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• | MetroPCS Wireless, Inc. will exchange all outstanding old notes that are validly tendered and not withdrawn prior to the expiration of the exchange offer for an equal principal amount of new notes. All interest due and payable on the old notes will become due and payable on the same terms under the new notes. | |
• | The terms of the new notes are substantially identical to those of the old notes, except that the new notes will be registered under the Securities Act of 1933, as amended, or Securities Act, and the transfer restrictions and registration rights relating to the old notes will not apply to the new notes. | |
• | You may withdraw your tender of old notes at any time prior to the expiration of the exchange offer. | |
• | Any old notes which are validly tendered and not timely withdrawn may be accepted by us. | |
• | The exchange of old notes for new notes should not be a taxable exchange for U.S. federal income tax purposes but you should see the discussion under the caption “Material United States Federal Income Tax Considerations” on page 213 for more information. | |
• | The old notes are, and the new notes will be, guaranteed on a senior unsecured basis by MetroPCS Communications, Inc., MetroPCS, Inc. and all of MetroPCS Wireless, Inc.’s current and future wholly-owned domestic subsidiaries. The new notes will not be guaranteed by Royal Street Communications, LLC or its subsidiaries, which are consolidated in MetroPCS Communications, Inc.’s financial statements. | |
• | The new notes will be eligible for trading in the Private Offering, Resales and Trading Automatic Linkage (PORTAL) Market.sm We do not intend to apply for a listing of the new notes on any securities exchange or for their inclusion on any automated dealer quotation system. |
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• | the highly competitive nature of our industry; | |
• | the rapid technological changes in our industry; | |
• | our ability to maintain adequate customer care and manage our churn rate; | |
• | our ability to sustain the growth rates we have experienced to date; | |
• | our ability to construct and launch future markets within projected time frames; | |
• | our ability to manage our rapid growth, train additional personnel and improve our financial and disclosure controls and procedures; | |
• | our ability to secure the necessary spectrum and network infrastructure equipment; | |
• | our ability to clear the Auction 66 spectrum of incumbent licensees; | |
• | our ability to adequately enforce or protect our intellectual property rights; | |
• | governmental regulation of our services and the costs of compliance and our failure to comply with such regulations; | |
• | our capital structure, including our indebtedness amounts; | |
• | changes in consumer preferences or demand for our products; | |
• | our inability to attract and retain key members of management; and | |
• | other factors described in this prospectus under “Risk Factors.” |
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• | Our fixed price calling plans, which provide unlimited usage within a local calling area with no long-term contract; | |
• | Our focus on densely populated markets, which provides significant operational efficiencies; | |
• | Our leadership position as one of the lowest cost providers of wireless telephone services in the United States; | |
• | Our spectrum portfolio, which covers 9 of the top 12 and 14 of the top 25 largest metropolitan areas in the United States; and | |
• | Our advanced CDMA network, which is designed to provide the capacity necessary to satisfy the usage requirements of our customers. |
• | Target the underserved customer segments in our markets; | |
• | Offer affordable, fixed price unlimited calling plans with no long-term service contract; | |
• | Remain one of the lowest cost wireless telephone service providers in the United States; and | |
• | Expand into new attractive markets. |
• | Our limited operating history; | |
• | Competition from other wireline and wireless providers, many of whom have substantially greater resources than us; | |
• | Our significant current debt levels of approximately $3.0 billion as of June 30, 2007, the terms of which may restrict our operational flexibility; | |
• | Our need to generate significant excess cash flows to meet the requirements for the build out and launch of our Auction 66 Markets; and | |
• | Increased costs which could result from higher customer churn, delays in technological developments or our inability to successfully manage our growth. |
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Old Notes | 91/4% Senior Notes due November 1, 2014, $1.0 billion of which were issued on November 3, 2006 and $400 million of which were issued on June 6, 2007. | |
New Notes | 91/4% Senior Notes due November 1, 2014. The terms of the new notes are substantially identical to those terms of the old notes, except that the new notes are registered under the Securities Act and are not subject to the transfer restrictions and registration rights relating to the old notes. | |
Exchange Offer | We are offering to exchange $1.4 billion principal amount of our new notes that have been registered under the Securities Act for an equal amount of our old notes to satisfy our obligations under the registration rights agreement. We may withdraw the exchange offer at any time. | |
The new notes will evidence the same debt as the old notes, including principal and interest, and will be issued under and be entitled to the benefits of the same indenture that governs the old notes. Holders of the old notes do not have any appraisal or dissenter’s rights in connection with the exchange offer. Because the new notes will be registered, the new notes will not be subject to transfer restrictions, and holders of old notes that have tendered and had their old notes accepted in the exchange offer will have no registration rights. | ||
Expiration Date | The exchange offer will expire at 5:00 P.M., New York City time, on November 7, 2007, or Expiration Date, unless we decide to extend it or terminate it early. A tender of old notes pursuant to this exchange offer may be withdrawn at any time prior to the Expiration Date if we receive a valid written withdrawal request before the expiration of the exchange offer. | |
Conditions to the Exchange Offer | The exchange offer is subject to customary conditions, which we may, but are not required to, waive. Please see “The Exchange Offer — Conditions to the Exchange Offer” for more information regarding the conditions to the exchange offer. We reserve the right, in our sole discretion, to waive any and all conditions to the exchange offer on or prior to the Expiration Date. | |
Procedures for Tendering Old Notes | Unless you comply with the procedures described below under “The Exchange Offer — Procedures for Tendering Old Notes — Guaranteed Delivery,” you must do one of the following procedures |
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on or prior to the Expiration Date to participate in the exchange offer: | ||
• tender your old notes by sending the certificates evidencing your old notes, in proper form for transfer, a properly completed and duly executed letter of transmittal with the required signature guarantee, and all other documents required by the letter of transmittal, to The Bank of New York Trust Company, N.A., as exchange agent, at the address set forth in this prospectus. Such old notes must be received by our exchange agent prior to the expiration of the exchange offer; or | ||
• tender your old notes by using the book-entry transfer procedures described in “The Exchange Offer — Procedures for Tendering Old Notes — Book-Entry Delivery Procedures” and transmitting a properly completed and duly executed letter of transmittal with the required signature guarantee, or an agent’s message instead of the letter of transmittal, to the exchange agent. In order for a book-entry transfer to constitute a valid tender of your old notes in the exchange offer, The Bank of New York Trust Company, N.A., as registrar and exchange agent, must receive a confirmation of book-entry transfer of your old notes into the exchange agent’s account at The Depository Trust Company prior to the expiration of the exchange offer. | ||
By signing or agreeing to be bound by the letter of transmittal, you will represent to us that, among other things: | ||
• any new notes that you will receive will be acquired in the ordinary course of your business; | ||
• you have no arrangement or understanding with any person or entity to participate in the distribution of the new notes; | ||
• you are transferring good and marketable title to the old notes free and clear of all liens, security interests, encumbrances, or rights or interests of parties other than you; | ||
• if you are a broker-dealer that will receive new notes for your own account in exchange for old notes that were acquired as a result of market-making activities, that you will deliver a prospectus, as required by law, in connection with any resale of such new notes; and | ||
• you are not our “affiliate” as defined in Rule 405 under the Securities Act. | ||
Guaranteed Delivery Procedures | If you are a registered holder of the old notes and wish to tender your old notes in the exchange offer, but | |
• the old notes are not immediately available, | ||
• time will not permit your old notes or other required documents to be received by our exchange agent before the expiration of the exchange offer, or | ||
• the procedure for book-entry transfer cannot be completed prior to the expiration of the exchange offer, |
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then you may tender old notes by following the procedures described below under “The Exchange Offer — Procedures for Tendering Old Notes — Guaranteed Delivery.” | ||
Special Procedures for Beneficial Owners | If you are a beneficial owner whose old notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and you wish to tender your old notes in the exchange offer, you should promptly contact the person in whose name the old notes are registered and instruct that person to tender on your behalf the old notes prior to the expiration of the exchange offer. | |
If you wish to tender in the exchange offer on your own behalf, prior to completing and executing the letter of transmittal and delivering the certificates for your old notes, you must either make appropriate arrangements to register ownership of the old notes in your name or obtain a properly completed bond power from the person in whose name the old notes are registered. | ||
Withdrawal; Non-Acceptance | You may withdraw any old notes tendered in the exchange offer at any time prior to 5:00 P.M., New York City time, on the Expiration Date, by sending our exchange agent written notice of withdrawal. Any old notes tendered on or prior to the Expiration Date that are not validly withdrawn on or prior to the Expiration Date may not be withdrawn. If we decide for any reason not to accept any old notes tendered for exchange or to withdraw the exchange offer, the old notes will be returned to the registered holder at our expense promptly after the expiration or termination of the exchange offer. In the case of old notes tendered by book-entry transfer into the exchange agent’s account at The Depository Trust Company, any withdrawn or unaccepted old notes will be credited to the tendering holder’s account at The Depository Trust Company. For further information regarding the withdrawal of tendered old notes, please see “The Exchange Offer ��� Withdrawal of Tenders.” | |
United States Federal Income TaxConsiderations | The exchange of old notes for new notes in the exchange offer should not be a taxable exchange for United States federal income tax purposes. Please see “Material United States Federal Income Tax Considerations” for more information regarding the tax consequences to you of the exchange offer. | |
Use of Proceeds | The issuance of the new notes will not provide us with any new proceeds. We are making this exchange offer solely to satisfy our obligations under the registration rights agreement. | |
Fees and Expenses | We will pay all of our expenses incident to the exchange offer. You are responsible for all expenses related to tendering your old notes to our exchange agent. | |
Exchange Agent | We have appointed The Bank of New York Trust Company, N.A. as our exchange agent for the exchange offer. You can find the address and telephone number of the exchange agent under “The Exchange Offer — Exchange Agent.” | |
Resales of New Notes | Based on interpretations by the staff of the SEC, as set forth in no-action letters issued to third parties, we believe that the new notes |
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you receive in the exchange offer may be offered for resale, resold or otherwise transferred by you without compliance with the registration and prospectus delivery provisions of the Securities Act so long as certain conditions are met. See “The Exchange Offer — Resale of the New Notes; Plan of Distribution” for more information regarding resales. | ||
Consequences of Not Exchanging YourOld Notes | If you do not exchange your old notes in this exchange offer, you will no longer be able to require us to register your old notes under the Securities Act pursuant to the registration rights agreement except in the limited circumstances provided under the registration rights agreement. In addition, you will not be able to resell, offer to resell or otherwise transfer your old notes unless we have registered the old notes under the Securities Act, or unless you resell, offer to resell or otherwise transfer them under an exemption from the registration requirements of, or in a transaction not subject to, the Securities Act and applicable state securities laws. Other than in connection with this exchange offer, or as otherwise required under certain limited circumstances pursuant to the terms of the registration rights agreement, we do not currently anticipate that we will register the old notes under the Securities Act. | |
For information regarding the consequences of not tendering your old notes and our obligation to file a registration statement, please see “The Exchange Offer — Consequences of Failure to Exchange.” | ||
Additional Documentation; FurtherInformation; Assistance | Any questions or requests for assistance or additional documentation regarding the exchange offer may be directed to the exchange agent. | |
Beneficial owners may also contact their custodian for assistance concerning the exchange offer. |
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Issuer | MetroPCS Wireless, Inc. | |
Notes Offered | $1,400,000,000 principal amount of its 91/4% Senior Notes due 2014. | |
Maturity Date | November 1, 2014. | |
Interest Rate | 91/4% per year (calculated using a360-day year). | |
Interest Payment Dates | May 1 and November 1 of each year, commencing November 1, 2007. | |
Ranking | The notes and the guarantees are the senior unsecured obligations of us and the guarantors. Accordingly, they rank: | |
• equal to all of our and the guarantors’ existing and future senior unsecured indebtedness; | ||
• senior to all of our and the guarantors’ existing and future senior subordinated and subordinated indebtedness; | ||
• effectively subordinated to all of our and the guarantors’ existing and future secured indebtedness, including indebtedness under our senior secured credit facility, to the extent of the assets securing such indebtedness; and | ||
• structurally subordinated to all existing and any future indebtedness and liabilities, including trade payables, and other liabilities of our subsidiaries that do not guarantee the notes, to the extent of the assets of such subsidiaries. For instance, the notes will not be guaranteed by Royal Street which is consolidated in MetroPCS Communications’ financial statements. | ||
As of June 30, 2007, we had total indebtedness of approximately $3.0 billion, $1.4 billion of which was the notes, and approximately $1.6 billion of which was secured indebtedness to which the notes effectively were subordinated as to the value of the collateral. | ||
Guarantees | Our obligations under the notes are jointly and severally, and fully and unconditionally, guaranteed on a senior unsecured basis by MetroPCS Communications, MetroPCS, Inc. and all of our current and future domestic wholly-owned subsidiaries. The notes are not guaranteed by Royal Street which is consolidated in MetroPCS Communications’ financial statements. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” and “Description of New Notes — Note Guarantees” and “— Certain Definitions.” | |
Optional Redemption | We may, at our option, redeem some or all of the notes at any time on or after November 1, 2010 at the redemption prices described in the section “Description of New Notes — Optional Redemption,” plus accrued and unpaid interest, if any. |
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In addition, prior to November 1, 2009, we may, at our option, redeem up to 35% of the aggregate principal amount of the notes with the net cash proceeds of certain sales of equity securities or certain contributions to our equity at the redemption prices described in the section “Description of New Notes — Optional Redemption,” plus accrued interest, if any. We may make the redemption only to the extent that, after the redemption, at least 65% of the aggregate principal amount of the notes remains outstanding. | ||
We may also, at our option, prior to November 1, 2010, redeem some or all of the notes at the “make whole” price set forth under “Description of New Notes — Optional Redemption.” | ||
Mandatory Redemption | None. | |
Change of Control | If we experience specific kinds of changes in control, each holder of notes may require us to repurchase all or a portion of its notes at a price equal to 101% of the principal amount of the notes, plus any accrued and unpaid interest to the date of repurchase. See “Description of New Notes — Repurchase at the Option of Holders — Change of Control.” | |
Certain Covenants | The indenture governing the notes contains covenants that, among other things, limit our ability to: | |
• incur more debt; | ||
