[X] | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF | |
THE SECURITIES EXCHANGE ACT OF 1934 | ||
For the fiscal year ended December 31, 2003 | ||
OR | ||
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF | ||
THE SECURITIES EXCHANGE ACT OF 1934 | ||
Commission file number 0-32421 |
Delaware (State or Other Jurisdiction of Incorporation or Organization) | 91-1671412 (I.R.S. Employer Identification No.) | |
10700 Parkridge Boulevard, Suite 600 Reston, Virginia (Address of Principal Executive Offices) | 20191 (Zip Code) |
Title of Securities | Name of Exchange on Which Registered | |
None | N/A |
Number of Shares Outstanding | ||||
Title of Class | on March 1, 2004 | |||
Common Stock, $0.001 par value per share | 68,960,832 |
Item | Description | Page | ||||
PART I | ||||||
1. | Business | 4 | ||||
2. | Properties | 39 | ||||
3. | Legal Proceedings | 39 | ||||
4. | Submission of Matters to a Vote of Security Holders | 39 | ||||
PART II | ||||||
5. | Market for Registrant’s Common Equity and Related Stockholder Matters | 42 | ||||
6. | Selected Financial Data | 43 | ||||
7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 50 | ||||
7A. | Quantitative and Qualitative Disclosures About Market Risk | 114 | ||||
8. | Financial Statements and Supplementary Data | 115 | ||||
9. | Changes In and Disagreements with Accountants on Accounting and Financial Disclosure | 115 | ||||
9A. | Controls and Procedures | 115 | ||||
PART III | ||||||
10. | Directors and Executive Officers of the Registrant | 118 | ||||
11. | Executive Compensation | 118 | ||||
12. | Security Ownership of Certain Beneficial Owners and Management | 118 | ||||
13. | Certain Relationships and Related Transactions | 118 | ||||
14. | Principal Accountant Fees and Services | 118 | ||||
PART IV | ||||||
15. | Exhibits, Financial Statement Schedule and Reports on Form 8-K | 119 |
1
• | Bookkeeping errors at our operating company in Mexico; | |
• | Accounting for deferred tax asset valuation allowance reversals; | |
• | Certain errors in the calculation of income taxes for financial statement purposes; | |
• | Depreciation of handsets in Argentina; and | |
• | Other insignificant miscellaneous adjustments. | |
• | Foreign currency adjustments — Some foreign currency transaction gains and losses were double-recorded through a combination of manual entries and system-generated automatic entries recorded upon payment of U.S. dollar denominated payables; | |
• | Accounts receivable adjustments — Periodic reconciliations between the accounts receivable subsidiary ledger and the general ledger were not performed properly. As a result, unreconciled differences related to the non-recognition of commissions expense on credit card payments, returned checks, manual adjustments and other items were classified to a current liability account, but were not reversed from the liability account upon resolution of these differences; and | |
• | Liability accounts — Certain liability accounts contained balances that could not be supported by invoices or subsequent disbursements. | |
2
3
Item 1. | Business |
A. | Introduction |
B. | Overview |
• | digital mobile telephone service, including advanced calling features such as speakerphone, conference calling, voice-mail, call forwarding and additional line service; | |
• | Nextel Direct Connect service, which allows subscribers anywhere on our network in the same country to talk to each other instantly, on a “push-to-talk” basis, on a private one-to-one call or on a group call; | |
• | Internet services, mobile messaging services, e-mail and advanced Java enabled business applications, which are marketed as “Nextel Online” services; and | |
• | international roaming capabilities, which are marketed as “Nextel Worldwide.” |
4
Population | Digital Handsets in | |||||||||||
Covered by | Commercial | |||||||||||
Country | System Type | Licenses | Service | |||||||||
(in millions) | (in thousands) | |||||||||||
Mexico | Analog/digital | 44 | 658 | |||||||||
Brazil | Analog/digital | 70 | 384 | |||||||||
Argentina | Digital | 19 | 275 | |||||||||
Peru | Analog/digital | 15 | 147 | |||||||||
Chile | Analog | 15 | — | |||||||||
Total | 163 | 1,464 | ||||||||||
5
• | during any fiscal quarter commencing after December 31, 2003, if the closing sale price of our common stock exceeds 110% of the conversion price for at least 20 trading days in the 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter; | |
• | during the five business day period after any five consecutive trading day period in which the trading price per note for each day of such period was less than 98% of the product of the closing sale price of our common stock and the number of shares issuable upon conversion of $1,000 principal amount of the notes, subject to certain limitations; | |
• | if the notes have been called for redemption by us; or | |
• | upon the occurrence of certain specified corporate events. |
6
7
• | during any fiscal quarter commencing after March 31, 2004, if the closing sale price of our common stock exceeds 120% of the conversion price for at least 20 trading days in the 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter; | |
• | during the five business day period after any five consecutive trading day period in which the trading price per note for each day of this period was less than 98% of the product of the closing sale price of our common stock and the number of shares issuable upon conversion of $1,000 principal amount of the notes subject to certain limitations; | |
• | if the notes have been called for redemption; or | |
• | upon the occurrence of specified corporate events. |
8
C. | Wireless Technology |
• | time division multiple access digital transmission technology; | |
• | code division multiple access digital transmission technology; and | |
• | global system for mobile communications digital transmission technology. |
• | First, each channel on our digital mobile networks is capable of carrying up to six voice and/or control paths, by employing six-time slot time division multiple access digital technology. Alternatively, each channel is capable of carrying up to three voice and/or control paths, by employing three-time slot time division multiple access digital technology. Each voice transmission is converted into a stream of data bits that are compressed before being transmitted. This compression allows each of these voice or control paths to be transmitted on the same channel without causing interference. Upon receipt of the coded voice data bits, the digital handset decodes the voice signal. Using iDEN technology, our two-way radio dispatch service achieves about six times improvement over analog specialized mobile radio in channel utilization capacity. We also achieve about three times improvement over analog specialized mobile radio in channel utilization capacity for channels used for mobile telephone service. |
9
• | Second, our digital mobile networks reuse each channel many times throughout the market area in a manner similar to that used in the cellular industry, further improving channel utilization capacity. |
D. | Network Implementation, Design and Construction |
E. | Marketing |
F. | Competition |
• | America Movil, which has the largest wireless market share in Mexico, operates in eight of Brazil’s ten cellular license areas, and recently purchased CTI, a wireless operator in Argentina; | |
• | Telefonica Moviles, which has wireless operations throughout Mexico, Argentina and Peru, and is a joint controlling shareholder of Vivo, the largest wireless operator in Brazil; |
10
• | Telecom Italia Mobile, which has wireless operations covering most of Brazil and Peru, and is joint controlling shareholder of the wireless affiliate of Telecom Argentina; and | |
• | BellSouth, which has wireless operations in Argentina and Peru. Until early in 2003, BellSouth also was a joint controlling shareholder of wireless operations in two of Brazil’s cellular license areas. It recently exited from these operations. |
11
G. | Regulation |
12
13
14
• | veto rights with respect to managerial and operational decisions; and | |
• | a right of first refusal and call option, under which we have the right, in our sole discretion, to acquire all or part of the common stock of Inversiones Nextel de Mexico if the 49% foreign ownership limitation is ever abrogated. |
15
Digital | Analog | |
Rio de Janeiro | Salvador | |
Sao Paulo | Recife | |
Curitiba | Fortaleza | |
Brasilia | Porto Alegre | |
Belo Horizonte | ||
Campinas | ||
Sao Jose dos Campos |
16
17
3. | Argentina |
18
19
• | Licenses of telecommunications services. The new regulations establish a single license system that allows the license holder to offer any and all types of telecommunications services. The licensee is free to choose the geographic area, technology, infrastructure and architecture through which its services will be provided. However, each specific service to be offered must be separately registered with the Secretary. Holders of existing telecommunications licenses, including holders of cellular, personal communications services and specialized mobile radio licenses, are automatically deemed to have a universal license under the new regulatory scheme, and all services currently offered which had been previously approved by the regulatory authorities are treated as having been registered. However, to the extent an existing license holder wishes to offer a new service, the new service must be registered. In addition, existing license holders who acquired spectrum under a public bid or auction must continue to abide by the original terms and conditions under which the spectrum was granted. |
20
• | Network interconnection. The general principles of the interconnection regulations are: |
• | freedom of negotiation and agreement between the parties with respect to prices charged for interconnection, although the regulations include guidelines which are generally followed in practice and which can be imposed by the Secretary in the event of a dispute between parties; | |
• | mandatory provision of interconnection with other carriers so long as interconnection is technically feasible; | |
• | non-discrimination; | |
• | reciprocal compensation; and | |
• | maintenance of an open architecture to avoid conditions that would restrict the efficiency of interconnected operators. |
• | Universal service. The regulations establish a tax equal to 1% of service revenue minus applicable taxes and specified related costs. The license holder can choose either to pay the resulting amount into a fund for universal service development or participate directly in offering services to specific geographical areas under an annual plan designed by the federal government, which is known as a pay or play system. Although regulations state that this tax would be applicable beginning January 1, 2001, the regulatory authorities have not taken the necessary actions to implement the tax. | |
• | Administration of spectrum. The regulations contain only general principles and guidelines with respect to the authorization of new spectrum and frequencies. To ensure the efficient and effective use of spectrum, the Secretary is empowered to partially or totally revoke awarded spectrum if it is not used, or if it is not used in accordance with the terms and conditions under which it was granted. In addition, until September 2004, the government may impose obligations on a spectrum holder in order to provide a service for which other spectrum holders were required to pay a price or had other obligations to provide the service. |
21
4. | Peru |
22
23
24
5. | Chile |
25
26
27
J. | Employees |
K. | Risk Factors |
• | substantially greater financial and marketing resources; | |
• | larger customer bases; | |
• | better name recognition; | |
• | bundled service offerings; | |
• | larger spectrum positions; and | |
• | larger coverage areas than those of our operating companies. |
28
• | close ties with national regulatory authorities; | |
• | control over connections to local telephone lines; or | |
• | the ability to subsidize competitive services with revenues generated from services they provide on a monopoly or near-monopoly basis. |
• | other operators deploy iDEN 800 MHz or GSM 900 MHz technology in markets outside of our coverage areas and we enter into roaming agreements with those operators; or | |
• | phones that can be used on both iDEN 800 MHz and non-GSM 900 MHz wireless communications networks become available and we enter into roaming agreements with the operators of those networks. |
29
• | segment the user markets, which could reduce demand for our technology; and | |
• | reduce the resources devoted by third-party suppliers, including Motorola, which supplies all of our current digital mobile technology, to developing or improving the technology for our systems. |
• | limit our ability to expand our network coverage or capacity as currently planned; or | |
• | place us at a competitive disadvantage to other wireless service providers in our markets. |
30
31
• | the size of the markets for wireless communications services; | |
• | the penetration rates of these markets; | |
• | the ability of potential subscribers to pay subscription and other fees; | |
• | the extent and nature of the competitive environment in these markets; and | |
• | the immediate and long-term commercial viability of wireless communications services in these markets. |
32
33
34
• | making it more difficult for us to satisfy our obligations with respect to our debt; | |
• | limiting our flexibility in planning for, or reacting to, changes in our business and the industries in which we compete and increasing our vulnerability to general adverse economic and industry conditions; | |
• | limiting our ability to obtain additional financing that we may need to fund future working capital, capital expenditures, product development, acquisitions or other corporate requirements; | |
• | requiring the dedication of a substantial portion of our cash flow from operations to the payment of principal and interest on our debt, which will reduce the availability of cash flow to fund working capital, capital expenditures, product development, acquisitions or other corporate requirements; and | |
• | placing us at a competitive disadvantage compared to competitors who are less leveraged and have greater financial and other resources. |
35
• | incur or guarantee additional indebtedness; | |
• | pay dividends and make other distributions; | |
• | prepay subordinated indebtedness; | |
• | make investments and other restricted payments; | |
• | enter into sale and leaseback transactions; | |
• | create liens; | |
• | sell assets; | |
• | engage in transactions with affiliates; and | |
• | transfer funds to our operating companies in Brazil and Argentina. |
36
37
Historical financial information may not be comparable to results reported in the future. |
• | our ability to meet the operating goals established by our business plan; | |
• | general economic conditions in Latin America and in the market segments that we are targeting for our digital mobile services; | |
• | the political and social conditions in the countries in which we operate, including political instability, which may affect the economies of our markets and the regulatory schemes in these countries; | |
• | substantive terms of any international financial aid package that may be made available to any country in which our operating companies conduct business; | |
• | the impact of foreign exchange volatility in our markets as compared to the U.S. dollar and related currency devaluations in countries in which our operating companies conduct business; | |
• | reasonable access to and the successful performance of the technology being deployed in our service areas, and improvements thereon, including technology deployed in connection with the introduction of digital two-way mobile data or Internet connectivity services in our markets; | |
• | the availability of adequate quantities of system infrastructure and subscriber equipment and components to meet our service deployment and marketing plans and customer demand; | |
• | the success of efforts to improve and satisfactorily address any issues relating to our digital mobile network performance; | |
• | future legislation or regulatory actions relating to our specialized mobile radio services, other wireless communication services or telecommunications generally; | |
• | the ability to achieve and maintain market penetration and average subscriber revenue levels sufficient to provide financial viability to our digital mobile network business; |
38
• | the quality and price of similar or comparable wireless communications services offered or to be offered by our competitors, including providers of cellular services and personal communications services; | |
• | market acceptance of our new service offerings, including Nextel Worldwidesm and Nextel Onlinesm; | |
• | our ability to access sufficient debt or equity capital to meet any future operating and financial needs; and | |
• | other risks and uncertainties described from time to time in our reports filed with the Securities and Exchange Commission. |
Number | |||||
Operating Company | of Sites | ||||
Nextel Mexico | 975 | ||||
Nextel Brazil | 870 | ||||
Nextel Argentina | 390 | ||||
Nextel Peru | 280 | ||||
Total | 2,515 | ||||
39
40
41
1. Market for Common Stock |
Price Range of | |||||||||
Common Stock | |||||||||
High | Low | ||||||||
2002 | |||||||||
Fourth Quarter (beginning November 20) | $ | 4.77 | $ | 1.83 | |||||
2003 | |||||||||
First Quarter | $ | 8.95 | $ | 3.87 | |||||
Second Quarter | 13.29 | 7.90 | |||||||
Third Quarter | 22.20 | 12.50 | |||||||
Fourth Quarter | 26.87 | 20.02 |
2. Number of Stockholders of Record |
3. Dividends |
42
4. Securities Authorized for Issuance under Equity Compensation Plans |
General |
Weighted | ||||||||||||
Average Exercise | ||||||||||||
Number of Securities | Price of | |||||||||||
to be Issued Upon | Outstanding | Number of Securities | ||||||||||
Exercise of | Options, | Remaining Available for | ||||||||||
Outstanding Options, | Warrants and | Future Issuance Under Equity | ||||||||||
Plan Category | Warrants and Rights | Rights | Compensation Plans(1) | |||||||||
Equity compensation plans approved by stockholders(2) | — | — | — | |||||||||
Equity compensation plans not approved by stockholders | 3,622,680 | $ | 1.27 | 160,776 | ||||||||
Total | 3,622,680 | $ | 1.27 | 160,776 | ||||||||
(1) | Amounts exclude any securities to be issued upon exercise of outstanding options, warrants and rights. |
(2) | We do not have any equity compensation plans that have been approved by stockholders. |
2002 Management Incentive Plan |
43
• | Bookkeeping errors at our operating company in Mexico; | |
• | Accounting for deferred tax asset valuation allowance reversals; | |
• | Certain errors in the calculation of income taxes for financial statement purposes; | |
• | Depreciation of handsets in Argentina; and | |
• | Other insignificant miscellaneous adjustments. | |
44
Successor Company | Predecessor Company | |||||||||||||||||||||||||
Two Months | Ten Months | |||||||||||||||||||||||||
Year Ended | Ended | Ended | Year Ended December 31, | |||||||||||||||||||||||
December 31, | December 31, | October 31, | ||||||||||||||||||||||||
2003 | 2002 | 2002 | 2001 | 2000 | 1999 | |||||||||||||||||||||
Restated | Restated | Restated | ||||||||||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||||||||
Consolidated Statement of Operations Data: | ||||||||||||||||||||||||||
Operating revenues | ||||||||||||||||||||||||||
Service and other revenues | $ | 895,615 | $ | 137,623 | $ | 610,341 | $ | 634,736 | $ | 303,328 | $ | 104,528 | ||||||||||||||
Digital handset and accessory revenues | 43,072 | 5,655 | 26,754 | 27,710 | 21,000 | 19,836 | ||||||||||||||||||||
938,687 | 143,278 | 637,095 | 662,446 | 324,328 | 124,364 | |||||||||||||||||||||
Cost of revenues | ||||||||||||||||||||||||||
Cost of service (exclusive of depreciation included below) | 240,021 | 29,929 | 164,995 | 173,000 | 78,817 | 40,999 | ||||||||||||||||||||
Cost of digital handset and accessory sales | 134,259 | 19,569 | 87,582 | 150,536 | 99,826 | 55,200 | ||||||||||||||||||||
374,280 | 49,498 | 252,577 | 323,536 | 178,643 | 96,199 | |||||||||||||||||||||
Selling, general and administrative | 317,400 | 47,108 | 262,405 | 426,679 | 275,361 | 191,015 | ||||||||||||||||||||
Impairment, restructuring and other charges | — | — | 15,808 | 1,581,164 | — | — | ||||||||||||||||||||
Depreciation | 49,127 | 4,694 | 55,758 | 162,083 | 113,648 | 81,594 | ||||||||||||||||||||
Amortization | 30,374 | 6,392 | 9,219 | 56,479 | 39,394 | 26,497 | ||||||||||||||||||||
Operating income (loss) | 167,506 | 35,586 | 41,328 | (1,887,495 | ) | (282,718 | ) | (270,941 | ) | |||||||||||||||||
Interest expense | (64,623 | ) | (10,469 | ) | (151,579 | ) | (297,228 | ) | (237,743 | ) | (179,604 | ) | ||||||||||||||
Interest income | 10,864 | 1,797 | 3,928 | 13,247 | 22,116 | 8,442 | ||||||||||||||||||||
Foreign currency transaction gains (losses), net | 8,856 | 2,616 | (180,765 | ) | (61,282 | ) | (10,671 | ) | (60,793 | ) | ||||||||||||||||
Reorganization items, net | — | — | 2,180,998 | — | — | — | ||||||||||||||||||||
Gain on extinguishment of debt, net | 22,404 | — | 101,598 | — | — | — | ||||||||||||||||||||
Realized (losses) gains on investments, net | — | — | — | (151,291 | ) | 239,467 | — | |||||||||||||||||||
Equity in gains (losses) of unconsolidated affiliates | — | — | — | 9,640 | (33,328 | ) | (9,270 | ) | ||||||||||||||||||
Minority interest in losses of subsidiaries | — | — | — | — | 6,504 | 19,314 | ||||||||||||||||||||
Other (expense) income, net | (12,166 | ) | (1,557 | ) | (8,918 | ) | (4,181 | ) | 6,251 | (5,112 | ) | |||||||||||||||
Income (loss) from continuing operations before income tax (provision) benefit | 132,841 | 27,973 | 1,986,590 | (2,378,590 | ) | (290,122 | ) | (497,964 | ) | |||||||||||||||||
Income tax (provision) benefit | (51,627 | ) | (24,874 | ) | (29,270 | ) | 68,750 | (67,660 | ) | 17 | ||||||||||||||||
Income (loss) from continuing operations | 81,214 | 3,099 | 1,957,320 | (2,309,840 | ) | (357,782 | ) | (497,947 | ) | |||||||||||||||||
Income (loss) from discontinued operations of Nextel Philippines | — | 19,665 | (2,025 | ) | (170,335 | ) | (59,973 | ) | (22,199 | ) | ||||||||||||||||
Income tax (provision) benefit from discontinued operations of Nextel Philippines | — | — | (252 | ) | (17,146 | ) | 549 | — | ||||||||||||||||||
Net income (loss) | 81,214 | 22,764 | 1,955,043 | (2,497,321 | ) | (417,206 | ) | (520,146 | ) | |||||||||||||||||
Accretion of series A redeemable preferred stock to value of liquidation preference | — | — | — | — | (61,334 | ) | — | |||||||||||||||||||
Income (loss) attributable to common stockholders | $ | 81,214 | $ | 22,764 | $ | 1,955,043 | $ | (2,497,321 | ) | $ | (478,540 | ) | $ | (520,146 | ) | |||||||||||
Net income (loss) from continuing operations per common share, basic | $ | 1.29 | $ | 0.05 | $ | 7.24 | $ | (8.53 | ) | $ | (1.69 | ) | $ | (2.27 | ) | |||||||||||
Net income (loss) from discontinued operations per common share, basic | — | 0.33 | (0.01 | ) | (0.69 | ) | (0.24 | ) | (0.10 | ) | ||||||||||||||||
Net income (loss) per common share, basic | $ | 1.29 | $ | 0.38 | $ | 7.23 | $ | (9.22 | ) | $ | (1.93 | ) | $ | (2.37 | ) | |||||||||||
Net income (loss) from continuing operations per common share, diluted | $ | 1.19 | $ | 0.05 | $ | 7.24 | $ | (8.53 | ) | $ | (1.69 | ) | $ | (2.27 | ) | |||||||||||
Net income (loss) from discontinued operations per common share, diluted | — | 0.31 | (0.01 | ) | (0.69 | ) | (0.24 | ) | (0.10 | ) | ||||||||||||||||
Net income (loss) per common share, diluted | $ | 1.19 | $ | 0.36 | $ | 7.23 | $ | (9.22 | ) | $ | (1.93 | ) | $ | (2.37 | ) | |||||||||||
Weighted average number of common shares outstanding, basic | 63,129 | 60,000 | 270,382 | 270,750 | 248,453 | 219,359 | ||||||||||||||||||||
Weighted average number of common shares outstanding, diluted | 67,987 | 63,429 | 270,382 | 270,750 | 248,453 | 219,359 | ||||||||||||||||||||
45
Successor Company | Predecessor Company | ||||||||||||||||||||
December 31, | December 31, | ||||||||||||||||||||
2003 | 2002 | 2001 | 2000 | 1999 | |||||||||||||||||
Restated | Restated | ||||||||||||||||||||
(in thousands) | |||||||||||||||||||||
Consolidated Balance Sheet Data: | |||||||||||||||||||||
Cash and cash equivalents | $ | 405,406 | $ | 231,161 | $ | 250,250 | $ | 473,707 | $ | 93,748 | |||||||||||
Restricted cash | — | — | 84,041 | 145 | 6,280 | ||||||||||||||||
Property, plant and equipment, net | 368,434 | 230,598 | 350,001 | 1,070,127 | 539,455 | ||||||||||||||||
Intangible assets, net | 85,818 | 182,264 | 192,649 | 936,880 | 454,657 | ||||||||||||||||
Total assets | 1,128,436 | 831,473 | 1,244,420 | 3,193,226 | 1,681,792 | ||||||||||||||||
Long-term debt, including current portion | 536,756 | 432,157 | 2,665,144 | 2,519,283 | 1,548,496 | ||||||||||||||||
Stockholders’ equity (deficit) | 217,770 | 71,612 | (2,022,150 | ) | 81,604 | (179,590 | ) |
Successor Company | Predecessor Company | |||||||||||||||||||
Two Months | Ten Months | |||||||||||||||||||
Year Ended | Ended | Ended | Year Ended December 31, | |||||||||||||||||
December 31, | December 31, | October 31, | ||||||||||||||||||
2003 | 2002 | 2002 | 2001 | 2000 | 1999 | |||||||||||||||
Restated | Restated | Restated | ||||||||||||||||||
2.55x | 3.09x | 12.63x | — | 0.15x | — |
• | interest on all indebtedness, amortization of debt financing costs and amortization of original issue discount; | |
• | interest capitalized; and | |
• | the portion of rental expense we believe is representative of interest. |
46
47
48
49
Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
A. Executive Overview | 51 | |||||
B. Results of Operations | 62 | |||||
1. Year Ended December 31, 2003 vs. Combined Period Ended December 31, 2002 | 64 | |||||
a. Consolidated | 64 | |||||
b. Nextel Mexico | 69 | |||||
c. Nextel Brazil | 73 | |||||
d. Nextel Argentina | 76 | |||||
e. Nextel Peru | 80 | |||||
f. Corporate and other | 82 | |||||
2. Combined Period Ended December 31, 2002 vs. Year Ended December 31, 2001 | 84 | |||||
a. Consolidated | 85 | |||||
b. Nextel Mexico | 90 | |||||
c. Nextel Brazil | 94 | |||||
d. Nextel Peru | 98 | |||||
e. Nextel Argentina | 101 | |||||
f. Corporate and other | 106 | |||||
C. Liquidity and Capital Resources | 109 | |||||
D. Future Capital Needs and Resources | 110 | |||||
E. Effect of Inflation and Foreign Currency Exchange | 113 | |||||
F. Effect of New Accounting Standards | 113 | |||||
Item 7A. Quantitative and Qualitative Disclosures About Market Risk | 114 |
50
51
• | Bookkeeping errors at our operating company in Mexico; | |
• | Accounting for deferred tax asset valuation allowance reversals; | |
• | Certain errors in the calculation of income taxes for financial statement purposes; | |
• | Depreciation of handsets in Argentina; and | |
• | Other insignificant miscellaneous adjustments. | |
52
• | during any fiscal quarter commencing after December 31, 2003, if the closing sale price of our common stock exceeds 110% of the conversion price for at least 20 trading days in the 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter; | |
• | during the five business day period after any five consecutive trading day period in which the trading price per note for each day of such period was less than 98% of the product of the closing sale price of our common stock and the number of shares issuable upon conversion of $1,000 principal amount of the notes, subject to certain limitations; | |
