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UNDER
THE SECURITIES ACT OF 1933
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 (Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices) | Roger D. Linquist Chief Executive Officer 8144 Walnut Hill Lane Suite 800 Dallas, Texas 75231-4388 (214) 265-2550 (Name, address, including zip code, and telephone number, including area code, of agent for service) |
Proposed Maximum | Amount of | |||||
Aggregate Offering | Registration | |||||
Title of Each Class of Securities to be Registered(1) | Price(2) | Fee | ||||
Common Stock, par value $0.0001 per share | $6,585,498.33(3) | $202.17 | ||||
(1) | Consists of shares issuable upon exercise of options pursuant to the Second Amended and Restated 1995 Stock Option Plan of MetroPCS, Inc., as amended, and the Amended and Restated MetroPCS Communications, Inc. 2004 Equity Incentive Compensation Plan. Pursuant to Rule 416(a) promulgated under the Securities Act, this Registration Statement shall also cover any additional shares of the Registrant’s common stock that become issuable with respect to the shares being registered hereunder by reason of any stock dividend, stock split, recapitalization or other similar transaction effected without the receipt of consideration that increases the number of the Registrant’s outstanding shares of common stock. | |
(2) | Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(j) of the Securities Act. | |
(3) | The weighted average price of the 936,546 shares of the common stock being registered is $7.03 per share. |
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The information in this offering circular 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 offering circular 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. |
• | We are offering to repurchase options granted by us to purchase approximately 936,546 shares of our common stock from certain persons who are or were residents of California, Florida, Georgia, Michigan, Nevada, and Texas at the time such options were issued by us. We refer to these states in this offering circular as the “Rescission States”. These holders are current and former employees who were granted options to purchase shares of our common stock during certain periods in 2004 and 2006 pursuant to the Second Amended and Restated 1995 Stock Option Plan of MetroPCS, Inc., as amended, or 1995 Plan, and the Amended and Restated MetroPCS Communications, Inc. 2004 Equity Incentive Compensation Plan, or 2004 Plan, and collectively, our Equity Compensation Plans. | |
• | The options to purchase shares of our common stock that we are offering to repurchase consist of (1) unexercised and outstanding options to purchase 339,114 shares of our common stock granted in 2004 to certain employees who are or were residents of the Rescission States at the time of grant and (2) unexercised and outstanding options to purchase 597,432 shares of our common stock granted between April 30, 2006 and September 30, 2006 to certain employees who are or were residents of the Rescission States at the time of grant. | |
• | The repurchase price for unexercised and outstanding options subject to this rescission offer is 20% of the per share exercise price of the options multiplied by the number of shares of common stock subject to the options. In each case, if you accept our rescission offer and tender your unexercised options, you will receive interest based on the repurchase price and calculated from the date the option was granted to you through the date that the rescission offer expires at the interest rate mandated by your state of residence at the time the option was granted as set forth below. | |
• | Federal law does not provide a specific interest rate to be used in the calculation of the consideration to be received in connection with the repurchases of securities by an issuer in a rescission offer. The legal rates of interest for the repurchase of options in the Rescission States are as follows: |
State | Interest Rate | |||
California | 7.00 | % | ||
Florida | 9.00 | % | ||
Georgia | 6.00 | % | ||
Michigan | 6.00 | % | ||
Nevada | 8.25 | % | ||
Texas | 6.00 | % |
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• | This rescission offer is not an unanticipated development. Rather, our intent to make this rescission offer and the details of the rescission offer were disclosed in the registration statement on FormS-1 related to our initial public offering originally filed with the Securities and Exchange Commission, or the SEC, on January 4, 2007 which became effective on April 19, 2007 and our registration statement on Form 10 originally filed with the SEC on January 4, 2007 which became effective on March 5, 2007. | |
• | Although we believed at the time we granted the options to purchase our common stock that valid exemptions existed from the registration and qualification requirements under the Securities Act of 1933, as amended, or Securities Act, and the securities laws of the Rescission States, certain options to purchase our common stock granted during certain periods of 2004 and 2006 may not have been exempt from the registration and qualification requirements under Rule 701 under the Securities Act or under the securities laws of the Rescission States. As a result, the holders of options to purchase our common stock received from us in violation of federal and state securities laws may have a right to require us to repurchase those securities. Rescission offers for such potential violations are commonly made by companies in this situation. | |
• | We intend to commence the rescission offer on , 2007. The rescission offer will be made to the holders of unexercised and outstanding options to purchase 936,546 shares of our common stock. The filing of this registration statement is a normal part of the rescission offer process. | |
• | We do not believe the rescission offer will be accepted by the holders subject to this rescission offer in an amount that would represent a material expenditure by us. This belief is based on the fact that our rescission offer will offer to repurchase options at a weighted average price of $1.41, which is significantly less than the difference between the highest per share exercise price of the options subject to the rescission offer and the two-week average trading price at which our common stock has traded since we completed our initial public offering on April 19, 2007. We cannot give you any assurances as to the price at which the common stock will trade in the future. | |
• | When the rescission offer expires, any holder of options to purchase our common stock subject to this rescission offer who did not accept the rescission offer will hold options to purchase freely tradable stock, subject to vesting and other restrictions contained in our Equity Compensation Plans, insider trading restrictions and anylock-up arrangements made with the underwriters of our initial public offering or contained in our Registration Rights Agreement, unless the holder is an affiliate of MetroPCS within the meaning of Rule 144 or Rule 145 of the Securities Act. | |
• | This rescission offer is merely an offer to repurchase certain options to purchase our common stock. You are not required to accept our rescission offer or take any action if you wish to decline our rescission offer. |
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F-1 | ||||||||
Opinion of Baker Botts L.L.P. | ||||||||
Subsidiaries of Registrant | ||||||||
Consent of Deloitte & Touche LLP |
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Q1: | Why are we making the rescission offer? | |
A: | Certain options to purchase our common stock, granted during certain periods of 2004 and 2006 may not have been exempt from the registration and qualification requirements under Rule 701 under the Securities Act or under the securities laws of certain states. We issued these options in reliance on Rule 701 under the Securities Act. However, we may not have been entitled to rely on Rule 701 because — during 2004 and beginning on April 30, 2006 — we were subject to, or should have been subject to, the periodic reporting requirements under the Securities Exchange Act of 1934, as amended, or the Exchange Act. | |
As a result, certain holders of options may have a right to require us to repurchase those securities if we are found to be in violation of federal or state securities laws. The rescission offer is intended to address these federal and state securities laws compliance issues by allowing the holders of options to purchase common stock covered by the rescission offer to rescind the underlying securities transactions and sell those securities back to us. | ||
For a more detailed description of the background of this rescission offer, please see “Rescission Offer — Background” below. | ||
Q2: | Which options are included in the rescission offer? | |
A: | We are offering, upon the terms and conditions described in this offering circular, to rescind the grant of options to purchase 936,546 shares of our common stock which were initially granted in 2004 and after April 30, 2006 through September 30, 2006 and to pay 20% of the per share exercise price of the options multiplied by the number of shares of common stock subject to the options. | |
The outstanding options to purchase shares of our common stock are held by 338 persons, all of whom are current and former employees. We granted these options subject to the rescission offer between (1) January and December 2004 and (2) April 30, 2006 and September 30, 2006, at exercise prices ranging from $1.57 to $8.67 per share. The weighted average exercise price per share for these options is $7.03. | ||
Q3: | When does the rescission offer expire? | |
A: | Our rescission offer will expire at 5:00 P.M. Dallas, Texas time on , 2007. | |
Q4: | What will I receive if I accept the rescission offer? | |
A: | If you accept our rescission offer with respect to unexercised options to purchase our common stock, regardless of whether these options are vested, we will repurchase these options at a price equal to 20% of the per share exercise price multiplied by the number of shares subject to the options, plus interest at the current statutory rate per year, from the date of grant through the date the rescission offer expires. |
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The legal rates of interest for the repurchase of options to purchase our common stock in the Rescission States are as follows: |
State | Interest Rate | |||
California | 7.00 | % | ||
Florida | 9.00 | % | ||
Georgia | 6.00 | % | ||
Michigan | 6.00 | % | ||
Nevada | 8.25 | % | ||
Texas | 6.00 | % |
We believe that your acceptance of the rescission offer will preclude you from later seeking similar relief under general legal theories of estoppel, and we are unaware of any federal or state case law to the contrary. However, we urge you to consult with your legal counsel regarding all of your legal rights and remedies and your tax and financial advisors before deciding whether or not to accept the rescission offer. | ||
Q5: | Can you give me an example of what I will receive if I accept the rescission offer? | |
A: | We will repurchase outstanding, unexercised options to purchase our common stock subject to the rescission offer at a price equal to 20% of the per share exercise price of the option multiplied by the number of shares subject to the options, plus interest at the current statutory rate per year (as specified above), from the date of grant through the date the rescission offer expires. For example, if you are a resident of California and hold an unexercised option to purchase 1,000 shares of our common stock at a per share exercise price of $5.47 that was granted in October 2004 and you accept our rescission offer, you would receive (subject to applicable taxes and tax withholding requirements): | |
• 20% of the exercise price for the total option = 20% * (1,000 X $5.47) = $1,094. | ||
• Plus interest at 7% per year = $77. | ||
• For a total of $1,287 (assuming 21/2 years of interest). | ||
If you tender your options to purchase our common stock, you will not have any right, title or interest to the options to purchase shares of common stock you are tendering upon the closing of the rescission offer, and you will only be entitled to receive the proceeds from our repurchase of the options. | ||
Q6: | Have any officers, directors or 5% stockholders advised MetroPCS whether they will participate in the rescission offer? | |
A: | None of our executive officers or directors are eligible to participate in this rescission offer. In addition, none of our 5% stockholders are holders of options to purchase shares of our common stock subject to this rescission offer. | |
Q7: | If I do not accept the offer now, can I sell my shares? | |
A: | If you do not accept the rescission offer, you can sell the shares of common stock obtained upon valid exercise of the options that were subject to the rescission offer without limitation as to the number or manner of sale, unless you are an affiliate of MetroPCS; provided, however, that you will remain subject to any restrictions contained in our Equity Compensation Plans, any market standoff agreements,lock-up arrangements with the underwriters of our initial public offering or contained in our Registration Rights Agreement, vesting restrictions, insider trading restrictions and any other transfer restrictions applicable to your shares. You may only sell shares purchased upon exercise of vested options; stock underlying unvested options may not be sold. | |
Q8: | What do I need to do now to accept or reject the rescission offer? | |
A: | To accept or reject the rescission offer, you must complete and sign the accompanying election form and return it in the enclosed return envelope to our legal department, to the attention of Damien Falgoust, Esq., 8144 Walnut Hill Lane, Suite 800, Dallas, Texas75231-4388, as soon as practical but in no |
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event later than 5:00 P.M. Dallas, Texas time on , 2007. If you are accepting the rescission offer, please also include in your return envelope a completed and signed election form (seeAppendix A). Please indicate on your election form the grant date of the options that you are tendering for repurchase and the number of shares underlying the options. | ||
Q9: | Can I accept the rescission offer in part? | |
A: | If you accept the rescission offer with respect to your options, then you must accept the rescission offer with respect to an entire option grant. You can accept the rescission offer in part to the extent you have received multiple option grants. For example, you can accept the rescission offer with respect to one option grant subject to the rescission offer by returning a completed signed election form with respect to that option grant (seeAppendix A) and not accept the rescission offer for another option grant. | |
Q10: | What happens if I do not return my rescission offer election form? | |
A: | If you do not return your election form before the expiration date of our rescission offer, you will be deemed to have rejected our offer. | |
Q11: | What remedies or rights do I have now that I will not have after the rescission offer? | |
A: | Because the options were granted to you without any monetary consideration, it is unclear what, if anything, you would be entitled to receive if you exercised your right of rescission under the Securities Act. It is also unclear whether or not you will have a right of rescission under federal securities laws after the rescission offer. The staff of the SEC is of the opinion that a person’s right of rescission created under the Securities Act may survive the rescission offer. However, federal courts in the past have ruled that a person who rejects or fails to accept a rescission offer is precluded from later seeking similar relief. Generally, the federal statute of limitations for noncompliance with the requirement to register securities under the Securities Act is one year but can run up to three years. | |
The state remedies and statutes of limitations vary and depend upon the state in which you resided when the options were granted. The following is a summary of the statutes of limitations and the effect of the rescission offer for the states in which the securities covered by this rescission offer were sold. |
California | While residents of California that hold options to purchase our common stock covered by this rescission offer may have a right of rescission under federal securities laws, we believe that the options issued by us in the state of California prior to April 30, 2006 were either issued pursuant to an exemption from qualification under California’s Corporate Securities Law of 1968 or else California’s applicable statute of limitations has already expired. California’s statute of limitations on rescission rights (or rights to damages if the securities are no longer held by the purchaser) under its securities laws is the earliest to occur of (i) one year from the date of the optionholder’s discovery of the violation giving rise to the right of rescission; and (ii) two years from the date of grant of the option. | |
Florida | While residents of Florida that hold options to purchase our common stock covered by the rescission offer may have a right of rescission under federal securities laws, we believe that the options issued by us in the state of Florida were issued pursuant to an exemption from registration or qualification under the Florida Securities and Investor Protection Act. | |
Georgia | While residents of Georgia that hold options to purchase our common stock covered by the rescission offer may have a right of rescission under federal securities laws, we believe that the options issued by us in the state of Georgia were issued pursuant to an exemption from registration or qualification under the Georgia Securities Act of 1973. | |
Michigan | While residents of Michigan that hold options to purchase our common stock covered by the rescission offer may have a right of rescission under federal securities laws, we believe that the options issued by us in the state of Michigan were issued pursuant to an exemption from registration or qualification under the Michigan Uniform Securities Act. | |
Nevada | While residents of Nevada that hold options to purchase our common stock covered by the rescission offer may have a right of rescission under federal securities laws, we believe that the options issued by us in the state of Nevada were issued pursuant to an exemption from registration or qualification under the Nevada Uniform Securities Act. |
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Texas | While residents of Texas that hold options to purchase our common stock covered by the rescission offer may have a right of rescission under federal securities laws, we believe that the options issued by us in the state of Texas were issued pursuant to an exemption from registration or qualification under the Texas Securities Act of 1957. |
We believe that your acceptance of the rescission offer will preclude you from later seeking similar relief. Regardless of whether you accept the rescission offer, we believe that any remedies you may have after the rescission offer expires would not be greater than an amount you would receive in the rescission offer and may be less. | ||
Q12: | How will the rescission offer be funded? | |
A: | The rescission offer will be funded from our existing cash balances. If all persons eligible to participate in the rescission offer accept our offer to the full extent, our results of operations, cash balances or financial condition will not be affected materially. If the rescission offer is accepted by all persons to whom it is made, we could be required to make aggregate payments of up to approximately $1.4 million. | |
Q13: | Can I change my mind after I have mailed my signed election form? | |
A: | Yes. You can change your decision about accepting or rejecting our rescission offer at any time before the expiration date of the rescission offer. You can do this by completing and submitting a new election form to us so that we receive it prior to the expiration date of the rescission offer. Any new election forms must be received by us prior to the expiration date in order to be valid or by submitting a letter of withdrawal that must be received by us before the expiration of the rescission offer and which clearly specifies your name, the grant date, the exercise price and number of shares underlying the option grant to be withdrawn. We will not accept any election forms or letters of withdrawal after the expiration date. Upon the expiration date, any election shall be irrevocable and final. We reserve the right to waive any defects in your election form and any decision by us to accept or reject an election shall be at our sole discretion and shall be final, conclusive and binding. | |
Q14: | Who can help answer my questions? | |
A: | We recommend that you consult your legal counsel and tax and financial advisors before making your decision about accepting or rejecting our rescission offer. In addition, you can call Damien Falgoust, Esq. in our legal department at(214) 378-2955 with questions about the rescission offer. | |
Q15: | Where can I get more information about MetroPCS? | |
A: | You can obtain more information about MetroPCS from the filings we make from time to time with the SEC. These filings are available on the SEC’s website atwww.sec.gov. |
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• | 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; | |
• | Our spectrum portfolio, which covers 9 of the top 12 and 14 of the top 25 largest 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. |
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• | 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 generate 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. |
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Common stock underlying options subject to rescission offer | 936,546 shares. | |
Repurchase Price | 20% of the per share exercise price multiplied by the number of shares subject to the options covered by this rescission offer. | |
Expiration Date | The rescission offer will expire at 5:00 P.M. Dallas, Texas time on , 2007. | |
Use of proceeds | We will not receive any proceeds from the rescission offer. | |
Total common stock outstanding | 346,643,726 shares. | |
NYSE symbol | “PCS” | |
Risk Factors | See “Risk Factors” below for a discussion of some of the factors you should consider carefully before deciding whether to accept or reject our rescission offer. |
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Year Ended December 31, | ||||||||||||||||||||
2002 | 2003 | 2004 | 2005 | 2006 | ||||||||||||||||
(In thousands, except share and per share data) | ||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||
Revenues: | ||||||||||||||||||||