• pay dividends and make distributions; | ||
• make certain investments; | ||
• repurchase stock; | ||
• create liens without also securing the notes; | ||
• enter into transactions with affiliates; | ||
• enter into agreements that restrict dividends or distributions from subsidiaries; and | ||
• merge, consolidate or sell, or otherwise dispose of, substantially all of our assets. | ||
These covenants contain important exceptions, limitations and qualifications. For more details, see “Description of New Notes — Certain Covenants.” | ||
Absence of Established Market for theNotes | The new notes are generally freely transferable but are also new securities for which there will not initially be a market. We do not intend to apply for a listing of the new notes on any securities exchange or for their inclusion on any automated dealer quotation system. Accordingly, we cannot assure you as to the development or liquidity of any market for the new notes. We expect that the new notes will be eligible for trading in the PORTALsm Market. | |
Risk Factors | You should consider carefully all of the information set forth in this offering memorandum and, in particular, you should evaluate the specific factors under “Risk Factors.” |
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Year Ended December 31, | Six Months Ended June 30, | |||||||||||||||||||
2004 | 2005 | 2006 | 2006 | 2007 | ||||||||||||||||
(In thousands, except share and per share data) | ||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||
Revenues: | ||||||||||||||||||||
Service revenues | $ | 616,401 | $ | 872,100 | $ | 1,290,947 | $ | 583,260 | $ | 918,857 | ||||||||||
Equipment revenues | 131,849 | 166,328 | 255,916 | 114,395 | 169,005 | |||||||||||||||
Total revenues | 748,250 | 1,038,428 | 1,546,863 | 697,655 | 1,087,862 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
Cost of service (excluding depreciation and amortization disclosed separately below) | 200,806 | 283,212 | 445,281 | 199,987 | 307,562 | |||||||||||||||
Cost of equipment | 222,766 | 300,871 | 476,877 | 212,916 | 306,747 | |||||||||||||||
Selling, general and administrative expenses (excluding depreciation and amortization disclosed separately below) | 131,510 | 162,476 | 243,618 | 111,701 | 155,654 | |||||||||||||||
Depreciation and amortization | 62,201 | 87,895 | 135,028 | 59,576 | 80,504 | |||||||||||||||
Loss (gain) on disposal of assets | 3,209 | (218,203 | ) | 8,806 | 12,377 | 2,657 | ||||||||||||||
Total operating expenses | 620,492 | 616,251 | 1,309,610 | 596,557 | 853,124 | |||||||||||||||
Income from operations | 127,758 | 422,177 | 237,253 | 101,098 | 234,738 | |||||||||||||||
Other expense (income): | ||||||||||||||||||||
Interest expense | 19,030 | 58,033 | 115,985 | 42,597 | 98,144 | |||||||||||||||
Accretion of put option in majority-owned subsidiary | 8 | 252 | 770 | 360 | 492 | |||||||||||||||
Interest and other income | (2,472 | ) | (8,658 | ) | (21,543 | ) | (10,719 | ) | (21,651 | ) | ||||||||||
(Gain) loss on extinguishment of debt | (698 | ) | 46,448 | 51,518 | (244 | ) | — | |||||||||||||
Total other expense | 15,868 | 96,075 | 146,730 | 31,994 | 76,985 | |||||||||||||||
Income before provision for income taxes | 111,890 | 326,102 | 90,523 | 69,104 | 157,753 | |||||||||||||||
Provision for income taxes | (47,000 | ) | (127,425 | ) | (36,717 | ) | (27,745 | ) | (63,307 | ) | ||||||||||
Net income | 64,890 | 198,677 | 53,806 | 41,359 | 94,446 | |||||||||||||||
Accrued dividends on Series D Preferred Stock | (21,006 | ) | (21,006 | ) | (21,006 | ) | (10,417 | ) | (6,499 | ) | ||||||||||
Accrued dividends on Series E Preferred Stock | — | (1,019 | ) | (3,000 | ) | (1,488 | ) | (929 | ) | |||||||||||
Accretion on Series D Preferred Stock | (473 | ) | (473 | ) | (473 | ) | (236 | ) | (148 | ) | ||||||||||
Accretion on Series E Preferred Stock | — | (114 | ) | (339 | ) | (170 | ) | (107 | ) | |||||||||||
Net income applicable to Common Stock | $ | 43,411 | $ | 176,065 | $ | 28,988 | $ | 29,048 | $ | 86,763 | ||||||||||
Net income per common share(1): | ||||||||||||||||||||
Basic | $ | 0.18 | $ | 0.71 | $ | 0.11 | $ | 0.11 | $ | 0.29 | ||||||||||
Diluted | $ | 0.15 | $ | 0.62 | $ | 0.10 | $ | 0.10 | $ | 0.28 | ||||||||||
Weighted average shares(1): | ||||||||||||||||||||
Basic | 126,722,051 | 135,352,396 | 155,820,381 | 155,503,804 | 227,238,734 | |||||||||||||||
Diluted | 150,633,686 | 153,610,589 | 159,696,608 | 159,318,289 | 235,898,089 | |||||||||||||||
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Year Ended December 31, | Six Months Ended June 30, | |||||||||||||||||||
2004 | 2005 | 2006 | 2006 | 2007 | ||||||||||||||||
(Dollars, customers and POPs in thousands) | ||||||||||||||||||||
Other Financial Data: | ||||||||||||||||||||
Net cash provided by operating activities | $ | 150,379 | $ | 283,216 | $ | 364,761 | $ | 199,068 | $ | 267,309 | ||||||||||
Net cash used in investment activities | (190,881 | ) | (905,228 | ) | (1,939,665 | ) | (203,125 | ) | (1,495,093 | ) | ||||||||||
Net cash (used in) provided by financing activities | (5,433 | ) | 712,244 | 1,623,693 | 27,939 | 1,294,122 | ||||||||||||||
Consolidated Operating Data: | ||||||||||||||||||||
Licensed POPs (at period end)(2) | 28,430 | 64,222 | 65,618 | 64,222 | 66,182 | |||||||||||||||
Covered POPs (at period end)(2) | 21,083 | 23,908 | 38,630 | 34,653 | 38,997 | |||||||||||||||
Customers (at period end) | 1,399 | 1,925 | 2,941 | 2,419 | 3,550 | |||||||||||||||
Adjusted EBITDA(3) | $ | 203,597 | $ | 294,465 | $ | 395,559 | $ | 177,020 | $ | 329,763 | ||||||||||
Adjusted EBITDA as a percentage of service revenues(4) | 33.0 | % | 33.8 | % | 30.6 | % | 30.4 | % | 35.9 | % | ||||||||||
Capital Expenditures | $ | 250,830 | $ | 266,499 | $ | 550,749 | $ | 307,296 | $ | 347,114 | ||||||||||
Core Markets Operating Data(5): | ||||||||||||||||||||
Licensed POPs (at period end)(2) | 24,686 | 25,433 | 25,881 | 25,433 | 26,111 | |||||||||||||||
Covered POPs (at period end)(2) | 21,083 | 21,263 | 22,461 | 21,528 | 22,690 | |||||||||||||||
Customers (at period end) | 1,399 | 1,872 | 2,301 | 2,119 | 2,542 | |||||||||||||||
Adjusted EBITDA(6) | $ | 203,597 | $ | 316,555 | $ | 492,773 | $ | 236,302 | $ | 318,191 | ||||||||||
Adjusted EBITDA as a percentage of service revenues(4) | 33.0 | % | 36.4 | % | 43.3 | % | 43.3 | % | 45.9 | % | ||||||||||
Capital Expenditures | $ | 250,830 | $ | 171,783 | $ | 217,215 | ||||||||||||||
Expansion Markets Operating Data(5): | ||||||||||||||||||||
Licensed POPs (at period end)(2) | 3,744 | 38,789 | 39,737 | 38,789 | 40,071 | |||||||||||||||
Covered POPs (at period end)(2) | — | 2,645 | 16,169 | 13,125 | 16,307 | |||||||||||||||
Customers (at period end) | — | 53 | 640 | 300 | 1,008 | |||||||||||||||
Adjusted EBITDA (Deficit)(6) | — | $ | (22,090 | ) | $ | (97,214 | ) | $ | (59,282 | ) | $ | 11,572 | ||||||||
Capital Expenditures | — | $ | 90,871 | $ | 314,308 |
Year Ended December 31, | Six Months Ended June 30, | |||||||||||||||||||
2004 | 2005 | 2006 | 2006 | 2007 | ||||||||||||||||
Average monthly churn(7)(8) | 4.9 | % | 5.1 | % | 4.6 | % | 4.5 | % | 4.4 | % | ||||||||||
Average revenue per user (ARPU)(9)(10) | $ | 41.13 | $ | 42.40 | $ | 42.98 | $ | 42.98 | $ | 43.46 | ||||||||||
Cost per gross addition (CPGA)(8)(9)(11) | $ | 103.78 | $ | 102.70 | $ | 117.58 | $ | 114.56 | $ | 115.87 | ||||||||||
Cost per user (CPU)(9)(12) | $ | 18.95 | $ | 19.57 | $ | 19.65 | $ | 19.93 | $ | 18.28 |
As of June 30, 2007 | ||||
(In thousands) | ||||
Balance Sheet Data: | ||||
Cash, cash equivalents & short-term investments | $ | 1,767,274 | ||
Property and equipment, net | 1,534,402 | |||
Total assets | 5,666,345 | |||
Long-term debt (including current maturities) | 3,011,355 | |||
Stockholders’ equity | 1,841,005 |
(1) | See Note 17 and Note 9 to the annual and interim consolidated financial statements, respectively, included elsewhere in this prospectus for an explanation of the calculation of basic and diluted net income (loss) per common share. | |
(2) | Licensed POPs represent the aggregate number of persons that reside within the areas covered by our or Royal Street’s licenses. Covered POPs represent the estimated number of POPs in our metropolitan areas that reside within the areas covered by our network. | |
(3) | Our senior secured credit facility calculates consolidated Adjusted EBITDA as: consolidated net incomeplusdepreciation and amortization; gain (loss) on disposal of assets; non-cash expenses; gain (loss) on extinguishment of debt; provision for income taxes; interest expense; and certain expenses of MetroPCS Communications, Inc.minusinterest and other income and non-cash items increasing consolidated net income. |
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Year Ended December 31, | Six Months Ended June 30, | |||||||||||||||||||
2004 | 2005 | 2006 | 2006 | 2007 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Calculation of Consolidated Adjusted EBITDA: | ||||||||||||||||||||
Net income | $ | 64,890 | $ | 198,677 | $ | 53,806 | $ | 41,359 | $ | 94,446 | ||||||||||
Adjustments: | ||||||||||||||||||||
Depreciation and amortization | 62,201 | 87,895 | 135,028 | 59,576 | 80,504 | |||||||||||||||
Loss (gain) on disposal of assets | 3,209 | (218,203 | ) | 8,806 | 12,377 | 2,657 | ||||||||||||||
Non-cash compensation expense(a) | 10,429 | 2,596 | 14,472 | 3,969 | 11,864 | |||||||||||||||
Interest expense | 19,030 | 58,033 | 115,985 | 42,597 | 98,144 | |||||||||||||||
Accretion of put option in majority-owned subsidiary(a) | 8 | 252 | 770 | 360 | 492 | |||||||||||||||
Interest and other income | (2,472 | ) | (8,658 | ) | (21,543 | ) | (10,719 | ) | (21,651 | ) | ||||||||||
(Gain) loss on extinguishment of debt | (698 | ) | 46,448 | 51,518 | (244 | ) | — | |||||||||||||
Provision for income taxes | 47,000 | 127,425 | 36,717 | 27,745 | 63,307 | |||||||||||||||
Consolidated Adjusted EBITDA | $ | 203,597 | $ | 294,465 | $ | 395,559 | $ | 177,020 | $ | 329,763 | ||||||||||
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Year Ended December 31, | Six Months Ended June 30, | |||||||||||||||||||
2004 | 2005 | 2006 | 2006 | 2007 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Reconciliation of Net Cash Provided By Operating Activities to Consolidated Adjusted EBITDA: | ||||||||||||||||||||
Net cash provided by operating activities | $ | 150,379 | $ | 283,216 | $ | 364,761 | $ | 199,068 | $ | 267,309 | ||||||||||
Adjustments: | ||||||||||||||||||||
Interest expense | 19,030 | 58,033 | 115,985 | 42,597 | 98,144 | |||||||||||||||
Non-cash interest expense | (2,889 | ) | (4,285 | ) | (6,964 | ) | (776 | ) | (2,048 | ) | ||||||||||
Interest and other income | (2,472 | ) | (8,658 | ) | (21,543 | ) | (10,719 | ) | (21,651 | ) | ||||||||||
Provision for uncollectible accounts receivable | (125 | ) | (129 | ) | (31 | ) | (111 | ) | (23 | ) | ||||||||||
Deferred rent expense | (3,466 | ) | (4,407 | ) | (7,464 | ) | (3,376 | ) | (4,265 | ) | ||||||||||
Cost of abandoned cell sites | (1,021 | ) | (725 | ) | (3,783 | ) | (638 | ) | (3,832 | ) | ||||||||||
Accretion of asset retirement obligation | (253 | ) | (423 | ) | (769 | ) | (298 | ) | (572 | ) | ||||||||||
(Loss) gain on sale of investments | (576 | ) | 190 | 2,385 | 1,268 | 2,241 | ||||||||||||||
Provision for income taxes | 47,000 | 127,425 | 36,717 | 27,745 | 63,307 | |||||||||||||||
Deferred income taxes | (44,441 | ) | (125,055 | ) | (32,341 | ) | (26,496 | ) | (62,158 | ) | ||||||||||
Changes in working capital | 42,431 | (30,717 | ) | (51,394 | ) | (51,244 | ) | (6,689 | ) | |||||||||||
Consolidated Adjusted EBITDA | $ | 203,597 | $ | 294,465 | $ | 395,559 | $ | 177,020 | $ | 329,763 | ||||||||||
(4) | Adjusted EBITDA as a percentage of service revenues is calculated by dividing Adjusted EBITDA by total service revenues. | |
(5) | Core Markets include Atlanta, Miami, Sacramento and San Francisco. Expansion Markets include Dallas/Ft. Worth, Detroit, Tampa/Sarasota/Orlando and Los Angeles and our Auction 66 Markets. Expansion Markets licensed POPs at June 30, 2007 do not include licenses associated with our Auction 66 Markets. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Operating Segments.” | |
(6) | Core and Expansion Markets Adjusted EBITDA is presented in accordance with SFAS No. 131 as it is the primary financial measure utilized by management to facilitate evaluation of our ability to meet future debt service, capital expenditures and working capital requirements and to fund future growth. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Operating Segments.” | |
(7) | Average monthly churn represents (a) the number of customers who have been disconnected from our system during the measurement period less the number of customers who have reactivated service, divided by (b) the sum of the average monthly number of customers during such period. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Performance Measures.” A customer’s handset is disabled if the customer has failed to make payment by the due date and is disconnected from our system if the customer fails to make payment within 30 days thereafter. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Customer Recognition and Disconnect Policies.” | |
(8) | In the first quarter of 2006, based upon a change in the allowable return period from 7 days to 30 days, we revised our definition of gross additions to exclude customers that discontinue service in the first 30 days of service as churn. This revision has the effect of reducing deactivations and gross additions, commencing March 23, 2006, and reduces churn and increases CPGA. Churn computed under the original 7 day allowable return period would have been 5.1% for the year ended December 31, 2006. | |
(9) | Average revenue per user, or ARPU, cost per gross addition, or CPGA, and cost per user, or CPU, are non-GAAP financial measures utilized by our management to evaluate our operating performance. We believe these measures are important in understanding the performance of our operations from period to period, and although every company in the wireless industry does not define each of these measures in precisely the same way, we believe that these measures (which are common in the wireless industry) facilitate operating performance comparisons with other companies in the wireless industry. | |
(10) | ARPU — Average revenue per user, or ARPU, represents (a) service revenues less activation revenues,E-911, Federal Universal Service Fund, or FUSF, and vendor’s compensation charges for the measurement period, divided by (b) the sum of the average monthly number of customers during such period. We utilize ARPU to evaluate our per-customer service revenue realization and to assist in forecasting our future service revenues. ARPU is calculated exclusive of activation revenues, as these amounts are a component of our costs of acquiring new customers and are included in our calculation of CPGA. ARPU is also calculated exclusive ofE-911, FUSF and vendor’s compensation charges, as these are generally pass through charges that we collect from our customers and remit to the appropriate government agencies. |
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Average number of customers for any measurement period is determined by dividing (a) the sum of the average monthly number of customers for the measurement period by (b) the number of months in such period. Average monthly number of customers for any month represents the sum of the number of customers on the first day of the month and the last day of the month divided by two. The following table shows the calculation of ARPU for the periods indicated: |
Year Ended December 31, | Six Months Ended June 30, | |||||||||||||||||||
2004 | 2005 | 2006 | 2006 | 2007 | ||||||||||||||||
(In thousands, except average number of customers and ARPU) | ||||||||||||||||||||
Calculation of ARPU: | ||||||||||||||||||||
Service revenues | $ | 616,401 | $ | 872,100 | $ | 1,290,947 | $ | 583,260 | $ | 918,857 | ||||||||||
Less: | ||||||||||||||||||||
Activation revenues | (7,874 | ) | (6,808 | ) | (8,297 | ) | (3,903 | ) | (5,142 | ) | ||||||||||
E-911, FUSF and vendor’s compensation charges | (12,522 | ) | (26,221 | ) | (45,640 | ) | (19,710 | ) | (45,992 | ) | ||||||||||
Net service revenues | $ | 596,005 | $ | 839,071 | $ | 1,237,010 | $ | 559,647 | $ | 867,723 | ||||||||||
Divided by: | ||||||||||||||||||||
Average number of customers | 1,207,521 | 1,649,208 | 2,398,682 | 2,170,180 | 3,328,032 | |||||||||||||||
ARPU | $ | 41.13 | $ | 42.40 | $ | 42.98 | $ | 42.98 | $ | 43.46 | ||||||||||
(11) | CPGA — Cost per gross addition, or CPGA, is determined by dividing (a) selling expenses plus the total cost of equipment associated with transactions with new customers less activation revenues and equipment revenues associated with transactions with new customers during the measurement period by (b) gross customer additions during such period. We utilize CPGA to assess the efficiency of our distribution strategy, validate the initial capital invested in our customers and determine the number of months to recover our customer acquisition costs. This measure also allows us to compare our average acquisition costs per new customer to those of other wireless broadband PCS providers. Activation revenues and equipment revenues related to new customers are deducted from selling expenses in this calculation as they represent amounts paid by customers at the time their service is activated that reduce our acquisition cost of those customers. Additionally, equipment costs associated with existing customers, net of related revenues, are excluded as this measure is intended to reflect only the acquisition costs related to new customers. The following table reconciles total costs used in the calculation of CPGA to selling expenses, which we consider to be the most directly comparable GAAP financial measure to CPGA: |
Year Ended December 31, | Six Months Ended June 30, | |||||||||||||||||||
2004 | 2005 | 2006 | 2006 | 2007 | ||||||||||||||||
(In thousands, except gross customer additions and CPGA) | ||||||||||||||||||||
Calculation of CPGA: | ||||||||||||||||||||
Selling expenses | $ | 52,605 | $ | 62,396 | $ | 104,620 | $ | 46,734 | $ | 63,471 | ||||||||||
Less: | ||||||||||||||||||||
Activation revenues | (7,874 | ) | (6,809 | ) | (8,297 | ) | (3,903 | ) | (5,142 | ) | ||||||||||
Less: | ||||||||||||||||||||