• | if the notes have been called for redemption by us; or | |
• | upon the occurrence of certain specified corporate events. |
53
54
• | during any fiscal quarter commencing after March 31, 2004, if the closing sale price of our common stock exceeds 120% of the conversion price for at least 20 trading days in the 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter; | |
• | during the five business day period after any five consecutive trading day period in which the trading price per note for each day of this period was less than 98% of the product of the closing sale price of our common stock and the number of shares issuable upon conversion of $1,000 principal amount of the notes subject to certain limitations; | |
• | if the notes have been called for redemption; or | |
• | upon the occurrence of specified corporate events. |
55
56
57
58
59
60
61
B. | Results of Operations |
62
63
1. | Year Ended December 31, 2003 vs. Combined Period Ended December 31, 2002 |
a. Consolidated |
Successor | Predecessor | |||||||||||||||||||||||||||||||||
Successor | Company | Company | ||||||||||||||||||||||||||||||||
Company | % of | Two Months | Ten Months | Combined | % of | Change from | ||||||||||||||||||||||||||||
Year Ended | Consolidated | Ended | Ended | Year Ended | Consolidated | Previous Year | ||||||||||||||||||||||||||||
December 31, | Operating | December 31, | October 31, | December 31, | Operating | |||||||||||||||||||||||||||||
2003 | Revenues | 2002 | 2002 | 2002 | Revenues | Dollars | Percent | |||||||||||||||||||||||||||
Restated | Restated | Restated | Restated | Restated | Restated | Restated | Restated | |||||||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||||||||||||
Operating revenues | ||||||||||||||||||||||||||||||||||
Service and other revenues | $ | 895,615 | 95 | % | $ | 137,623 | $ | 610,341 | $ | 747,964 | 96 | % | $ | 147,651 | 20 | % | ||||||||||||||||||
Digital handset and accessory revenues | 43,072 | 5 | % | 5,655 | 26,754 | 32,409 | 4 | % | 10,663 | 33 | % | |||||||||||||||||||||||
938,687 | 100 | % | 143,278 | 637,095 | 780,373 | 100 | % | 158,314 | 20 | % | ||||||||||||||||||||||||
Cost of revenues | ||||||||||||||||||||||||||||||||||
Cost of service (exclusive of depreciation included below) | (240,021 | ) | (26 | )% | (29,929 | ) | (164,995 | ) | (194,924 | ) | (25 | )% | (45,097 | ) | 23 | % | ||||||||||||||||||
Cost of digital handset and accessory sales | (134,259 | ) | (14 | )% | (19,569 | ) | (87,582 | ) | (107,151 | ) | (14 | )% | (27,108 | ) | 25 | % | ||||||||||||||||||
(374,280 | ) | (40 | )% | (49,498 | ) | (252,577 | ) | (302,075 | ) | (39 | )% | (72,205 | ) | 24 | % | |||||||||||||||||||
Selling and marketing expenses | (128,575 | ) | (14 | )% | (18,938 | ) | (107,910 | ) | (126,848 | ) | (16 | )% | (1,727 | ) | 1 | % | ||||||||||||||||||
General and administrative expenses | (188,825 | ) | (20 | )% | (28,170 | ) | (154,495 | ) | (182,665 | ) | (23 | )% | (6,160 | ) | 3 | % | ||||||||||||||||||
Impairment, restructuring and other charges | — | — | — | (15,808 | ) | (15,808 | ) | (2 | )% | 15,808 | (100 | )% | ||||||||||||||||||||||
Depreciation and amortization | (79,501 | ) | (8 | )% | (11,086 | ) | (64,977 | ) | (76,063 | ) | (10 | )% | (3,438 | ) | 5 | % | ||||||||||||||||||
Operating income | 167,506 | 18 | % | 35,586 | 41,328 | 76,914 | 10 | % | 90,592 | 118 | % | |||||||||||||||||||||||
Interest expense, net | (53,759 | ) | (6 | )% | (8,672 | ) | (147,651 | ) | (156,323 | ) | (20 | )% | 102,564 | (66 | )% | |||||||||||||||||||
Foreign currency transaction gains (losses), net | 8,856 | 1 | % | 2,616 | (180,765 | ) | (178,149 | ) | (23 | )% | 187,005 | (105 | )% | |||||||||||||||||||||
Gain on extinguishment of debt, net | 22,404 | 2 | % | — | 101,598 | 101,598 | 13 | % | (79,194 | ) | (78 | )% | ||||||||||||||||||||||
Reorganization items, net | — | — | — | 2,180,998 | 2,180,998 | 279 | % | (2,180,998 | ) | (100 | )% | |||||||||||||||||||||||
Other expense, net | (12,166 | ) | (1 | )% | (1,557 | ) | (8,918 | ) | (10,475 | ) | (1 | )% | (1,691 | ) | 16 | % | ||||||||||||||||||
Income from continuing operations before income tax provision | 132,841 | 14 | % | 27,973 | 1,986,590 | 2,014,563 | 258 | % | (1,881,722 | ) | (93 | )% | ||||||||||||||||||||||
Income tax provision | (51,627 | ) | (5 | )% | (24,874 | ) | (29,270 | ) | (54,144 | ) | (7 | )% | 2,517 | (5 | )% | |||||||||||||||||||
Net income from continuing operations | 81,214 | 9 | % | 3,099 | 1,957,320 | 1,960,419 | 251 | % | (1,879,205 | ) | (96 | )% | ||||||||||||||||||||||
Income (loss) from discontinued operations, net | — | — | 19,665 | (2,277 | ) | 17,388 | 2 | % | (17,388 | ) | (100 | )% | ||||||||||||||||||||||
Net income | $ | 81,214 | 9 | % | $ | 22,764 | $ | 1,955,043 | $ | 1,977,807 | 253 | % | $ | (1,896,593 | ) | (96 | )% | |||||||||||||||||
64
1. | Operating revenues |
2. | Cost of revenues |
3. | Selling and marketing expenses |
65
4. | General and administrative expenses |
• | a $12.6 million, or 13%, increase in consolidated general corporate expenses primarily caused by an increase in operating taxes on gross revenues in Mexico and Argentina and an increase in payroll and employee related costs as a result of an increase in headcount; and | |
• | a $5.3 million, or 13%, increase in consolidated customer care and billing operations expenses mainly caused by a 12% increase in average consolidated digital handsets in service and the implementation of customer-for-life retention programs, mainly in Mexico. |
6. | Depreciation and amortization |
• | the elimination of interest expense that we recognized during the ten months ended October 31, 2002 related to our former senior notes, our former Argentine credit facilities, and our former Motorola incremental international equipment facility, all of which were extinguished or settled on November 12, 2002 in connection with our emergence from Chapter 11 reorganization; | |
• | a reduction of interest expense related to the $100.0 million principal pay-down of our $225.0 million international equipment facility and pay-off of our $103.2 million Brazil equipment facility in September 2003; |
66
• | a reduction of interest expense related to the discontinuation of handset financing resulting from the pay-down of handset financing liabilities in all of our markets during 2003; and | |
• | an increase in consolidated interest income, primarily caused by an increase in average cash balances. |
• | an increase in interest expense recognized during 2003 as a result of debt incurred in connection with our tower financing transactions; | |
• | an increase in interest expense recognized related to our new $180.0 million aggregate principal amount 3.5% convertible notes due 2033 that we issued in September 2003; | |
• | the $4.4 million loss we recognized on the elimination of our interest rate swap; and | |
• | an increase in accreted interest on our 13.0% senior secured discount notes that we issued in November 2002. |
• | $2,402.9 million net gain on the extinguishment of our senior notes and related accrued interest; and | |
• | $37.7 million net gain on the extinguishment of accrued expenses and other. |
• | a $114.3 million charge resulting from adjustments to the carrying values of our long-lived assets and liabilities to estimated fair values in accordance with fresh-start accounting rules; | |
• | a $92.2 million write off of the unamortized bond discounts on our senior notes; | |
• | a $31.2 million write off of debt financing costs; and | |
• | $21.9 million in legal, advisory and employee retention costs. |
67
11. | Income tax provision |
12. | Income (loss) from discontinued operations |
Segment Results |
% of | ||||||||||||||||||||||||||||
Consolidated | ||||||||||||||||||||||||||||
% of | % of | Selling, | Selling, | |||||||||||||||||||||||||
Successor Company | Consolidated | Consolidated | General and | General and | Segment | |||||||||||||||||||||||
Year Ended | Operating | Operating | Cost of | Cost of | Administrative | Administrative | Earnings | |||||||||||||||||||||
December 31, 2003 | Revenues | Revenues | Revenues | Revenues | Expenses | Expenses | (Losses) | |||||||||||||||||||||
Restated | Restated | Restated | ||||||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||||||
Nextel Mexico | $ | 578,368 | 62 | % | $ | (193,423 | ) | 51 | % | $ | (169,642 | ) | 53 | % | $ | 215,303 | ||||||||||||
Nextel Brazil | 148,545 | 16 | % | (84,973 | ) | 23 | % | (49,969 | ) | 16 | % | 13,603 | ||||||||||||||||
Nextel Argentina | 118,143 | 12 | % | (48,651 | ) | 13 | % | (36,824 | ) | 12 | % | 32,668 | ||||||||||||||||
Nextel Peru | 92,575 | 10 | % | (45,295 | ) | 12 | % | (26,341 | ) | 8 | % | 20,939 | ||||||||||||||||
Corporate and other | 1,571 | — | (2,453 | ) | 1 | % | (34,624 | ) | 11 | % | (35,506 | ) | ||||||||||||||||
Intercompany eliminations | (515 | ) | — | 515 | — | — | — | — | ||||||||||||||||||||
Total consolidated | $ | 938,687 | 100 | % | $ | (374,280 | ) | 100 | % | $ | (317,400 | ) | 100 | % | ||||||||||||||
68
% of | ||||||||||||||||||||||||||||
Consolidated | ||||||||||||||||||||||||||||
% of | % of | Selling, | Selling, | |||||||||||||||||||||||||
Consolidated | Consolidated | General and | General and | Segment | ||||||||||||||||||||||||
Combined Year Ended | Operating | Operating | Cost of | Cost of | Administrative | Administrative | Earnings | |||||||||||||||||||||
December 31, 2002 | Revenues | Revenues | Revenues | Revenues | Expenses | Expenses | (Losses) | |||||||||||||||||||||
Restated | Restated | Restated | ||||||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||||||
Nextel Mexico | $ | 447,238 | 57 | % | $ | (152,292 | ) | 50 | % | $ | (153,191 | ) | 50 | % | $ | 141,755 | ||||||||||||
Nextel Brazil | 174,770 | 22 | % | (87,510 | ) | 29 | % | (68,947 | ) | 22 | % | 18,313 | ||||||||||||||||
Nextel Argentina | 74,517 | 10 | % | (23,917 | ) | 8 | % | (35,314 | ) | 11 | % | 15,286 | ||||||||||||||||
Nextel Peru | 82,740 | 11 | % | (36,606 | ) | 12 | % | (24,465 | ) | 8 | % | 21,669 | ||||||||||||||||
Corporate and other | 1,600 | — | (2,242 | ) | 1 | % | (27,596 | ) | 9 | % | (28,238 | ) | ||||||||||||||||
Intercompany eliminations | (492 | ) | — | 492 | — | — | — | — | ||||||||||||||||||||
Total consolidated | $ | 780,373 | 100 | % | $ | (302,075 | ) | 100 | % | $ | (309,513 | ) | 100 | % | ||||||||||||||
b. Nextel Mexico |
Successor | Predecessor | |||||||||||||||||||||||||||||||||
Successor | % of | Company | Company | % of | ||||||||||||||||||||||||||||||
Company | Nextel | Two Months | Ten Months | Combined | Nextel | Change from | ||||||||||||||||||||||||||||
Year Ended | Mexico’s | Ended | Ended | Year Ended | Mexico’s | Previous Year | ||||||||||||||||||||||||||||
December 31, | Operating | December 31, | October 31, | December 31, | Operating | |||||||||||||||||||||||||||||
2003 | Revenues | 2002 | 2002 | 2002 | Revenues | Dollars | Percent | |||||||||||||||||||||||||||
Restated | Restated | Restated | Restated | Restated | Restated | Restated | Restated | |||||||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||||||||||||
Operating revenues | ||||||||||||||||||||||||||||||||||
Service and other revenues | $ | 559,198 | 97 | % | $ | 92,272 | $ | 339,991 | $ | 432,263 | 97 | % | $ | 126,935 | 29 | % | ||||||||||||||||||
Digital handset and accessory revenues | 19,170 | 3 | % | 3,410 | 11,565 | 14,975 | 3 | % | 4,195 | 28 | % | |||||||||||||||||||||||
578,368 | 100 | % | 95,682 | 351,556 | 447,238 | 100 | % | 131,130 | 29 | % | ||||||||||||||||||||||||
Cost of revenues | ||||||||||||||||||||||||||||||||||
Cost of service (exclusive of depreciation included below) | (115,207 | ) | (20 | )% | (16,169 | ) | (72,166 | ) | (88,335 | ) | (20 | )% | (26,872 | ) | 30 | % | ||||||||||||||||||
Cost of digital handset and accessory sales | (78,216 | ) | (14 | )% | (13,144 | ) | (50,813 | ) | (63,957 | ) | (14 | )% | (14,259 | ) | 22 | % | ||||||||||||||||||
(193,423 | ) | (34 | )% | (29,313 | ) | (122,979 | ) | (152,292 | ) | (34 | )% | (41,131 | ) | 27 | % | |||||||||||||||||||
Selling and marketing expenses | (80,791 | ) | (14 | )% | (12,524 | ) | (66,525 | ) | (79,049 | ) | (18 | )% | (1,742 | ) | 2 | % | ||||||||||||||||||
General and administrative expenses | (88,851 | ) | (14 | )% | (13,410 | ) | (60,732 | ) | (74,142 | ) | (17 | )% | (14,709 | ) | 20 | % | ||||||||||||||||||
Segment earnings | 215,303 | 38 | % | 40,435 | 101,320 | 141,755 | 31 | % | 73,548 | 52 | % | |||||||||||||||||||||||
Depreciation and amortization | (67,681 | ) | (12 | )% | (10,267 | ) | (43,648 | ) | (53,915 | ) | (12 | )% | (13,766 | ) | 26 | % | ||||||||||||||||||
Operating income | 147,622 | 26 | % | 30,168 | 57,672 | 87,840 | 19 | % | 59,782 | 68 | % | |||||||||||||||||||||||
Interest expense, net | (17,153 | ) | (3 | )% | (1,177 | ) | (2,483 | ) | (3,660 | ) | (1 | )% | (13,493 | ) | 369 | % | ||||||||||||||||||
Foreign currency transaction (losses) gains, net | (16,381 | ) | (3 | )% | 850 | (14,823 | ) | (13,973 | ) | (3 | )% | (2,408 | ) | (17 | )% | |||||||||||||||||||
Reorganization items, net | — | — | — | (46,039 | ) | (46,039 | ) | (10 | )% | 46,039 | (100 | )% | ||||||||||||||||||||||
Other expense, net | (959 | ) | — | (1,456 | ) | (3,071 | ) | (4,527 | ) | (1 | )% | 3,568 | (79 | )% | ||||||||||||||||||||
Income (loss) before income tax | $ | 113,129 | 20 | % | $ | 28,385 | $ | (8,744 | ) | $ | 19,641 | 4 | % | $ | 93,488 | 476 | % | |||||||||||||||||
69
1. | Operating revenues |
• | a 28% increase in the average number of digital handsets in service resulting from growth in Mexico’s existing markets, the expansion of service coverage in Mexico and continued emphasis on maintaining brand awareness; | |
• | an increase in average revenue per handset primarily due to the successful implementation of previously introduced monthly service plans and increased usage; and | |
• | revenue generated from the implementation of an amended handset insurance program during 2003. |
2. | Cost of revenues |
• | increases in variable costs related to interconnect fees resulting from a 49% increase in total system minutes of use, partially offset by decreases in variable rates per minute of use beginning in 2003 when Nextel Mexico renegotiated interconnect rates with some of its traffic carriers; | |
• | increases in service and repair expenses, primarily due to an amended handset insurance program that resulted in the reclassification of handset insurance program revenues that were netted against |
70
costs and an increase in claims under the handset insurance program as a result of growth in Nextel Mexico’s customer base; and | ||
• | increases in fixed costs related to direct switch and transmitter and receiver site costs, including utility and warranty costs that Nextel Mexico incurred resulting from a 22% increase in the number of transmitter and receiver sites in service from December 31, 2002 to December 31, 2003. |
3. | Selling and marketing expenses |
4. | General and administrative expenses |
• | a $12.2 million, or 31%, increase in general corporate expenses primarily caused by an increase in operating taxes on certain gross revenues, an increase in payroll and related expenses and higher rent and building maintenance costs; and | |
• | a $4.2 million, or 23%, increase in customer care and billing operations primarily due to an increase in payroll and related expenses caused by an increase in customer care personnel to support a larger customer base and the implementation of new customer retention programs. Bad debt expense remained relatively flat from 2002 to 2003. |
5. | Depreciation and amortization |
71
• | interest incurred on Nextel Mexico’s $71.3 million tower financing obligations, which Nextel Mexico incurred in connection with the sale-leaseback of communication towers during 2003; | |
• | interest incurred on Nextel Mexico’s $125.0 million portion of the international equipment facility for which it became obligated in November 2002; and | |
• | the recognition of Nextel Mexico’s $2.5 million portion of the loss on the termination of the interest rate swap associated with the international equipment facility in the third quarter of 2003. |
7. | Foreign currency transaction (losses) gains, net |
8. | Reorganization items, net |
72
c. Nextel Brazil |
Successor | Predecessor | |||||||||||||||||||||||||||||||||
Successor | % of | Company | Company | % of | ||||||||||||||||||||||||||||||
Company | Nextel | Two Months | Ten Months | Combined | Nextel | Change from | ||||||||||||||||||||||||||||
Year Ended | Brazil’s | Ended | Ended | Year Ended | Brazil’s | Previous Year | ||||||||||||||||||||||||||||
December 31, | Operating | December 31, | October 31, | December 31, | Operating | |||||||||||||||||||||||||||||
2003 | Revenues | 2002 | 2002 | 2002 | Revenues | Dollars | Percent | |||||||||||||||||||||||||||
Restated | Restated | Restated | Restated | |||||||||||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||||||||||||
Operating revenues | ||||||||||||||||||||||||||||||||||
Service and other revenues | $ | 138,244 | 93 | % | $ | 20,617 | $ | 141,908 | $ | 162,525 | 93 | % | $ | (24,281 | ) | (15 | )% | |||||||||||||||||
Digital handset and accessory revenues | 10,301 | 7 | % | 1,373 | 10,872 | 12,245 | 7 | % | (1,944 | ) | (16 | )% | ||||||||||||||||||||||
148,545 | 100 | % | 21,990 | 152,780 | 174,770 | 100 | % | (26,225 | ) | (15 | )% | |||||||||||||||||||||||
Cost of revenues | ||||||||||||||||||||||||||||||||||
Cost of service (exclusive of depreciation included below) | (57,057 | ) | (38 | )% | (6,861 | ) | (57,698 | ) | (64,559 | ) | (37 | )% | 7,502 | (12 | )% | |||||||||||||||||||
Cost of digital handset and accessory sales | (27,916 | ) | (19 | )% | (2,973 | ) | (19,978 | ) | (22,951 | ) | (13 | )% | (4,965 | ) | 22 | % | ||||||||||||||||||
(84,973 | ) | (57 | )% | (9,834 | ) | (77,676 | ) | (87,510 | ) | (50 | )% | 2,537 | (3 | )% | ||||||||||||||||||||
Selling and marketing expenses | (21,862 | ) | (15 | )% | (2,629 | ) | (20,219 | ) | (22,848 | ) | (13 | )% | 986 | (4 | )% | |||||||||||||||||||
General and administrative expenses | (28,107 | ) | (19 | )% | (4,864 | ) | (41,235 | ) | (46,099 | ) | (27 | )% | 17,992 | (39 | )% | |||||||||||||||||||
Segment earnings | 13,603 | 9 | % | 4,663 | 13,650 | 18,313 | 10 | % | (4,710 | ) | (26 | )% | ||||||||||||||||||||||
Restructuring and other charges | — | — | — | (695 | ) | (695 | ) | — | 695 | (100 | )% | |||||||||||||||||||||||
Depreciation and amortization | (4,520 | ) | (3 | )% | (263 | ) | (9,977 | ) | (10,240 | ) | (6 | )% | 5,720 | (56 | )% | |||||||||||||||||||
Operating income | 9,083 | 6 | % | 4,400 | 2,978 | 7,378 | 4 | % | 1,705 | 23 | % | |||||||||||||||||||||||
Interest expense, net | (5,418 | ) | (4 | )% | (4,569 | ) | (9,879 | ) | (14,448 | ) | (8 | )% | 9,030 | (63 | )% | |||||||||||||||||||
Foreign currency transaction gains (losses), net | 23,751 | 16 | % | 1,422 | (27,669 | ) | (26,247 | ) | (15 | )% | 49,998 | (190 | )% | |||||||||||||||||||||
Gain on extinguishment of debt | 22,739 | 15 | % | — | — | — | — | 22,739 | 100 | % | ||||||||||||||||||||||||
Reorganization items, net | — | — | — | (33,658 | ) | (33,658 | ) | (19 | )% | 33,658 | (100 | )% | ||||||||||||||||||||||
Other expense, net | (8,239 | ) | (5 | )% | (950 | ) | (3,703 | ) | (4,653 | ) | (3 | )% | (3,586 | ) | 77 | % | ||||||||||||||||||
Income (loss) before income tax | $ | 41,916 | 28 | % | $ | 303 | $ | (71,931 | ) | $ | (71,628 | ) | (41 | )% | $ | 113,544 | (159 | )% | ||||||||||||||||
73
1. | Operating revenues |
2. | Cost of revenues |
3. | Selling and marketing expenses |
74
4. | General and administrative expenses |
• | a $12.2 million, or 54%, decrease in general corporate expenses largely resulting from a $9.8 million, or 143%, reduction in tax and other contingency expenses and the depreciation of the Brazilian real; and | |
• | a $5.3 million, or 94%, decrease in bad debt expense, which also decreased as a percentage of revenues from 3.2% for the year ended December 31, 2002 to 0.2% for the year ended December 31, 2003, primarily as a result of improved collections during 2003, a change in Nextel Brazil’s bad debt reserve policy and the depreciation of the Brazilian real. |
5. | Depreciation and amortization |
6. | Interest expense, net |
7. | Foreign currency transaction gains (losses), net |
8. | Gain on extinguishment of debt |
75
9. | Reorganization items, net |
10. | Other expense, net |
d. Nextel Argentina |
Successor | Predecessor | |||||||||||||||||||||||||||||||||
Successor | % of | Company | Company | % of | ||||||||||||||||||||||||||||||
Company | Nextel | Two Months | Ten Months | Combined | Nextel | Change from | ||||||||||||||||||||||||||||
Year Ended | Argentina’s | Ended | Ended | Year Ended | Argentina’s | Previous Year | ||||||||||||||||||||||||||||
December 31, | Operating | December 31, | October 31, | December 31, | Operating | |||||||||||||||||||||||||||||
2003 | Revenues | 2002 | 2002 | 2002 | Revenues | Dollars | Percent | |||||||||||||||||||||||||||
Restated | Restated | Restated | Restated | |||||||||||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||||||||||||
Operating revenues | ||||||||||||||||||||||||||||||||||
Service and other revenues | $ | 106,730 | 90 | % | $ | 10,282 | $ | 60,920 | $ | 71,202 | 96 | % | $ | 35,528 | 50 | % | ||||||||||||||||||
Digital handset and accessory revenues | 11,413 | 10 | % | 445 | 2,870 | 3,315 | 4 | % | 8,098 | 244 | % | |||||||||||||||||||||||
118,143 | 100 | % | 10,727 | 63,790 | 74,517 | 100 | % | 43,626 | 59 | % | ||||||||||||||||||||||||
Cost of revenues | ||||||||||||||||||||||||||||||||||
Cost of service (exclusive of depreciation included below) | (32,740 | ) | (28 | )% | (2,264 | ) | (14,061 | ) | (16,325 | ) | (22 | )% | (16,415 | ) | 101 | % | ||||||||||||||||||
Cost of digital handset and accessory sales | (15,911 | ) | (13 | )% | (1,240 | ) | (6,352 | ) | (7,592 | ) | (10 | )% | (8,319 | ) | 110 | % | ||||||||||||||||||
(48,651 | ) | (41 | )% | (3,504 | ) | (20,413 | ) | (23,917 | ) | (32 | )% | (24,734 | ) | 103 | % | |||||||||||||||||||
Selling and marketing expenses | (11,030 | ) | (9 | )% | (1,450 | ) | (9,297 | ) | (10,747 | ) | (14 | )% | (283 | ) | 3 | % | ||||||||||||||||||
General and administrative expenses | (25,794 | ) | (22 | )% | (2,952 | ) | (21,615 | ) | (24,567 | ) | (33 | )% | (1,227 | ) | 5 | % | ||||||||||||||||||
Segment earnings | 32,668 | 28 | % | 2,821 | 12,465 | 15,286 | 21 | % | 17,382 | 114 | % | |||||||||||||||||||||||
Impairment, restructuring and other charges | — | — | — | (8,542 | ) | (8,542 | ) | (12 | )% | 8,542 | (100 | )% | ||||||||||||||||||||||
Depreciation and amortization | (3,983 | ) | (3 | )% | (212 | ) | (2,231 | ) | (2,443 | ) | (3 | )% | (1,540 | ) | 63 | % | ||||||||||||||||||
Operating income | 28,685 | 25 | % | 2,609 | 1,692 | 4,301 | 6 | % | 24,384 | 567 | % | |||||||||||||||||||||||
Interest income (expense), net | 459 | 0 | % | (156 | ) | (9,318 | ) | (9,474 | ) | (13 | )% | 9,933 | (105 | )% | ||||||||||||||||||||
Foreign currency transaction gains (losses), net | 1,335 | 1 | % | 285 | (137,820 | ) | (137,535 | ) | (185 | )% | 138,870 | (101 | )% | |||||||||||||||||||||
Reorganization items, net | — | — | — | (4,112 | ) | (4,112 | ) | (5 | )% | 4,112 | (100 | )% | ||||||||||||||||||||||
Other income (expense), net | 8,383 | 7 | % | (60 | ) | (1,954 | ) | (2,014 | ) | (3 | )% | 10,397 | (516 | )% | ||||||||||||||||||||
Income (loss) before income tax | $ | 38,862 | 33 | % | $ | 2,678 | $ | (151,512 | ) | $ | (148,834 | ) | (200 | )% | $ | 187,696 | (126 | )% | ||||||||||||||||
76
1. | Operating revenues |
• | a 20% increase in the average number of digital handsets in service, resulting from growth in Nextel Argentina’s existing markets and lower customer turnover; and | |
• | an increase in average revenue per handset, largely due to monthly service plans with higher access fees that Nextel Argentina introduced in 2002 and the implementation of a termination fee between mobile carriers during the second quarter of 2003. |
• | a change in accounting for digital handset revenues that Nextel Argentina implemented during the fourth quarter of 2002, when it began recognizing all digital handset revenue and related cost of revenue upon delivery of the handset to the customer; and | |
• | an 18% increase in handset sales and a change in the mix of handsets sold during 2003, which included a higher proportion of expensive models than those sold during 2002, when handset sales primarily included lower cost refurbished models. |
2. | Cost of revenues |
• | an increase in variable costs related to interconnect fees resulting from a 46% increase in total system minutes of use, primarily due to an increase in the number of digital handsets in service and the implementation of rate plans with increased volumes of usable minutes; | |
• | a significant increase in per minute costs related to interconnect minutes of use resulting from the signing of interconnect agreements with other mobile service providers during the second quarter of 2003; |
77
• | an increase in service and repair costs resulting from increased activity associated with a program under which Nextel Argentina provides new handsets to customers to replace damaged handsets; and | |
• | an increase in fixed costs related to direct switch and transmitter and receiver site costs that Nextel Argentina incurred as a result of a 7% increase in the number of transmitter and receiver sites in service from December 31, 2002 to December 31, 2003. |
3. | Selling and marketing expenses |
4. | General and administrative expenses |
5. | Impairment, restructuring and other charges |
6. | Depreciation and amortization |
7. | Interest income (expense), net |
78
8. | Foreign currency transaction gains (losses), net |
9. | Reorganization items, net |
10. | Other income (expense), net |
79
e. Nextel Peru |
Successor | Predecessor | |||||||||||||||||||||||||||||||||
Successor | % of | Company | Company | % of | ||||||||||||||||||||||||||||||
Company | Nextel | Two Months | Ten Months | Combined | Nextel | Change from | ||||||||||||||||||||||||||||
Year Ended | Peru’s | Ended | Ended | Year Ended | Peru’s | Previous Year | ||||||||||||||||||||||||||||
December 31, | Operating | December 31, | October 31, | December 31, | Operating | |||||||||||||||||||||||||||||
2003 | Revenues | 2002 | 2002 | 2002 | Revenues | Dollars | Percent | |||||||||||||||||||||||||||
Restated | Restated | Restated | Restated | |||||||||||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||||||||||||
Operating revenues | ||||||||||||||||||||||||||||||||||
Service and other revenues | $ | 90,391 | 98 | % | $ | 14,303 | $ | 66,598 | $ | 80,901 | 98 | % | $ | 9,490 | 12 | % | ||||||||||||||||||
Digital handset and accessory revenues | 2,184 | 2 | % | 426 | 1,413 | 1,839 | 2 | % | 345 | 19 | % | |||||||||||||||||||||||
92,575 | 100 | % | 14,729 | 68,011 | 82,740 | 100 | % | 9,835 | 12 | % | ||||||||||||||||||||||||
Cost of revenues | ||||||||||||||||||||||||||||||||||
Cost of service (exclusive of depreciation included below) | (34,049 | ) | (37 | )% | (4,532 | ) | (20,326 | ) | (24,858 | ) | (30 | )% | (9,191 | ) | 37 | % | ||||||||||||||||||
Cost of digital handset and accessory sales | (11,246 | ) | (12 | )% | (2,036 | ) | (9,712 | ) | (11,748 | ) | (14 | )% | 502 | (4 | )% | |||||||||||||||||||