Service revenues | $ | 102,293 | $ | 369,851 | $ | 616,401 | $ | 872,100 | $ | 1,290,947 | ||||||||||
Equipment revenues | 27,048 | 81,258 | 131,849 | 166,328 | 255,916 | |||||||||||||||
Total revenues | 129,341 | 451,109 | 748,250 | 1,038,428 | 1,546,863 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
Cost of service (excluding depreciation and amortization disclosed separately below) | 63,567 | 122,211 | 200,806 | 283,212 | 445,281 | |||||||||||||||
Cost of equipment | 106,508 | 150,832 | 222,766 | 300,871 | 476,877 | |||||||||||||||
Selling, general and administrative expenses (excluding depreciation and amortization disclosed separately below) | 55,161 | 94,073 | 131,510 | 162,476 | 243,618 | |||||||||||||||
Depreciation and amortization | 21,472 | 42,428 | 62,201 | 87,895 | 135,028 | |||||||||||||||
(Gain) loss on disposal of assets | (279,659 | ) | 392 | 3,209 | (218,203 | ) | 8,806 | |||||||||||||
Total operating expenses | (32,951 | ) | 409,936 | 620,492 | 616,251 | 1,309,610 | ||||||||||||||
Income from operations | 162,292 | 41,173 | 127,758 | 422,177 | 237,253 | |||||||||||||||
Other expense (income): | ||||||||||||||||||||
Interest expense | 6,720 | 11,115 | 19,030 | 58,033 | 115,985 | |||||||||||||||
Accretion of put option in majority-owned subsidiary | — | — | 8 | 252 | 770 | |||||||||||||||
Interest and other income | (964 | ) | (996 | ) | (2,472 | ) | (8,658 | ) | (21,543 | ) | ||||||||||
Loss (gain) on extinguishment of debt | 703 | (603 | ) | (698 | ) | 46,448 | 51,518 | |||||||||||||
Total other expense | 6,459 | 9,516 | 15,868 | 96,075 | 146,730 | |||||||||||||||
Income before provision for income taxes and cumulative effect of change in accounting principle | 155,833 | 31,657 | 111,890 | 326,102 | 90,523 | |||||||||||||||
Provision for income taxes | (25,528 | ) | (16,179 | ) | (47,000 | ) | (127,425 | ) | (36,717 | ) | ||||||||||
Income before cumulative effect of change in accounting principle | 130,305 | 15,478 | 64,890 | 198,677 | 53,806 | |||||||||||||||
Cumulative effect of change in accounting principle, net of tax | — | (120 | ) | — | — | — | ||||||||||||||
Net income | 130,305 | 15,358 | 64,890 | 198,677 | 53,806 | |||||||||||||||
Accrued dividends on Series D Preferred Stock | (10,619 | ) | (18,493 | ) | (21,006 | ) | (21,006 | ) | (21,006 | ) | ||||||||||
Accrued dividends on Series E Preferred Stock | — | — | — | (1,019 | ) | (3,000 | ) | |||||||||||||
Accretion on Series D Preferred Stock | (473 | ) | (473 | ) | (473 | ) | (473 | ) | (473 | ) | ||||||||||
Accretion on Series E Preferred Stock | — | — | — | (114 | ) | (339 | ) | |||||||||||||
Net income (loss) applicable to Common Stock | $ | 119,213 | $ | (3,608 | ) | $ | 43,411 | $ | 176,065 | $ | 28,988 | |||||||||
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Year Ended December 31, | ||||||||||||||||||||
2002 | 2003 | 2004 | 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 | $ | 0.72 | $ | (0.03 | ) | $ | 0.18 | $ | 0.71 | $ | 0.11 | |||||||||
Cumulative effect of change in accounting principle, net of tax | — | (0.00 | ) | — | — | — | ||||||||||||||
Basic net income (loss) per common share | $ | 0.72 | $ | (0.03 | ) | $ | 0.18 | $ | 0.71 | $ | 0.11 | |||||||||
Diluted net income (loss) per common share(1): | ||||||||||||||||||||
Income (loss) before cumulative effect of change in accounting principle | $ | 0.52 | $ | (0.03 | ) | $ | 0.15 | $ | 0.62 | $ | 0.10 | |||||||||
Cumulative effect of change in accounting principle, net of tax | — | (0.00 | ) | — | — | — | ||||||||||||||
Diluted net income (loss) per common share | $ | 0.52 | $ | (0.03 | ) | $ | 0.15 | $ | 0.62 | $ | 0.10 | |||||||||
Weighted average shares(1): | ||||||||||||||||||||
Basic | 108,709,302 | 109,331,885 | 126,722,051 | 135,352,396 | 155,820,381 | |||||||||||||||
Diluted | 150,218,097 | 109,331,885 | 150,633,686 | 153,610,589 | 159,696,608 | |||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2002 | 2003 | 2004 | 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 | $ | 364,761 | |||||||||
Net cash used in investment activities | (88,311 | ) | (306,868 | ) | (190,881 | ) | (905,228 | ) | (1,939,665 | ) | ||||||||||
Net cash provided by (used in) financing activities | 157,039 | 201,951 | (5,433 | ) | 712,244 | 1,623,693 | ||||||||||||||
Consolidated Operating Data: | ||||||||||||||||||||
Licensed POPs (at period end)(2) | 22,584 | 22,584 | 28,430 | 64,222 | 65,618 | |||||||||||||||
Covered POPs (at period end)(2) | 16,964 | 17,662 | 21,083 | 23,908 | 38,630 | |||||||||||||||
Customers (at period end) | 513 | 977 | 1,399 | 1,925 | 2,941 | |||||||||||||||
Adjusted EBITDA (Deficit)(3) | $ | (94,376 | ) | $ | 89,566 | $ | 203,597 | $ | 294,465 | $ | 395,559 | |||||||||
Adjusted EBITDA as a percentage of service revenues(4) | NM | 24.2 | % | 33.0 | % | 33.8 | % | 30.6 | % | |||||||||||
Capital Expenditures | $ | 227,350 | $ | 117,731 | $ | 250,830 | $ | 266,499 | $ | 550,749 | ||||||||||
Core Markets Operating Data(6): | ||||||||||||||||||||
Licensed POPs (at period end)(2) | 22,584 | 22,584 | 24,686 | 25,433 | 25,881 | |||||||||||||||
Covered POPs (at period end)(2) | 16,964 | 17,662 | 21,083 | 21,263 | 22,461 | |||||||||||||||
Customers (at period end) | 513 | 977 | 1,399 | 1,872 | 2,301 | |||||||||||||||
Adjusted EBITDA (Deficit)(6) | $ | (94,376 | ) | $ | 89,566 | $ | 203,597 | $ | 316,555 | $ | 492,773 | |||||||||
Adjusted EBITDA as a percentage of service revenues(4) | NM | 24.2 | % | 33.0 | % | 36.4 | % | 43.3 | % | |||||||||||
Capital Expenditures | $ | 227,350 | $ | 117,731 | $ | 250,830 | $ | 171,783 | $ | 217,215 | ||||||||||
Expansion Markets Operating Data(6): | ||||||||||||||||||||
Licensed POPs (at period end)(2) | — | — | 3,744 | 38,789 | 39,737 | |||||||||||||||
Covered POPs (at period end)(2) | — | — | — | 2,645 | 16,169 | |||||||||||||||
Customers (at period end) | — | — | — | 53 | 640 | |||||||||||||||
Adjusted EBITDA (Deficit)(6) | — | — | — | $ | (22,090 | ) | $ | (97,214 | ) | |||||||||||
Capital Expenditures | — | — | — | $ | 90,871 | $ | 314,308 |
Year Ended December 31, | ||||||||||||||||||||
2002 | 2003 | 2004 | 2005 | 2006 | ||||||||||||||||
Average monthly churn(7)(8) | 4.4 | % | 4.6 | % | 4.9 | % | 5.1 | % | 4.6 | % | ||||||||||
Average revenue per user (ARPU)(9)(10) | $ | 39.23 | $ | 37.49 | $ | 41.13 | $ | 42.40 | $ | 42.98 | ||||||||||
Cost per gross addition (CPGA)(8)(9)(11) | $ | 157.02 | $ | 100.46 | $ | 103.78 | $ | 102.70 | $ | 117.58 | ||||||||||
Cost per user (CPU)(9)(12) | $ | 37.68 | $ | 18.21 | $ | 18.95 | $ | 19.57 | $ | 19.65 |
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As of December 31, 2006 | ||||||||
Actual | As Adjusted(13) | |||||||
(In thousands) | ||||||||
Balance Sheet Data: | ||||||||
Cash, cash equivalents & short-term investments | $ | 552,149 | $ | 1,374,812 | ||||
Property and equipment, net | 1,256,162 | 1,256,162 | ||||||
Total assets | 4,153,122 | 4,975,785 | ||||||
Long-term debt (including current maturities) | 2,596,000 | 2,596,000 | ||||||
Series D Cumulative Convertible Redeemable Participating Preferred Stock | 443,368 | — | ||||||
Series E Cumulative Convertible Redeemable Participating Preferred Stock | 51,135 | — | ||||||
Stockholders’ equity | 413,245 | 1,730,410 |
(1) | See Note 17 to the consolidated financial statements included elsewhere in this offering circular 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 years ended December 31, 2002 and 2003 are not included in Note 17 to the 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 incomeplusdepreciation 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. The lenders under our senior secured credit facility use the senior secured leverage ratio to measure our ability to meet our obligations on our senior secured debt by comparing the total amount of such debt to our Adjusted EBITDA, which our lenders use to estimate our cash flow from operations. The senior secured leverage ratio is calculated as the ratio of senior secured indebtedness to Adjusted EBITDA, as defined by our senior secured credit facility. For the year ended December 31, 2006, our senior secured leverage ratio was 3.24 to 1.0, which means for every $1.00 of Adjusted EBITDA we had $3.24 of senior secured indebtedness. 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.” |
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The following table shows the calculation of consolidated Adjusted EBITDA, as defined in our senior secured credit facility, for the periods indicated. |
Year Ended December 31, | ||||||||||||||||||||
2002 | 2003 | 2004 | 2005 | 2006 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Calculation of Consolidated Adjusted EBITDA (Deficit): | ||||||||||||||||||||
Net income | $ | 130,305 | $ | 15,358 | $ | 64,890 | $ | 198,677 | $ | 53,806 | ||||||||||
Adjustments: | ||||||||||||||||||||
Depreciation and amortization | 21,472 | 42,428 | 62,201 | 87,895 | 135,028 | |||||||||||||||
(Gain) loss on disposal of assets | (279,659 | ) | 392 | 3,209 | (218,203 | ) | 8,806 | |||||||||||||
Non-cash compensation expense(a) | 1,519 | 5,573 | 10,429 | 2,596 | 14,472 | |||||||||||||||
Interest expense | 6,720 | 11,115 | 19,030 | 58,033 | 115,985 | |||||||||||||||
Accretion of put option in majority-owned subsidiary(a) | — | — | 8 | 252 | 770 | |||||||||||||||
Interest and other income | (964 | ) | (996 | ) | (2,472 | ) | (8,658 | ) | (21,543 | ) | ||||||||||
Loss (gain) on extinguishment of debt | 703 | (603 | ) | (698 | ) | 46,448 | 51,518 | |||||||||||||
Provision for income taxes | 25,528 | 16,179 | 47,000 | 127,425 | 36,717 | |||||||||||||||
Cumulative effect of change in accounting principle, net of tax(a) | — | 120 | — | — | — | |||||||||||||||
Consolidated Adjusted EBITDA (Deficit) | $ | (94,376 | ) | $ | 89,566 | $ | 203,597 | $ | 294,465 | $ | 395,559 | |||||||||
(a) | Represents a non-cash expense, as defined by our senior secured credit facility. |
In addition, for further information, the following table reconciles consolidated Adjusted EBITDA, as defined in our senior secured credit facility, to cash flows from operating activities for the periods indicated. |
Year Ended December 31, | ||||||||||||||||||||
2002 | 2003 | 2004 | 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 | $ | 364,761 | |||||||||
Adjustments: | ||||||||||||||||||||
Interest expense | 6,720 | 11,115 | 19,030 | 58,033 | 115,985 | |||||||||||||||
Non-cash interest expense | (2,833 | ) | (3,073 | ) | (2,889 | ) | (4,285 | ) | (6,964 | ) | ||||||||||
Interest and other income | (964 | ) | (996 | ) | (2,472 | ) | (8,658 | ) | (21,543 | ) | ||||||||||
Provision for uncollectible accounts receivable | (359 | ) | (110 | ) | (125 | ) | (129 | ) | (31 | ) | ||||||||||
Deferred rent expense | (2,886 | ) | (2,803 | ) | (3,466 | ) | (4,407 | ) | (7,464 | ) | ||||||||||
Cost of abandoned cell sites | (1,449 | ) | (824 | ) | (1,021 | ) | (725 | ) | (3,783 | ) | ||||||||||
Accretion of asset retirement obligation | — | (127 | ) | (253 | ) | (423 | ) | (769 | ) | |||||||||||
Loss (gain) on sale of investments | — | — | (576 | ) | 190 | 2,385 | ||||||||||||||
Provision for income taxes | 25,528 | 16,179 | 47,000 | 127,425 | 36,717 | |||||||||||||||
Deferred income taxes | (6,616 | ) | (18,716 | ) | (44,441 | ) | (125,055 | ) | (32,341 | ) | ||||||||||
Changes in working capital | (60,845 | ) | (23,684 | ) | 42,431 | (30,717 | ) | (51,394 | ) | |||||||||||
Consolidated Adjusted EBITDA (Deficit) | $ | (94,376 | ) | $ | 89,566 | $ | 203,597 | $ | 294,465 | $ | 395,559 | |||||||||
(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 |
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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 5.1% for the year ended December 31, 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 ofE-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. | |
Average number of customers for any measurement period is determined by dividing (a) the sum of the average monthly number of customers for the measurement period by (b) the number of months in such period. Average monthly number of customers for any month represents the sum of the number of customers on the first day of the month and the last day of the month divided by two. The following table shows the calculation of ARPU for the periods indicated: |
Year Ended December 31, | ||||||||||||||||||||
2002 | 2003 | 2004 | 2005 | 2006 | ||||||||||||||||
(In thousands, except average number of customers and ARPU) | ||||||||||||||||||||
Calculation of ARPU: | ||||||||||||||||||||
Service revenues | $ | 102,293 | $ | 369,851 | $ | 616,401 | $ | 872,100 | $ | 1,290,947 | ||||||||||
Less: | ||||||||||||||||||||
Activation revenues | (3,018 | ) | (14,410 | ) | (7,874 | ) | (6,808 | ) | (8,297 | ) | ||||||||||
E-911, FUSF and vendor’s compensation charges | — | (6,527 | ) | (12,522 | ) | (26,221 | ) | (45,640 | ) | |||||||||||
Net service revenues | $ | 99,275 | $ | 348,914 | $ | 596,005 | $ | 839,071 | $ | 1,237,010 | ||||||||||
Divided by: | ||||||||||||||||||||
Average number of customers | 210,881 | 775,605 | 1,207,521 | 1,649,208 | 2,398,682 | |||||||||||||||
ARPU | $ | 39.23 | $ | 37.49 | $ | 41.13 | $ | 42.40 | $ | 42.98 | ||||||||||
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(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: |
Year Ended December 31, | ||||||||||||||||||||
2002 | 2003 | 2004 | 2005 | 2006 | ||||||||||||||||
(In thousands, except gross customer additions and CPGA) | ||||||||||||||||||||
Calculation of CPGA: | ||||||||||||||||||||
Selling expenses | $ | 26,228 | $ | 44,006 | $ | 52,605 | $ | 62,396 | $ | 104,620 | ||||||||||
Less: | ||||||||||||||||||||
Activation revenues | (3,018 | ) | (14,410 | ) | (7,874 | ) | (6,809 | ) | (8,297 | ) | ||||||||||
Less: | ||||||||||||||||||||
Equipment revenues | (27,048 | ) | (81,258 | ) | (131,849 | ) | (166,328 | ) | (255,916 | ) | ||||||||||
Add: | ||||||||||||||||||||
Equipment revenue not associated with new customers | 482 | 13,228 | 54,323 | 77,011 | 114,392 | |||||||||||||||
Add: | ||||||||||||||||||||
Cost of equipment | 106,508 | 150,832 | 222,766 | 300,871 | �� | 476,877 | ||||||||||||||
Less: | ||||||||||||||||||||
Equipment costs not associated with new customers | (4,850 | ) | (22,549 | ) | (72,200 | ) | (109,803 | ) | (155,930 | ) | ||||||||||
Gross addition expenses | $ | 98,302 | $ | 89,849 | $ | 117,771 | $ | 157,338 | $ | 275,746 | ||||||||||
Divided by: | ||||||||||||||||||||
Gross customer additions | 626,050 | 894,348 | 1,134,762 | 1,532,071 | 2,345,135 | |||||||||||||||
CPGA | $ | 157.02 | $ | 100.46 | $ | 103.78 | $ | 102.70 | $ | 117.58 | ||||||||||
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(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: |
Year Ended December 31, | ||||||||||||||||||||
2002 | 2003 | 2004 | 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 | $ | 445,281 | ||||||||||
Add: | ||||||||||||||||||||
General and administrative expense | 28,933 | 50,067 | 78,905 | 100,080 | 138,998 | |||||||||||||||
Add: | ||||||||||||||||||||
Net loss on equipment transactions unrelated to initial customer acquisition | 4,368 | 9,320 | 17,877 | 32,791 | 41,538 | |||||||||||||||
Less: | ||||||||||||||||||||
Non-cash compensation expense included in cost of service and general and administrative expense | (1,519 | ) | (5,573 | ) | (10,429 | ) | (2,596 | ) | (14,472 | ) | ||||||||||
Less: | ||||||||||||||||||||
E-911, FUSF and vendor’s compensation revenues | — | (6,527 | ) | (12,522 | ) | (26,221 | ) | (45,640 | ) | |||||||||||
Total costs used in the calculation of CPU | $ | 95,349 | $ | 169,498 | $ | 274,637 | $ | 387,266 | $ | 565,705 | ||||||||||
Divided by: | ||||||||||||||||||||
Average number of customers | 210,881 | 775,605 | 1,207,521 | 1,649,208 | 2,398,682 | |||||||||||||||
CPU | $ | 37.68 | $ | 18.21 | $ | 18.95 | $ | 19.57 | $ | 19.65 | ||||||||||
(13) | As adjusted to give effect to the consummation of our initial public offering of 57,500,000 shares of common stock at a price per share of $23 (less underwriting discounts and fees), consisting of 37,500,000 shares of common stock sold by us and 20,000,000 shares of common stock sold by selling stockholders, including 7,500,000 sold by selling stockholders pursuant to the underwriters’ exercise of their over-allotment option. Upon consummation of the offering, all of our shares of Series D and Series E Preferred Stock were converted into shares of common stock. |
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• | 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 or changes in service plans or pricing by us or our competitors; | |
• | significant developments with respect to intellectual property rights or litigation; | |
• | 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. |
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• | 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 stockholder 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 stockholders; | |
• | 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. |
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• | 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; | |
• | 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. |
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• | 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 | |
• | adverse changes in the regulatory environment that may limit our ability to grow our customer base. |
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• | 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 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 of 1934, as amended, or 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. |
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• | 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. |
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• | 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) to pay dividends or make other payments. |
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• | physical damage to outside plant facilities; | |
• | power surges or outages; |
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• | 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. |
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• | First, companies subject to the periodic reporting requirements of the Exchange Act are not eligible to rely upon the Rule 701 exemption. We became subject to the reporting requirements of the Exchange Act in January 2004 as a result of our registration of certain of our debt securities, and we were subject to the reporting requirements of the Exchange Act for the remainder of 2004. As a result of being a reporting company in 2004, all options granted in 2004 were ineligible for the Rule 701 exemption. | |
• | Second, because we have rapidly expanded our operations and the size of our workforce since our inception, we have granted options to purchase shares of our common stock to a large number of participants under our Equity Compensation Plans. On December 31, 2005, options granted under our Equity Compensation Plans were held by more than 500 holders. As a result, we became subject to the registration requirements under Section 12(g) of the Exchange Act. In general, Section 12(g) of the Exchange Act (as supplemented by rules adopted by the SEC) requires every issuer having total assets of more than $10 million and a class of equity security held of record by 500 or more persons to register that class of equity security under the Exchange Act. An issuer is required to comply with the registration requirements within 120 days after the end of the first fiscal year when it first meets the above-described total asset and record holder test. However, we failed to register under Section 12(g) of the Exchange Act by April 30, 2006 (the date we were required to do so). If we had filed a registration statement as required by Section 12(g), we would have become subject to the periodic reporting requirements of the Exchange Act. Accordingly, we may not have been eligible to rely on the exemption from registration under Rule 701 of the Securities Act or the corresponding exemption from qualification under California securities laws that requires compliance with Rule 701. Due to the unavailability of these exemptions and our failure to register under Section 12(g) following the end of our 2005 fiscal year, certain options granted between April 30, 2006 through September 30, 2006 may not have been exempt from registration under Rule 701 or exempt from qualification under the California securities laws. In November 2006, we realized that we were not in compliance with Section 12(g) of the Exchange Act and we ceased granting options in reliance on Rule 701 of the Securities Act. |
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• | 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 financial and disclosure control and reporting obligations of public companies; | |
• | our ability to manage our rapid growth, train additional personnel and improve our financial and disclosure 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 offering circular under “Risk Factors.” |
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• | 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. |
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• | the conversion of our outstanding shares of Series D and Series E preferred stock, including accrued but unpaid dividends as of December 31, 2006; | |
• | the exercise of 1,013,739 options at a weighted average exercise price of $3.65 by the selling stockholders identified in the prospectus dated April 18, 2007 related to our initial public offering in April 2007; and | |
• | the consummation of our initial public offering in April 2007, which consisted of the sale by us of 37,500,000 shares of common stock at a price per share of $23 (less underwriting discounts and commissions). |
As of December 31, 2006 | ||||||||
Actual | As Adjusted | |||||||
(In thousands) | ||||||||
Cash, cash equivalents and short-term investments | $ | 552,149 | $ | 1,374,812 | ||||
Long-Term Debt: | ||||||||
Senior secured credit facility | 1,596,000 | 1,596,000 | ||||||
Senior notes | 1,000,000 | 1,000,000 | ||||||
Total Long-Term Debt | $ | 2,596,000 | $ | 2,596,000 | ||||
Series D Preferred Stock(1) | $ | 443,368 | $ | — | ||||
Series E Preferred Stock(2) | $ | 51,135 | $ | — | ||||
Stockholders’ Equity: | ||||||||
Preferred stock(3) | $ | — | $ | — | ||||
Common stock(4) | 16 | 34 | ||||||
Additional paid-in capital | 166,315 | 1,483,462 | ||||||
Retained earnings | 245,690 | 245,690 | ||||||
Accumulated other comprehensive income | 1,224 | 1,224 | ||||||
Total Stockholders’ Equity | $ | 413,245 | $ | 1,730,410 | ||||
Total Capitalization | $ | 3,503,748 | $ | 4,326,410 | ||||
(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. | |
