411 | $ | (3,608 | ) | |||||
Amount allocable to common shareholders | 54.4 | % | 53.1 | % | 100.00 | % | ||||||
Rights to undistributed earnings (losses) | $ | 95,722 | $ | 23,070 | $ | (3,608 | ) | |||||
Weighted average shares outstanding — basic | 45,117,465 | 42,240,684 | 36,443,962 | |||||||||
Net income (loss) per common share — basic | $ | 2.12 | $ | 0.55 | $ | (0.10 | ) | |||||
Diluted EPS: | ||||||||||||
Rights to undistributed earnings (losses) | $ | 95,722 | $ | 23,070 | $ | (3,608 | ) | |||||
Weighted average shares outstanding — basic | 45,117,465 | 42,240,684 | 36,443,962 | |||||||||
Effect of dilutive securities: | ||||||||||||
Warrants | 896,459 | 2,214,005 | — | |||||||||
Stock options | 5,189,606 | 5,756,540 | — | |||||||||
Weighted average shares outstanding — diluted | 51,203,530 | 50,211,229 | 36,443,962 | |||||||||
Net income (loss) per common share — diluted | $ | 1.87 | $ | 0.46 | $ | (0.10 | ) | |||||
F-38
Table of Contents
2005 | ||||
Net income | $ | 198,677 | ||
Basic net income per common share — Pro forma | $ | 2.24 | ||
Diluted net income per common share — Pro forma | $ | 2.09 | ||
Shares used in computing pro forma basic net income per common share | 88,866,582 | |||
Shares used in computing pro forma diluted net income per common share | 94,952,646 | |||
18. | Segment Information: |
• | Core Markets, which include Atlanta, Miami, San Francisco, and Sacramento, are aggregated because they are reviewed on an aggregate basis by the chief operating decision maker, they are similar in respect to their products and services, production processes, class of customer, method of distribution, and regulatory environment and currently exhibit similar financial performance and economic characteristics. | |
• | Expansion Markets, which include Dallas/Ft. Worth, Detroit, Tampa/Sarasota/Orlando and Los Angeles, are aggregated because they are reviewed on an aggregate basis by the chief operating decision maker, they are similar in respect to their products and services, production processes, class of customer, method of distribution, and regulatory environment and have similar expected long-term financial performance and economic characteristics. |
F-39
Table of Contents
Core | Expansion | |||||||||||||||
Year Ended December 31, 2005 | Markets | Markets | Other | Total | ||||||||||||
Service revenues | $ | 868,681 | $ | 3,419 | $ | — | $ | 872,100 | ||||||||
Equipment revenues | 163,738 | 2,590 | — | 166,328 | ||||||||||||
Total revenues | 1,032,419 | 6,009 | — | 1,038,428 | ||||||||||||
Cost of service | 271,437 | 11,775 | — | 283,212 | ||||||||||||
Cost of equipment | 293,702 | 7,169 | — | 300,871 | ||||||||||||
Selling, general and administrative expenses(1) | 153,321 | 9,155 | — | 162,476 | ||||||||||||
Adjusted EBITDA (deficit)(2) | 316,555 | (22,090 | ) | — | ||||||||||||
Depreciation and amortization | 84,436 | 2,030 | 1,429 | 87,895 | ||||||||||||
Non-cash compensation expense | 2,596 | — | — | 2,596 | ||||||||||||
Income (loss) from operations | 219,777 | (24,370 | ) | 226,770 | 422,177 | |||||||||||
Interest expense | — | — | 58,033 | 58,033 | ||||||||||||
Accretion of put option in majority-owned subsidiary | — | — | 252 | 252 | ||||||||||||
Interest income | — | — | (8,658 | ) | (8,658 | ) | ||||||||||
Loss on extinguishment of debt | — | — | 46,448 | 46,448 | ||||||||||||
Income (loss) before provision for income taxes | 219,777 | (24,370 | ) | 130,695 | 326,102 | |||||||||||
Capital expenditures | 171,783 | 90,871 | 3,845 | 266,499 | ||||||||||||
Total assets | 701,675 | 378,671 | 1,078,635 | 2,158,981 |
(1) | Selling, general and administrative expenses include non-cash compensation disclosed separately. |
(2) | Adjusted EBITDA (deficit) is presented in accordance with SFAS No. 131 as it is the primary financial measure utilized by management to facilitate evaluation of each segments’ ability to meet future debt service, capital expenditures and working capital requirements and to fund future growth. |
F-40
Table of Contents
2005 | ||||
Segment Adjusted EBITDA (Deficit): | ||||
Core Markets Adjusted EBITDA | $ | 316,555 | ||
Expansion Markets Adjusted EBITDA (Deficit) | (22,090 | ) | ||
Total | 294,465 | |||
Depreciation and amortization | (87,895 | ) | ||
Gain on disposal of assets | 218,203 | |||
Non-cash compensation expense | (2,596 | ) | ||
Interest expense | (58,033 | ) | ||
Accretion of put option in majority-owned subsidiary | (252 | ) | ||
Interest and other income | 8,658 | |||
Loss on extinguishment of debt | (46,448 | ) | ||
Consolidated income before provision for income taxes | $ | 326,102 | ||
19. | Guarantor Subsidiaries: |
F-41
Table of Contents
As of December 31, 2005
Non- | ||||||||||||||||||||||||
Guarantor | Guarantor | |||||||||||||||||||||||
Parent | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||
CURRENT ASSETS: | ||||||||||||||||||||||||
Cash and cash equivalents | $ | 10,624 | $ | 95,772 | $ | 219 | $ | 6,094 | $ | — | $ | 112,709 | ||||||||||||
Short-term investments | 24,223 | 366,199 | — | — | — | 390,422 | ||||||||||||||||||
Inventories, net | — | 34,045 | 5,386 | — | — | 39,431 | ||||||||||||||||||
Accounts receivable, net | — | 16,852 | — | — | (824 | ) | 16,028 | |||||||||||||||||
Prepaid expenses | — | — | 21,412 | 18 | — | 21,430 | ||||||||||||||||||
Deferred charges | — | 13,270 | — | — | — | 13,270 | ||||||||||||||||||
Deferred tax asset | — | 2,122 | — | — | — | 2,122 | ||||||||||||||||||
Other current assets | 208 | 2,364 | 14,118 | — | — | 16,690 | ||||||||||||||||||
Total current assets | 35,055 | 530,624 | 41,135 | 6,112 | (824 | ) | 612,102 | |||||||||||||||||
Property and equipment, net | — | — | 829,457 | 2,033 | — | 831,490 | ||||||||||||||||||
Restricted cash and investments | — | 2,917 | 3 | — | — | 2,920 | ||||||||||||||||||
Long-term investments | — | 16,385 | — | — | (11,333 | ) | 5,052 | |||||||||||||||||
Investment in subsidiaries | 243,930 | 709,704 | — | — | (953,634 | ) | — | |||||||||||||||||
PCS licenses | — | — | 387,700 | 293,599 | — | 681,299 | ||||||||||||||||||
Microwave relocation costs | — | — | 9,187 | — | — | 9,187 | ||||||||||||||||||
Long-term receivable from subsidiaries | — | 320,630 | — | — | (320,630 | ) | — | |||||||||||||||||
Other assets | — | 15,360 | 1,571 | — | — | 16,931 | ||||||||||||||||||
Total assets | $ | 278,985 | $ | 1,595,620 | $ | 1,269,053 | $ | 301,744 | $ | (1,286,421 | ) | $ | 2,158,981 | |||||||||||
CURRENT LIABILITIES: | ||||||||||||||||||||||||
Accounts payable and accrued expenses | $ | 321 | $ | 58,104 | $ | 125,362 | $ | 2,590 | $ | (12,157 | ) | $ | 174,220 | |||||||||||
Current maturities of long-term debt | — | — | 2,690 | — | — | 2,690 | ||||||||||||||||||
Deferred revenue | — | 9,158 | 47,402 | — | — | 56,560 | ||||||||||||||||||
Advances to subsidiaries | (559,186 | ) | 218,278 | 340,908 | — | — | — | |||||||||||||||||
Other current liabilities | — | — | 2,147 | — | — | 2,147 | ||||||||||||||||||
Total current liabilities | (558,865 | ) | 285,540 | 518,509 | 2,590 | (12,157 | ) | 235,617 | ||||||||||||||||
Long-term debt, net | — | 902,864 | — | — | — | 902,864 | ||||||||||||||||||
Long-term note to parent | — | — | — | 320,630 | (320,630 | ) | — | |||||||||||||||||
Deferred tax liabilities | — | 146,053 | — | — | — | 146,053 | ||||||||||||||||||
Deferred rents | — | — | 14,739 | — | — | 14,739 | ||||||||||||||||||
Redeemable minority interest | — | — | — | — | 1,259 | 1,259 | ||||||||||||||||||
Other long-term liabilities | — | 17,233 | 3,625 | — | — | 20,858 | ||||||||||||||||||
Total liabilities | (558,865 | ) | 1,351,690 | 536,873 | 323,220 | (331,528 | ) | 1,321,390 | ||||||||||||||||
COMMITMENTS AND CONTINGENCIES (See Note 10) SERIES D PREFERRED STOCK | 421,889 | — | — | — | — | 421,889 | ||||||||||||||||||
SERIES E PREFERRED STOCK | 47,796 | — | — | — | — | 47,796 | ||||||||||||||||||
STOCKHOLDERS’ EQUITY: | ||||||||||||||||||||||||
Preferred stock | — | — | — | — | — | — | ||||||||||||||||||
Common stock | 5 | — | — | — | — | 5 | ||||||||||||||||||
Additional paid-in capital | 149,594 | — | — | 20,000 | (20,000 | ) | 149,594 | |||||||||||||||||
Subscriptions receivable | — | — | — | (13,333 | ) | 13,333 | — | |||||||||||||||||
Deferred compensation | (178 | ) | (178 | ) | (178 | ) | — | 356 | (178 | ) | ||||||||||||||
Retained earnings (deficit) | 216,961 | 242,357 | 732,358 | (28,143 | ) | (946,831 | ) | 216,702 | ||||||||||||||||
Accumulated other comprehensive income | 1,783 | 1,751 | — | — | (1,751 | ) | 1,783 | |||||||||||||||||
Total stockholders’ equity | 368,165 | 243,930 | 732,180 | (21,476 | ) | (954,893 | ) | 367,906 | ||||||||||||||||
Total liabilities and stockholders’ equity | $ | 278,985 | $ | 1,595,620 | $ | 1,269,053 | $ | 301,744 | $ | (1,286,421 | ) | $ | 2,158,981 | |||||||||||
F-42
Table of Contents
As of December 31, 2004
Non- | ||||||||||||||||||||||||
Guarantor | Guarantor | |||||||||||||||||||||||
Parent | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||
CURRENT ASSETS: | ||||||||||||||||||||||||
Cash and cash equivalents | $ | 1 | $ | 22,349 | $ | 127 | $ | — | $ | — | $ | 22,477 | ||||||||||||
Short-term investments | — | 36,964 | — | — | — | 36,964 | ||||||||||||||||||
Inventories, net | — | 29,439 | 4,278 | — | — | 33,717 | ||||||||||||||||||
Accounts receivable, net | — | 9,101 | — | — | — | 9,101 | ||||||||||||||||||
Prepaid expenses | — | 2,610 | 4,413 | — | — | 7,023 | ||||||||||||||||||
Deferred charges | — | 9,225 | — | — | — | 9,225 | ||||||||||||||||||
Deferred tax asset | — | 3,574 | — | — | — | 3,574 | ||||||||||||||||||
Other current assets | — | 8,031 | 1,446 | 25,000 | — | 34,477 | ||||||||||||||||||
Total current assets | 1 | 121,293 | 10,264 | 25,000 | — | 156,558 | ||||||||||||||||||
Property and equipment, net | — | 3,404 | 632,964 | — | — | 636,368 | ||||||||||||||||||
Restricted cash and investments | — | 2,293 | — | — | — | 2,293 | ||||||||||||||||||
Investment in subsidiaries | 40,069 | 313,821 | — | — | (353,890 | ) | — | |||||||||||||||||
PCS licenses | — | — | 154,144 | — | — | 154,144 | ||||||||||||||||||
Microwave relocation costs | — | — | 9,566 | — | — | 9,566 | ||||||||||||||||||
Long-term receivable from subsidiaries | — | 18,408 | — | — | (18,408 | ) | — | |||||||||||||||||
Other assets | — | 5,157 | 1,310 | — | — | 6,467 | ||||||||||||||||||
Total assets | $ | 40,070 | $ | 464,376 | $ | 808,248 | $ | 25,000 | $ | (372,298 | ) | $ | 965,396 | |||||||||||
CURRENT LIABILITIES: | ||||||||||||||||||||||||
Accounts payable and accrued expenses | $ | — | $ | 16,707 | $ | 88,691 | $ | 143 | $ | — | $ | 105,541 | ||||||||||||
Current maturities of long-term debt | — | — | 14,310 | — | — | 14,310 | ||||||||||||||||||
Deferred revenue | — | 6,371 | 34,053 | — | — | 40,424 | ||||||||||||||||||
Advances to subsidiaries | (484,861 | ) | 155,579 | 329,282 | — | — | — | |||||||||||||||||
Other current liabilities | — | 2,559 | 186 | — | — | 2,745 | ||||||||||||||||||
Total current liabilities | (484,861 | ) | 181,216 | 466,522 | 143 | — | 163,020 | |||||||||||||||||
Long-term debt, net | — | 150,000 | 20,689 | — | — | 170,689 | ||||||||||||||||||