(45,295 | ) | (49 | )% | (6,568 | ) | (30,038 | ) | (36,606 | ) | (44 | )% | (8,689 | ) | 24 | % | |||||||||||||||||||
Selling and marketing expenses | (10,762 | ) | (11 | )% | (1,796 | ) | (8,610 | ) | (10,406 | ) | (13 | )% | (356 | ) | 3 | % | ||||||||||||||||||
General and administrative expenses | (15,579 | ) | (17 | )% | (3,170 | ) | (10,889 | ) | (14,059 | ) | (17 | )% | (1,520 | ) | 11 | % | ||||||||||||||||||
Segment earnings | 20,939 | 23 | % | 3,195 | 18,474 | 21,669 | 26 | % | (730 | ) | (3 | )% | ||||||||||||||||||||||
Restructuring and other charges | — | — | — | (23 | ) | (23 | ) | — | 23 | (100 | )% | |||||||||||||||||||||||
Depreciation and amortization | (3,054 | ) | (4 | )% | (323 | ) | (5,068 | ) | (5,391 | ) | (6 | )% | 2,337 | (43 | )% | |||||||||||||||||||
Operating income | 17,885 | 19 | % | 2,872 | 13,383 | 16,255 | 20 | % | 1,630 | 10 | % | |||||||||||||||||||||||
Interest expense, net | (1,942 | ) | (2 | )% | (246 | ) | (2,223 | ) | (2,469 | ) | (3 | )% | 527 | (21 | )% | |||||||||||||||||||
Foreign currency transaction gains (losses), net | 165 | — | 624 | (1,030 | ) | (406 | ) | (1 | )% | 571 | (141 | )% | ||||||||||||||||||||||
Reorganization items, net | — | — | — | (31,030 | ) | (31,030 | ) | (38 | )% | 31,030 | (100 | )% | ||||||||||||||||||||||
Other (expense) income, net | (328 | ) | — | 6,983 | (530 | ) | 6,453 | 8 | % | (6,781 | ) | (105 | )% | |||||||||||||||||||||
Income (loss) before income tax | $ | 15,780 | 17 | % | $ | 10,233 | $ | (21,430 | ) | $ | (11,197 | ) | (14 | )% | $ | 26,977 | (241 | )% | ||||||||||||||||
1. | Operating revenues |
80
2. | Cost of revenues |
• | an increase in variable costs related to interconnect fees resulting from a 14% increase in total system minutes of use, largely related to the 16% increase in the average number of digital handsets in service; | |
• | an increase in average variable cost per interconnect minute of use caused by higher interconnect rates that Nextel Peru began incurring in 2003 as a result of a change in intercarrier settlement methodologies due to a decision made by the Peruvian telecommunications regulator; and | |
• | an increase in fixed costs related to direct switch and transmitter and receiver site costs, including utility and warranty costs that Nextel Peru incurred as a result of a 6% increase in the number of transmitter and receiver sites in service from December 31, 2002 to December 31, 2003. |
3. | Selling and marketing expenses |
4. | General and administrative expenses |
• | a $0.8 million, or 17%, increase in customer care and billing operations expenses primarily as a result of an increase in payroll and related expenses related to an increase in customer care personnel necessary to support a larger customer base; and | |
• | a $0.8 million, or 29%, increase in information technology expenses largely as a result of the implementation of a renumbering program which added an extra digit to all mobile numbers, new software licenses and maintenance and an increase in payroll and related expenses caused by an increase in information technology personnel. |
5. | Depreciation and amortization |
6. | Interest expense, net |
81
7. | Reorganization items, net |
8. | Other (expense) income, net |
f. Corporate and other |
Successor | Predecessor | |||||||||||||||||||||||||||||||||
Successor | % of | Company | Company | % of | ||||||||||||||||||||||||||||||
Company | Corporate | Two Months | Ten Months | Combined | Corporate | Change from | ||||||||||||||||||||||||||||
Year Ended | and Other | Ended | Ended | Year Ended | and Other | Previous Year | ||||||||||||||||||||||||||||
December 31, | Operating | December 31, | October 31, | December 31, | Operating | |||||||||||||||||||||||||||||
2003 | Revenues | 2002 | 2002 | 2002 | Revenues | Dollars | Percent | |||||||||||||||||||||||||||
Restated | Restated | Restated | Restated | Restated | Restated | |||||||||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||||||||||||
Operating revenues | ||||||||||||||||||||||||||||||||||
Service and other revenues | $ | 1,567 | 100 | % | $ | 238 | $ | 1,327 | $ | 1,565 | 98 | % | $ | 2 | — | |||||||||||||||||||
Digital handset and accessory revenues | 4 | — | 1 | 34 | 35 | 2 | % | (31 | ) | (89 | )% | |||||||||||||||||||||||
1,571 | 100 | % | 239 | 1,361 | 1,600 | 100 | % | (29 | ) | (2 | )% | |||||||||||||||||||||||
Cost of revenues | ||||||||||||||||||||||||||||||||||
Cost of service (exclusive of depreciation included below) | (1,483 | ) | (94 | )% | (192 | ) | (1,147 | ) | (1,339 | ) | (84 | )% | (144 | ) | 11 | % | ||||||||||||||||||
Cost of digital handset and accessory sales | (970 | ) | (62 | )% | (176 | ) | (727 | ) | (903 | ) | (56 | )% | (67 | ) | 7 | % | ||||||||||||||||||
(2,453 | ) | (156 | )% | (368 | ) | (1,874 | ) | (2,242 | ) | (140 | )% | (211 | ) | 9 | % | |||||||||||||||||||
Selling and marketing expenses | (4,130 | ) | (263 | )% | (539 | ) | (3,259 | ) | (3,798 | ) | (237 | )% | (332 | ) | 9 | % | ||||||||||||||||||
General and administrative expenses | (30,494 | ) | NM | (3,774 | ) | (20,024 | ) | (23,798 | ) | NM | (6,696 | ) | 28 | % | ||||||||||||||||||||
Segment losses | (35,506 | ) | NM | (4,442 | ) | (23,796 | ) | (28,238 | ) | NM | (7,268 | ) | 26 | % | ||||||||||||||||||||
Impairment, restructuring and other charges | — | — | — | (6,548 | ) | (6,548 | ) | (409 | )% | 6,548 | (100 | )% | ||||||||||||||||||||||
Depreciation and amortization | (755 | ) | (48 | )% | (367 | ) | (5,733 | ) | (6,100 | ) | (381 | )% | 5,345 | (88 | )% | |||||||||||||||||||
Operating loss | (36,261 | ) | NM | (4,809 | ) | (36,077 | ) | (40,886 | ) | NM | 4,625 | (11 | )% | |||||||||||||||||||||
Interest expense, net | (29,705 | ) | NM | (2,524 | ) | (119,867 | ) | (122,391 | ) | NM | 92,686 | (76 | )% | |||||||||||||||||||||
Foreign currency transaction (losses) gains, net | (14 | ) | (1 | )% | 34 | (22 | ) | 12 | 1 | % | (26 | ) | (217 | )% | ||||||||||||||||||||
(Loss) gain on extinguishment of debt, net | (335 | ) | (21 | )% | — | 101,598 | 101,598 | NM | (101,933 | ) | (100 | )% | ||||||||||||||||||||||
Reorganization items, net | — | — | — | 2,281,829 | 2,281,829 | NM | (2,281,829 | ) | (100 | )% | ||||||||||||||||||||||||
Other (expense) income, net | (8,564 | ) | (545 | )% | (6,074 | ) | 340 | (5,734 | ) | (358 | )% | (2,830 | ) | 49 | % | |||||||||||||||||||
(Loss) income before income tax | $ | (74,879 | ) | NM | $ | (13,373 | ) | $ | 2,227,801 | $ | 2,214,428 | NM | $ | (2,289,307 | ) | (103 | )% | |||||||||||||||||
82
1. | General and administrative expenses |
2. | Impairment, restructuring and other charges |
3. | Depreciation and amortization |
4. | Interest expense, net |
• | the elimination of interest expense on our former senior notes that we extinguished in connection with our emergence from Chapter 11 reorganization in 2002; | |
• | a reduction in interest expense on our former $225.0 million international equipment facility, which was entirely held at the corporate level until our emergence from reorganization in 2002, at which point only $70.0 million was held at the corporate level; and | |
• | an increase in interest income due to higher cash balances at the corporate level as a result of net proceeds received in connection with our stock and note offerings during the third quarter of 2003. |
• | accreted interest on our senior secured discount notes that we issued in November 2002; | |
• | interest expense that we recognized on the $70.0 million portion of our international equipment facility held at the corporate level, which we fully paid down in September 2003; | |
• | interest expense that we recognized on our new convertible notes issued in September 2003; and | |
• | the recognition of a $4.4 million loss on the elimination of our interest rate swap in the third quarter of 2003. | |
5. | (Loss) gain on extinguishment of debt, net |
83
6. | Reorganization items, net |
• | $2,402.9 million on the extinguishment of our former senior notes and related accrued interest; and | |
• | $34.5 million on the extinguishment of amounts due to Nextel Communications, Inc., acquisition payables, accrued expenses and other. |
• | a $92.2 million write-off of the unamortized bond discounts on our former senior notes; | |
• | a $31.2 million write-off of debt financing costs; | |
• | $17.8 million in legal, advisory, retention and tax costs; and | |
• | a $14.4 million charge resulting from the recording of our assets at their estimated fair values in accordance with fresh-start accounting rules. |
7. | Other (expense) income, net |
2. | Combined Period Ended December 31, 2002 vs. Year Ended December 31, 2001 |
84
Successor | Predecessor | ||||||||||||||||||||||||||||||||
Company | Company | ||||||||||||||||||||||||||||||||
Two Months | Ten Months | Combined | % of | % of | Change from | ||||||||||||||||||||||||||||
Ended | Ended | Year Ended | Consolidated | Year Ended | Consolidated | Previous Year | |||||||||||||||||||||||||||
December 31, | October 31, | December 31, | Operating | December 31, | Operating | ||||||||||||||||||||||||||||
2002 | 2002 | 2002 | Revenues | 2001 | Revenues | Dollars | Percent | ||||||||||||||||||||||||||
Restated | Restated | Restated | Restated | Restated | Restated | ||||||||||||||||||||||||||||
(dollars in thousands) | |||||||||||||||||||||||||||||||||
Operating revenues | $ | 143,278 | $ | 637,095 | $ | 780,373 | 100 | % | $ | 662,446 | 100 | % | $ | 117,927 | 18 | % | |||||||||||||||||
Cost of revenues (exclusive of depreciation included below) | (49,498 | ) | (252,577 | ) | (302,075 | ) | (39 | )% | (323,536 | ) | (49 | )% | 21,461 | (7 | )% | ||||||||||||||||||
Gross margin | 93,780 | 384,518 | 478,298 | 61 | % | 338,910 | 51 | % | 139,388 | 41 | % | ||||||||||||||||||||||
Selling and marketing expenses | (18,938 | ) | (107,910 | ) | (126,848 | ) | (16 | )% | (204,840 | ) | (31 | )% | 77,992 | (38 | )% | ||||||||||||||||||
General and administrative expenses | (28,170 | ) | (154,495 | ) | (182,665 | ) | (23 | )% | (221,839 | ) | (33 | )% | 39,174 | (18 | )% | ||||||||||||||||||
Impairment, restructuring and other charges | — | (15,808 | ) | (15,808 | ) | (2 | )% | (1,581,164 | ) | (239 | )% | 1,565,356 | (99 | )% | |||||||||||||||||||
Depreciation and amortization | (11,086 | ) | (64,977 | ) | (76,063 | ) | (10 | )% | (218,562 | ) | (33 | )% | 142,499 | (65 | )% | ||||||||||||||||||
Operating income (loss) | 35,586 | 41,328 | 76,914 | 10 | % | (1,887,495 | ) | (285 | )% | 1,964,409 | (104 | )% | |||||||||||||||||||||
Interest expense, net | (8,672 | ) | (147,651 | ) | (156,323 | ) | (20 | )% | (283,981 | ) | (43 | )% | 127,658 | (45 | )% | ||||||||||||||||||
Reorganization items, net | — | 2,180,998 | 2,180,998 | 279 | % | — | — | 2,180,998 | NM | ||||||||||||||||||||||||
Gain on extinguishment of debt, net | — | 101,598 | 101,598 | 13 | % | — | — | 101,598 | NM | ||||||||||||||||||||||||
Foreign currency transaction gains (losses), net | 2,616 | (180,765 | ) | (178,149 | ) | (23 | )% | (61,282 | ) | (9 | )% | (116,867 | ) | 191 | % | ||||||||||||||||||
Realized losses on investments, net | — | — | — | — | (151,291 | ) | (23 | )% | 151,291 | (100 | )% | ||||||||||||||||||||||
Equity in gain of unconsolidated affiliates | — | — | — | — | 9,640 | 2 | % | (9,640 | ) | (100 | )% | ||||||||||||||||||||||
Other expense, net | (1,557 | ) | (8,918 | ) | (10,475 | ) | (1 | )% | (4,181 | ) | (1 | )% | (6,294 | ) | 151 | % | |||||||||||||||||
Income (loss) from continuing operations before income tax (provision) benefit | 27,973 | 1,986,590 | 2,014,563 | 258 | % | (2,378,590 | ) | (359 | )% | 4,393,153 | (185 | )% | |||||||||||||||||||||
Income tax (provision) benefit | (24,874 | ) | (29,270 | ) | (54,144 | ) | (7 | )% | 68,750 | 10 | % | (122,894 | ) | (179 | )% | ||||||||||||||||||
Income (loss) from continuing operations | 3,099 | 1,957,320 | 1,960,419 | 251 | % | (2,309,840 | ) | (349 | )% | 4,270,259 | (185 | )% | |||||||||||||||||||||
Income (loss) from discontinued operations | 19,665 | (2,277 | ) | 17,388 | 2 | % | (187,481 | ) | (28 | )% | 204,869 | (109 | )% | ||||||||||||||||||||
Net income (loss) | $ | 22,764 | $ | 1,955,043 | $ | 1,977,807 | 253 | % | $ | (2,497,321 | ) | (377 | )% | $ | 4,475,128 | (179 | )% | ||||||||||||||||
85
• | a $55.3 million decrease in commissions and related sales costs, including a $27.8 million, or 39%, decrease in direct commissions and payroll costs, and a $27.5 million, or 39%, decrease in commissions earned by our indirect dealers and distributors both resulting from lower digital handsets sales in all our markets during 2002; and | |
• | a $25.0 million, or 51%, decrease in advertising expenses primarily due to our shift to less costly advertising programs, and a $4.0 million, or 30%, decrease in marketing costs primarily due to cash conservation initiatives in all our markets. |
• | a $21.1 million, or 15%, decrease in information technology expenses and general and corporate expenses as a result of cash conservation initiatives and the depreciation of the Argentine peso and Brazilian real as compared to the U.S. dollar during 2002; and | |
• | a $21.7 million, or 56%, decrease in bad debt expense, which decreased as a percentage of consolidated operating revenues from 5.9% for year ended December 31, 2001 to 2.2% for the year ended December 31, 2002, primarily due to the implementation of stricter credit policies and improved collections procedures across all our markets. |
86
• | a $2,402.9 million net gain on the extinguishment of our senior notes and related accrued interest; and | |
• | a $37.7 million net gain on the extinguishment of accrued expenses and other. |
• | a $114.3 million charge resulting from adjustments to the carrying values of our long-lived assets and liabilities to estimated fair values in accordance with fresh-start accounting rules; | |
• | a $92.2 million write off of the unamortized bond discounts on our senior notes; | |
• | a $31.2 million write off of debt financing costs; and | |
• | $21.9 million in legal, advisory and employee retention costs. |
87
• | a $188.4 million pre-tax loss that we realized during the third quarter of 2001 as a result of an other-than-temporary reduction in the value of our investment in TELUS Corporation; and | |
• | a $3.7 million write-off that we recorded in the second quarter of 2001 related to our warrant to purchase shares of China United Telecommunications Corporation upon expiration of the warrant. |
13. | Other expense, net |
14. | Income tax (provision) benefit |
15. | Income (loss) from discontinued operations |
88
Segment Results |
% of | ||||||||||||||||||||||||||||
Consolidated | ||||||||||||||||||||||||||||
% of | % of | Selling, | Selling, | |||||||||||||||||||||||||
Consolidated | Consolidated | General and | General and | Segment | ||||||||||||||||||||||||
Combined Year Ended | Operating | Operating | Cost of | Cost of | Administrative | Administrative | Earnings | |||||||||||||||||||||
December 31, 2002 | Revenues | Revenues | Revenues | Revenues | Expenses | Expenses | (Losses) | |||||||||||||||||||||
Restated | Restated | Restated | ||||||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||||||
Nextel Mexico | $ | 447,238 | 57 | % | $ | (152,292 | ) | 50 | % | $ | (153,191 | ) | 50 | % | $ | 141,755 | ||||||||||||
Nextel Brazil | 174,770 | 22 | % | (87,510 | ) | 29 | % | (68,947 | ) | 22 | % | 18,313 | ||||||||||||||||
Nextel Peru | 82,740 | 11 | % | (36,606 | ) | 12 | % | (24,465 | ) | 8 | % | 21,669 | ||||||||||||||||
Nextel Argentina | 74,517 | 10 | % | (23,917 | ) | 8 | % | (35,314 | ) | 11 | % | 15,286 | ||||||||||||||||
Corporate and other | 1,600 | — | (2,242 | ) | 1 | % | (27,596 | ) | 9 | % | (28,238 | ) | ||||||||||||||||
Intercompany eliminations | (492 | ) | — | 492 | — | — | — | — | ||||||||||||||||||||
Total consolidated | $ | 780,373 | 100 | % | $ | (302,075 | ) | 100 | % | $ | (309,513 | ) | 100 | % | ||||||||||||||
% of | ||||||||||||||||||||||||||||
Consolidated | ||||||||||||||||||||||||||||
Selling, | ||||||||||||||||||||||||||||
% of | % of | Selling, | General | |||||||||||||||||||||||||
Consolidated | Consolidated | General and | and | Segment | ||||||||||||||||||||||||
Year Ended | Operating | Operating | Cost of | Cost of | Administrative | Administrative | Earnings | |||||||||||||||||||||
December 31, 2001 | Revenues | Revenues | Revenues | Revenues | Expenses | Expenses | (Losses) | |||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||||||
Nextel Mexico | $ | 289,335 | 44 | % | $ | (118,621 | ) | 37 | % | $ | (154,781 | ) | 36 | % | $ | 15,933 | ||||||||||||
Nextel Brazil | 171,138 | 26 | % | (116,508 | ) | 36 | % | (121,940 | ) | 29 | % | (67,310 | ) | |||||||||||||||
Nextel Peru | 64,952 | 10 | % | (31,077 | ) | 9 | % | (28,505 | ) | 7 | % | 5,370 | ||||||||||||||||
Nextel Argentina | 135,320 | 20 | % | (55,395 | ) | 17 | % | (77,535 | ) | 18 | % | 2,390 | ||||||||||||||||
Corporate and other | 2,240 | — | (2,234 | ) | 1 | % | (44,158 | ) | 10 | % | (44,152 | ) | ||||||||||||||||
Intercompany eliminations | (539 | ) | — | 299 | — | 240 | — | — | ||||||||||||||||||||
Total consolidated | $ | 662,446 | 100 | % | $ | (323,536 | ) | 100 | % | $ | (426,679 | ) | 100 | % | ||||||||||||||
89
Predecessor | |||||||||||||||||||||||||||||||||
Successor | Company | ||||||||||||||||||||||||||||||||
Company | Ten | % of | % of | ||||||||||||||||||||||||||||||
Two Months | Months | Combined | Nextel | Nextel | Change from | ||||||||||||||||||||||||||||
Ended | Ended | Year Ended | Mexico’s | Year Ended | Mexico’s | Previous Year | |||||||||||||||||||||||||||
December 31, | October 31, | December 31, | Operating | December 31, | Operating | ||||||||||||||||||||||||||||
2002 | 2002 | 2002 | Revenues | 2001 | Revenues | Dollars | Percent | ||||||||||||||||||||||||||
Restated | Restated | Restated | Restated | Restated | Restated | ||||||||||||||||||||||||||||
(dollars in thousands) | |||||||||||||||||||||||||||||||||
Operating revenues | $ | 95,682 | $ | 351,556 | $ | 447,238 | 100 | % | $ | 289,335 | 100 | % | $ | 157,903 | 55 | % | |||||||||||||||||
Cost of revenues (exclusive of depreciation included below | (29,313 | ) | (122,979 | ) | (152,292 | ) | (34 | )% | (118,621 | ) | (41 | )% | (33,671 | ) | 28 | % | |||||||||||||||||
Gross margin | 66,369 | 228,577 | 294,946 | 66 | % | 170,714 | 59 | % | 124,232 | 73 | % | ||||||||||||||||||||||
Selling and marketing expenses | (12,524 | ) | (66,525 | ) | (79,049 | ) | (18 | )% | (87,257 | ) | (30 | )% | 8,208 | (9 | )% | ||||||||||||||||||
General and administrative expenses | (13,410 | ) | (60,732 | ) | (74,142 | ) | (17 | )% | (67,524 | ) | (24 | )% | (6,618 | ) | 10 | % | |||||||||||||||||
Segment earnings | 40,435 | 101,320 | 141,755 | 31 | % | 15,933 | 5 | % | 125,821 | 790 | % | ||||||||||||||||||||||
Impairment, restructuring and other charges | — | — | — | — | (433,945 | ) | (150 | )% | 433,945 | (100 | )% | ||||||||||||||||||||||
Depreciation and amortization | (10,267 | ) | (43,648 | ) | (53,915 | ) | (12 | )% | (67,106 | ) | (23 | )% | 13,191 | (20 | )% | ||||||||||||||||||
Operating income (loss) | 30,168 | 57,672 | 87,840 | 19 | % | (485,118 | ) | (168 | )% | 572,957 | (118 | )% | |||||||||||||||||||||
Interest expense, net | (1,177 | ) | (2,483 | ) | (3,660 | ) | (1 | )% | (5,245 | ) | (2 | )% | 1,585 | (30 | )% | ||||||||||||||||||
Foreign currency transaction gains (losses), net | 850 | (14,823 | ) | (13,973 | ) | (3 | )% | 1,816 | 1 | % | (15,789 | ) | NM | ||||||||||||||||||||
Reorganization items, net | — | (46,039 | ) | (46,039 | ) | (10 | )% | — | — | (46,039 | ) | NM | |||||||||||||||||||||
Other expense, net | (1,456 | ) | (3,071 | ) | (4,527 | ) | (1 | )% | (954 | ) | — | (3,573 | ) | 375 | % | ||||||||||||||||||
Income (loss) before income tax | $ | 28,385 | $ | (8,744 | ) | $ | 19,641 | 4 | % | $ | (489,501 | ) | (169 | )% | $ | 509,141 | (104 | )% | |||||||||||||||
90
1. | Operating revenues |
Successor | Predecessor | ||||||||||||||||||||||||
Company | Company | ||||||||||||||||||||||||
Two Months | Ten Months | Combined | Increase from | ||||||||||||||||||||||
Ended | Ended | Year Ended | Year Ended | Previous Year | |||||||||||||||||||||
December 31, | October 31, | December 31, | December 31, | ||||||||||||||||||||||
2002 | 2002 | 2002 | 2001 | Dollars | Percent | ||||||||||||||||||||
(dollars in thousands) | |||||||||||||||||||||||||
Wireless service and other revenues | $ | 92,272 | $ | 339,991 | $ | 432,263 | $ | 280,254 | $ | 152,009 | 54 | % | |||||||||||||
Digital handset and accessory sales | 3,410 | 11,565 | 14,975 | 9,081 | 5,894 | 65 | % | ||||||||||||||||||
Total operating revenues | $ | 95,682 | $ | 351,556 | $ | 447,238 | $ | 289,335 | $ | 157,903 | 55 | % | |||||||||||||
• | a 48% increase in the average number of digital handsets in commercial service from the year ended December 31, 2001 to the year ended December 31, 2002 resulting from growth in Nextel Mexico’s existing markets and a continued emphasis on maintaining brand awareness; and | |
• | the successful introduction of new monthly service plans that have generated higher average revenues per handset for the year ended December 31, 2002 compared to the year ended December 31, 2001. |
2. | Cost of revenues |
Successor | Predecessor | ||||||||||||||||||||||||
Company | Company | ||||||||||||||||||||||||
Two Months | Ten Months | Combined | Increase from | ||||||||||||||||||||||
Ended | Ended | Year Ended | Year Ended | Previous Year | |||||||||||||||||||||
December 31, | October 31, | December 31, | December 31, | ||||||||||||||||||||||
2002 | 2002 | 2002 | 2001 | Dollars | Percent | ||||||||||||||||||||
(dollars in thousands) | |||||||||||||||||||||||||
Cost of providing wireless services and other | $ | 16,169 | $ | 72,166 | $ | 88,335 | $ | 57,011 | $ | 31,324 | 55 | % | |||||||||||||
Cost of digital handset and accessory sales | 13,144 | 50,813 | 63,957 | 61,610 | 2,347 | 4 | % | ||||||||||||||||||
Total cost of revenues | $ | 29,313 | $ | 122,979 | $ | 152,292 | $ | 118,621 | $ | 33,671 | 28 | % | |||||||||||||
• | an increase in variable costs related to interconnect fees resulting from a 99% increase in total system minutes of use from the year ended December 31, 2001 to the year ended December 31, 2002, mainly due to the increased number of handsets in service and the implementation of usage volume-based promotions; and | |
• | an increase in fixed costs related to direct switch and transmitter and receiver site costs, including rent, utility and warranty costs that Nextel Mexico incurred resulting from a 30% increase in the number of transmitter and receiver sites in service from December 31, 2001 to December 31, 2002. |
91
3. | Selling and marketing expenses |
• | a $4.9 million, or 13%, decrease in commissions earned by indirect dealers and distributors as a result of fewer digital handsets sold through indirect channels, partially offset by higher average commissions paid per handset sold by indirect dealers; | |
• | a $3.4 million, or 13%, decrease in advertising expenses primarily due to Nextel Mexico’s shift to less costly advertising programs; | |
• | a $1.2 million, or 28%, decrease in marketing costs primarily due to a decrease in analog costs, as well as a reduction in temporary and contractor personnel; and | |
• | a $1.0 million, or 5%, decrease in direct commission and payroll costs as a result of fewer handsets sold by Nextel Mexico’s internal sales force. |
4. | General and administrative expenses |
• | a $8.3 million, or 20%, increase in information technology and general corporate expenses primarily due to activities to support the growth in operations and expansion into new geographic areas, increases in facilities and administrative expenses associated with a new facility in Mexico City that houses Nextel Mexico’s customer care operations and an increase in a business tax that is based on a portion of Nextel Mexico’s service revenues; and | |
• | a $6.3 million, or 51%, increase in expenses related to billing, collection, customer retention and customer care activities primarily due to an increase in customer care headcount to support a larger customer base and an increase in program costs designed to increase customer retention. | |
5. | Impairment, restructuring and other charges |
6. | Depreciation and amortization |
92
7. | Interest expense, net |
8. | Foreign currency transaction (losses) gains, net |
9. | Reorganization items, net |
10. | Other expense, net |
93
Successor | Predecessor | ||||||||||||||||||||||||||||||||
Company | Company | % of | % of | ||||||||||||||||||||||||||||||
Two Months | Ten Months | Combined | Nextel | Nextel | Change from | ||||||||||||||||||||||||||||
Ended | Ended | Year Ended | Brazil’s | Year Ended | Brazil’s | Previous Year | |||||||||||||||||||||||||||
December 31, | October 31, | December 31, | Operating | December 31, | Operating | ||||||||||||||||||||||||||||
2002 | 2002 | 2002 | Revenues | 2001 | Revenues | Dollars | Percent | ||||||||||||||||||||||||||
(dollars in thousands) | |||||||||||||||||||||||||||||||||
Operating revenues | $ | 21,990 | $ | 152,780 | $ | 174,770 | 100 | % | $ | 171,138 | 100 | % | $ | 3,632 | 2 | % | |||||||||||||||||
Cost of revenues (exclusive of depreciation included below | (9,834 | ) | (77,676 | ) | (87,510 | ) | (50 | )% | (116,508 | ) | (68 | )% | 28,998 | (25 | )% | ||||||||||||||||||
Gross margin | 12,156 | 75,104 | 87,260 | 50 | % | 54,630 | 32 | % | 32,630 | 60 | % | ||||||||||||||||||||||
Selling and marketing expenses | (2,629 | ) | (20,219 | ) | (22,848 | ) | (13 | )% | (56,998 | ) | (33 | )% | 34,150 | (60 | )% | ||||||||||||||||||
General and administrative expenses | (4,864 | ) | (41,235 | ) | (46,099 | ) | (27 | )% | (64,942 | ) | (38 | )% | 18,843 | (29 | )% | ||||||||||||||||||
Segment earnings (losses) | 4,663 | 13,650 | 18,313 | 10 | % | (67,310 | ) | (39 | )% | 85,623 | (127 | )% | |||||||||||||||||||||
Impairment, restructuring and other charges | — | (695 | ) | (695 | ) | — | (679,440 | ) | (397 | )% | 678,745 | (100 | )% | ||||||||||||||||||||
Depreciation and amortization | (263 | ) | (9,977 | ) | (10,240 | ) | (6 | )% | (73,026 | ) | (43 | )% | 62,786 | (86 | )% | ||||||||||||||||||
Operating income (loss) | 4,400 | 2,978 | 7,378 | 4 | % | (819,776 | ) | (479 | )% | 827,154 | (101 | )% | |||||||||||||||||||||
Interest expense, net | (4,569 | ) | (9,879 | ) | (14,448 | ) | (8 | )% | 10,126 | 6 | % | (24,574 | ) | (243 | )% | ||||||||||||||||||
Foreign currency transaction gains (losses), net | 1,422 | (27,669 | ) | (26,247 | ) | (15 | )% | (62,590 | ) | (37 | )% | 36,343 | (58 | )% | |||||||||||||||||||
Reorganization items, net | — | (33,658 | ) | (33,658 | ) | (19 | )% | — | — | (33,658 | ) | NM | |||||||||||||||||||||
Other expense, net | (950 | ) | (3,703 | ) | (4,653 | ) | (3 | )% | (5,690 | ) | (3 | )% | 1,037 | (18 | )% | ||||||||||||||||||
Income (loss) before income tax | $ | 303 | $ | (71,931 | ) | $ | (71,628 | ) | (41 | )% | $ | (877,930 | ) | (513 | )% | $ | 806,302 | (92 | )% | ||||||||||||||
1. | Operating revenues |
Successor | Predecessor | ||||||||||||||||||||||||
Company | Company | ||||||||||||||||||||||||
Two | Ten | ||||||||||||||||||||||||
Months | Months | Combined | Increase from | ||||||||||||||||||||||
Ended | Ended | Year Ended | Year Ended | Previous Year | |||||||||||||||||||||
December 31, | October 31, | December 31, | December 31, | ||||||||||||||||||||||
2002 | 2002 | 2002 | 2001 | Dollars | Percent | ||||||||||||||||||||
(dollars in thousands) | |||||||||||||||||||||||||
Wireless service and other revenues | $ | 20,617 | $ | 141,908 | $ | 162,525 | $ | 159,844 | $ | 2,681 | 2% | ||||||||||||||