Equipment revenues | (131,849 | ) | (166,328 | ) | (255,916 | ) | (114,395 | ) | (169,005 | ) | ||||||||||
Add: | ||||||||||||||||||||
Equipment revenue not associated with new customers | 54,323 | 77,011 | 114,392 | 51,768 | 75,902 | |||||||||||||||
Add: | ||||||||||||||||||||
Cost of equipment | 222,766 | 300,871 | 476,877 | 212,916 | 306,747 | |||||||||||||||
Less: | ||||||||||||||||||||
Equipment costs not associated with new customers | (72,200 | ) | (109,803 | ) | (155,930 | ) | (70,033 | ) | (98,964 | ) | ||||||||||
Gross addition expenses | $ | 117,771 | $ | 157,338 | $ | 275,746 | $ | 123,087 | $ | 173,009 | ||||||||||
Divided by: | ||||||||||||||||||||
Gross customer additions | 1,134,762 | 1,532,071 | 2,345,135 | 1,074,462 | 1,493,132 | |||||||||||||||
CPGA | $ | 103.78 | $ | 102.70 | $ | 117.58 | $ | 114.56 | $ | 115.87 | ||||||||||
(12) | CPU — Cost per user, or CPU, is cost of service and general and administrative costs (excluding applicable non-cash compensation expense included in cost of service and general and administrative expense) plus net loss on equipment transactions unrelated to initial customer acquisition (which includes the gain or loss on sale of handsets to existing customers and costs associated with handset replacements and repairs (other than warranty costs which are the responsibility of the handset manufacturers)), divided by the sum of the average monthly number of customers during such period. CPU does not include any depreciation and amortization expense. |
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Management uses CPU as a tool to evaluate the non-selling cash expenses associated with ongoing business operations on a per customer basis, to track changes in these non-selling cash costs over time, and to help evaluate how changes in our business operations affect non-selling cash costs per customer. In addition, CPU provides management with a useful measure to compare our non-selling cash costs per customer with those of other wireless providers. We believe investors use CPU primarily as a tool to track changes in our non-selling cash costs over time and to compare our non-selling cash costs to those of other wireless providers. Other wireless carriers may calculate this measure differently. The following table reconciles total costs used in the calculation of CPU to cost of service, which we consider to be the most directly comparable GAAP financial measure to CPU: |
Year Ended December 31, | Six Months Ended June 30, | |||||||||||||||||||
2004 | 2005 | 2006 | 2006 | 2007 | ||||||||||||||||
(In thousands, except average number of customers and CPU) | ||||||||||||||||||||
Calculation of CPU: | ||||||||||||||||||||
Cost of service | $ | 200,806 | $ | 283,212 | $ | 445,281 | $ | 199,987 | $ | 307,562 | ||||||||||
Add: | ||||||||||||||||||||
General and administrative expense | 78,905 | 100,080 | 138,998 | 64,967 | 92,183 | |||||||||||||||
Add: | ||||||||||||||||||||
Net loss on equipment transactions unrelated to initial customer acquisition | 17,877 | 32,791 | 41,538 | 18,265 | 23,062 | |||||||||||||||
Less: | ||||||||||||||||||||
Non-cash compensation expense included in cost of service and general and administrative expense | (10,429 | ) | (2,596 | ) | (14,472 | ) | (3,969 | ) | (11,864 | ) | ||||||||||
Less: | ||||||||||||||||||||
E-911, FUSF and vendor’s compensation revenues | (12,522 | ) | (26,221 | ) | (45,640 | ) | (19,710 | ) | (45,992 | ) | ||||||||||
Total costs used in the calculation of CPU | $ | 274,637 | $ | 387,266 | $ | 565,705 | $ | 259,540 | $ | 364,951 | ||||||||||
Divided by: | ||||||||||||||||||||
Average number of customers | 1,207,521 | 1,649,208 | 2,398,682 | 2,170,180 | 3,328,032 | |||||||||||||||
CPU | $ | 18.95 | $ | 19.57 | $ | 19.65 | $ | 19.93 | $ | 18.28 | ||||||||||
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• | changes in the overall market for non-investment grade securities; | |
• | changes in our financial performance or prospects; | |
• | a change in our credit rating; | |
• | the prospects for companies in our industry generally; | |
• | the number of holders of the new notes; | |
• | any acquisitions or business combinations proposed or consummated by us; | |
• | the interest of securities dealers in making a market for the new notes; and | |
• | prevailing interest rates, financial markets and general economic conditions. |
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• | make it more difficult for us to satisfy our obligations under the notes; | |
• | increase our vulnerability to general adverse economic, financial market and industry conditions; | |
• | require us to dedicate a substantial portion of our cash flow from operations to make interest and principal payment on our debt, limiting the availability of our cash flow to fund future capital expenditures for existing or new markets, working capital and other general corporate requirements; | |
• | limit our flexibility in planning for, or reacting to, changes in our business and the telecommunications industry; | |
• | limit our ability to purchase additional spectrum or develop new metropolitan areas in the future or fund growth in our existing metropolitan areas; | |
• | place us at a competitive disadvantage compared with competitors that have less debt; and | |
• | limit our ability to borrow additional funds, even when necessary to maintain adequate liquidity. |
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• | paying interest on any additional indebtedness incurred; |
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• | paying dividends, redeeming capital stock or making other restricted payments or investments; | |
• | selling or buying assets, properties or licenses; | |
• | developing assets, properties or licenses which we have or in the future may procure; | |
• | creating liens on assets; | |
• | participating in future FCC auctions of spectrum; | |
• | merging, consolidating or disposing of assets; | |
• | entering into transactions with affiliates; and | |
• | permitting subsidiaries (other than Royal Street) to pay dividends or make other payments. |
• | incurred this debt with the intent of hindering, delaying or defrauding current or future creditors; or | |
• | received less than reasonably equivalent value or fair consideration for incurring this debt and the guarantor: |
• | was insolvent or was rendered insolvent by reason of the related financing transactions; | |
• | was engaged in, or about to engage in, a business or transaction for which its remaining assets constituted unreasonably small capital to carry on its business; or | |
• | intended to incur, or believed that it would incur, debts beyond its ability to pay these debts as they mature, as all of the foregoing terms are defined in or interpreted under the relevant fraudulent transfer or conveyance statutes; |
• | it could not pay its debts or contingent liabilities as they become due; | |
• | the sum of its debts, including contingent liabilities, is greater than its assets, at a fair valuation; or | |
• | the present fair saleable value of its assets is less than the amount required to pay the probable liability on its total existing debts and liabilities, including contingent liabilities, as they become absolute and mature. |
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• | network coverage; | |
• | reliability issues, such as dropped and blocked calls and network availability; | |
• | handset problems; | |
• | lack of competitive regional and nationwide roaming and the inability of our customers to cost-effectively roam onto other wireless networks; | |
• | affordability; | |
• | supplier or vendor failures; | |
• | customer care concerns; | |
• | lack of early access to the newest handsets; | |
• | wireless number portability requirements that allow customers to keep their wireless phone number when switching between service providers; | |
• | our inability to offer bundled services or new services offered by our competitors; and | |
• | competitive offers by third parties. |
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• | increased competition from existing competitors or new competitors; | |
• | higher than anticipated churn in our Core and Expansion Markets; | |
• | our inability to increase our network capacity in areas we currently cover and plan to cover in the Core and Expansion Markets to meet growing customer demand; | |
• | our inability to continue to offer products or services which prospective customers want; | |
• | our inability to increase the relevant coverage areas in our Core and Expansion Markets in areas that are important to our current and prospective customers; |
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• | changes in the demographics of our Core and Expansion Markets; and | |
• | adverse changes in the regulatory environment that may limit our ability to grow our customer base. |
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• | rapid development and introduction of new technologies, products, and services, such as VoIP,push-to-talk services, orpush-to-talk, location based services, such as global positioning satellite, or GPS, mapping technology and high speed data services, including streaming video, mobile gaming, video conferencing and other applications; | |
• | substantial regulatory change due to the continuing implementation of the Telecommunications Act of 1996, which amended the Communications Act of 1934, as amended, or Communications Act, and included changes designed to stimulate competition for both local and long distance telecommunications services and continued allocation of spectrum for, and relaxation of existing rules to allow existing licensees to offer, wireless services competitive with our services; | |
• | increased competition within established metropolitan areas from current and new entrants that may provide competing or alternative services; | |
• | an increase in mergers and strategic alliances that allow one telecommunications provider greater access to capital or resources or to offer increased services, access to wider geographic territory, access to greater spectrum, or attractive bundles of services; and | |
• | the blurring of traditional dividing lines between, and the bundling of, different services, such as local telephone, long distance, wireless, video, data and Internet services. For example, several carriers appear to be positioning themselves to offer a “quadruple play” of services which includes telephone service, Internet access, video service and wireless service. |
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• | physical damage to outside plant facilities; | |
• | power surges or outages; | |
• | equipment failure; | |
• | vendor or supplier failures; | |
• | software defects; | |
• | human error; | |
• | disruptions beyond our control, including disruptions caused by terrorist activities, theft, or natural disasters; and | |
• | failures in operational support systems. |
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• | our inability to integrate successfully the respective businesses and operations of the two companies; | |
• | the diversion of significant resources and management attention from our existing business operations; | |
• | our inability to realize the expected benefits of the transaction, including our inability to realize operating efficiencies, improvements in market penetration, improvements in churn and reductions in costs; | |
• | our inability to integrate successfully the companies’ internal controls over financial reporting, which could result in errors in our financial statements; | |
• | the combined company’s substantially greater level of indebtedness as a result of our assumption or refinancing of Leap’s approximately $2.0 billion of existing indebtedness; | |
• | further restrictions on our operating flexibility as a result of restrictive covenants contained in Leap’s indenture governing its existing 9.375% senior notes due 2014; | |
• | failures in our service coverage resulting from an inability to successfully integrate our respective networks; | |
• | the loss of key personnel from both companies; and | |
• | the recording of non-recurring charges and expenses, some of which may be significant and could affect our results of operations in the period in which they are recorded. |
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• | file with the SEC a registration statement under the Securities Act with respect to an offer to exchange the outstanding initial notes for new notes identical in all material respects to the initial notes within 365 days after the issuance of the initial notes or 30 days after MetroPCS Communications consummated its initial public offering, which was consummated on April 24, 2007 (such, registration statement being referred to herein as the initial exchange offer registration statement) and | |
• | use our commercially reasonable efforts to cause the initial exchange offer registration statement to become effective within 180 days after filing under the Securities Act, or November 12, 2007. |
• | file with the SEC an amendment to the initial exchange offer registration statement within 120 days of the date of the registration rights agreement, or October 4, 2007, and | |
• | use commercially reasonable efforts to have the initial exchange offer registration statement, as amended, declared effective on or prior to November 12, 2007. |
• | you are not a broker-dealer who purchased old notes directly from us for resale pursuant to Rule 144A or any other available exemption under the Securities Act, | |
• | you are not our “affiliate”, or | |
• | you acquire the new notes in the ordinary course of your business and that you have no arrangement or understanding with any person to participate in the distribution of the new notes. |
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• | you are acquiring the new notes in the exchange offer in the ordinary course of your business, whether or not you are a holder, | |
• | you are transferring good and marketable title to the old notes free and clear of all liens, security interests, charges or encumbrances or rights of parties other than you, | |
• | you do not have an arrangement or understanding with any person to participate in the distribution of the new notes, | |
• | you are not a broker-dealer, or you are a broker-dealer but will not receive new notes for your own account in exchange for old notes, neither you nor any other person is engaged in or intends to participate in the distribution of the new notes, and | |
• | you are not our “affiliate” within the meaning of Rule 405 under the Securities Act or, if you are our “affiliate,” you will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. |
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• | the new notes will have been registered under the Securities Act and will not bear legends restricting their transfer pursuant to the Securities Act, and | |
• | except as otherwise described above, holders of the new notes will not be entitled to the rights of holders of old notes under the registration rights agreement. |
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• | to extend the exchange offer, | |
• | if any of the conditions set forth below under “— Conditions to the Exchange Offer” have not been satisfied, to terminate the exchange offer, or | |
• | to amend the terms of the exchange offer in any manner. |
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• | the exchange agent must receive at one of the addresses set forth in this prospectus, a properly completed letter of transmittal applicable to such notes (or a facsimile thereof) duly executed by the tendering holder, and any other documents the letter of transmittal requires, and tendered old notes must be received by the exchange agent at such address (or delivery effected through the deposit of old notes into the exchange agent’s account with DTC and making book-entry delivery as set forth below), on or prior to the Expiration Date, or | |
• | the tendering holder must comply with the guaranteed delivery procedures set forth below on or prior to the Expiration Date. |
• | properly complete and duly execute the letter of transmittal (or a facsimile thereof), and any other documents required by the letter of transmittal, and mail or deliver the letter of transmittal or such facsimile pursuant to the procedures for book-entry transfer set forth below, or | |
• | transmit their acceptance through ATOP, for which the transaction will be eligible, and DTC will then edit and verify the acceptance and send an Agent’s Message to the exchange agent for its acceptance. |
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• | the tender is made by or through an eligible institution; | |
• | prior to 5:00 p.m., New York City time, on the Expiration Date, the exchange agent receives from that eligible institution either a properly completed and duly executed notice of guaranteed delivery by facsimile transmission, mail, courier or overnight delivery or a properly transmitted agent’s message relating to a notice of guaranteed delivery: |
• | stating your name and address, the registration number or numbers of your old notes and the principal amount of old notes tendered; | |
• | stating that the tender is being made thereby; and | |
• | guaranteeing that, within three business days after the Expiration Date of the exchange offer, the letter of transmittal or facsimile thereof or agent’s message in lieu thereof, together with the old notes or a book-entry confirmation, and any other documents required by the letter of transmittal, will be deposited by the eligible institution with the exchange agent; and |
• | the exchange agent receives such properly completed and executed letter of transmittal or facsimile or Agent’s Message, as well as all tendered old notes in proper form for transfer or a book-entry confirmation, and all other documents required by the letter of transmittal, within three business days after the Expiration Date. |
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• | returned by the exchange agent to the tendering holders, or | |
• | in the case of old notes tendered by book-entry transfer into the exchange agent’s account at the book-entry transfer facility pursuant to the book-entry transfer procedures described below, credited to an account maintained with such book-entry transfer facility. |