Long-term note to parent | — | — | — | 18,408 | (18,408 | ) | — | |||||||||||||||||
Deferred tax liabilities | (921 | ) | 74,022 | — | — | — | 73,101 | |||||||||||||||||
Deferred rents | — | 71 | 10,260 | — | — | 10,331 | ||||||||||||||||||
Redeemable minority interest | — | — | — | — | 1,008 | 1,008 | ||||||||||||||||||
Other long-term liabilities | — | 18,998 | 2,405 | — | — | 21,403 | ||||||||||||||||||
Total liabilities | (485,782 | ) | 424,307 | 499,876 | 18,551 | (17,400 | ) | 439,552 | ||||||||||||||||
COMMITMENTS AND CONTINGENCIES (See Note 10) | ||||||||||||||||||||||||
SERIES D PREFERRED STOCK | 400,410 | — | — | — | — | 400,410 | ||||||||||||||||||
STOCKHOLDERS’ EQUITY: | ||||||||||||||||||||||||
Preferred stock | — | — | — | — | — | — | ||||||||||||||||||
Common stock | 4 | — | — | — | — | 4 | ||||||||||||||||||
Additional paid-in capital | 88,493 | — | — | 6,667 | (6,667 | ) | 88,493 | |||||||||||||||||
Subscriptions receivable | (98 | ) | (98 | ) | — | — | 98 | (98 | ) | |||||||||||||||
Deferred compensation | (3,331 | ) | (3,331 | ) | — | — | 3,331 | (3,331 | ) | |||||||||||||||
Retained earnings (deficit) | 40,645 | 43,769 | 308,372 | (218 | ) | (351,931 | ) | 40,637 | ||||||||||||||||
Accumulated other comprehensive income | (271 | ) | (271 | ) | — | — | 271 | (271 | ) | |||||||||||||||
Total stockholders’ equity | 125,442 | 40,069 | 308,372 | 6,449 | (354,898 | ) | 125,434 | |||||||||||||||||
Total liabilities and stockholders’ equity | $ | 40,070 | $ | 464,376 | $ | 808,248 | $ | 25,000 | $ | (372,298 | ) | $ | 965,396 | |||||||||||
F-43
Table of Contents
Year Ended December 31, 2005
Guarantor | Non-Guarantor | |||||||||||||||||||||||
Parent | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||
REVENUES: | ||||||||||||||||||||||||
Service revenues | $ | — | $ | — | $ | 872,100 | $ | — | $ | — | $ | 872,100 | ||||||||||||
Equipment revenues | — | 13,960 | 152,368 | — | — | 166,328 | ||||||||||||||||||
Total revenues | — | 13,960 | 1,024,468 | — | — | 1,038,428 | ||||||||||||||||||
OPERATING EXPENSES: | ||||||||||||||||||||||||
Cost of service (excluding depreciation and amortization expense shown separately below) | — | — | 283,175 | 37 | — | 283,212 | ||||||||||||||||||
Cost of equipment | — | 12,837 | 288,034 | — | — | 300,871 | ||||||||||||||||||
Selling, general and administrative expenses (excluding depreciation and amortization expense shown separately below) | 274 | 2,893 | 158,287 | 1,022 | — | 162,476 | ||||||||||||||||||
Depreciation and amortization | — | 120 | 87,775 | — | — | 87,895 | ||||||||||||||||||
Gain on disposal of assets | — | — | (218,203 | ) | — | — | (218,203 | ) | ||||||||||||||||
Total operating expenses | 274 | 15,850 | 599,068 | 1,059 | — | 616,251 | ||||||||||||||||||
Income from operations | (274 | ) | (1,890 | ) | 425,400 | (1,059 | ) | — | 422,177 | |||||||||||||||
OTHER EXPENSE (INCOME): | ||||||||||||||||||||||||
Interest expense | — | 58,482 | (444 | ) | 26,997 | (27,002 | ) | 58,033 | ||||||||||||||||
Earnings from consolidated subsidiaries | (198,587 | ) | (396,060 | ) | — | — | 594,647 | — | ||||||||||||||||
Accretion of put option in majority-owned subsidiary | — | — | — | — | 252 | 252 | ||||||||||||||||||
Interest income | (615 | ) | (34,913 | ) | (1 | ) | (131 | ) | 27,002 | (8,658 | ) | |||||||||||||
Loss on extinguishment of debt | — | 44,589 | 1,859 | — | — | 46,448 | ||||||||||||||||||
Total other expense | (199,202 | ) | (327,902 | ) | 1,414 | 26,866 | 594,899 | 96,075 | ||||||||||||||||
Income before provision for income taxes | 198,928 | 326,012 | 423,986 | (27,925 | ) | (594,899 | ) | 326,102 | ||||||||||||||||
Provision for income taxes | — | (127,425 | ) | — | — | — | (127,425 | ) | ||||||||||||||||
Net income (loss) | $ | 198,928 | $ | 198,587 | $ | 423,986 | $ | (27,925 | ) | $ | (594,899 | ) | $ | 198,677 | ||||||||||
F-44
Table of Contents
Year Ended December 31, 2004
Guarantor | Non-Guarantor | |||||||||||||||||||||||
Parent | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||
REVENUES: | ||||||||||||||||||||||||
Service revenues | $ | — | $ | — | $ | 616,401 | $ | — | $ | — | $ | 616,401 | ||||||||||||
Equipment revenues | — | 11,720 | 120,129 | — | — | 131,849 | ||||||||||||||||||
Total revenues | — | 11,720 | 736,530 | — | — | 748,250 | ||||||||||||||||||
OPERATING EXPENSES: | ||||||||||||||||||||||||
Cost of service (excluding depreciation and amortization expense shown separately below) | — | — | 200,806 | — | — | 200,806 | ||||||||||||||||||
Cost of equipment | — | 10,944 | 211,822 | — | — | 222,766 | ||||||||||||||||||
Selling, general and administrative expenses (excluding depreciation and amortization expense shown separately below) | 2,631 | 38,956 | 89,761 | 162 | — | 131,510 | ||||||||||||||||||
Depreciation and amortization | — | 915 | 61,286 | — | — | 62,201 | ||||||||||||||||||
Loss on disposal of assets | — | 24 | 3,185 | — | — | 3,209 | ||||||||||||||||||
Total operating expenses | 2,631 | 50,839 | 566,860 | 162 | — | 620,492 | ||||||||||||||||||
Income from operations | (2,631 | ) | (39,119 | ) | 169,670 | (162 | ) | — | 127,758 | |||||||||||||||
OTHER EXPENSE (INCOME): | ||||||||||||||||||||||||
Interest expense | — | 16,723 | 2,307 | 56 | (56 | ) | 19,030 | |||||||||||||||||
Earnings from consolidated subsidiaries | (56,004 | ) | (167,844 | ) | — | — | 223,848 | — | ||||||||||||||||
Accretion of put option in majority-owned subsidiary | — | — | — | — | 8 | 8 | ||||||||||||||||||
Interest income | — | (2,528 | ) | — | — | 56 | (2,472 | ) | ||||||||||||||||
Gain on extinguishment of debt | — | — | (698 | ) | — | — | (698 | ) | ||||||||||||||||
Total other expense | (56,004 | ) | (153,649 | ) | 1,609 | 56 | 223,856 | 15,868 | ||||||||||||||||
Income before provision for income taxes | 53,373 | 114,530 | 168,061 | (218 | ) | (223,856 | ) | 111,890 | ||||||||||||||||
Provision for income taxes | 921 | (47,921 | ) | — | — | — | (47,000 | ) | ||||||||||||||||
Net income (loss) | $ | 54,294 | $ | 66,609 | $ | 168,061 | $ | (218 | ) | $ | (223,856 | ) | $ | 64,890 | ||||||||||
F-45
Table of Contents
Year Ended December 31, 2003
Guarantor | Non-Guarantor | |||||||||||||||||||||||
Parent | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||
REVENUES: | ||||||||||||||||||||||||
Service revenues | $ | — | $ | — | $ | 369,851 | $ | — | $ | — | $ | 369,851 | ||||||||||||
Equipment revenues | — | 9,372 | 71,886 | — | — | 81,258 | ||||||||||||||||||
Total revenues | 9,372 | 441,737 | 451,109 | |||||||||||||||||||||
OPERATING EXPENSES: | ||||||||||||||||||||||||
Cost of service (excluding depreciation and amortization expense shown separately below) | — | — | 122,211 | — | — | 122,211 | ||||||||||||||||||
Cost of equipment | — | 8,242 | 142,590 | — | — | 150,832 | ||||||||||||||||||
Selling, general and administrative expenses (excluding depreciation and amortization expense shown separately below) | — | 21,671 | 72,402 | — | — | 94,073 | ||||||||||||||||||
Depreciation and amortization | — | 1,058 | 41,370 | — | — | 42,428 | ||||||||||||||||||
Loss on disposal of assets | — | 13 | 379 | — | — | 392 | ||||||||||||||||||
Total operating expenses | — | 30,984 | 378,952 | — | — | 409,936 | ||||||||||||||||||
Income from operations | — | (21,612 | ) | 62,785 | — | — | 41,173 | |||||||||||||||||
OTHER EXPENSE (INCOME): | ||||||||||||||||||||||||
Interest expense | — | 4,613 | 6,502 | — | — | 11,115 | ||||||||||||||||||
Earnings from consolidated subsidiaries | — | (56,886 | ) | — | — | 56,886 | — | |||||||||||||||||
Interest income | — | (996 | ) | — | — | — | (996 | ) | ||||||||||||||||
Gain on extinguishment of debt | — | — | (603 | ) | — | — | (603 | ) | ||||||||||||||||
Total other expense | — | (53,269 | ) | 5,899 | — | 56,886 | 9,516 | |||||||||||||||||
Income before provision for income taxes and cumulative effect of change in accounting principle | — | 31,657 | 56,886 | — | (56,886 | ) | 31,657 | |||||||||||||||||
Provision for income taxes | — | (16,179 | ) | — | — | — | (16,179 | ) | ||||||||||||||||
Income before cumulative effect of change in accounting principle | — | 15,478 | 56,886 | — | (56,886 | ) | 15,478 | |||||||||||||||||
Cumulative effect of change in accounting principle | — | (120 | ) | — | — | — | (120 | ) | ||||||||||||||||
Net income | $ | — | $ | 15,358 | $ | 56,886 | $ | — | $ | (56,886 | ) | $ | 15,358 | |||||||||||
F-46
Table of Contents
Year Ended December 31, 2005
Guarantor | Non-Guarantor | |||||||||||||||||||||||
Parent | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||||||||||
Net income (loss) | $ | 198,928 | $ | 198,587 | $ | 423,986 | $ | (27,925 | ) | $ | (594,899 | ) | $ | 198,677 | ||||||||||
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: | ||||||||||||||||||||||||
Depreciation and amortization | — | 120 | 87,775 | — | — | 87,895 | ||||||||||||||||||
Provision for uncollectible accounts receivable | — | 129 | — | — | — | 129 | ||||||||||||||||||
Deferred rent expense | — | (72 | ) | 4,479 | — | — | 4,407 | |||||||||||||||||
Cost of abandoned cell sites | — | — | 725 | — | — | 725 | ||||||||||||||||||
Non-cash interest expense | — | 3,695 | 590 | 26,997 | (26,997 | ) | 4,285 | |||||||||||||||||
Gain on disposal of assets | — | — | (218,203 | ) | — | — | (218,203 | ) | ||||||||||||||||
Loss on extinguishment of debt | — | 44,589 | 1,859 | — | — | 46,448 | ||||||||||||||||||
Gain on sale of investments | (154 | ) | (36 | ) | — | — | — | (190 | ) | |||||||||||||||
Accretion of asset retirement obligation | — | 1 | 422 | — | — | 423 | ||||||||||||||||||
Accretion of put option in majority-owned subsidiary | — | — | — | — | 252 | 252 | ||||||||||||||||||
Deferred income taxes | 52,882 | 72,173 | — | — | — | 125,055 | ||||||||||||||||||
Stock-based compensation expense | — | — | 2,596 | — | — | 2,596 | ||||||||||||||||||
Changes in assets and liabilities | (272,868 | ) | (608,004 | ) | 13,857 | 862 | 896,870 | 30,717 | ||||||||||||||||
Net cash (used in) provided by operating activities | (21,212 | ) | (288,818 | ) | 318,086 | (66 | ) | 275,226 | 283,216 | |||||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||||||||||
Purchases of property and equipment | — | — | (266,033 | ) | (466 | ) | — | (266,499 | ) | |||||||||||||||
Change in prepaid purchases of property and equipment | — | — | (11,800 | ) | — | — | (11,800 | ) | ||||||||||||||||
Proceeds from sale of property and equipment | — | — | 146 | — | — | 146 | ||||||||||||||||||
Purchase of investments | (54,262 | ) | (685,220 | ) | — | — | — | (739,482 | ) | |||||||||||||||
Proceeds from sale of investments | 30,225 | 356,219 | — | — | — | 386,444 | ||||||||||||||||||
Change in restricted cash and investments | — | (121 | ) | 14 | — | — | (107 | ) | ||||||||||||||||
Purchases of FCC licenses | — | — | (235,330 | ) | (268,600 | ) | — | (503,930 | ) | |||||||||||||||
Proceeds from sale of FCC licenses | — | — | 230,000 | — | — | 230,000 | ||||||||||||||||||
Net cash used in investing activities | (24,037 | ) | (329,122 | ) | (283,003 | ) | (269,066 | ) | — | (905,228 | ) | |||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||||||||||
Change in book overdraft | — | (565 | ) | — | — | — | (565 | ) | ||||||||||||||||