Digital handset and accessory sales | 1,373 | 10,872 | 12,245 | 11,294 | 951 | 8% | |||||||||||||||||||
Total operating revenues | $ | 21,990 | $ | 152,780 | $ | 174,770 | $ | 171,138 | $ | 3,632 | 2% | ||||||||||||||
94
• | a 9% increase in the average number of digital handsets in service from the year ended December 31, 2001 to the year ended December 31, 2002, notwithstanding a decrease in the total ending number of digital handsets in commercial service as of December 31, 2002; and | |
• | the recognition of revenue from calling party pays service agreements that Nextel Brazil signed and implemented with various fixed line and wireless operators throughout 2002. |
2. | Cost of revenues |
Successor | Predecessor | ||||||||||||||||||||||||
Company | Company | ||||||||||||||||||||||||
Two Months | Ten Months | Combined | Decrease from | ||||||||||||||||||||||
Ended | Ended | Year Ended | Year Ended | Previous Year | |||||||||||||||||||||
December 31, | October 31, | December 31, | December 31, | ||||||||||||||||||||||
2002 | 2002 | 2002 | 2001 | Dollars | Percent | ||||||||||||||||||||
(dollars in thousands) | |||||||||||||||||||||||||
Cost of providing wireless services and other | $ | 6,861 | $ | 57,698 | $ | 64,559 | $ | 70,036 | $ | (5,477 | ) | (8 | )% | ||||||||||||
Cost of digital handset and accessory sales | 2,973 | 19,978 | 22,951 | 46,472 | (23,521 | ) | (51 | )% | |||||||||||||||||
Total cost of revenues | $ | 9,834 | $ | 77,676 | $ | 87,510 | $ | 116,508 | $ | (28,998 | ) | (25 | )% | ||||||||||||
• | nonrecurring charges recorded during the second quarter of 2001 related to the resolution of disputes with local carriers over minutes of use; |
95
• | lower variable costs related to interconnect fees resulting from declining system minutes of use and costs per minutes of use consistent with the decline in Nextel Brazil’s subscriber base; and | |
• | decreases in payroll and facilities and administrative expenses due to cash conservation initiatives. |
3. | Selling and marketing expenses |
• | a $9.1 million, or 68%, decrease in commissions earned by indirect dealers and distributors as a result of fewer digital handsets sold through indirect channels and the depreciation of the Brazilian real; | |
• | a $14.4 million, or 56%, decrease in direct commission and payroll costs as a result of fewer handsets sold by Nextel Brazil’s internal sales force and a decrease in commissions paid per each handset sold and the depreciation of the Brazilian real; | |
• | an $11.9 million, or 76%, decrease in advertising expenses, primarily due to Nextel Brazil’s shift to less costly advertising programs and the depreciation of the Brazilian real; and | |
• | a $1.1 million, or 24%, decrease in marketing costs, primarily due to our cash conservation initiatives and the depreciation of the Brazilian real. |
4. | General and administrative expenses |
• | a $12.5 million, or 69%, decrease in bad debt expense, which decreased as a percentage of operating revenues from 10.6% for year ended December 31, 2001 to 3.2% for the year ended December 31, 2002, primarily due to more stringent credit controls and improved collections procedures, as well as the depreciation of the Brazilian real compared to the U.S. dollar; | |
• | a $4.8 million, or 46%, decrease in information technology expenses as a result of cash conservation initiatives and the depreciation of the Brazilian real compared to the U.S. dollar; and | |
• | a $1.5 million, or 4%, decrease in general corporate expenses and expenses related to billing, collection, customer retention and customer care activities, as well as due to the 18% depreciation of the Brazilian real compared to the U.S. dollar, partially offset by increased reserves for tax contingencies related to various tax disputes with the Brazilian government. |
5. | Impairment, restructuring and other charges |
96
6. | Depreciation and amortization |
7. | Interest expense, net |
8. | Foreign currency transaction gains (losses), net |
9. | Reorganization items, net |
10. | Other expense, net |
97
d. Nextel Peru |
Successor | Predecessor | ||||||||||||||||||||||||||||||||
Company | Company | % of | % of | ||||||||||||||||||||||||||||||
Two Months | Ten Months | Combined | Nextel | Nextel | Change from | ||||||||||||||||||||||||||||
Ended | Ended | Year Ended | Peru’s | Year Ended | Peru’s | Previous Year | |||||||||||||||||||||||||||
December 31, | October 31, | December 31, | Operating | December 31, | Operating | ||||||||||||||||||||||||||||
2002 | 2002 | 2002 | Revenues | 2001 | Revenues | Dollars | Percent | ||||||||||||||||||||||||||
(dollars in thousands) | |||||||||||||||||||||||||||||||||
Operating revenues | $ | 14,729 | $ | 68,011 | $ | 82,740 | 100 | % | $ | 64,952 | 100 | % | $ | 17,788 | 27 | % | |||||||||||||||||
Cost of revenues (exclusive of depreciation included below) | (6,568 | ) | (30,038 | ) | (36,606 | ) | (44 | )% | (31,077 | ) | (48 | )% | (5,529 | ) | 18 | % | |||||||||||||||||
Gross margin | 8,161 | 37,973 | 46,134 | 56 | % | 33,875 | 52 | % | 12,259 | 36 | % | ||||||||||||||||||||||
Selling and marketing expenses | (1,796 | ) | (8,610 | ) | (10,406 | ) | (13 | )% | (14,339 | ) | (22 | )% | 3,933 | (27 | )% | ||||||||||||||||||
General and administrative expenses | (3,170 | ) | (10,889 | ) | (14,059 | ) | (17 | )% | (14,166 | ) | (22 | )% | 107 | (1 | )% | ||||||||||||||||||
Segment earnings | 3,195 | 18,474 | 21,669 | 26 | % | 5,370 | 8 | % | 16,299 | 304 | % | ||||||||||||||||||||||
Impairment, restructuring and other charges | — | (23 | ) | (23 | ) | — | (171,590 | ) | (264 | )% | 171,567 | (100 | )% | ||||||||||||||||||||
Depreciation and amortization | (323 | ) | (5,068 | ) | (5,391 | ) | (6 | )% | (26,117 | ) | (40 | )% | 20,726 | (79 | )% | ||||||||||||||||||
Operating income (loss) | 2,872 | 13,383 | 16,255 | 20 | % | (192,337 | ) | (296 | )% | 208,592 | (108 | )% | |||||||||||||||||||||
Interest expense, net | (246 | ) | (2,223 | ) | (2,469 | ) | (3 | )% | (4,141 | ) | (7 | )% | 1,672 | (40 | )% | ||||||||||||||||||
Foreign currency transaction gains (losses), net | 624 | (1,030 | ) | (406 | ) | (1 | )% | 573 | 1 | % | (979 | ) | (171 | )% | |||||||||||||||||||
Reorganization items, net | — | (31,030 | ) | (31,030 | ) | (38 | )% | — | — | (31,030 | ) | NM | |||||||||||||||||||||
Other income (expense), net | 6,983 | (530 | ) | 6,453 | 8 | % | (765 | ) | (1 | )% | 7,218 | (944 | )% | ||||||||||||||||||||
Income (loss) before income tax | $ | 10,233 | $ | (21,430 | ) | $ | (11,197 | ) | (14 | )% | $ | (196,670 | ) | (303 | )% | $ | 185,473 | (94 | )% | ||||||||||||||
1. | Operating revenues |
Successor | Predecessor | ||||||||||||||||||||||||
Company | Company | ||||||||||||||||||||||||
Two Months | Ten Months | Combined | Increase from | ||||||||||||||||||||||
Ended | Ended | Year Ended | Year Ended | Previous Year | |||||||||||||||||||||
December 31, | October 31, | December 31, | December 31, | ||||||||||||||||||||||
2002 | 2002 | 2002 | 2001 | Dollars | Percent | ||||||||||||||||||||
(dollars in thousands) | |||||||||||||||||||||||||
Wireless service and other revenues | $ | 14,303 | $ | 66,598 | $ | 80,901 | $ | 63,572 | $ | 17,329 | 27 | % | |||||||||||||
Digital handset and accessory sales | 426 | 1,413 | 1,839 | 1,380 | 459 | 33 | % | ||||||||||||||||||
Total operating revenues | $ | 14,729 | $ | 68,011 | $ | 82,740 | $ | 64,952 | $ | 17,788 | 27 | % | |||||||||||||
98
2. | Cost of revenues |
Successor | Predecessor | ||||||||||||||||||||||||
Company | Company | ||||||||||||||||||||||||
Two Months | Ten Months | Combined | Change from | ||||||||||||||||||||||
Ended | Ended | Year Ended | Year Ended | Previous Year | |||||||||||||||||||||
December 31, | October 31, | December 31, | December 31, | ||||||||||||||||||||||
2002 | 2002 | 2002 | 2001 | Dollars | Percent | ||||||||||||||||||||
(dollars in thousands) | |||||||||||||||||||||||||
Cost of providing wireless services and other | $ | 4,532 | $ | 20,326 | $ | 24,858 | $ | 16,617 | $ | 8,241 | 50 | % | |||||||||||||
Cost of digital handset and accessory sales | 2,036 | 9,712 | 11,748 | 14,460 | (2,712 | ) | (19 | )% | |||||||||||||||||
Total cost of revenues | $ | 6,568 | $ | 30,038 | $ | 36,606 | $ | 31,077 | $ | 5,529 | 18 | % | |||||||||||||
• | an increase in variable costs related to interconnect fees resulting from a 54% increase in total system minutes of use from the year ended December 31, 2001 to the year ended December 31, 2002, principally resulting from the larger number of handsets in service; and | |
• | an increase in fixed costs related to direct switch and transmitter and receiver site costs that Nextel Peru incurred resulting from an 18% increase in the number of transmitter and receiver sites in service from December 31, 2001 to December 31, 2002. |
3. | Selling and marketing expenses |
• | a $2.2 million, or 48%, decrease in advertising expenses primarily due to Nextel Peru’s shift to less costly advertising programs; | |
• | a $1.4 million, or 43%, decrease in commissions earned by indirect dealers and distributors as a result of fewer digital handsets sold through indirect channels and the implementation of lower cost service pricing plans during 2002, which resulted in lower average commissions paid per handset sold by indirect dealers; and | |
• | a $0.9 million, or 15%, decrease in direct commissions and payroll and employee related expenses as a result of fewer handsets sold by Nextel Peru’s internal sales force and a reduction in Nextel Peru’s sales and marketing personnel. | |
99
4. | General and administrative expenses |
5. | Impairment, restructuring and other charges |
6. | Depreciation and amortization |
7. | Interest expense, net |
8. | Foreign currency transaction gains (losses), net |
9. | Reorganization items, net |
10. | Other expense, net |
100
e. Nextel Argentina |
Successor | Predecessor | ||||||||||||||||||||||||||||||||
Company | Company | % of | % of | ||||||||||||||||||||||||||||||
Two Months | Ten Months | Combined | Nextel | Nextel | Change from | ||||||||||||||||||||||||||||
Ended | Ended | Year Ended | Argentina’s | Year Ended | Argentina’s | Previous Year | |||||||||||||||||||||||||||
December 31, | October 31, | December 31, | Operating | December 31, | Operating | ||||||||||||||||||||||||||||
2002 | 2002 | 2002 | Revenues | 2001 | Revenues | Dollars | Percent | ||||||||||||||||||||||||||
(dollars in thousands) | |||||||||||||||||||||||||||||||||
Operating revenues | $ | 10,727 | $ | 63,790 | $ | 74,517 | 100 | % | $ | 135,320 | 100 | % | $ | (60,803 | ) | (45 | )% | ||||||||||||||||
Cost of revenues (exclusive of depreciation included below) | (3,504 | ) | (20,413 | ) | (23,917 | ) | (32 | )% | (55,395 | ) | (41 | )% | 31,478 | (57 | )% | ||||||||||||||||||
Gross margin | 7,223 | 43,377 | 50,600 | 68 | % | 79,925 | 59 | % | (29,325 | ) | (37 | )% | |||||||||||||||||||||
Selling and marketing expenses | (1,450 | ) | (9,297 | ) | (10,747 | ) | (14 | )% | (38,478 | ) | (28 | )% | 27,731 | (72 | )% | ||||||||||||||||||
General and administrative expenses | (2,952 | ) | (21,615 | ) | (24,567 | ) | (33 | )% | (39,057 | ) | (29 | )% | 14,490 | (37 | )% | ||||||||||||||||||
Segment earnings | 2,821 | 12,465 | 15,286 | 21 | % | 2,390 | 2% | 12,896 | 540 | % | |||||||||||||||||||||||
Impairment, restructuring and other charges | — | (8,542 | ) | (8,542 | ) | (12 | )% | (262,541 | ) | (194 | )% | 253,999 | (97 | )% | |||||||||||||||||||
Depreciation and amortization | (212 | ) | (2,231 | ) | (2,443 | ) | (3 | )% | (44,507 | ) | (33 | )% | 42,064 | (95 | )% | ||||||||||||||||||
Operating income (loss) | 2,609 | 1,692 | 4,301 | 6 | % | (304,658 | ) | (225 | )% | 308,959 | (101 | )% | |||||||||||||||||||||
Interest expense, net | (156 | ) | (9,318 | ) | (9,474 | ) | (13 | )% | (12,812 | ) | (10 | )% | 3,338 | (26 | )% | ||||||||||||||||||
Foreign currency transaction gains (losses), net | 285 | (137,820 | ) | (137,535 | ) | (184 | )% | (1 | ) | — | (137,534 | ) | NM | ||||||||||||||||||||
Reorganization items, net | — | (4,112 | ) | (4,112 | ) | (6 | )% | — | — | (4,112 | ) | NM | |||||||||||||||||||||
Other expense, net | (60 | ) | (1,954 | ) | (2,014 | ) | (3 | )% | (2,601 | ) | (2 | )% | 587 | (23 | )% | ||||||||||||||||||
Income (loss) before income tax | $ | 2,678 | $ | (151,512 | ) | $ | (148,834 | ) | (200 | )% | $ | (320,072 | ) | (237 | )% | $ | 171,238 | (53 | )% | ||||||||||||||
101
1. | Operating revenues |
Successor | Predecessor | |||||||||||||||||||||||
Company | Company | |||||||||||||||||||||||
Two Months | Ten Months | Combined | Decrease from | |||||||||||||||||||||
Ended | Ended | Year Ended | Year Ended | Previous Year | ||||||||||||||||||||
December 31, | October 31, | December 31, | December 31, | |||||||||||||||||||||
2002 | 2002 | 2002 | 2001 | Dollars | Percent | |||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||
Wireless service and other revenues | $ | 10,282 | $ | 60,920 | $ | 71,202 | $ | 129,364 | $ | (58,162 | ) | (45 | )% | |||||||||||
Digital handset and accessory sales | 445 | 2,870 | 3,315 | 5,956 | (2,641 | ) | (44 | )% | ||||||||||||||||
Total operating revenues | $ | 10,727 | $ | 63,790 | $ | 74,517 | $ | 135,320 | $ | (60,803 | ) | (45 | )% | |||||||||||
• | a 17% increase in the average number of digital handsets in service from the year ended December 31, 2001 to the year ended December 31, 2002 resulting from growth in Nextel Argentina’s existing markets; | |
• | the successful introduction of new monthly service plans with higher access fees that have generated higher average revenues per handset on a local currency basis per digital handset in service; and | |
• | the implementation of general increases in prices to all handsets in service. |
102
2. | Cost of revenues |
Successor | Predecessor | ||||||||||||||||||||||||
Company | Company | ||||||||||||||||||||||||
Two Months | Ten Months | Combined | Decrease from | ||||||||||||||||||||||
Ended | Ended | Year Ended | Year Ended | Previous Year | |||||||||||||||||||||
December 31, | October 31, | December 31, | December 31, | ||||||||||||||||||||||
2002 | 2002 | 2002 | 2001 | Dollars | Percent | ||||||||||||||||||||
(dollars in thousands) | |||||||||||||||||||||||||
Cost of providing wireless services and other | $ | 2,264 | $ | 14,061 | $ | 16,325 | $ | 28,453 | $ | (12,128 | ) | (43 | )% | ||||||||||||
Cost of digital handset and accessory sales | 1,240 | 6,352 | 7,592 | 26,942 | (19,350 | ) | (72 | )% | |||||||||||||||||
Total cost of revenues | $ | 3,504 | $ | 20,413 | $ | 23,917 | $ | 55,395 | $ | (31,478 | ) | (57 | )% | ||||||||||||
• | an increase in variable costs related to interconnect fees resulting from a 46% increase in annual total system minutes of use, principally due to the larger number of handsets in service; and | |
• | an increase in fixed costs related to direct switch and transmitter and receiver site costs that Nextel Argentina incurred resulting from a 4% increase in the number of transmitter and receiver sites in service from December 31, 2001 to December 31, 2002. |
3. | Selling and marketing expenses |
• | an $11.8 million, or 78%, decrease in commissions earned by indirect dealers and distributors as a result of fewer digital handsets sold through indirect channels and the depreciation of the Argentine peso; | |
• | a $10.6 million, or 67%, decrease in direct commission and payroll costs as a result of fewer handset sold by Nextel Argentina’s internal sales force, a reduction in sales and marketing personnel and the depreciation of the Argentine peso; | |
• | a $5.0 million, or 76%, decrease in advertising expenses, primarily due to Nextel Argentina’s shift to less costly advertising programs and the depreciation of the Argentine peso; and | |
• | a $1.3 million, or 67%, decrease in marketing costs primarily due to cash conservation initiatives and the depreciation of the Argentine peso. |
103
4. | General and administrative expenses |
• | a $9.4 million, or 40%, decrease in information technology, facilities and general corporate expenses primarily due to the devaluation of the Argentine peso and subsequent depreciation of the peso compared to the U.S. dollar, partially offset by an increase in operating taxes on gross revenues; | |
• | a $4.5 million, or 50%, decrease in expenses related to billing, collection, customer retention and customer care activities primarily due to the devaluation of the Argentine peso and subsequent depreciation of the peso compared to the U.S. dollar, partially offset by an increase in payroll and related expenses caused by an increase in customer care headcount; and | |
• | a $0.6 million, or 9%, decrease in bad debt expense. However, bad debt expense increased as a percentage of operating revenues from 5.0% for the year ended December 31, 2001 to 8.2% for the year ended December 31, 2002 as a result of the adverse economic conditions in Argentina. Despite a significant increase in bad debt in the first half of 2002, bad debt expenses as a percentage of revenues decreased from 3.0% in the third quarter of 2002 to 1.3% in the fourth quarter of 2002. |
5. | Impairment, restructuring and other charges |
6. | Depreciation and amortization |
7. | Interest expense, net |
8. | Foreign currency transaction gains (losses), net |
104
105
Successor | Predecessor | ||||||||||||||||||||||||||||||||
Company | Company | % of | % of | ||||||||||||||||||||||||||||||
Two Months | Ten Months | Combined | Corporate | Corporate | Change from | ||||||||||||||||||||||||||||
Ended | Ended | Year Ended | and Other | Year Ended | and Other | Previous Year | |||||||||||||||||||||||||||
December 31, | October 31, | December 31, | Operating | December 31, | Operating | ||||||||||||||||||||||||||||
2002 | 2002 | 2002 | Revenues | 2001 | Revenues | Dollars | Percent | ||||||||||||||||||||||||||
(dollars in thousands) | |||||||||||||||||||||||||||||||||
Operating revenues | $ | 239 | $ | 1,361 | $ | 1,600 | 100 | % | $ | 2,240 | 100 | % | $ | (640 | ) | (29 | )% | ||||||||||||||||
Cost of revenues (exclusive of depreciation included below) | (368 | ) | (1,874 | ) | (2,242 | ) | (140 | )% | (2,234 | ) | (100 | )% | (8 | ) | — | ||||||||||||||||||
Gross margin | (129 | ) | (513 | ) | (642 | ) | (40 | )% | 6 | NM | (648 | ) | NM | ||||||||||||||||||||
Selling and marketing expenses | (539 | ) | (3,259 | ) | (3,798 | ) | (237 | )% | (7,768 | ) | (347 | )% | 3,970 | (51 | )% | ||||||||||||||||||
General and administrative expenses | (3,774 | ) | (20,024 | ) | (23,798 | ) | NM | (36,390 | ) | NM | 12,592 | (35 | )% | ||||||||||||||||||||
Segment losses | (4,442 | ) | (23,796 | ) | (28,238 | ) | NM | (44,152 | ) | NM | 15,914 | (36 | )% | ||||||||||||||||||||
Impairment, restructuring and other charges | — | (6,548 | ) | (6,548 | ) | (409 | )% | (33,648 | ) | NM | 27,100 | (81 | )% | ||||||||||||||||||||
Depreciation and amortization | (367 | ) | (5,733 | ) | (6,100 | ) | (381 | )% | (8,724 | ) | (389 | )% | 2,624 | (30 | )% | ||||||||||||||||||
Operating loss | (4,809 | ) | (36,077 | ) | (40,886 | ) | NM | (86,524 | ) | NM | 45,638 | (53 | )% | ||||||||||||||||||||
Interest expense, net | (2,524 | ) | (119,867 | ) | (122,391 | ) | NM | (259,183 | ) | NM | 136,792 | (53 | )% | ||||||||||||||||||||
Reorganization items, net | — | 2,281,829 | 2,281,829 | NM | — | — | 2,281,829 | NM | |||||||||||||||||||||||||
Gain on extinguishment of debt, net | — | 101,598 | 101,598 | NM | — | — | 101,598 | NM | |||||||||||||||||||||||||
Foreign currency transaction gains (losses), net | 34 | (22 | ) | 12 | 1 | % | (1,228 | ) | (55 | )% | 1,240 | (101 | )% | ||||||||||||||||||||
Realized losses on investments, net | — | — | — | — | (151,291 | ) | NM | 151,291 | (100 | )% | |||||||||||||||||||||||
Equity in gain of unconsolidated affiliates | — | — | — | — | 9,640 | 430 | % | (9,640 | ) | (100 | )% | ||||||||||||||||||||||
Other (expense) income, net | (6,074 | ) | 340 | (5,734 | ) | (358 | )% | 5,829 | 260 | % | (11,563 | ) | (198 | )% | |||||||||||||||||||
(Loss) income from continuing operations before income tax | $ | (13,373 | ) | $ | 2,227,801 | $ | 2,214,428 | NM | $ | (482,757 | ) | NM | $ | 2,697,185 | (559 | )% | |||||||||||||||||
106
107
• | $2,402.9 million on the extinguishment of our former senior notes and related accrued interest; and | |
• | $34.5 million on the extinguishment of amounts due to Nextel Communications, acquisition payables, accrued expenses and other. |
• | a $92.2 million write-off of the unamortized bond discounts on our former senior notes; | |
• | a $31.2 million write-off of debt financing costs; | |
• | $17.8 million in legal, advisory, retention and tax costs; and | |
• | a $14.4 million charge resulting from the recording of our assets at their estimated fair values in accordance with fresh-start accounting. |
11. | Realized losses on investments, net |
• | a $188.4 million other-than-temporary pre-tax loss that we realized during the third quarter of 2001 on our investment in TELUS Corporation; and | |
• | a $3.7 million write-off that we recorded in the second quarter of 2001 related to our warrant to purchase shares of China United Telecommunications Corporation upon expiration of the warrant. |
108
109
• | the amount of revenue we are able to generate and collect from our customers; | |
• | the amount of operating expenses required to provide our services; | |
• | the cost of acquiring and retaining customers, including the subsidies we incur to provide handsets to both our new and existing customers; | |
• | our ability to continue to grow our customer base; and | |
• | fluctuations in foreign exchange rates. |
110
• | operating expenses relating to our digital mobile networks; | |
• | capital expenditures to expand and enhance our digital mobile networks, as discussed below under “Capital Expenditures;” | |
• | future spectrum purchases; | |
• | debt service requirements, including tower financing obligations; | |
• | cash taxes; and | |
• | other general corporate expenditures. |
Payments due by Period | ||||||||||||||||||||
Less than | More than | |||||||||||||||||||
Contractual Obligations | 1 Year | 1-3 Years | 3-5 Years | 5 Years | Total | |||||||||||||||
(in thousands) | ||||||||||||||||||||
Senior discount notes, convertible notes and credit facility(1) | $ | 6,300 | $ | 154,595 | $ | 103,221 | $ | 541,697 | $ | 805,813 | ||||||||||
Towers financing obligations(1) | 25,194 | 51,127 | 52,446 | 285,942 | 414,709 | |||||||||||||||
Spectrum acquisition obligations | 27,869 | — | — | — | 27,869 | |||||||||||||||
Operating leases(2) | 30,975 | 47,894 | 38,521 | 45,617 | 163,007 | |||||||||||||||
Purchase obligations(3) | 51,893 | — | — | — | 51,893 | |||||||||||||||
Other long-term obligations(4) | — | — | — | 47,775 | 47,775 | |||||||||||||||
Total contractual commitments | $ | 142,231 | $ | 253,616 | $ | 194,188 | $ | 921,031 | $ | 1,511,066 | ||||||||||
(1) | These amounts include estimated principal and interest payments based on our expectations as to future interest rates, assuming the current payment schedule. |
(2) | These amounts principally include future lease costs, transmitter and receiver sites and switches and office facilities as of December 31, 2003. |
(3) | These amounts represent maximum contractual purchase obligations under various agreements with our vendors. |
(4) | The amounts due in more than five years include our current estimates of asset retirement obligations based on our expectations as to future retirement costs, inflation rates and timing of retirements. |
111
• | the construction of additional transmitter and receiver sites to increase system capacity and maintain system quality and the installation of related switching equipment in some of our existing market coverage areas; | |
• | the enhancement of our digital mobile network coverage around some major market areas; | |
• | the expansion of our digital mobile networks to new market areas; | |
• | enhancements to our existing iDEN technology to increase voice capacity; and | |
• | non-network related information technology projects. |
• | cash and cash equivalents on hand and available to fund our operations as of December 31, 2003 of $405.4 million; | |
• | expected cash flows from operations; | |
• | expected cash flows from the committed communications tower sale-leaseback financings; | |
• | the anticipated level of capital expenditures, including a significant positive impact associated with our anticipated receipt of the contemplated iDEN technology upgrade from Motorola; | |
• | the anticipated level of spectrum acquisitions; | |
• | our scheduled debt service and handset financing requirements; and | |
• | cash taxes. |
112
• | the commercial success of our operations; | |
• | the volatility and demand of the capital markets; and | |
• | the future market prices of our securities. |
F. | Effect of New Accounting Standards |
113
114
• | quoted market prices for our senior secured discount notes and convertible notes; | |
• | carrying values for our vendor credit facilities as of December 31, 2003 as interest rates are reset periodically; and | |
• | carrying values for our tower financing obligations as interest rates were set recently when we entered into these transactions. |
Year of Maturity | 2003 | 2002 | |||||||||||||||||||||||||||||||||||||||
2004 | 2005 | 2006 | 2007 | 2008 | Thereafter | Total | Fair Value | Total | Fair Value | ||||||||||||||||||||||||||||||||
(dollars in thousands) | |||||||||||||||||||||||||||||||||||||||||
Long-Term Debt: | |||||||||||||||||||||||||||||||||||||||||
Fixed Rate (US$) | $ | 180,821 | $ | — | $ | — | $ | — | $ | — | $ | 180,000 | $ | 360,821 | $ | 383,580 | $ | 180,821 | $ | 135,616 | |||||||||||||||||||||
Average Interest Rate | 13.0% | — | — | — | — | 3.5% | 8.3% | 13.0% | |||||||||||||||||||||||||||||||||
Fixed Rate (MP) | $ | 1,286 | $ | 1,518 | $ | 1,793 | $ | 2,120 | $ | 2,509 | $ | 61,978 | $ | 71,204 | $ | 71,204 | $ | — | $ | — | |||||||||||||||||||||
Average Interest Rate | 17.8% | 17.8% | 17.8% | 17.8% | 17.8% | 17.8% | 17.8% | — | |||||||||||||||||||||||||||||||||
Fixed Rate (BR) | $ | 180 | $ | 238 | $ | 315 | $ | 418 | $ | 553 | $ | 30,176 | $ | 31,880 | $ | 31,880 | $ | 5,755 | $ | 5,755 | |||||||||||||||||||||
Average Interest Rate | 28.4% | 28.4% | 28.4% | 28.4% | 28.4% | 28.4% | 28.4% | 23.0% | |||||||||||||||||||||||||||||||||
Variable Rate (US$) | $ | 72,507 | $ | — | $ | 10,827 | $ | 41,666 | $ | — | $ | — | $ | 125,000 | $ | 125,000 | $ | 372,383 | $ | 372,383 | |||||||||||||||||||||
Average Interest Rate | 6.2% | — | 6.2% | 6.2% | — | — | 6.2% | 7.0% |
Item 8. | Financial Statements and Supplementary Data |
Item 9. | Changes In and Disagreements with Accountants on Accounting and Financial Disclosure |
Item 9A. | Controls and Procedures |
115
Nextel Mexico Bookkeeping Errors |
116
• | Foreign Currency Adjustments — Some of our foreign currency transaction gains and losses were double-recorded through a combination of manual entries and system generated automatic entries recorded upon payment of U.S. dollar denominated payables; | |
• | Accounts receivable adjustments — Periodic reconciliations between the accounts receivable subsidiary ledger and the general ledger were not performed properly or timely. As a result, unreconciled differences related to the non-recognition of commissions expenses for credit card payments, returned checks, manual adjustments and other items were classified to a current liability account, but were not reversed from the liability account upon resolution of these differences; and | |