• | specify the name of the person having deposited the old notes to be withdrawn, | |
• | identify the old notes to be withdrawn, including the certificate number or numbers of the particular certificates evidencing the old notes (unless such old notes were tendered by book-entry transfer), and aggregate principal amount of such old notes, and | |
• | be signed by the holder in the same manner as the original signature on the letter of transmittal (including any required signature guarantees) or be accompanied by documents of transfer sufficient to have the trustee under the indenture register the transfer of the old notes into the name of the person withdrawing such old notes. |
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• | the exchange offer, or the making of any exchange by a holder, does not violate applicable law or any applicable interpretation of the staff of the SEC, | |
• | there shall have not been instituted, threatened or be pending any action or proceeding before or by any court, governmental, regulatory or administrative agency or instrumentality, or by any other person, in connection with the exchange offer, that would or might, in our sole judgment, prohibit, prevent, restrict or delay consummation of the exchange offer, | |
• | no order, statute, rule, regulation, executive order, stay, decree, judgment or injunction shall have been proposed, enacted, entered, issued, promulgated, enforced or deemed applicable by any court or governmental, regulatory or administrative agency or instrumentality that, in our sole judgment, would or might prohibit, prevent, restrict or delay consummation of the exchange offer, or that is, or is reasonably likely to be, materially adverse to the business, operations, properties, condition (financial or otherwise), assets, liabilities or prospects, of us, our subsidiaries or our affiliates, | |
• | there shall not have occurred or be likely to occur any event affecting the business, operations, properties, condition (financial or otherwise), assets, liabilities or prospects of us, our subsidiaries or our affiliates that, in our sole judgment, would or might prohibit, prevent, restrict or delay consummation of the exchange offer, | |
• | the Trustee under the Indenture shall not have objected in any respect to or taken any action that could, in our sole judgment, adversely affect the consummation of the exchange offer, or shall have taken any action that challenges the validity or effectiveness of the procedures used by us in soliciting or the making of the exchange offer, or | |
• | there shall not have occurred (a) any general suspension of, or limitation on prices for, trading in the United States securities or financial markets, (b) a material impairment in the trading market for debt securities, (c) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, (d) any limitation (whether or not mandatory) by any government or governmental, administrative or regulatory authority or agency, domestic or foreign, or other event that, in our sole judgment, might affect the extension of credit by banks or other lending institutions, (e) an outbreak or escalation of hostilities or acts of terrorism involving the United States or declaration of a national emergency or war by the United States or any other calamity or crisis or any other change in political, financial or economic conditions, if the effect of any such event, in our sole judgment, makes it impractical or inadvisable to proceed with the exchange offer, or (f) in the case of any of the foregoing existing on the date hereof, a material acceleration or worsening thereof. |
• | refuse to accept any old notes and return all tendered old notes to the tendering holders, | |
• | terminate the exchange offer, | |
• | extend the exchange offer and retain all old notes tendered prior to the Expiration Date, subject, however, to the rights of holders to withdraw such old notes, or | |
• | waive such unsatisfied conditions with respect to the exchange offer and accept all validly tendered old notes which have not been withdrawn. |
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• | in theover-the-counter market, | |
• | in negotiated transactions, | |
• | through the writing of options on the new notes or a combination of such methods of resale, | |
• | at market prices prevailing at the time of resale, | |
• | at prices related to such prevailing market prices, or | |
• | at negotiated prices. |
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As of | ||||
June 30, 2007 | ||||
Actual | ||||
(In thousands) | ||||
Cash, cash equivalents and short-term investments | $ | 1,767,274 | ||
Long-Term Debt: | ||||
Senior secured credit facility | 1,588,000 | |||
Senior notes | 1,400,000 | |||
Unamortized premium on debt | 23,355 | |||
Total Long-Term Debt | $ | 3,011,355 | ||
Options subject to rescission | $ | 1,437 | ||
Stockholders’ Equity: | ||||
Preferred stock(1) | $ | — | ||
Common stock(2) | 35 | |||
Additional paid-in capital | 1,502,290 | |||
Retained earnings | 332,453 | |||
Accumulated other comprehensive income | 6,227 | |||
Total Stockholders’ Equity | $ | 1,841,005 | ||
Total Capitalization | $ | 4,853,797 | ||
(1) | Par value $0.0001 per share, 100,000,000 shares authorized, no shares issued or outstanding. | |
(2) | Par value $0.0001 per share, 1,000,000,000 shares authorized and 346,728,450 shares issued and outstanding. |
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Year Ended December 31, | Six Months Ended June 30, | |||||||||||||||||||||||||||
2002 | 2003 | 2004 | 2005 | 2006 | 2006 | 2007 | ||||||||||||||||||||||
(In thousands, except share and per share data) | ||||||||||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||
Service revenues | $ | 102,293 | $ | 369,851 | $ | 616,401 | $ | 872,100 | $ | 1,290,947 | $ | 583,260 | $ | 918,857 | ||||||||||||||
Equipment revenues | 27,048 | 81,258 | 131,849 | 166,328 | 255,916 | 114,395 | 169,005 | |||||||||||||||||||||
Total revenues | 129,341 | 451,109 | 748,250 | 1,038,428 | 1,546,863 | 697,655 | 1,087,862 | |||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||
Cost of service (excluding depreciation and amortization disclosed separately below) | 63,567 | 122,211 | 200,806 | 283,212 | 445,281 | 199,987 | 307,562 | |||||||||||||||||||||
Cost of equipment | 106,508 | 150,832 | 222,766 | 300,871 | 476,877 | 212,916 | 306,747 | |||||||||||||||||||||
Selling, general and administrative expenses (excluding depreciation and amortization disclosed separately below) | 55,161 | 94,073 | 131,510 | 162,476 | 243,618 | 111,701 | 155,654 | |||||||||||||||||||||
Depreciation and amortization | 21,472 | 42,428 | 62,201 | 87,895 | 135,028 | 59,576 | 80,504 | |||||||||||||||||||||
(Gain) loss on disposal of assets | (279,659 | ) | 392 | 3,209 | (218,203 | ) | 8,806 | 12,377 | 2,657 | |||||||||||||||||||
Total operating expenses | (32,951 | ) | 409,936 | 620,492 | 616,251 | 1,309,610 | 596,557 | 853,124 | ||||||||||||||||||||
Income from operations | 162,292 | 41,173 | 127,758 | 422,177 | 237,253 | 101,098 | 234,738 | |||||||||||||||||||||
Other expense (income): | ||||||||||||||||||||||||||||
Interest expense | 6,720 | 11,115 | 19,030 | 58,033 | 115,985 | 42,597 | 98,144 | |||||||||||||||||||||
Accretion of put option in majority-owned subsidiary | — | — | 8 | 252 | 770 | 360 | 492 | |||||||||||||||||||||
Interest and other income | (964 | ) | (996 | ) | (2,472 | ) | (8,658 | ) | (21,543 | ) | (10,719 | ) | (21,651 | ) | ||||||||||||||
Loss (gain) on extinguishment of debt | 703 | (603 | ) | (698 | ) | 46,448 | 51,518 | (244 | ) | — | ||||||||||||||||||
Total other expense | 6,459 | 9,516 | 15,868 | 96,075 | 146,730 | 31,994 | 76,985 | |||||||||||||||||||||
Income before provision for income taxes and cumulative effect of change in accounting principle | 155,833 | 31,657 | 111,890 | 326,102 | 90,523 | 69,104 | 157,753 | |||||||||||||||||||||
Provision for income taxes | (25,528 | ) | (16,179 | ) | (47,000 | ) | (127,425 | ) | (36,717 | ) | (27,745 | ) | (63,307 | ) | ||||||||||||||
Income before cumulative effect of change in accounting principle | 130,305 | 15,478 | 64,890 | 198,677 | 53,806 | 41,359 | 94,446 | |||||||||||||||||||||
Cumulative effect of change in accounting, net of tax | — | (120 | ) | — | — | — | — | — | ||||||||||||||||||||
Net income | 130,305 | 15,358 | 64,890 | 198,677 | 53,806 | 41,359 | 94,446 | |||||||||||||||||||||
Accrued dividends on Series D Preferred Stock | (10,619 | ) | (18,493 | ) | (21,006 | ) | (21,006 | ) | (21,006 | ) | (10,417 | ) | (6,499 | ) | ||||||||||||||
Accrued dividends on Series E Preferred Stock | — | — | — | (1,019 | ) | (3,000 | ) | (1,488 | ) | (929 | ) | |||||||||||||||||
Accretion on Series D Preferred Stock | (473 | ) | (473 | ) | (473 | ) | (473 | ) | (473 | ) | (236 | ) | (148 | ) | ||||||||||||||
Accretion on Series E Preferred Stock | — | — | — | (114 | ) | (339 | ) | (170 | ) | (107 | ) | |||||||||||||||||
Net income (loss) applicable to Common Stock | $ | 119,213 | $ | (3,608 | ) | $ | 43,411 | $ | 176,065 | $ | 28,988 | $ | 29,048 | $ | 86,763 | |||||||||||||
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Six Months Ended | ||||||||||||||||||||||||||||
Year Ended December 31, | June 30, | |||||||||||||||||||||||||||
2002 | 2003 | 2004 | 2005 | 2006 | 2006 | 2007 | ||||||||||||||||||||||
(In thousands, except share and per share data) | ||||||||||||||||||||||||||||
Basic net income (loss) per common share(1): | ||||||||||||||||||||||||||||
Income (loss) before cumulative effect of change in accounting principle | $ | 0.72 | $ | (0.03 | ) | $ | 0.18 | $ | 0.71 | $ | 0.11 | $ | 0.11 | $ | 0.29 | |||||||||||||
Cumulative effect of change in accounting, net of tax | — | (0.00 | ) | — | — | — | — | — | ||||||||||||||||||||
Basic net income (loss) per common share | $ | 0.72 | $ | (0.03 | ) | $ | 0.18 | $ | 0.71 | $ | 0.11 | $ | 0.11 | $ | 0.29 | |||||||||||||
Diluted net income (loss) per common share(1): | ||||||||||||||||||||||||||||
Income (loss) before cumulative effect of change in accounting principle | $ | 0.52 | $ | (0.03 | ) | $ | 0.15 | $ | 0.62 | $ | 0.10 | $ | 0.10 | $ | 0.28 | |||||||||||||
Cumulative effect of change in accounting, net of tax | — | (0.00 | ) | — | — | — | — | — | ||||||||||||||||||||
Diluted net income (loss) per common share | $ | 0.52 | $ | (0.03 | ) | $ | 0.15 | $ | 0.62 | $ | 0.10 | $ | 0.10 | $ | 0.28 | |||||||||||||
Weighted average shares(1): | ||||||||||||||||||||||||||||
Basic | 108,709,302 | 109,331,885 | 126,722,051 | 135,352,396 | 155,820,381 | 155,503,804 | 227,238,734 | |||||||||||||||||||||
Diluted | 150,218,097 | 109,331,885 | 150,633,686 | 153,610,589 | 159,696,608 | 159,318,289 | 235,898,089 | |||||||||||||||||||||
Other Financial Data: | �� | |||||||||||||||||||||||||||
Net cash (used in) provided by operating activities | $ | (50,672 | ) | $ | 112,605 | $ | 150,379 | $ | 283,216 | $ | 364,761 | $ | 199,068 | $ | 267,309 | |||||||||||||
Net cash used in investment activities | (88,311 | ) | (306,868 | ) | (190,881 | ) | (905,228 | ) | (1,939,665 | ) | (203,125 | ) | (1,495,093 | ) | ||||||||||||||
Net cash provided by (used in) financing activities | 157,039 | 201,951 | (5,433 | ) | 712,244 | 1,623,693 | 27,939 | 1,294,122 | ||||||||||||||||||||
Ratio of earnings to fixed charges(2) | 6.69x | 1.54x | 2.54x | 3.81x | 1.37x | 1.83x | 2.02x |
As of December 31, | As of June 30, | |||||||||||||||||||||||||||
2002 | 2003 | 2004 | 2005 | 2006 | 2006 | 2007 | ||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||||||||||
Cash, cash equivalents & short-term investments | $ | 60,724 | $ | 254,838 | $ | 59,441 | $ | 503,131 | $ | 552,149 | $ | 420,539 | $ | 1,767,274 | ||||||||||||||
Property and equipment, net | 352,799 | 485,032 | 636,368 | 831,490 | 1,256,162 | 1,091,412 | 1,534,402 | |||||||||||||||||||||
Total assets | 554,705 | 898,939 | 965,396 | 2,158,981 | 4,153,122 | 2,346,292 | 5,666,345 | |||||||||||||||||||||
Long-term debt (including current maturities) | 51,649 | 195,755 | 184,999 | 905,554 | 2,596,000 | 903,122 | 3,011,355 | |||||||||||||||||||||
Series D Cumulative Convertible Redeemable Participating Preferred Stock | 294,423 | 378,926 | 400,410 | 421,889 | 443,368 | 432,542 | — | |||||||||||||||||||||
Series E Cumulative Convertible Redeemable Participating Preferred Stock | — | — | — | 47,796 | 51,135 | 49,453 | — | |||||||||||||||||||||
Stockholders’ equity | 69,397 | 71,333 | 125,434 | 367,906 | 413,245 | 402,054 | 1,841,005 |
(1) | See Note 17 and note 9 to the annual and interim consolidated financial statements, respectively, included elsewhere in this prospectus for an explanation of the calculation of basic and diluted net income (loss) per common share. The calculation of basic and diluted net income (loss) per common share for the years ended December 31, 2002 and 2003 is not included in Note 17 to the consolidated financial statements. | |
(2) | For purposes of calculating the ratio of earning to fixed charges, earnings represents income before provision for income taxes and cumulative effect of change in accounting principle plus fixed charges (excluding capitalized interest). Fixed charges include interest expense (including capitalized interest); amortized discounts related to indebtedness; amortization of deferred debt issuance costs; the portion of operating rental expense that management believes is representative of the appropriate interest component of rent expense; and net preferred stock dividends. The portion of total rent expense that represents the interest factor is estimated to be 33%. Net preferred stock dividends are our preferred expense net of income tax benefit. |
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December 31, | December 31, | |||||||
2006 | 2005 | |||||||
Expected dividends | 0.00 | % | 0.00 | % | ||||
Expected volatility | 35.04 | % | 50.00 | % | ||||
Risk-free interest rate | 4.64 | % | 4.24 | % | ||||
Expected lives in years | 5.00 | 5.00 | ||||||
Weighted-average fair value of options: | ||||||||
Granted at below fair value | $ | 10.16 | $ | — | ||||
Granted at fair value | $ | 3.75 | $ | 3.44 | ||||
Weighted-average exercise price of options: | ||||||||
Granted at below fair value | $ | 1.49 | $ | — | ||||
Granted at fair value | $ | 9.95 | $ | 7.13 |
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Weighted | Weighted | Weighted | ||||||||||||||
Number of | Average | Average | Average | |||||||||||||
Grants Made During | Options | Exercise | Market Value | Intrinsic Value | ||||||||||||
the Quarter Ended | Granted | Price | per Share | per Share | ||||||||||||
March 31, 2005 | 60,000 | $ | 6.31 | $ | 6.31 | $ | 0.00 | |||||||||
June 30, 2005 | — | — | — | — | ||||||||||||
September 30, 2005 | 4,922,385 | $ | 7.14 | $ | 7.14 | $ | 0.00 | |||||||||
December 31, 2005 | 856,149 | $ | 7.15 | $ | 7.15 | $ | 0.00 | |||||||||
March 31, 2006 | 2,869,989 | $ | 7.15 | $ | 7.15 | $ | 0.00 | |||||||||
June 30, 2006 | 534,525 | $ | 7.54 | $ | 7.54 | $ | 0.00 | |||||||||
September 30, 2006 | 418,425 | $ | 8.67 | $ | 8.67 | $ | 0.00 | |||||||||
December 31, 2006 | 7,546,854 | $ | 10.81 | $ | 11.33 | $ | 0.53 | |||||||||
March 31, 2007 | 1,008,300 | $ | 11.33 | $ | 11.33 | $ | 0.00 | |||||||||
June 30, 2007 | 5,912,098 | $ | 23.78 | $ | 23.78 | $ | 0.00 |
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• | Cell Site Costs. We incur expenses for the rent of cell sites, network facilities, engineering operations, field technicians and related utility and maintenance charges. | |
• | Intercarrier Compensation. We pay charges to other telecommunications companies for their transport and termination of calls originated by our customers and destined for customers of other networks. These variable charges are based on our customers’ usage and generally applied at pre-negotiated rates with other carriers, although some carriers have sought to impose such charges unilaterally. | |
• | Variable Long Distance. We pay charges to other telecommunications companies for long distance service provided to our customers. These variable charges are based on our customers’ usage, applied at pre-negotiated rates with the long distance carriers. |
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• | Core Markets, which include Atlanta, Miami, San Francisco, and Sacramento, are aggregated because they are reviewed on an aggregate basis by the chief operating decision maker, they are similar in respect to their products and services, production processes, class of customer, method of distribution, and regulatory environment and currently exhibit similar financial performance and economic characteristics. | |
• | Expansion Markets, which include Dallas/Ft. Worth, Detroit, Tampa/Sarasota/Orlando, Los Angeles, New York, Philadelphia, Boston and Las Vegas, are aggregated because they are reviewed on an aggregate basis by the chief operating decision maker, they are similar in respect to their products and services, production processes, class of customer, method of distribution, and regulatory environment and have similar expected long-term financial performance and economic characteristics. |
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Six Months | ||||||||||||
Ended June 30, | ||||||||||||
Reportable Operating Segment Data | 2007 | 2006 | Change | |||||||||
(In thousands) | ||||||||||||
REVENUES: | ||||||||||||
Service revenues: | ||||||||||||
Core Markets | $ | 693,481 | $ | 545,741 | 27 | % | ||||||
Expansion Markets | 225,376 | 37,519 | 501 | % | ||||||||
Total | $ | 918,857 | $ | 583,260 | 58 | % | ||||||
Equipment revenues: | ||||||||||||
Core Markets | $ | 120,370 | $ | 98,606 | 22 | % | ||||||
Expansion Markets | 48,635 | 15,789 | 208 | % | ||||||||
Total | $ | 169,005 | $ | 114,395 | 48 | % | ||||||
OPERATING EXPENSES: | ||||||||||||
Cost of service (excluding depreciation and amortization disclosed separately below)(1): | ||||||||||||
Core Markets | $ | 211,046 | $ | 161,137 | 31 | % | ||||||
Expansion Markets | 96,516 | 38,850 | 148 | % | ||||||||
Total | $ | 307,562 | $ | 199,987 | 54 | % | ||||||
Cost of equipment: | ||||||||||||
Core Markets | $ | 202,929 | $ | 173,644 | 17 | % | ||||||
Expansion Markets | 103,818 | 39,272 | 164 | % | ||||||||
Total | $ | 306,747 | $ | 212,916 | 44 | % | ||||||