Payment upon execution of cash flow hedging derivative | — | (1,899 | ) | — | — | — | (1,899 | ) | ||||||||||||||||
Proceeds from Credit Agreements | — | 902,875 | — | — | — | 902,875 | ||||||||||||||||||
Proceeds from Bridge Credit Agreements | — | 540,000 | — | — | — | 540,000 | ||||||||||||||||||
Proceeds from long-term note to parent | — | — | — | 275,226 | (275,226 | ) | — | |||||||||||||||||
Debt issuance costs | — | (29,480 | ) | — | — | — | (29,480 | ) | ||||||||||||||||
Repayment of debt | — | (719,671 | ) | (34,991 | ) | — | — | (754,662 | ) | |||||||||||||||
Proceeds from repayment of subscriptions receivable | — | 103 | — | — | — | 103 | ||||||||||||||||||
Proceeds from issuance of preferred stock, net of issuance costs | 46,662 | — | — | — | — | 46,662 | ||||||||||||||||||
Proceeds from exercise of stock options and warrants | 9,210 | — | — | — | — | 9,210 | ||||||||||||||||||
Net cash provided by (used in) financing activities | 55,872 | 691,363 | (34,991 | ) | 275,226 | (275,226 | ) | 712,244 | ||||||||||||||||
INCREASE IN CASH AND CASH EQUIVALENTS | 10,623 | 73,423 | 92 | 6,094 | — | 90,232 | ||||||||||||||||||
CASH AND CASH EQUIVALENTS, beginning of period | 1 | 22,349 | 127 | — | — | 22,477 | ||||||||||||||||||
CASH AND CASH EQUIVALENTS, end of period | $ | 10,624 | $ | 95,772 | $ | 219 | $ | 6,094 | $ | — | $ | 112,709 | ||||||||||||
F-47
Table of Contents
Year Ended December 31, 2004
Guarantor | Non-Guarantor | |||||||||||||||||||||||
Parent | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||||||||||
Net income (loss) | $ | 54,294 | $ | 66,609 | $ | 168,061 | $ | (218 | ) | $ | (223,856 | ) | $ | 64,890 | ||||||||||
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | ||||||||||||||||||||||||
Depreciation and amortization | — | 915 | 61,286 | — | — | 62,201 | ||||||||||||||||||
Provision for uncollectible accounts receivable | — | 125 | — | — | — | 125 | ||||||||||||||||||
Deferred rent expense | — | 15 | 3,451 | — | — | 3,466 | ||||||||||||||||||
Cost of abandoned cell sites | — | — | 1,021 | — | — | 1,021 | ||||||||||||||||||
Non-cash interest expense | — | 470 | 2,419 | 56 | (56 | ) | 2,889 | |||||||||||||||||
Loss (gain) on disposal of assets | — | 24 | 3,185 | — | — | 3,209 | ||||||||||||||||||
(Gain) loss on extinguishment of debt | — | — | (698 | ) | — | — | (698 | ) | ||||||||||||||||
(Gain) loss on sale of investments | — | 576 | — | — | — | 576 | ||||||||||||||||||
Accretion of asset retirement obligation | — | (1 | ) | 254 | — | — | 253 | |||||||||||||||||
Accretion of put option in majority-owned subsidiary | — | — | — | — | 8 | 8 | ||||||||||||||||||
Deferred income taxes | (921 | ) | 45,362 | — | — | — | 44,441 | |||||||||||||||||
Stock-based compensation expense | — | 10,429 | — | — | — | 10,429 | ||||||||||||||||||
Changes in assets and liabilities | (53,837 | ) | (314,588 | ) | 77,929 | 143 | 247,922 | (42,431 | ) | |||||||||||||||
Net cash (used in) provided by operating activities | (464 | ) | (190,064 | ) | 316,908 | (19 | ) | 24,018 | 150,379 | |||||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||||||||||
Purchases of property and equipment | — | (1,558 | ) | (249,272 | ) | — | — | (250,830 | ) | |||||||||||||||
Purchase of investments | — | (158,672 | ) | — | — | — | (158,672 | ) | ||||||||||||||||
Proceeds from sale of investments | — | 307,220 | — | — | — | 307,220 | ||||||||||||||||||
Change in restricted cash and investments | — | (1,511 | ) | — | — | — | (1,511 | ) | ||||||||||||||||
Purchases of FCC licenses | — | (8,700 | ) | (53,325 | ) | — | — | (62,025 | ) | |||||||||||||||
Deposit to FCC for licenses | — | — | — | (25,000 | ) | — | (25,000 | ) | ||||||||||||||||
Microwave relocation costs | — | — | (63 | ) | — | — | (63 | ) | ||||||||||||||||
Net cash provided by (used in) investing activities | — | 136,779 | (302,660 | ) | (25,000 | ) | — | (190,881 | ) | |||||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||||||||||
Change in book overdraft | — | 5,778 | — | — | — | 5,778 | ||||||||||||||||||
Proceeds from short-term notes payable | — | 1,703 | — | — | — | 1,703 | ||||||||||||||||||
Proceeds from long-term note to parent | — | — | — | 18,352 | (18,352 | ) | — | |||||||||||||||||
Proceeds from capital contributions | — | — | — | 6,667 | (6,667 | ) | — | |||||||||||||||||
Debt issuance costs | — | (164 | ) | — | — | — | (164 | ) | ||||||||||||||||
Repayment of debt | — | — | (14,215 | ) | — | — | (14,215 | ) | ||||||||||||||||
Proceeds from minority interest in majority-owned subsidiary | — | — | — | — | 1,000 | 1,000 | ||||||||||||||||||
Proceeds from issuance of preferred stock, net of issuance costs | 5 | — | — | — | — | 5 | ||||||||||||||||||
Proceeds from exercise of stock options and warrants | 460 | — | — | — | — | 460 | ||||||||||||||||||
Net cash provided by (used in) financing activities | 465 | 7,317 | (14,215 | ) | 25,019 | (24,019 | ) | (5,433 | ) | |||||||||||||||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 1 | (45,968 | ) | 33 | — | (1 | ) | (45,935 | ) | |||||||||||||||
CASH AND CASH EQUIVALENTS, beginning of period | — | 68,318 | 94 | — | — | 68,412 | ||||||||||||||||||
CASH AND CASH EQUIVALENTS, end of period | $ | 1 | $ | 22,350 | $ | 127 | $ | — | $ | (1 | ) | $ | 22,477 | |||||||||||
F-48
Table of Contents
Year Ended December 31, 2003
Guarantor | Non-Guarantor | |||||||||||||||||||||||
Parent | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||||||||||
Net income | $ | — | $ | 15,358 | $ | 56,886 | $ | — | $ | (56,886 | ) | $ | 15,358 | |||||||||||
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | ||||||||||||||||||||||||
Cumulative effect of change in accounting principle | — | 120 | — | — | — | 120 | ||||||||||||||||||
Depreciation and amortization | — | 1,058 | 41,370 | — | — | 42,428 | ||||||||||||||||||
Provision for uncollectible accounts receivable | — | 110 | — | — | — | 110 | ||||||||||||||||||
Deferred rent expense | — | 17 | 2,786 | — | — | 2,803 | ||||||||||||||||||
Cost of abandoned cell sites | — | — | 824 | — | — | 824 | ||||||||||||||||||
Non-cash interest expense | — | 90 | 2,983 | — | — | 3,073 | ||||||||||||||||||
Loss on disposal of assets | — | 13 | 379 | — | — | 392 | ||||||||||||||||||
Gain on extinguishment of debt | — | — | (603 | ) | — | — | (603 | ) | ||||||||||||||||
Accretion of asset retirement obligation | — | 28 | 99 | — | — | 127 | ||||||||||||||||||
Deferred income taxes | — | 18,716 | — | — | — | 18,716 | ||||||||||||||||||
Stock-based compensation expense | — | 5,573 | — | — | — | 5,573 | ||||||||||||||||||
Changes in assets and liabilities | — | (57,393 | ) | 24,191 | — | 56,886 | 23,684 | |||||||||||||||||
Net cash (used in) provided by operating activities | — | (16,310 | ) | 128,915 | — | — | 112,605 | |||||||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||||||||||
Purchases of property and equipment | — | — | (117,731 | ) | — | — | (117,731 | ) | ||||||||||||||||
Proceeds from sale of property and equipment | — | — | 6 | — | — | 6 | ||||||||||||||||||
Purchase of other assets | — | — | (35 | ) | — | — | (35 | ) | ||||||||||||||||
Purchase of investments | — | (209,149 | ) | — | — | — | (209,149 | ) | ||||||||||||||||
Proceeds from sale of investments | — | 22,650 | — | — | — | 22,650 | ||||||||||||||||||
Change in restricted cash and investments | — | 953 | — | — | — | 953 | ||||||||||||||||||
Deposit to FCC for licenses | — | (1,500 | ) | — | — | — | (1,500 | ) | ||||||||||||||||
Microwave relocation costs | — | — | (2,062 | ) | — | — | (2,062 | ) | ||||||||||||||||
Net cash (used in) provided by investing activities | — | (187,046 | ) | (119,822 | ) | — | — | (306,868 | ) | |||||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||||||||||
Change in book overdraft | — | 824 | — | — | — | 824 | ||||||||||||||||||
Proceeds from 103/4% Senior Notes Due 2011 | — | 145,500 | — | — | — | 145,500 | ||||||||||||||||||
Debt issuance costs | — | (876 | ) | — | — | — | (876 | ) | ||||||||||||||||
Repayment of debt | — | — | (9,077 | ) | — | — | (9,077 | ) | ||||||||||||||||
Proceeds from issuance of preferred stock, net of issuance costs | — | 65,537 | — | — | — | 65,537 | ||||||||||||||||||
Proceeds from exercise of stock options and warrants | — | 43 | — | — | — | 43 | ||||||||||||||||||
Net cash provided by financing activities | — | 211,028 | (9,077 | ) | — | — | 201,951 | |||||||||||||||||
INCREASE IN CASH AND CASH EQUIVALENTS | — | 7,672 | 16 | — | — | 7,688 | ||||||||||||||||||
CASH AND CASH EQUIVALENTS, beginning of period | — | 60,646 | 78 | — | — | 60,724 | ||||||||||||||||||
CASH AND CASH EQUIVALENTS, end of period | $ | — | $ | 68,318 | $ | 94 | $ | — | $ | — | $ | 68,412 | ||||||||||||
F-49
Table of Contents
20. | Related-Party Transactions: |
21. | Supplemental Cash Flow Information: |
Year Ended December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
(In Thousands) | ||||||||||||
Cash paid for interest | $ | 41,360 | $ | 19,180 | $ | 3,596 | ||||||
Cash paid for income taxes | — | — | 21 |
22. | Fair Value of Financial Instruments: |
F-50
Table of Contents
2005 | 2004 | |||||||||||||||
Carrying | Carrying | |||||||||||||||
Amount | Fair Value | Amount | Fair Value | |||||||||||||
FCC notes | $ | — | $ | — | $ | 33,409 | $ | 32,240 | ||||||||
Senior Notes | — | — | 150,000 | 160,875 | ||||||||||||
Microwave relocation obligations | 2,690 | 2,690 | 4,061 | 4,061 | ||||||||||||
Credit Agreements | 900,000 | 861,380 | — | — |
23. | Subsequent Events: |
F-51
Table of Contents
Condensed Consolidated Balance Sheets
(In Thousands, Except Share and Per Share Information)
(Unaudited)
Pro Forma | ||||||||||||
September 30, | September 30, | December 31, | ||||||||||
2006 | 2006 | 2005 | ||||||||||
CURRENT ASSETS: | ||||||||||||
Cash and cash equivalents | $ | 116,265 | $ | 112,709 | ||||||||
Short-term investments | 229,546 | 390,422 | ||||||||||
Inventories, net | 39,648 | 39,431 | ||||||||||
Accounts receivable (net of allowance for uncollectible accounts of $1,806 and $2,383 at September 30, 2006 and December 31, 2005, respectively) | 23,506 | 16,028 | ||||||||||
Prepaid charges | 25,854 | 21,430 | ||||||||||
Deferred charges | 21,442 | 13,270 | ||||||||||
Deferred tax asset | 10,365 | 2,122 | ||||||||||
Other current assets | 22,870 | 16,690 | ||||||||||
Total current assets | 489,496 | 612,102 | ||||||||||
Property and equipment, net | 1,207,982 | 831,490 | ||||||||||
Restricted cash and investments | 6,163 | 2,920 | ||||||||||
Long-term investments | 2,272 | 5,052 | ||||||||||
PCS licenses | 681,475 | 681,299 | ||||||||||
Microwave relocation costs | 9,187 | 9,187 | ||||||||||
Long-term deposits | 200,165 | 84 | ||||||||||
Other assets | 29,434 | 16,847 | ||||||||||
Total assets | $ | 2,626,174 | $ | 2,158,981 | ||||||||
CURRENT LIABILITIES: | ||||||||||||
Accounts payable and accrued expenses | $ | 281,789 | $ | 174,220 | ||||||||
Current maturities of long-term debt | 200,000 | 2,690 | ||||||||||
Deferred revenue | 78,600 | 56,560 | ||||||||||
Other current liabilities | 2,989 | 2,147 | ||||||||||
Total current liabilities | 563,378 | 235,617 | ||||||||||
Long-term debt, net | 902,594 | 902,864 | ||||||||||
Deferred tax liabilities | 196,314 | 146,053 | ||||||||||