• | Liability accounts — Certain liability accounts contained balances that could not be supported by invoices or subsequent disbursements. | |
• | personnel changes, including the termination of the controller responsible for the unreconciled accounts; | |
• | the implementation of additional procedures surrounding the account reconciliation process as well as manual journal entries in our operating companies and related to the monitoring by NII Holdings of key control procedures in our operating companies; | |
• | revisions to system controls regarding general ledger posting restrictions; and | |
• | the provision of more specific guidance regarding steps that must be completed by our operating companies’ executives before signing the certifications related to Section 302 of the Sarbanes-Oxley Act of 2002. | |
Accounting for Income Taxes |
117
Item 10. | Directors and Executive Officers of the Registrant |
Item 11. | Executive Compensation |
Item 12. | Security Ownership of Certain Beneficial Owners and Management |
Item 13. | Certain Relationships and Related Transactions |
Item 14. | Principal Accountant Fees and Services |
118
Item 15. | Exhibits, Financial Statement Schedule and Reports on Form 8-K |
Page | ||||
Report of Independent Registered Public Accounting Firm | F-2 | |||
Report of Independent Registered Public Accounting Firm | F-3 | |||
Consolidated Balance Sheets — As of December 31, 2003 (restated) and 2002 (restated) | F-4 | |||
Consolidated Statements of Operations — For the Year Ended December 31, 2003 (Successor Company) (restated), Two Months Ended December 31, 2002 (Successor Company) (restated), Ten Months Ended October 31, 2002 (Predecessor Company) (restated) and Year Ended December 31, 2001 (Predecessor Company) | F-5 | |||
Consolidated Statements of Changes in Stockholders’ (Deficit) Equity — For the Year Ended December 31, 2003 (Successor Company) (restated), Two Months Ended December 31, 2002 (Successor Company) (restated), Ten Months Ended October 31, 2002 (Predecessor Company) (restated) and Year Ended December 31, 2001 (Predecessor Company) | F-6 | |||
Consolidated Statements of Cash Flows — For the Year Ended December 31, 2003 (Successor Company) (restated), Two Months Ended December 31, 2002 (Successor Company) (restated), Ten Months Ended October 31, 2002 (Predecessor Company) (restated) and Year Ended December 31, 2001 (Predecessor Company) | F-7 | |||
Notes to Consolidated Financial Statements | F-8 |
(2) | Financial Statement Schedule. The following financial statement schedule is filed as part of this report and is included in Item 15(d) below. Schedules other than the schedule listed below are omitted because they are either not required or not applicable. |
Page | ||||
Schedule II — Valuation and Qualifying Accounts | F-75 |
(3) | List of Exhibits. The exhibits filed as part of this report are listed in the Exhibit Index, which is incorporated in this item by reference. |
• | On October 29, 2003, we filed a Current Report on Form 8-K, dated October 29, 2003, which furnished under Item 12 a press release announcing certain financial and operating results for the quarter and nine months ended September 30, 2003; and | |
• | On November 17, 2003, we filed a Current Report on Form 8-K, dated November 13, 2003, which reported under Item 7 our Form of Underwriting Agreement dated November 13, 2003, between the Registrant, NII Holdings, Inc., the Selling Stockholder, Nextel Communications, Inc. and the Underwriter, Goldman, Sachs & Co. |
(c) | Exhibits. The exhibits filed as part of this report are listed in Item 15(a)(3) above. | |
(d) | Financial Statement Schedule. The financial statement schedule filed as part of this report is listed in Item 15(a)(2) above. |
119
NII HOLDINGS, INC. |
By: | /s/Ricardo L. Israele |
Ricardo L. Israele | |
Vice President and Controller | |
120
F-2 | |||||
F-3 | |||||
CONSOLIDATED FINANCIAL STATEMENTS | |||||
F-4 | |||||
F-5 | |||||
F-6 | |||||
F-7 | |||||
F-8 | |||||
FINANCIAL STATEMENT SCHEDULE | |||||
F-75 |
F-1
F-2
F-3
December 31, | December 31, | |||||||||
2003 | 2002 | |||||||||
Restated | Restated | |||||||||
ASSETS | ||||||||||
Current assets | ||||||||||
Cash and cash equivalents | $ | 405,406 | $ | 231,161 | ||||||
Accounts receivable, less allowance for doubtful accounts of $9,020 and $7,143 | 119,985 | 100,953 | ||||||||
Handset and accessory inventory, net | 21,138 | 17,954 | ||||||||
Deferred income taxes, net | 41,097 | — | ||||||||
Prepaid expenses and other | 59,128 | 45,535 | ||||||||
Total current assets | 646,754 | 395,603 | ||||||||
Property, plant and equipment, net | 368,434 | 230,598 | ||||||||
Intangible assets, net | 85,818 | 182,264 | ||||||||
Other assets | 27,430 | 23,008 | ||||||||
Total assets | $ | 1,128,436 | $ | 831,473 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
Current liabilities | ||||||||||
Accounts payable | $ | 33,681 | $ | 24,040 | ||||||
Accrued expenses and other | 167,492 | 156,003 | ||||||||
Deferred revenues | 32,040 | 20,763 | ||||||||
Accrued interest | 5,022 | 2,587 | ||||||||
Due to related parties | 13,460 | 52,178 | ||||||||
Current portion of long-term debt | 1,466 | — | ||||||||
Total current liabilities | 253,161 | 255,571 | ||||||||
Long-term debt, including $168,067 and $365,991 due to related parties | 535,290 | 432,157 | ||||||||
Deferred income taxes, net | — | 3,438 | ||||||||
Deferred revenues (related party) | 45,968 | 25,000 | ||||||||
Other long-term liabilities | 76,247 | 43,695 | ||||||||
Total liabilities | 910,666 | 759,861 | ||||||||
Commitments and contingencies (Notes 8 and 10) | ||||||||||
Stockholders’ equity | ||||||||||
Common stock, par value $0.001, 68,883 shares issued and outstanding — 2003, 60,000 shares issued and outstanding — 2002 | 69 | 60 | ||||||||
Paid-in capital | 164,705 | 49,138 | ||||||||
Retained earnings | 103,978 | 22,764 | ||||||||
Accumulated other comprehensive loss | (50,982 | ) | (350 | ) | ||||||
Total stockholders’ equity | 217,770 | 71,612 | ||||||||
Total liabilities and stockholders’ equity | $ | 1,128,436 | $ | 831,473 | ||||||
F-4
Successor Company | Predecessor Company | |||||||||||||||||
Two Months | Ten Months | |||||||||||||||||
Year Ended | Ended | Ended | Year Ended | |||||||||||||||
December 31, | December 31, | October 31, | December 31, | |||||||||||||||
2003 | 2002 | 2002 | 2001 | |||||||||||||||
Restated | Restated | Restated | ||||||||||||||||
Operating revenues | ||||||||||||||||||
Service and other revenues | $ | 895,615 | $ | 137,623 | $ | 610,341 | $ | 634,736 | ||||||||||
Digital handset and accessory revenues | 43,072 | 5,655 | 26,754 | 27,710 | ||||||||||||||
938,687 | 143,278 | 637,095 | 662,446 | |||||||||||||||
Operating expenses | ||||||||||||||||||
Cost of service (exclusive of depreciation included below) | 240,021 | 29,929 | 164,995 | 173,000 | ||||||||||||||
Cost of digital handset and accessory sales | 134,259 | 19,569 | 87,582 | 150,536 | ||||||||||||||
Selling, general and administrative | 317,400 | 47,108 | 262,405 | 426,679 | ||||||||||||||
Impairment, restructuring and other charges (Note 12) | — | — | 15,808 | 1,581,164 | ||||||||||||||
Depreciation | 49,127 | 4,694 | 55,758 | 162,083 | ||||||||||||||
Amortization | 30,374 | 6,392 | 9,219 | 56,479 | ||||||||||||||
771,181 | 107,692 | 595,767 | 2,549,941 | |||||||||||||||
Operating income (loss) | 167,506 | 35,586 | 41,328 | (1,887,495 | ) | |||||||||||||
Other income (expense) | ||||||||||||||||||
Interest expense | (64,623 | ) | (10,469 | ) | (151,579 | ) | (297,228 | ) | ||||||||||
Interest income | 10,864 | 1,797 | 3,928 | 13,247 | ||||||||||||||
Foreign currency transaction gains (losses), net | 8,856 | 2,616 | (180,765 | ) | (61,282 | ) | ||||||||||||
Gain on extinguishment of debt, net | 22,404 | — | 101,598 | — | ||||||||||||||
Reorganization items, net (Note 3) | — | — | 2,180,998 | — | ||||||||||||||
Realized losses on investments, net | — | — | — | (151,291 | ) | |||||||||||||
Equity in gains of unconsolidated affiliates | — | — | — | 9,640 | ||||||||||||||
Other expense, net | (12,166 | ) | (1,557 | ) | (8,918 | ) | (4,181 | ) | ||||||||||
(34,665 | ) | (7,613 | ) | 1,945,262 | (491,095 | ) | ||||||||||||
Income (loss) from continuing operations before income tax (provision) benefit | 132,841 | 27,973 | 1,986,590 | (2,378,590 | ) | |||||||||||||
Income tax (provision) benefit | (51,627 | ) | (24,874 | ) | (29,270 | ) | 68,750 | |||||||||||
Income (loss) from continuing operations | 81,214 | 3,099 | 1,957,320 | (2,309,840 | ) | |||||||||||||
Discontinued operations | ||||||||||||||||||
Income (loss) from operations of Philippine operating company (including gain on disposal of $23,475 for the two months ended December 31, 2002) | — | 19,665 | (2,025 | ) | (170,335 | ) | ||||||||||||
Income tax provision | — | — | (252 | ) | (17,146 | ) | ||||||||||||
Income (loss) from discontinued operations | — | 19,665 | (2,277 | ) | (187,481 | ) | ||||||||||||
Net income (loss) | $ | 81,214 | $ | 22,764 | $ | 1,955,043 | $ | (2,497,321 | ) | |||||||||
Income (loss) from continuing operations per common share, basic | $ | 1.29 | $ | 0.05 | $ | 7.24 | $ | (8.53 | ) | |||||||||
Income (loss) from discontinued operations per common share, basic | — | 0.33 | (0.01 | ) | (0.69 | ) | ||||||||||||
Net income (loss) per common share, basic | $ | 1.29 | $ | 0.38 | $ | 7.23 | $ | (9.22 | ) | |||||||||
Income (loss) from continuing operations per common share, diluted | $ | 1.19 | $ | 0.05 | $ | 7.24 | $ | (8.53 | ) | |||||||||
Income (loss) from discontinued operations per common share, diluted | — | 0.31 | (0.01 | ) | (0.69 | ) | ||||||||||||
Net income (loss) per common share, diluted | $ | 1.19 | $ | 0.36 | $ | 7.23 | $ | (9.22 | ) | |||||||||
Weighted average number of common shares outstanding, basic | 63,129 | 60,000 | 270,382 | 270,750 | ||||||||||||||
Weighted average number of common shares outstanding, diluted | 67,987 | 63,429 | 270,382 | 270,750 | ||||||||||||||
F-5
Accumulated Other | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive Income | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(Loss) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Series A | Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock | Common Stock | Common Stock | Retained | Treasury Stock | Unrealized | Cumulative | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Paid-in | (Deficit) | Deferred | Gain (Loss) | Translation | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Capital | Earnings | Shares | Amount | Compensation | on Investments | Adjustment | Total | ||||||||||||||||||||||||||||||||||||||||||||||||
Balance, January 1, 2001 — Predecessor Company | 6 | $ | 550,300 | — | — | 271,025 | $ | 271 | $ | 941,921 | $ | (1,277,176 | ) | 12 | $ | (62 | ) | $ | (5,173 | ) | $ | 5,772 | $ | (134,249 | ) | $ | 81,604 | ||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | (2,497,321 | ) | — | — | — | — | — | (2,497,321 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss, net of income tax: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | — | — | — | — | — | — | — | (94,745 | ) | (94,745 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Available-for-sale securities: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized holding losses arising during the year | — | — | — | — | — | — | — | — | — | — | — | (197,859 | ) | — | (197,859 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Reclassification adjustments for losses included in net loss, net of taxes of $0 | — | — | — | — | — | — | — | — | — | — | — | 192,087 | — | 192,087 | |||||||||||||||||||||||||||||||||||||||||||||||
Total comprehensive loss | (2,597,838 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of Series A exchangeable redeemable preferred stock to Nextel Communications | 5 | 500,000 | — | — | — | — | — | — | — | — | — | — | — | 500,000 | |||||||||||||||||||||||||||||||||||||||||||||||
Purchase of treasury stock | — | — | — | — | (643 | ) | — | — | — | 643 | (3,213 | ) | — | — | — | (3,213 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Deferred compensation and other | — | — | — | — | — | — | (6,973 | ) | — | — | — | 4,270 | — | — | (2,703 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2001 — Predecessor Company | 11 | 1,050,300 | — | — | 270,382 | 271 | 934,948 | (3,774,497 | ) | 655 | (3,275 | ) | (903 | ) | — | (228,994 | ) | (2,022,150 | ) | ||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | 1,955,043 | — | — | — | — | — | 1,955,043 | |||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income, net of income tax: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | — | — | — | — | — | — | — | 67,054 | 67,054 | |||||||||||||||||||||||||||||||||||||||||||||||
Total comprehensive income | — | — | — | — | — | — | — | — | — | — | — | — | — | 2,022,097 | |||||||||||||||||||||||||||||||||||||||||||||||
Deferred compensation | — | — | — | — | — | — | 10 | — | — | — | 43 | — | — | 53 | |||||||||||||||||||||||||||||||||||||||||||||||
Balance, October 31, 2002 — Predecessor Company | 11 | 1,050,300 | — | — | 270,382 | 271 | 934,958 | (1,819,454 | ) | 655 | (3,275 | ) | (860 | ) | — | (161,940 | ) | — | |||||||||||||||||||||||||||||||||||||||||||
Elimination of Predecessor Company stockholders’ equity | (11 | ) | (1,050,300 | ) | — | — | (270,382 | ) | (271 | ) | (934,958 | ) | 1,819,454 | (655 | ) | 3,275 | 860 | — | 161,940 | — | |||||||||||||||||||||||||||||||||||||||||
Issuance of Successor Company common stock | — | — | 60,000 | 60 | — | — | 49,138 | — | — | — | — | — | — | 49,198 | |||||||||||||||||||||||||||||||||||||||||||||||
Balance, October 31, 2002 — Successor Company | — | — | 60,000 | 60 | — | — | 49,138 | — | — | — | — | — | — | 49,198 | |||||||||||||||||||||||||||||||||||||||||||||||
Net income — Restated | — | — | — | — | — | — | — | 22,764 | — | — | — | — | — | 22,764 | |||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss, net of income tax: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | — | — | — | — | — | — | — | (350 | ) | (350 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Total comprehensive income | — | — | — | — | — | — | — | — | — | — | — | — | — | 22,414 | |||||||||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2002 — Successor Company — Restated | — | — | 60,000 | 60 | — | — | 49,138 | 22,764 | — | — | — | — | (350 | ) | 71,612 | ||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | 81,214 | — | — | — | — | — | 81,214 | |||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss, net of income tax: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | — | — | — | — | — | — | — | (50,632 | ) | (50,632 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Total comprehensive income | — | — | — | — | — | — | — | — | — | — | — | — | — | 30,582 | |||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | — | — | 2,883 | 3 | — | — | 2,520 | — | — | — | — | — | — | 2,523 | |||||||||||||||||||||||||||||||||||||||||||||||
Public offering, net | — | — | 6,000 | 6 | — | — | 113,047 | — | — | — | — | — | — | 113,053 | |||||||||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2003 — Successor Company — Restated | — | $ | — | 68,883 | $ | 69 | — | $ | — | $ | 164,705 | $ | 103,978 | — | $ | — | $ | — | $ | — | $ | (50,982 | ) | $ | 217,770 | ||||||||||||||||||||||||||||||||||||
F-6
Successor Company | Predecessor Company | |||||||||||||||||||
Two Months | Ten Months | |||||||||||||||||||
Year Ended | Ended | Ended | Year Ended | |||||||||||||||||
December 31, | December 31, | October 31, | December 31, | |||||||||||||||||
2003 | 2002 | 2002 | 2001 | |||||||||||||||||
Restated | Restated | Restated | ||||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||||
Net income (loss) | $ | 81,214 | $ | 22,764 | $ | 1,955,043 | $ | (2,497,321 | ) | |||||||||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||||||||||||||
Gain on extinguishment of debt, net | (22,404 | ) | — | (101,598 | ) | — | ||||||||||||||
Amortization of debt financing costs and accretion of senior redeemable notes | 25,295 | 3,250 | 67,537 | 187,302 | ||||||||||||||||
Depreciation and amortization | 79,501 | 11,086 | 64,977 | 234,556 | ||||||||||||||||
Provision for losses on accounts receivable | 7,179 | 634 | 17,484 | 40,902 | ||||||||||||||||
Provision for losses on inventory | 1,716 | 563 | 3,135 | 1,441 | ||||||||||||||||
Foreign currency transaction (gains) losses, net | (8,856 | ) | (2,616 | ) | 180,765 | 69,854 | ||||||||||||||
Reorganization items, including fresh-start valuation adjustments | — | — | (2,198,522 | ) | — | |||||||||||||||
Equity in gains of unconsolidated affiliates | — | — | — | (9,640 | ) | |||||||||||||||
Impairment, restructuring and other charges | — | — | 7,968 | 1,741,007 | ||||||||||||||||
Realized losses on investments | — | — | — | 151,291 | ||||||||||||||||
Gain on sale of discontinued operations | — | (23,025 | ) | — | — | |||||||||||||||
Deferred income tax provision (benefit) | 51,095 | 17,272 | (449 | ) | (131,005 | ) | ||||||||||||||
Stock-based compensation | — | — | (382 | ) | (17 | ) | ||||||||||||||
Loss on disposal of property, plant and equipment | 1,587 | 338 | 609 | 1,265 | ||||||||||||||||
Other, net | 385 | — | — | 3,142 | ||||||||||||||||
Change in assets and liabilities, net of effects from acquisitions: | ||||||||||||||||||||
Accounts receivable, gross | (27,340 | ) | (5,583 | ) | 11,698 | (80,339 | ) | |||||||||||||
Handset and accessory inventory, gross | (4,879 | ) | 152 | 4,300 | 1,466 | |||||||||||||||
Prepaid expenses and other assets | (9,691 | ) | (1,770 | ) | 13,500 | 16,598 | ||||||||||||||
Other long-term assets | 1,367 | (1,792 | ) | 16,808 | (14,967 | ) | ||||||||||||||
Accounts payable, accrued expenses and other | 42,382 | (290 | ) | 87,859 | 140,405 | |||||||||||||||
Current deferred revenue | 5,753 | 272 | 1,480 | — | ||||||||||||||||
Due to related parties | (38,325 | ) | 3,318 | (57,723 | ) | 12,059 | ||||||||||||||
Other long-term liabilities | — | — | 3,998 | — | ||||||||||||||||
Proceeds from spectrum sharing agreement with Nextel Communications | 25,000 | — | 25,000 | — | ||||||||||||||||
Net cash provided by (used in) operating activities | 210,979 | 24,573 | 103,487 | (132,001 | ) | |||||||||||||||
Cash flows from investing activities: | ||||||||||||||||||||
Capital expenditures | (197,376 | ) | (25,417 | ) | (199,682 | ) | (644,977 | ) | ||||||||||||
Payments for acquisitions, purchases of licenses and other | (49,137 | ) | (58 | ) | (13,775 | ) | (35,183 | ) | ||||||||||||
Net proceeds from sale of available-for-sale securities | — | — | — | 139,080 | ||||||||||||||||
Net proceeds from sale of affiliates | — | — | — | 3,500 | ||||||||||||||||
Other | — | 727 | — | 1,390 | ||||||||||||||||
Net cash used in investing activities | (246,513 | ) | (24,748 | ) | (213,457 | ) | (536,190 | ) | ||||||||||||
Cash flows from financing activities: | ||||||||||||||||||||
Proceeds from stock option exercises | 2,523 | — | — | — | ||||||||||||||||
Gross proceeds from towers financing transactions | 106,414 | — | — | — | ||||||||||||||||
Net proceeds from sale of common stock | 113,053 | — | 38,394 | — | ||||||||||||||||
Gross proceeds from issuance of convertible notes | 180,000 | — | — | — | ||||||||||||||||
Issuance of senior secured notes | — | — | 100,800 | — | ||||||||||||||||
Repayments under long-term credit facilities and other | (186,517 | ) | — | (13,044 | ) | (34,149 | ) | |||||||||||||
Transfers from (to) restricted cash | — | — | 29 | (26,524 | ) | |||||||||||||||
(Repayments to) borrowings from Nextel Communications, net | — | — | (12,059 | ) | 9,899 | |||||||||||||||
Payment of debt financing costs | (5,428 | ) | — | (2,810 | ) | — | ||||||||||||||
Proceeds from issuance of series A exchangeable redeemable preferred stock to Nextel Communications | — | — | — | 500,000 | ||||||||||||||||
Purchase of treasury stock | — | — | — | (3,213 | ) | |||||||||||||||
Net cash provided by financing activities | 210,045 | — | 111,310 | 446,013 | ||||||||||||||||
Effect of exchange rate changes on cash and cash equivalents | (266 | ) | 314 | (20,568 | ) | (1,279 | ) | |||||||||||||
Net increase (decrease) in cash and cash equivalents | 174,245 | 139 | (19,228 | ) | (223,457 | ) | ||||||||||||||
Cash and cash equivalents, beginning of period | 231,161 | 231,022 | 250,250 | 473,707 | ||||||||||||||||
Cash and cash equivalents, end of period | $ | 405,406 | $ | 231,161 | $ | 231,022 | $ | 250,250 | ||||||||||||
F-7
• | digital mobile telephone service, including advanced calling features such as speakerphone, conference calling, voice-mail, call forwarding and additional line service; | |
• | Nextel Direct Connect service, which allows subscribers anywhere on our network in the same country to talk to each other instantly, on a “push-to-talk” basis, on a private one-to-one call or on a group call; | |
• | Internet services, mobile messaging services, e-mail and advanced Javatm enabled business applications, which are marketed as “Nextel Online” services; and | |
• | international roaming capabilities, which are marketed as “Nextel Worldwide.” |
F-8
F-9
F-10
Successor Company | Predecessor Company | |||||||||||||||||
Two Months | Ten Months | |||||||||||||||||
Year Ended | Ended | Ended | Year Ended | |||||||||||||||
December 31, | December 31, | October 31, | December 31, | |||||||||||||||
2003 | 2002 | 2002 | 2001 | |||||||||||||||
Restated | Restated | |||||||||||||||||
(in thousands) | ||||||||||||||||||
Capital expenditures | ||||||||||||||||||
Cash paid for capital expenditures, including capitalized interest | $ | 197,376 | $ | 25,417 | $ | 199,682 | $ | 644,977 | ||||||||||
Change in capital expenditures accrued and unpaid or financed, including accreted interest capitalized | 16,971 | (683 | ) | (49,860 | ) | 22,854 | ||||||||||||
214,347 | 24,734 | 149,822 | 667,831 | |||||||||||||||
Capital expenditures from discontinued operations | — | (205 | ) | (1,606 | ) | (39,110 | ) | |||||||||||
Capital expenditures from continuing operations | $ | 214,347 | $ | 24,529 | $ | 148,216 | $ | 628,721 | ||||||||||
Interest costs | ||||||||||||||||||
Interest expense | $ | 64,623 | $ | 10,469 | $ | 151,579 | $ | 297,228 | ||||||||||
Interest capitalized | 6,825 | 971 | 8,239 | 42,927 | ||||||||||||||
$ | 71,448 | $ | 11,440 | $ | 159,818 | $ | 340,155 | |||||||||||
Acquisitions | ||||||||||||||||||
Fair value of assets acquired | $ | 39,469 | $ | — | $ | — | $ | — | ||||||||||
Less: liabilities assumed | (136 | ) | — | — | — | |||||||||||||
Less: cash acquired | (82 | ) | — | — | — | |||||||||||||
$ | 39,251 | $ | — | $ | — | $ | — | |||||||||||
Cash paid for interest | $ | 26,701 | $ | 1,488 | $ | 49,105 | $ | 142,043 | ||||||||||
Cash paid for income taxes | $ | 21,672 | $ | 536 | $ | 2,230 | $ | 2,785 | ||||||||||
Cash paid for reorganization items | $ | — | $ | 216 | $ | 18,299 | $ | — | ||||||||||
Cash received from sales placed directly into escrow | $ | — | $ | — | $ | — | $ | 57,372 | ||||||||||
Credit for equipment purchases received in exchange for sale of ownership interest in NEXNET | $ | — | $ | — | $ | — | $ | 6,500 | ||||||||||
F-11
F-12
F-13
F-14
Successor Company | Predecessor Company | |||||||||||||||||
Two Months | Ten Months | |||||||||||||||||
Year Ended | Ended | Ended | Year Ended | |||||||||||||||
December 31, | December 31, | October 31, | December 31, | |||||||||||||||
2003 | 2002 | 2002 | 2001 | |||||||||||||||
Restated | Restated | |||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||
Net income (loss), as reported | $ | 81,214 | $ | 22,764 | $ | 1,955,043 | $ | (2,497,321 | ) | |||||||||
Deduct: | ||||||||||||||||||
Total stock-based employee compensation expense determined under fair value-based method for all awards, net of related tax effects | (1,372 | ) | (812 | ) | (23,767 | ) | (40,293 | ) | ||||||||||
Pro forma net income (loss) | $ | 79,842 | $ | 21,952 | $ | 1,931,276 | $ | (2,537,614 | ) | |||||||||
Net income (loss) per common share: | ||||||||||||||||||
Basic — as reported | $ | 1.29 | $ | 0.38 | $ | 7.23 | $ | (9.22 | ) | |||||||||
Basic — pro forma | $ | 1.26 | $ | 0.37 | $ | 7.14 | $ | (9.37 | ) | |||||||||
Diluted — as reported | $ | 1.19 | $ | 0.36 | $ | 7.23 | $ | (9.22 | ) | |||||||||
Diluted — pro forma | $ | 1.18 | $ | 0.35 | $ | 7.14 | $ | (9.37 | ) | |||||||||
F-15
Year Ended December 31, 2003 | Two Months Ended December 31, 2002 | |||||||||||||||||||||||||
Income | Shares | Per Share | Income | Shares | Per Share | |||||||||||||||||||||
(Numerator) | (Denominator) | Amount | (Numerator) | (Denominator) | Amount | |||||||||||||||||||||
Restated | Restated | Restated | Restated | |||||||||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||||||||
Basic net income per common share: | ||||||||||||||||||||||||||
Net income | $ | 81,214 | 63,129 | $ | 1.29 | $ | 22,764 | 60,000 | $ | 0.38 | ||||||||||||||||
Effect of dilutive securities: | ||||||||||||||||||||||||||
Stock options | — | 4,858 | — | 3,429 | ||||||||||||||||||||||
Diluted net income per common share: | ||||||||||||||||||||||||||
Net income | $ | 81,214 | 67,987 | $ | 1.19 | $ | 22,764 | 63,429 | $ | 0.36 | ||||||||||||||||
Net loss as reported | $ | (2,497,321 | ) | |
Add back: amortization of goodwill | 7,986 | |||
Adjusted net loss | $ | (2,489,335 | ) | |
Net loss per common share, basic, as reported | $ | (9.22 | ) | |
Amortization of goodwill | .03 | |||
Adjusted net loss per common share, basic | $ | (9.19 | ) | |
Net loss per common share, diluted, as reported | $ | (9.22 | ) | |
Amortization of goodwill | .03 | |||
Adjusted net loss per common share, diluted | $ | (9.19 | ) | |
F-16
F-17
2. | Restatement of Previously Issued Financial Statements |
• | Bookkeeping errors at our operating company in Mexico; | |
• | Accounting for deferred tax asset valuation allowance reversals; | |
F-18
2. | Restatement of Previously Issued Financial Statements — (Continued) |
• | Certain errors in the calculation of income taxes for financial statement purposes; | |
• | Depreciation of handsets in Argentina; and | |
• | Other insignificant miscellaneous adjustments. | |
• | Foreign currency adjustments — Some foreign currency transaction gains and losses were double-recorded through a combination of manual entries and system-generated automatic entries recorded upon payment of U.S. dollar denominated payables; | |
• | Accounts receivable adjustments — Periodic reconciliations between the accounts receivable subsidiary ledger and the general ledger were not performed properly. As a result, unreconciled differences related to the non-recognition of commissions expense on credit card payments, returned checks, manual adjustments and other items were classified to a current liability account, but were not reversed from the liability account upon resolution of these differences; and | |
• | Liability accounts — Certain liability accounts contained balances that could not be supported by invoices or subsequent disbursements. | |
F-19
2. | Restatement of Previously Issued Financial Statements — (Continued) |
F-20
2. | Restatement of Previously Issued Financial Statements — (Continued) |
For the Year Ended | For the Two Months Ended | For the Ten Months Ended | ||||||||||||||||||||||||||||||||||||
December 31, 2003 | December 31, 2002 | October 31, 2002 | ||||||||||||||||||||||||||||||||||||
Successor Company | Successor Company | Predecessor Company | ||||||||||||||||||||||||||||||||||||
As | As | As | As | As | As | |||||||||||||||||||||||||||||||||