(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 157,052,097 shares issued and outstanding, actual; 1,000,000,000 shares authorized and 344,351,229 issued and outstanding, pro forma as adjusted. The number of shares of common stock outstanding after this offer excludes: 22,485,723 shares of our common stock issuable upon exercise of options outstanding as of December 31, 2006, at a weighted average exercise price of $7.06 per share, of which options to purchase 9,736,953 shares were exercisable as of that date; 26,283,582 shares of our common stock available for future grant under our equity compensation plans as of December 31, 2006. |
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Year Ended December 31, | ||||||||||||||||||||
2002 | 2003 | 2004 | 2005 | 2006 | ||||||||||||||||
(In thousands, except share and per share data) | ||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||
Revenues: | ||||||||||||||||||||
Service revenues | $ | 102,293 | $ | 369,851 | $ | 616,401 | $ | 872,100 | $ | 1,290,947 | ||||||||||
Equipment revenues | 27,048 | 81,258 | 131,849 | 166,328 | 255,916 | |||||||||||||||
Total revenues | 129,341 | 451,109 | 748,250 | 1,038,428 | 1,546,863 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
Cost of service (excluding depreciation and amortization disclosed separately below) | 63,567 | 122,211 | 200,806 | 283,212 | 445,281 | |||||||||||||||
Cost of equipment | 106,508 | 150,832 | 222,766 | 300,871 | 476,877 | |||||||||||||||
Selling, general and administrative expenses (excluding depreciation and amortization disclosed separately below) | 55,161 | 94,073 | 131,510 | 162,476 | 243,618 | |||||||||||||||
Depreciation and amortization | 21,472 | 42,428 | 62,201 | 87,895 | 135,028 | |||||||||||||||
(Gain) loss on disposal of assets | (279,659 | ) | 392 | 3,209 | (218,203 | ) | 8,806 | |||||||||||||
Total operating expenses | (32,951 | ) | 409,936 | 620,492 | 616,251 | 1,309,610 | ||||||||||||||
Income from operations | 162,292 | 41,173 | 127,758 | 422,177 | 237,253 | |||||||||||||||
Other expense (income): | ||||||||||||||||||||
Interest expense | 6,720 | 11,115 | 19,030 | 58,033 | 115,985 | |||||||||||||||
Accretion of put option in majority-owned subsidiary | — | — | 8 | 252 | 770 | |||||||||||||||
Interest and other income | (964 | ) | (996 | ) | (2,472 | ) | (8,658 | ) | (21,543 | ) | ||||||||||
Loss (gain) on extinguishment of debt | 703 | (603 | ) | (698 | ) | 46,448 | 51,518 | |||||||||||||
Total other expense | 6,459 | 9,516 | 15,868 | 96,075 | 146,730 | |||||||||||||||
Income before provision for income taxes and cumulative effect of change in accounting principle | 155,833 | 31,657 | 111,890 | 326,102 | 90,523 | |||||||||||||||
Provision for income taxes | (25,528 | ) | (16,179 | ) | (47,000 | ) | (127,425 | ) | (36,717 | ) | ||||||||||
Income before cumulative effect of change in accounting principle | 130,305 | 15,478 | 64,890 | 198,677 | 53,806 | |||||||||||||||
Cumulative effect of change in accounting, net of tax | — | (120 | ) | — | — | — | ||||||||||||||
Net income | 130,305 | 15,358 | 64,890 | 198,677 | 53,806 | |||||||||||||||
Accrued dividends on Series D Preferred Stock | (10,619 | ) | (18,493 | ) | (21,006 | ) | (21,006 | ) | (21,006 | ) | ||||||||||
Accrued dividends on Series E Preferred Stock | — | — | — | (1,019 | ) | (3,000 | ) | |||||||||||||
Accretion on Series D Preferred Stock | (473 | ) | (473 | ) | (473 | ) | (473 | ) | (473 | ) | ||||||||||
Accretion on Series E Preferred Stock | — | — | — | (114 | ) | (339 | ) | |||||||||||||
Net income (loss) applicable to common stock | $ | 119,213 | $ | (3,608 | ) | $ | 43,411 | $ | 176,065 | $ | 28,988 | |||||||||
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Year Ended December 31, | ||||||||||||||||||||
2002 | 2003 | 2004 | 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 | $ | 0.72 | $ | (0.03 | ) | $ | 0.18 | $ | 0.71 | $ | 0.11 | |||||||||
Cumulative effect of change in accounting, net of tax | — | (0.00 | ) | — | — | — | ||||||||||||||
Basic net income (loss) per common share | $ | 0.72 | $ | (0.03 | ) | $ | 0.18 | $ | 0.71 | $ | 0.11 | |||||||||
Diluted net income (loss) per common share(1): | ||||||||||||||||||||
Income (loss) before cumulative effect of change in accounting principle | $ | 0.52 | $ | (0.03 | ) | $ | 0.15 | $ | 0.62 | $ | 0.10 | |||||||||
Cumulative effect of change in accounting, net of tax | — | (0.00 | ) | — | — | — | ||||||||||||||
Diluted net income (loss) per common share | $ | 0.52 | $ | (0.03 | ) | $ | 0.15 | $ | 0.62 | $ | 0.10 | |||||||||
Weighted average shares(1): | ||||||||||||||||||||
Basic | 108,709,302 | 109,331,885 | 126,722,051 | 135,352,396 | 155,820,381 | |||||||||||||||
Diluted | 150,218,097 | 109,331,885 | 150,633,686 | 153,610,589 | 159,696,608 | |||||||||||||||
Other Financial Data: | ||||||||||||||||||||
Net cash (used in) provided by operating activities | $ | (50,672 | ) | $ | 112,605 | $ | 150,379 | $ | 283,216 | $ | 364,761 | |||||||||
Net cash used in investment activities | (88,311 | ) | (306,868 | ) | (190,881 | ) | (905,228 | ) | (1,939,665 | ) | ||||||||||
Net cash provided by (used in) financing activities | 157,039 | 201,951 | (5,433 | ) | 712,244 | 1,623,693 |
As of December 31, | ||||||||||||||||||||
2002 | 2003 | 2004 | 2005 | 2006 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||
Cash, cash equivalents & short-term investments | $ | 60,724 | $ | 254,838 | $ | 59,441 | $ | 503,131 | $ | 552,149 | ||||||||||
Property and equipment, net | 352,799 | 485,032 | 636,368 | 831,490 | 1,256,162 | |||||||||||||||
Total assets | 554,705 | 898,939 | 965,396 | 2,158,981 | 4,153,122 | |||||||||||||||
Long-term debt (including current maturities) | 51,649 | 195,755 | 184,999 | 905,554 | 2,596,000 | |||||||||||||||
Series D Cumulative Convertible Redeemable Participating Preferred Stock | 294,423 | 378,926 | 400,410 | 421,889 | 443,368 | |||||||||||||||
Series E Cumulative Convertible Redeemable Participating Preferred Stock | — | — | — | 47,796 | 51,135 | |||||||||||||||
Stockholders’ equity | 69,397 | 71,333 | 125,434 | 367,906 | 413,245 |
(1) | See Note 17 to the consolidated financial statements included elsewhere in this offering circular 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, 2002 and 2003 is not included in Note 17 to the consolidated financial statements. |
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FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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December 31, | December 31, | |||||||
2006 | 2005 | |||||||
Expected dividends | 0.00 | % | 0.00 | % | ||||
Expected volatility | 35.04 | % | 50.00 | % | ||||
Risk-free interest rate | 4.64 | % | 4.24 | % | ||||
Expected lives in years | 5.00 | 5.00 | ||||||
Weighted-average fair value of options: | ||||||||
Granted at below fair value | $ | 10.16 | $ | — | ||||
Granted at fair value | $ | 3.75 | $ | 3.44 | ||||
Weighted-average exercise price of options: | ||||||||
Granted at below fair value | $ | 1.49 | $ | — | ||||
Granted at fair value | $ | 9.95 | $ | 7.13 |
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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, 2005 | 60,000 | $ | 6.31 | $ | 6.31 | $ | 0.00 | |||||||||
June 30, 2005 | — | — | — | — | ||||||||||||
September 30, 2005 | 4,922,385 | $ | 7.14 | $ | 7.14 | $ | 0.00 | |||||||||
December 31, 2005 | 856,149 | $ | 7.15 | $ | 7.15 | $ | 0.00 | |||||||||
March 31, 2006 | 2,869,989 | $ | 7.15 | $ | 7.15 | $ | 0.00 | |||||||||
June 30, 2006 | 534,525 | $ | 7.54 | $ | 7.54 | $ | 0.00 | |||||||||
September 30, 2006 | 418,425 | $ | 8.67 | $ | 8.67 | $ | 0.00 | |||||||||
December 31, 2006 | 7,546,854 | $ | 10.81 | $ | 11.33 | $ | 0.53 |
• | discounted cash flow analysis; | |
• | comparable company market multiples; and | |
• | comparable merger and acquisition transaction multiples. |
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Number of | Price | Gross | ||||||||||
Shares | per Share | Proceeds | ||||||||||
October 2005 | 48,847,533 | $ | 7.15 | $ | 349,422,686 | |||||||
September 2006 | 1,375,488 | $ | 8.67 | 11,920,896 | ||||||||
October 2006 | 1,654,050 | $ | 8.67 | 14,335,100 | ||||||||
Total | 51,877,071 | $ | 375,678,682 | |||||||||
• | Cell Site Costs. We incur expenses for the rent of cell sites, network facilities, engineering operations, field technicians and related utility and maintenance charges. |
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• | 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. |
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• | 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. |
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Reportable Operating Segment Data | 2006 | 2005 | Change | |||||||||
(In thousands) | ||||||||||||
REVENUES: | ||||||||||||
Service revenues: | ||||||||||||
Core Markets | $ | 1,138,019 | $ | 868,681 | 31 | % | ||||||
Expansion Markets | 152,928 | 3,419 | ** | |||||||||
Total | $ | 1,290,947 | $ | 872,100 | 48 | % | ||||||
Equipment revenues: | ||||||||||||
Core Markets | $ | 208,333 | $ | 163,738 | 27 | % | ||||||
Expansion Markets | 47,583 | 2,590 | ** | |||||||||
Total | $ | 255,916 | $ | 166,328 | 54 | % | ||||||
OPERATING EXPENSES: | ||||||||||||
Cost of service (excluding depreciation and amortization disclosed separately below)(1): | ||||||||||||
Core Markets | $ | 338,923 | $ | 271,437 | 25 | % | ||||||
Expansion Markets | 106,358 | 11,775 | ** | |||||||||
Total | $ | 445,281 | $ | 283,212 | 57 | % | ||||||
Cost of equipment: | ||||||||||||
Core Markets | $ | 364,281 | $ | 293,702 | 24 | % | ||||||
Expansion Markets | 112,596 | 7,169 | ** | |||||||||
Total | $ | 476,877 | $ | 300,871 | 59 | % | ||||||
Selling, general and administrative expenses (excluding depreciation and amortization disclosed separately below)(1): | ||||||||||||
Core Markets | $ | 158,100 | $ | 153,321 | 3 | % | ||||||
Expansion Markets | 85,518 | 9,155 | ** | |||||||||
Total | $ | 243,618 | $ | 162,476 | 50 | % | ||||||
Adjusted EBITDA (Deficit)(2): | ||||||||||||
Core Markets | $ | 492,773 | $ | 316,555 | 56 | % | ||||||
Expansion Markets | (97,214 | ) | (22,090 | ) | ** | |||||||
Depreciation and amortization: | ||||||||||||
Core Markets | $ | 109,626 | $ | 84,436 | 30 | % | ||||||
Expansion Markets | 21,941 | 2,030 | ** | |||||||||
Other | 3,461 | 1,429 | 142 | % | ||||||||
Total | $ | 135,028 | $ | 87,895 | 54 | % | ||||||
Stock-based compensation expense: | ||||||||||||
Core Markets | $ | 7,725 | $ | 2,596 | 198 | % | ||||||
Expansion Markets | 6,747 | — | ** | |||||||||
Total | $ | 14,472 | $ | 2,596 | 457 | % | ||||||
Income (loss) from operations: | ||||||||||||
Core Markets | $ | 367,109 | $ | 219,777 | 67 | % | ||||||
Expansion Markets | (126,387 | ) | (24,370 | ) | ** | |||||||
Other | (3,469 | ) | 226,770 | (102 | )% | |||||||
Total | $ | 237,253 | $ | 422,177 | (44 | )% | ||||||
** | Not meaningful. The Expansion Markets reportable segment had no significant operations during 2005. |
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(1) | Cost of service and selling, general and administrative expenses include stock-based compensation expense. For the year ended December 31, 2006, cost of service includes $1.3 million and selling, general and administrative expenses includes $13.2 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 $269.3 million, or 31%, to $1,138.0 million for the year ended December 31, 2006 from $868.7 million for the year ended December 31, 2005. The increase in service revenues is primarily attributable to net additions of approximately 430,000 customers accounting for $199.2 million of the Core Markets increase, coupled with the migration of existing customers to higher price rate plans accounting for $70.1 million of the Core Markets increase. |
• | Expansion Markets. Expansion Markets service revenues increased $149.5 million to $152.9 million for the year ended December 31, 2006 from $3.4 million for the year ended December 31, 2005. These revenues wereattributableto the launch of the Tampa/Sarasota metropolitan area in October 2005, the Dallas/Ft. Worth metropolitan area in March 2006, the Detroit metropolitan area in April 2006 and the expansion of the Tampa/Sarasota area to include the Orlando metropolitan area in November 2006. Net additions in the Expansion Markets totaled approximately 587,000 customers for the year ended December 31, 2006. |
• | Core Markets. Core Markets equipment revenues increased $44.6 million, or 27%, to $208.3 million for the year ended December 31, 2006 from $163.7 million for the year ended December 31, 2005. The increase in equipment revenues is primarily attributable to the sale of higher priced handset models accounting for $30.2 million of the increase, coupled with the increase in gross customer additions during the year of approximately 130,000 customers, which accounted for $14.4 million of the increase. | |
• | Expansion Markets. Expansion Markets equipment revenues increased $45.0 million to $47.6 million for the year ended December 31, 2006 from $2.6 million for the year ended December 31, 2005. These revenues were attributable to the launch of the Tampa/Sarasota metropolitan area in October 2005, the Dallas/Ft. Worth metropolitan area in March 2006, the Detroit metropolitan area in April 2006 and the expansion of the Tampa/Sarasota area to include the Orlando metropolitan area in November 2006. Gross additions in the Expansion Markets totaled approximately 730,000 customers for the year ended December 31, 2006. |
• | Core Markets. Core Markets cost of service increased $67.5 million, or 25%, to $338.9 million for the year ended December 31, 2006 from $271.4 million for the year ended December 31, 2005. The |
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increase in cost of service was primarily attributable to a $14.8 million increase in federal universal service fund, or FUSF, fees, a $13.2 million increase in long distance costs, a $7.7 million increase in cell site and switch facility lease expense, a $6.4 million increase in customer service expense, a $5.9 million increase in intercarrier compensation, and a $4.3 million increase in employee costs, all of which are a result of the 23% growth in our Core Markets customer base and the addition of approximately 350 cell sites to our existing network infrastructure. |
• | Expansion Markets. Expansion Markets cost of service increased $94.6 million to $106.4 million for the year ended December 31, 2006 from $11.8 million for the year ended December 31, 2005. These increases were attributable to the launch of the Tampa/Sarasota metropolitan area in October 2005, the Dallas/Ft. Worth metropolitan area in March 2006, the Detroit metropolitan area in April 2006 and the expansion of the Tampa/Sarasota area to include the Orlando metropolitan area in November 2006. The increase in cost of service was primarily attributable to a $22.3 million increase in cell site and switch facility lease expense, a $13.8 million increase in employee costs, a $9.3 million increase in intercarrier compensation, $8.2 million in long distance costs, $8.2 million in customer service expense and $3.5 million in billing expenses. |
• | Core Markets. Core Markets cost of equipment increased $70.6 million, or 24%, to $364.3 million for the year ended December 31, 2006 from $293.7 million for the year ended December 31, 2005. The increase in equipment costs is primarily attributable to the sale of higher cost handset models accounting for $44.7 million of the increase. The increase in gross customer additions during the year of approximately 130,000 customers as well as the sale of new handsets to existing customers accounted for $25.9 million of the increase. | |
• | Expansion Markets. Expansion Markets costs of equipment increased $105.4 million to $112.6 million for the year ended December 31, 2006 from $7.2 million for the year ended December 31, 2005. These costs were primarily attributable to the launch of the Tampa/Sarasota metropolitan area in October 2005, the Dallas/Ft. Worth metropolitan area in March 2006, the Detroit metropolitan area in April 2006 and the expansion of the Tampa/Sarasota area to include the Orlando metropolitan area in November 2006. |
• | Core Markets. Core Markets selling, general and administrative expenses increased $4.8 million, or 3%, to $158.1 million for the year ended December 31, 2006 from $153.3 million for the year ended December 31, 2005. Selling expenses increased by $10.7 million, or approximately 18% for the year ended December 31, 2006 compared to year ended December 31, 2005. General and administrative expenses decreased by $5.9 million, or approximately 6% for the year ended December 31, 2006 compared to the year ended December 31, 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 $76.3 million to $85.5 million for the year ended December 31, 2006 from $9.2 million for the year ended December 31, 2005. Selling expenses increased $31.5 million for the year ended December 31, 2006 |
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compared to the year ended December 31, 2005. This increase in selling expenses was related to marketing and advertising expenses associated with the launch of the Dallas/Ft. Worth metropolitan area, the Detroit metropolitan area, and the expansion of the Tampa/Sarasota area to include the Orlando metropolitan area. General and administrative expenses increased by $44.8 million for the year ended December 31, 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 metropolitan area, Detroit metropolitan area, and the expansion of the Tampa/Sarasota area to include the Orlando metropolitan area as well as build-out expenses related to the Los Angeles metropolitan area. |
• | Core Markets. Core Markets depreciation and amortization expense increased $25.2 million, or 30%, to $109.6 million for the year ended December 31, 2006 from $84.4 million for the year ended December 31, 2005. The increase related primarily to an increase in network infrastructure assets placed into service during the year ended December 31, 2006. We added approximately 350 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 $19.9 million to $21.9 million for the year ended December 31, 2006 from $2.0 million for the year ended December 31, 2005. The increase related to network infrastructure assets that were placed into service as a result of the launch of the Dallas/Ft. Worth metropolitan area, the Detroit metropolitan area, and expansion of the Tampa/Sarasota area to include the Orlando metropolitan area. |
• | Core Markets. Core Markets stock-based compensation expense increased $5.1 million, or 198%, to $7.7 million for the year ended December 31, 2006 from $2.6 million for the year ended December 31, 2005. The increase is primarily related to the adoption of SFAS No. 123(R) on January 1, 2006. In addition, in December 2006, we amended the stock option agreements of a former member of our board of directors to extend the contractual life of 405,054 vested options to purchase common stock until December 31, 2006. This amendment resulted in the recognition of additional stock-based compensation expense of approximately $4.1 million in the fourth quarter of 2006. | |
• | Expansion Markets. Expansion Markets stock-based compensation expense was $6.8 million for the year ended December 31, 2006. This expense is attributable to stock options granted to employees in our Expansion Markets which are being accounted for under SFAS No. 123(R)as of January 1, 2006. |
Consolidated Data | 2006 | 2005 | Change | |||||||||
(In thousands) | ||||||||||||
Loss (gain) on disposal of assets | $ | 8,806 | $ | (218,203 | ) | 104 | % | |||||
Loss on extinguishment of debt | 51,518 | 46,448 | 11 | % | ||||||||
Interest expense | 115,985 | 58,033 | 100 | % | ||||||||
Provision for income taxes | 36,717 | 127,425 | (72 | )% | ||||||||
Net income | 53,806 | 198,677 | (73 | )% |
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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 | % | ||||||
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** | 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. CoreMarketsequipment 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. | |
• | 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. |
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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 sites in our Core Markets during the year ended December 31, 2005 to increase the capacity of our existing network and expand our footprint. |
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• | 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 |
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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 | % |
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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 | ||||||||
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Three Months Ended | ||||||||||||||||
March 31, | June 30, | September 30, | December 31, | |||||||||||||
2006 | 2006 | 2006 | 2006 | |||||||||||||
(In thousands) | ||||||||||||||||
REVENUES: | ||||||||||||||||
Service revenues | $ | 275,416 | $ | 307,843 | $ | 332,920 | $ | 374,768 | ||||||||
Equipment revenues | 54,045 | 60,351 | 63,196 | 78,324 | ||||||||||||
Total revenues | 329,461 | 368,194 | 396,116 | 453,092 | ||||||||||||
OPERATING EXPENSES: | ||||||||||||||||
Cost of service (excluding depreciation and amortization expense shown separately below) | 92,489 | 107,497 | 113,524 | 131,771 | ||||||||||||
Cost of equipment | 100,911 | 112,005 | 117,982 | 145,979 | ||||||||||||
Selling, general and administrative expenses (excluding depreciation and amortization expense shown separately below) | 51,437 | 60,264 | 60,220 | 71,697 | ||||||||||||
Depreciation and amortization | 27,260 | 32,316 | 36,611 | 38,841 | ||||||||||||
Loss (gain) on disposal of assets | 10,365 | 2,013 | (1,615 | ) | (1,957 | ) | ||||||||||
Total operating expenses | 282,462 | 314,095 | 326,722 | 386,331 | ||||||||||||
Income from operations | 46,999 | 54,099 | 69,394 | 66,761 | ||||||||||||
OTHER EXPENSE (INCOME): | ||||||||||||||||
Interest expense | 20,885 | 21,713 | 24,811 | 48,576 | ||||||||||||
Accretion of put option in majority-owned subsidiary | 157 | 203 | 203 | 207 | ||||||||||||
Interest and other income | (4,572 | ) | (6,147 | ) | (4,386 | ) | (6,438 | ) | ||||||||
(Gain) loss on extinguishment of debt | (217 | ) | (27 | ) | — | 51,762 | ||||||||||
Total other expense | 16,253 | 15,742 | 20,628 | 94,107 | ||||||||||||
Income (loss) before provision for income taxes | 30,746 | 38,357 | 48,766 | (27,346 | ) | |||||||||||
Provision for income taxes | (12,377 | ) | (15,368 | ) | (19,500 | ) | 10,528 | |||||||||
Net income (loss) | $ | 18,369 | $ | 22,989 | $ | 29,266 | $ | (16,818 | ) | |||||||
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Year Ended December 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
Customers: | ||||||||||||
End of period | 1,398,732 | 1,924,621 | 2,940,986 | |||||||||
Net additions | 421,833 | 525,889 | 1,016,365 | |||||||||
Churn: | ||||||||||||
Average monthly rate | 4.9 | % | 5.1 | % | 4.6 | % | ||||||
ARPU | $ | 41.13 | $ | 42.40 | $ | 42.98 | ||||||
CPGA | $ | 103.78 | $ | 102.70 | $ | 117.58 | ||||||