Deferred rents | 20,104 | 14,739 | ||||||||||
Redeemable minority interest | 3,823 | 1,259 | ||||||||||
Other long-term liabilities | 24,023 | 20,858 | ||||||||||
Total liabilities | 1,710,236 | 1,321,390 | ||||||||||
COMMITMENTS AND CONTINGENCIES (See Note 11) | ||||||||||||
SERIES D CUMULATIVE CONVERTIBLE REDEEMABLE PARTICIPATING PREFERRED STOCK, par value $0.0001 per share, 4,000,000 shares designated, 3,500,993 shares issued and outstanding at September 30, 2006 and December 31, 2005; Liquidation preference of $442,093 and $426,382 at September 30, 2006 and December 31, 2005, respectively | 437,955 | — | 421,889 | |||||||||
SERIES E CUMULATIVE CONVERTIBLE REDEEMABLE PARTICIPATING PREFERRED STOCK, par value $0.0001 per share, 500,000 shares designated, 500,000 shares issued and outstanding at September 30, 2006 and December 31, 2005; Liquidation preference of $53,263 and $51,019 at September 30, 2006 and December 31, 2005, respectively | 50,294 | — | 47,796 | |||||||||
STOCKHOLDERS’ EQUITY: | ||||||||||||
Preferred stock, par value $0.0001 per share, 25,000,000 shares authorized, 4,000,000 of which have been designated as Series D Preferred Stock and 500,000 of which have been designated as Series E Preferred Stock; no shares of preferred stock other than Series D & E Preferred Stock (presented above) issued and outstanding at September 30, 2006 and December 31, 2005 | — | — | — | |||||||||
Common Stock, par value $0.0001 per share, 300,000,000 shares authorized, 52,071,221 and 51,775,698 shares issued and outstanding at September 30, 2006 and December 31, 2005, respectively | 5 | 10 | 5 | |||||||||
Additional paid-in capital | 157,712 | 645,956 | 149,594 | |||||||||
Deferred compensation | — | — | (178 | ) | ||||||||
Retained earnings | 268,762 | 268,762 | 216,702 | |||||||||
Accumulated other comprehensive income | 1,210 | 1,210 | 1,783 | |||||||||
Total stockholders’ equity | 427,689 | 915,938 | 367,906 | |||||||||
Total liabilities and stockholders’ equity | $ | 2,626,174 | $ | 2,158,981 | ||||||||
F-52
Table of Contents
Condensed Consolidated Statements of Income and Comprehensive Income
(In Thousands, Except Share and Per Share Information)
(Unaudited)
For the Nine Months Ended | ||||||||
September 30, | ||||||||
2006 | 2005 | |||||||
REVENUES: | ||||||||
Service revenues | $ | 916,179 | $ | 631,209 | ||||
Equipment revenues | 177,592 | 118,990 | ||||||
Total revenues | 1,093,771 | 750,199 | ||||||
OPERATING EXPENSES: | ||||||||
Cost of service (excluding depreciation and amortization expense of $87,602 and $57,270, shown separately below) | 313,510 | 201,940 | ||||||
Cost of equipment | 330,898 | 210,529 | ||||||
Selling, general and administrative expenses (excluding depreciation and amortization expense of $8,585 and $4,625, shown separately below) | 171,921 | 116,206 | ||||||
Depreciation and amortization | 96,187 | 61,895 | ||||||
Loss (gain) loss on disposal of assets | 10,763 | (218,292 | ) | |||||
Total operating expenses | 923,279 | 372,278 | ||||||
Income from operations | 170,492 | 377,921 | ||||||
OTHER EXPENSE (INCOME): | ||||||||
Interest expense | 67,408 | 40,867 | ||||||
Accretion of put option in majority-owned subsidiary | 564 | 187 | ||||||
Interest income | (15,106 | ) | (4,876 | ) | ||||
(Gain) loss on extinguishment of debt | (244 | ) | 46,448 | |||||
Total other expense | 52,622 | 82,626 | ||||||
Income before provision for income taxes | 117,870 | 295,295 | ||||||
Provision for income taxes | (47,245 | ) | (115,460 | ) | ||||
Net income | 70,625 | 179,835 | ||||||
Accrued dividends on Series D Preferred Stock | (15,711 | ) | (15,711 | ) | ||||
Accrued dividends on Series E Preferred Stock | (2,244 | ) | (263 | ) | ||||
Accretion on Series D Preferred Stock | (355 | ) | (355 | ) | ||||
Accretion on Series E Preferred Stock | (254 | ) | (30 | ) | ||||
Net income applicable to Common Stock | $ | 52,061 | $ | 163,476 | ||||
Net income | $ | 70,625 | $ | 179,835 | ||||
Other comprehensive income: | ||||||||
Unrealized (loss) gain onavailable-for-sale securities, net of tax | (847 | ) | 104 | |||||
Unrealized gain on cash flow hedging derivative, net of tax | 896 | 1,495 | ||||||
Reclassification adjustment for gains included in net income, net of tax | (622 | ) | (30 | ) | ||||
Comprehensive income | $ | 70,052 | $ | 181,404 | ||||
Net income per common share: (See Note 10) | ||||||||
Basic | $ | 0.57 | $ | 2.02 | ||||
Diluted | $ | 0.56 | $ | 1.74 | ||||
Weighted average shares: | ||||||||
Basic | 51,890,687 | 43,517,417 | ||||||
Diluted | 53,158,789 | 50,417,637 | ||||||
F-53
Table of Contents
Condensed Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
For the Nine Months Ended | ||||||||
September 30, | ||||||||
2006 | 2005 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income | $ | 70,625 | $ | 179,835 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 96,187 | 61,895 | ||||||
Provision for (recovery of) uncollectible accounts receivable | 64 | (38 | ) | |||||
Deferred rent expense | 5,365 | 3,091 | ||||||
Cost of abandoned cell sites | 2,069 | 251 | ||||||
Non-cash interest expense | 3,702 | 3,766 | ||||||
Loss (gain) on disposal of assets | 10,763 | (218,292 | ) | |||||
(Gain) loss on extinguishment of debt | (244 | ) | 46,448 | |||||
(Gain) loss on sale of investments | (1,875 | ) | 49 | |||||
Accretion of asset retirement obligation | 469 | 103 | ||||||
Accretion of put option in majority-owned subsidiary | 564 | 187 | ||||||
Deferred income taxes | 41,792 | 113,580 | ||||||
Stock-based compensation expense | 7,750 | 3,302 | ||||||
Changes in assets and liabilities: | ||||||||
Inventories | (220 | ) | 14,825 | |||||
Accounts receivable | (7,542 | ) | (3,721 | ) | ||||
Prepaid expenses | (7,365 | ) | (1,890 | ) | ||||
Deferred charges | (8,172 | ) | (4,443 | ) | ||||
Other assets | (2,974 | ) | (4,804 | ) | ||||
Accounts payable and accrued expenses | 49,121 | 40,060 | ||||||
Deferred revenue | 22,055 | 10,830 | ||||||
Other liabilities | 2,554 | 1,981 | ||||||
Net cash provided by operating activities | 284,688 | 247,015 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchases of property and equipment | (453,864 | ) | (204,450 | ) | ||||
Change in prepaid purchases of property and equipment | 2,427 | (4,336 | ) | |||||
Proceeds from sale of property and equipment | 2,548 | 123 | ||||||
Purchase of investments | (737,088 | ) | (427,732 | ) | ||||
Proceeds from sale of investments | 900,189 | 171,725 | ||||||
Change in restricted cash and investments | (3,291 | ) | (50,510 | ) | ||||
Purchases of FCC licenses | (176 | ) | (235,330 | ) | ||||
Deposit to FCC for licenses | (200,000 | ) | (268,599 | ) | ||||
Proceeds from sale of FCC licenses | — | 230,000 | ||||||
Net cash used in investing activities | (489,255 | ) | (789,109 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Change in book overdraft | 22,993 | 11,105 | ||||||
Proceeds from bridge credit agreements | 200,000 | 540,000 | ||||||
Proceeds from Credit Agreements | — | 750,000 | ||||||
Payment upon execution of cash flow hedging derivative | — | (1,899 | ) | |||||
Debt issuance costs | (15,313 | ) | (28,801 | ) | ||||
Repayment of debt | (2,446 | ) | (753,080 | ) | ||||
Proceeds from minority interest in majority-owned subsidiary | 2,000 | — | ||||||
Proceeds from issuance of preferred stock, net of issuance costs | — | 46,688 | ||||||
Proceeds from exercise of stock options and warrants | 889 | 764 | ||||||
Net cash provided by financing activities | 208,123 | 564,777 | ||||||
INCREASE IN CASH AND CASH EQUIVALENTS | 3,556 | 22,683 | ||||||
CASH AND CASH EQUIVALENTS, beginning of period | 112,709 | 22,477 | ||||||
CASH AND CASH EQUIVALENTS, end of period | $ | 116,265 | $ | 45,160 | ||||
F-54
Table of Contents
1. | Basis of Presentation: |
F-55
Table of Contents
2. | Share-Based Payments: |
F-56
Table of Contents
Nine Months Ended | ||||||||
September 30, | ||||||||
2006 | 2005 | |||||||
Expected dividends | 0.00 | % | 0.00 | % | ||||
Expected volatility | 45.00 | % | 50.00 | % | ||||
Risk-free interest rate | 4.76 | % | 4.11 | % | ||||
Expected lives in years | 5.00 | 5.00 | ||||||
Weighted-average fair value of options: | ||||||||
Granted at fair value | $ | 10.12 | $ | 10.31 | ||||
Weighted-average exercise price of options: | ||||||||
Granted at fair value | $ | 22.12 | $ | 21.38 |
As of September 30, | ||||||||||||||||
2006 | 2005 | |||||||||||||||
Weighted | Weighted | |||||||||||||||
Average | Average | |||||||||||||||
Exercise | Exercise | |||||||||||||||
Shares | Price | Shares | Price | |||||||||||||
Outstanding, beginning of period | 4,834,070 | $ | 12.54 | 10,816,285 | $ | 2.76 | ||||||||||
Granted | 1,274,313 | $ | 22.12 | 1,660,795 | $ | 21.38 | ||||||||||
Exercised | (105,258 | ) | $ | 8.45 | (99,405 | ) | $ | 6.02 | ||||||||
Forfeited | (368,054 | ) | $ | 12.00 | (322,448 | ) | $ | 12.09 | ||||||||
Outstanding, end of period | 5,635,071 | $ | 14.82 | 12,055,227 | $ | 5.05 | ||||||||||
Options exercisable at period-end | 3,649,360 | $ | 10.98 | 11,154,412 | $ | 3.72 | ||||||||||
Options vested at period-end | 2,879,196 | 9,515,477 | ||||||||||||||
F-57
Table of Contents
Options Outstanding | Options Vested | |||||||||||||||||||
Weighted | Weighted | Weighted | ||||||||||||||||||
Average | Average | Average | ||||||||||||||||||
Number of | Contractual | Exercise | Number of | Exercise | ||||||||||||||||
Exercise Price | Shares | Life (Years) | Price | Shares | Price | |||||||||||||||
$ 0.23 - $ 1.00 | 283,997 | 6.18 | $ | 0.35 | 283,997 | $ | 0.35 | |||||||||||||
$ 4.70 - $ 4.70 | 1,356,132 | 5.07 | $ | 4.70 | 1,329,671 | $ | 4.70 | |||||||||||||
$ 5.62 - $18.94 | 992,683 | 7.16 | $ | 11.91 | 612,482 | $ | 11.04 | |||||||||||||
$21.40 - $21.40 | 1,180,254 | 8.84 | $ | 21.40 | 469,023 | $ | 21.40 | |||||||||||||
$21.46 - $26.00 | 1,822,005 | 9.40 | $ | 21.92 | 184,023 | $ | 21.46 | |||||||||||||
5,635,071 | 2,879,196 | |||||||||||||||||||
Weighted | ||||||||
Average | ||||||||
Grant-Date | ||||||||
Stock Option Grants | Shares | Fair Value | ||||||
Unvested balance, January 1, 2006 | 2,527,553 | $ | 9.00 | |||||
Grants | 1,274,313 | $ | 10.12 | |||||
Vested shares | (866,454 | ) | $ | 8.45 | ||||
Forfeitures | (179,537 | ) | $ | 9.21 | ||||
Unvested balance, September 30, 2006 | 2,755,875 | $ | 9.68 | |||||
F-58
Table of Contents
Nine Months | ||||
Ended | ||||
September 30, | ||||
2005 | ||||
Net income applicable to Common Stock — as reported | $ | 163,476 | ||
Add: Amortization of deferred compensation determined under the intrinsic method for employee stock awards, net of tax | 1,981 | |||
Less: Total stock-based employee compensation expense determined under the fair value method for employee stock awards, net of tax | (1,855 | ) | ||
Net income applicable to Common Stock — pro forma | $ | 163,602 | ||
Basic net income per common share: | ||||
As reported | $ | 2.02 | ||
Pro forma | $ | 2.02 | ||
Diluted net income per common share: | ||||
As reported | $ | 1.74 | ||
Pro forma | $ | 1.75 | ||
Weighted | Weighted | Weighted | ||||||||||||||
Number of | Average | Average | Average | |||||||||||||
Options | Exercise | Market Value | Intrinsic Value | |||||||||||||