Reported | Adjustment | Restated | Reported | Adjustment | Restated | Reported | Adjustment | Restated | ||||||||||||||||||||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||||||||||||||||||||||||
Operating revenues | $ | 938,687 | $ | — | $ | 938,687 | $ | 143,278 | $ | — | $ | 143,278 | $ | 637,095 | $ | — | $ | 637,095 | ||||||||||||||||||||
Operating expenses | ||||||||||||||||||||||||||||||||||||||
Cost of service | 240,021 | — | 240,021 | 29,929 | — | 29,929 | 164,995 | — | 164,995 | |||||||||||||||||||||||||||||
Cost of digital handset and accessory sales | 134,259 | — | 134,259 | 19,569 | — | 19,569 | 87,582 | — | 87,582 | |||||||||||||||||||||||||||||
Selling, general and administrative | 316,470 | 930 | (a) | 317,400 | 46,483 | 625 | (a) | 47,108 | 262,344 | 61 | (a) | 262,405 | ||||||||||||||||||||||||||
Impairment, restructuring and other charges | — | — | — | — | — | — | 15,808 | — | 15,808 | |||||||||||||||||||||||||||||
Depreciation | 48,611 | 516 | (b) | 49,127 | 4,695 | (1 | )(b) | 4,694 | 55,758 | — | 55,758 | |||||||||||||||||||||||||||
Amortization | 38,631 | (8,257 | )(c) | 30,374 | 6,380 | 12 | (c) | 6,392 | 9,219 | — | 9,219 | |||||||||||||||||||||||||||
Total operating expenses | 777,992 | (6,811 | ) | 771,181 | 107,056 | 636 | 107,692 | 595,706 | 61 | 595,767 | ||||||||||||||||||||||||||||
Operating income | 160,695 | 6,811 | 167,506 | 36,222 | (636 | ) | 35,586 | 41,389 | (61 | ) | 41,328 | |||||||||||||||||||||||||||
Other income (expense) | ||||||||||||||||||||||||||||||||||||||
Gain on early extinguishment of debt, net | 22,404 | — | 22,404 | — | — | — | 101,598 | — | 101,598 | |||||||||||||||||||||||||||||
Foreign currency transaction gains (losses), net | 6,457 | 2,399 | (d) | 8,856 | 1,357 | 1,259 | (d) | 2,616 | (183,136 | ) | 2,371 | (d) | (180,765 | ) | ||||||||||||||||||||||||
Interest expense and all other non-operating (expenses) income, net | (65,925 | ) | — | (65,925 | ) | (10,229 | ) | — | (10,229 | ) | 2,023,654 | 775 | (e) | 2,024,429 | ||||||||||||||||||||||||
Total other (expense) income | (37,064 | ) | 2,399 | (34,665 | ) | (8,872 | ) | 1,259 | (7,613 | ) | 1,942,116 | 3,146 | 1,945,262 | |||||||||||||||||||||||||
Income from continuing operations before income tax benefit (provision) | 123,631 | 9,210 | 132,841 | 27,350 | 623 | 27,973 | 1,983,505 | 3,085 | 1,986,590 | |||||||||||||||||||||||||||||
Income (loss) from discontinued operations, net of tax | — | — | — | 19,665 | — | 19,665 | (2,277 | ) | — | (2,277 | ) | |||||||||||||||||||||||||||
Income tax benefit (provision) | 49,329 | (100,956 | )(f) | (51,627 | ) | (4,449 | ) | (20,425 | )(f) | (24,874 | ) | (26,185 | ) | (3,085 | )(f) | (29,270 | ) | |||||||||||||||||||||
Net income | $ | 172,960 | $ | (91,746 | ) | $ | 81,214 | $ | 42,566 | $ | (19,802 | ) | $ | 22,764 | $ | 1,955,043 | $ | — | $ | 1,955,043 | ||||||||||||||||||
F-21
2. | Restatement of Previously Issued Financial Statements — (Continued) |
For the Year Ended | For the Two Months Ended | For the Ten Months Ended | |||||||||||||||||||||||||||||||||||
December 31, 2003 | December 31, 2002 | October 31, 2002 | |||||||||||||||||||||||||||||||||||
Successor Company | Successor Company | Predecessor Company | |||||||||||||||||||||||||||||||||||
As | As | As | As | As | As | ||||||||||||||||||||||||||||||||
Reported | Adjustment | Restated | Reported | Adjustment | Restated | Reported | Adjustment | Restated | |||||||||||||||||||||||||||||
(in thousands, except per share amounts) | |||||||||||||||||||||||||||||||||||||
Net income per common share, basic | $ | 2.74 | $ | (1.45 | ) | $ | 1.29 | $ | 0.71 | $ | (0.33 | ) | $ | 0.38 | $ | 7.23 | $ | — | $ | 7.23 | |||||||||||||||||
Net income per common share, diluted | $ | 2.54 | $ | (1.35 | ) | $ | 1.19 | $ | 0.67 | $ | (0.31 | ) | $ | 0.36 | $ | 7.23 | $ | — | $ | 7.23 | |||||||||||||||||
Weighted average number of common shares outstanding, basic | 63,129 | — | 63,129 | 60,000 | — | 60,000 | 270,382 | — | 270,382 | ||||||||||||||||||||||||||||
Weighted average number of common shares outstanding, diluted | 67,987 | — | 67,987 | 63,429 | — | 63,429 | 270,382 | — | 270,382 | ||||||||||||||||||||||||||||
Predecessor | |||||||||||||||
Successor Company | Company | ||||||||||||||
For the Two | For the Ten | ||||||||||||||
For the Year Ended | Months Ended | Months Ended | |||||||||||||
December 31, 2003 | December 31, 2002 | October 31, 2002 | |||||||||||||
(a) | Selling, general and administrative | ||||||||||||||
Mexico bookkeeping errors | $ | 930 | $ | 625 | $ | 61 | |||||||||
Net increase | $ | 930 | $ | 625 | $ | 61 | |||||||||
(b) | Depreciation | ||||||||||||||
Mexico bookkeeping errors | $ | (208 | ) | $ | (37 | ) | $ | — | |||||||
Argentina handset depreciation | 508 | — | — | ||||||||||||
Tax provision calculation errors | 216 | 36 | — | ||||||||||||
Net increase (decrease) | $ | 516 | $ | (1 | ) | $ | — | ||||||||
(c) | Amortization | ||||||||||||||
Mexico bookkeeping errors | $ | (202 | ) | $ | (35 | ) | $ | — | |||||||
Release of deferred tax asset valuation allowance | (8,338 | ) | — | — | |||||||||||
Tax provision calculation errors | 283 | 47 | — | ||||||||||||
Net (decrease) increase | $ | (8,257 | ) | $ | 12 | $ | — | ||||||||
F-22
2. | Restatement of Previously Issued Financial Statements — (Continued) |
Predecessor | |||||||||||||||
Successor Company | Company | ||||||||||||||
For the Two | For the Ten | ||||||||||||||
For the Year Ended | Months Ended | Months Ended | |||||||||||||
December 31, 2003 | December 31, 2002 | October 31, 2002 | |||||||||||||
(d) | Foreign currency transaction gains (losses), net | ||||||||||||||
Mexico bookkeeping errors | $ | 2,399 | $ | 1,259 | $ | 2,371 | |||||||||
Net change | $ | 2,399 | $ | 1,259 | $ | 2,371 | |||||||||
(e) | Interest expense and all other non- operating (expenses) income, net | ||||||||||||||
Mexico bookkeeping errors | $ | — | $ | — | $ | (2,310 | ) | ||||||||
Tax provision calculation errors | — | — | 3,085 | ||||||||||||
Net increase | $ | — | $ | — | $ | 775 | |||||||||
(f) | Income tax benefit (provision) | ||||||||||||||
Release of deferred tax asset valuation allowance, Mexico bookkeeping errors and other | $ | (97,011 | ) | $ | (17,260 | ) | $ | — | |||||||
Tax provision calculation errors | (3,945 | ) | (3,165 | ) | (3,085 | ) | |||||||||
Net increase | $ | (100,956 | ) | $ | (20,425 | ) | $ | (3,085 | ) | ||||||
F-23
2. | Restatement of Previously Issued Financial Statements — (Continued) |
As of December 31, 2003 | As of December 31, 2002 | |||||||||||||||||||||||||
As | As | As | ||||||||||||||||||||||||
As Reported | Adjustment | Restated | Reported | Adjustment | Restated | |||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||
Current deferred income taxes, net | $ | 38,312 | $ | 2,785 | (g) | $ | 41,097 | $ | — | $ | — | $ | — | |||||||||||||
Current assets, excluding current deferred income taxes, net | 606,229 | (572 | )(h) | 605,657 | 395,603 | — | 395,603 | |||||||||||||||||||
Property, plant and equipment, net | 368,561 | (127 | )(i) | 368,434 | 230,208 | 390 | (i) | 230,598 | ||||||||||||||||||
Intangible assets, net | 193,976 | (108,158 | )(j) | 85,818 | 200,098 | (17,834 | )(j) | 182,264 | ||||||||||||||||||
Other assets | 27,430 | — | 27,430 | 23,008 | — | 23,008 | ||||||||||||||||||||
Total assets | $ | 1,234,508 | $ | (106,072 | ) | $ | 1,128,436 | $ | 848,917 | $ | (17,444 | ) | $ | 831,473 | ||||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||||||||||
Accounts payable, accrued expenses and other | $ | 195,549 | $ | 5,624 | (k) | $ | 201,173 | $ | 176,736 | $ | 3,307 | (k) | $ | 180,043 | ||||||||||||
Other current liabilities | 51,988 | — | 51,988 | 75,528 | — | 75,528 | ||||||||||||||||||||
Deferred income taxes, net | — | — | — | 4,387 | (949 | )(l) | 3,438 | |||||||||||||||||||
Other long-term liabilities | 657,505 | — | 657,505 | 500,852 | — | 500,852 | ||||||||||||||||||||
Total liabilities | 905,042 | 5,624 | 910,666 | 757,503 | 2,358 | 759,861 | ||||||||||||||||||||
Stockholders’ equity | ||||||||||||||||||||||||||
Common stock | 69 | — | 69 | 60 | — | 60 | ||||||||||||||||||||
Paid-in capital | 164,705 | — | 164,705 | 49,138 | — | 49,138 | ||||||||||||||||||||
Retained earnings | 215,526 | (111,548 | )(m) | 103,978 | 42,566 | (19,802 | )(m) | 22,764 | ||||||||||||||||||
Accumulated other comprehensive loss | (50,834 | ) | (148 | )(n) | (50,982 | ) | (350 | ) | — | (350 | ) | |||||||||||||||
Total stockholders’ equity | 329,466 | (111,696 | ) | 217,770 | 91,414 | (19,802 | ) | 71,612 | ||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 1,234,508 | $ | (106,072 | ) | $ | 1,128,436 | $ | 848,917 | $ | (17,444 | ) | $ | 831,473 | ||||||||||||
F-24
2. | Restatement of Previously Issued Financial Statements — (Continued) |
As of | As of | |||||||||
December 31, | December 31, | |||||||||
2003 | 2002 | |||||||||
(g) | Current deferred income taxes, net | |||||||||
Release of deferred tax asset valuation allowance, Mexico bookkeeping errors and other | $ | 2,785 | $ | — | ||||||
Net increase | $ | 2,785 | $ | — | ||||||
(h) | Current assets, excluding current deferred income taxes, net | |||||||||
Mexico bookkeeping errors | $ | (572 | ) | $ | — | |||||
Net decrease | $ | (572 | ) | $ | — | |||||
(i) | Property, plant and equipment, net | |||||||||
Mexico bookkeeping errors | $ | (907 | ) | $ | (1,117 | ) | ||||
Argentina handset depreciation | (508 | ) | — | |||||||
Tax provision calculation errors | 1,288 | 1,507 | ||||||||
Net (decrease) increase | $ | (127 | ) | $ | 390 | |||||
(j) | Intangible assets, net | |||||||||
Mexico bookkeeping errors | $ | (916 | ) | $ | (1,118 | ) | ||||
Release of deferred tax asset valuation allowance | (108,453 | ) | (18,211 | ) | ||||||
Tax provision calculation errors | 1,211 | 1,495 | ||||||||
Net decrease | $ | (108,158 | ) | $ | (17,834 | ) | ||||
(k) | Accounts payable, accrued expenses and other | |||||||||
Mexico bookkeeping errors | $ | (4,572 | ) | $ | (2,944 | ) | ||||
Tax provision calculation errors | 10,196 | 6,251 | ||||||||
Net increase | $ | 5,624 | $ | 3,307 | ||||||
(l) | Deferred income taxes, net | |||||||||
Release of deferred tax asset valuation allowance, Mexico bookkeeping errors and other | $ | — | $ | (949 | ) | |||||
Net decrease | $ | — | $ | (949 | ) | |||||
(m) | Retained earnings | |||||||||
Mexico bookkeeping errors | $ | 2,585 | $ | 706 | ||||||
Release of deferred tax asset valuation allowance, tax impact of Mexico bookkeeping errors and other | (105,932 | ) | (17,260 | ) | ||||||
Argentina handset depreciation | (508 | ) | — | |||||||
Tax provision calculation errors | (7,693 | ) | (3,248 | ) | ||||||
Net decrease | $ | (111,548 | ) | $ | (19,802 | ) | ||||
F-25
2. | Restatement of Previously Issued Financial Statements — (Continued) |
As of | As of | |||||||||
December 31, | December 31, | |||||||||
2003 | 2002 | |||||||||
(n) | Accumulated other comprehensive loss | |||||||||
Mexico bookkeeping errors | $ | (413 | ) | $ | — | |||||
Release of deferred tax asset valuation allowance and other | 267 | — | ||||||||
Argentina handset depreciation | (2 | ) | — | |||||||
Net increase | $ | (148 | ) | $ | — | |||||
For the Two Months Ended | ||||||||||||
December 31, 2002 | ||||||||||||
As | As | |||||||||||
Reported | Adjustment | Restated | ||||||||||
(in thousands) | ||||||||||||
Net cash provided by operating activities | $ | 24,839 | $ | (266 | ) | $ | 24,573 | |||||
Net cash used in investing activities | (25,014 | ) | 266 | (24,748 | ) | |||||||
Net cash provided by financing activities | — | — | — |
3. | Reorganization |
• | NII Holdings amended and restated its Bylaws and filed a Restated Certificate of Incorporation with the Secretary of State of the State of Delaware authorizing an aggregate of 300,000,000 shares of common stock, par value $0.001 per share, one share of special director preferred stock, par value $1.00 per share, and 10,000,000 shares of undesignated preferred stock, par value $0.001 per share; |
F-26
3. | Reorganization — (Continued) |
• | NII Holdings cancelled all shares of its preferred stock, common stock and other equity interests that existed prior to November 12, 2002; | |
• | NII Holdings exchanged, on a pro rata basis, $2.3 billion in senior redeemable notes and other unsecured, non-trade claims that existed prior to its bankruptcy filing for 11,760,000 shares of new common stock and canceled its then-existing senior redeemable notes and some other unsecured, non-trade debt that existed prior to November 12, 2002; | |
• | Motorola Credit Corporation reinstated in full our $225.0 million international Motorola equipment financing facility and our $100.0 million Brazil Motorola equipment financing facility including $3.2 million in accrued interest, subject to deferrals of principal amortization and some structural modifications; | |
• | NII Holdings repaid the outstanding principal balance, together with accrued interest, due under its $56.7 million international Motorola incremental equipment financing facility using restricted cash held in escrow. The principal amount repaid will be available for re-borrowing upon the terms set forth in the international Motorola equipment financing facility (see Note 8); | |
• | NII Holdings raised $140.0 million in proceeds from some of our creditors that participated in a rights offering in exchange for the issuance of 47,040,000 additional shares of NII Holdings’ new common stock and new notes with an aggregate principal amount of $180.8 million due at maturity. The rights offering provided the holders of NII Holdings’ then-existing senior redeemable notes, and some of our other creditors, the opportunity to purchase a pro rata share of NII Holdings’ new common stock, as well as new notes issued by NII Holdings (Cayman), Ltd., one of our wholly-owned subsidiaries. Through the rights offering, Nextel Communications, Inc. purchased $50.9 million of the new notes and 17,089,563 shares of the common stock issued, together with 4,266,501 shares of common stock that NII Holdings issued to Nextel Communications, Inc. in connection with the cancellation of NII Holdings’ senior redeemable notes and in satisfaction of claims by Nextel Communications, Inc. under our 1997 tax sharing agreement. Nextel Communications, Inc. owned about 35.6% of NII Holdings’ issued and outstanding shares of new common stock as of November 12, 2002. MacKay Shields owned or controlled about 21.8% of NII Holdings’ common stock as of November 12, 2002. The new notes are senior secured obligations that accrue interest at a rate of approximately 13% per annum, compounded quarterly, through October 31, 2004, which interest is added to principal, and accrues interest thereafter at a rate of approximately 13% per annum, compounded quarterly and payable in cash quarterly. The new notes mature on November 1, 2009. The repayment of the new notes is fully, unconditionally and irrevocably guaranteed by NII Holdings and some of our subsidiaries and affiliates; and | |
• | NII Holdings entered into a new spectrum use and build-out agreement with Nextel Communications with respect to certain areas on the border between the United States and Mexico. As part of that agreement, we received $25.0 million of a total payment of $50.0 million, with the remaining $25.0 million placed in escrow to be distributed as costs are incurred during the completion of the network build-out. |
F-27
3. | Reorganization — (Continued) |
Post petition current liabilities | $ | 8,482 | ||
Liabilities deferred under the Chapter 11 proceeding | 2,446,174 | |||
Total post petition liabilities and allowed claims | 2,454,656 | |||
Total reorganization value | (475,800 | ) | ||
Excess of liabilities over reorganization value | $ | 1,978,856 | ||
• | the receipt of $25.0 million of a total $50.0 million in proceeds from Nextel Communications on the effective date of our reorganization under a new spectrum use and build-out agreement, which we deferred and recognized as a liability because of our future performance obligations; | |
• | the repayment to Motorola Credit Corporation of $56.7 million in outstanding principal plus accrued interest under our international Motorola incremental equipment financing facility and accrued interest under our international Motorola equipment financing facility and Brazil Motorola equipment financing facility; |
F-28
3. | Reorganization — (Continued) |
• | the extinguishment of $2.3 billion of our senior redeemable notes plus accrued interest and some other unsecured, non-trade debt in exchange for the issuance of 11,760,000 shares of our new common stock; | |
• | the receipt of $140.0 million in proceeds received through our rights offering in exchange for the issuance of new senior notes and 47,040,000 shares of new common stock, allocated between debt and equity based on the relative fair values of each; | |
• | the payment of $5.0 million and the issuance of 1,200,000 shares of new common stock in exchange for the retirement of the entire outstanding balance of $100.7 million under our Argentine credit facilities plus accrued interest; | |
• | the cancellation of all outstanding preferred stock, common stock and other equity interests and elimination of all components of stockholders’ equity, including paid-in-capital, accumulated deficit, deferred compensation and accumulated other comprehensive loss; and | |
• | the $115.1 million adjustment to the carrying values of our property, plant and equipment and intangible assets based on our estimates of their relative fair values, which we determined in consultation with external valuation specialists that we hired, and the resulting adjustment to deferred income taxes. | |
F-29
3. | Reorganization — (Continued) |
Elimination of Equity | ||||||||||||||||||||||||||||||||||
and Fresh | ||||||||||||||||||||||||||||||||||
Debt | Start Adjustments | |||||||||||||||||||||||||||||||||
Extinguishment | ||||||||||||||||||||||||||||||||||
Pre | Spectrum | and | Allocation of | Post | ||||||||||||||||||||||||||||||
Reorganization | Transaction | Reorganization | Rights | Argentina | Equity | Reorganization | Reorganization | |||||||||||||||||||||||||||
Balance | with NCI | Payments | Offering | Settlement | Elimination | Value | Balance | |||||||||||||||||||||||||||
Restated | Restated | Restated | ||||||||||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||||||||
Current assets | ||||||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 90,526 | $ | 25,000 | $ | (19,504 | ) | $ | 140,000 | $ | (5,000 | ) | $ | — | $ | — | $ | 231,022 | ||||||||||||||||
Restricted cash | 69,489 | (69,489 | ) | |||||||||||||||||||||||||||||||
Accounts receivable, net | 97,342 | 97,342 | ||||||||||||||||||||||||||||||||
Handset and accessory inventory | 19,269 | 19,269 | ||||||||||||||||||||||||||||||||
Prepaid expenses and other | 63,774 | (26,455 | ) | 37,319 | ||||||||||||||||||||||||||||||
Total current assets | 340,400 | 25,000 | (88,993 | ) | 140,000 | (5,000 | ) | — | (26,455 | ) | 384,952 | |||||||||||||||||||||||
Property, plant and equipment, net | 359,752 | (149,060 | ) | 210,692 | ||||||||||||||||||||||||||||||
Intangible assets and other, net | 172,610 | 33,082 | 205,692 | |||||||||||||||||||||||||||||||
Other assets | 46,380 | (18,374 | ) | 28,006 | ||||||||||||||||||||||||||||||
$ | 919,142 | $ | 25,000 | $ | (88,993 | ) | $ | 140,000 | $ | (5,000 | ) | $ | — | $ | (160,807 | ) | $ | 829,342 | ||||||||||||||||
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY | ||||||||||||||||||||||||||||||||||
Current liabilities | ||||||||||||||||||||||||||||||||||
Accounts payable | $ | 33,933 | $ | — | $ | 2,718 | $ | — | $ | — | $ | — | $ | — | $ | 36,651 | ||||||||||||||||||
Accrued expenses and other | 212,634 | (11,866 | ) | (2,600 | ) | 198,168 | ||||||||||||||||||||||||||||
Deferred revenues | 46,935 | (26,455 | ) | 20,480 | ||||||||||||||||||||||||||||||
Accrued interest | 31,600 | (23,670 | ) | (6,829 | ) | 1,101 | ||||||||||||||||||||||||||||
Due to related parties | 50,407 | 215 | 50,622 | |||||||||||||||||||||||||||||||
Current portion of long-term debt | 157,419 | (56,650 | ) | (100,769 | ) | — | ||||||||||||||||||||||||||||
Total current liabilities | 532,928 | — | (89,253 | ) | — | (107,598 | ) | — | (29,055 | ) | 307,022 | |||||||||||||||||||||||
Long-term debt | 325,000 | 3,193 | 100,800 | 428,993 | ||||||||||||||||||||||||||||||
Deferred income taxes | 2,659 | 1,714 | 4,373 | |||||||||||||||||||||||||||||||
Deferred revenues and other | 33,130 | 25,000 | (18,374 | ) | 39,756 | |||||||||||||||||||||||||||||
Total liabilities not subject to compromise | 893,717 | 25,000 | (86,060 | ) | 100,800 | (107,598 | ) | — | (45,715 | ) | 780,144 | |||||||||||||||||||||||
Liabilities subject to compromise | 2,446,174 | (2,446,174 | ) | — | ||||||||||||||||||||||||||||||
Stockholders’ (deficit) equity | ||||||||||||||||||||||||||||||||||
Preferred stock | 1,050,300 | (1,050,300 | ) | — | ||||||||||||||||||||||||||||||
Common stock — old | 271 | (271 | ) | — | ||||||||||||||||||||||||||||||
Common stock — new | — | 4 | 16 | 20 | ||||||||||||||||||||||||||||||
Paid-in-capital — old | 934,958 | (934,958 | ) | — | ||||||||||||||||||||||||||||||
Paid-in-capital — new | — | 8,994 | 39,184 | 1,000 | 49,178 | |||||||||||||||||||||||||||||
Treasury stock | (3,275 | ) | 3,275 | — | ||||||||||||||||||||||||||||||
Deferred compensation | (860 | ) | 860 | — | ||||||||||||||||||||||||||||||
Cumulative translation adjustment | (161,940 | ) | 161,940 | — | ||||||||||||||||||||||||||||||
Accumulated deficit | (4,240,203 | ) | 2,434,243 | 101,598 | 1,819,454 | (115,092 | ) | — | ||||||||||||||||||||||||||
Total stockholders’ (deficit) equity | (2,420,749 | ) | — | 2,443,241 | 39,200 | 102,598 | — | (115,092 | ) | 49,198 | ||||||||||||||||||||||||
$ | 919,142 | $ | 25,000 | $ | (88,993 | ) | $ | 140,000 | $ | (5,000 | ) | $ | — | $ | (160,807 | ) | $ | 829,342 | ||||||||||||||||
F-30
4. | Significant Transactions |
F-31
4. | Significant Transactions — (Continued) |
Successor Company | Predecessor Company | ||||||||||||||||
Two Months | Ten Months | ||||||||||||||||
Year Ended | Ended | Ended | Year Ended | ||||||||||||||
December 31, | December 31, | October 31, | December 31, | ||||||||||||||
2003 | 2002 | 2002 | 2001, | ||||||||||||||
(in thousands) | |||||||||||||||||
Operating revenues | $ | — | $ | 997 | $ | 12,570 | $ | 17,149 | |||||||||
Net pre-tax loss | $ | — | $ | (3,810 | ) | $ | (2,025 | ) | $ | (170,335 | ) | ||||||
December 31, | ||||||||
2003 | 2002 | |||||||
Restated | Restated | |||||||
(in thousands) | ||||||||
Land | $ | 560 | $ | 576 | ||||
Leasehold improvements | 16,711 | 14,202 | ||||||
Digital network equipment | 323,484 | 154,480 | ||||||
Office equipment, furniture and fixtures, and other | 55,058 | 22,751 | ||||||
Less: Accumulated depreciation and amortization | (56,913 | ) | (5,036 | ) | ||||
338,900 | 186,973 | |||||||
Construction in progress | 29,534 | 43,625 | ||||||
$ | 368,434 | $ | 230,598 | |||||
F-32
6. | Intangible Assets |
December 31, 2003 | December 31, 2002 | |||||||||||||||||||||||||
Gross Carrying | Accumulated | Net Carrying | Gross Carrying | Accumulated | Net Carrying | |||||||||||||||||||||
Value | Amortization | Value | Value | Amortization | Value | |||||||||||||||||||||
Restated | Restated | Restated | Restated | Restated | Restated | |||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||
Amortizable intangible assets: | ||||||||||||||||||||||||||
Licenses | $ | 73,595 | $ | (5,380 | ) | $ | 68,215 | $ | 93,202 | $ | (1,087 | ) | $ | 92,115 | ||||||||||||
Customer base | 42,133 | (27,684 | ) | 14,449 | 81,267 | (5,188 | ) | 76,079 | ||||||||||||||||||
Tradename and other | 4,132 | (978 | ) | 3,154 | 14,236 | (166 | ) | 14,070 | ||||||||||||||||||
Total intangible assets | $ | 119,860 | $ | (34,042 | ) | $ | 85,818 | $ | 188,705 | $ | (6,441 | ) | $ | 182,264 | ||||||||||||
Estimated | ||||
Amortization | ||||
Years | Expense | |||
2004 | $ | 19,153 | ||
2005 | 14,399 | |||
2006 | 4,871 | |||
2007 | 4,211 | |||
2008 | 4,211 |
F-33
6. | Intangible Assets — (Continued) |
7. | Balance Sheet Details |
Prepaid Expenses and Other. |
December 31, | ||||||||
2003 | 2002 | |||||||
(in thousands) | ||||||||
Value added tax receivables, current | $ | 22,596 | $ | 16,491 | ||||
Advances to suppliers | 8,053 | 4,456 | ||||||
Prepaid interest | — | 4,180 | ||||||
Insurance claims | 4,853 | 6,036 | ||||||
Prepaid income taxes | 4,470 | — | ||||||
Other prepaid expenses | 19,156 | 14,372 | ||||||
$ | 59,128 | $ | 45,535 | |||||
Accrued Expenses and Other. |
December 31, | ||||||||
2003 | 2002 | |||||||
Restated | Restated | |||||||
(in thousands) | ||||||||
Accrued income taxes | $ | 11,080 | $ | — | ||||
Accrued non-income based taxes | 32,899 | 62,648 | ||||||
Accrued payroll related items and commissions | 32,816 | 29,364 | ||||||
Accrued network system and information technology costs | 27,578 | 18,603 | ||||||
Accrued capital expenditures | 22,328 | 16,713 | ||||||
Customer deposits | 11,485 | 5,913 | ||||||
Accrued tax and other contingencies | 6,676 | 10,240 | ||||||
Other | 22,630 | 12,522 | ||||||
$ | 167,492 | $ | 156,003 | |||||
Other Long-Term Liabilities. |
December 31, | ||||||||
2003 | 2002 | |||||||
(in thousands) | ||||||||
Tax and other contingencies | $ | 69,627 | $ | 43,695 | ||||
Asset retirement obligations | 3,021 | — | ||||||
Other long-term liabilities | 3,599 | — | ||||||
$ | 76,247 | $ | 43,695 | |||||
F-34
8. | Debt |
December 31, | ||||||||
2003 | 2002 | |||||||
(in thousands) | ||||||||
3.5% convertible notes due 2033 | $ | 180,000 | $ | — | ||||
13.0% senior secured discount notes due 2009, net of unamortized discount of $52,196 and $76,857 | 128,625 | 103,964 | ||||||
International equipment facility | 125,000 | 225,000 | ||||||
Tower financing obligations | 103,131 | — | ||||||
Brazil equipment facility | — | 103,193 | ||||||
Total debt | 536,756 | 432,157 | ||||||
Less: current portion | (1,466 | ) | — | |||||
$ | 535,290 | $ | 432,157 | |||||
• | during any fiscal quarter commencing after December 31, 2003, if the closing sale price of our common stock exceeds 110% of the conversion price for at least 20 trading days in the 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter; | |
• | during the five business day period after any five consecutive trading day period in which the trading price per note for each day of such period was less than 98% of the product of the closing sale price of our common stock and the number of shares issuable upon conversion of $1,000 principal amount of the notes, subject to certain limitations; | |
• | if the notes have been called for redemption by us; or | |
• | upon the occurrence of certain specified corporate events. |
F-35
8. | Debt — (Continued) |
Redemption Period | Price | |||
Beginning on September 20, 2008 and ending on September 14, 2009 | 101.0 | % | ||
Beginning on September 15, 2009 and ending on September 14, 2010 | 100.5 | % | ||
Beginning on September 15, 2010 and thereafter | 100.0 | % |
Redemption | ||||
Year | Price | |||
2006 | 106.50% | |||
2007 | 103.25% | |||
2008 and thereafter | 100.00% |
F-36
8. | Debt — (Continued) |
• | the termination of a $56.7 million credit commitment; | |
• | amendments to financial covenants and mandatory prepayment provisions which permit us, subject to certain terms and conditions, to refinance our senior secured discount notes; | |
• | removal of the requirement that our Chilean subsidiary pledge collateral to secure this facility, provided that our investment in this subsidiary does not exceed $50.0 million; | |
• | expansion of the amounts and types of indebtedness and related liens we may incur; | |