CPU | $ | 18.95 | $ | 19.57 | $ | 19.65 |
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Three Months Ended | ||||||||||||||||||||||||||||||||
March 31, | June 30, | September 30, | December 31, | March 31, | June 30, | September 30, | December 31, | |||||||||||||||||||||||||
2005 | 2005 | 2005 | 2005 | 2006 | 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 | 2,940,986 | ||||||||||||||||||||||||
Net additions | 169,236 | 77,205 | 94,613 | 184,834 | 245,437 | 248,850 | 197,623 | 324,454 | ||||||||||||||||||||||||
Churn(1): | ||||||||||||||||||||||||||||||||
Average monthly rate | 4.3 | % | 5.1 | % | 5.6 | % | 5.2 | % | 4.4 | % | 4.5 | % | 5.0 | % | 4.5 | % | ||||||||||||||||
ARPU | $ | 42.57 | $ | 42.32 | $ | 42.16 | $ | 42.55 | $ | 43.12 | $ | 42.86 | $ | 42.78 | $ | 43.15 | ||||||||||||||||
CPGA(1) | $ | 100.15 | $ | 101.63 | $ | 102.56 | $ | 105.50 | $ | 106.26 | $ | 122.20 | $ | 120.29 | $ | 120.01 | ||||||||||||||||
CPU | $ | 19.33 | $ | 18.50 | $ | 19.61 | $ | 20.67 | $ | 20.11 | $ | 19.78 | $ | 19.15 | $ | 19.67 |
(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%, 5.7% and 5.0% for the three month periods ended March 31, 2006, June 30, 2006, September 30, 2006 and December 31, |
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2006, respectively. CPGA computed under the original 7 day allowable return period would have been $105.33, $113.11, $110.43 and $113.67 for the three month periods ended March 31, 2006, June 30, 2006, September 30, 2006 and December 31, 2006, respectively. |
Year Ended December 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
(Dollars in thousands) | ||||||||||||
Core Markets Customers: | ||||||||||||
End of period | 1,398,732 | 1,871,665 | 2,300,958 | |||||||||
Net additions | 421,833 | 472,933 | 429,293 | |||||||||
Core Markets Adjusted EBITDA | $ | 203,597 | $ | 316,555 | $ | 492,773 | ||||||
Core Markets Adjusted EBITDA as a Percent of Service Revenues | 33.0 | % | 36.4 | % | 43.3 | % |
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Three Months Ended | ||||||||||||||||||||||||||||||||
March 31, | June 30, | September 30, | December 31, | March 31, | June 30, | September 30, | December 31, | |||||||||||||||||||||||||
2005 | 2005 | 2005 | 2005 | 2006 | 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 | 2,300,958 | ||||||||||||||||||||||||
Net additions | 169,236 | 77,205 | 94,267 | 132,224 | 183,884 | 63,618 | 55,096 | 126,694 | ||||||||||||||||||||||||
Core Markets Adjusted EBITDA | $ | 68,036 | $ | 84,321 | $ | 81,133 | $ | 83,064 | $ | 109,120 | $ | 127,182 | $ | 128,283 | $ | 128,188 | ||||||||||||||||
Core Markets Adjusted EBITDA as a Percent of Service Revenues | 34.6 | % | 39.6 | % | 36.6 | % | 35.0 | % | 41.2 | % | 45.2 | % | 45.0 | % | 41.8 | % |
Year Ended December 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
(Dollars in thousands) | ||||||||||||
Expansion Markets Customers: | ||||||||||||
End of period | — | 52,956 | 640,028 | |||||||||
Net additions | — | 52,956 | 587,072 | |||||||||
Expansion Markets Adjusted EBITDA (Deficit) | — | $ | (22,090 | ) | $ | (97,214 | ) |
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Three Months Ended | ||||||||||||||||||||||||||||||||
March 31, | June 30, | September 30, | December 31, | March 31, | June 30, | September 30, | December 31, | |||||||||||||||||||||||||
2005 | 2005 | 2005 | 2005 | 2006 | 2006 | 2006 | 2006 | |||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||
Expansion Markets Customers: | ||||||||||||||||||||||||||||||||
End of period | — | — | 346 | 52,956 | 114,509 | 299,741 | 442,268 | 640,028 | ||||||||||||||||||||||||
Net additions | — | — | 346 | 52,610 | 61,553 | 185,232 | 142,527 | 197,760 | ||||||||||||||||||||||||
Expansion Markets Adjusted EBITDA (Deficit) | $ | (901 | ) | $ | (2,105 | ) | $ | (5,659 | ) | $ | (13,425 | ) | $ | (22,685 | ) | $ | (36,596 | ) | $ | (20,112 | ) | $ | (17,821 | ) |
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Year Ended December 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
(In thousands, except average number of customers and ARPU) | ||||||||||||
Calculation of Average Revenue Per User (ARPU): | ||||||||||||
Service revenues | $ | 616,401 | $ | 872,100 | $ | 1,290,947 | ||||||
Less: | ||||||||||||
Activation revenues | (7,874 | ) | (6,808 | ) | (8,297 | ) | ||||||
E-911, FUSF and vendor’s compensation charges | (12,522 | ) | (26,221 | ) | (45,640 | ) | ||||||
Net service revenues | $ | 596,005 | $ | 839,071 | $ | 1,237,010 | ||||||
Divided by: | ||||||||||||
Average number of customers | 1,207,521 | 1,649,208 | 2,398,682 | |||||||||
ARPU | $ | 41.13 | $ | 42.40 | $ | 42.98 | ||||||
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 | ||||||||
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Three Months Ended | ||||||||||||||||
March 31, | June 30, | September 30, | December 31, | |||||||||||||
2006 | 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 | $ | 374,768 | ||||||||
Less: | ||||||||||||||||
Activation revenues | (1,923 | ) | (1,979 | ) | (2,123 | ) | (2,272 | ) | ||||||||
E-911, FUSF and vendor’s compensation charges | (8,958 | ) | (10,752 | ) | (9,512 | ) | (16,418 | ) | ||||||||
Net service revenues | $ | 264,535 | $ | 295,112 | $ | 321,285 | $ | 356,078 | ||||||||
Divided by: Average number of customers | 2,045,110 | 2,295,249 | 2,503,423 | 2,750,943 | ||||||||||||
ARPU | $ | 43.12 | $ | 42.86 | $ | 42.78 | $ | 43.15 | ||||||||
Year Ended December 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
(In thousands, except gross customer additions and CPGA) | ||||||||||||
Calculation of Cost Per Gross Addition (CPGA): | ||||||||||||
Selling expenses | $ | 52,605 | $ | 62,396 | $ | 104,620 | ||||||
Less: | ||||||||||||
Activation revenues | (7,874 | ) | (6,808 | ) | (8,297 | ) | ||||||
Less: | ||||||||||||
Equipment revenues | (131,849 | ) | (166,328 | ) | (255,916 | ) | ||||||
Add: | ||||||||||||
Equipment revenue not associated with new customers | 54,323 | 77,010 | 114,392 | |||||||||
Add: | ||||||||||||
Cost of equipment | 222,766 | 300,871 | 476,877 | |||||||||
Less: | ||||||||||||
Equipment costs not associated with new customers | (72,200 | ) | (109,803 | ) | (155,930 | ) | ||||||
Gross addition expenses | $ | 117,771 | $ | 157,338 | $ | 275,746 | ||||||
Divided by: | ||||||||||||
Gross customer additions | 1,134,762 | 1,532,071 | 2,345,135 | |||||||||
CPGA | $ | 103.78 | $ | 102.70 | $ | 117.58 | ||||||
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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 | ||||||||
Three Months Ended | ||||||||||||||||
March 31, | June 30, | September 30, | December 31, | |||||||||||||
2006 | 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 | $ | 31,823 | ||||||||
Less: | ||||||||||||||||
Activation revenues | (1,923 | ) | (1,979 | ) | (2,123 | ) | (2,272 | ) | ||||||||
Less: | ||||||||||||||||
Equipment revenues | (54,045 | ) | (60,351 | ) | (63,196 | ) | (78,324 | ) | ||||||||
Add: | ||||||||||||||||
Equipment revenue not associated with new customers | 24,864 | 26,904 | 28,802 | 33,822 | ||||||||||||
Add: | ||||||||||||||||
Cost of equipment | 100,911 | 112,005 | 117,982 | 145,979 | ||||||||||||
Less: | ||||||||||||||||
Equipment costs not associated with new customers | (35,364 | ) | (34,669 | ) | (38,259 | ) | (47,638 | ) | ||||||||
Gross addition expenses | $ | 54,741 | $ | 68,347 | $ | 69,268 | $ | 83,390 | ||||||||
Divided by: | ||||||||||||||||
Gross customer additions | 515,153 | 559,309 | 575,820 | 694,853 | ||||||||||||
CPGA | $ | 106.26 | $ | 122.20 | $ | 120.29 | $ | 120.01 | ||||||||
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Year Ended December 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
(In thousands, except average number of customers and CPU) | ||||||||||||
Calculation of Cost Per User (CPU): | ||||||||||||
Cost of service | $ | 200,806 | $ | 283,212 | $ | 445,281 | ||||||
Add: | ||||||||||||
General and administrative expense | 78,905 | 100,080 | 138,998 | |||||||||
Add: | ||||||||||||
Net loss on equipment transactions unrelated to initial customer acquisition | 17,877 | 32,791 | 41,538 | |||||||||
Less: | ||||||||||||
Stock-based compensation expense included in cost of service and general and administrative expense | (10,429 | ) | (2,596 | ) | (14,472 | ) | ||||||
Less: | ||||||||||||
E-911, FUSF and vendor’s compensation revenues | (12,522 | ) | (26,221 | ) | (45,640 | ) | ||||||
Total costs used in the calculation of CPU | $ | 274,637 | $ | 387,266 | $ | 565,705 | ||||||
Divided by: | ||||||||||||
Average number of customers | 1,207,521 | 1,649,208 | 2,398,682 | |||||||||
CPU | $ | 18.95 | $ | 19.57 | $ | 19.65 | ||||||
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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, | December 31, | |||||||||||||
2006 | 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 | $ | 131,771 | ||||||||
Add: | ||||||||||||||||
General and administrative expense | 31,139 | 33,827 | 34,158 | 39,874 | ||||||||||||
Add: | ||||||||||||||||
Net loss on equipment transactions unrelated to initial customer acquisition | 10,500 | 7,765 | 9,457 | 13,816 | ||||||||||||
Less: | ||||||||||||||||
Stock-based compensation expense included in general and administrative expense | (1,811 | ) | (2,158 | ) | (3,781 | ) | (6,722 | ) | ||||||||
Less: | ||||||||||||||||
E-911, FUSF and vendor’s compensation revenues | (8,958 | ) | (10,752 | ) | (9,512 | ) | (16,418 | ) | ||||||||
Total costs used in the calculation of CPU | $ | 123,359 | $ | 136,179 | $ | 143,846 | $ | 162,321 | ||||||||
Divided by: | ||||||||||||||||
Average number of customers | 2,045,110 | 2,295,249 | 2,503,423 | 2,750,943 | ||||||||||||
CPU | $ | 20.11 | $ | 19.78 | $ | 19.15 | $ | 19.67 | ||||||||
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Year Ended December 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
(In thousands) | ||||||||||||
Calculation of Consolidated Adjusted EBITDA: | ||||||||||||
Net income | $ | 64,890 | $ | 198,677 | $ | 53,806 | ||||||
Adjustments: | ||||||||||||
Depreciation and amortization | 62,201 | 87,895 | 135,028 | |||||||||
Loss (gain) on disposal of assets | 3,209 | (218,203 | ) | 8,806 | ||||||||
Stock-based compensation expense(1) | 10,429 | 2,596 | 14,472 | |||||||||
Interest expense | 19,030 | 58,033 | 115,985 | |||||||||
Accretion of put option in majority-owned subsidiary(1) | 8 | 252 | 770 | |||||||||
Interest and other income | (2,472 | ) | (8,658 | ) | (21,543 | ) | ||||||
(Gain) loss on extinguishment of debt | (698 | ) | 46,448 | 51,518 | ||||||||
Provision for income taxes | 47,000 | 127,425 | 36,717 | |||||||||
Cumulative effect of change in accounting principle, net of tax(1) | — | — | — | |||||||||
Consolidated Adjusted EBITDA | $ | 203,597 | $ | 294,465 | $ | 395,559 | ||||||
(1) | Represents a non-cash expense, as defined by our senior secured credit facility. |
Year Ended December 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
(In thousands) | ||||||||||||
Reconciliation of Net Cash Provided by Operating Activities to Consolidated Adjusted EBITDA: | ||||||||||||
Net cash provided by operating activities | $ | 150,379 | $ | 283,216 | $ | 364,761 | ||||||
Adjustments: | ||||||||||||
Interest expense | 19,030 | 58,033 | 115,985 | |||||||||
Non-cash interest expense | (2,889 | ) | (4,285 | ) | (6,964 | ) | ||||||
Interest and other income | (2,472 | ) | (8,658 | ) | (21,543 | ) | ||||||
Provision for uncollectible accounts receivable | (125 | ) | (129 | ) | (31 | ) | ||||||
Deferred rent expense | (3,466 | ) | (4,407 | ) | (7,464 | ) | ||||||
Cost of abandoned cell sites | (1,021 | ) | (725 | ) | (3,783 | ) | ||||||
Accretion of asset retirement obligation | (253 | ) | (423 | ) | (769 | ) | ||||||
Loss (gain) on sale of investments | (576 | ) | 190 | 2,385 | ||||||||
Provision for income taxes | 47,000 | 127,425 | 36,717 | |||||||||
Deferred income taxes | (44,441 | ) | (125,055 | ) | (32,341 | ) | ||||||
Changes in working capital | 42,431 | (30,717 | ) | (51,394 | ) | |||||||
Consolidated Adjusted EBITDA | $ | 203,597 | $ | 294,465 | $ | 395,559 | ||||||
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Payments Due by Period | ||||||||||||||||||||
Less Than | 1 - 3 | 3 - 5 | More Than | |||||||||||||||||
Total | 1 Year | Years | Years | 5 Years | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Contractual Obligations: | ||||||||||||||||||||
Long-term debt, including current portion | $ | 2,596,000 | $ | 16,000 | $ | 32,000 | $ | 32,000 | $ | 2,516,000 | ||||||||||
Interest expense on long-term debt(1) | 1,601,613 | 218,185 | 436,370 | 436,370 | 510,688 | |||||||||||||||
Operating leases | 728,204 | 88,639 | 180,873 | 179,277 | 279,415 | |||||||||||||||
Total cash contractual obligations | $ | 4,925,817 | $ | 322,824 | $ | 649,243 | $ | 647,647 | $ | 3,306,103 | ||||||||||
(1) | Interest expense on long-term debt includes future interest payments on outstanding obligations under our senior secured credit facility and 91/4% senior notes. The senior secured credit facility bears interest at a floating rate 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, 2006 which was 7.875% for the senior secured credit facility. |
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Product | $30/Month | $35/Month | $40/Month | $45/Month | $50/Month | |||||||||||||||
Unlimited local calling | X | X | X | X | X | |||||||||||||||
Unlimited nationwide long distance calling(1) | X | X | X | |||||||||||||||||
Unlimited domestic text messaging | X | X | ||||||||||||||||||
Unlimited picture messaging | X | X | ||||||||||||||||||
Enhanced voicemail | X | X | ||||||||||||||||||
3-way calling | X | X | ||||||||||||||||||
Caller ID | X | X | ||||||||||||||||||
Call waiting | X | X | ||||||||||||||||||
Mobile Internet browsing | X | |||||||||||||||||||
Pushe-mail | X | |||||||||||||||||||
Additional calling features available | X | X | X | X |
(1) | Includes only the continental United States. |
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• | 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; | |
• | mobile Internet browsing; and | |
• | pushe-mail. |
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Annualized | ||||||||||||||||||||||||
POPs | POP | POP | Launch | |||||||||||||||||||||
Metropolitan Area | BTA | (’000s)(1) | Density(3) | Growth(4) | MHz | Date | ||||||||||||||||||
Core Markets: | ||||||||||||||||||||||||
Georgia: | ||||||||||||||||||||||||
Atlanta, GA | 24 | 5,213.8 | 474 | 2.53 | % | 20 | Q1 2002 | |||||||||||||||||
Gainesville, GA | 160 | 304.9 | 187 | 3.15 | % | 30 | Q1 2002 | |||||||||||||||||
Athens, GA | 22 | 232.1 | 169 | 1.70 | % | 20 | Q1 2002 | |||||||||||||||||
South Florida: | ||||||||||||||||||||||||
Miami-Fort Lauderdale, FL | 293 | 4,415.8 | 1,051 | 1.69 | % | 30 | Q1 2002 | |||||||||||||||||
West Palm Beach, FL | 469 | 1,334.9 | 483 | 2.05 | % | 30 | Q1 2002 | |||||||||||||||||
Fort Myers, FL | 151 | 748.5 | 219 | 2.61 | % | 30 | Q1 2004 | |||||||||||||||||
Fort Pierce-Vero Beach, FL | 152 | 497.3 | 305 | 2.13 | % | 30 | Q1 2004 | |||||||||||||||||
Naples, FL | 313 | 322.2 | 162 | 3.63 | % | 30 | Q1 2004 | |||||||||||||||||
Northern California: | ||||||||||||||||||||||||
San Fran.-Oak.-S.J., CA | 404 | 7,501.4 | 553 | 0.57 | % | 20 | Q3 2002 | |||||||||||||||||
Sacramento, CA | 389 | 2,388.0 | 150 | 2.65 | % | 30 | Q1 2002 | |||||||||||||||||
Stockton, CA | 434 | 752.6 | 309 | 3.25 | % | 30 | Q1 2002 | |||||||||||||||||
Modesto, CA | 303 | 604.2 | 162 | 2.79 | % | 15 | Q1 2005 | |||||||||||||||||
Salinas-Monterey, CA | 397 | 434.2 | 131 | 1.21 | % | 30 | Q1 2002 | |||||||||||||||||
Redding, CA | 371 | 304.3 | 19 | 1.47 | % | 30 | Q4 2006 | |||||||||||||||||
Merced, CA | 291 | 269.3 | 79 | 2.53 | % | 15 | Q1 2005 | |||||||||||||||||
Chico-Oroville, CA | 79 | 246.9 | 83 | 1.13 | % | 30 | Q1 2002 | |||||||||||||||||
Eureka, CA | 134 | 155.8 | 34 | 0.18 | % | 15 | TBD | |||||||||||||||||
Yuba City-Marysville, CA | 485 | 155.3 | 125 | 1.68 | % | 30 | Q1 2002 | |||||||||||||||||
Expansion Markets: | ||||||||||||||||||||||||
Central and Northern Florida: | ||||||||||||||||||||||||
Tampa-St. Petersburg, FL | 440 | 2,915.0 | 602 | 1.59 | % | 10 | Q4 2005 | |||||||||||||||||
Sarasota-Bradenton, FL | 408 | 708.0 | 362 | 1.97 | % | 10 | Q4 2005 | |||||||||||||||||
Daytona Beach, FL | 107 | 559.1 | 349 | 1.92 | % | 20 | TBD | |||||||||||||||||
Ocala, FL | 326 | 297.0 | 184 | 2.09 | % | 10 | TBD | |||||||||||||||||
Jacksonville, FL(2) | 212 | 1,525.9 | 192 | 1.78 | % | 10 | TBD | |||||||||||||||||
Lakeland-Winter Haven, FL(2) | 239 | 525.1 | 288 | 1.27 | % | 10 | Q4 2006 | |||||||||||||||||
Melbourne-Titusville, FL(2) | 289 | 530.1 | 533 | 1.65 | % | 10 | TBD | |||||||||||||||||
Gainesville, FL(2) | 159 | 339.6 | 94 | 0.92 | % | 10 | TBD | |||||||||||||||||
Orlando, FL(2) | 336 | 2,010.0 | 493 | 2.54 | % | 10 | Q4 2006 | |||||||||||||||||
Dallas/Ft. Worth: | ||||||||||||||||||||||||
Dallas/Ft. Worth, TX(5) | 101 | 6,028.9 | 727 | 2.56 | % | 10 | Q1 2006 | |||||||||||||||||
Sherman-Denison, TX(6) | 418 | 190.1 | 70 | 0.99 | % | 10 | Q1 2006 | |||||||||||||||||
Detroit: | ||||||||||||||||||||||||
Detroit, MI | 112 | 5,095.3 | 826 | 0.41 | % | 10 | Q2 2006 | |||||||||||||||||
Southern California: | ||||||||||||||||||||||||
Los Angeles, CA(2) | 262 | 18,261.0 | 413 | 1.66 | % | 10 | Q2/Q3 2007 | |||||||||||||||||
Bakersfield, CA | 28 | 752.0 | 92 | 1.95 | % | 10 | TBD |
(1) | POPs based on 2005 population data and increased based on annualized POP growth rates. | |
(2) | License granted to Royal Street. | |
(3) | Calculated as number of POPs divided by square miles. | |
(4) | Estimatedaverage 2003-2008 annual population growth. | |
(5) | The Dallas/Ft. Worth license is comprised of the counties which make up CMA9. | |
(6) | Comprised of Grayson and Fannin counties only. |
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Purchase | Spectrum | |||||||||||||
License | 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 |
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(1) | Licenses overlap other Auction 66 licenses |
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• | 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-basedbillsas 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 make their payments. Many of these locationsalsoserve 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. |
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MetroPCS Subscriber Statistics | ||||||||||||||||||||||||
Net Additions | Subscribers | |||||||||||||||||||||||
Core | Expansion | Core | Expansion | |||||||||||||||||||||
Markets | Markets | Consolidated | Markets | Markets | Consolidated | |||||||||||||||||||
(In 000s) | ||||||||||||||||||||||||
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 | ||||||||||||||||||
Q4 | 127 | 198 | 324 | 2,301 | 640 | 2,941 |
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• | 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. |
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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 | 63 | Director | ||||
James N. Perry, Jr. | 46 | Director | ||||
John Sculley | 67 | Director | ||||
Walker C. Simmons | 36 | Director | ||||
James F. Wade | 51 | Director |
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• | 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; | |
• | 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. |
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• | 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. |
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• | Attract and retain talented and experienced executives in the highly competitive and dynamic wireless telecommunications industry; | |
• | Motivate and reward executives whose knowledge, skills and performance are critical to our success; | |
• | Align the interests of our executive officers and stockholders by motivating executive officers to increase stockholder value and rewarding executive officers when stockholder 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 stockholder 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. |
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• | Data in proxy statement filings from wireless telecommunications 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. |
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• | 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 | |
• | 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 as performance awards pursuant to the 2004 Plan and are based on the following performance measures: |
• | Operating markets: |
• | Gross margin; |
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• | 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. |
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• | Allocation between long-term and currently paid out compensation: The compensation we currently pay consists of base payandannual 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 of MetroPCS, Inc., 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 and annual incentive pay 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. |
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. Provides change in control protection. |
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Element | Characteristics | Purpose | ||
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 stockholders; motivate and reward management to increase the stockholder value of the company over the long term. Vesting based on continued employment will facilitate retention; amount realized from exercise of stock options rewards increases stockholder 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; and 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. |
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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 | % |
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 | % |
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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 |
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• | 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; | |
• | 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; |
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• | 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 stockholders 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. |
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Non-Equity | ||||||||||||||||||||
Option | Incentive Plan | |||||||||||||||||||
Awards | Compensation | |||||||||||||||||||
Name & Principal Position | Year | Salary | (3) | (4) | Total | |||||||||||||||
Roger D. Linquist | 2006 | $ | 466,923 | $ | 1,184,793 | $ | 815,300 | $ | 2,467,016 | |||||||||||
— President and CEO | 2005 | $ | 435,833 | — | $ | 527,840 | $ | 963,673 | ||||||||||||
J. Braxton Carter | 2006 | $ | 287,404 | $ | 410,865 | $ | 379,000 | $ | 1,077,269 | |||||||||||
— SVP/CFO | 2005 | $ | 264,750 | — | $ | 238,280 | $ | 503,030 | ||||||||||||
Robert A. Young | 2006 | $ | 330,769 | $ | 583,738 | $ | 424,200 | $ | 1,338,707 | |||||||||||