Selling, general and administrative expenses (excluding depreciation and amortization disclosed separately below)(1): | ||||||||||||
Core Markets | $ | 87,684 | $ | 75,480 | 16 | % | ||||||
Expansion Markets | 67,970 | 36,221 | 88 | % | ||||||||
Total | $ | 155,654 | $ | 111,701 | 39 | % | ||||||
Adjusted EBITDA (Deficit)(2): | ||||||||||||
Core Markets | $ | 318,191 | $ | 236,302 | 35 | % | ||||||
Expansion Markets | 11,572 | (59,282 | ) | 120 | % | |||||||
Depreciation and amortization: | ||||||||||||
Core Markets | $ | 56,317 | $ | 51,671 | 9 | % | ||||||
Expansion Markets | 21,597 | 6,491 | 233 | % | ||||||||
Other | 2,590 | 1,414 | 83 | % | ||||||||
Total | $ | 80,504 | $ | 59,576 | 35 | % | ||||||
Stock-based compensation expense: | ||||||||||||
Core Markets | $ | 5,999 | $ | 2,216 | 171 | % | ||||||
Expansion Markets | 5,865 | 1,753 | 235 | % | ||||||||
Total | $ | 11,864 | $ | 3,969 | 199 | % | ||||||
Income (loss) from operations: | ||||||||||||
Core Markets | $ | 253,626 | $ | 170,390 | 49 | % | ||||||
Expansion Markets | (16,084 | ) | (67,878 | ) | 76 | % | ||||||
Other | (2,804 | ) | (1,414 | ) | (98 | )% | ||||||
Total | $ | 234,738 | $ | 101,098 | 132 | % | ||||||
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(1) | Cost of service and selling, general and administrative expenses include stock-based compensation expense. For the six months ended June 30, 2007, cost of service includes $0.7 million and selling, general and administrative expenses includes $11.2 million of stock-based compensation expense. For the six months ended June 30, 2006, cost of service includes $0.5 million and selling, general and administrative expenses includes $3.5 million of stock-based compensation expense. | |
(2) | Core and Expansion Markets Adjusted EBITDA (Deficit) is presented in accordance with SFAS No. 131 as it is the primary financial measure utilized by management to facilitate evaluation of our ability to meet future debt service, capital expenditures and working capital requirements and to fund future growth. |
• | Core Markets. Core Markets service revenues increased $147.7 million, or 27%, to $693.5 million for the six months ended June 30, 2007 from $545.8 million for the six months ended June 30, 2006. The increase in service revenues is primarily attributable to net additions of approximately 423,000 customers for the twelve months ended June 30, 2007, which accounted for $108.9 million of the Core Markets increase, coupled with the migration of existing customers to higher priced rate plans accounting for $38.8 million of the Core Markets increase. | |
• | Expansion Markets. Expansion Markets service revenues increased $187.9 million, or 501%, to $225.4 million for the six months ended June 30, 2007 from $37.5 million for the six months ended June 30, 2006. The increase in service revenues is primarily attributable to the launch of the Dallas/Ft. Worth metropolitan area in March 2006, the Detroit metropolitan area in April 2006 and the expansion of the Tampa/Sarasota area to include the Orlando metropolitan area in November 2006. These new markets contributed to net additions of approximately 708,000 customers for the twelve months ended June 30, 2007, which accounted for $88.6 million of the Expansion Markets increase, coupled with new customer additions at higher priced rate plans accounting for $99.3 million of the Expansion Markets increase. |
• | Core Markets. Core Markets equipment revenues increased $21.8 million, or 22%, to $120.4 million for the six months ended June 30, 2007 from $98.6 million for the six months ended June 30, 2006. The increase in equipment revenues is primarily attributable to the sale of higher priced handset models accounting for $11.9 million of the increase, coupled with the increase in gross customer additions of approximately 80,000 customers for the six months ended June 30, 2007 as compared to the same period in 2006, which accounted for $9.9 million of the increase. | |
• | Expansion Markets. Expansion Markets equipment revenues increased $32.8 million, or 208%, to $48.6 million for the six months ended June 30, 2007 from $15.8 million for the six months ended June 30, 2006. The increase in equipment revenues is primarily attributable to the launch of the Dallas/Ft. Worth metropolitan area in March 2006, the Detroit metropolitan area in April 2006 and the expansion of the Tampa/Sarasota area to include the Orlando metropolitan area in November 2006. These new markets contributed to an increase in gross additions of approximately 339,000 customers for the six months ended June 30, 2007 as compared to the same period in 2006, which accounted for $19.4 million of the Expansion Markets increase, coupled with the sale of higher priced handset models accounting for $13.4 million of the Expansion Markets increase. |
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• | Core Markets. Core Markets cost of service increased $49.9 million, or 31%, to $211.0 million for the six months ended June 30, 2007 from $161.1 million for the six months ended June 30, 2006. The increase was primarily attributable to a $23.9 million increase in FUSF fees, a $7.9 million increase in customer service expense, a $5.1 million increase in cell site and switch facility lease expense, a $3.8 million increase in long distance costs and a $2.2 million increase in data services expense, all of which are as a result of the 21% growth in our Core Markets customer base and the deployment of additional network infrastructure during the twelve months ended June 30, 2007. | |
• | Expansion Markets. Expansion Markets cost of service increased $57.7 million, or 148%, to $96.6 million for the six months ended June 30, 2007 from $38.9 million for the six months ended June 30, 2006. The increase was primarily attributable to the launch of the Dallas/Ft. Worth metropolitan area in March 2006, the Detroit metropolitan area in April 2006 and the expansion of the Tampa/Sarasota area to include the Orlando metropolitan area in November 2006. These new markets contributed to net additions of approximately 708,000 customers during the twelve months ended June 30, 2007. The increase in cost of service is primarily attributable to a $12.1 million increase in cell site and switch facility lease expense, a $9.9 million increase in customer service expense, a $9.3 million increase in intercarrier compensation, a $8.1 million increase in long distance costs, a $5.6 million increase in employee costs and a $3.6 million increase in billing expenses. |
• | Core Markets. Core Markets cost of equipment increased $29.3 million, or 17%, to $202.9 million for the six months ended June 30, 2007 from $173.6 million for the six months ended June 30, 2006. The increase in equipment costs is primarily attributable to the sale of higher cost handset models accounting for $11.9 million of the increase. The increase in gross customer additions during the six months ended June 30, 2007 of approximately 80,000 customers as well as the sale of new handsets to existing customers accounted for $17.4 million of the Core Markets increase. | |
• | Expansion Markets. Expansion Markets cost of equipment increased $64.5 million, or 164%, to $103.8 million for the six months ended June 30, 2007 from $39.3 million for the six months ended June 30, 2006. These costs were primarily attributable to the launch of the Dallas/Ft. Worth metropolitan area in March 2006, the Detroit metropolitan area in April 2006 and the expansion of the Tampa/Sarasota area to include the Orlando metropolitan area in November 2006. These new markets contributed to an increase in gross additions of approximately 339,000 customers for the six months ended June 30, 2007 as compared to the same period in 2006 which accounted for $48.3 million of the Expansion Markets increase, coupled with the sale of new handsets to existing customers accounting for $16.2 million of the Expansion Markets increase. |
• | Core Markets. Core Markets selling, general and administrative expenses increased $12.2 million, or 16%, to $87.7 million for the six months ended June 30, 2007 from $75.5 million for the six months ended June 30, 2006. Selling expenses increased by $4.4 million, or approximately 14% for the six months ended June 30, 2007 compared to the six months ended June 30, 2006. This increase is primarily related to a $2.0 million increase in labor costs as well as a $1.1 million increase in marketing and advertising expenses incurred to support the growth in the Core Markets. General and administrative expenses increased $7.8 million, or approximately 18% for the six months ended June 30, |
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2007 compared to the same period in 2006 which is primarily attributable to a $1.6 million increase in insurance cost as well as an increase in various administrative expenses. |
• | Expansion Markets. Expansion Markets selling, general and administrative expenses increased $31.8 million, or 88%, to $68.0 million for the six months ended June 30, 2007 from $36.2 million for the six months ended June 30, 2006. Selling expenses increased by $12.3 million for the six months ended June 30, 2007 compared to the six months ended June 30, 2006. This increase is primarily related to a $6.0 million increase in labor costs as well as a $4.4 million increase in marketing and advertising expenses incurred to support the growth in the Expansion Markets. General and administrative expenses increased by $19.5 million for the six months ended June 30, 2007 compared to the same period in 2006 which was primarily due to a $2.4 million increase in labor costs, a $1.8 million increase in property taxes, a $1.7 million increase in bank fees as well as an increase in various administrative expenses incurred in relation to the growth in the Expansion Markets, including build out expenses related to the Los Angeles, New York, Philadelphia, Boston and Las Vegas metropolitan areas. |
• | Core Markets. Core Markets depreciation and amortization expense increased $4.6 million, or 9%, to $56.3 million for the six months ended June 30, 2007 from $51.7 million for the six months ended June 30, 2006. The increase related primarily to an increase in network infrastructure assets placed into service during the twelve months ended June 30, 2007. | |
• | Expansion Markets. Expansion Markets depreciation and amortization expense increased $15.1 million, or 233%, to $21.6 million for the six months ended June 30, 2007 from $6.5 million for the six months ended June 30, 2006. The increase is attributable to network infrastructure assets placed into service as a result of the launch of the Dallas/Ft. Worth metropolitan area, the Detroit metropolitan area and the expansion of the Tampa/Sarasota area to include the Orlando metropolitan area. |
• | Core Markets. Core Markets stock-based compensation expense increased $3.8 million, or 171%, to $6.0 million for the six months ended June 30, 2007 from $2.2 million for the six months ended June 30, 2006. The increase is primarily related to an increase in stock options granted throughout the twelve months ended June 30, 2007. | |
• | Expansion Markets. Expansion Markets stock-based compensation expense increased $4.1 million, or 235%, to $5.9 million for the six months ended June 30, 2007 from $1.8 million for the six months ended June 30, 2006. The increase is primarily related to an increase in stock options granted throughout the twelve months ended June 30, 2007. |
Six Months | ||||||||||||
Ended June 30, | ||||||||||||
Consolidated Data | 2007 | 2006 | Change | |||||||||
(In thousands) | ||||||||||||
Interest expense | 98,144 | 42,597 | 130 | % | ||||||||
Provision for income taxes | 63,307 | 27,745 | 128 | % | ||||||||
Net income | 94,446 | 41,359 | 128 | % |
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Reportable Operating Segment Data | 2006 | 2005 | Change | |||||||||
(In thousands) | ||||||||||||
REVENUES: | ||||||||||||
Service revenues: | ||||||||||||
Core Markets | $ | 1,138,019 | $ | 868,681 | 31 | % | ||||||
Expansion Markets | 152,928 | 3,419 | ** | |||||||||
Total | $ | 1,290,947 | $ | 872,100 | 48 | % | ||||||
Equipment revenues: | ||||||||||||
Core Markets | $ | 208,333 | $ | 163,738 | 27 | % | ||||||
Expansion Markets | 47,583 | 2,590 | ** | |||||||||
Total | $ | 255,916 | $ | 166,328 | 54 | % | ||||||
OPERATING EXPENSES: | ||||||||||||
Cost of service (excluding depreciation and amortization disclosed separately below)(1): | ||||||||||||
Core Markets | $ | 338,923 | $ | 271,437 | 25 | % | ||||||
Expansion Markets | 106,358 | 11,775 | ** | |||||||||
Total | $ | 445,281 | $ | 283,212 | 57 | % | ||||||
Cost of equipment: | ||||||||||||
Core Markets | $ | 364,281 | $ | 293,702 | 24 | % | ||||||
Expansion Markets | 112,596 | 7,169 | ** | |||||||||
Total | $ | 476,877 | $ | 300,871 | 59 | % | ||||||
Selling, general and administrative expenses (excluding depreciation and amortization disclosed separately below)(1): | ||||||||||||
Core Markets | $ | 158,100 | $ | 153,321 | 3 | % | ||||||
Expansion Markets | 85,518 | 9,155 | ** | |||||||||
Total | $ | 243,618 | $ | 162,476 | 50 | % | ||||||
Adjusted EBITDA (Deficit)(2): | ||||||||||||
Core Markets | $ | 492,773 | $ | 316,555 | 56 | % | ||||||
Expansion Markets | (97,214 | ) | (22,090 | ) | ** | |||||||
Depreciation and amortization: | ||||||||||||
Core Markets | $ | 109,626 | $ | 84,436 | 30 | % | ||||||
Expansion Markets | 21,941 | 2,030 | ** | |||||||||
Other | 3,461 | 1,429 | 142 | % | ||||||||
Total | $ | 135,028 | $ | 87,895 | 54 | % | ||||||
Stock-based compensation expense: | ||||||||||||
Core Markets | $ | 7,725 | $ | 2,596 | 198 | % | ||||||
Expansion Markets | 6,747 | — | ** | |||||||||
Total | $ | 14,472 | $ | 2,596 | 457 | % | ||||||
Income (loss) from operations: | ||||||||||||
Core Markets | $ | 367,109 | $ | 219,777 | 67 | % | ||||||
Expansion Markets | (126,387 | ) | (24,370 | ) | ** | |||||||
Other | (3,469 | ) | 226,770 | (102 | )% | |||||||
Total | $ | 237,253 | $ | 422,177 | (44 | )% | ||||||
** | Not meaningful. The Expansion Markets reportable segment had no significant operations during 2005. |
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(1) | Cost of service and selling, general and administrative expenses include stock-based compensation expense. For the year ended December 31, 2006, cost of service includes $1.3 million and selling, general and administrative expenses includes $13.2 million of stock-based compensation expense. | |
(2) | Core and Expansion Markets Adjusted EBITDA (deficit) is presented in accordance with SFAS No. 131 as it is the primary financial measure utilized by management to facilitate evaluation of our ability to meet future debt service, capital expenditures and working capital requirements and to fund future growth. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Operating Segments.” |
• | Core Markets. Core Markets service revenues increased $269.3 million, or 31%, to $1,138.0 million for the year ended December 31, 2006 from $868.7 million for the year ended December 31, 2005. The increase in service revenues is primarily attributable to net additions of approximately 430,000 customers accounting for $199.2 million of the Core Markets increase, coupled with the migration of existing customers to higher price rate plans accounting for $70.1 million of the Core Markets increase. |
• | Expansion Markets. Expansion Markets service revenues increased $149.5 million to $152.9 million for the year ended December 31, 2006 from $3.4 million for the year ended December 31, 2005. These revenues were attributable to the launch of the Tampa/Sarasota metropolitan area in October 2005, the Dallas/Ft. Worth metropolitan area in March 2006, the Detroit metropolitan area in April 2006 and the expansion of the Tampa/Sarasota area to include the Orlando metropolitan area in November 2006. Net additions in the Expansion Markets totaled approximately 587,000 customers for the year ended December 31, 2006. |
• | Core Markets. Core Markets equipment revenues increased $44.6 million, or 27%, to $208.3 million for the year ended December 31, 2006 from $163.7 million for the year ended December 31, 2005. The increase in equipment revenues is primarily attributable to the sale of higher priced handset models accounting for $30.2 million of the increase, coupled with the increase in gross customer additions during the year of approximately 130,000 customers, which accounted for $14.4 million of the increase. | |
• | Expansion Markets. Expansion Markets equipment revenues increased $45.0 million to $47.6 million for the year ended December 31, 2006 from $2.6 million for the year ended December 31, 2005. These revenues were attributable to the launch of the Tampa/Sarasota metropolitan area in October 2005, the Dallas/Ft. Worth metropolitan area in March 2006, the Detroit metropolitan area in April 2006 and the expansion of the Tampa/Sarasota area to include the Orlando metropolitan area in November 2006. Gross additions in the Expansion Markets totaled approximately 730,000 customers for the year ended December 31, 2006. |
• | Core Markets. Core Markets cost of service increased $67.5 million, or 25%, to $338.9 million for the year ended December 31, 2006 from $271.4 million for the year ended December 31, 2005. The increase in cost of service was primarily attributable to a $14.8 million increase in federal universal |
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service fund, or FUSF, fees, a $13.2 million increase in long distance costs, a $7.7 million increase in cell site and switch facility lease expense, a $6.4 million increase in customer service expense, a $5.9 million increase in intercarrier compensation, and a $4.3 million increase in employee costs, all of which are a result of the 23% growth in our Core Markets customer base and the addition of approximately 350 cell sites to our existing network infrastructure. |
• | Expansion Markets. Expansion Markets cost of service increased $94.6 million to $106.4 million for the year ended December 31, 2006 from $11.8 million for the year ended December 31, 2005. These increases were attributable to the launch of the Tampa/Sarasota metropolitan area in October 2005, the Dallas/Ft. Worth metropolitan area in March 2006, the Detroit metropolitan area in April 2006 and the expansion of the Tampa/Sarasota area to include the Orlando metropolitan area in November 2006. The increase in cost of service was primarily attributable to a $22.3 million increase in cell site and switch facility lease expense, a $13.8 million increase in employee costs, a $9.3 million increase in intercarrier compensation, $8.2 million in long distance costs, $8.2 million in customer service expense and $3.5 million in billing expenses. |