Grants Made During the Quarter Ended | Granted | Price | per Share | per Share | ||||||||||||
March 31, 2006 | 956,663 | $ | 21.46 | $ | 21.46 | $ | 0.00 | |||||||||
June 30, 2006 | 178,175 | $ | 22.63 | $ | 22.63 | $ | 0.00 | |||||||||
September 30, 2006 | 139,475 | $ | 26.00 | $ | 26.00 | $ | 0.00 |
F-59
Table of Contents
3. | Property and Equipment: |
September 30, | December 31, | |||||||
2006 | 2005 | |||||||
Construction-in-progress | $ | 206,599 | $ | 98,078 | ||||
Network infrastructure | 1,244,749 | 905,924 | ||||||
Office equipment | 28,545 | 17,059 | ||||||
Leasehold improvements | 21,428 | 16,608 | ||||||
Furniture and fixtures | 5,938 | 4,000 | ||||||
Vehicles | 185 | 118 | ||||||
1,507,444 | 1,041,787 | |||||||
Accumulated depreciation | (299,462 | ) | (210,297 | ) | ||||
Property and equipment, net | $ | 1,207,982 | $ | 831,490 | ||||
F-60
Table of Contents
4. | PCS Licenses: |
5. | Accounts Payable and Accrued Expenses: |
September 30, | December 31, | |||||||
2006 | 2005 | |||||||
Accounts payable | $ | 59,446 | $ | 29,430 | ||||
Book overdraft | 32,913 | 9,920 | ||||||
Accrued accounts payable | 92,429 | 69,611 | ||||||
Accrued liabilities | 8,624 | 7,590 | ||||||
Payroll and employee benefits | 13,535 | 12,808 | ||||||
Accrued interest | 29,664 | 17,578 | ||||||
Taxes, other than income | 37,896 | 23,211 | ||||||
Income taxes | 7,282 | 4,072 | ||||||
Accounts payable and accrued expenses | $ | 281,789 | $ | 174,220 | ||||
F-61
Table of Contents
6. | Long-Term Debt: |
September 30, | December 31, | |||||||
2006 | 2005 | |||||||
Microwave relocation obligations | $ | — | $ | 2,690 | ||||
Secured Bridge Credit Facility | 200,000 | — | ||||||
Credit Agreements | 900,000 | 900,000 | ||||||
Total | 1,100,000 | 902,690 | ||||||
Add: unamortized premium on debt | 2,594 | 2,864 | ||||||
Total debt | 1,102,594 | 905,554 | ||||||
Less: current maturities | (200,000 | ) | (2,690 | ) | ||||
Total long-term debt | $ | 902,594 | $ | 902,864 | ||||
F-62
Table of Contents
F-63
Table of Contents
7. | Asset Retirement Obligations: |
F-64
Table of Contents
September 30, | December 31, | |||||||
2006 | 2005 | |||||||
Beginning asset retirement obligations | $ | 3,522 | $ | 1,893 | ||||
Liabilities incurred | 972 | 1,206 | ||||||
Accretion expense | 469 | 423 | ||||||
Ending asset retirement obligations | $ | 4,963 | $ | 3,522 | ||||
8. | Income Taxes: |
F-65
Table of Contents
9. | Stockholders’ Equity: |
10. | Net Income Per Common Share: |
Nine Months Ended | ||||||||
September 30, | ||||||||
2006 | 2005 | |||||||
Basic EPS — Two Class Method: | ||||||||
Net income | $ | 70,625 | $ | 179,835 | ||||
Accrued dividends and accretion: | ||||||||
Series D Preferred Stock | (16,066 | ) | (16,066 | ) | ||||
Series E Preferred Stock | (2,498 | ) | (293 | ) | ||||
Net income applicable to common stock | $ | 52,061 | $ | 163,476 | ||||
Amount allocable to common shareholders | 57.0 | % | 53.7 | % | ||||
Rights to undistributed earnings | $ | 29,691 | $ | 87,858 | ||||
Weighted average shares outstanding — basic | 51,890,687 | 43,517,417 | ||||||
Net income per common share — basic | $ | 0.57 | $ | 2.02 | ||||
Diluted EPS: | ||||||||
Rights to undistributed earnings | $ | 29,691 | $ | 87,858 | ||||
Weighted average shares outstanding — basic | 51,890,687 | 43,517,417 | ||||||
Effect of dilutive securities: | ||||||||
Warrants | 49,086 | 769,325 | ||||||
Stock options | 1,219,016 | 6,130,895 | ||||||
Weighted average shares outstanding — diluted | 53,158,789 | 50,417,637 | ||||||
Net income per common share — diluted | $ | 0.56 | $ | 1.74 | ||||
F-66
Table of Contents
Nine Months | ||||
Ended | ||||
September 30, | ||||
2006 | ||||
Net income (in thousands) | $ | 70,625 | ||
Basic net income per common share — Pro forma | $ | 0.71 | ||
Diluted net income per common share — Pro forma | $ | 0.70 | ||
Shares used in computing pro forma basic net income per common share | 99,140,030 | |||
Shares used in computing pro forma diluted net income per common share | 100,408,133 | |||
11. | Commitments and Contingencies: |
F-67
Table of Contents
12. | Supplemental Cash Flow Information: |
Nine Months Ended | ||||||||
September 30, | ||||||||
2006 | 2005 | |||||||
(In Thousands) | ||||||||
Cash paid for interest | $ | 34,225 | $ | 21,022 | ||||
Cash paid for income taxes | 525 | — |
F-68
Table of Contents
13. | Related-Party Transactions: |
Nine Months Ended | ||||||||
September 30, | ||||||||
2006 | 2005 | |||||||
(In Thousands) | ||||||||
Professional services to a law firm, a partner of which was a director of the Company | $ | 44 | $ | 179 | ||||
Professional services to a law firm, a partner of which is related to an officer of the Company | 28 | 1,095 |
14. | Segment Information: |
• | Core Markets, which include Atlanta, Miami, San Francisco, and Sacramento, are aggregated because they are reviewed on an aggregate basis by the chief operating decision maker, they are similar in respect to their products and services, production processes, class of customer, method of distribution, and regulatory environment and currently exhibit similar financial performance and economic characteristics. | |
• | Expansion Markets, which include Dallas/Ft. Worth, Detroit, Tampa/Sarasota/Orlando and Los Angeles, are aggregated because they are reviewed on an aggregate basis by the chief operating decision maker, they are similar in respect to their products and services, production processes, class of customer, method of distribution, and regulatory environment and have similar expected long-term financial performance and economic characteristics. |
F-69
Table of Contents
Core | Expansion | |||||||||||||||
Nine Months Ended September 30, 2006 | Markets | Markets | Other | Total | ||||||||||||
(In Thousands) | ||||||||||||||||
Service revenues | $ | 831,053 | $ | 85,126 | $ | — | $ | 916,179 | ||||||||
Equipment revenues | 149,200 | 28,392 | — | 177,592 | ||||||||||||
Total revenues | 980,253 | 113,518 | — | 1,093,771 | ||||||||||||
Cost of service(1) | 244,636 | 68,874 | — | 313,510 | ||||||||||||
Cost of equipment | 261,258 | 69,640 | — | 330,898 | ||||||||||||
Selling, general and administrative expenses(2) | 114,021 | 57,900 | — | 171,921 | ||||||||||||
Adjusted EBITDA (deficit)(3) | 364,585 | (79,393 | ) | — | ||||||||||||
Depreciation and amortization | 80,467 | 13,381 | 2,339 | 96,187 | ||||||||||||
Stock-based compensation expense | 4,246 | 3,504 | — | 7,750 | ||||||||||||
Income (loss) from operations | 269,735 | (96,904 | ) | (2,339 | ) | 170,492 | ||||||||||
Interest expense | — | — | 67,408 | 67,408 | ||||||||||||
Accretion of put option in majority-owned subsidiary | — | — | 564 | 564 | ||||||||||||
Interest and other income | — | — | (15,106 | ) | (15,106 | ) | ||||||||||
Loss on extinguishment of debt | — | — | (244 | ) | (244 | ) | ||||||||||
Income (loss) before provision for income taxes | 269,735 | (96,904 | ) | (54,961 | ) | 117,870 | ||||||||||
Capital expenditures | 187,922 | 256,531 | 9,411 | 453,864 | ||||||||||||
Total assets | 958,792 | 963,847 | 703,535 | 2,626,174 |
F-70
Table of Contents
Core | Expansion | |||||||||||||||
Nine Months Ended September 30, 2005 | Markets | Markets | Other | Total | ||||||||||||
(In Thousands) | ||||||||||||||||
Service revenues | $ | 631,208 | $ | 1 | $ | — | $ | 631,209 | ||||||||
Equipment revenues | 118,973 | 17 | — | 118,990 | ||||||||||||
Total revenues | 750,181 | 18 | — | 750,199 | ||||||||||||
Cost of service | 197,425 | 4,515 | — | 201,940 | ||||||||||||
Cost of equipment | 210,431 | 98 | — | 210,529 | ||||||||||||
Selling, general and administrative expenses | 112,137 | 4,069 | — | 116,206 | ||||||||||||
Adjusted EBITDA (deficit)(3) | 233,491 | (8,665 | ) | — | ||||||||||||
Depreciation and amortization | 60,158 | 721 | 1,016 | 61,895 | ||||||||||||
Stock-based compensation expense | 3,302 | — | — | 3,302 | ||||||||||||
Income (loss) from operations | 388,572 | (9,635 | ) | (1,016 | ) | 377,921 | ||||||||||
Interest expense | — | — | 40,867 | 40,867 | ||||||||||||
Accretion of put option in majority-owned subsidiary | — | — | 187 | 187 | ||||||||||||
Interest and other income | — | — | (4,876 | ) | (4,876 | ) | ||||||||||
Loss on extinguishment of debt | — | — | 46,448 | 46,448 | ||||||||||||
Income (loss) before provision for income taxes | 388,572 | (9,635 | ) | (83,642 | ) | 295,295 | ||||||||||
Capital expenditures | 157,153 | 44,893 | 2,404 | 204,450 | ||||||||||||
Total assets | 698,623 | 646,107 | 602,055 | 1,946,785 |
(1) | Cost of service for the nine months ended September 30, 2006 includes $1.0 million of stock-based compensation disclosed separately. | |
(2) | Selling, general and administrative expenses include stock-based compensation disclosed separately. For the nine months ended September 30, 2006, selling, general and administrative expenses include $6.8 million, respectively, of stock-based compensation. |
(3) | Adjusted EBITDA (deficit) is presented in accordance with SFAS No. 131 as it is the primary financial measure utilized by management to facilitate evaluation of each segment’s ability to meet future debt service, capital expenditures and working capital requirements and to fund future growth. |
F-71
Table of Contents
Nine Months Ended | ||||||||
September 30, | ||||||||
2006 | 2005 | |||||||
Segment Adjusted EBITDA (Deficit): | ||||||||
Core Markets Adjusted EBITDA | $ | 364,585 | $ | 233,491 | ||||
Expansion Markets Adjusted EBITDA (Deficit) | (79,393 | ) | (8,665 | ) | ||||
Total | 285,192 | 224,826 | ||||||
Depreciation and amortization | (96,187 | ) | (61,895 | ) | ||||
Loss (gain) on disposal of assets | (10,763 | ) | 218,292 | |||||
Non-cash compensation expense | (7,750 | ) | (3,302 | ) | ||||
Interest expense | (67,408 | ) | (40,867 | ) | ||||
Accretion of put option in majority-owned subsidiary | (564 | ) | (187 | ) | ||||
Interest and other income | 15,106 | 4,876 | ||||||
(Gain) loss on extinguishment of debt | 244 | (46,448 | ) | |||||
Consolidated income before provision for income taxes | $ | 117,870 | $ | 295,295 | ||||
15. | Guarantor Subsidiaries: |
F-72
Table of Contents
As of September 30, 2006
Non- | ||||||||||||||||||||||||
Guarantor | Guarantor | |||||||||||||||||||||||
Parent | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||
CURRENT ASSETS: | ||||||||||||||||||||||||
Cash and cash equivalents | $ | 7,338 | $ | 99,985 | $ | 260 | $ | 8,682 | $ | — | $ | 116,265 | ||||||||||||
Short-term investments | 37,844 | 191,702 | — | — | — | 229,546 | ||||||||||||||||||
Inventories, net | — | 33,804 | 5,844 | — | — | 39,648 | ||||||||||||||||||
Accounts receivable, net | — | 26,493 | — | — | (2,987 | ) | 23,506 | |||||||||||||||||
Prepaid expenses | — | 4,751 | 20,861 | 242 | — | 25,854 | ||||||||||||||||||
Deferred charges | — | 21,442 | — | — | — | 21,442 | ||||||||||||||||||
Deferred tax asset | — | 10,365 | — | — | — | 10,365 | ||||||||||||||||||
Other current assets | 77 | 5,201 | 17,513 | 79 | — | 22,870 | ||||||||||||||||||
Total current assets | 45,259 | 393,743 | 44,478 | 9,003 | (2,987 | ) | 489,496 | |||||||||||||||||
Property and equipment, net | — | 17,324 | 1,141,145 | 49,513 | — | 1,207,982 | ||||||||||||||||||