— EVP Market Operations | 2005 | $ | 310,750 | — | $ | 265,340 | $ | 576,090 | ||||||||||||
Mark A. Stachiw | 2006 | $ | 223,173 | $ | 349,212 | $ | 251,700 | $ | 824,085 | |||||||||||
— SVP/General Counsel and Secretary(1) | 2005 | $ | 204,583 | — | $ | 136,740 | $ | 341,323 | ||||||||||||
Malcolm M. Lorang | 2006 | $ | 214,135 | $ | 247,300 | $ | 237,500 | $ | 698,935 | |||||||||||
— SVP/Chief Technology Officer(2) | 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. For option awards during the year ended December 31, 2005, in accordance with APB 25, the following amounts were included as non-cash compensation expense in the 2005 audited consolidated financial statements for Messrs. Linquist, Carter, Young, and Lorang, respectively: $83,199, $6,521, $28,473 and $289,800. See Note 2 “Summary of Significant Accounting Policies” to the consolidated financial statements contained elsewhere in this offering circular for further discussion of the accounting treatment for these options. | |
(4) | During 2005 and 2006, MetroPCS Communications awarded annual cash incentive bonuses pursuant to a written annual cash incentive plan. This plan provides for the award of annual cash bonuses based upon targets and maximum bonus payouts set by the board of directors at the beginning of each fiscal year. See “— Discussion of Summary Compensation and Plan-Based Awards Tables — Material Terms of Plan-Based Awards.” |
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All Other | ||||||||||||||||||||||||||||
Option | ||||||||||||||||||||||||||||
Awards: | Exercise | |||||||||||||||||||||||||||
Number of | or Base | |||||||||||||||||||||||||||
Estimated Future Payouts | Securities | Price of | ||||||||||||||||||||||||||
Under Non-Equity Incentive | Underlying | Option | ||||||||||||||||||||||||||
Grant | Grant Date | Plan Awards(4) | Options | Awards | ||||||||||||||||||||||||
Name & Principal Position | Date | Fair Value(3) | Threshold | Target | Maximum | (#) | ($/Share) | |||||||||||||||||||||
Roger D. Linquist | $ | 0 | $ | 480,000 | $ | 960,000 | — | — | ||||||||||||||||||||
— President and CEO | 3/14/2006 | $ | 1,676,633 | — | — | — | 513,900 | 7.15 | ||||||||||||||||||||
12/22/2006 | $ | 8,907,975 | — | — | — | 2,250,000 | 11.33 | |||||||||||||||||||||
J. Braxton Carter | $ | 0 | $ | 221,250 | $ | 442,500 | — | — | ||||||||||||||||||||
— Senior VP/CFO | 3/14/2006 | $ | 446,319 | — | — | — | 136,800 | 7.15 | ||||||||||||||||||||
12/22/2006 | $ | 2,375,460 | — | — | — | 600,000 | 11.33 | |||||||||||||||||||||
Robert A. Young | $ | 0 | $ | 255,000 | $ | 510,000 | — | — | ||||||||||||||||||||
— Executive VP Market | 3/14/2006 | $ | 745,823 | — | — | — | 228,600 | 7.15 | ||||||||||||||||||||
Operations — East | 12/22/2006 | $ | 2,375,460 | — | — | — | 600,000 | 11.33 | ||||||||||||||||||||
Mark A. Stachiw | $ | 0 | $ | 149,500 | $ | 299,000 | — | — | ||||||||||||||||||||
— Senior VP/General Counsel | 3/14/2006 | $ | 61,663 | — | — | — | 18,900 | 7.15 | ||||||||||||||||||||
and Secretary(1) | 3/14/2006 | $ | 195,754 | — | — | — | 60,000 | 7.15 | ||||||||||||||||||||
12/22/2006 | $ | 1,781,595 | — | — | — | 450,000 | 11.33 | |||||||||||||||||||||
Malcolm M. Lorang | $ | 0 | $ | 143,000 | $ | 286,000 | — | |||||||||||||||||||||
— Senior VP/Chief Technology | 3/14/2006 | $ | 178,136 | — | — | — | 54,600 | 7.15 | ||||||||||||||||||||
Officer(2) | 3/14/2006 | $ | 195,754 | — | — | — | 60,000 | 7.15 | ||||||||||||||||||||
12/22/2006 | $ | 593,865 | — | — | — | 150,000 | 11.33 |
(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. | |
(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.” |
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• | incentivize and reward individuals whose accountability, performance and potential is critical to our success; | |
• | encourage long-term focus and provide a strong link to stockholder 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. |
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Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
Equity | ||||||||||||||||||||||||||||||||||||
Incentive | ||||||||||||||||||||||||||||||||||||
Plan | ||||||||||||||||||||||||||||||||||||
Equity | Awards: | |||||||||||||||||||||||||||||||||||
Incentive | Market | |||||||||||||||||||||||||||||||||||
Awards: | or Payout | |||||||||||||||||||||||||||||||||||
Equity | Number of | Value of | ||||||||||||||||||||||||||||||||||
Incentive | Market | Unearned | Unearned | |||||||||||||||||||||||||||||||||
Plan | Value of | Shares, | Shares, | |||||||||||||||||||||||||||||||||
Awards; | Number | Shares or | Units or | Units or | ||||||||||||||||||||||||||||||||
Number of | Number of | Number of | of Shares | Units of | Other | Other | ||||||||||||||||||||||||||||||
Securities | Securities | Securities | or Units of | Stock | Rights | Rights | ||||||||||||||||||||||||||||||
Underlying | Underlying | Underlying | Stock That | That Have | That Have | That Have | ||||||||||||||||||||||||||||||
Unexercised | Unexercised | Unexercised | Option | Option | Have Not | Not | Not | Not | ||||||||||||||||||||||||||||
Options (#) | Options (#) | Unearned | Exercise | Expiration | Vested | Vested | Vested | Vested | ||||||||||||||||||||||||||||
Name | Exercisable(1) | Unexercisable(1) | Options (#) | Price | Date | (#) | ($) | (#) | ($) | |||||||||||||||||||||||||||
Roger D. Linquist | 25,155 | (2) | — | — | $ | 5.49 | 3/11/2014 | — | — | — | — | |||||||||||||||||||||||||
President and CEO | 520,800 | (3) | — | — | $ | 7.13 | 8/3/2015 | — | — | — | — | |||||||||||||||||||||||||
1,209 | (4) | 1,209 | (4) | — | $ | 7.15 | 12/30/2015 | — | �� | — | — | — | ||||||||||||||||||||||||
— | 513,900 | (13) | $ | 7.15 | 3/14/2016 | |||||||||||||||||||||||||||||||
— | 2,250,000 | (15) | $ | 11.33 | 12/22/2016 | |||||||||||||||||||||||||||||||
J. Braxton Carter | 6,969 | (2) | — | — | $ | 5.49 | 3/11/2014 | — | — | — | — | |||||||||||||||||||||||||
SVP/CFO | 60,000 | (5) | — | — | $ | 6.31 | 3/31/2015 | — | — | — | — | |||||||||||||||||||||||||
165,057 | (3) | — | — | $ | 7.13 | 8/3/2015 | — | — | — | — | ||||||||||||||||||||||||||
3,516 | (3) | 4,527 | (3) | — | $ | 7.13 | 8/3/2015 | |||||||||||||||||||||||||||||
333 | (4) | 336 | (4) | — | $ | 7.15 | 12/30/2015 | |||||||||||||||||||||||||||||
— | 136,800 | (13) | $ | 7.15 | 3/14/2016 | |||||||||||||||||||||||||||||||
— | 600,000 | (16) | $ | 11.33 | 12/22/2016 | |||||||||||||||||||||||||||||||
Robert A. Young | 7,911 | (2) | — | — | $ | 5.49 | 3/11/2014 | — | — | — | — | |||||||||||||||||||||||||
EVP Market | 126,393 | (3) | 162,507 | (3) | — | $ | 7.13 | 8/3/2015 | — | — | — | — | ||||||||||||||||||||||||
Operations | 381 | (4) | 381 | (4) | — | $ | 7.15 | 12/30/2015 | — | — | — | — | ||||||||||||||||||||||||
— | 228,600 | (13) | $ | 7.15 | 3/14/2016 | |||||||||||||||||||||||||||||||
— | 600,000 | (16) | $ | 11.33 | 12/22/2016 | |||||||||||||||||||||||||||||||
Mark A. Stachiw | 120,000 | (6) | — | — | $ | 5.47 | 10/12/2014 | — | — | — | — | |||||||||||||||||||||||||
SVP/General | 37,500 | (7) | 82,500 | (7) | — | $ | 7.15 | 9/21/2015 | — | — | — | — | ||||||||||||||||||||||||
Counsel and | 16,608 | (4) | 16,608 | (4) | — | $ | 7.15 | 12/30/2015 | — | — | — | — | ||||||||||||||||||||||||
Secretary | — | 18,900 | (13) | $ | 7.15 | 3/14/2016 | ||||||||||||||||||||||||||||||
— | 60,000 | (13) | $ | 7.15 | 3/14/2016 | |||||||||||||||||||||||||||||||
— | 450,000 | (16) | $ | 11.33 | 12/22/2016 | |||||||||||||||||||||||||||||||
Malcolm M. Lorang | 285,444 | (8) | — | — | $ | 0.08 | 7/1/2009 | — | — | — | — | |||||||||||||||||||||||||
SVP/Chief | 36,792 | (9) | — | — | $ | 1.57 | 7/1/2012 | — | — | — | — | |||||||||||||||||||||||||
Technology | 24,108 | (10) | — | — | $ | 1.92 | 7/1/2012 | — | — | — | — | |||||||||||||||||||||||||
Officer | 21,093 | (11) | — | — | $ | 1.57 | 10/30/2013 | — | — | — | — | |||||||||||||||||||||||||
46,407 | (12) | — | — | $ | 3.13 | 10/30/2013 | — | — | — | — | ||||||||||||||||||||||||||
23,061 | (2) | — | — | $ | 5.49 | 3/11/2014 | — | — | — | — | ||||||||||||||||||||||||||
68,700 | (3) | — | — | $ | 7.13 | 8/3/2015 | — | — | — | — | ||||||||||||||||||||||||||
8,592 | (4) | 8,589 | (4) | — | $ | 7.15 | 12/30/2015 | — | — | — | — | |||||||||||||||||||||||||
— | 54,600 | (13) | $ | 7.15 | 3/14/2016 | |||||||||||||||||||||||||||||||
— | 150,000 | (14) | $ | 11.33 | 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 $4.97 to $5.49 on December 28, 2005. | |
(3) | Options granted on August 3, 2005. |
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(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. | |
(5) | Options granted on March 31, 2005. | |
(6) | Options granted on October 12, 2004. Options repriced from $3.97 to $5.47 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. | |
(10) | Options granted on July 1, 2002. Options repriced from $1.57 to $1.92 on December 28, 2005. | |
(11) | Options granted on October 30, 2003. | |
(12) | Options granted on October 30, 2003. Options repriced from $1.57 to $3.13 on December 28, 2005. | |
(13) | Options granted on March 14, 2006. | |
(14) | Options granted on December 22, 2006 and vest over a period of 2 years ending December 22, 2008. | |
(15) | Options granted on December 22, 2006 and vest over a period of 3 years ending December 22, 2009. | |
(16) | Options granted on December 22, 2006. |
• | 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 120,000 options to purchase common stock plus an additional 30,000 or 9,000 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; |
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• | an annual grant of 30,000 options to purchase common stock plus an additional 15,000 or 6,000 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; and | |
• | $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. |
Change in | ||||||||||||||||||||||||||||
Pension Value & | ||||||||||||||||||||||||||||
Fees | Non-qualified | |||||||||||||||||||||||||||
Earned | Non-Equity | Deferred | ||||||||||||||||||||||||||
or Paid | Stock | Option | Incentive Plan | Compensation | All Other | |||||||||||||||||||||||
Name | in Cash | Awards(1) | Awards(2)(11) | Compensation | Earnings | Compensation | Total | |||||||||||||||||||||
W. Michael Barnes(3) | $ | 29,750 | $ | 59,981 | $ | 196,226 | — | — | — | $ | 285,957 | |||||||||||||||||
Harry F. Hopper, III(4) | $ | 13,250 | $ | 44,980 | $ | 46,825 | — | — | — | $ | 105,055 | |||||||||||||||||
Arthur C. Patterson(5) | $ | 44,250 | $ | 50,989 | $ | 115,270 | — | — | — | $ | 210,509 | |||||||||||||||||
John Sculley(6) | $ | 23,000 | $ | 50,960 | $ | 98,907 | — | — | — | $ | 172,867 | |||||||||||||||||
James F. Wade(7) | $ | 12,000 | $ | 50,989 | $ | 42,440 | — | — | — | $ | 105,429 | |||||||||||||||||
Walker C. Simmons(8) | $ | 5,250 | $ | 44,980 | $ | 79,174 | — | — | — | $ | 129,404 | |||||||||||||||||
C. Kevin Landry(9) | $ | 64,055 | $ | 0 | $ | 167,414 | — | — | — | $ | 231,469 | |||||||||||||||||
James N. Perry, Jr.(10) | $ | 45,250 | $ | 61,719 | $ | 176,267 | — | — | — | $ | 283,236 |
(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. | |
(3) | Includes 8,385 stock awards and 197,487 option awards outstanding as of December 31, 2006. | |
(4) | Includes 6,288 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 7,128 stock awards and 376,524 option awards outstanding as of December 31, 2006. | |
(6) | Includes 6,978 stock awards and 580,428 option awards outstanding as of December 31, 2006. | |
(7) | Includes 7,128 stock awards and 295,305 option awards outstanding as of December 31, 2006. | |
(8) | Includes 5,190 stock awards and 120,000 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 150,000 option awards outstanding as of December 31, 2006. | |
(10) | Includes 8,628 stock awards and 159,000 option awards outstanding as of December 31, 2006. |
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(11) | The following summarizes the grant date, fair value of each award granted during 2006, computed in accordance with SFAS No. 123(R): |
Number of | Exercise or | |||||||||||||||
Securities | Base Price | |||||||||||||||
Underlying | of Option | Grant Date | ||||||||||||||
Grant | Options | Awards | Fair Value | |||||||||||||
Name | Date | (#) | ($/share) | ($) | ||||||||||||
W. Michael Barnes | 3/14/2006 | 45,000 | $ | 7.15 | $ | 146,816 | ||||||||||
Harry F. Hopper, III | 3/14/2006 | 30,000 | $ | 7.15 | $ | 97,877 | ||||||||||
Arthur C. Patterson | 3/14/2006 | 39,000 | $ | 7.15 | $ | 127,240 | ||||||||||
John Sculley | 3/14/2006 | 30,000 | $ | 7.15 | $ | 97,877 | ||||||||||
6/28/2006 | 9,000 | $ | 7.54 | $ | 31,518 | |||||||||||
James F. Wade | 3/14/2006 | 36,000 | $ | 7.15 | $ | 117,452 | ||||||||||
Walker C. Simmons | 12/22/2006 | 120,000 | $ | 11.33 | $ | 475,092 | ||||||||||
C. Kevin Landry | 3/14/2006 | 30,000 | $ | 7.15 | $ | 97,877 | ||||||||||
James N. Perry, Jr. | 3/14/2006 | 39,000 | $ | 7.15 | $ | 127,240 |
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• | each of our directors; | |
• | each named executive officer; | |
• | all of our directors and executive officers as a group; and | |
• | each person known by us to beneficially own more than 5% of the outstanding shares of our common stock. |
Common Stock | ||||||||
Beneficially Owned | ||||||||
Number | Percentage | |||||||
Directors and Named Executive Officers(1): | ||||||||
Roger D. Linquist(2) | 7,559,727 | 2.18 | % | |||||
J. Braxton Carter(3) | 285,261 | * | ||||||
Robert A. Young(4) | 238,028 | * | ||||||
Mark A. Stachiw(5) | 166,872 | * | ||||||
Malcolm M. Lorang(6) | 739,298 | * | ||||||
John Sculley(7) | 1,372,627 | * | ||||||
James F. Wade(8)(15) | 25,013,015 | 7.21 | % | |||||
Arthur C. Patterson(9) | 37,837,961 | 10.90 | % | |||||
W. Michael Barnes(10) | 203,531 | * | ||||||
C. Kevin Landry(11)(17) | 37,789,567 | 10.90 | % | |||||
James N. Perry, Jr.(12)(16) | 38,671,394 | 11.15 | % | |||||
Walker C. Simmons(13) | — | — | ||||||
All directors and executive officers as a group (12 persons) | 156,830,058 | 44.79 | % | |||||
Beneficial Owners of More Than 5%: | ||||||||
Accel Partners, et al(14) | 31,604,109 | 9.11 | % | |||||
428 University Ave | ||||||||
Palo Alto, CA 94301 | ||||||||
First Plaza Group Trust | 22,524,561 | 6.50 | % | |||||
One Chase Manhattan Plaza, 17th Floor | ||||||||
New York, NY 10005 | ||||||||
M/C Venture Partners, et al(15)(8) | 25,013,015 | 7.21 | % | |||||
75 State Street | ||||||||
Boston, MA 02109 | ||||||||
Madison Dearborn Capital Partners IV, L.P.(16)(12) | 38,671,394 | 11.15 | % | |||||
Three First National Plaza, Suite 3800 | ||||||||
Chicago, IL 60602 | ||||||||
TA Associates, et al(17)(11) | 37,789,567 | 10.90 | % | |||||
John Hancock Tower — 56th Floor | ||||||||
200 Clarendon Street | ||||||||
Boston, MA 012116 |
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* | 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 708,966 shares of common stock issuable upon exercise of options granted under our Equity Compensation Plans, 5,320,761 shares of common stock held directly by Mr. Linquist, and 1,530,000 shares of common stock held by THCT Partners, LTD, a partnership with which Mr. Linquist 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. Linquist disclaims beneficial ownership of such shares, except to the extent of his interest in such shares arising from his interests in THCT Partners, LTD. Mr. Linquist has dispositive power with respect to the common stock held by THCT Partners, LTD. | |
(3) | Includes 269,300 shares of common stock issuable upon exercise of options granted under our Equity Compensation Plans. | |
(4) | Includes 222,710 shares of common stock issuable upon exercise of options granted under our Equity Compensation Plans. | |
(5) | Includes 166,872 shares of common stock issuable upon exercise of options granted under our Equity Compensation Plans. | |
(6) | Includes 561,098 shares of common stock issuable upon exercise of options granted under our Equity Compensation Plans. | |
(7) | Includes 563,594 shares of common stock issuable upon exercise of options granted under our Equity Compensation Plans. | |
(8) | Includes 281,309 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 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 360,939 shares of common stock issuable upon exercise of options granted to Mr. Patterson under our Equity Compensation Plans and 12,888 shares of common stock held directly by Mr. Patterson. All other shares attributed to Mr. Patterson 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 Pattersonc/o A.O. Choate, Brandywine-Caroline Choate de Chazal Trust U/A 2-10-56, Brandywine-David C. Patterson U/A 2-10-56, Brandywine-Jane C. Beck TrustU/A 2-10-56, Brandywine-Michael E. Patterson Trust U/A 2-10-56, Brandywine-Robert E. Patterson TrustU/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 179,987 shares of common stock issuable upon exercise of options granted under our Equity Compensation Plans. | |
(11) | Includes 88,332 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 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 90,082 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 are owned directly by Madison Dearborn Capital Partners IV, L.P. and Madison Dearborn 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 |
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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) | Mr. Simmons is a managing director of Wachovia Corporation (“Wachovia”), an affiliate of which owns 6,908,611 shares of common stock and 44,166 shares of common stock issuable upon exercise of options granted under our Equity Compensation Plans. Under his employment arrangement with Wachovia, Mr. Simmons holds all shares and options for the benefit of Wachovia and its affiliates and, consequently, Mr. Simmons disclaims beneficial ownership of all shares and options held directly by him as well as those owned by Wachovia and its affiliates, except to the extent of his pecuniary interest therein. | |
(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. and Accel VII L.P.), may be deemed to be a “group” underSection 13d-3 of the Exchange Act. Includes 31,243,170 shares of common stock and 360,939 shares of common stock issuable upon exercise of options granted under our Equity Compensation Plans, which are held directly by Arthur C. Patterson. | |
(15) | 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 281,309 shares of common stock issuable upon exercise of options granted under our Equity Compensation Plans. | |
(16) | Madison Dearborn Capital Partners IV, L.P., et al (consisting of Madison Dearborn Capital Partners IV, L.P. and Madison Dearborn Partners IV, L.P.) may be deemed to be a “group” underSection 13d-3 of the Exchange Act. Includes 90,082 shares of common stock issuable upon exercise of options granted under our Equity Compensation Plans and held directly by Mr. Perry. | |
(17) | 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 88,332 shares of common stock issuable upon exercise of options granted under our Equity Compensation Plans and held directly by Mr. Landry. |
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• | 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. |
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• | 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. |
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• | 1.0% of the number of then outstanding shares of common stock; 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. |
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Page | ||||
Audited Consolidated Financial Statements: | ||||
F-2 | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-8 | ||||
F-9 |
F-1
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F-2
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2006 | 2005 | |||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 161,498 | $ | 112,709 | ||||
Short-term investments | 390,651 | 390,422 | ||||||
Restricted short-term investments | 607 | 50 | ||||||
Inventories, net | 92,915 | 39,431 | ||||||
Accounts receivable (net of allowance for uncollectible accounts of $1,950 and $2,383 at December 31, 2006 and 2005, respectively) | 28,140 | 16,028 | ||||||
Prepaid expenses | 33,109 | 21,430 | ||||||
Deferred charges | 26,509 | 13,270 | ||||||
Deferred tax asset | 815 | 2,122 | ||||||
Other current assets | 24,283 | 16,640 | ||||||
Total current assets | 758,527 | 612,102 | ||||||
Property and equipment, net | 1,256,162 | 831,490 | ||||||
Restricted cash and investments | — | 2,920 | ||||||
Long-term investments | 1,865 | 5,052 | ||||||
FCC licenses | 2,072,885 | 681,299 | ||||||
Microwave relocation costs | 9,187 | 9,187 | ||||||
Other assets | 54,496 | 16,931 | ||||||
Total assets | $ | 4,153,122 | $ | 2,158,981 | ||||
CURRENT LIABILITIES: | ||||||||
Accounts payable and accrued expenses | $ | 325,681 | $ | 174,220 | ||||
Current maturities of long-term debt | 16,000 | 2,690 | ||||||
Deferred revenue | 90,501 | 56,560 | ||||||
Other current liabilities | 3,447 | 2,147 | ||||||
Total current liabilities | 435,629 | 235,617 | ||||||
Long-term debt, net | 2,580,000 | 902,864 | ||||||
Deferred tax liabilities | 177,197 | 146,053 | ||||||
Deferred rents | 22,203 | 14,739 | ||||||
Redeemable minority interest | 4,029 | 1,259 | ||||||
Other long-term liabilities | 26,316 | 20,858 | ||||||
Total liabilities | 3,245,374 | 1,321,390 | ||||||
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, 2006 and 2005; Liquidation preference of $447,388 and $426,382 at December 31, 2006 and 2005, respectively | 443,368 | 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 December 31, 2006 and 2005; Liquidation preference of $54,019 and $51,019 at December 31, 2006 and 2005, respectively | 51,135 | 47,796 | ||||||
STOCKHOLDERS’ EQUITY: | ||||||||
Preferred stock, par value $0.0001 per share, 25,000,000 shares authorized at December 31, 2006 and 2005, 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, 2006 and 2005 | — | — | ||||||
Common Stock, par value $0.0001 per share, 300,000,000 shares authorized, 157,052,097 and 155,327,094 shares issued and outstanding at December 31, 2006 and 2005, respectively | 16 | 15 | ||||||
Additional paid-in capital | 166,315 | 149,584 | ||||||
Deferred compensation | — | (178 | ) | |||||
Retained earnings | 245,690 | 216,702 | ||||||
Accumulated other comprehensive income | 1,224 | 1,783 | ||||||
Total stockholders’ equity | 413,245 | 367,906 | ||||||
Total liabilities and stockholders’ equity | $ | 4,153,122 | $ | 2,158,981 | ||||
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2006 | 2005 | 2004 | ||||||||||
REVENUES: | ||||||||||||
Service revenues | $ | 1,290,947 | $ | 872,100 | $ | 616,401 | ||||||
Equipment revenues | 255,916 | 166,328 | 131,849 | |||||||||
Total revenues | 1,546,863 | 1,038,428 | 748,250 | |||||||||
OPERATING EXPENSES: | ||||||||||||
Cost of service (exclusive of depreciation and amortization expense of $122,606, $81,196 and $57,572, shown separately below) | 445,281 | 283,212 | 200,806 | |||||||||
Cost of equipment | 476,877 | 300,871 | 222,766 | |||||||||