• | Core Markets. Core Markets cost of equipment increased $70.6 million, or 24%, to $364.3 million for the year ended December 31, 2006 from $293.7 million for the year ended December 31, 2005. The increase in equipment costs is primarily attributable to the sale of higher cost handset models accounting for $44.7 million of the increase. The increase in gross customer additions during the year of approximately 130,000 customers as well as the sale of new handsets to existing customers accounted for $25.9 million of the increase. | |
• | Expansion Markets. Expansion Markets costs of equipment increased $105.4 million to $112.6 million for the year ended December 31, 2006 from $7.2 million for the year ended December 31, 2005. These costs were primarily attributable to the launch of the Tampa/Sarasota metropolitan area in October 2005, the Dallas/Ft. Worth metropolitan area in March 2006, the Detroit metropolitan area in April 2006 and the expansion of the Tampa/Sarasota area to include the Orlando metropolitan area in November 2006. |
• | Core Markets. Core Markets selling, general and administrative expenses increased $4.8 million, or 3%, to $158.1 million for the year ended December 31, 2006 from $153.3 million for the year ended December 31, 2005. Selling expenses increased by $10.7 million, or approximately 18% for the year ended December 31, 2006 compared to year ended December 31, 2005. General and administrative expenses decreased by $5.9 million, or approximately 6% for the year ended December 31, 2006 compared to the year ended December 31, 2005. The increase in selling expenses is primarily due to an increase in advertising and market research expenses which were incurred to support the growth in the Core Markets. This increase in selling expenses was offset by a decrease in general and administrative expenses, which were higher in 2005 because they included approximately $5.9 million in legal and accounting expenses associated with an internal investigation related to material weaknesses in our internal control over financial reporting as well as financial statement audits related to our restatement efforts. | |
• | Expansion Markets. Expansion Markets selling, general and administrative expenses increased $76.3 million to $85.5 million for the year ended December 31, 2006 from $9.2 million for the year ended December 31, 2005. Selling expenses increased $31.5 million for the year ended December 31, 2006 compared to the year ended December 31, 2005. This increase in selling expenses was related to |
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marketing and advertising expenses associated with the launch of the Dallas/Ft. Worth metropolitan area, the Detroit metropolitan area, and the expansion of the Tampa/Sarasota area to include the Orlando metropolitan area. General and administrative expenses increased by $44.8 million for the year ended December 31, 2006 compared to the same period in 2005 due to labor, rent, legal and professional fees and various administrative expenses incurred in relation to the launch of the Dallas/Ft. Worth metropolitan area, Detroit metropolitan area, and the expansion of the Tampa/Sarasota area to include the Orlando metropolitan area as well as build out expenses related to the Los Angeles metropolitan area. |
• | Core Markets. Core Markets depreciation and amortization expense increased $25.2 million, or 30%, to $109.6 million for the year ended December 31, 2006 from $84.4 million for the year ended December 31, 2005. The increase related primarily to an increase in network infrastructure assets placed into service during the year ended December 31, 2006. We added approximately 350 cell sites in our Core Markets during this period to increase the capacity of our existing network and expand our footprint. | |
• | Expansion Markets. Expansion Markets depreciation and amortization expense increased $19.9 million to $21.9 million for the year ended December 31, 2006 from $2.0 million for the year ended December 31, 2005. The increase related to network infrastructure assets that were placed into service as a result of the launch of the Dallas/Ft. Worth metropolitan area, the Detroit metropolitan area, and expansion of the Tampa/Sarasota area to include the Orlando metropolitan area. |
• | Core Markets. Core Markets stock-based compensation expense increased $5.1 million, or 198%, to $7.7 million for the year ended December 31, 2006 from $2.6 million for the year ended December 31, 2005. The increase is primarily related to the adoption of SFAS No. 123(R) on January 1, 2006. In addition, in December 2006, we amended the stock option agreements of a former member of our board of directors to extend the contractual life of 405,054 vested options to purchase common stock until December 31, 2006. This amendment resulted in the recognition of additional stock-based compensation expense of approximately $4.1 million in the fourth quarter of 2006. | |
• | Expansion Markets. Expansion Markets stock-based compensation expense was $6.8 million for the year ended December 31, 2006. This expense is attributable to stock options granted to employees in our Expansion Markets which are being accounted for under SFAS No. 123(R)as of January 1, 2006. |
Consolidated Data | 2006 | 2005 | Change | |||||||||
(In thousands) | ||||||||||||
Loss (gain) on disposal of assets | $ | 8,806 | $ | (218,203 | ) | 104 | % | |||||
Loss on extinguishment of debt | 51,518 | 46,448 | 11 | % | ||||||||
Interest expense | 115,985 | 58,033 | 100 | % | ||||||||
Provision for income taxes | 36,717 | 127,425 | (72 | )% | ||||||||
Net income | 53,806 | 198,677 | (73 | )% |
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Reportable Operating Segment Data | 2005 | 2004 | Change | |||||||||
(In thousands) | ||||||||||||
REVENUES: | ||||||||||||
Service revenues: | ||||||||||||
Core Markets | $ | 868,681 | $ | 616,401 | 41 | % | ||||||
Expansion Markets | 3,419 | — | ** | |||||||||
Total | $ | 872,100 | $ | 616,401 | 41 | % | ||||||
Equipment revenues: | ||||||||||||
Core Markets | $ | 163,738 | $ | 131,849 | 24 | % | ||||||
Expansion Markets | 2,590 | — | ** | |||||||||
Total | $ | 166,328 | $ | 131,849 | 26 | % | ||||||
OPERATING EXPENSES: | ||||||||||||
Cost of service (excluding depreciation and amortization disclosed separately below): | ||||||||||||
Core Markets | $ | 271,437 | $ | 200,806 | 35 | % | ||||||
Expansion Markets | 11,775 | — | ** | |||||||||
Total | $ | 283,212 | $ | 200,806 | 41 | % | ||||||
Cost of equipment: | ||||||||||||
Core Markets | $ | 293,702 | $ | 222,766 | 32 | % | ||||||
Expansion Markets | 7,169 | — | ** | |||||||||
Total | $ | 300,871 | $ | 222,766 | 35 | % | ||||||
Selling, general and administrative expenses (excluding depreciation and amortization disclosed separately below)(1): | ||||||||||||
Core Markets | $ | 153,321 | $ | 131,510 | 17 | % | ||||||
Expansion Markets | 9,155 | — | ** | |||||||||
Total | $ | 162,476 | $ | 131,510 | 24 | % | ||||||
Adjusted EBITDA (Deficit)(2): | ||||||||||||
Core Markets | $ | 316,555 | $ | 203,597 | 55 | % | ||||||
Expansion Markets | (22,090 | ) | — | ** | ||||||||
Depreciation and amortization: | ||||||||||||
Core Markets | $ | 84,436 | $ | 61,286 | 38 | % | ||||||
Expansion Markets | 2,030 | — | ** | |||||||||
Other | 1,429 | 915 | 56 | % | ||||||||
Total | $ | 87,895 | $ | 62,201 | 41 | % | ||||||
Stock-based compensation expense: | ||||||||||||
Core Markets | $ | 2,596 | $ | 10,429 | (75 | )% | ||||||
Expansion Markets | — | — | — | |||||||||
Total | $ | 2,596 | $ | 10,429 | (75 | )% | ||||||
Income (loss) from operations: | ||||||||||||
Core Markets | $ | 219,777 | $ | 128,673 | 71 | % | ||||||
Expansion Markets | (24,370 | ) | — | ** | ||||||||
Other | 226,770 | (915 | ) | ** | ||||||||
Total | $ | 422,177 | $ | 127,758 | 230 | % | ||||||
** | Not meaningful. The Expansion Markets reportable segment had no operations until 2005. | |
(1) | Selling, general and administrative expenses include stock-based compensation expense disclosed separately. | |
(2) | Core and Expansion Markets Adjusted EBITDA (deficit) is presented in accordance with SFAS No. 131 as it is the primary financial measure utilized by management to facilitate evaluation of our ability to meet future debt service, capital expenditures and working capital requirements and to fund future growth. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Operating Segments.” |
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• | Core Markets. Core Markets service revenues increased $252.3 million, or 41%, to $868.7 million for the year ended December 31, 2005 from $616.4 million for the year ended December 31, 2004. The increase in service revenues is primarily attributable to net additions of approximately 473,000 customers accounting for $231.8 million of the Core Markets increase, coupled with the migration of existing customers to higher priced rate plans accounting for $20.5 million of the Core Markets increase. |
• | Expansion Markets. Expansion Markets service revenues were $3.4 million for the year ended December 31, 2005. These revenues are attributable to the launch of the Tampa/Sarasota metropolitan area in October 2005. Net additions in the Tampa/Sarasota metropolitan area totaled approximately 53,000 customers. |
• | Core Markets. Core Markets equipment revenues increased $31.9 million, or 24%, to $163.7 million for the year ended December 31, 2005 from $131.8 million for the year ended December 31, 2004. The increase in revenues was primarily attributable to an increase in sales to new customers of $32.6 million, a 60% increase over 2004. During the year ended December 31, 2005, Core Markets gross customer additions increased 30% to approximately 1,478,500 customers compared to 2004. | |
• | Expansion Markets. Expansion Markets equipment revenues were $2.6 million for the year ended December 31, 2005. These revenues are attributable to approximately 53,600 gross customer additions due to the launch of the Tampa/Sarasota metropolitan area in October 2005. |
• | Core Markets. Core Markets cost of service increased $70.6 million, or 35%, to $271.4 million for the year ended December 31, 2005 from $200.8 million for the year ended December 31, 2004. The increase was primarily attributable to a $12.9 million increase in intercarrier compensation, a $12.3 million increase in long distance costs, a $9.5 million increase in cell site and switch facility lease expense, a $5.6 million increase in customer service expense, a $3.9 million increase in billing expenses and $2.6 million increase in employee costs, which were a result of the 34% growth in our customer base and the addition of 315 cell sites to our existing network infrastructure. | |
• | Expansion Markets. Expansion Markets cost of service was $11.8 million for the year ended December 31, 2005. These expenses are attributable to the launch of the Tampa/Sarasota metropolitan area in October 2005, which contributed net additions of approximately 53,000 customers during 2005. Cost of service included employee costs of $4.1 million, cell site and switch facility lease expense of 3.4 million, repair and maintenance expense of $1.6 million and intercarrier compensation of $1.0 million. |
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• | Core Markets. Core Markets cost of equipment increased $70.9 million, or 32%, to $293.7 million for the year ended December 31, 2005 from $222.8 million for the year ended December 31, 2004. The increase in cost of equipment is due to the 30% increase in gross customer additions during 2005 compared to the year ended December 31, 2004. | |
• | Expansion Markets. Expansion Markets cost of equipment was $7.2 million for the year ended December 31, 2005. This cost is attributable to the launch of the Tampa/Sarasota metropolitan area in October 2005, which resulted in approximately 53,600 activations during 2005. |
• | Core Markets. Core Markets selling, general and administrative expenses increased $21.8 million, or 17%, to $153.3 million for the year ended December 31, 2005 from $131.5 million for the year ended December 31, 2004. Selling expenses increased by $6.3 million, or 12% for the year ended December 31, 2005 compared to 2004. General and administrative expenses increased by $15.5 million, or 20%, during 2005 compared to 2004. The significant increase in general and administrative expenses was primarily driven by increases in accounting and auditing fees of $4.9 million and increases in professional service fees of $3.6 million due to substantial legal and accounting expenses associated with an internal investigation related to material weaknesses in our internal control over financial reporting as well as financial statement audits related to our restatement efforts. We also experienced a $6.6 million increase in labor costs associated with new employee additions necessary to support the growth in our business. These increases were offset by a $7.8 million decrease in stock-based compensation expense. | |
• | Expansion Markets. Expansion Markets selling, general and administrative expenses were $9.2 million for the year ended December 31, 2005. Selling expenses were $3.5 million and general and administrative expenses were $5.7 million for 2005. These expenses are comprised of marketing and advertising expenses as well as labor, rent, professional fees and various administrative expenses associated with the launch of the Tampa/Sarasota metropolitan area in October 2005 and build out of the Dallas/Ft. Worth and Detroit metropolitan areas. |
• | Core Markets. Core Markets depreciation and amortization expense increased $23.1 million, or 38%, to $84.4 million for the year ended December 31, 2005 from $61.3 million for the year ended December 31, 2004. The increase related primarily to an increase in network infrastructure assets placed into service during 2005, compared to the year ended December 31, 2004. We added 315 cell sites in our Core Markets during the year ended December 31, 2005 to increase the capacity of our existing network and expand our footprint. | |
• | Expansion Markets. Expansion Markets depreciation and amortization expense was $2.0 million for the year ended December 31, 2005. This expense is attributable to network infrastructure assets placed into service as a result of the launch of the Tampa/Sarasota metropolitan area. |
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Consolidated Data | 2005 | 2004 | Change | |||||||||
(In thousands) | ||||||||||||
Loss (gain) on disposal of assets | $ | (218,203 | ) | $ | 3,209 | ** | ||||||
(Gain) loss on extinguishment of debt | 46,448 | (698 | ) | ** | ||||||||
Interest expense | 58,033 | 19,030 | 205 | % | ||||||||
Provision for income taxes | 127,425 | 47,000 | 171 | % | ||||||||
Net income | 198,677 | 64,890 | 206 | % |
** | Not meaningful |
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Six Months Ended | ||||||||||||||||||||
Year Ended December 31, | June 30, | |||||||||||||||||||
2004 | 2005 | 2006 | 2006 | 2007 | ||||||||||||||||
Customers: | ||||||||||||||||||||
End of period | 1,398,732 | 1,924,621 | 2,940,986 | 2,418,909 | 3,549,916 | |||||||||||||||
Net additions | 421,833 | 525,889 | 1,016,365 | 494,288 | 608,930 | |||||||||||||||
Churn: | ||||||||||||||||||||
Average monthly rate | 4.9 | % | 5.1 | % | 4.6 | % | 4.5 | % | 4.4 | % | ||||||||||
ARPU | $ | 41.13 | $ | 42.40 | $ | 42.98 | $ | 42.98 | $ | 43.46 | ||||||||||
CPGA | $ | 103.78 | $ | 102.70 | $ | 117.58 | $ | 114.56 | $ | 115.87 | ||||||||||
CPU | $ | 18.95 | $ | 19.57 | $ | 19.65 | $ | 19.93 | $ | 18.28 |
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Year Ended December 31, | Six Months Ended June 30, | |||||||||||||||||||
2004 | 2005 | 2006 | 2006 | 2007 | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Core Markets Customers: | ||||||||||||||||||||
End of period | 1,398,732 | 1,871,665 | 2,300,958 | 2,119,168 | 2,542,290 | |||||||||||||||
Net additions | 421,833 | 472,933 | 429,293 | 247,503 | 241,332 | |||||||||||||||
Core Markets Adjusted EBITDA | $ | 203,597 | $ | 316,555 | $ | 492,773 | $ | 236,302 | $ | 318,191 | ||||||||||
Core Markets Adjusted EBITDA as a Percent of Service Revenues | 33.0 | % | 36.4 | % | 43.3 | % | 43.3 | % | 45.9 | % |
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Six Months Ended | ||||||||||||||||||||
Year Ended December 31, | June 30, | |||||||||||||||||||
2004 | 2005 | 2006 | 2006 | 2007 | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Expansion Markets Customers: | ||||||||||||||||||||
End of period | — | 52,956 | 640,028 | 299,741 | 1,007,626 | |||||||||||||||
Net additions | — | 52,956 | 587,072 | 246,785 | 367,598 | |||||||||||||||
Expansion Markets Adjusted EBITDA (Deficit) | — | $ | (22,090 | ) | $ | (97,214 | ) | $ | (59,282 | ) | $ | 11,572 | ||||||||
Expansion Markets Adjusted EBITDA as a Percent of Service Revenues | NM | NM | NM | NM | 5.1 | % |
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Three Months Ended | Three Months Ended | Nine Months Ended | Nine Months Ended | |||||||||||||
September 30, 2006 | September 30, 2007 | September 30, 2006 | September 30, 2007 | |||||||||||||
Consolidated Market Subscribers | ||||||||||||||||
End of Period | 2,616,532 | 3,664,218 | 2,616,532 | 3,664,218 | ||||||||||||
Net Additions | 197,623 | 114,302 | 691,911 | 723,232 | ||||||||||||
Core Market Subscribers | ||||||||||||||||
End of Period | 2,174,264 | 2,578,019 | 2,174,264 | 2,578,019 | ||||||||||||
Net Additions | 55,096 | 35,729 | 302,599 | 277,061 | ||||||||||||
Expansion Market Subscribers | ||||||||||||||||
End of Period | 442,268 | 1,086,199 | 442,268 | 1,086,199 | ||||||||||||
Net Additions | 142,527 | 78,573 | 389,312 | 446,171 |
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Six Months Ended | ||||||||||||||||||||
Year Ended December 31, | June 30, | |||||||||||||||||||
2004 | 2005 | 2006 | 2006 | 2007 | ||||||||||||||||
(In thousands, except average number of customers and ARPU) | ||||||||||||||||||||