• | a modification to the amortization schedule under this facility to a semi-annual payment of $20.8 million, with the first amortization payment under this revised schedule due on June 30, 2005; | |
• | a reduction of certain financial reporting requirements relating to our operating companies; |
F-37
8. | Debt — (Continued) |
• | a reduction of restrictions on leverage; and | |
• | removal of the requirement that certain of our operating companies maintain unencumbered cash. |
F-38
8. | Debt — (Continued) |
2004 | $ | 1,466 | ||
2005 | 43,423 | |||
2006 | 43,775 | |||
2007 | 44,204 | |||
2008 | 3,062 | |||
Thereafter | 453,022 | |||
$ | 588,952 | |||
F-39
9. | Fair Value of Financial Instruments |
December 31, | ||||||||||||||||
2003 | 2002 | |||||||||||||||
Carrying | Estimated | Carrying | Estimated | |||||||||||||
Amount | Fair Value | Amount | Fair Value | |||||||||||||
(in thousands) | ||||||||||||||||
Debt, including current portion | $ | 536,756 | $ | 611,664 | $ | 432,157 | $ | 463,809 |
10. | Commitments and Contingencies |
2004 | $ | 30,975 | ||
2005 | 26,108 | |||
2006 | 21,786 | |||
2007 | 19,258 | |||
2008 | 19,263 | |||
Thereafter | 45,617 | |||
$ | 163,007 | |||
F-40
F-41
• | filed a Restated Certificate of Incorporation authorizing an aggregate of 300,000,000 shares of new common stock, par value $0.001 per share, one share of special director preferred stock, par value $1.00 per share and 10,000,000 shares of undesignated preferred stock, par value $0.001 per share; | |
• | cancelled all shares of our preferred stock, common stock and other equity interests that existed prior to November 12, 2002; and | |
• | issued 60,000,000 shares of our new common stock and one share of our special director preferred stock. | |
F-42
F-43
F-44
F-45
Impairment | Restructuring | Other | Total | |||||||||||||
Charges | Charges | Charges | Charges | |||||||||||||
(in thousands) | ||||||||||||||||
Argentina | $ | 262,541 | $ | — | $ | — | $ | 262,541 | ||||||||
Brazil | 678,672 | 768 | — | 679,440 | ||||||||||||
Chile | 31,953 | — | — | 31,953 | ||||||||||||
Mexico | 433,945 | — | — | 433,945 | ||||||||||||
Peru | 171,590 | — | — | 171,590 | ||||||||||||
Corporate | — | 1,025 | 670 | 1,695 | ||||||||||||
Total | $ | 1,578,701 | $ | 1,793 | $ | 670 | $ | 1,581,164 | ||||||||
13. | Investments |
F-46
14. | Income Taxes |
Successor Company | Predecessor Company | |||||||||||||||||
Two Months | Ten Months | |||||||||||||||||
Year Ended | Ended | Ended | Year Ended | |||||||||||||||
December 31, | December 31, | October 31, | December 31, | |||||||||||||||
2003 | 2002 | 2002 | 2001 | |||||||||||||||
Restated | Restated | Restated | ||||||||||||||||
(in thousands) | ||||||||||||||||||
Current: | ||||||||||||||||||
Federal | $ | 23,252 | $ | (4,375 | ) | $ | (25,764 | ) | $ | (13,718 | ) | |||||||
State | — | — | — | (2,503 | ) | |||||||||||||
Foreign | (23,784 | ) | (3,227 | ) | (3,955 | ) | (26,205 | ) | ||||||||||
Total current income tax benefit (provision) | (532 | ) | (7,602 | ) | (29,719 | ) | (42,426 | ) | ||||||||||
Deferred: | ||||||||||||||||||
Federal | (2,646 | ) | — | — | — | |||||||||||||
Foreign | (48,449 | ) | (17,272 | ) | 449 | 111,176 | ||||||||||||
Total deferred income tax (provision) benefit | (51,095 | ) | (17,272 | ) | 449 | 111,176 | ||||||||||||
Total income tax (provision) benefit | $ | (51,627 | ) | $ | (24,874 | ) | $ | (29,270 | ) | $ | 68,750 | |||||||
F-47
Successor Company | Predecessor Company | ||||||||||||||||
Two Months | Ten Months | ||||||||||||||||
Year Ended | Ended | Ended | Year Ended | ||||||||||||||
December 31, | December 31, | October 31, | December 31, | ||||||||||||||
2003 | 2002 | 2002 | 2001 | ||||||||||||||
Restated | Restated | Restated | |||||||||||||||
(in thousands) | |||||||||||||||||
Income tax (provision) benefit at statutory rate | $ | (46,494 | ) | $ | (9,982 | ) | $ | (695,093 | ) | $ | 904,126 | ||||||
State taxes (net of federal benefit) | — | 2,085 | (7,785 | ) | 13,968 | ||||||||||||
Effect of foreign operations | 1,855 | 22,001 | (52,556 | ) | (67,699 | ) | |||||||||||
Non-consolidated subsidiary adjustments | 1,777 | — | (72,541 | ) | 7,348 | ||||||||||||
High yield discount obligations | — | — | (215,632 | ) | (4,524 | ) | |||||||||||
Utilization (generation) of deferred tax assets | — | — | — | (376,194 | ) | ||||||||||||
Change in deferred tax asset valuation allowance | (20,448 | ) | (32,286 | ) | 400,420 | — | |||||||||||
Loss on impairment charges | — | — | — | (366,492 | ) | ||||||||||||
Intercompany transactions | — | (1,465 | ) | (9,775 | ) | (11,873 | ) | ||||||||||
Withholding tax and subpart F income tax | 15,146 | (8,750 | ) | (47,638 | ) | — | |||||||||||
Reorganization items | — | — | 659,612 | — | |||||||||||||
Other | (3,463 | ) | 3,523 | 11,718 | (29,910 | ) | |||||||||||
Income tax (provision) benefit | $ | (51,627 | ) | $ | (24,874 | ) | $ | (29,270 | ) | $ | 68,750 | ||||||
F-48
December 31, | |||||||||
2003 | 2002 | ||||||||
Restated | Restated | ||||||||
(in thousands) | |||||||||
Deferred tax assets: | |||||||||
Loss carryforwards | $ | 260,026 | $ | 295,592 | |||||
Allowance for doubtful accounts | 10,619 | 8,424 | |||||||
Deferred interest | — | 501 | |||||||
Provision for expenses | 19,653 | 10,561 | |||||||
Accrual for contingent liabilities | 17,541 | 13,293 | |||||||
Intangible assets | 33,033 | 26,750 | |||||||
Property, plant and equipment | 107,949 | 60,754 | |||||||
Other | 25,762 | 27,609 | |||||||
474,583 | 443,484 | ||||||||
Valuation allowance | (374,879 | ) | (428,294 | ) | |||||
Total deferred tax asset | 99,704 | 15,190 | |||||||
Deferred tax liabilities: | |||||||||
Intangible assets | — | 8,706 | |||||||
Intercompany debt | 20,858 | 247 | |||||||
Other | 37,749 | 9,675 | |||||||
Total deferred tax liability | 58,607 | 18,628 | |||||||
Net deferred tax asset (liability) | $ | 41,097 | $ | (3,438 | ) | ||||
F-49
• | Nextel Communications’ ownership in us was reduced below 80% in October 2002. As a result, we deconsolidated from Nextel Communications for tax purposes and are now required to file a separate tax return. We and our domestic subsidiaries elected to file a consolidated return for business activities conducted after deconsolidation. Our results from operations through October 2002 were reported on Nextel Communications’ consolidated tax return. The results of our operations from the date of deconsolidation through the end of the calendar year were included in our consolidated tax return. | |
• | We extinguished approximately $2.3 billion of our secured redeemable notes plus accrued interest and some other unsecured, non-trade debt in exchange for the issuance of 11,760,000 shares of new common stock. For U.S. tax purposes, this transaction caused us to recognize cancellation of indebtedness income on the first day of the Successor Company’s new tax year. Internal Revenue Code Section 108 provides that we are not required to recognize taxable income with respect to the cancellation of indebtedness. | |
• | Certain reorganization items were recorded for financial statement purposes. In certain situations, these reorganization items resulted in the adjustment of the financial statement basis of certain assets, which resulted in the adjustment of certain deferred tax assets and liabilities. | |
• | We had a tax sharing agreement with Nextel Communications dated January 1, 1997, which was in effect through November 11, 2002. On November 12, 2002, we terminated the tax sharing |
F-50
agreement and entered into a tax cooperation agreement with Nextel Communications. See Note 16 for additional information. |
F-51
Weighted Average | |||||||||
Predecessor Company | Options | Exercise Price | |||||||
Outstanding, December 31, 2000 | 22,683,627 | $ | 7.35 | ||||||
Granted | 9,129,875 | 5.00 | |||||||
Exercised | — | — | |||||||
Cancelled | (2,826,876 | ) | 5.97 | ||||||
Outstanding, December 31, 2001 | 28,986,626 | 6.75 | |||||||
Granted | — | — | |||||||
Exercised | — | — | |||||||
Terminated | (28,986,626 | ) | 6.75 | ||||||
Outstanding, October 31, 2002 | — | — | |||||||
Exercisable, December 31, 2001 | 9,294,575 | 3.30 | |||||||
Exercisable, October 31, 2002 | — | — | |||||||
Weighted Average | |||||||||
Successor Company | Options | Exercise Price | |||||||
Outstanding, October 31, 2002 | — | $ | — | ||||||
Granted | 6,657,300 | 0.83 | |||||||
Exercised | — | — | |||||||
Cancelled | — | — | |||||||
Outstanding, December 31, 2002 | 6,657,300 | 0.83 | |||||||
Granted | 167,400 | 10.94 | |||||||
Exercised | (2,883,210 | ) | 0.87 | ||||||
Cancelled | (318,810 | ) | 0.83 | ||||||
Outstanding, December 31, 2003 | 3,662,680 | 1.27 | |||||||
Exercisable, December 31, 2002 | 1,997,190 | 0.83 | |||||||
Exercisable, December 31, 2003 | 1,026,180 | 0.93 | |||||||
F-52
Options Outstanding | Options Exercisable | |||||||||||||||||||
Exercise Price or | Weighted Average | Weighted Average | Weighted Average | |||||||||||||||||
Range | Shares | Remaining Life | Exercise Price | Shares | Exercise Price | |||||||||||||||
$ | 0.83 | 3,468,780 | 8.9 years | $ | 0.83 | 1,021,680 | $ | 0.83 | ||||||||||||
8.62 - 9.14 | 99,900 | 9.3 years | 8.80 | — | — | |||||||||||||||
11.33 - 13.70 | 39,000 | 9.5 years | 12.79 | — | — | |||||||||||||||
21.93 | 15,000 | 9.7 years | 21.93 | 4,500 | 21.93 | |||||||||||||||
3,622,680 | 1,026,180 | |||||||||||||||||||
• | were granted at prices equal to the market value of Nextel Communications’ stock on the grant date; | |
• | vested ratably over a four year service period; and | |
• | expired ten years subsequent to the award date. |
F-53
Weighted Average | |||||||||
Predecessor Company | Options | Exercise Price | |||||||
Outstanding, December 31, 2000 | 3,920,174 | $ | 38.13 | ||||||
Granted | — | — | |||||||
Transferred | 139,209 | 28.71 | |||||||
Exercised | (62,884 | ) | 12.23 | ||||||
Cancelled | (255,661 | ) | 50.37 | ||||||
Outstanding, December 31, 2001 | 3,740,838 | 37.34 | |||||||
Granted | — | — | |||||||
Transferred | (126,463 | ) | 29.78 | ||||||
Exercised | (30,000 | ) | 7.56 | ||||||
Cancelled | (1,309,822 | ) | 49.84 | ||||||
Outstanding, October 31, 2002 | 2,274,553 | 30.93 | |||||||
Exercisable, December 31, 2001 | 1,619,594 | 27.40 | |||||||
Exercisable, October 31, 2002 | 2,274,553 | 30.93 | |||||||
Weighted Average | |||||||||
Successor Company | Options | Exercise Price | |||||||
Outstanding, October 31, 2002 | 2,274,553 | $ | 30.93 | ||||||
Granted | — | — | |||||||
Transferred | — | — | |||||||
Exercised | (95,000 | ) | 11.80 | ||||||
Cancelled | (155,000 | ) | 22.10 | ||||||
Outstanding, December 31, 2002 | 2,024,553 | 32.51 | |||||||
Granted | — | — | |||||||
Transferred | — | — | |||||||
Exercised | (1,067,622 | ) | 13.50 | ||||||
Cancelled | (915,535 | ) | 55.56 | ||||||
Outstanding, December 31, 2003 | 41,396 | 12.80 | |||||||
Exercisable, December 31, 2002 | 2,024,553 | 32.51 | |||||||
Exercisable, December 31, 2003 | 41,396 | 12.80 | |||||||
F-54
2003 | 2002 | 2001 | ||||||||||
Expected stock price volatility | 59%- 64 | % | 83 | % | 66 | % | ||||||
Risk-free interest rate | 3.2%- 4.4 | % | 2.7 | % | 4.9 | % | ||||||
Expected life in years | 5 | 5 | 5 | |||||||||
Expected dividend yield | 0.00 | % | 0.00 | % | 0.00 | % | ||||||
Forfeiture rate | 4.00 | % | 4.00 | % | 0.00 | % |
Transactions with Nextel Communications, Inc. |
F-55
New Spectrum Use and Build-Out Agreement |
Tax Cooperation Agreement with Nextel Communications |
Amended and Restated Overhead Services Agreement with Nextel Communications |
F-56
Third Amended and Restated Trademark License Agreement with Nextel Communications, Inc. |
Standstill Agreement |
F-57
Successor Company | Predecessor Company | ||||||||||||||||
Two Months | Ten Months | ||||||||||||||||
Year Ended | Ended | Ended | Year Ended | ||||||||||||||
December 31, | December 31, | October 31, | December 31, | ||||||||||||||
2003 | 2002 | 2002 | 2001 | ||||||||||||||
(in thousands) | |||||||||||||||||
Digital mobile network equipment | $ | 54,756 | $ | 1,228 | $ | 16,272 | $ | 200,371 | |||||||||
Handsets | 125,178 | 18,708 | 93,670 | 186,463 | |||||||||||||
Software upgrades and maintenance | 14,293 | 2,676 | 9,550 | 9,148 | |||||||||||||
Training and other | 537 | 24 | 174 | 1,120 | |||||||||||||
$ | 194,764 | $ | 22,636 | $ | 119,666 | $ | 397,102 | ||||||||||
December 31, | |||||||||
2003 | 2002 | ||||||||
(in thousands) | |||||||||
Handset purchases | $ | 5,155 | $ | 44,812 | |||||
Digital mobile network equipment purchases | 7,084 | 4,441 | |||||||
Other | 987 | 2,026 | |||||||
Total due to Motorola | $ | 13,226 | $ | 51,279 | |||||
F-58
17. | Segment Information |
Corporate | Intercompany | |||||||||||||||||||||||||||
Mexico | Brazil | Argentina | Peru | and Other | Eliminations | Consolidated | ||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||
Year Ended December 31, 2003 (Successor Company) — Restated (see Note 2) | ||||||||||||||||||||||||||||
Operating revenues | $ | 578,368 | $ | 148,545 | $ | 118,143 | $ | 92,575 | $ | 1,571 | $ | (515 | ) | $ | 938,687 | |||||||||||||
Segment earnings (losses) | 215,303 | 13,603 | 32,668 | 20,939 | (35,506 | ) | — | 247,007 | ||||||||||||||||||||
Depreciation and amortization | (67,681 | ) | (4,520 | ) | (3,983 | ) | (3,054 | ) | (755 | ) | 492 | (79,501 | ) | |||||||||||||||
Operating income (loss) | 147,622 | 9,083 | 28,685 | 17,885 | (36,261 | ) | 492 | 167,506 | ||||||||||||||||||||
Interest expense | (19,762 | ) | (11,165 | ) | (61 | ) | (2,027 | ) | (36,683 | ) | 5,075 | (64,623 | ) | |||||||||||||||
Interest income | 2,609 | 5,747 | 520 | 85 | 6,978 | (5,075 | ) | 10,864 | ||||||||||||||||||||
Foreign currency transaction (losses) gains, net | (16,381 | ) | 23,751 | 1,335 | 165 | (14 | ) | — | 8,856 | |||||||||||||||||||
Gain (loss) on extinguishment of debt | — | 22,739 | — | — | (335 | ) | — | 22,404 | ||||||||||||||||||||
Other (expense) income, net | (959 | ) | (8,239 | ) | 8,383 | (328 | ) | (8,564 | ) | (2,459 | ) | (12,166 | ) | |||||||||||||||
Income (loss) from continuing operations before income tax | $ | 113,129 | $ | 41,916 | $ | 38,862 | $ | 15,780 | $ | (74,879 | ) | $ | (1,967 | ) | $ | 132,841 | ||||||||||||
Capital expenditures from continuing operations | $ | 139,896 | $ | 32,993 | $ | 22,919 | $ | 15,876 | $ | 2,663 | $ | — | $ | 214,347 | ||||||||||||||
F-59
17. | Segment Information — (Continued) |
Corporate | Intercompany | |||||||||||||||||||||||||||
Mexico | Brazil | Argentina | Peru | and Other | Eliminations | Consolidated | ||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||
Two Months Ended December 31, 2002 (Successor Company) — Restated (see Note 2) | ||||||||||||||||||||||||||||
Operating revenues | $ | 95,682 | $ | 21,990 | $ | 10,727 | $ | 14,729 | $ | 239 | $ | (89 | ) | $ | 143,278 | |||||||||||||
Segment earnings (losses) | 40,435 | 4,663 | 2,821 | 3,195 | (4,442 | ) | — | 46,672 | ||||||||||||||||||||
Depreciation and amortization | (10,267 | ) | (263 | ) | (212 | ) | (323 | ) | (367 | ) | 346 | (11,086 | ) | |||||||||||||||
Operating income (loss) | 30,168 | 4,400 | 2,609 | 2,872 | (4,809 | ) | 346 | 35,586 | ||||||||||||||||||||
Interest expense | (1,447 | ) | (5,747 | ) | (172 | ) | (252 | ) | (3,788 | ) | 937 | (10,469 | ) | |||||||||||||||
Interest income | 270 | 1,178 | 16 | 6 | 1,264 | (937 | ) | 1,797 | ||||||||||||||||||||
Foreign currency transaction gains, net | 850 | 1,422 | 285 | 624 | 34 | (599 | ) | 2,616 | ||||||||||||||||||||
Other (expense) income, net | (1,456 | ) | (950 | ) | (60 | ) | 6,983 | (6,074 | ) | — | (1,557 | ) | ||||||||||||||||
Income (loss) from continuing operations before income tax | $ | 28,385 | $ | 303 | $ | 2,678 | $ | 10,233 | $ | (13,373 | ) | $ | (253 | ) | $ | 27,973 | ||||||||||||
Capital expenditures from continuing operations | $ | 16,195 | $ | 1,547 | $ | 1,932 | $ | 4,269 | $ | 586 | $ | — | $ | 24,529 | ||||||||||||||
Ten Months Ended October 31, 2002 (Predecessor Company) — Restated (see Note 2) | ||||||||||||||||||||||||||||
Operating revenues | $ | 351,556 | $ | 152,780 | $ | 63,790 | $ | 68,011 | $ | 1,361 | $ | (403 | ) | $ | 637,095 | |||||||||||||
Segment earnings (losses) | 101,320 | 13,650 | 12,465 | 18,474 | (23,796 | ) | — | 122,113 | ||||||||||||||||||||
Impairment, restructuring and other charges | — | (695 | ) | (8,542 | ) | (23 | ) | (6,548 | ) | — | (15,808 | ) | ||||||||||||||||
Depreciation and amortization | (43,648 | ) | (9,977 | ) | (2,231 | ) | (5,068 | ) | (5,733 | ) | 1,680 | (64,977 | ) | |||||||||||||||
Operating income (loss) | 57,672 | 2,978 | 1,692 | 13,383 | (36,077 | ) | 1,680 | 41,328 | ||||||||||||||||||||
Interest expense | (2,921 | ) | (32,458 | ) | (9,485 | ) | (2,253 | ) | (128,245 | ) | 23,783 | (151,579 | ) | |||||||||||||||
Interest income | 438 | 22,579 | 167 | 30 | 8,378 | (27,664 | ) | 3,928 | ||||||||||||||||||||
Foreign currency transaction losses, net | (14,823 | ) | (27,669 | ) | (137,820 | ) | (1,030 | ) | (22 | ) | 599 | (180,765 | ) | |||||||||||||||
Reorganization items, net | (46,039 | ) | (33,658 | ) | (4,112 | ) | (31,030 | ) | 2,281,829 | 14,008 | 2,180,998 | |||||||||||||||||
Gain on extinguishment of debt, net | — | — | — | — | 101,598 | — | 101,598 | |||||||||||||||||||||
Other (expense) income, net | (3,071 | ) | (3,703 | ) | (1,954 | ) | (530 | ) | 340 | — | (8,918 | ) | ||||||||||||||||
(Loss) income from continuing operations before income tax | $ | (8,744 | ) | $ | (71,931 | ) | $ | (151,512 | ) | $ | (21,430 | ) | $ | 2,227,801 | $ | 12,406 | $ | 1,986,590 | ||||||||||
Capital expenditures from continuing operations | $ | 100,651 | $ | 20,521 | $ | 12,190 | $ | 12,883 | $ | 1,971 | $ | — | $ | 148,216 | ||||||||||||||
F-60
17. | Segment Information — (Continued) |
Corporate | Intercompany | |||||||||||||||||||||||||||
Mexico | Brazil | Argentina | Peru | and Other | Eliminations | Consolidated | ||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||
Year Ended December 31, 2001 (Predecessor Company) | ||||||||||||||||||||||||||||
Operating revenues | $ | 289,335 | $ | 171,138 | $ | 135,320 | $ | 64,952 | $ | 2,240 | $ | (539 | ) | $ | 662,446 | |||||||||||||
Segment earnings (losses) | 15,933 | (67,310 | ) | 2,390 | 5,370 | (44,152 | ) | — | (87,769 | ) | ||||||||||||||||||
Impairment, restructuring and other charges | (433,945 | ) | (679,440 | ) | (262,541 | ) | (171,590 | ) | (33,648 | ) | — | (1,581,164 | ) | |||||||||||||||
Depreciation and amortization | (67,106 | ) | (73,026 | ) | (44,507 | ) | (26,117 | ) | (8,724 | ) | 918 | (218,562 | ) | |||||||||||||||
Operating loss | (485,118 | ) | (819,776 | ) | (304,658 | ) | (192,337 | ) | (86,524 | ) | 918 | (1,887,495 | ) | |||||||||||||||
Interest expense | (6,398 | ) | (24,766 | ) | (13,474 | ) | (4,270 | ) | (279,344 | ) | 31,024 | (297,228 | ) | |||||||||||||||
Interest income | 1,153 | 26,011 | 662 | 129 | 20,161 | (34,869 | ) | 13,247 | ||||||||||||||||||||
Realized losses on investments | — | — | — | — | (151,291 | ) | — | (151,291 | ) | |||||||||||||||||||
Equity in gains of unconsolidated affiliates | — | — | — | — | 9,640 | — | 9,640 | |||||||||||||||||||||
Foreign currency transaction gains (losses), net | 1,816 | (62,590 | ) | (1 | ) | 573 | (1,228 | ) | 148 | (61,282 | ) | |||||||||||||||||
Other (expense) income, net | (954 | ) | (5,690 | ) | (2,601 | ) | (765 | ) | 5,829 | — | (4,181 | ) | ||||||||||||||||
Loss from continuing operations before income tax | $ | (489,501 | ) | $ | (886,811 | ) | $ | (320,072 | ) | $ | (196,670 | ) | $ | (482,757 | ) | $ | (2,779 | ) | $ | (2,378,590 | ) | |||||||
Capital expenditures from continuing operations | $ | 213,191 | $ | 244,310 | $ | 93,674 | $ | 75,354 | $ | 14,918 | $ | (12,726 | ) | $ | 628,721 | |||||||||||||
December 31, 2003 (Successor Company) — Restated (see Note 2) | ||||||||||||||||||||||||||||
Property, plant and equipment, net | $ | 278,118 | $ | 38,320 | $ | 25,699 | $ | 25,313 | $ | 2,602 | $ | (1,618 | ) | $ | 368,434 | |||||||||||||
Identifiable assets | $ | 675,035 | $ | 138,824 | $ | 94,158 | $ | 76,935 | $ | 145,102 | $ | (1,618 | ) | $ | 1,128,436 | |||||||||||||
December 31, 2002 (Successor Company) — Restated (see Note 2) | ||||||||||||||||||||||||||||
Property, plant and equipment, net | $ | 208,310 | $ | 4,433 | $ | 4,599 | $ | 12,668 | $ | 243 | $ | 345 | $ | 230,598 | ||||||||||||||
Identifiable assets | $ | 522,533 | $ | 73,478 | $ | 38,499 | $ | 59,425 | $ | 137,193 | $ | 345 | $ | 831,473 | ||||||||||||||
October 31, 2002 (Predecessor Company) — Restated (see Note 2) | ||||||||||||||||||||||||||||
Property, plant and equipment, net | $ | 196,372 | $ | 3,181 | $ | 2,652 | $ | 8,487 | $ | — | $ | — | $ | 210,692 | ||||||||||||||
Identifiable assets | $ | 515,348 | $ | 70,901 | $ | 32,982 | $ | 58,698 | $ | 151,413 | $ | — | $ | 829,342 | ||||||||||||||
December 31, 2001 (Predecessor Company) | ||||||||||||||||||||||||||||
Property, plant and equipment, net | $ | 243,424 | $ | 40,004 | $ | 31,392 | $ | 33,869 | $ | 17,001 | $ | (15,689 | ) | $ | 350,001 | |||||||||||||
Identifiable assets | $ | 514,198 | $ | 157,137 | $ | 134,662 | $ | 98,200 | $ | 633,386 | $ | (293,163 | ) | $ | 1,244,420 | |||||||||||||
F-61
Successor Company | |||||||||||||||||
First | Second | Third | Fourth | ||||||||||||||
Restated | Restated | Restated | Restated | ||||||||||||||
(in thousands, except per share amounts) | |||||||||||||||||
2003 | |||||||||||||||||
Operating revenues | $ | 203,393 | $ | 225,951 | $ | 246,230 | $ | 263,113 | |||||||||
Operating income | 45,358 | 41,952 | 43,371 | 36,825 | |||||||||||||
Net income | 10,004 | 11,475 | 48,382 | 11,353 | |||||||||||||
Net income per common share, basic | $ | 0.17 | $ | 0.19 | $ | 0.77 | $ | 0.17 | |||||||||
Net income per common share, diluted | $ | 0.16 | $ | 0.18 | $ | 0.74 | $ | 0.16 | |||||||||
Fourth | ||||||||||||||||||||||
Predecessor | Successor | |||||||||||||||||||||
Company | Company | |||||||||||||||||||||
Predecessor Company | One Month | Two Months | ||||||||||||||||||||
Ended | Ended | |||||||||||||||||||||
First | Second | Third | October 31 | December 31 | ||||||||||||||||||
Restated | Restated | Restated | ||||||||||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||||||||
2002 | ||||||||||||||||||||||
Operating revenues | $ | 194,768 | $ | 190,169 | $ | 187,634 | $ | 64,524 | $ | 143,278 | ||||||||||||
Operating income | 3,358 | 6,816 | 19,708 | 11,446 | 35,586 | |||||||||||||||||
Net (loss) income | (154,549 | ) | (236,617 | ) | (36,329 | ) | 2,382,538 | 22,764 | ||||||||||||||
Net (loss) income per common share, basic | $ | (0.57 | ) | $ | (0.88 | ) | $ | (0.13 | ) | $ | 8.81 | $ | 0.38 | |||||||||
Net (loss) income per common share, diluted | $ | (0.57 | ) | $ | (0.88 | ) | $ | (0.13 | ) | $ | 8.81 | $ | 0.36 | |||||||||
F-62
18. | Quarterly Financial Data (Unaudited) — (Continued) |
19. | Subsequent Events |
• | during any fiscal quarter commencing after March 31, 2004, if the closing sale price of our common stock exceeds 120% of the conversion price for at least 20 trading days in the 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter; | |
• | during the five business day period after any five consecutive trading day period in which the trading price per note for each day of this period was less than 98% of the product of the closing sale price of our common stock and the number of shares issuable upon conversion of $1,000 principal amount of the notes subject to certain limitations; | |
• | if the notes have been called for redemption; or | |
• | upon the occurrence of specified corporate events. |
F-63
19. | Subsequent Events — (Continued) |
F-64
NII Holdings | ||||||||||||||||||||||||||
NII Holdings, | (Cayman), Ltd. | Guarantor | Non-Guarantor | Intercompany | ||||||||||||||||||||||
Inc. (Parent) | (Issuer)(1) | Subsidiaries(2) | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||
Current assets | ||||||||||||||||||||||||||
Cash and cash equivalents | $ | 108,688 | $ | 123,730 | $ | 137,931 | $ | 35,057 | $ | — | $ | 405,406 | ||||||||||||||
Accounts receivable, net | 110 | 101 | 105,785 | 13,989 | — | 119,985 | ||||||||||||||||||||
Handset and accessory inventory, net | — | — | 17,485 | 3,653 | — | 21,138 | ||||||||||||||||||||
Deferred income taxes, net | — | — | 33,073 | 8,024 | — | 41,097 | ||||||||||||||||||||
Prepaid expenses and other | 112 | — | 50,187 | 8,829 | — | 59,128 | ||||||||||||||||||||
Total current assets | 108,910 | 123,831 | 344,461 | 69,552 | — | 646,754 | ||||||||||||||||||||
Property, plant and equipment, net | 2,401 | — | 340,133 | 25,900 | — | 368,434 | ||||||||||||||||||||
Investments in and advances to affiliates | 302,994 | 145,955 | 160,805 | 136 | (609,890 | ) | — | |||||||||||||||||||
Intangible assets, net | — | — | 15,184 | 70,634 | — | 85,818 | ||||||||||||||||||||
Other assets | 5,097 | 1,728 | 19,557 | 1,048 | — | 27,430 | ||||||||||||||||||||
$ | 419,402 | $ | 271,514 | $ | 880,140 | $ | 167,270 | $ | (609,890 | ) | $ | 1,128,436 | ||||||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||||||||||
Current liabilities | ||||||||||||||||||||||||||
Accounts payable | $ | 257 | $ | — | $ | 24,970 | $ | 8,454 | $ | — | $ | 33,681 | ||||||||||||||
Accrued expenses and other | 185 | 519 | 140,767 | 26,021 | — | 167,492 | ||||||||||||||||||||
Deferred revenues | — | — | 29,608 | 2,432 | — | 32,040 | ||||||||||||||||||||
Accrued interest | 1,835 | — | 3,187 | — | — | 5,022 | ||||||||||||||||||||
Due to related parties | 9,135 | 68,454 | 189,040 | 57,784 | (310,953 | ) | 13,460 | |||||||||||||||||||
Current portion of long-term debt | — | — | 1,466 | — | — | 1,466 | ||||||||||||||||||||
Total current liabilities | 11,412 | 68,973 | 389,038 | 94,691 | (310,953 | ) | 253,161 | |||||||||||||||||||
Long-term debt | 180,000 | 128,625 | 226,665 | — | — | 535,290 | ||||||||||||||||||||
Deferred revenues (related party) | — | — | 45,968 | — | — | 45,968 | ||||||||||||||||||||
Other long-term liabilities | 10,220 | — | 65,160 | 867 | — | 76,247 | ||||||||||||||||||||
Total liabilities | 201,632 | 197,598 | 726,831 | 95,558 | (310,953 | ) | 910,666 | |||||||||||||||||||
Total stockholders’ equity | 217,770 | 73,916 | 153,309 | 71,712 | (298,937 | ) | 217,770 | |||||||||||||||||||
$ | 419,402 | $ | 271,514 | $ | 880,140 | $ | 167,270 | $ | (609,890 | ) | $ | 1,128,436 | ||||||||||||||
(1) | NII Holdings (Cayman), Ltd. is the issuer of our senior secured discount notes due 2009. See Note 8. |
(2) | Represents our subsidiaries that have provided guarantees of the obligations of NII Holdings (Cayman), Ltd. under our senior secured discount notes due 2009. See Note 8. |
F-65
NII Holdings | |||||||||||||||||||||||||
NII Holdings, | (Cayman), Ltd. | Guarantor | Non-Guarantor | Intercompany | |||||||||||||||||||||
Inc. (Parent) | (Issuer) | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||||
Operating revenues | $ | — | $ | — | $ | 819,376 | $ | 312,554 | $ | (193,243 | ) | $ | 938,687 | ||||||||||||
Operating expenses | |||||||||||||||||||||||||
Cost of revenues (exclusive of depreciation included below) | — | — | 324,549 | 50,135 | (404 | ) | 374,280 | ||||||||||||||||||
Selling, general and administrative | 6,385 | — | 266,781 | 218,893 | (174,659 | ) | 317,400 | ||||||||||||||||||
Depreciation and amortization | 694 | — | 69,669 | 9,138 | — | 79,501 | |||||||||||||||||||
7,079 | — | 660,999 | 278,166 | (175,063 | ) | 771,181 | |||||||||||||||||||
Operating (loss) income | (7,079 | ) | — | 158,377 | 34,388 | (18,180 | ) | 167,506 | |||||||||||||||||
Other income (expense) | |||||||||||||||||||||||||