Selling, general and administrative expenses (exclusive of depreciation and amortization expense of $12,422, $6,699 and $4,629, shown separately below) | 243,618 | 162,476 | 131,510 | |||||||||
Depreciation and amortization | 135,028 | 87,895 | 62,201 | |||||||||
Loss (gain) on disposal of assets | 8,806 | (218,203 | ) | 3,209 | ||||||||
Total operating expenses | 1,309,610 | 616,251 | 620,492 | |||||||||
Income from operations | 237,253 | 422,177 | 127,758 | |||||||||
OTHER EXPENSE (INCOME): | ||||||||||||
Interest expense | 115,985 | 58,033 | 19,030 | |||||||||
Accretion of put option in majority-owned subsidiary | 770 | 252 | 8 | |||||||||
Interest and other income | (21,543 | ) | (8,658 | ) | (2,472 | ) | ||||||
Loss (gain) on extinguishment of debt | 51,518 | 46,448 | (698 | ) | ||||||||
Total other expense | 146,730 | 96,075 | 15,868 | |||||||||
Income before provision for income taxes | 90,523 | 326,102 | 111,890 | |||||||||
Provision for income taxes | (36,717 | ) | (127,425 | ) | (47,000 | ) | ||||||
Net income | 53,806 | 198,677 | 64,890 | |||||||||
Accrued dividends on Series D Preferred Stock | (21,006 | ) | (21,006 | ) | (21,006 | ) | ||||||
Accrued dividends on Series E Preferred Stock | (3,000 | ) | (1,019 | ) | — | |||||||
Accretion on Series D Preferred Stock | (473 | ) | (473 | ) | (473 | ) | ||||||
Accretion on Series E Preferred Stock | (339 | ) | (114 | ) | — | |||||||
Net income applicable to common stock | $ | 28,988 | $ | 176,065 | $ | 43,411 | ||||||
Net income | $ | 53,806 | $ | 198,677 | $ | 64,890 | ||||||
Other comprehensive income: | ||||||||||||
Unrealized losses onavailable-for-sale securities, net of tax | (1,211 | ) | (28 | ) | (240 | ) | ||||||
Unrealized gains on cash flow hedging derivatives, net of tax | 1,959 | 1,914 | — | |||||||||
Reclassification adjustment for gains and losses included in net income, net of tax | (1,307 | ) | 168 | 41 | ||||||||
Comprehensive income | $ | 53,247 | $ | 200,731 | $ | 64,691 | ||||||
Net income per common share: (See Note 17) | ||||||||||||
Net income per common share — basic | $ | 0.11 | $ | 0.71 | $ | 0.18 | ||||||
Net income per common share — diluted | $ | 0.10 | $ | 0.62 | $ | 0.15 | ||||||
Weighted average shares: | ||||||||||||
Basic | 155,820,381 | 135,352,396 | 126,722,051 | |||||||||
Diluted | 159,696,608 | 153,610,589 | 150,633,686 | |||||||||
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Consolidated Statements of Stockholders’ Equity
For the Years Ended December 31, 2006, 2005 and 2004
(in thousands, except share information)
Accumulated | ||||||||||||||||||||||||||||||||
Additional | Other | |||||||||||||||||||||||||||||||
Number | Paid-In | Subscriptions | Deferred | Retained | Comprehensive | |||||||||||||||||||||||||||
of Shares | Amount | Capital | Receivable | Compensation | Earnings | Income (Loss) | Total | |||||||||||||||||||||||||
BALANCE, December 31, 2003 | 110,159,094 | $ | 11 | $ | 78,414 | $ | (92 | ) | $ | (4,154 | ) | $ | (2,774 | ) | $ | (72 | ) | $ | 71,333 | |||||||||||||
Exercise of Common Stock options | 635,928 | — | 416 | — | — | — | — | 416 | ||||||||||||||||||||||||
Exercise of Common Stock warrants | 19,501,020 | 2 | 42 | — | — | — | — | 44 | ||||||||||||||||||||||||
Reverse stock split — fractional shares redeemed | (261 | ) | — | — | — | — | — | — | — | |||||||||||||||||||||||
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 | 130,295,781 | $ | 13 | $ | 88,484 | $ | (98 | ) | $ | (3,331 | ) | $ | 40,637 | $ | (271 | ) | $ | 125,434 |
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Accumulated | ||||||||||||||||||||||||||||||||
Additional | Other | |||||||||||||||||||||||||||||||
Number | Paid-In | Subscriptions | Deferred | Retained | Comprehensive | |||||||||||||||||||||||||||
of Shares | Amount | Capital | Receivable | Compensation | Earnings | Income (Loss) | Total | |||||||||||||||||||||||||
Common Stock issued | 79,437 | — | 483 | — | — | — | — | 483 | ||||||||||||||||||||||||
Exercise of Common Stock options | 22,669,671 | 2 | 8,603 | — | — | — | — | 8,605 | ||||||||||||||||||||||||
Exercise of Common Stock warrants | 2,282,205 | — | 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 | 155,327,094 | $ | 15 | $ | 149,584 | $ | — | $ | (178 | ) | $ | 216,702 | $ | 1,783 | $ | 367,906 |
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Consolidated Statements of Stockholders’ Equity — (Continued)
For the Years Ended December 31, 2006, 2005 and 2004
(in thousands, except share information)
Accumulated | ||||||||||||||||||||||||||||||||
Additional | Other | |||||||||||||||||||||||||||||||
Number | Paid-In | Subscriptions | Deferred | Retained | Comprehensive | |||||||||||||||||||||||||||
of Shares | Amount | Capital | Receivable | Compensation | Earnings | Income (Loss) | Total | |||||||||||||||||||||||||
Common Stock issued | 49,725 | — | 314 | — | — | — | — | 314 | ||||||||||||||||||||||||
Exercise of Common Stock options | 1,148,328 | 1 | 2,743 | — | — | — | — | 2,744 | ||||||||||||||||||||||||
Exercise of Common Stock warrants | 526,950 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Reversal of deferred compensation upon adoption of SFAS No. 123(R) | — | — | (178 | ) | — | 178 | — | — | — | |||||||||||||||||||||||
Stock-based compensation | — | — | 14,472 | — | — | — | — | 14,472 | ||||||||||||||||||||||||
Accrued dividends on Series D Preferred Stock | — | — | — | — | — | (21,006 | ) | — | (21,006 | ) | ||||||||||||||||||||||
Accrued dividends on Series E Preferred Stock | — | — | — | — | — | (3,000 | ) | — | (3,000 | ) | ||||||||||||||||||||||
Accretion on Series D Preferred Stock | — | — | — | — | — | (473 | ) | — | (473 | ) | ||||||||||||||||||||||
Accretion on Series E Preferred Stock | — | — | — | — | — | (339 | ) | — | (339 | ) | ||||||||||||||||||||||
Reduction due to the tax impact of Common Stock option forfeitures | — | — | (620 | ) | — | — | — | — | (620 | ) | ||||||||||||||||||||||
Net income | — | — | — | — | — | 53,806 | — | 53,806 | ||||||||||||||||||||||||
Unrealized losses onavailable-for-sale securities, net of tax | — | — | — | — | — | — | (1,211 | ) | (1,211 | ) | ||||||||||||||||||||||
Unrealized gains on cash flow hedging derivatives, net of tax | — | — | — | — | — | — | 1,959 | 1,959 | ||||||||||||||||||||||||
Reclassification adjustment for gains included in net income, net of tax | — | — | — | — | — | — | (1,307 | ) | (1,307 | ) | ||||||||||||||||||||||
BALANCE, December 31, 2006 | 157,052,097 | $ | 16 | $ | 166,315 | $ | — | $ | — | $ | 245,690 | $ | 1,224 | $ | 413,245 | |||||||||||||||||
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Consolidated Statements of Cash Flows
For the Years Ended December 31, 2006, 2005 and 2004
(in thousands)
2006 | 2005 | 2004 | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||
Net income | $ | 53,806 | $ | 198,677 | $ | 64,890 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 135,028 | 87,895 | 62,201 | |||||||||
Provision for uncollectible accounts receivable | 31 | 129 | 125 | |||||||||
Deferred rent expense | 7,464 | 4,407 | 3,466 | |||||||||
Cost of abandoned cell sites | 3,783 | 725 | 1,021 | |||||||||
Stock-based compensation expense | 14,472 | 2,596 | 10,429 | |||||||||
Non-cash interest expense | 6,964 | 4,285 | 2,889 | |||||||||
Loss (gain) on disposal of assets | 8,806 | (218,203 | ) | 3,209 | ||||||||
Loss (gain) on extinguishment of debt | 51,518 | 46,448 | (698 | ) | ||||||||
(Gain) loss on sale of investments | (2,385 | ) | (190 | ) | 576 | |||||||
Accretion of asset retirement obligation | 769 | 423 | 253 | |||||||||
Accretion of put option in majority-owned subsidiary | 770 | 252 | 8 | |||||||||
Deferred income taxes | 32,341 | 125,055 | 44,441 | |||||||||
Changes in assets and liabilities: | ||||||||||||
Inventories | (53,320 | ) | (5,717 | ) | (16,706 | ) | ||||||
Accounts receivable | (12,143 | ) | (7,056 | ) | (714 | ) | ||||||
Prepaid expenses | (6,538 | ) | (2,613 | ) | (1,933 | ) | ||||||
Deferred charges | (13,239 | ) | (4,045 | ) | (2,727 | ) | ||||||
Other assets | (9,231 | ) | (5,580 | ) | (2,243 | ) | ||||||
Accounts payable and accrued expenses | 108,492 | 41,204 | (31,304 | ) | ||||||||
Deferred revenue | 33,957 | 16,071 | 10,317 | |||||||||
Other liabilities | 3,416 | (1,547 | ) | 2,879 | ||||||||
Net cash provided by operating activities | 364,761 | 283,216 | 150,379 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||
Purchases of property and equipment | (550,749 | ) | (266,499 | ) | (250,830 | ) | ||||||
Change in prepaid purchases of property and equipment | (5,262 | ) | (11,800 | ) | — | |||||||
Proceeds from sale of property and equipment | 3,021 | 146 | — | |||||||||
Purchase of investments | (1,269,919 | ) | (739,482 | ) | (158,672 | ) | ||||||
Proceeds from sale of investments | 1,272,424 | 386,444 | 307,220 | |||||||||
Change in restricted cash and investments | 2,406 | (107 | ) | (1,511 | ) | |||||||
Purchases of and deposits for FCC licenses | (1,391,586 | ) | (503,930 | ) | (87,025 | ) | ||||||
Proceeds from sale of FCC licenses | — | 230,000 | — | |||||||||
Microwave relocation costs | — | — | (63 | ) | ||||||||
Net cash used in investing activities | (1,939,665 | ) | (905,228 | ) | (190,881 | ) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||
Change in book overdraft. | 11,368 | (565 | ) | 5,778 | ||||||||
Payment upon execution of cash flow hedging derivative | — | (1,899 | ) | — | ||||||||
Proceeds from bridge credit agreements | 1,500,000 | 540,000 | — | |||||||||
Proceeds from Senior Secured Credit Facility | 1,600,000 | — | — | |||||||||
Proceeds from 91/4% Senior Notes Due 2014 | 1,000,000 | — | — | |||||||||
Proceeds from Credit Agreements | — | 902,875 | — | |||||||||
Proceeds from short-term notes payable | — | — | 1,703 | |||||||||
Debt issuance costs | (58,789 | ) | (29,480 | ) | (164 | ) | ||||||
Repayment of debt | (2,437,985 | ) | (754,662 | ) | (14,215 | ) | ||||||
Proceeds from minority interest in majority-owned subsidiary | 2,000 | — | 1,000 | |||||||||
Proceeds from termination of cash flow hedging derivative | 4,355 | — | — | |||||||||
Proceeds from repayment of subscriptions receivable | — | 103 | — | |||||||||
Proceeds from issuance of preferred stock, net of issuance costs | — | 46,662 | 5 | |||||||||
Proceeds from exercise of stock options and warrants | 2,744 | 9,210 | 460 | |||||||||
Net cash provided by (used in) financing activities | 1,623,693 | 712,244 | (5,433 | ) | ||||||||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 48,789 | 90,232 | (45,935 | ) | ||||||||
CASH AND CASH EQUIVALENTS, beginning of period | 112,709 | 22,477 | 68,412 | |||||||||
CASH AND CASH EQUIVALENTS, end of period | $ | 161,498 | $ | 112,709 | $ | 22,477 | ||||||
F-8
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1. | Organization and Business Operations: |
F-9
Table of Contents
2. | Summary of Significant Accounting Policies: |
• | 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; | |
• | valuation of common stock; and | |
• | stock-based compensation expense. |
F-10
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2006 | 2005 | 2004 | ||||||||||
Balance at beginning of period | $ | 2,383 | $ | 2,323 | $ | 962 | ||||||
Additions: | ||||||||||||
Charged to costs and expenses | 31 | 129 | 125 | |||||||||
Direct reduction to revenue and other accounts | 929 | 1,211 | 2,804 | |||||||||
Deductions | (1,393 | ) | (1,280 | ) | (1,568 | ) | ||||||
Balance at end of period | $ | 1,950 | $ | 2,383 | $ | 2,323 | ||||||
2006 | 2005 | |||||||
Prepaid vendor purchases | $ | 16,898 | $ | 11,801 | ||||
Prepaid rent | 9,089 | 6,347 | ||||||
Prepaid maintenance and support contracts | 1,846 | 1,393 | ||||||
Prepaid insurance | 3,047 | 1,020 | ||||||
Other | 2,229 | 869 | ||||||
Prepaid expenses | $ | 33,109 | $ | 21,430 | ||||
F-11
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2006 | 2005 | |||||||
Construction-in-progress | $ | 193,856 | $ | 98,078 | ||||
Network infrastructure | 1,329,986 | 905,924 | ||||||
Office equipment | 31,065 | 17,059 | ||||||
Leasehold improvements | 21,721 | 16,608 | ||||||
Furniture and fixtures | 5,903 | 4,000 | ||||||
Vehicles | 207 | 118 | ||||||
1,582,738 | 1,041,787 | |||||||
Accumulated depreciation | (326,576 | ) | (210,297 | ) | ||||
Property and equipment, net | $ | 1,256,162 | $ | 831,490 | ||||
F-12
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F-13
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F-14
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2005 | 2004 | |||||||
Net income applicable to common stock — as reported | $ | 176,065 | $ | 43,411 | ||||
Add: Amortization of deferred compensation determined under the intrinsic method for employee stock awards, net of tax | 1,584 | 6,036 | ||||||
Less: Total stock-based employee compensation expense determined under the fair value method for employee stock awards, net of tax | (3,227 | ) | (5,689 | ) | ||||
Net income applicable to common stock — pro forma | $ | 174,422 | $ | 43,758 | ||||
Basic net income per common share: | ||||||||
As reported | $ | 0.71 | $ | 0.18 | ||||
Pro forma | $ | 0.70 | $ | 0.18 | ||||
Diluted net income per common share: | ||||||||
As reported | $ | 0.62 | $ | 0.15 | ||||
Pro forma | $ | 0.62 | $ | 0.15 | ||||
F-15
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2006 | 2005 | |||||||
Beginning asset retirement obligations | $ | 3,522 | $ | 1,893 | ||||
Liabilities incurred | 2,394 | 1,206 | ||||||
Accretion expense | 769 | 423 | ||||||
Ending asset retirement obligations | $ | 6,685 | $ | 3,522 | ||||
F-16
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F-17
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3. | Majority-Owned Subsidiary: |
4. | Short-Term Investments: |
2006 | ||||||||||||||||
Gross | Gross | Aggregate | ||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
United States government and agencies | $ | 2,000 | $ | — | $ | (15 | ) | $ | 1,985 | |||||||
Auction rate securities | 290,055 | — | (30 | ) | 290,025 | |||||||||||
Corporate bonds | 98,428 | 213 | — | 98,641 | ||||||||||||
Total short-term investments | $ | 390,483 | $ | 213 | $ | (45 | ) | $ | 390,651 | |||||||
F-18
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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 | |||||||
Aggregate | ||||||||
Amortized | Fair | |||||||
Cost | Value | |||||||
Less than one year | $ | 215,618 | $ | 215,801 | ||||
Due in 1 - 2 years | — | — | ||||||
Due in 2 - 5 years | — | — | ||||||
Due after 5 years | 174,865 | 174,850 | ||||||
Total | $ | 390,483 | $ | 390,651 | ||||
5. | Derivative Instruments and Hedging Activities: |
F-19
Table of Contents
6. | Intangible Assets: |
Microwave | ||||||||
Relocation | ||||||||
FCC Licenses | Costs | |||||||
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 | ||||
Additions | 1,391,586 | — | ||||||
Balance at December 31, 2006 | $ | 2,072,885 | $ | 9,187 | ||||
F-20
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F-21
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7. | Accounts Payable and Accrued Expenses: |
2006 | 2005 | |||||||
Accounts payable | $ | 90,084 | $ | 29,430 | ||||
Book overdraft. | 21,288 | 9,920 | ||||||
Accrued accounts payable | 111,974 | 69,611 | ||||||
Accrued liabilities | 9,405 | 7,590 | ||||||
Payroll and employee benefits | 20,645 | 12,808 | ||||||
Accrued interest | 24,529 | 17,578 | ||||||
Taxes, other than income | 42,882 | 23,211 | ||||||
Income taxes | 4,874 | 4,072 | ||||||
Accounts payable and accrued expenses | $ | 325,681 | $ | 174,220 | ||||
8. | Long-Term Debt: |
2006 | 2005 | |||||||
Microwave relocation obligations | $ | — | $ | 2,690 | ||||
Credit Agreements | — | 900,000 | ||||||
91/4% Senior Notes | 1,000,000 | — | ||||||
Senior Secured Credit Facility | 1,596,000 | — | ||||||
Total | 2,596,000 | 902,690 | ||||||
Add: unamortized premium on debt | — | 2,864 | ||||||
Total debt | 2,596,000 | 905,554 | ||||||
Less: current maturities | (16,000 | ) | (2,690 | ) | ||||
Total long-term debt | $ | 2,580,000 | $ | 902,864 | ||||
For the Year Ending December 31, | ||||
2007 | $ | 16,000 | ||
2008 | 16,000 | |||
2009 | 16,000 | |||
2010 | 16,000 | |||
2011 | 16,000 | |||
Thereafter | 2,516,000 | |||
Total | $ | 2,596,000 | ||
F-22
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F-23
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F-24
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9. | Concentrations: |
F-25
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For the Year Ending December 31, | ||||
2007 | $ | 88,639 | ||
2008 | 89,782 | |||
2009 | 91,091 | |||
2010 | 92,570 | |||
2011 | 86,707 | |||
Thereafter | 279,415 | |||
Total | $ | 728,204 | ||
F-26
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11. | Series D Cumulative Convertible Redeemable Participating Preferred Stock: |
F-27
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 Preferred Stock. |
12. | Series E Cumulative Convertible Redeemable Participating Preferred Stock: |
F-28
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13. | Capitalization: |
F-29
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14. | Share-Based Payments: |
F-30
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2006 | 2005 | 2004 | ||||||||||
Expected dividends | 0.00 | % | 0.00 | % | 0.00 | % | ||||||
Expected volatility | 35.04 | % | 50.00 | % | 55.00 | % | ||||||
Risk-free interest rate | 4.64 | % | 4.24 | % | 3.22 | % | ||||||
Expected lives in years | 5.00 | 5.00 | 5.00 | |||||||||
Weighted-average fair value of options: | ||||||||||||
Granted at below fair value | $ | 10.16 | $ | — | $ | 2.88 | ||||||
Granted at fair value | $ | 3.75 | $ | 3.44 | $ | 2.64 | ||||||
Weighted-average exercise price of options: | ||||||||||||
Granted at below fair value | $ | 1.49 | $ | — | $ | 4.46 | ||||||
Granted at fair value | $ | 9.95 | $ | 7.13 | $ | 5.25 |
F-31
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2006 | 2005 | 2004 | ||||||||||||||||||||||
Weighted | Weighted | Weighted | ||||||||||||||||||||||
Average | Average | Average | ||||||||||||||||||||||
Exercise | Exercise | Exercise | ||||||||||||||||||||||
Shares | Price | Shares | Price | Shares | Price | |||||||||||||||||||
Outstanding, beginning of year | 14,502,210 | $ | 4.18 | 32,448,855 | $ | 0.92 | 31,057,182 | $ | 0.61 | |||||||||||||||
Granted | 11,369,793 | $ | 9.65 | 5,838,534 | $ | 7.13 | 2,671,518 | $ | 4.76 | |||||||||||||||
Exercised | (1,148,328 | ) | $ | 2.39 | (22,669,671 | ) | $ | 0.38 | (635,928 | ) | $ | 0.65 | ||||||||||||
Forfeited | (1,224,213 | ) | $ | 4.22 | (1,115,508 | ) | $ | 4.04 | (643,917 | ) | $ | 2.02 | ||||||||||||
Outstanding, end of year | 23,499,462 | $ | 6.91 | 14,502,210 | $ | 4.18 | 32,448,855 | $ | 0.92 | |||||||||||||||
Options vested or expected to vest at year-end | 20,127,759 | $ | 6.55 | |||||||||||||||||||||
Options exercisable at year-end | 10,750,692 | $ | 3.78 | 10,985,577 | $ | 3.23 | 32,448,855 | $ | 0.92 | |||||||||||||||
Options vested at year-end | 8,940,615 | $ | 3.59 | 6,696,330 | $ | 1.87 | 26,976,972 | $ | 0.49 | |||||||||||||||
Options Outstanding | Options Vested | |||||||||||||||||||
Weighted | Weighted | Weighted | ||||||||||||||||||
Average | Average | Average | ||||||||||||||||||
Number of | Contractual | Exercise | Number of | Exercise | ||||||||||||||||
Exercise Price | Shares | Life | Price | Shares | Price | |||||||||||||||
$0.08 - $ 0.33 | 851,991 | 5.93 | $ | 0.12 | 851,991 | $ | 0.12 | |||||||||||||
$0.34 - $ 1.57 | 3,733,773 | 4.74 | $ | 1.57 | 3,728,109 | $ | 1.57 | |||||||||||||
$1.58 - $ 6.31 | 2,961,708 | 6.80 | $ | 3.97 | 2,083,725 | $ | 3.72 | |||||||||||||
$6.32 - $ 7.15 | 7,872,015 | 8.58 | $ | 7.14 | 2,255,292 | $ | 7.14 | |||||||||||||
$7.16 - $11.33 | 8,079,975 | 9.64 | $ | 10.95 | 21,498 | $ | 11.07 |
F-32
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Weighted | ||||||||
Average | ||||||||
Grant-Date | ||||||||
Stock Option Grants | Shares | Fair Value | ||||||
Unvested balance, January 1, 2006 | 7,582,659 | $ | 3.00 | |||||
Grants | 11,369,793 | $ | 3.98 | |||||
Vested shares | (3,679,491 | ) | $ | 3.64 | ||||
Forfeitures | (639,012 | ) | $ | 3.10 | ||||
Unvested balance, December 31, 2006 | 14,633,949 | $ | 3.60 | |||||
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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 | 2,869,989 | $ | 7.15 | $ | 7.15 | $ | 0.00 | |||||||||
June 30, 2006 | 534,525 | $ | 7.54 | $ | 7.54 | $ | 0.00 | |||||||||
September 30, 2006 | 418,425 | $ | 8.67 | $ | 8.67 | $ | 0.00 | |||||||||
December 31, 2006 | 7,546,854 | $ | 10.81 | $ | 11.33 | $ | 0.53 |
F-34
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15. | Employee Benefit Plan: |
16. | Income Taxes: |
2006 | 2005 | 2004 | ||||||||||
Current: | ||||||||||||
Federal | $ | 674 | $ | (233 | ) | $ | 197 | |||||
State | 3,702 | 2,603 | 2,502 | |||||||||
4,376 | 2,370 | 2,699 | ||||||||||
Deferred: | ||||||||||||
Federal | 29,959 | 114,733 | 39,056 | |||||||||
State | 2,382 | 10,322 | 5,245 | |||||||||
32,341 | 125,055 | 44,301 | ||||||||||
Provision for income taxes | $ | 36,717 | $ | 127,425 | $ | 47,000 | ||||||
2006 | 2005 | |||||||
Deferred tax assets: | ||||||||
Start-up costs capitalized for tax purposes | $ | — | $ | 866 | ||||
Net operating loss carry forward | 83,787 | 85,152 | ||||||
Net basis difference in FCC licenses | — | 1,428 | ||||||
Revenue deferred for book purposes | 9,407 | 5,007 | ||||||
Allowance for uncollectible accounts | 1,214 | 1,272 | ||||||
Deferred rent expense | 8,311 | 5,747 | ||||||
Deferred compensation | 5,636 | 2,818 | ||||||
Asset retirement obligation | 592 | 347 | ||||||
Accrued vacation | 1,004 | 603 | ||||||
Partnership interest | 7,130 | 392 |
F-35
Table of Contents
2006 | 2005 | |||||||
Alternative Minimum Tax credit carryforward | 666 | — | ||||||
Other | 1,011 | 558 | ||||||
Total deferred tax assets | 118,758 | 104,190 | ||||||
Deferred tax liabilities: | ||||||||
Depreciation | (188,484 | ) | (157,083 | ) | ||||
Deferred cost of handset sales | (10,251 | ) | (4,867 | ) | ||||
Net basis difference in FCC licenses | (9,802 | ) | — | |||||
Prepaid insurance | (1,174 | ) | (374 | ) | ||||
Gain deferral related to like kind exchange | (83,467 | ) | (83,699 | ) | ||||
Other comprehensive income | (949 | ) | (1,331 | ) | ||||
Other | (1,013 | ) | (573 | ) | ||||
Total deferred tax liabilities | (295,140 | ) | (247,927 | ) | ||||
Subtotal | (176,382 | ) | (143,737 | ) | ||||
Valuation allowance | — | (194 | ) | |||||
Net deferred tax liability | $ | (176,382 | ) | $ | (143,931 | ) | ||
2006 | 2005 | |||||||
Current deferred tax asset | $ | 815 | $ | 2,122 | ||||
Non-current deferred tax liability | (177,197 | ) | (146,053 | ) | ||||
Net deferred tax liability | $ | (176,382 | ) | $ | (143,931 | ) | ||
F-36
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2006 | 2005 | 2004 | ||||||||||
U.S. federal income tax provision at statutory rate | $ | 31,683 | $ | 114,136 | $ | 39,117 | ||||||
Increase (decrease) in income taxes resulting from: | ||||||||||||
State income taxes, net of federal income tax impact | 2,386 | 10,865 | 5,187 | |||||||||