Calculation of Average Revenue Per User (ARPU): | ||||||||||||||||||||
Service revenues | $ | 616,401 | $ | 872,100 | $ | 1,290,947 | $ | 583,260 | $ | 918,857 | ||||||||||
Less: | ||||||||||||||||||||
Activation revenues | (7,874 | ) | (6,808 | ) | (8,297 | ) | (3,903 | ) | (5,142 | ) | ||||||||||
E-911, FUSF and vendor’s compensation charges | (12,522 | ) | (26,221 | ) | (45,640 | ) | (19,710 | ) | (45,992 | ) | ||||||||||
Net service revenues | $ | 596,005 | $ | 839,071 | $ | 1,237,010 | $ | 559,647 | $ | 867,723 | ||||||||||
Divided by: | ||||||||||||||||||||
Average number of customers | 1,207,521 | 1,649,208 | 2,398,682 | 2,170,180 | 3,328,032 | |||||||||||||||
ARPU | $ | 41.13 | $ | 42.40 | $ | 42.98 | $ | 42.98 | $ | 43.46 | ||||||||||
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Six Months | ||||||||||||||||||||
Year Ended December 31, | Ended June 30, | |||||||||||||||||||
2004 | 2005 | 2006 | 2006 | 2007 | ||||||||||||||||
(In thousands, except gross customer additions and CPGA) | ||||||||||||||||||||
Calculation of Cost Per Gross Addition (CPGA): | ||||||||||||||||||||
Selling expenses | $ | 52,605 | $ | 62,396 | $ | 104,620 | $ | 46,734 | $ | 63,471 | ||||||||||
Less: | ||||||||||||||||||||
Activation revenues | (7,874 | ) | (6,808 | ) | (8,297 | ) | (3,903 | ) | (5,142 | ) | ||||||||||
Less: | ||||||||||||||||||||
Equipment revenues | (131,849 | ) | (166,328 | ) | (255,916 | ) | (114,395 | ) | (169,005 | ) | ||||||||||
Add: | ||||||||||||||||||||
Equipment revenue not associated with new customers | 54,323 | 77,010 | 114,392 | 51,768 | 75,902 | |||||||||||||||
Add: | ||||||||||||||||||||
Cost of equipment | 222,766 | 300,871 | 476,877 | 212,916 | 306,747 | |||||||||||||||
Less: | ||||||||||||||||||||
Equipment costs not associated with new customers | (72,200 | ) | (109,803 | ) | (155,930 | ) | (70,033 | ) | (98,964 | ) | ||||||||||
Gross addition expenses | $ | 117,771 | $ | 157,338 | $ | 275,746 | $ | 123,087 | $ | 173,009 | ||||||||||
Divided by: | ||||||||||||||||||||
Gross customer additions | 1,134,762 | 1,532,071 | 2,345,135 | 1,074,462 | 1,493,132 | |||||||||||||||
CPGA | $ | 103.78 | $ | 102.70 | $ | 117.58 | $ | 114.56 | $ | 115.87 | ||||||||||
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Year Ended December 31, | Six Months Ended June 30, | |||||||||||||||||||
2004 | 2005 | 2006 | 2006 | 2007 | ||||||||||||||||
(In thousands, except average number of customers and CPU) | ||||||||||||||||||||
Calculation of Cost Per User (CPU): | ||||||||||||||||||||
Cost of service | $ | 200,806 | $ | 283,212 | $ | 445,281 | $ | 199,987 | $ | 307,562 | ||||||||||
Add: | ||||||||||||||||||||
General and administrative expense | 78,905 | 100,080 | 138,998 | 64,967 | 92,183 | |||||||||||||||
Add: | ||||||||||||||||||||
Net loss on equipment transactions unrelated to initial customer acquisition | 17,877 | 32,791 | 41,538 | 18,265 | 23,062 | |||||||||||||||
Less: | ||||||||||||||||||||
Stock-based compensation expense included in cost of service and general and administrative expense | (10,429 | ) | (2,596 | ) | (14,472 | ) | (3,969 | ) | (11,864 | ) | ||||||||||
Less: | ||||||||||||||||||||
E-911, FUSF and vendor’s compensation revenues | (12,522 | ) | (26,221 | ) | (45,640 | ) | (19,710 | ) | (45,992 | ) | ||||||||||
Total costs used in the calculation of CPU | $ | 274,637 | $ | 387,266 | $ | 565,705 | $ | 259,540 | $ | 364,951 | ||||||||||
Divided by: | ||||||||||||||||||||
Average number of customers | 1,207,521 | 1,649,208 | 2,398,682 | 2,170,180 | 3,328,032 | |||||||||||||||
CPU | $ | 18.95 | $ | 19.57 | $ | 19.65 | $ | 19.93 | $ | 18.28 | ||||||||||
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Year Ended December 31, | Six Months Ended June 30, | |||||||||||||||||||
2004 | 2005 | 2006 | 2006 | 2007 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Calculation of Consolidated Adjusted EBITDA: | ||||||||||||||||||||
Net income | $ | 64,890 | $ | 198,677 | $ | 53,806 | $ | 41,359 | $ | 94,446 | ||||||||||
Adjustments: | ||||||||||||||||||||
Depreciation and amortization | 62,201 | 87,895 | 135,028 | 59,576 | 80,504 | |||||||||||||||
Loss (gain) on disposal of assets | 3,209 | (218,203 | ) | 8,806 | 12,377 | 2,657 | ||||||||||||||
Stock-based compensation expense(1) | 10,429 | 2,596 | 14,472 | 3,969 | 11,864 | |||||||||||||||
Interest expense | 19,030 | 58,033 | 115,985 | 42,597 | 98,144 | |||||||||||||||
Accretion of put option in majority-owned subsidiary(1) | 8 | 252 | 770 | 360 | 492 | |||||||||||||||
Interest and other income | (2,472 | ) | (8,658 | ) | (21,543 | ) | (10,719 | ) | (21,651 | ) | ||||||||||
(Gain) loss on extinguishment of debt | (698 | ) | 46,448 | 51,518 | (244 | ) | — | |||||||||||||
Provision for income taxes | 47,000 | 127,425 | 36,717 | 27,745 | 63,307 | |||||||||||||||
Consolidated Adjusted EBITDA | $ | 203,597 | $ | 294,465 | $ | 395,559 | $ | 177,020 | $ | 329,763 | ||||||||||
(1) | Represents a non-cash expense, as defined by our senior secured credit facility. |
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Six Months | ||||||||||||||||||||
Year Ended December 31, | Ended June 30, | |||||||||||||||||||
2004 | 2005 | 2006 | 2006 | 2007 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Reconciliation of Net Cash Provided by Operating Activities to Consolidated Adjusted EBITDA: | ||||||||||||||||||||
Net cash provided by operating activities | $ | 150,379 | $ | 283,216 | $ | 364,761 | $ | 199,068 | $ | 267,309 | ||||||||||
Adjustments: | ||||||||||||||||||||
Interest expense | 19,030 | 58,033 | 115,985 | 42,597 | 98,144 | |||||||||||||||
Non-cash interest expense | (2,889 | ) | (4,285 | ) | (6,964 | ) | (776 | ) | (2,048 | ) | ||||||||||
Interest and other income | (2,472 | ) | (8,658 | ) | (21,543 | ) | (10,719 | ) | (21,651 | ) | ||||||||||
Provision for uncollectible accounts receivable | (125 | ) | (129 | ) | (31 | ) | (111 | ) | (23 | ) | ||||||||||
Deferred rent expense | (3,466 | ) | (4,407 | ) | (7,464 | ) | (3,376 | ) | (4,265 | ) | ||||||||||
Cost of abandoned cell sites | (1,021 | ) | (725 | ) | (3,783 | ) | (638 | ) | (3,832 | ) | ||||||||||
Accretion of asset retirement obligation | (253 | ) | (423 | ) | (769 | ) | (298 | ) | (572 | ) | ||||||||||
Loss (gain) on sale of investments | (576 | ) | 190 | 2,385 | 1,268 | 2,241 | ||||||||||||||
Provision for income taxes | 47,000 | 127,425 | 36,717 | 27,745 | 63,307 | |||||||||||||||
Deferred income taxes | (44,441 | ) | (125,055 | ) | (32,341 | ) | (26,496 | ) | (62,158 | ) | ||||||||||
Changes in working capital | 42,431 | (30,717 | ) | (51,394 | ) | (51,244 | ) | (6,689 | ) | |||||||||||
Consolidated Adjusted EBITDA | $ | 203,597 | $ | 294,465 | $ | 395,559 | $ | 177,020 | $ | 329,763 | ||||||||||
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Payments Due by Period | ||||||||||||||||||||
Less | More | |||||||||||||||||||
Than | Than | |||||||||||||||||||
Total | 1 Year | 1–3 Years | 3–5 Years | 5 Years | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Contractual Obligations: | ||||||||||||||||||||
Long-term debt, including current portion | $ | 2,596,000 | $ | 16,000 | $ | 32,000 | $ | 32,000 | $ | 2,516,000 | ||||||||||
Interest expense on long-term debt(1) | 1,601,613 | 218,185 | 436,370 | 436,370 | 510,688 | |||||||||||||||
Operating leases | 728,204 | 88,639 | 180,873 | 179,277 | 279,415 | |||||||||||||||
Total cash contractual obligations | $ | 4,925,817 | $ | 322,824 | $ | 649,243 | $ | 647,647 | $ | 3,306,103 | ||||||||||
(1) | Interest expense on long-term debt includes future interest payments on outstanding obligations under our senior secured credit facility and 91/4% senior notes. The senior secured credit facility bears interest at a floating rate tied to a fixed spread to the London Inter Bank Offered Rate. The interest expense presented in this table is based on the rates at December 31, 2006 which was 7.875% for the senior secured credit facility. |
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Product | $30/Month | $35/Month | $40/Month | $45/Month | $50/Month | |||||||||||||||
Unlimited local calling | X | X | X | X | X | |||||||||||||||
Unlimited nationwide long distance calling(1) | X | X | X | |||||||||||||||||
Unlimited domestic text messaging | X | X | ||||||||||||||||||
Unlimited picture messaging | X | X | ||||||||||||||||||
Enhanced voicemail | X | X | ||||||||||||||||||
3-way calling | X | X | ||||||||||||||||||
Caller ID | X | X | ||||||||||||||||||
Call waiting | X | X | ||||||||||||||||||
Enhanced directory assistance | X | X | ||||||||||||||||||
Mobile Internet browsing | X | |||||||||||||||||||
Pushe-mail | X | |||||||||||||||||||
Mobile instant messaging | X | |||||||||||||||||||
Additional calling features available | X | X | X | X |
(1) | Includes only the continental United States. |
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• | services provided through the Binary Runtime Environment for Wireless, or BREW, platform, including ringtones, games and content applications; | |
• | text messaging services (domestic and international), which allow the customer to send and receive alphanumeric messages that the handset can receive, store and display on demand; | |
• | multimedia messaging services, which allow the customer to send and receive messages containing photographs; | |
• | mobile Internet browsing; | |
• | mobile instant messaging; and | |
• | pushe-mail. |
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Annualized | ||||||||||||||||||||||||
POPs | POP | POP | Launch | |||||||||||||||||||||
Metropolitan Area | BTA | (’000s)(1) | Density(3) | Growth(4) | MHz | Date | ||||||||||||||||||
Core Markets: | ||||||||||||||||||||||||
Georgia: | ||||||||||||||||||||||||
Atlanta, GA | 24 | 5,213.8 | 474 | 2.53 | % | 20 | Q1 2002 | |||||||||||||||||
Gainesville, GA | 160 | 304.9 | 187 | 3.15 | % | 30 | Q1 2002 | |||||||||||||||||
Athens, GA | 22 | 232.1 | 169 | 1.70 | % | 20 | Q1 2002 | |||||||||||||||||
South Florida: | ||||||||||||||||||||||||
Miami-Fort Lauderdale, FL | 293 | 4,415.8 | 1,051 | 1.69 | % | 30 | Q1 2002 | |||||||||||||||||
West Palm Beach, FL | 469 | 1,334.9 | 483 | 2.05 | % | 30 | Q1 2002 | |||||||||||||||||
Fort Myers, FL | 151 | 748.5 | 219 | 2.61 | % | 30 | Q1 2004 | |||||||||||||||||
Fort Pierce-Vero Beach, FL | 152 | 497.3 | 305 | 2.13 | % | 30 | Q1 2004 | |||||||||||||||||
Naples, FL | 313 | 322.2 | 162 | 3.63 | % | 30 | Q1 2004 | |||||||||||||||||
Northern California: | ||||||||||||||||||||||||
San Fran.-Oak.-S.J., CA | 404 | 7,501.4 | 553 | 0.57 | % | 20 | Q3 2002 | |||||||||||||||||
Sacramento, CA | 389 | 2,388.0 | 150 | 2.65 | % | 30 | Q1 2002 | |||||||||||||||||
Stockton, CA | 434 | 752.6 | 309 | 3.25 | % | 30 | Q1 2002 | |||||||||||||||||
Modesto, CA | 303 | 604.2 | 162 | 2.79 | % | 15 | Q1 2005 | |||||||||||||||||
Salinas-Monterey, CA | 397 | 434.2 | 131 | 1.21 | % | 30 | Q1 2002 | |||||||||||||||||
Redding, CA | 371 | 304.3 | 19 | 1.47 | % | 30 | Q4 2006 | |||||||||||||||||
Merced, CA | 291 | 269.3 | 79 | 2.53 | % | 15 | Q1 2005 | |||||||||||||||||
Chico-Oroville, CA | 79 | 246.9 | 83 | 1.13 | % | 30 | Q1 2002 | |||||||||||||||||
Eureka, CA | 134 | 155.8 | 34 | 0.18 | % | 15 | TBD | |||||||||||||||||
Yuba City-Marysville, CA | 485 | 155.3 | 125 | 1.68 | % | 30 | Q1 2002 | |||||||||||||||||
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Annualized | ||||||||||||||||||||||||
POPs | POP | POP | Launch | |||||||||||||||||||||
Metropolitan Area | BTA | (’000s)(1) | Density(3) | Growth(4) | MHz | Date | ||||||||||||||||||
Expansion Markets (excluding Auction 66 Markets): | ||||||||||||||||||||||||
Central and Northern Florida: | ||||||||||||||||||||||||
Tampa-St. Petersburg, FL | 440 | 2,915.0 | 602 | 1.59 | % | 10 | Q4 2005 | |||||||||||||||||
Sarasota-Bradenton, FL | 408 | 708.0 | 362 | 1.97 | % | 10 | Q4 2005 | |||||||||||||||||
Daytona Beach, FL | 107 | 559.1 | 349 | 1.92 | % | 20 | TBD | |||||||||||||||||
Ocala, FL | 326 | 297.0 | 184 | 2.09 | % | 10 | TBD | |||||||||||||||||
Jacksonville, FL(2) | 212 | 1,525.9 | 192 | 1.78 | % | 10 | TBD | |||||||||||||||||
Lakeland-Winter Haven, FL(2) | 239 | 525.1 | 288 | 1.27 | % | 10 | Q4 2006 | |||||||||||||||||
Melbourne-Titusville, FL(2) | 289 | 530.1 | 533 | 1.65 | % | 10 | TBD | |||||||||||||||||
Gainesville, FL(2) | 159 | 339.6 | 94 | 0.92 | % | 10 | TBD | |||||||||||||||||
Orlando, FL(2) | 336 | 2,010.0 | 493 | 2.54 | % | 10 | Q4 2006 | |||||||||||||||||
Dallas/Ft. Worth | ||||||||||||||||||||||||
Dallas/Ft. Worth, TX(5) | 101 | 6,028.9 | 727 | 2.56 | % | 10 | Q1 2006 | |||||||||||||||||
Sherman-Denison, TX(6) | 418 | 190.1 | 70 | 0.99 | % | 10 | Q1 2006 | |||||||||||||||||
Detroit: | ||||||||||||||||||||||||
Detroit, MI | 112 | 5,095.3 | 826 | 0.41 | % | 10 | Q2 2006 | |||||||||||||||||
Southern California: | ||||||||||||||||||||||||
Los Angeles, CA(2) | 262 | 18,261.0 | 413 | 1.66 | % | 10 | Q3 2007 | |||||||||||||||||
Bakersfield, CA | 28 | 752.0 | 92 | 1.95 | % | 10 | TBD |
Source: | Kagan 2005 Wireless Telecom Atlas and Databook. |
(1) | POPs based on 2005 population data and increased based on annualized POP growth rates. | |
(2) | License granted to Royal Street. | |
(3) | Calculated as number of POPs divided by square miles. | |
(4) | Estimatedaverage 2003-2008 annual population growth. | |
(5) | The Dallas/Ft. Worth license is comprised of the counties which make up CMA9. | |
(6) | Comprised of Grayson and Fannin counties only. |
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Purchase Price | Spectrum | |||||||||||||
License | $ | MHz | Population | |||||||||||
REA 1 | Northeast | 552,694,000 | 10 | 50,058,090 | ||||||||||
REA 6 | West | 355,726,000 | 10 | 49,999,164 | ||||||||||
EA 10 | New York-No. New Jer.-Long Island, | |||||||||||||
NY-NJ-CT-PA-MA-VT(1) | 363,945,000 | 10 | 25,712,577 | |||||||||||
EA 57 | Detroit-Ann Arbor-Flint, MI | 50,317,000 | 10 | 6,963,637 | ||||||||||
EA 127 | Dallas/Ft. Worth, TX-AR-OK | 49,766,000 | 10 | 7,645,530 | ||||||||||
EA 62 | Grand Rapids-Muskegon-Holland, MI | 7,920,000 | 10 | 1,881,991 | ||||||||||
EA 153 | Las Vegas, NV-AZ-UT(1) | 10,420,000 | 10 | 1,709,797 | ||||||||||
EA 88 | Shreveport-Bossier City, LA-AR | 622,000 | 10 | 573,616 |
Source: | FCC Auction 66 Website |
(1) | Licenses overlap other Auction 66 licenses |
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• | Customer Care. We have outsourcing contracts with two nationally recognized call center vendors. These call centers are staffed with professional and bilingual customer service personnel, who are available to assist our customers 24 hours a day, 365 days a year. We also provide automated voice response services to assist our customers with routine information requests. We believe providing quality customer service is an important element in overall customer satisfaction and retention, and we regularly review performance of our call center vendors. | |
• | Billing. We utilize a nationally recognized third-party billing platform, that bills, monitors and analyzes payments from our customers. We offer our customers the option of receiving web-based and short messaging service-based bills as well as traditional paper bills. We also offer our customers the option of automatic payment of their bills via credit or debit cards. Very few of our customers utilize paper bills and substantially all of our customers receive their bills through the short message service included with our wireless service. | |
• | Payment Processing. Customers may pay their bills by credit card, debit card, check or cash. We have over 2,900 locations where customers choosing to pay for their monthly service in cash can make their payments. Many of these locations also serve as distribution points for our products and services |
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making them convenient for customer payments. Customers may also make payments at any of the Western Union locations throughout our metropolitan service areas. |
• | Logistics. We outsource logistics associated with shipping handsets and accessories to our distribution channels to a nationally recognized logistics provider. |
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Net Additions | Subscribers | |||||||||||||||||||||||||||||||
Core | Expansion | Core | Expansion | |||||||||||||||||||||||||||||
MetroPCS Subscriber Statistics | Markets | Markets | Consolidated | Markets | Markets | Consolidated | ||||||||||||||||||||||||||
(In 000s) | ||||||||||||||||||||||||||||||||
2004 | ||||||||||||||||||||||||||||||||
Q1 | 174 | — | 174 | 1,151 | — | 1,151 | ||||||||||||||||||||||||||
Q2 | 63 | — | 63 | 1,214 | — | 1,214 | ||||||||||||||||||||||||||
Q3 | 66 | — | 66 | 1,280 | — | 1,280 | ||||||||||||||||||||||||||
Q4 | 119 | — | 119 | 1,399 | — | 1,399 | ||||||||||||||||||||||||||
2005 | ||||||||||||||||||||||||||||||||
Q1 | 169 | — | 169 | 1,568 | — | 1,568 | ||||||||||||||||||||||||||
Q2 | 77 | — | 77 | 1,645 | — | 1,645 | ||||||||||||||||||||||||||
Q3 | 95 | — | 95 | 1,740 | — | 1,740 | ||||||||||||||||||||||||||
Q4 | 132 | 53 | 185 | 1,872 | 53 | 1,925 | ||||||||||||||||||||||||||
2006 | ||||||||||||||||||||||||||||||||
Q1 | 184 | 61 | 245 | 2,056 | 114 | 2,170 | ||||||||||||||||||||||||||
Q2 | 63 | 186 | 249 | 2,119 | 300 | 2,419 | ||||||||||||||||||||||||||
Q3 | 55 | 142 | 198 | 2,174 | 442 | 2,617 | ||||||||||||||||||||||||||
Q4 | 127 | 198 | 324 | 2,301 | 640 | 2,941 | ||||||||||||||||||||||||||
2007 | ||||||||||||||||||||||||||||||||
Q1 | 184 | 270 | 454 | 2,485 | 910 | 3,395 | ||||||||||||||||||||||||||
Q2 | 58 | 97 | 155 | 2,543 | 1,007 | 3,550 |
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• | relationships between designated entities and other communications enterprises based on class of services, financial measures, or spectrum interests; | |
• | the need to include other agreements within the definition of impermissible material relationships; and | |
• | prohibiting entities or persons with net worth over a particular amount from being considered a DE. |
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Name | Age | Position | ||||
Roger D. Linquist | 69 | Chief Executive Officer and Chairman of the Board of Directors | ||||
Thomas J. Bolger | 56 | Senior Vice President, Human Resources | ||||
J. Braxton Carter | 49 | Senior Vice President and Chief Financial Officer | ||||
Douglas S. Glen | 50 | Senior Vice President, Corporate Operations | ||||