Interest expense | (7,436 | ) | (27,410 | ) | (28,112 | ) | (1,665 | ) | — | (64,623 | ) | ||||||||||||||
Interest income | 4,899 | 1,332 | 3,948 | 685 | — | 10,864 | |||||||||||||||||||
Foreign currency transaction gains, net | — | — | 7,100 | 1,756 | — | 8,856 | |||||||||||||||||||
(Loss) gain on extinguishment of debt | (74 | ) | (261 | ) | 22,739 | — | — | 22,404 | |||||||||||||||||
Equity in income of affiliates | 70,440 | 2,012 | 9,650 | — | (82,102 | ) | — | ||||||||||||||||||
Other (expense) income, net | (292 | ) | (390 | ) | (11,976 | ) | 838 | (346 | ) | (12,166 | ) | ||||||||||||||
67,537 | (24,717 | ) | 3,349 | 1,614 | (82,448 | ) | (34,665 | ) | |||||||||||||||||
Income (loss) before income tax benefit (provision) | 60,458 | (24,717 | ) | 161,726 | 36,002 | (100,628 | ) | 132,841 | |||||||||||||||||
Income tax benefit (provision) | 20,756 | — | (56,030 | ) | (16,353 | ) | — | (51,627 | ) | ||||||||||||||||
Net income (loss) | $ | 81,214 | $ | (24,717 | ) | $ | 105,696 | $ | 19,649 | $ | (100,628 | ) | $ | 81,214 | |||||||||||
F-66
NII Holdings | ||||||||||||||||||||||||
NII Holdings, | (Cayman), Ltd. | Guarantor | Non-Guarantor | Intercompany | ||||||||||||||||||||
Inc. (Parent) | (Issuer) | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
Cash and cash equivalents, beginning of year | $ | 9,811 | $ | 122,499 | $ | 81,156 | $ | 17,695 | $ | — | $ | 231,161 | ||||||||||||
Cash flows (used in) from operating activities | (22,236 | ) | 1,231 | 200,009 | 31,975 | — | 210,979 | |||||||||||||||||
Cash flows used in investing activities | (8,568 | ) | — | (224,208 | ) | (19,517 | ) | 5,780 | (246,513 | ) | ||||||||||||||
Cash flows from financing activities | 129,681 | — | 83,991 | 2,153 | (5,780 | ) | 210,045 | |||||||||||||||||
Effect of exchange rate changes on cash and cash equivalents | — | — | (3,017 | ) | 2,751 | — | (266 | ) | ||||||||||||||||
Cash and cash equivalents, end of year | $ | 108,688 | $ | 123,730 | $ | 137,931 | $ | 35,057 | $ | — | $ | 405,406 | ||||||||||||
F-67
NII Holdings | ||||||||||||||||||||||||||
NII Holdings, | (Cayman), Ltd. | Guarantor | Non-Guarantor | Intercompany | ||||||||||||||||||||||
Inc. (Parent) | (Issuer)(1) | Subsidiaries(2) | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||
Current assets | ||||||||||||||||||||||||||
Cash and cash equivalents | $ | 9,811 | $ | 122,499 | $ | 81,156 | $ | 17,695 | $ | — | $ | 231,161 | ||||||||||||||
Accounts receivable, net | 56 | — | 94,168 | 6,729 | — | 100,953 | ||||||||||||||||||||
Handset and accessory inventory, net | — | — | 15,255 | 2,699 | — | 17,954 | ||||||||||||||||||||
Prepaid expenses and other | 3 | — | 37,578 | 7,954 | — | 45,535 | ||||||||||||||||||||
Total current assets | 9,870 | 122,499 | 228,157 | 35,077 | — | 395,603 | ||||||||||||||||||||
Property, plant and equipment, net | 115 | — | 225,850 | 4,633 | — | 230,598 | ||||||||||||||||||||
Investments in and advances to affiliates | 135,006 | 899,657 | 728,300 | 17 | (1,762,980 | ) | — | |||||||||||||||||||
Intangible assets, net | 154 | — | 34,828 | 147,282 | — | 182,264 | ||||||||||||||||||||
Other assets | 502 | 2,756 | 19,176 | 574 | — | 23,008 | ||||||||||||||||||||
$ | 145,647 | $ | 1,024,912 | $ | 1,236,311 | $ | 187,583 | $ | (1,762,980 | ) | $ | 831,473 | ||||||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||||||||||
Current liabilities | ||||||||||||||||||||||||||
Accounts payable | $ | 74 | $ | — | $ | 21,378 | $ | 2,588 | $ | — | $ | 24,040 | ||||||||||||||
Accrued expenses and other | 27,041 | 750 | 113,331 | 14,881 | — | 156,003 | ||||||||||||||||||||
Deferred revenues | — | — | 20,629 | 134 | — | 20,763 | ||||||||||||||||||||
Accrued interest | — | — | 2,587 | — | — | 2,587 | ||||||||||||||||||||
Due to related parties | 36,966 | 67,581 | 159,741 | 141,876 | (353,986 | ) | 52,178 | |||||||||||||||||||
Total current liabilities | 64,081 | 68,331 | 317,666 | 159,479 | (353,986 | ) | 255,571 | |||||||||||||||||||
Long-term debt | — | 173,964 | 258,193 | — | — | 432,157 | ||||||||||||||||||||
Deferred income taxes, net | 154 | — | 3,015 | 269 | — | 3,438 | ||||||||||||||||||||
Deferred revenues (related party) | — | — | 25,000 | — | — | 25,000 | ||||||||||||||||||||
Other long-term liabilities | 9,800 | — | 33,895 | — | — | 43,695 | ||||||||||||||||||||
Total liabilities | 74,035 | 242,295 | 637,769 | 159,748 | (353,986 | ) | 759,861 | |||||||||||||||||||
Total stockholders’ equity | 71,612 | 782,617 | 598,542 | 27,835 | (1,408,994 | ) | 71,612 | |||||||||||||||||||
$ | 145,647 | $ | 1,024,912 | $ | 1,236,311 | $ | 187,583 | $ | (1,762,980 | ) | $ | 831,473 | ||||||||||||||
(1) | NII Holdings (Cayman), Ltd. is the issuer of our senior secured discount notes due 2009. See Note 8. |
(2) | Represents our subsidiaries that have provided guarantees of the obligations of NII Holdings (Cayman), Ltd. under our senior secured discount notes due 2009. See Note 8. |
F-68
NII Holdings | |||||||||||||||||||||||||
NII Holdings, | (Cayman), Ltd. | Guarantor | Non-Guarantor | Intercompany | |||||||||||||||||||||
Inc. (Parent) | (Issuer) | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||||
Operating revenues | $ | — | $ | — | $ | 129,982 | $ | 13,357 | $ | (61 | ) | $ | 143,278 | ||||||||||||
Operating expenses | |||||||||||||||||||||||||
Cost of revenues (exclusive of depreciation included below) | — | — | 45,838 | 3,721 | (61 | ) | 49,498 | ||||||||||||||||||
Selling, general and administrative | 4,037 | — | 35,727 | 7,344 | — | 47,108 | |||||||||||||||||||
Depreciation and amortization | 13 | — | 9,603 | 1,470 | — | 11,086 | |||||||||||||||||||
4,050 | — | 91,168 | 12,535 | (61 | ) | 107,692 | |||||||||||||||||||
Operating (loss) income | (4,050 | ) | — | 38,814 | 822 | — | 35,586 | ||||||||||||||||||
Other income (expense) | |||||||||||||||||||||||||
Interest expense | (105 | ) | (3,655 | ) | (6,293 | ) | (416 | ) | — | (10,469 | ) | ||||||||||||||
Interest income | 574 | 221 | 880 | 122 | — | 1,797 | |||||||||||||||||||
Foreign currency transaction gains, net | 27 | — | 2,919 | 269 | (599 | ) | 2,616 | ||||||||||||||||||
Equity in losses of affiliates | (1,904 | ) | — | (1,679 | ) | — | 3,583 | — | |||||||||||||||||
Other (expense) income, net | (6,147 | ) | — | 4,575 | 15 | — | (1,557 | ) | |||||||||||||||||
(7,555 | ) | (3,434 | ) | 402 | (10 | ) | 2,984 | (7,613 | ) | ||||||||||||||||
(Loss) income from continuing operations before income tax provision | (11,605 | ) | (3,434 | ) | 39,216 | 812 | 2,984 | 27,973 | |||||||||||||||||
Income tax provision | (4,358 | ) | — | (19,334 | ) | (1,182 | ) | — | (24,874 | ) | |||||||||||||||
(Loss) income from continuing operations | (15,963 | ) | (3,434 | ) | 19,882 | (370 | ) | 2,984 | 3,099 | ||||||||||||||||
Discontinued operations | |||||||||||||||||||||||||
Income (loss) from operations of Nextel Philippines | 38,727 | — | (847 | ) | (5,071 | ) | (13,144 | ) | 19,665 | ||||||||||||||||
Income tax provision | — | — | — | — | — | — | |||||||||||||||||||
Income (loss) from discontinued operations | 38,727 | — | (847 | ) | (5,071 | ) | (13,144 | ) | 19,665 | ||||||||||||||||
Net income (loss) | $ | 22,764 | $ | (3,434 | ) | $ | 19,035 | $ | (5,441 | ) | $ | (10,160 | ) | $ | 22,764 | ||||||||||
F-69
NII Holdings | ||||||||||||||||||||||||
NII Holdings, | (Cayman), Ltd. | Guarantor | Non-Guarantor | Intercompany | ||||||||||||||||||||
Inc. (Parent) | (Issuer) | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
Cash and cash equivalents, beginning of period | $ | 25,493 | $ | 120,655 | $ | 69,052 | $ | 15,822 | $ | — | $ | 231,022 | ||||||||||||
Cash flows (used in) from operating activities | (14,475 | ) | 1,844 | 34,435 | 2,769 | — | 24,573 | |||||||||||||||||
Cash flows used in investing activities | (1,207 | ) | — | (22,945 | ) | (1,975 | ) | 1,379 | (24,748 | ) | ||||||||||||||
Cash flows from financing activities | — | — | 531 | 848 | (1,379 | ) | — | |||||||||||||||||
Effect of exchange rate changes on cash and cash equivalents | — | — | 83 | 231 | — | 314 | ||||||||||||||||||
Cash and cash equivalents, end of period | $ | 9,811 | $ | 122,499 | $ | 81,156 | $ | 17,695 | $ | — | $ | 231,161 | ||||||||||||
F-70
NII Holdings | |||||||||||||||||||||||||
NII Holdings, | (Cayman), Ltd. | Guarantor | Non-Guarantor | Intercompany | |||||||||||||||||||||
Inc. (Parent) | (Issuer) | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||||
Operating revenues | $ | — | $ | — | $ | 563,805 | $ | 73,572 | $ | (282 | ) | $ | 637,095 | ||||||||||||
Operating expenses | |||||||||||||||||||||||||
Cost of revenues (exclusive of depreciation included below) | — | — | 231,291 | 21,568 | (282 | ) | 252,577 | ||||||||||||||||||
Selling, general and administrative | 21,581 | — | 198,512 | 42,312 | — | 262,405 | |||||||||||||||||||
Impairment, restructuring and other charges | 6,375 | — | 779 | 8,654 | — | 15,808 | |||||||||||||||||||
Depreciation and amortization | 4,596 | — | 51,859 | 8,522 | — | 64,977 | |||||||||||||||||||
32,552 | — | 482,441 | 81,056 | (282 | ) | 595,767 | |||||||||||||||||||
Operating (loss) income | (32,552 | ) | — | 81,364 | (7,484 | ) | — | 41,328 | |||||||||||||||||
Other income (expense) | |||||||||||||||||||||||||
Interest expense, net | (121,054 | ) | — | (17,098 | ) | (9,499 | ) | — | (147,651 | ) | |||||||||||||||
Reorganization items, net | 2,282,672 | — | (110,727 | ) | (4,955 | ) | 14,008 | 2,180,998 | |||||||||||||||||
Gain on extinguishment of debt, net | — | — | 101,598 | — | — | 101,598 | |||||||||||||||||||
Foreign currency transaction losses, net | (28 | ) | — | (43,309 | ) | (138,027 | ) | 599 | (180,765 | ) | |||||||||||||||
Equity in losses of affiliates | (159,226 | ) | — | (7,782 | ) | — | 167,008 | — | |||||||||||||||||
Other income (expense), net | 19 | — | (7,408 | ) | (1,529 | ) | — | (8,918 | ) | ||||||||||||||||
2,002,383 | — | (84,726 | ) | (154,010 | ) | 181,615 | 1,945,262 | ||||||||||||||||||
Income (loss) from continuing operations before income tax provision | 1,969,831 | — | (3,362 | ) | (161,494 | ) | 181,615 | 1,986,590 | |||||||||||||||||
Income tax provision | (14,788 | ) | — | (13,969 | ) | (513 | ) | — | (29,270 | ) | |||||||||||||||
Income (loss) from continuing operations | 1,955,043 | — | (17,331 | ) | (162,007 | ) | 181,615 | 1,957,320 | |||||||||||||||||
Discontinued operations | |||||||||||||||||||||||||
Loss from operations of Nextel Philippines | — | — | — | (14,219 | ) | 12,194 | (2,025 | ) | |||||||||||||||||
Income tax provision | — | — | — | (252 | ) | — | (252 | ) | |||||||||||||||||
Loss from discontinued operations | — | — | — | (14,471 | ) | 12,194 | (2,277 | ) | |||||||||||||||||
Net income (loss) | $ | 1,955,043 | $ | — | $ | (17,331 | ) | $ | (176,478 | ) | $ | 193,809 | $ | 1,955,043 | |||||||||||
F-71
NII Holdings | ||||||||||||||||||||||||
NII Holdings, | (Cayman), Ltd. | Guarantor | Non-Guarantor | Intercompany | ||||||||||||||||||||
Inc. (Parent) | (Issuer) | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
Cash and cash equivalents, beginning of period | $ | 194,810 | $ | — | $ | 40,359 | $ | 15,081 | $ | — | $ | 250,250 | ||||||||||||
Cash flows (used in) from operating activities | (65,958 | ) | (2,685 | ) | 150,419 | 21,711 | — | 103,487 | ||||||||||||||||
Cash flows used in investing activities | (72,244 | ) | — | (212,974 | ) | (23,340 | ) | 95,101 | (213,457 | ) | ||||||||||||||
Cash flows (used in) from financing activities | (31,115 | ) | 123,340 | 93,393 | 20,793 | (95,101 | ) | 111,310 | ||||||||||||||||
Effect of exchange rate changes on cash and cash equivalents | — | — | (2,145 | ) | (18,423 | ) | — | (20,568 | ) | |||||||||||||||
Cash and cash equivalents, end of period | $ | 25,493 | $ | 120,655 | $ | 69,052 | $ | 15,822 | $ | — | $ | 231,022 | ||||||||||||
F-72
NII Holdings | |||||||||||||||||||||||||
NII Holdings, | (Cayman), Ltd. | Guarantor | Non-Guarantor | Intercompany | |||||||||||||||||||||
Inc. (Parent) | (Issuer) | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||||
Operating revenues | $ | — | $ | — | $ | 520,563 | $ | 137,319 | $ | (539 | ) | $ | 657,343 | ||||||||||||
Operating expenses | |||||||||||||||||||||||||
Cost of revenues (exclusive of depreciation included below) | 1,055 | — | 266,206 | 56,574 | (299 | ) | 323,536 | ||||||||||||||||||
Selling, general and administrative | 39,365 | — | 300,138 | 81,666 | (240 | ) | 420,929 | ||||||||||||||||||
Impairment, restructuring and other charges | 1,695 | — | 1,284,975 | 294,494 | — | 1,581,164 | |||||||||||||||||||
Depreciation and amortization | 4,768 | — | 161,441 | 46,738 | (918 | ) | 212,029 | ||||||||||||||||||
46,883 | — | 2,012,760 | 479,472 | (1,457 | ) | 2,537,658 | |||||||||||||||||||
Operating loss | (46,883 | ) | — | (1,492,197 | ) | (342,153 | ) | 918 | (1,880,315 | ) | |||||||||||||||
Other income (expense) | |||||||||||||||||||||||||
Interest expense | (279,342 | ) | — | (24,632 | ) | (13,476 | ) | 22,143 | (295,307 | ) | |||||||||||||||
Interest income | 16,229 | — | 30,060 | 705 | (34,869 | ) | 12,125 | ||||||||||||||||||
Foreign currency transaction losses, net | — | — | (60,392 | ) | (1,229 | ) | 148 | (61,473 | ) | ||||||||||||||||
Realized losses on investments | (137,067 | ) | — | (14,224 | ) | — | — | (151,291 | ) | ||||||||||||||||
Equity in (losses) income of affiliates | (1,884,196 | ) | — | 2,064 | — | 1,884,196 | 2,064 | ||||||||||||||||||
Other income (expense), net | 5,999 | — | (7,622 | ) | (2,770 | ) | — | (4,393 | ) | ||||||||||||||||
(2,278,377 | ) | — | (74,746 | ) | (16,770 | ) | 1,871,618 | (498,275 | ) | ||||||||||||||||
Loss from continuing operations before income tax (provision) benefit | (2,325,260 | ) | — | (1,566,943 | ) | (358,923 | ) | 1,872,536 | (2,378,590 | ) | |||||||||||||||
Income tax (provision) benefit | (28,062 | ) | — | 89,903 | 6,909 | — | 68,750 | ||||||||||||||||||
Loss from continuing operations | (2,353,322 | ) | — | (1,477,040 | ) | (352,014 | ) | 1,872,536 | (2,309,840 | ) | |||||||||||||||
Discontinued operations | |||||||||||||||||||||||||
Loss from operations of Nextel Philippines | — | — | — | (177,213 | ) | 6,878 | (170,335 | ) | |||||||||||||||||
Income tax provision | — | — | — | (17,146 | ) | — | (17,146 | ) | |||||||||||||||||
Loss from discontinued operations | — | — | — | (194,359 | ) | 6,878 | (187,481 | ) | |||||||||||||||||
Net loss | $ | (2,353,322 | ) | $ | — | $ | (1,477,040 | ) | $ | (546,373 | ) | $ | 1,879,414 | $ | (2,497,321 | ) | |||||||||
F-73
NII Holdings | ||||||||||||||||||||||||
NII Holdings, | (Cayman), Ltd. | Guarantor | Non-Guarantor | Intercompany | ||||||||||||||||||||
Inc. (Parent) | (Issuer) | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
Cash and cash equivalents, beginning of year | $ | 56,712 | $ | — | $ | 377,763 | $ | 39,232 | $ | — | $ | 473,707 | ||||||||||||
Cash flows (used in) from operating activities | (109,788 | ) | — | 20,014 | (42,227 | ) | — | (132,001 | ) | |||||||||||||||
Cash flows used in investing activities | (255,010 | ) | — | (920,333 | ) | (137,530 | ) | 776,683 | (536,190 | ) | ||||||||||||||
Cash flows from financing activities | 502,896 | — | 564,406 | 155,394 | (776,683 | ) | 446,013 | |||||||||||||||||
Effect of exchange rate changes on cash and cash equivalents | — | — | (1,491 | ) | 212 | — | (1,279 | ) | ||||||||||||||||
Cash and cash equivalents, end of year | $ | 194,810 | $ | — | $ | 40,359 | $ | 15,081 | $ | — | $ | 250,250 | ||||||||||||
F-74
Balance at | Charged to | Deductions | Balance at | ||||||||||||||
Beginning of | Costs and | and Other | End | ||||||||||||||
Period | Expenses | Adjustments(1) | of Period | ||||||||||||||
Year Ended December 31, 2003 | |||||||||||||||||
Allowance for doubtful accounts | $ | 7,143 | $ | 7,179 | $ | (5,302 | ) | $ | 9,020 | ||||||||
Reserve for inventory obsolescence | $ | 5,538 | $ | 1,716 | $ | (1,815 | ) | $ | 5,439 | ||||||||
Valuation allowance for deferred tax assets — Restated | $ | 428,294 | $ | 16,211 | $ | (69,626 | ) | $ | 374,879 | ||||||||
Two Months Ended December 31, 2002 | |||||||||||||||||
Allowance for doubtful accounts | $ | 10,659 | $ | 634 | $ | (4,150 | ) | $ | 7,143 | ||||||||
Reserve for inventory obsolescence | $ | 5,669 | $ | 149 | $ | (280 | ) | $ | 5,538 | ||||||||
Valuation allowance for deferred tax assets — Restated | $ | 738,122 | $ | 13,753 | $ | (323,581 | ) | $ | 428,294 | ||||||||
Ten Months Ended October 31, 2002 | |||||||||||||||||
Allowance for doubtful accounts | $ | 24,277 | $ | 17,484 | $ | (31,102 | ) | $ | 10,659 | ||||||||
Reserve for inventory obsolescence | $ | 9,370 | $ | 3,884 | $ | (7,585 | ) | $ | 5,669 | ||||||||
Valuation allowance for deferred tax assets | $ | 787,556 | $ | (158,191 | ) | $ | 108,757 | $ | 738,122 | ||||||||
Accrued restructuring charges | $ | 406 | $ | 7,933 | $ | (8,339 | ) | $ | — | ||||||||
Year Ended December 31, 2001 | |||||||||||||||||
Allowance for doubtful accounts | $ | 22,163 | $ | 40,902 | $ | (38,788 | ) | $ | 24,277 | ||||||||
Reserve for inventory obsolescence | $ | 8,240 | $ | 1,441 | $ | (311 | ) | $ | 9,370 | ||||||||
Valuation allowance for deferred tax assets | $ | 395,272 | $ | 411,793 | $ | (19,509 | ) | $ | 787,556 | ||||||||
Accrued restructuring charges | $ | — | $ | 5,230 | $ | (4,824 | ) | $ | 406 | ||||||||
(1) | Includes the impact of foreign currency translation adjustments and, for the two months ended December 31, 2002, the elimination of amounts related to Nextel Philippines. |
F-75
Exhibit | ||||
Number | Exhibit Description | |||
2.1 | Revised Third Amended Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code for NII Holdings and NII Holdings (Delaware), Inc. (incorporated by reference to Exhibit 2.1 to NII Holdings’ Current Report on Form 8-K, filed on November 12, 2002) | |||
3.1 | Restated Certificate of Incorporation of NII Holdings (incorporated by reference to Exhibit 3.1 to NII Holdings’ Current Report on Form 8-K, filed on November 12, 2002) | |||
3.2 | Amended and Restated Bylaws of NII Holdings (previously filed in NII Holdings’ Form 10-K, filed on March 12, 2004) | |||
4.1 | Indenture governing the 13% Senior Secured Discount Notes Due 2009 issued by NII Holdings (Cayman), Ltd., dated as of November 12, 2002, among NII Holdings (Cayman), Ltd., the Guarantors named therein and Wilmington Trust Company, as Indenture Trustee (incorporated by reference to Exhibit 4.1 to NII Holdings’ Form 10-Q, filed on November 14, 2002) | |||
4.2 | Form of 13% Senior Secured Discount Notes (incorporated by reference to Exhibit A to Exhibit 4.1 to NII Holdings’ Form 10-Q, filed on November 14, 2002) | |||
4.3 | Form of First Supplemental Indenture governing the 13% Senior Secured Discount Notes Due 2009 issued by NII Holdings (Cayman), Ltd., dated as of February 18, 2004, among NII Holdings (Cayman), Ltd., the Guarantors named therein and Wilmington Trust Company, as Indenture Trustee (previously filed in NII Holdings’ Form 10-K, filed on March 12, 2004) | |||
4.4 | Indenture governing our 31/2% convertible notes due 2033, dated as of September 16, 2003, by and between NII Holdings, Inc. and Wilmington Trust Company, as Indenture Trustee (incorporated by reference to Exhibit 4.1 to NII Holdings’ Form S-3, File No. 333-110980, filed on December 5, 2003) | |||
4.5 | Form of Indenture governing our 27/8% convertible notes due 2034, dated as of January 30, 2004, by and between NII Holdings, Inc. and Wilmington Trust Company, as Indenture Trustee (previously filed in NII Holdings’ Form 10-K, filed on March 12, 2004) | |||
10.1 | Form of Subscriber Unit Purchase Agreement, dated as of July 20, 2002, by and between Motorola, Inc. and Multifon, S.A. de C.V. (previously filed in NII Holdings’ Form 10-K, filed on March 12, 2004) | |||
10.2 | Subscriber Unit Purchase Agreement, dated July 23, 1999, by and between Motorola, Inc. and Nextel del Peru, S.A. (incorporated by reference to Exhibit 10.44 to NII Holdings’ Form 10-K, filed on March 30, 2000) | |||
10.3 | Form of Subscriber Unit Purchase Agreement, dated as of July 2, 2001, by and between Motorola Industrial Ltda. and Nextel Telecomunicacoes Ltda. (previously filed in NII Holdings’ Form 10-K, filed on March 12, 2004) | |||
10.4 | Subscriber Unit Purchase Agreement, dated as of September 7, 1999, by and between Motorola Industrial LTDA and NII Holdings (incorporated by reference to Exhibit 10.39 to NII Holdings’ Form 10-K filed on March 30, 2000) | |||
10.5 | Subscriber Unit Purchase Agreement, dated as of September 7, 1999, by and between Motorola, Inc. and NII Holdings (incorporated by reference to Exhibit 10.40 to NII Holdings’ Form 10-K, filed on March 30, 2000) | |||
10.6 | Form of iDEN Infrastructure Equipment Supply Agreement dated August 14, 2000 by and between NII Holdings, Motorola, Inc. and each of Nextel Telecommunicacoes Ltda., Nextel Argentina S.R.L., Nextel de Mexico, S.A. de C.V., Nextel del Peru, S.A. and Nextel Communications Philippines, Inc. (incorporated by reference to Exhibit 10.2 to NII Holdings’ Form 8-K, filed on December 22, 2000) |
Exhibit | ||||
Number | Exhibit Description | |||
10.7 | Form of iDEN Installation Services Agreement, dated August 14, 2000 by and between NII Holdings, Motorola, Inc. and each of Nextel, Telecomunicações Ltda., Nextel Argentina S.R.L., Nextel de Mexico, S.A. de C.V., Nextel del Peru, S.A. and Nextel Communications Philippines, Inc. (incorporated by reference to Exhibit 10.1 to NII Holdings’ Form 8-K, filed on December 22, 2000) | |||
10.8 | Master Equipment Financing Agreement, dated as of November 12, 2002, by and between NII Holdings (Cayman), Nextel del Peru, S.A., Teletransportes Integrales, S.A. de C.V., the Lenders named therein, Motorola Credit Corporation, as Administrative Agent, and Citibank, N.A., as Collateral Agent (incorporated by reference to Exhibit 10.11 to NII Holdings’ Form S-1, File No. 333-102077, filed on December 20, 2002) | |||
10.9 | Third Amended and Restated Trademark License Agreement, dated as of November 12, 2002, between Nextel Communications, Inc. and NII Holdings (incorporated by reference to Exhibit 10.12 to NII Holdings’ Form S-1, File No. 333-102077, filed on December 20, 2002) | |||
10.10 | Amendment 003 to iDEN Infrastructure Equipment Supply Agreement, dated December 7, 2001, between NII Holdings, Motorola, Inc., Nextel Argentina, S.A., Nextel Telecomunicações Ltda., Comunicaciones Nextel de México, S.A. de C.V., Nextel del Peru S.A. and Nextel Communications Philippines, Inc. (incorporated by reference to Exhibit 10.48 to NII Holdings’ Form 10-K, filed on March 29, 2002) | |||
10.11 | Amendment 003 to iDEN Subscriber Supply Agreement, dated December 10, 2001, between NII Holdings and Motorola, Inc. (incorporated by reference to Exhibit 10.51 to NII Holdings’ Form 10-K, filed on March 29, 2002) | |||
10.12 | Form of Amendment 004 to iDEN Infrastructure Supply Agreement, dated as of December 30, 2003, between NII Holdings, Motorola, Inc. and each of Nextel Telecommunicacoes Ltda., Nextel Argentina S.R.L., Comunicaciones Nextel de Mexico, S.A. de C.V. and Nextel del Peru, S.A. (previously filed in NII Holdings’ Form 10-K, filed on March 12, 2004) | |||
10.13 | Intercreditor Agreement, dated as of November 12, 2002, among NII Holdings, certain other borrowers, Motorola Credit Corporation, Wilmington Trust Company, and a collateral agent (incorporated by reference to Exhibit 10.18 to NII Holdings’ Form S-1, File No. 333-102077, filed on December 20, 2002) | |||
10.14 | Registration Rights Agreement, as of November 12, 2002, between NII Holdings and Eligible Holders (incorporated by reference to Exhibit 10.19 to NII Holdings’ Form S-1, File No. 333-102077, filed on December 20, 2002) | |||
10.15 | * | Management Incentive Plan, dated as of November 12, 2002 (incorporated by reference to Exhibit 99.1 to NII Holdings’ Registration Statement on Form S-8, filed on November 12, 2002) | ||
10.16 | Standstill Agreement, dated as of November 12, 2002, among NII Holdings, Nextel Communications, Inc. and certain other parties thereto (incorporated by reference to Exhibit 10.21 to NII Holdings’ Form S-1, File No. 333-102077, filed on December 20, 2002) | |||
10.17 | Spectrum Use and Build Out Agreement, dated as of November 12, 2002 (incorporated by reference to Exhibit 10.22 to NII Holdings’ Form 10-K, filed on March 27, 2003) | |||
10.18 | First Amendment to the Master Equipment Financing Agreement, dated as of July 29, 2003, by and between NII Holdings (Cayman), Nextel del Peru, S.A., Teletransportes Integrales, S.A. de C.V., the Lenders named therein, Motorola Credit Corporation, as Administrative Agent, and Citibank, N.A., as Collateral Agent (incorporated by reference to Exhibit 33.1 to NII Holdings’ Form 10-Q filed on August 14, 2003) | |||
10.19 | Form of Second Amendment to the Master Equipment Financing Agreement, dated as of January 16, 2004, by and between NII Holdings (Cayman), Nextel del Peru, S.A., Teletransportes Integrales, S.A. de C.V., the Lenders named therein, Motorola Credit Corporation, as Administrative Agent, and Citibank, N.A., as Collateral Agent (previously filed in NII Holdings’ Form 10-K, filed on March 12, 2004) |
Exhibit | ||||
Number | Exhibit Description | |||
10.20 | Agreement to Retire Indebtedness, dated as of July 29, 2003, by and between NII Holdings, Nextel Telecomunicações Ltda. and Motorola Credit Corporation (incorporated by reference to Exhibit 33.2 to NII Holdings’ Form 10-Q filed on August 14, 2003) | |||
10.21 | Form of Loan Assignment Agreement, dated as of September 26, 2003, by and between NII Holdings, Nextel Telecomunicacoes, Ltda. and Motorola Credit Corporation (previously filed in NII Holdings’ Form 10-K, filed on March 12, 2004) | |||
10.22 | Form of Modification Agreement, dated as of September 26, 2003, by and between NII Holdings and Nextel Telecommunicacoes, Ltda. (previously filed in NII Holdings’ Form 10-K, filed on March 12, 2004) | |||
10.23 | Registration Rights Agreement related to our 31/2% convertible notes due 2033, dated as of September 16, 2003, by and between NII Holdings, Inc. and Morgan Stanley & Co. Incorporated on behalf of the initial purchasers (incorporated by reference to Exhibit 4.2 to NII Holdings’ Form S-3, File No. 333-110980, filed on December 5, 2003) | |||
10.24 | Form of Registration Rights Agreement related to our 27/8% convertible notes due 2034, dated as of January 27, 2004, by and between NII Holdings, Inc. and Banc of America Securities LLC as the initial purchaser (previously filed in NII Holdings’ Form 10-K, filed on March 12, 2004) | |||
10.25 | Form of Built-to-Suit Agreement Restructuring (previously filed in NII Holdings’ Form 10-K, filed on March 12, 2004) | |||
10.26 | * | Form of NII Holdings, Inc. Change of Control Severance Plan (previously filed in NII Holdings’ Form 10-K, filed on March 12, 2004) | ||
12.1 | Ratio of Earnings to Fixed Charges (filed herewith) | |||
14.1 | Code of Business Conduct and Ethics (previously filed in NII Holdings’ Form 10-K, filed on March 12, 2004) | |||
21.1 | Subsidiaries of NII Holdings (previously filed in NII Holdings’ Form 10-K, filed on March 12, 2004) | |||
23.1 | Consent of PricewaterhouseCoopers LLP (filed herewith) | |||
23.2 | Consent of Deloitte & Touche LLP (filed herewith) | |||
31.1 | Statement of Chief Executive Officer Pursuant to Rule 13a-14(a) (filed herewith) | |||
31.2 | Statement of Chief Financial Officer Pursuant to Rule 13a-14(a) (filed herewith) | |||
32.1 | Statement of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 (filed herewith) | |||
32.2 | Statement of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 (filed herewith) |
* | Indicates Management Compensatory Plan. |