Change in valuation allowance | (194 | ) | 52 | 58 | ||||||||
Provision for tax uncertainties | 2,557 | 2,274 | 2,561 | |||||||||
Permanent items | 218 | 98 | 15 | |||||||||
Other | 67 | — | 62 | |||||||||
Provision for income taxes | $ | 36,717 | $ | 127,425 | $ | 47,000 | ||||||
F-37
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17. | Net Income Per Common Share: |
2006 | 2005 | 2004 | ||||||||||
Basic EPS — Two Class Method: | ||||||||||||
Net income | $ | 53,806 | $ | 198,677 | $ | 64,890 | ||||||
Accrued dividends and accretion: | ||||||||||||
Series D Preferred Stock | (21,479 | ) | (21,479 | ) | (21,479 | ) | ||||||
Series E Preferred Stock | (3,339 | ) | (1,133 | ) | — | |||||||
Net income applicable to common stock | $ | 28,988 | $ | 176,065 | $ | 43,411 | ||||||
Amount allocable to common shareholders | 57.1 | % | 54.4 | % | 53.1 | % | ||||||
Rights to undistributed earnings | $ | 16,539 | $ | 95,722 | $ | 23,070 | ||||||
Weighted average shares outstanding — basic | 155,820,381 | 135,352,396 | 126,722,051 | |||||||||
Net income per common share — basic | $ | 0.11 | $ | 0.71 | $ | 0.18 | ||||||
Diluted EPS: | ||||||||||||
Rights to undistributed earnings | $ | 16,539 | $ | 95,722 | $ | 23,070 | ||||||
Weighted average shares outstanding — basic | 155,820,381 | 135,352,396 | 126,722,051 | |||||||||
Effect of dilutive securities: | ||||||||||||
Warrants | 147,257 | 2,689,377 | 6,642,015 | |||||||||
Stock options | 3,728,970 | 15,568,816 | 17,269,621 | |||||||||
Weighted average shares outstanding — diluted | 159,696,608 | 153,610,589 | 150,633,687 | |||||||||
Net income per common share — diluted | $ | 0.10 | $ | 0.62 | $ | 0.15 | ||||||
F-38
Table of Contents
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, 2006 | Markets | Markets | Other | Total | ||||||||||||
Service revenues | $ | 1,138,019 | $ | 152,928 | $ | — | $ | 1,290,947 | ||||||||
Equipment revenues | 208,333 | 47,583 | — | 255,916 | ||||||||||||
Total revenues | 1,346,352 | 200,511 | — | 1,546,863 | ||||||||||||
Cost of service(1) | 338,923 | 106,358 | — | 445,281 | ||||||||||||
Cost of equipment | 364,281 | 112,596 | — | 476,877 | ||||||||||||
Selling, general and administrative expenses(2) | 158,100 | 85,518 | — | 243,618 | ||||||||||||
Adjusted EBITDA (deficit)(3) | 492,773 | (97,214 | ) | — | ||||||||||||
Depreciation and amortization | 109,626 | 21,941 | 3,461 | 135,028 | ||||||||||||
Stock-based compensation expense | 7,725 | 6,747 | — | 14,472 | ||||||||||||
Income (loss) from operations | 367,109 | (126,387 | ) | (3,469 | ) | 237,253 | ||||||||||
Interest expense | — | — | 115,985 | 115,985 | ||||||||||||
Accretion of put option in majority-owned subsidiary | — | — | 770 | 770 | ||||||||||||
Interest income | — | — | (21,543 | ) | (21,543 | ) | ||||||||||
Loss on extinguishment of debt | — | — | 51,518 | 51,518 | ||||||||||||
Income (loss) before provision for income taxes | 367,109 | (126,387 | ) | (150,199 | ) | 90,523 | ||||||||||
Capital expenditures | 217,215 | 314,308 | 19,226 | 550,749 | ||||||||||||
Total assets(4) | 945,699 | 1,064,243 | 2,143,180 | 4,153,122 |
F-40
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(2) | 153,321 | 9,155 | — | 162,476 | ||||||||||||
Adjusted EBITDA (deficit)(3) | 316,555 | (22,090 | ) | — | ||||||||||||
Depreciation and amortization | 84,436 | 2,030 | 1,429 | 87,895 | ||||||||||||
Stock-based 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) | Cost of service for the year ended December 31, 2006 includes $1.3 million of stock-based compensation expense disclosed separately. | |
(2) | Selling, general and administrative expenses include stock-based compensation expense disclosed separately. For the years ended December 31, 2006 and 2005, selling, general and administrative expenses include $13.2 million and $2.6 million, respectively, of stock-based compensation expense. | |
(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 segments’ ability to meet future debt service, capital expenditures and working capital requirements and to fund future growth. | |
(4) | Total assets as of December 31, 2006 include the Auction 66 AWS licenses that the Company was granted on November 29, 2006 for a total aggregate purchase price of approximately $1.4 billion. These AWS licenses are presented in the “Other” column as the Company has not allocated the Auction 66 licenses to its reportable segments as of December 31, 2006. |
F-41
Table of Contents
2006 | 2005 | |||||||
Segment Adjusted EBITDA (Deficit): | ||||||||
Core Markets Adjusted EBITDA | $ | 492,773 | $ | 316,555 | ||||
Expansion Markets Adjusted EBITDA (Deficit) | (97,214 | ) | (22,090 | ) | ||||
Total | 395,559 | 294,465 | ||||||
Depreciation and amortization | (135,028 | ) | (87,895 | ) | ||||
Loss (gain) on disposal of assets | (8,806 | ) | 218,203 | |||||
Non-cash compensation expense | (14,472 | ) | (2,596 | ) | ||||
Interest expense | (115,985 | ) | (58,033 | ) | ||||
Accretion of put option in majority-owned subsidiary | (770 | ) | (252 | ) | ||||
Interest and other income | 21,543 | 8,658 | ||||||
(Gain) loss on extinguishment of debt | (51,518 | ) | (46,448 | ) | ||||
Consolidated income before provision for income taxes | $ | 90,523 | $ | 326,102 | ||||
19. | Guarantor Subsidiaries: |
F-42
Table of Contents
As of December 31, 2006
Non- | ||||||||||||||||||||||||
Guarantor | Guarantor | |||||||||||||||||||||||
Parent | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
CURRENT ASSETS: | ||||||||||||||||||||||||
Cash and cash equivalents | $ | 15,714 | $ | 99,301 | $ | 257 | $ | 46,226 | $ | — | $ | 161,498 | ||||||||||||
Short-term investments | 45,365 | 345,286 | — | — | — | 390,651 | ||||||||||||||||||
Restricted short-term investments | — | 556 | — | 51 | — | 607 | ||||||||||||||||||
Inventories, net | — | 81,339 | 11,576 | — | — | 92,915 | ||||||||||||||||||
Accounts receivable, net | — | 29,348 | — | 1,005 | (2,213 | ) | 28,140 | |||||||||||||||||
Prepaid expenses | — | 8,107 | 23,865 | 1,137 | — | 33,109 | ||||||||||||||||||
Deferred charges | — | 26,509 | — | — | — | 26,509 | ||||||||||||||||||
Deferred tax asset | — | 815 | — | — | — | 815 | ||||||||||||||||||
Current receivable from subsidiaries | — | 4,734 | — | — | (4,734 | ) | — | |||||||||||||||||
Other current assets | 97 | 9,478 | 15,354 | 120 | (766 | ) | 24,283 | |||||||||||||||||
Total current assets | 61,176 | 605,473 | 51,052 | 48,539 | (7,713 | ) | 758,527 | |||||||||||||||||
Property and equipment, net | — | 14,077 | 1,158,442 | 83,643 | — | 1,256,162 | ||||||||||||||||||
Long-term investments | — | 1,865 | — | — | — | 1,865 | ||||||||||||||||||
Investment in subsidiaries | 320,783 | 939,009 | — | — | (1,259,792 | ) | — | |||||||||||||||||
FCC licenses | 1,391,410 | — | 387,876 | 293,599 | — | 2,072,885 | ||||||||||||||||||
Microwave relocation costs | — | — | 9,187 | — | — | 9,187 | ||||||||||||||||||
Long-term receivable from subsidiaries | — | 456,070 | — | — | (456,070 | ) | — | |||||||||||||||||
Other assets | 399 | 51,477 | 4,078 | 5,810 | (7,268 | ) | 54,496 | |||||||||||||||||
Total assets | $ | 1,773,768 | $ | 2,067,971 | $ | 1,610,635 | $ | 431,591 | $ | (1,730,843 | ) | $ | 4,153,122 | |||||||||||
CURRENT LIABILITIES: | ||||||||||||||||||||||||
Accounts payable and accrued expenses | $ | 401 | $ | 138,953 | $ | 161,663 | $ | 29,614 | $ | (4,950 | ) | $ | 325,681 | |||||||||||
Current maturities of long-term debt | — | 16,000 | — | 4,734 | (4,734 | ) | 16,000 | |||||||||||||||||
Deferred revenue | — | 19,030 | 71,471 | — | — | 90,501 | ||||||||||||||||||
Advances to subsidiaries | 865,612 | (1,207,821 | ) | 341,950 | — | 259 | — | |||||||||||||||||
Other current liabilities | — | 31 | 3,416 | 757 | (757 | ) | 3,447 | |||||||||||||||||
Total current liabilities | 866,013 | (1,033,807 | ) | 578,500 | 35,105 | (10,182 | ) | 435,629 | ||||||||||||||||
Long-term debt | — | 2,580,000 | — | 4,540 | (4,540 | ) | 2,580,000 | |||||||||||||||||
Long-term note to parent | — | — | — | 456,070 | (456,070 | ) | — | |||||||||||||||||
Deferred tax liabilities | 7 | 177,190 | — | — | — | 177,197 | ||||||||||||||||||
Deferred rents | — | — | 21,784 | 419 | — | 22,203 | ||||||||||||||||||
Redeemable minority interest | — | 4,029 | — | — | — | 4,029 | ||||||||||||||||||
Other long-term liabilities | — | 19,517 | 6,285 | 514 | — | 26,316 | ||||||||||||||||||
Total liabilities | 866,020 | 1,746,929 | 606,569 | 496,648 | (470,792 | ) | 3,245,374 | |||||||||||||||||
COMMITMENTS AND CONTINGENCIES (See Note 10) | ||||||||||||||||||||||||
SERIES D PREFERRED STOCK | 443,368 | — | — | — | — | 443,368 | ||||||||||||||||||
SERIES E PREFERRED STOCK | 51,135 | — | — | — | — | 51,135 | ||||||||||||||||||
STOCKHOLDERS’ EQUITY: | ||||||||||||||||||||||||
Preferred stock | — | — | — | — | — | — | ||||||||||||||||||
Common stock | 16 | — | — | — | — | 16 | ||||||||||||||||||
Additional paid-in capital | 166,315 | — | — | 20,000 | (20,000 | ) | 166,315 | |||||||||||||||||
Retained earnings (deficit) | 245,690 | 319,863 | 1,004,066 | (85,057 | ) | (1,238,872 | ) | 245,690 | ||||||||||||||||
Accumulated other comprehensive income | 1,224 | 1,179 | — | — | (1,179 | ) | 1,224 | |||||||||||||||||
Total stockholders’ equity | 413,245 | 321,042 | 1,004,066 | (65,057 | ) | (1,260,051 | ) | 413,245 | ||||||||||||||||
Total liabilities and stockholders’ equity | $ | 1,773,768 | $ | 2,067,971 | $ | 1,610,635 | $ | 431,591 | $ | (1,730,843 | ) | $ | 4,153,122 | |||||||||||
F-43
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 | 243,671 | 710,963 | — | — | (954,634 | ) | — | |||||||||||||||||
FCC 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 | $ | 278,726 | $ | 1,596,879 | $ | 1,269,053 | $ | 301,744 | $ | (1,287,421 | ) | $ | 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 | ) | 1,352,949 | 536,873 | 323,220 | (332,787 | ) | 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 | 15 | — | — | — | — | 15 | ||||||||||||||||||
Additional paid-in capital | 149,584 | — | — | 20,000 | (20,000 | ) | 149,584 | |||||||||||||||||
Subscriptions receivable | — | — | — | (13,333 | ) | 13,333 | — | |||||||||||||||||
Deferred compensation | (178 | ) | (178 | ) | (178 | ) | — | 356 | (178 | ) | ||||||||||||||
Retained earnings (deficit) | 216,702 | 242,357 | 732,358 | (28,143 | ) | (946,572 | ) | 216,702 | ||||||||||||||||
Accumulated other comprehensive income | 1,783 | 1,751 | — | — | (1,751 | ) | 1,783 | |||||||||||||||||
Total stockholders’ equity | 367,906 | 243,930 | 732,180 | (21,476 | ) | (954,634 | ) | 367,906 | ||||||||||||||||
Total liabilities and stockholders’ equity | $ | 278,726 | $ | 1,596,879 | $ | 1,269,053 | $ | 301,744 | $ | (1,287,421 | ) | $ | 2,158,981 | |||||||||||
F-44
Table of Contents
Year Ended December 31, 2006
Guarantor | Non-Guarantor | |||||||||||||||||||||||
Parent | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
REVENUES: | ||||||||||||||||||||||||
Service revenues | $ | — | $ | 695 | $ | 1,290,945 | $ | 1,005 | $ | (1,698 | ) | $ | 1,290,947 | |||||||||||
Equipment revenues | — | 11,900 | 244,016 | — | — | 255,916 | ||||||||||||||||||
Total revenues | — | 12,595 | 1,534,961 | 1,005 | (1,698 | ) | 1,546,863 | |||||||||||||||||
OPERATING EXPENSES: | ||||||||||||||||||||||||
Cost of service (excluding depreciation and amortization expense shown separately below) | — | — | 434,987 | 11,992 | (1,698 | ) | 445,281 | |||||||||||||||||
Cost of equipment | — | 11,538 | 465,339 | — | — | 476,877 | ||||||||||||||||||
Selling, general and administrative expenses (excluding depreciation and amortization expense shown separately below) | — | 362 | 227,723 | 15,533 | — | 243,618 | ||||||||||||||||||
Depreciation and amortization | — | — | 134,708 | 320 | — | 135,028 | ||||||||||||||||||
Loss on disposal of assets | — | — | 8,806 | — | — | 8,806 | ||||||||||||||||||
Total operating expenses | — | 11,900 | 1,271,563 | 27,845 | (1,698 | ) | 1,309,610 | |||||||||||||||||
Income from operations | — | 695 | 263,398 | (26,480 | ) | — | 237,253 | |||||||||||||||||
OTHER EXPENSE (INCOME): | ||||||||||||||||||||||||
Interest expense | 17,161 | 115,575 | (7,370 | ) | 30,956 | (40,337 | ) | 115,985 | ||||||||||||||||
Earnings from consolidated subsidiaries | (77,506 | ) | (214,795 | ) | — | — | 292,301 | — | ||||||||||||||||
Accretion of put option in majority-owned subsidiary | — | 770 | — | — | — | 770 | ||||||||||||||||||
Interest and other income | (2,807 | ) | (57,493 | ) | (699 | ) | (882 | ) | 40,338 | (21,543 | ) | |||||||||||||
Loss on extinguishment of debt | 9,345 | 42,415 | (242 | ) | — | — | 51,518 | |||||||||||||||||
Total other expense | (53,807 | ) | (113,528 | ) | (8,311 | ) | 30,074 | 292,302 | 146,730 | |||||||||||||||
Income before provision for income taxes | 53,807 | 114,223 | 271,709 | (56,914 | ) | (292,302 | ) | 90,523 | ||||||||||||||||
Provision for income taxes | — | (36,717 | ) | — | — | — | (36,717 | ) | ||||||||||||||||
Net income (loss) | $ | 53,807 | $ | 77,506 | $ | 271,709 | $ | (56,914 | ) | $ | (292,302 | ) | $ | 53,806 | ||||||||||
F-45
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 | (198,335 | ) | (396,060 | ) | — | — | 594,395 | — | ||||||||||||||||
Accretion of put option in majority-owned subsidiary | — | 252 | — | — | — | 252 | ||||||||||||||||||
Interest and other income | (615 | ) | (34,913 | ) | (1 | ) | (131 | ) | 27,002 | (8,658 | ) | |||||||||||||
Loss on extinguishment of debt | — | 44,589 | 1,859 | — | — | 46,448 | ||||||||||||||||||
Total other expense | (198,950 | ) | (327,650 | ) | 1,414 | 26,866 | 594,395 | 96,075 | ||||||||||||||||
Income before provision for income taxes | 198,676 | 325,760 | 423,986 | (27,925 | ) | (594,395 | ) | 326,102 | ||||||||||||||||
Provision for income taxes | — | (127,425 | ) | — | — | — | (127,425 | ) | ||||||||||||||||
Net income (loss) | $ | 198,676 | $ | 198,335 | $ | 423,986 | $ | (27,925 | ) | $ | (594,395 | ) | $ | 198,677 | ||||||||||
F-46
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 | (66,600 | ) | (167,843 | ) | — | — | 234,443 | — | ||||||||||||||||
Accretion of put option in majority-owned subsidiary | — | 8 | — | — | — | 8 | ||||||||||||||||||
Interest and other income | — | (2,528 | ) | — | — | 56 | (2,472 | ) | ||||||||||||||||
Gain on extinguishment of debt | — | — | (698 | ) | — | — | (698 | ) | ||||||||||||||||
Total other expense | (66,600 | ) | (153,640 | ) | 1,609 | 56 | 234,443 | 15,868 | ||||||||||||||||
Income before provision for income taxes | 63,969 | 114,521 | 168,061 | (218 | ) | (234,443 | ) | 111,890 | ||||||||||||||||
Provision for income taxes | 921 | (47,921 | ) | — | — | — | (47,000 | ) | ||||||||||||||||
Net income (loss) | $ | 64,890 | $ | 66,600 | $ | 168,061 | $ | (218 | ) | $ | (234,443 | ) | $ | 64,890 | ||||||||||
F-47
Table of Contents
Year Ended December 31, 2006
Guarantor | Non-Guarantor | |||||||||||||||||||||||
Parent | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||||||||||
Net income (loss) | $ | 53,807 | $ | 77,504 | $ | 271,709 | $ | (56,914 | ) | $ | (292,300 | ) | $ | 53,806 | ||||||||||
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: | ||||||||||||||||||||||||
Depreciation and amortization | — | — | 134,708 | 320 | — | 135,028 | ||||||||||||||||||
Provision for uncollectible accounts receivable | — | 31 | — | — | — | 31 | ||||||||||||||||||
Deferred rent expense | — | — | 7,045 | 419 | — | 7,464 | ||||||||||||||||||
Cost of abandoned cell sites | — | — | 1,421 | 2,362 | — | 3,783 | ||||||||||||||||||
Non-cash interest expense | 4,810 | 1,681 | 473 | 40,129 | (40,129 | ) | 6,964 | |||||||||||||||||
Loss on disposal of assets | — | — | 8,806 | — | — | 8,806 | ||||||||||||||||||
Loss (gain) on extinguishment of debt | 9,345 | 42,415 | (242 | ) | — | — | 51,518 | |||||||||||||||||
Gain on sale of investments | (815 | ) | (1,570 | ) | — | — | — | (2,385 | ) | |||||||||||||||
Accretion of asset retirement obligation | — | — | 706 | 63 | — | 769 | ||||||||||||||||||
Accretion of put option in majority-owned subsidiary | — | 770 | — | — | — | 770 | ||||||||||||||||||
Deferred income taxes | (613 | ) | 32,954 | — | — | — | 32,341 | |||||||||||||||||
�� | ||||||||||||||||||||||||
Stock-based compensation expense | — | — | 14,472 | — | — | 14,472 | ||||||||||||||||||
Changes in assets and liabilities | 1,334,686 | (1,758,916 | ) | 29,988 | 13,162 | 432,474 | 51,394 | |||||||||||||||||
Net cash provided by (used in) operating activities | 1,401,220 | (1,605,131 | ) | 469,086 | (459 | ) | 100,045 | 364,761 | ||||||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||||||||||
Purchases of property and equipment | — | (19,326 | ) | (472,020 | ) | (59,403 | ) | — | (550,749 | ) | ||||||||||||||
Change in prepaid purchases of property and equipment | — | (7,826 | ) | 2,564 | — | — | (5,262 | ) | ||||||||||||||||
Proceeds from sale of property and equipment | — | — | 3,021 | — | — | 3,021 | ||||||||||||||||||
Purchase of investments | (326,517 | ) | (943,402 | ) | — | — | — | (1,269,919 | ) | |||||||||||||||
Proceeds from sale of investments | 333,159 | 939,265 | — | — | — | 1,272,424 | ||||||||||||||||||
Change in restricted cash and investments | — | 2,448 | 9 | (51 | ) | — | 2,406 | |||||||||||||||||
Purchases of and deposits for FCC licenses | (1,391,410 | ) | — | (176 | ) | — | — | (1,391,586 | ) | |||||||||||||||
Net cash used in investing activities | (1,384,768 | ) | (28,841 | ) | (466,602 | ) | (59,454 | ) | — | (1,939,665 | ) | |||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||||||||||
Change in book overdraft. | — | 11,368 | — | — | — | 11,368 | ||||||||||||||||||
Proceeds from bridge credit agreements | 1,500,000 | — | — | — | — | 1,500,000 | ||||||||||||||||||
Proceeds from Senior Secured Credit Facility | — | 1,600,000 | — | — | — | 1,600,000 | ||||||||||||||||||
Proceeds from 91/4% Senior Notes | — | 1,000,000 | — | — | — | 1,000,000 | ||||||||||||||||||
Proceeds from minority interest in subsidiary | — | 2,000 | — | — | — | 2,000 | ||||||||||||||||||
Proceeds from long-term note to parent | — | — | — | 100,045 | (100,045 | ) | — | |||||||||||||||||
Debt issuance costs | (14,106 | ) | (44,683 | ) | — | — | — | (58,789 | ) | |||||||||||||||
Repayment of debt | (1,500,000 | ) | (935,539 | ) | (2,446 | ) | — | — | (2,437,985 | ) | ||||||||||||||
Proceeds from termination of cash flow hedging derivative | — | 4,355 | — | — | — | 4,355 | ||||||||||||||||||
Proceeds from exercise of stock options and warrants | 2,744 | — | — | — | — | 2,744 | ||||||||||||||||||
Net cash (used in) provided by financing activities | (11,362 | ) | 1,637,501 | (2,446 | ) | 100,045 | (100,045 | ) | 1,623,693 | |||||||||||||||
INCREASE IN CASH AND CASH EQUIVALENTS | 5,090 | 3,529 | 38 | 40,132 | — | 48,789 | ||||||||||||||||||
CASH AND CASH EQUIVALENTS, beginning of period | 10,624 | 95,772 | 219 | 6,094 | — | 112,709 | ||||||||||||||||||
CASH AND CASH EQUIVALENTS, end of period | $ | 15,714 | $ | 99,301 | $ | 257 | $ | 46,226 | $ | — | $ | 161,498 | ||||||||||||
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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 | ||||||||||||
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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 | |||||||||||
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20. | Related-Party Transactions: |
21. | Supplemental Cash Flow Information: |
Year Ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(In thousands) | ||||||||||||
Cash paid for interest | $ | 86,380 | $ | 41,360 | $ | 19,180 | ||||||
Cash paid for income taxes | 3,375 | — | — |
F-51
Table of Contents
22. | Fair Value of Financial Instruments: |
2006 | 2005 | |||||||||||||||||||
Carrying | Carrying | |||||||||||||||||||
Amount | Fair Value | Amount | Fair Value | |||||||||||||||||
Microwave relocation obligations | $ | — | $ | — | $ | 2,690 | $ | 2,690 | ||||||||||||
Credit Agreements | — | — | 900,000 | 861,380 | ||||||||||||||||
Senior Secured Credit Facility | 1,596,000 | 1,597,219 | — | — | ||||||||||||||||
91/4% Senior Notes | 1,000,000 | 1,032,500 | — | — | ||||||||||||||||
Cash flow hedging derivatives | 1,865 | 1,865 | 5,052 | 5,052 | ||||||||||||||||
Short-term investments | 390,651 | 390,651 | 390,422 | 390,422 |
Three Months Ended | ||||||||||||||||
March 31, | June 30, | September 30, | December 31, | |||||||||||||
2005 | 2005 | 2005 | 2005 | |||||||||||||
Total revenues | $ | 235,956 | $ | 250,689 | $ | 263,555 | $ | 288,229 | ||||||||
Income from operations(1) | 45,841 | 284,303 | 47,778 | 44,256 | ||||||||||||
Net income(1) | 22,800 | 136,482 | 20,556 | 18,841 | ||||||||||||
Net income per common share — basic | $ | 0.07 | $ | 0.54 | $ | 0.06 | $ | 0.05 | ||||||||
Net income per common share — diluted | $ | 0.06 | $ | 0.46 | $ | 0.05 | $ | 0.04 |
Three Months Ended | ||||||||||||||||
March 31, | June 30, | September 30, | December 31, | |||||||||||||
2006 | 2006 | 2006 | 2006 | |||||||||||||
Total revenues | $ | 329,461 | $ | 368,194 | $ | 396,116 | $ | 453,092 | ||||||||
Income from operations | 46,999 | 54,099 | 69,394 | 66,761 | ||||||||||||
Net income (loss)(2) | 18,369 | 22,989 | 29,266 | (16,818 | ) | |||||||||||
Net income (loss) per common share — basic | $ | 0.04 | $ | 0.06 | $ | 0.08 | $ | (0.15 | ) | |||||||
Net income (loss) per common share — diluted | $ | 0.04 | $ | 0.06 | $ | 0.08 | $ | (0.15 | ) |
F-52
Table of Contents
(1) | During the three months ended June 30, 2005, the Company recorded on a gain on the sale of PCS spectrum in the amount of $228.2 million. | |
(2) | During the three months ended December 31, 2006, the Company repaid all of its outstanding obligations under the Credit Agreements, the Secured Bridge Credit Facility and the Unsecured Bridge Credit Facility resulting in a loss on extinguishment of debt in the amount of approximately $51.8 million. |
24. | Subsequent Events: |
F-53
Table of Contents
Options to | ||
Purchase | ||
Shares of | ||
Common | ||
Stock | ||
o 1. | I hereby elect to reject the rescission offer and desire to retain the grant of the option(s) to purchase Common Stock. | |
o 2. | I hereby elect to accept the rescission offer and rescind the grant of the following option(s) to purchase Common Stock of MetroPCS, to forego the right to purchase the Common Stock thereunder, and to receive a payment equal to 20% of the exercise price of such options together with interest at the applicable statutory rate per year. |
Grant Date | ||||||||
(The Date Indicated | ||||||||
on Your Option | ||||||||
Paperwork | ||||||||
as the Date the | Number of Shares | Number of Shares | ||||||
Board of Directors | Underlying the Option | to be Repurchased | ||||||
Granted You | (Please Indicate on | (Please indicate on | ||||||
Your Options.) | a Post-Split Basis) | a Post-Split Basis) | ||||||
. | ||||||||
A-1
Table of Contents
By: |
A-2
Table of Contents
of California
1. | Name and Address of Person Making the Offer |
8144 Walnut Hill Lane, Suite 800
Dallas, Texas75231-4388
2. | Description of Transaction |
3. | Parties to the Transaction |
B-1
Table of Contents
4. | Basis for Liability under the California Securities Laws |