Restricted cash and investments | 834 | 5,279 | — | 50 | — | 6,163 | ||||||||||||||||||
Long-term investments | — | 2,272 | — | — | — | 2,272 | ||||||||||||||||||
Investment in subsidiaries | 319,565 | 875,666 | — | — | (1,195,231 | ) | — | |||||||||||||||||
PCS licenses | — | — | 387,876 | 293,599 | — | 681,475 | ||||||||||||||||||
Microwave relocation costs | — | — | 9,187 | — | — | 9,187 | ||||||||||||||||||
Long-term deposits | 200,000 | — | 134 | 31 | — | 200,165 | ||||||||||||||||||
Long-term receivable from subsidiaries | — | 379,242 | — | — | (379,242 | ) | — | |||||||||||||||||
Other assets | 12,889 | 14,040 | 2,461 | 44 | — | 29,434 | ||||||||||||||||||
Total assets | $ | 578,547 | $ | 1,687,566 | $ | 1,585,281 | $ | 352,240 | $ | (1,577,460 | ) | $ | 2,626,174 | |||||||||||
CURRENT LIABILITIES: | ||||||||||||||||||||||||
Accounts payable and accrued expenses | $ | 4,395 | $ | 116,655 | $ | 144,571 | $ | 19,155 | $ | (2,987 | ) | $ | 281,789 | |||||||||||
Current maturities of long-term debt | 200,000 | — | — | — | — | 200,000 | ||||||||||||||||||
Deferred revenue | — | 15,172 | 63,428 | — | — | 78,600 | ||||||||||||||||||
Advances to subsidiaries | (542,617 | ) | 118,302 | 424,315 | — | — | — | |||||||||||||||||
Other current liabilities | — | 25 | 2,964 | — | — | 2,989 | ||||||||||||||||||
Total current liabilities | (338,222 | ) | 250,154 | 635,278 | 19,155 | (2,987 | ) | 563,378 | ||||||||||||||||
Long-term debt, net | — | 902,594 | — | — | — | 902,594 | ||||||||||||||||||
Long-term note to parent | — | — | — | 379,242 | (379,242 | ) | — | |||||||||||||||||
Deferred tax liabilities | 8 | 196,306 | — | — | — | 196,314 | ||||||||||||||||||
Deferred rents | — | — | 19,972 | 132 | — | 20,104 | ||||||||||||||||||
Redeemable minority interest | — | — | — | — | 3,823 | 3,823 | ||||||||||||||||||
Other long-term liabilities | — | 18,947 | 5,020 | 56 | — | 24,023 | ||||||||||||||||||
Total liabilities | (338,214 | ) | 1,368,001 | 660,270 | 398,585 | (378,406 | ) | 1,710,236 | ||||||||||||||||
COMMITMENTS AND CONTINGENCIES (See Note 11) | ||||||||||||||||||||||||
SERIES D PREFERRED STOCK | 437,955 | — | — | — | — | 437,955 | ||||||||||||||||||
SERIES E PREFERRED STOCK | 50,294 | — | — | — | — | 50,294 | ||||||||||||||||||
STOCKHOLDERS’ EQUITY: | ||||||||||||||||||||||||
Preferred stock | — | — | — | — | — | — | ||||||||||||||||||
Common stock | 5 | — | — | — | — | 5 | ||||||||||||||||||
Additional paid-in capital | 157,712 | — | — | 20,000 | (20,000 | ) | 157,712 | |||||||||||||||||
Retained earnings | 269,585 | 318,429 | 925,011 | (66,345 | ) | (1,177,918 | ) | 268,762 | ||||||||||||||||
Accumulated other comprehensive income | 1,210 | 1,136 | — | — | (1,136 | ) | 1,210 | |||||||||||||||||
Total stockholders’ equity | 428,512 | 319,565 | 925,011 | (46,345 | ) | (1,199,054 | ) | 427,689 | ||||||||||||||||
Total liabilities and stockholders’ equity | $ | 578,547 | $ | 1,687,566 | $ | 1,585,281 | $ | 352,240 | $ | (1,577,460 | ) | $ | 2,626,174 | |||||||||||
F-73
Table of Contents
As of December 31, 2005
Non- | ||||||||||||||||||||||||
Guarantor | Guarantor | |||||||||||||||||||||||
Parent | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||
CURRENT ASSETS: | ||||||||||||||||||||||||
Cash and cash equivalents | $ | 10,624 | $ | 95,772 | $ | 219 | $ | 6,094 | $ | — | $ | 112,709 | ||||||||||||
Short-term investments | 24,223 | 366,199 | — | — | — | 390,422 | ||||||||||||||||||
Inventories, net | — | 34,045 | 5,386 | — | — | 39,431 | ||||||||||||||||||
Accounts receivable, net | — | 16,852 | — | — | (824 | ) | 16,028 | |||||||||||||||||
Prepaid expenses | — | — | 21,412 | 18 | — | 21,430 | ||||||||||||||||||
Deferred charges | — | 13,270 | — | — | — | 13,270 | ||||||||||||||||||
Deferred tax asset | — | 2,122 | — | — | — | 2,122 | ||||||||||||||||||
Other current assets | 208 | 2,364 | 14,118 | — | — | 16,690 | ||||||||||||||||||
Total current assets | 35,055 | 530,624 | 41,135 | 6,112 | (824 | ) | 612,102 | |||||||||||||||||
Property and equipment, net | — | — | 829,457 | 2,033 | — | 831,490 | ||||||||||||||||||
Restricted cash and investments | — | 2,917 | 3 | — | — | 2,920 | ||||||||||||||||||
Long-term investments | — | 16,385 | — | — | (11,333 | ) | 5,052 | |||||||||||||||||
Investment in subsidiaries | 243,930 | 709,704 | — | — | (953,634 | ) | — | |||||||||||||||||
PCS licenses | — | — | 387,700 | 293,599 | — | 681,299 | ||||||||||||||||||
Microwave relocation costs | — | — | 9,187 | — | — | 9,187 | ||||||||||||||||||
Long-term receivable from subsidiaries | — | 320,630 | — | — | (320,630 | ) | — | |||||||||||||||||
Other assets | — | 15,360 | 1,571 | — | — | 16,931 | ||||||||||||||||||
Total assets | $ | 278,985 | $ | 1,595,620 | $ | 1,269,053 | $ | 301,744 | $ | (1,286,421 | ) | $ | 2,158,981 | |||||||||||
CURRENT LIABILITIES: | ||||||||||||||||||||||||
Accounts payable and accrued expenses | $ | 321 | $ | 58,104 | $ | 125,362 | $ | 2,590 | $ | (12,157 | ) | $ | 174,220 | |||||||||||
Current maturities of long-term debt | — | — | 2,690 | — | — | 2,690 | ||||||||||||||||||
Deferred revenue | — | 9,158 | 47,402 | — | — | 56,560 | ||||||||||||||||||
Advances to subsidiaries | (559,186 | ) | 218,278 | 340,908 | — | — | — | |||||||||||||||||
Other current liabilities | — | — | 2,147 | — | — | 2,147 | ||||||||||||||||||
Total current liabilities | (558,865 | ) | 285,540 | 518,509 | 2,590 | (12,157 | ) | 235,617 | ||||||||||||||||
Long-term debt, net | — | 902,864 | — | — | — | 902,864 | ||||||||||||||||||
Long-term note to parent | — | — | — | 320,630 | (320,630 | ) | — | |||||||||||||||||
Deferred tax liabilities | — | 146,053 | — | — | — | 146,053 | ||||||||||||||||||
Deferred rents | — | — | 14,739 | — | — | 14,739 | ||||||||||||||||||
Redeemable minority interest | — | — | — | — | 1,259 | 1,259 | ||||||||||||||||||
Other long-term liabilities | — | 17,233 | 3,625 | — | — | 20,858 | ||||||||||||||||||
Total liabilities | (558,865 | ) | 1,351,690 | 536,873 | 323,220 | (331,528 | ) | 1,321,390 | ||||||||||||||||
COMMITMENTS AND CONTINGENCIES (See Note 11) | ||||||||||||||||||||||||
SERIES D PREFERRED STOCK | 421,889 | — | — | — | — | 421,889 | ||||||||||||||||||
SERIES E PREFERRED STOCK | 47,796 | — | — | — | — | 47,796 | ||||||||||||||||||
STOCKHOLDERS’ EQUITY: | ||||||||||||||||||||||||
Preferred stock | — | — | — | — | — | — | ||||||||||||||||||
Common stock | 5 | — | — | — | — | 5 | ||||||||||||||||||
Additional paid-in capital | 149,594 | — | — | 20,000 | (20,000 | ) | 149,594 | |||||||||||||||||
Subscriptions receivable | — | — | — | (13,333 | ) | 13,333 | — | |||||||||||||||||
Deferred compensation | (178 | ) | (178 | ) | (178 | ) | — | 356 | (178 | ) | ||||||||||||||
Retained earnings | 216,961 | 242,357 | 732,358 | (28,143 | ) | (946,831 | ) | 216,702 | ||||||||||||||||
Accumulated other comprehensive income | 1,783 | 1,751 | — | — | (1,751 | ) | 1,783 | |||||||||||||||||
Total stockholders’ equity | 368,165 | 243,930 | 732,180 | (21,476 | ) | (954,893 | ) | 367,906 | ||||||||||||||||
Total liabilities and stockholders’ equity | $ | 278,985 | $ | 1,595,620 | $ | 1,269,053 | $ | 301,744 | $ | (1,286,421 | ) | $ | 2,158,981 | |||||||||||
F-74
Table of Contents
Nine Months Ended September 30, 2006
Non- | ||||||||||||||||||||||||
Guarantor | Guarantor | |||||||||||||||||||||||
Parent | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||
REVENUES: | ||||||||||||||||||||||||
Service revenues | $ | — | $ | — | $ | 916,179 | $ | — | $ | — | $ | 916,179 | ||||||||||||
Equipment revenues | — | 9,300 | 168,292 | — | — | 177,592 | ||||||||||||||||||
Total revenues | — | 9,300 | 1,084,471 | — | — | 1,093,771 | ||||||||||||||||||
OPERATING EXPENSES: | ||||||||||||||||||||||||
Cost of service (excluding depreciation and amortization expense shown separately below) | — | — | 308,546 | 4,964 | — | 313,510 | ||||||||||||||||||
Cost of equipment | — | 9,022 | 321,876 | — | — | 330,898 | ||||||||||||||||||
Selling, general and administrative expenses (excluding depreciation and amortization expense shown separately below) | — | 278 | 160,850 | 10,793 | — | 171,921 | ||||||||||||||||||
Depreciation and amortization | — | — | 96,187 | — | — | 96,187 | ||||||||||||||||||
Loss on disposal of assets | — | — | 10,763 | — | — | 10,763 | ||||||||||||||||||
Total operating expenses | — | 9,300 | 898,222 | 15,757 | — | 923,279 | ||||||||||||||||||
Income from operations | — | — | 186,249 | (15,757 | ) | — | 170,492 | |||||||||||||||||
OTHER EXPENSE (INCOME): | ||||||||||||||||||||||||
Interest expense | 6,820 | 71,638 | (5,481 | ) | 22,997 | (28,566 | ) | 67,408 | ||||||||||||||||
Earnings from consolidated subsidiaries | (76,073 | ) | (154,450 | ) | — | — | 230,523 | — | ||||||||||||||||
Accretion of put option in majority-owned subsidiary | — | — | — | — | 564 | 564 | ||||||||||||||||||
Interest income | (1,936 | ) | (40,505 | ) | (678 | ) | (553 | ) | 28,566 | (15,106 | ) | |||||||||||||
Gain on extinguishment of debt | — | — | (244 | ) | — | — | (244 | ) | ||||||||||||||||
Total other expense | (71,189 | ) | (123,317 | ) | (6,403 | ) | 22,444 | 231,087 | 52,622 | |||||||||||||||
Income before provision for income taxes | 71,189 | 123,317 | 192,652 | (38,201 | ) | (231,087 | ) | 117,870 | ||||||||||||||||
Provision for income taxes | — | (47,245 | ) | — | — | — | (47,245 | ) | ||||||||||||||||
Net income (loss) | $ | 71,189 | $ | 76,072 | $ | 192,652 | $ | (38,201 | ) | $ | (231,087 | ) | $ | 70,625 | ||||||||||
F-75
Table of Contents
Nine Months Ended September 30, 2005
Non- | ||||||||||||||||||||||||
Guarantor | Guarantor | |||||||||||||||||||||||
Parent | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||
REVENUES: | ||||||||||||||||||||||||
Service revenues | $ | — | $ | — | $ | 631,209 | $ | — | $ | — | $ | 631,209 | ||||||||||||
Equipment revenues | — | 897 | 118,093 | — | — | 118,990 | ||||||||||||||||||
Total revenues | — | 897 | 749,302 | — | — | 750,199 | ||||||||||||||||||
OPERATING EXPENSES: | ||||||||||||||||||||||||
Cost of service (excluding depreciation and amortization expense shown separately below) | — | — | 201,940 | — | — | 201,940 | ||||||||||||||||||
Cost of equipment | — | 829 | 209,700 | — | — | 210,529 | ||||||||||||||||||
Selling, general and administrative expenses (excluding depreciation and amortization expense shown separately below) | 234 | 3,207 | 112,388 | 377 | — | 116,206 | ||||||||||||||||||
Depreciation and amortization | — | 120 | 61,775 | — | — | 61,895 | ||||||||||||||||||
Gain on disposal of assets | — | — | (218,292 | ) | — | — | (218,292 | ) | ||||||||||||||||
Total operating expenses | 234 | 4,156 | 367,511 | 377 | — | 372,278 | ||||||||||||||||||
Income from operations | (234 | ) | (3,259 | ) | 381,791 | (377 | ) | — | 377,921 | |||||||||||||||
OTHER EXPENSE (INCOME): | ||||||||||||||||||||||||
Interest expense | — | 40,537 | 331 | 17,905 | (17,906 | ) | 40,867 | |||||||||||||||||
Earnings from consolidated subsidiaries | (180,149 | ) | (361,389 | ) | — | — | 541,538 | — | ||||||||||||||||
Accretion of put option in majority-owned subsidiary | — | — | — | — | 187 | 187 | ||||||||||||||||||