5. | Scope of Rescission Rights under the California Securities Laws |
6. | Terms of Repurchase Offer |
7. | If You Accept the Repurchase Offer |
8. | If You Do Not Accept the Repurchase Offer |
B-2
Table of Contents
9. | Right of Action |
10. | Release |
11. | Legend Condition |
12. | California Law |
13. | Information Regarding the Company |
[please see “Business” beginning on page 91 of the accompanying offering circular]
[please see “Management” beginning on page 122 of the accompanying offering circular]
[please see “Capitalization” beginning on page 45 of the accompanying offering circular]
[please see “Financial Statements” beginning onpage F-1 of the accompanying offering circular]
B-3
Table of Contents
Option | Grant | Outstanding | Exercise | Aggregate | Statutory | Securities | ||||||
Number | Date | (Share #) | Price ($) | Consideration(1) | Interest(2) | Refund | ||||||
TOTAL SECURITIES REFUND AMOUNT: $ |
(1) | Assumes, for purposes of this repurchase offer, that the consideration received by the Company for issuance of options was equal to 20% of the aggregate exercise price of the options. | |
(2) | Assumes, for purposes of this repurchase offer, that the Securities Holder accepts this offer on . |
B-4
Table of Contents
Options to | ||
Purchase | ||
Shares of | ||
Common | ||
Stock | ||
o 1. | I hereby elect to reject the rescission offer and desire to retain the grant of the option(s) to purchase Common Stock. | |
o 2. | I hereby elect to accept the rescission offer and rescind the grant of the following option(s) to purchase Common Stock of MetroPCS, to forego the right to purchase the Common Stock thereunder, and to receive a payment equal to 20% of the exercise price of such options together with interest at the applicable statutory rate of 7% per year measured from the date of option grant. |
Grant Date | ||||||||
(The Date Indicated | ||||||||
on Your Option | ||||||||
Paperwork | ||||||||
as the Date the | Number of Shares | Number of Shares | ||||||
Board of Directors | Underlying the Option | to be Repurchased | ||||||
Granted You | (Please Indicate on | (Please indicate on | ||||||
Your Options.) | a Post-Split Basis) | a Post-Split Basis) | ||||||
. | ||||||||
B-5
Table of Contents
By: |
RETURN TO: | MetroPCS Communications, Inc. |
B-6
Table of Contents
By: |
B-7
Table of Contents
§25503. | Rescission or Damages for Failure to Qualify Securities. |
§25504. | Joint and Several Liability of Principals and Agents. |
B-8
Table of Contents
§25507. | Time Limitations — Failure to Qualify Securities. |
B-9
Table of Contents
INFORMATION NOT REQUIRED IN OFFERING CIRCULAR
ITEM 13. | Other Expenses of Issuance and Distribution. |
SEC registration fee | $ | 202.17 | ||
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. |
• | 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. |
II-2
Table of Contents
ITEM 15. | Recent Sales of Unregistered Securities |
II-3
Table of Contents
II-4
Table of Contents
ITEM 16. | Exhibits and Financial Statement Schedules |
Exhibit No. | Description | |||
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 (Filed as Exhibit 2.1(a) to MetroPCS Communications, Inc.’s Registration Statement onForm S-1 (SEC FileNo. 333-139793), filed on January 4, 2007, and incorporated by reference herein). | ||
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. (Filed as Exhibit 2.1(b) to MetroPCS Communications, Inc.’s Registration Statement onForm S-1 (SEC FileNo. 333-139793), filed on January 4, 2007, and incorporated by reference herein). | ||
3 | .1 | Third Amended and Restated Certificate of Incorporation of MetroPCS Communications, Inc. (Filed as Exhibit 3.1 to Amendment No. 2 to MetroPCS Communications, Inc.’s Registration Statement onForm S-1/A (SEC FileNo. 333-139793), filed on February 27, 2007, and incorporated by reference herein). | ||
3 | .2 | Third Amended and Restated Bylaws of MetroPCS Communications, Inc. (Filed as Exhibit 3.2 to Amendment No. 2 to MetroPCS Communications, Inc.’s Registration Statement onForm S-1/A (SEC FileNo. 333-139793), filed on February 27, 2007, and incorporated by reference herein). | ||
4 | .1 | Form of Certificate of MetroPCS Communications, Inc. Common Stock. (Filed as Exhibit 4.1 to Amendment No. 4 to MetroPCS Communications, Inc.’s Registration Statement onForm S-1/A (SEC FileNo. 333-139793), filed on April 3, 2007, and incorporated by reference herein). |
II-5
Table of Contents
Exhibit No. | Description | |||
4 | .2 | Rights Agreement, dated as of March 29, 2007, between MetroPCS Communications, Inc. and American Stock Transfer & Trust Company, as Rights Agent, which includes the form of Certificate of Designation of Series A Junior Participating Preferred Stock of MetroPCS Communications, Inc. as Exhibit A, the form of Rights Certificate as Exhibit B and the Summary of Rights as Exhibit C (Filed as Exhibit 4.1 to MetroPCS Communications, Inc.’s Current Report onForm 8-K, filed on March 30, 2007, and incorporated by reference herein). | ||
5 | .1* | Opinion of Baker Botts L.L.P. | ||
10 | .1(a) | Amended and Restated MetroPCS Communications, Inc. 2004 Equity Incentive Compensation Plan (Filed as Exhibit 10.1(a) to Amendment No. 2 to MetroPCS Communications, Inc.’s Registration Statement onForm S-1/A (SEC FileNo. 333-139793), filed on February 27, 2007, and incorporated by reference herein). | ||
10 | .1(b) | Second Amended and Restated 1995 Stock Option Plan of MetroPCS, Inc. (Filed as Exhibit 10.1(d) to MetroPCS Communications, Inc.’s Registration Statement onForm S-1 (SEC FileNo. 333-139793), filed on January 4, 2007, and incorporated by reference herein). | ||
10 | .1(c) | First Amendment to the Second Amended and Restated 1995 Stock Option Plan of MetroPCS, Inc. (Filed as Exhibit 10.1(e) to MetroPCS Communications, Inc.’s Registration Statement onForm S-1 (SEC FileNo. 333-139793), filed on January 4, 2007, and incorporated by reference herein). | ||
10 | .1(d) | Second Amendment to the Second Amended and Restated 1995 Stock Option Plan of MetroPCS, Inc. (Filed as Exhibit 10.1(f) to MetroPCS Communications, Inc.’s Registration Statement onForm S-1 (SEC FileNo. 333-139793), filed on January 4, 2007, and incorporated by reference herein). | ||
10 | .2 | Registration Rights Agreement, effective as of April 24, 2007, by and among MetroPCS Communications, Inc. and the stockholders listed therein. (Filed as Exhibit 10.2 to MetroPCS Communications, Inc.’s Registration Statement onForm S-1/A (SEC FileNo. 333-139793), filed on April 11, 2007, and incorporated by reference herein). | ||
10 | .3 | Form of Officer and Director Indemnification Agreement (Filed as Exhibit 10.4 to Amendment No. 2 to MetroPCS Communications, Inc.’s Registration Statement onForm S-1/A (SEC FileNo. 333-139793), filed on February 27, 2007, and incorporated by reference herein). | ||
10 | .4(a) | General Purchase Agreement, effective as of June 6, 2005, by and between MetroPCS Wireless, Inc. and Lucent Technologies Inc. (Filed as Exhibit 10.5(a) to Amendment No. 2 to MetroPCS Communications, Inc.’s Registration Statement onForm S-1/A (SEC FileNo. 333-139793), filed on February 27, 2007, and incorporated by reference herein). | ||
10 | .4(b) | Amendment No. 1 to the General Purchase Agreement, effective as of September 30, 2005, by and between MetroPCS Wireless, Inc. and Lucent Technologies Inc. (Filed as Exhibit 10.5(b) to Amendment No. 2 to MetroPCS Communications, Inc.’s Registration Statement onForm S-1/A (SEC FileNo. 333-139793), filed on February 27, 2007, and incorporated by reference herein). | ||
10 | .4(c) | Amendment No. 2 to the General Purchase Agreement, effective as of November 10, 2005, by and between MetroPCS Wireless, Inc. and Lucent Technologies Inc. (Filed as Exhibit 10.5(c) to Amendment No. 2 to MetroPCS Communications, Inc.’s Registration Statement onForm S-1/A (SEC FileNo. 333-139793), filed on February 27, 2007, and incorporated by reference herein). | ||
10 | .5 | Amended and Restated Services Agreement, executed on December 15, 2005 as of November 24, 2004, by and between MetroPCS Wireless, Inc. and Royal Street Communications, LLC, including all amendments thereto (Filed as Exhibit 10.6 to Amendment No. 2 to MetroPCS Communications, Inc.’s Registration Statement onForm S-1/A (SEC FileNo. 333-139793), filed on February 27, 2007, and incorporated by reference herein). | ||
10 | .6 | Second Amended and Restated Credit Agreement, executed on December 15, 2005 as of December 22, 2004, by and between MetroPCS Wireless, Inc. and Royal Street Communications, LLC, including all amendments thereto (Filed as Exhibit 10.7 to Amendment No. 2 to MetroPCS Communications, Inc.’s Registration Statement onForm S-1/A (SEC FileNo. 333-139793), filed on February 27, 2007, and incorporated by reference herein). |
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Exhibit No. | Description | |||
10 | .7 | Amended and Restated Pledge Agreement, executed on December 15, 2005 as of December 22, 2004, by and between Royal Street Communications, LLC and MetroPCS Wireless, Inc., including all amendments thereto (Filed as Exhibit 10.8 to Amendment No. 2 to MetroPCS Communications, Inc.’s Registration Statement onForm S-1/A (SEC FileNo. 333-139793), filed on February 27, 2007, and incorporated by reference herein). | ||
10 | .8 | Amended and Restated Security Agreement, executed on December 15, 2005 as of December 22, 2004, by and between Royal Street Communications, LLC and MetroPCS Wireless, Inc., including all amendments thereto (Filed as Exhibit 10.9 to Amendment No. 2 to MetroPCS Communications, Inc.’s Registration Statement onForm S-1/A (SEC FileNo. 333-139793), filed on February 27, 2007, and incorporated by reference herein). | ||
10 | .9 | Amended and Restated Limited Liability Company Agreement of Royal Street Communications, LLC, 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 thereto (Filed as Exhibit 10.10 to Amendment No. 2 to MetroPCS Communications, Inc.’s Registration Statement onForm S-1/A (SEC FileNo. 333-139793), filed on February 27, 2007, and incorporated by reference herein). | ||
10 | .10 | Master Equipment and Facilities Lease Agreement, executed as of May 17, 2006, by and between MetroPCS Wireless, Inc. and Royal Street Communications, LLC, including all amendments thereto (Filed as Exhibit 10.11 to Amendment No. 2 to MetroPCS Communications, Inc.’s Registration Statement onForm S-1/A (SEC FileNo. 333-139793), filed on February 27, 2007, and incorporated by reference herein). | ||
10 | .11 | Amended and Restated Credit Agreement, dated as of February 20, 2007, among MetroPCS Wireless, Inc., as borrower, the several lenders from time to time parties thereto, Bear Stearns Corporate Lending Inc., as administrative agent and syndication agent, Bear, Stearns & Co. Inc., as sole lead arranger and joint book runner, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as joint book runner and Banc of America Securities LLC, as joint book runner (Filed as Exhibit 10.12 to Amendment No. 2 to MetroPCS Communications, Inc.’s Registration Statement onForm S-1/A (SEC FileNo. 333-139793), filed on February 27, 2007, and incorporated by reference herein). | ||
10 | .12 | 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 (Filed as Exhibit 10.13 to Amendment No. 1 to MetroPCS Communications, Inc.’s Registration Statement onForm S-1/A (SEC FileNo. 333-139793), filed on February 13, 2007, and incorporated by reference herein). | ||
10 | .13 | Registration Rights Agreement, dated as of 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 (Filed as Exhibit 10.14 to Amendment No. 1 to MetroPCS Communications, Inc.’s Registration Statement onForm S-1/A (SEC FileNo. 333-139793), filed on February 13, 2007, and incorporated by reference herein). | ||
10 | .14 | Indenture, dated as of November 3, 2006, among MetroPCS Wireless, Inc., the Guarantors as defined therein and The Bank of New York Trust Company, N.A., as trustee (Filed as Exhibit 10.15 to Amendment No. 1 to MetroPCS Communications, Inc.’s Registration Statement onForm S-1/A (SEC FileNo. 333-139793), filed on February 13, 2007, and incorporated by reference herein). | ||
10 | .15 | 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 (Filed as Exhibit 10.16 to Amendment No. 1 to MetroPCS Communications, Inc.’s Registration Statement onForm S-1/A (SEC FileNo. 333-139793), filed on February 13, 2007, and incorporated by reference herein). | ||
21 | .1* | Subsidiaries of Registrant. | ||
23 | .1* | Consent of Deloitte & Touche LLP. | ||
23 | .2* | 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. |
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ITEM 17. | Undertakings |
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By: | /s/ Roger D. Linquist |
/s/ Roger D. Linquist Roger D. Linquist President and Chief Executive Officer and Chairman of the Board (Principal Executive Officer) | /s/ J. Braxton Carter J. Braxton Carter Senior Vice President and Chief Financial Officer (Principal Financial Officer) | |
/s/ Christine B. Kornegay Christine B. Kornegay Vice President, Controller and Chief Accounting Officer (Principal Accounting Officer) | /s/ Arthur C. Patterson Arthur C. Patterson Director | |
/s/ Walker C. Simmons Walker C. Simmons Director | /s/ John Sculley John Sculley Director | |
/s/ James F. Wade James F. Wade Director | /s/ W. Michael Barnes W. Michael Barnes Director | |
/s/ C. Kevin Landry C. Kevin Landry Director | /s/ James N. Perry, Jr. James N. Perry, Jr. Director |
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Exhibit No. | Description | |||
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. (Filed as Exhibit 2.1(a) to MetroPCS Communications, Inc.’s Registration Statement onForm S-1 (SEC FileNo. 333-139793), filed on January 4, 2007, and incorporated by reference herein). | ||
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. (Filed as Exhibit 2.1(b) to MetroPCS Communications, Inc.’s Registration Statement onForm S-1 (SEC FileNo. 333-139793), filed on January 4, 2007, and incorporated by reference herein). | ||
3 | .1 | Third Amended and Restated Certificate of Incorporation of MetroPCS Communications, Inc. (Filed as Exhibit 3.1 to Amendment No. 2 to MetroPCS Communications, Inc.’s Registration Statement onForm S-1/A (SEC FileNo. 333-139793), filed on February 27, 2007, and incorporated by reference herein). | ||
3 | .2 | Third Amended and Restated Bylaws of MetroPCS Communications, Inc. (Filed as Exhibit 3.2 to Amendment No. 2 to MetroPCS Communications, Inc.’s Registration Statement onForm S-1/A (SEC FileNo. 333-139793), filed on February 27, 2007, and incorporated by reference herein). | ||
4 | .1 | Form of Certificate of MetroPCS Communications, Inc. Common Stock. (Filed as Exhibit 4.1 to Amendment No. 4 to MetroPCS Communications, Inc.’s Registration Statement onForm S-1/A (SEC FileNo. 333-139793), filed on April 3, 2007, and incorporated by reference herein). | ||
4 | .2 | Rights Agreement, dated as of March 29, 2007, between MetroPCS Communications, Inc. and American Stock Transfer & Trust Company, as Rights Agent, which includes the form of Certificate of Designation of Series A Junior Participating Preferred Stock of MetroPCS Communications, Inc. as Exhibit A, the form of Rights Certificate as Exhibit B and the Summary of Rights as Exhibit C (Filed as Exhibit 4.1 to MetroPCS Communications, Inc.’s Current Report onForm 8-K, filed on March 30, 2007, and incorporated by reference herein). | ||
5 | .1* | Opinion of Baker Botts L.L.P. | ||
10 | .1(a) | Amended and Restated MetroPCS Communications, Inc. 2004 Equity Incentive Compensation Plan (Filed as Exhibit 10.1(a) to Amendment No. 2 to MetroPCS Communications, Inc.’s Registration Statement onForm S-1/A (SEC FileNo. 333-139793), filed on February 27, 2007, and incorporated by reference herein). | ||
10 | .1(b) | Second Amended and Restated 1995 Stock Option Plan of MetroPCS, Inc. (Filed as Exhibit 10.1(d) to MetroPCS Communications, Inc.’s Registration Statement onForm S-1 (SEC FileNo. 333-139793), filed on January 4, 2007, and incorporated by reference herein). | ||
10 | .1(c) | First Amendment to the Second Amended and Restated 1995 Stock Option Plan of MetroPCS, Inc. (Filed as Exhibit 10.1(e) to MetroPCS Communications, Inc.’s Registration Statement onForm S-1 (SEC FileNo. 333-139793), filed on January 4, 2007, and incorporated by reference herein). | ||
10 | .1(d) | Second Amendment to the Second Amended and Restated 1995 Stock Option Plan of MetroPCS, Inc. (Filed as Exhibit 10.1(f) to MetroPCS Communications, Inc.’s Registration Statement onForm S-1 (SEC FileNo. 333-139793), filed on January 4, 2007, and incorporated by reference herein). | ||
10 | .2 | Registration Rights Agreement, effective as of April 24, 2007, by and among MetroPCS Communications, Inc. and the stockholders listed therein. (Filed as Exhibit 10.2 to MetroPCS Communications, Inc.’s Registration Statement onForm S-1/A (SEC FileNo. 333-139793), filed on April 11, 2007, and incorporated by reference herein). | ||
10 | .3 | Form of Officer and Director Indemnification Agreement (Filed as Exhibit 10.4 to Amendment No. 2 to MetroPCS Communications, Inc.’s Registration Statement onForm S-1/A (SEC FileNo. 333-139793), filed on February 27, 2007, and incorporated by reference herein). | ||
10 | .4(a) | General Purchase Agreement, effective as of June 6, 2005, by and between MetroPCS Wireless, Inc. and Lucent Technologies Inc. (Filed as Exhibit 10.5(a) to Amendment No. 2 to MetroPCS Communications, Inc.’s Registration Statement onForm S-1/A (SEC FileNo. 333-139793), filed on February 27, 2007, and incorporated by reference herein). | ||
10 | .4(b) | Amendment No. 1 to the General Purchase Agreement, effective as of September 30, 2005, by and between MetroPCS Wireless, Inc. and Lucent Technologies Inc. (Filed as Exhibit 10.5(b) to Amendment No. 2 to MetroPCS Communications, Inc.’s Registration Statement onForm S-1/A (SEC FileNo. 333-139793), filed on February 27, 2007, and incorporated by reference herein). |
Table of Contents
Exhibit No. | Description | |||
10 | .4(c) | Amendment No. 2 to the General Purchase Agreement, effective as of November 10, 2005, by and between MetroPCS Wireless, Inc. and Lucent Technologies Inc. (Filed as Exhibit 10.5(c) to Amendment No. 2 to MetroPCS Communications, Inc.’s Registration Statement onForm S-1/A (SEC FileNo. 333-139793), filed on February 27, 2007, and incorporated by reference herein). | ||
10 | .5 | Amended and Restated Services Agreement, executed on December 15, 2005 as of November 24, 2004, by and between MetroPCS Wireless, Inc. and Royal Street Communications, LLC, including all amendments thereto (Filed as Exhibit 10.6 to Amendment No. 2 to MetroPCS Communications, Inc.’s Registration Statement onForm S-1/A (SEC FileNo. 333-139793), filed on February 27, 2007, and incorporated by reference herein). | ||
10 | .6 | Second Amended and Restated Credit Agreement, executed on December 15, 2005 as of December 22, 2004, by and between MetroPCS Wireless, Inc. and Royal Street Communications, LLC, including all amendments thereto (Filed as Exhibit 10.7 to Amendment No. 2 to MetroPCS Communications, Inc.’s Registration Statement onForm S-1/A (SEC FileNo. 333-139793), filed on February 27, 2007, and incorporated by reference herein). | ||
10 | .7 | Amended and Restated Pledge Agreement, executed on December 15, 2005 as of December 22, 2004, by and between Royal Street Communications, LLC and MetroPCS Wireless, Inc., including all amendments thereto (Filed as Exhibit 10.8 to Amendment No. 2 to MetroPCS Communications, Inc.’s Registration Statement onForm S-1/A (SEC FileNo. 333-139793), filed on February 27, 2007, and incorporated by reference herein). | ||
10 | .8 | Amended and Restated Security Agreement, executed on December 15, 2005 as of December 22, 2004, by and between Royal Street Communications, LLC and MetroPCS Wireless, Inc., including all amendments thereto (Filed as Exhibit 10.9 to Amendment No. 2 to MetroPCS Communications, Inc.’s Registration Statement onForm S-1/A (SEC FileNo. 333-139793), filed on February 27, 2007, and incorporated by reference herein). | ||
10 | .9 | Amended and Restated Limited Liability Company Agreement of Royal Street Communications, LLC, 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 thereto (Filed as Exhibit 10.10 to Amendment No. 2 to MetroPCS Communications, Inc.’s Registration Statement onForm S-1/A (SEC FileNo. 333-139793), filed on February 27, 2007, and incorporated by reference herein). | ||
10 | .10 | Master Equipment and Facilities Lease Agreement, executed as of May 17, 2006, by and between MetroPCS Wireless, Inc. and Royal Street Communications, LLC, including all amendments thereto (Filed as Exhibit 10.11 to Amendment No. 2 to MetroPCS Communications, Inc.’s Registration Statement onForm S-1/A (SEC FileNo. 333-139793), filed on February 27, 2007, and incorporated by reference herein). | ||
10 | .11 | Amended and Restated Credit Agreement, dated as of February 20, 2007, among MetroPCS Wireless, Inc., as borrower, the several lenders from time to time parties thereto, Bear Stearns Corporate Lending Inc., as administrative agent and syndication agent, Bear, Stearns & Co. Inc., as sole lead arranger and joint book runner, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as joint book runner and Banc of America Securities LLC, as joint book runner (Filed as Exhibit 10.12 to Amendment No. 2 to MetroPCS Communications, Inc.’s Registration Statement onForm S-1/A (SEC FileNo. 333-139793), filed on February 27, 2007, and incorporated by reference herein). | ||
10 | .12 | 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 (Filed as Exhibit 10.13 to Amendment No. 1 to MetroPCS Communications, Inc.’s Registration Statement onForm S-1/A (SEC FileNo. 333-139793), filed on February 13, 2007, and incorporated by reference herein). | ||
10 | .13 | Registration Rights Agreement, dated as of 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 (Filed as Exhibit 10.14 to Amendment No. 1 to MetroPCS Communications, Inc.’s Registration Statement onForm S-1/A (SEC FileNo. 333-139793), filed on February 13, 2007, and incorporated by reference herein). | ||
10 | .14 | Indenture, dated as of November 3, 2006, among MetroPCS Wireless, Inc., the Guarantors as defined therein and The Bank of New York Trust Company, N.A., as trustee (Filed as Exhibit 10.15 to Amendment No. 1 to MetroPCS Communications, Inc.’s Registration Statement onForm S-1/A (SEC FileNo. 333-139793), filed on February 13, 2007, and incorporated by reference herein). |
Table of Contents
Exhibit No. | Description | |||
10 | .15 | 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 (Filed as Exhibit 10.16 to Amendment No. 1 to MetroPCS Communications, Inc.’s Registration Statement onForm S-1/A (SEC FileNo. 333-139793), filed on February 13, 2007, and incorporated by reference herein). | ||
21 | .1* | Subsidiaries of Registrant. | ||
23 | .1* | Consent of Deloitte & Touche LLP. | ||
23 | .2* | 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. |