Interest income | (107 | ) | (22,604 | ) | — | (71 | ) | 17,906 | (4,876 | ) | ||||||||||||||
Loss on extinguishment of debt | — | 44,589 | 1,859 | — | — | 46,448 | ||||||||||||||||||
Total other expense | (180,256 | ) | (298,867 | ) | 2,190 | 17,834 | 541,725 | 82,626 | ||||||||||||||||
Income before provision for income taxes | 180,022 | 295,608 | 379,601 | (18,211 | ) | (541,725 | ) | 295,295 | ||||||||||||||||
Provision for income taxes | — | (115,460 | ) | — | — | — | (115,460 | ) | ||||||||||||||||
Net income (loss) | $ | 180,022 | $ | 180,148 | $ | 379,601 | $ | (18,211 | ) | $ | (541,725 | ) | $ | 179,835 | ||||||||||
F-76
Table of Contents
Nine Months Ended September 30, 2006
Guarantor | Non-Guarantor | |||||||||||||||||||||||
Parent | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||||||||||
Net income (loss) | $ | 71,189 | $ | 76,072 | $ | 192,652 | $ | (38,201 | ) | $ | (231,087 | ) | $ | 70,625 | ||||||||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||||||||||||||||||
Depreciation and amortization | — | — | 96,187 | — | — | 96,187 | ||||||||||||||||||
Provision for uncollectible accounts receivable | — | 64 | — | — | — | 64 | ||||||||||||||||||
Deferred rent expense | — | — | 5,233 | 132 | — | 5,365 | ||||||||||||||||||
Cost of abandoned cell sites | — | — | 702 | 1,367 | — | 2,069 | ||||||||||||||||||
Non-cash interest expense | 2,505 | 724 | 473 | 28,566 | (28,566 | ) | 3,702 | |||||||||||||||||
Loss on disposal of assets | — | — | 10,763 | — | — | 10,763 | ||||||||||||||||||
Gain on extinguishment of debt | — | — | (244 | ) | — | — | (244 | ) | ||||||||||||||||
Gain on sale of investments | (611 | ) | (1,264 | ) | — | — | — | (1,875 | ) | |||||||||||||||
Accretion of asset retirement obligation | — | — | 464 | 5 | — | 469 | ||||||||||||||||||
Accretion of put option in majority-owned subsidiary | — | — | — | — | 564 | 564 | ||||||||||||||||||
Deferred income taxes | (650 | ) | 42,442 | — | — | — | 41,792 | |||||||||||||||||
Stock-based compensation expense | — | — | 7,750 | — | — | 7,750 | ||||||||||||||||||
Changes in assets and liabilities | (47,568 | ) | (307,695 | ) | 98,019 | 17,567 | 287,134 | 47,457 | ||||||||||||||||
Net cash provided by (used in) operating activities | 24,865 | (189,657 | ) | 411,999 | 9,436 | 28,045 | 284,688 | |||||||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||||||||||
Purchases of property and equipment | — | (2,700 | ) | (414,320 | ) | (36,844 | ) | — | (453,864 | ) | ||||||||||||||
Change in prepaid purchases of property and equipment | — | — | 2,427 | — | — | 2,427 | ||||||||||||||||||
Proceeds from sale of property and equipment | — | — | 2,548 | — | — | 2,548 | ||||||||||||||||||
Purchase of investments | (280,971 | ) | (456,117 | ) | — | — | — | (737,088 | ) | |||||||||||||||
Proceeds from sale of investments | 268,079 | 632,110 | — | — | — | 900,189 | ||||||||||||||||||
Change in restricted cash and investments | (834 | ) | (2,416 | ) | 9 | (50 | ) | — | (3,291 | ) | ||||||||||||||
Purchases of FCC licenses | — | — | (176 | ) | — | — | (176 | ) | ||||||||||||||||
Deposit to FCC for licenses | (200,000 | ) | — | — | — | — | (200,000 | ) | ||||||||||||||||
Net cash (used in) provided by investing activities | (213,726 | ) | 170,877 | (409,512 | ) | (36,894 | ) | — | (489,255 | ) | ||||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||||||||||
Change in book overdraft | — | 22,993 | — | — | — | 22,993 | ||||||||||||||||||
Proceeds from bridge credit agreements | 200,000 | — | — | — | — | 200,000 | ||||||||||||||||||
Proceeds from long-term note to parent | — | — | — | 30,045 | (30,045 | ) | — | |||||||||||||||||
Debt issuance costs | (15,313 | ) | — | — | — | — | (15,313 | ) | ||||||||||||||||
Repayment of debt | — | — | (2,446 | ) | — | — | (2,446 | ) | ||||||||||||||||
Proceeds from minority interest in majority-owned subsidiary | — | — | — | — | 2,000 | 2,000 | ||||||||||||||||||
Proceeds from exercise of stock options and warrants | 889 | — | — | — | — | 889 | ||||||||||||||||||
Net cash provided by (used in) financing activities | 185,576 | 22,993 | (2,446 | ) | 30,045 | (28,045 | ) | 208,123 | ||||||||||||||||
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (3,285 | ) | 4,213 | 41 | 2,587 | — | 3,556 | |||||||||||||||||
CASH AND CASH EQUIVALENTS, beginning of period | 10,623 | 95,772 | 219 | 6,095 | — | 112,709 | ||||||||||||||||||
CASH AND CASH EQUIVALENTS, end of period | $ | 7,338 | $ | 99,985 | $ | 260 | $ | 8,682 | $ | — | $ | 116,265 | ||||||||||||
F-77
Table of Contents
Nine Months Ended September 30, 2005
Guarantor | Non-Guarantor | |||||||||||||||||||||||
Parent | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||||||||||
Net income | $ | 180,022 | $ | 180,148 | $ | 379,601 | $ | (18,211 | ) | $ | (541,725 | ) | $ | 179,835 | ||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||||||||||
Depreciation and amortization | — | 120 | 61,775 | — | — | 61,895 | ||||||||||||||||||
Provision for uncollectible accounts receivable | — | (38 | ) | — | — | — | (38 | ) | ||||||||||||||||
Deferred rent expense | — | (71 | ) | 3,162 | — | — | 3,091 | |||||||||||||||||
Cost of abandoned cell sites | — | — | 251 | — | — | 251 | ||||||||||||||||||
Non-cash interest expense | (107 | ) | 3,271 | 603 | 17,905 | (17,906 | ) | 3,766 | ||||||||||||||||
Gain on disposal of assets | — | — | (218,292 | ) | — | — | (218,292 | ) | ||||||||||||||||
Loss on extinguishment of debt | — | 44,589 | 1,859 | — | — | 46,448 | ||||||||||||||||||
Loss on sale of investments | — | 49 | — | — | — | 49 | ||||||||||||||||||
Accretion of asset retirement obligation | — | 1 | 102 | — | — | 103 | ||||||||||||||||||
Accretion of put option in majority-owned subsidiary | — | — | — | — | 187 | 187 | ||||||||||||||||||
Deferred income taxes | — | 113,580 | — | — | — | 113,580 | ||||||||||||||||||
Stock-based compensation expense | — | — | 3,302 | — | — | 3,302 | ||||||||||||||||||
Changes in assets and liabilities | (177,242 | ) | (619,680 | ) | 14,965 | 86 | 834,709 | 52,838 | ||||||||||||||||
Net cash provided by operating activities | 2,673 | (278,031 | ) | 247,328 | (220 | ) | 275,265 | 247,015 | ||||||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||||||||||
Purchases of property and equipment | — | — | (204,300 | ) | (150 | ) | — | (204,450 | ) | |||||||||||||||
Change in prepaid purchases of property and equipment | — | — | (4,336 | ) | — | — | (4,336 | ) | ||||||||||||||||
Proceeds from sale of property and equipment | — | — | 123 | — | — | 123 | ||||||||||||||||||
Purchase of investments | — | (427,732 | ) | — | — | — | (427,732 | ) | ||||||||||||||||
Proceeds from sale of investments | — | 171,725 | — | — | — | 171,725 | ||||||||||||||||||
Change in restricted cash and investments | (50,000 | ) | (524 | ) | 14 | — | — | (50,510 | ) | |||||||||||||||
Purchases of FCC licenses | — | — | (235,330 | ) | — | — | (235,330 | ) | ||||||||||||||||
Deposit to FCC for licenses | — | — | — | (268,599 | ) | — | (268,599 | ) | ||||||||||||||||
Proceeds from sale of FCC licenses | — | — | 230,000 | — | — | 230,000 | ||||||||||||||||||
Net cash used in investing activities | (50,000 | ) | (256,531 | ) | (213,829 | ) | (268,749 | ) | — | (789,109 | ) | |||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||||||||||
Change in book overdraft | — | 11,105 | — | — | — | 11,105 | ||||||||||||||||||
Proceeds from bridge credit agreements | — | 540,000 | — | — | — | 540,000 | ||||||||||||||||||
Proceeds from Credit Agreements | — | 750,000 | — | — | — | 750,000 | ||||||||||||||||||
Proceeds from long-term note to parent | — | — | — | 275,265 | (275,265 | ) | — | |||||||||||||||||
Payment upon execution of cash flow hedging derivative | — | (1,899 | ) | — | — | — | (1,899 | ) | ||||||||||||||||
Debt issuance costs | — | (28,801 | ) | — | — | — | (28,801 | ) | ||||||||||||||||
Repayment of debt | — | (719,671 | ) | (33,409 | ) | — | — | (753,080 | ) | |||||||||||||||
Proceeds from issuance of preferred stock, net of issuance costs | 46,688 | — | — | — | — | 46,688 | ||||||||||||||||||
Proceeds from exercise of stock options and warrants | 764 | — | — | — | — | 764 | ||||||||||||||||||
Net cash provided by (used in) financing activities | 47,452 | 550,734 | (33,409 | ) | 275,265 | (275,265 | ) | 564,777 | ||||||||||||||||
INCREASE IN CASH AND CASH EQUIVALENTS | 125 | 16,172 | 90 | 6,296 | — | 22,683 | ||||||||||||||||||
CASH AND CASH EQUIVALENTS, beginning of period | 1 | 22,349 | 127 | — | — | 22,477 | ||||||||||||||||||
CASH AND CASH EQUIVALENTS, end of period | $ | 126 | $ | 38,521 | $ | 217 | $ | 6,296 | $ | — | $ | 45,160 | ||||||||||||
F-78
Table of Contents
16. | Recent Accounting Pronouncements: |
F-79
Table of Contents
17. | Subsequent Events: |
F-80
Table of Contents
F-81
Table of Contents
F-82
Table of Contents
Table of Contents
Item 13. | Other Expenses of Issuance and Distribution. |
SEC registration fee | $ | 120,375 | ||
National Association of Securities Dealers, Inc. filing fee | $ | 75,500 | ||
Listing fee | * | |||
Legal fees and expenses | * | |||
Blue sky fees and expenses | * | |||
Accounting fees and expenses | * | |||
Printing expenses | * | |||
Transfer agent fees and expenses | * | |||
Miscellaneous | * | |||
Total | $ | |||
* | To be filed by amendment. |
Item 14. | Indemnification of Officers and Directors. |
II-1
Table of Contents
• | shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any law, bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in an official capacity and as to action in another capacity while holding such office; | |
• | shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent; and | |
• | shall inure to the benefit of the heirs, executors and administrators of such a person. |
• | for any breach of the director’s duty of loyalty to us or our stockholders; | |
• | for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; | |
• | under Section 174 of the Delaware General Corporation Law; or | |
• | for any transaction from which the director derived any improper personal benefit. |
II-2
Table of Contents
• | any rights or obligations then existing with respect to any state of facts then or theretofore existing or any action, suit or proceeding theretofore or thereafter brought based in whole or in part upon any such state of facts; or | |
• | any limitation on the personal liability of a director existing at the time of such repeal or modification. |
ITEM 15. | Recent Sales of Unregistered Securities |
II-3
Table of Contents
II-4
Table of Contents
II-5
Table of Contents
ITEM 16. | Exhibits and Financial Statement Schedules |
Exhibit No. | Description | |||
1 | .1** | Form of Underwriting Agreement. | ||
2 | .1(a)*** | Agreement and Plan of Merger, dated as of April 6, 2004, by and among MetroPCS Communications, Inc., MPCS Holdco Merger Sub, Inc. and MetroPCS, Inc. | ||
2 | .1(b)*** | Agreement and Plan of Merger, dated as of November 3, 2006, by and among MetroPCS Wireless, Inc., MetroPCS IV, Inc., MetroPCS III, Inc., MetroPCS II, Inc. and MetroPCS, Inc. | ||
3 | .1** | Form of Third Amended and Restated Certificate of Incorporation of MetroPCS Communications, Inc. to be filed upon the closing of this offering. | ||
3 | .2** | Form of Third Amended and Restated Bylaws of MetroPCS Communications, Inc. to be effective upon the closing of this offering. | ||
4 | .1** | Form of Certificate of MetroPCS Communications, Inc. Common Stock. | ||
5 | .1** | Opinion of Baker Botts L.L.P. | ||
10 | .1(a)** | MetroPCS Communications, Inc. Amended and Restated 2004 Equity Incentive Compensation Plan. | ||
10 | .1(b)*** | Second Amended and Restated 1995 Stock Option Plan of MetroPCS, Inc. | ||
10 | .1(c)*** | Amendment to the Second Amended and Restated 1995 Stock Option Plan of MetroPCS, Inc. | ||
10 | .1(d)*** | Second Amendment to the Second Amended and Restated 1995 Stock Option Plan of MetroPCS, Inc. | ||
10 | .2** | Form of Registration Rights Agreement to become effective upon the closing of this offering. | ||
10 | .3** | Employment Agreement, dated as of March 31, 2005, by and between MetroPCS Communications, Inc. and J. Braxton Carter. | ||
10 | .4** | Form of Officer and Director Indemnification Agreement. | ||
10 | .5(a)** | General Purchase Agreement, effective as of June 6, 2005, by and between MetroPCS Wireless and Lucent Technologies Inc. | ||
10 | .5(b)** | Amendment No. 1 to the General Purchase Agreement, effective as of September 30, 2005, by and between MetroPCS Wireless and Lucent Technologies Inc. | ||
10 | .5(c)** | Amendment No. 2 to the General Purchase Agreement, effective as of November 10, 2005, by and between MetroPCS Wireless and Lucent Technologies Inc. | ||
10 | .6** | Amended and Restated Services Agreement, executed on December 15, 2005 as of November 24, 2004, by and between Royal Street and MetroPCS Wireless, Inc., including all amendments and waivers thereto. | ||
10 | .7** | Second Amended and Restated Credit Agreement, executed on December 15, 2005 as of December 22, 2004, by and among MetroPCS Wireless, Inc. and Royal Street Communications, LLC, including all amendments and waivers thereto. |
II-6
Table of Contents
Exhibit No. | Description | |||
10 | .8** | Amended and Restated Pledge Agreement, executed on December 15, 2005 as of December 22, 2004, by and between Royal Street and MetroPCS Wireless, Inc., including all amendments and waivers thereto. | ||
10 | .9** | Amended and Restated Security Agreement, executed on December 15, 2005 as of December 22, 2004, by and between Royal Street and MetroPCS Wireless, Inc., including all amendments and waivers thereto. | ||
10 | .10** | Amended and Restated Limited Liability Company Agreement of Royal Street, executed on December 15, 2005 as of November 24, 2004 by and between C9 Wireless, LLC, GWI PCS1, Inc., and MetroPCS Wireless, Inc., including all amendments and waivers thereto. | ||
10 | .11** | Master Equipment and Facilities Lease Agreement, executed as of May 17, 2006, by and between Royal Street and MetroPCS Wireless, Inc., including all amendments and waivers thereto. | ||
10 | .12** | Credit Agreement, dated as of November 3, 2006, among MetroPCS Wireless, Inc., the several banks and other financial institutions or entities from time to time parties thereto, Bear, Stearns & Co. Inc., as sole lead arranger and joint book runner, Bear Stearns Corporate Lending Inc., as syndication agent, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as joint book runner, Banc of America Securities LLC, as joint book runner, Bear Stearns Corporate Lending Inc., as administrative agent, and Bank of America, N.A., as issuing lender. | ||
10 | .13* | Purchase Agreement dated October 26, 2006, among MetroPCS Wireless, Inc., the Guarantors as defined therein and Bear Stearns & Co. Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Banc of America Securities LLC. | ||
10 | .14* | Registration Rights Agreement, dated November 3, 2006, by and among MetroPCS Wireless, Inc., the Guarantors as defined therein and Bear Stearns & Co. Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Banc of America Securities LLC. | ||
10 | .15* | Indenture, dated as of November 3, 2006, among MetroPCS Wireless, Inc., the Guarantors as defined therein and The Bank of New York, as trustee. | ||
10 | .16* | Supplemental Indenture, dated as of February 6, 2007, among the Guaranteeing Subsidiaries as defined therein, the other Guarantors as defined in the Indenture referred to therein and The Bank of New York Trust Company, N.A., as trustee under the Indenture referred to therein. | ||
16 | .1*** | Letter regarding change in certifying accountant. | ||
21 | .1* | Subsidiaries of Registrant. | ||
23 | .1* | Consent of PricewaterhouseCoopers LLP. | ||
23 | .2* | Consent of Deloitte & Touche LLP. | ||
23 | .3** | Consent of Baker Botts L.L.P. (included in Exhibit 5.1). | ||
24 | .1*** | Power of Attorney, pursuant to which amendments to thisForm S-1 may be filed, is included on the signature page contained in Part II of thisForm S-1. |
* | Filed herewith. | |
** | To be filed by amendment. |
*** | Previously filed. |
ITEM 17. | Undertakings |
II-7
Table of Contents
II-8
Table of Contents
By: | /s/ ROGER D. LINQUIST |
/s/ ROGER D. LINQUIST Roger D. LinquistPresident and Chief Executive Officer and Chairman of the Board (Principal Executive Officer) | * J. Braxton CarterSenior Vice President and Chief Financial Officer (Principal Financial Officer) | |
* Christine B. KornegayVice President, Controller and Chief Accounting Officer (Principal Accounting Officer) | * Arthur C. PattersonDirector | |
* Walker C. SimmonsDirector | * John SculleyDirector | |
* James F. WadeDirector | * W. Michael BarnesDirector | |
* C. Kevin LandryDirector | * James N. Perry, Jr.Director |
* By: | /s/ ROGER D. LINQUIST |
II-9
Table of Contents
Exhibit No. | Description | |||
1 | .1** | Form of Underwriting Agreement. | ||
2 | .1(a)*** | Agreement and Plan of Merger, dated as of April 6, 2004, by and among MetroPCS Communications, Inc., MPCS Holdco Merger Sub, Inc. and MetroPCS, Inc. | ||
2 | .1(b)*** | Agreement and Plan of Merger, dated as of November 3, 2006, by and among MetroPCS Wireless, Inc., MetroPCS IV, Inc., MetroPCS III, Inc., MetroPCS II, Inc. and MetroPCS, Inc. | ||
3 | .1** | Form of Third Amended and Restated Certificate of Incorporation of MetroPCS Communications, Inc. to be filed upon the closing of this offering. | ||
3 | .2** | Form of Third Amended and Restated Bylaws of MetroPCS Communications, Inc. to be effective upon the closing of this offering. | ||
4 | .1** | Form of Certificate of MetroPCS Communications, Inc. Common Stock. | ||
5 | .1** | Opinion of Baker Botts L.L.P. | ||
10 | .1(a)** | MetroPCS Communications, Inc. Amended and Restated 2004 Equity Incentive Compensation Plan. | ||
10 | .1(b)*** | Second Amended and Restated 1995 Stock Option Plan of MetroPCS, Inc. | ||
10 | .1(c)*** | Amendment to the Second Amended and Restated 1995 Stock Option Plan of MetroPCS, Inc. | ||
10 | .1(d)*** | Second Amendment to the Second Amended and Restated 1995 Stock Option Plan of MetroPCS, Inc. | ||
10 | .2** | Form of Registration Rights Agreement to become effective upon the closing of this offering. | ||
10 | .3** | Employment Agreement, dated as of March 31, 2005, by and between MetroPCS Communications, Inc. and J. Braxton Carter. | ||
10 | .4** | Form of Officer and Director Indemnification Agreement. | ||
10 | .5(a)** | General Purchase Agreement, effective as of June 6, 2005, by and between MetroPCS Wireless and Lucent Technologies Inc. | ||
10 | .5(b)** | Amendment No. 1 to the General Purchase Agreement, effective as of September 30, 2005, by and between MetroPCS Wireless and Lucent Technologies Inc. | ||
10 | .5(c)** | Amendment No. 2 to the General Purchase Agreement, effective as of November 10, 2005, by and between MetroPCS Wireless and Lucent Technologies Inc. | ||
10 | .6** | Amended and Restated Services Agreement, executed on December 15, 2005 as of November 24, 2004, by and between Royal Street and MetroPCS Wireless, Inc., including all amendments and waivers thereto. | ||
10 | .7** | Second Amended and Restated Credit Agreement, executed on December 15, 2005 as of December 22, 2004, by and among MetroPCS Wireless, Inc. and Royal Street Communications, LLC, including all amendments and waivers thereto. | ||
10 | .8** | Amended and Restated Pledge Agreement, executed on December 15, 2005 as of December 22, 2004, by and between Royal Street and MetroPCS Wireless, Inc., including all amendments and waivers thereto. | ||
10 | .9** | Amended and Restated Security Agreement, executed on December 15, 2005 as of December 22, 2004, by and between Royal Street and MetroPCS Wireless, Inc., including all amendments and waivers thereto. | ||
10 | .10** | Amended and Restated Limited Liability Company Agreement of Royal Street, executed on December 15, 2005 as of November 24, 2004 by and between C9 Wireless, LLC, GWI PCS1, Inc., and MetroPCS Wireless, Inc., including all amendments and waivers thereto. | ||
10 | .11** | Master Equipment and Facilities Lease Agreement, executed as of May 17, 2006, by and between Royal Street and MetroPCS Wireless, Inc., including all amendments and waivers thereto. |
Table of Contents
Exhibit No. | Description | |||
10 | .12** | Credit Agreement, dated as of November 3, 2006, among MetroPCS Wireless, Inc., the several banks and other financial institutions or entities from time to time parties thereto, Bear, Stearns & Co. Inc., as sole lead arranger and joint book runner, Bear Stearns Corporate Lending Inc., as syndication agent, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as joint book runner, Banc of America Securities LLC, as joint book runner, Bear Stearns Corporate Lending Inc., as administrative agent, and Bank of America, N.A., as issuing lender. | ||
10 | .13* | Purchase Agreement dated October 26, 2006, among MetroPCS Wireless, Inc., the Guarantors as defined therein and Bear Stearns & Co. Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Banc of America Securities LLC. | ||
10 | .14* | Registration Rights Agreement, dated November 3, 2006, by and among MetroPCS Wireless, Inc., the Guarantors as defined therein and Bear Stearns & Co. Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Banc of America Securities LLC. | ||
10 | .15* | Indenture, dated as of November 3, 2006, among MetroPCS Wireless, Inc., the Guarantors as defined therein and The Bank of New York, as trustee. | ||
10 | .16* | Supplemental Indenture, dated as of February 6, 2007, among the Guaranteeing Subsidiaries as defined therein, the other Guarantors as defined in the Indenture referred to therein and The Bank of New York Trust Company, N.A., as trustee under the Indenture referred to therein. | ||
16 | .1*** | Letter regarding change in certifying accountant. | ||
21 | .1* | Subsidiaries of Registrant. | ||
23 | .1* | Consent of PricewaterhouseCoopers LLP. | ||
23 | .2* | Consent of Deloitte & Touche LLP. | ||
23 | .3** | Consent of Baker Botts L.L.P. (included in Exhibit 5.1). | ||
24 | .1*** | Power of Attorney, pursuant to which amendments to thisForm S-1 may be filed, is included on the signature page contained in Part II of thisForm S-1. |
* | Filed herewith. | |
** | To be filed by amendment. |
*** | Previously filed. |