Herbert C. Graves | 52 | Senior Vice President, Market Operations, West | ||||
Thomas C. Keys | 49 | President and Chief Operating Officer | ||||
Christine B. Kornegay | 43 | Vice President, Controller and Chief Accounting Officer | ||||
Malcolm M. Lorang | 74 | Senior Vice President and Chief Technology Officer | ||||
John J. Olsen | 50 | Vice President and Chief Information Officer | ||||
Mark A. Stachiw | 46 | Senior Vice President, General Counsel and Secretary | ||||
Keith D. Terreri | 42 | Vice President, Finance and Treasurer | ||||
Robert A. Young | 56 | Executive Vice President, Market Operations, East | ||||
W. Michael Barnes | 65 | Director | ||||
C. Kevin Landry | 63 | Director | ||||
Arthur C. Patterson | 63 | Director | ||||
James N. Perry, Jr. | 47 | Director | ||||
John Sculley | 68 | Director | ||||
Walker C. Simmons | 36 | Director | ||||
James F. Wade | 51 | Director |
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• | overseeing, reviewing and evaluating our financial statements, the audits of our financial statements, our accounting and financial reporting processes, the integrity of our financial statements, our disclosure controls and procedures and our internal audit functions; | |
• | appointing, compensating, retaining and overseeing our independent accountants; | |
• | pre-approving permissible non-audit services to be performed by our independent accountants, if any, and the fees to be paid in connection therewith; | |
• | overseeing our compliance with legal and regulatory requirements and compliance with ethical standards adopted by us; | |
• | establishing and maintaining whistleblower procedures; | |
• | evaluating periodically our Code of Business Conduct and Ethics; and | |
• | conducting an annual self-evaluation. |
• | assisting in the process of identifying, recruiting, evaluating and nominating candidates for membership on our board of directors and the committees thereof; | |
• | developing processes regarding the consideration of director candidates recommended by stockholders and stockholder communications with our board of directors; | |
• | conducting an annual self-evaluation and assisting our board of directors and our other committees of the board of directors in the conduct of their annual self-evaluations; and | |
• | development and recommendation of corporate governance principles. |
• | developing and reviewing general policy relating to compensation and benefits; | |
• | reviewing and evaluating the compensation discussion and analysis prepared by management; | |
• | evaluating the performance of the chief executive officer and reviewing and making recommendations to our board of directors concerning the compensation and benefits of our chief executive officer, our directors and our other corporate officers; | |
• | overseeing our chief executive officer’s decisions concerning the performance and compensation of our other executive officers; | |
• | administering our stock option and employee benefit plans; | |
• | preparing an executive compensation report for publication in our annual proxy statement; and | |
• | conducting an annual self-evaluation. |
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• | monitoring our present and future capital requirements and business opportunities; | |
• | overseeing, reviewing and evaluating our capital structure and our strategic planning and financial execution processes; and | |
• | making recommendations to our board regarding acquisitions, dispositions and our short and long-term operating plans. |
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• | Attract and retain talented and experienced executives in the highly competitive and dynamic wireless telecommunications industry; | |
• | Motivate and reward executives whose knowledge, skills and performance are critical to our success; | |
• | Align the interests of our executive officers and stockholders by motivating executive officers to increase stockholder value and rewarding executive officers when stockholder value increases; | |
• | Provide a competitive compensation package which is weighted heavily towards pay for performance, and in which total compensation is primarily determined by company/team and individual results and the creation of stockholder value; | |
• | Ensure fairness among the executive management team by recognizing the contributions each executive makes to our success; | |
• | Foster a shared commitment among executives by coordinating their company/team and individual goals; and | |
• | Compensate our executives to manage our business to meet our long-range objectives. |
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• | Data in proxy statement filings from wireless telecommunications companies that we believe are comparable to us based on revenue and market capitalization or are otherwise relevant, including: |
• | Alltel Corp; | |
• | Centennial Communications Corp.; | |
• | Dobson Communications Corp.; |
• | Leap Wireless International Inc.; |
• | Rural Cellular Corp; | |
• | SunCom PCS Holding; and | |
• | United States Cellular Corp. |
• | Published survey data from public and private companies to determine appropriate compensation levels based on revenue levels in general industry and the telecommunications industry. |
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• | Our business need for the executive officer’s skills; | |
• | The contributions that the executive officer has made or we believe will make to our success; | |
• | The transferability of the executive officer’s managerial skills to other potential employers; | |
• | The relevance of the executive officer’s experience to other potential employers, particularly in the telecommunications industry; and | |
• | The readiness of the executive officer to assume a more significant role with another potential employer. |
• | For 2006, the annual cash incentive plan award under the Bonus Opportunity Plan award was based on the following performance measures: |
• | Achievement of Operating Market Targets: |
• | Gross margin; | |
• | Adjusted EBITDA per average subscriber; | |
• | Capital expenditures per ending subscriber at year-end; | |
• | New Markets % of Build; and | |
• | Discretionary component. |
• | Implementation of financial controls and Sarbanes-Oxley Act compliance; and | |
• | Individual performance measures, such as achievement of strategic objectives, and demonstration of our core values. |
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• | For 2007, the annual cash incentive plan awards have been made as performance awards pursuant to our 2004 Plan and are based on the following performance measures: |
• | Operating markets: |
• | Gross margin; | |
• | Adjusted EBITDA per average subscriber; | |
• | Capital expenditures per ending subscriber at year-end; and | |
• | Discretionary component. |
• | New Markets Build out: |
• | Construction/market readiness goals for new markets; and | |
• | Discretionary component. |
• | Individual performance measures, such as achievement of strategic objectives, and demonstration of our core values. |
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• | Allocation between long-term and currently paid out compensation: The compensation we currently pay consists of base pay and annual cash incentive compensation. The long-term compensation consists entirely of awards of stock options pursuant to our Second Amended and Restated 1995 Stock Option Plan of MetroPCS, Inc., as amended, or the 1995 Plan, and our 2004 Plan. The allocation between long-term and currently paid out compensation is based on an analysis of how our peer companies, telecommunication industry and general industry use long-term and currently paid compensation to pay their executive officers. | |
• | Allocation between cash and non-cash compensation: It is our policy to allocate all currently paid compensation and annual incentive pay in the form of cash and all long-term compensation in the form of awards of options to purchase our common stock. We consider competitive market analyses when determining the allocation between cash and non-cash compensation. | |
• | Return of incentive pay: We have implemented a policy for the adjustment or recovery of awards if performance measures upon which they are based are materially restated or otherwise adjusted in a manner that will reduce the size of an award or payment. This policy includes the return by any executive officer any compensation based upon performance measures that require material restatement which are caused by such executive’s intentional misconduct or misrepresentation. |
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Element | Characteristics | Purpose | ||
Base salary | Fixed annual cash compensation; all executives are eligible for periodic increases in base salary based on performance; targeted at the median market pay level. | Keep our annual compensation competitive with the market for skills and experience necessary to meet the requirements of the executive’s role with us. | ||
Annual cash incentive awards | Performance-based annual cash incentive earned based on company/team and individual performance against target performance levels; targeted above the market median for outstanding performance achievement. | Motivate and reward for the achievement and over-performance of our critical financial and strategic goals. Amounts earned for achievement of target performance levels based on our annual budget is designed to provide a market-competitive pay package at median performance; potential for lesser or greater amounts are intended to motivate participants to achieve or exceed our financial and other performance goals and to not reward if performance goals are not met. Provides change in control protection. | ||
Long-term equity incentive plan awards (stock options) | Performance-based equity award which has value to the extent our common stock price increases over time; targeted at the median market pay leveland/or competitive practices at peer companies. | Align interest of management with stockholders; motivate and reward management to increase the stockholder value of the company over the long term. Vesting based on continued employment will facilitate retention; amount realized from exercise of stock options rewards increases stockholder value of the company; provides change in control protection. | ||
Retirement savings opportunity | Tax-deferred plan in which all employees can choose to defer compensation for retirement. We provide no matching or other contributions; and we do not allow employees to invest these savings in company stock. | Provide employees the opportunity to save for their retirement. Account balances are affected by contributions and investment decisions made by the employee. | ||
Health & welfare benefits | Fixed component. The same/comparable health & welfare benefits (medical, dental, vision, disability insurance and life insurance) are available for all full-time employees. | Provides benefits to meet the health and welfare needs of employees and their families. |
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EVP Market | Other | |||||||||||||||
2006 Pay Out Measures/Annual Cash Incentive Plan Components | CEO | CFO | Ops | NEOs | ||||||||||||
Company/team performance | 70 | % | 60 | % | 70 | % | 70 | % | ||||||||
• Gross Margin | ||||||||||||||||
• Adjusted EBITDA per average subscriber | ||||||||||||||||
• Capital expenditures per ending subscriber | ||||||||||||||||
• New market % of build | ||||||||||||||||
• Discretionary | ||||||||||||||||
Financial Controls/Sarbanes-Oxley Act compliance | 20 | % | 20 | % | 20 | % | 15 | % | ||||||||
Individual performance | 10 | % | 20 | % | 10 | % | 15 | % |
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All | ||||
2007 Pay Out Measures/Annual Cash Incentive Plan Components | NEOs | |||
Company/team performance | 70 | % | ||
• Operating Markets: | ||||
• Gross Margin | ||||
• Adjusted EBITDA per average subscriber | ||||
• Capital expenditures per ending subscriber | ||||
• Discretionary | ||||
• New market build out: | ||||
• Construction/Market Readiness | ||||
• Discretionary Component | ||||
Individual performance | 30 | % |
2006 and 2007 Annual Cash Incentive Plan Award | ||||
Level Based on Goal Achievement | ||||
Officer | At 100% (Target) | Maximum Performance | ||
CEO | 100% of base salary | 200% of base salary | ||
SVP and CFO | 75% of base salary | 150% of base salary | ||
EVP, Market Ops | 75% of base salary | 150% of base salary | ||
SVP, General Counsel and Secretary | 65% of base salary | 130% of base salary | ||
SVP and CTO | 65% of base salary | 130% of base salary |
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• | Each outstanding option automatically accelerates so that each option becomes fully exercisable for all of the shares of the related class of common stock at the time subject to such option immediately before the corporation transaction; | |
• | All outstanding repurchase rights automatically terminate and the shares of common stock subject to those terminated rights immediately vest in full; | |
• | Immediately following a corporate transaction, all outstanding options terminate and cease to be outstanding, except to the extent assumed by the successor corporation and thereafter adjusted in accordance with the 1995 Plan; and | |
• | In the event of an “involuntary termination” of an optionee’s “service” with us within 18 months following a corporate transaction, any fully-vested options issued to such holder remain exercisable until the earlier of (i) the expiration of the option term, or (ii) the expiration of one year from the effective date of the involuntary termination. |
• | A merger or consolidation transferring greater than 50% of the voting power of our outstanding securities to a person or persons different from the persons holding those securities immediately prior to such transaction; or | |
• | The disposition of all or substantially all of our assets in a complete liquidation or dissolution; |
• | All “options” and “stock appreciation rights” then outstanding become immediately vested and fully exercisable; | |
• | All restrictions and conditions of all “restricted stock” and “phantom stock” then outstanding are deemed satisfied, and the “restriction period” or other limitations on payment in full with respect thereto are deemed to have expired, as of the date of the change in control; and | |
• | All outstanding “performance awards” and any “other stock or performance-based awards” become fully vested, deemed earned in full and are to be promptly paid to the participants as of the date of the change in control. |
• | Any “person” (a) other than us or any of our subsidiaries, (b) any of our or our subsidiaries’ employee benefit plans, (c) any “affiliate,” (d) a company owned, directly or indirectly, by our stockholders, or (e) an underwriter temporarily holding our securities pursuant to an offering of such securities, becomes the “beneficial owner,” directly or indirectly, of more than 50% of our voting stock; | |
• | A merger, organization, business combination or consolidation of us or one of our subsidiaries transferring greater than 50% of the voting power of our outstanding securities to a person or persons different from the persons holding those securities immediately prior to such transaction; | |
• | The disposition of all or substantially all of our assets, other than to the current holders of 50% or more of the voting power of our voting securities; |
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• | The approval by the stockholders of a plan for the complete liquidation or dissolution; or | |
• | The individuals who constitute our board on the effective date of the 2004 Plan (or any individual who was appointed to the board of directors by a majority of the individuals who constitute our board of directors as of the effective date of the 2004 Plan) cease for any reason to constitute at least a majority of our board of directors. |
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Non-Equity | ||||||||||||||||||||
Option | Incentive Plan | |||||||||||||||||||
Awards | Compensation | |||||||||||||||||||
Name & Principal Position | Year | Salary | (3) | (4) | Total | |||||||||||||||
Roger D. Linquist — | 2006 | $ | 466,923 | $ | 1,184,793 | $ | 815,300 | $ | 2,467,016 | |||||||||||
President and CEO | 2005 | $ | 435,833 | — | $ | 527,840 | $ | 963,673 | ||||||||||||
J. Braxton Carter — | 2006 | $ | 287,404 | $ | 410,865 | $ | 379,000 | $ | 1,077,269 | |||||||||||
SVP/CFO | 2005 | $ | 264,750 | — | $ | 238,280 | $ | 503,030 | ||||||||||||
Robert A. Young — | 2006 | $ | 330,769 | $ | 583,738 | $ | 424,200 | $ | 1,338,707 | |||||||||||
EVP Market Operations | 2005 | $ | 310,750 | — | $ | 265,340 | $ | 576,090 | ||||||||||||
Mark A. Stachiw — | 2006 | $ | 223,173 | $ | 349,212 | $ | 251,700 | $ | 824,085 | |||||||||||
SVP/General Counsel and Secretary(1) | 2005 | $ | 204,583 | — | $ | 136,740 | $ | 341,323 | ||||||||||||
Malcolm M. Lorang — | 2006 | $ | 214,135 | $ | 247,300 | $ | 237,500 | $ | 698,935 | |||||||||||
SVP/Chief Technology Officer(2) | 2005 | $ | 202,250 | — | $ | 130,790 | $ | 333,040 |
(1) | Mr. Stachiw became a Senior Vice President during 2006. | |
(2) | Mr. Lorang became a Senior Vice President during 2006. | |
(3) | The value of the option awards for 2006 is determined using the fair value recognition provisions of SFAS 123(R), which was effective January 1, 2006. For option awards during the year ended December 31, 2005, in accordance with APB 25, the following amounts were included as non-cash compensation expense in the 2005 audited consolidated financial statements for Messrs. Linquist, Carter, Young, and Lorang, respectively: $83,199, $6,521, $28,473 and $289,800. See Note 2 “Summary of Significant Accounting Policies” to the consolidated financial statements contained elsewhere in this prospectus for further discussion of the accounting treatment for these options. | |
(4) | During 2005 and 2006, MetroPCS Communications awarded annual cash incentive bonuses pursuant to a written annual cash incentive plan. This plan provides for the award of annual cash bonuses based upon targets and maximum bonus payouts set by the board of directors at the beginning of each fiscal year. See “— Discussion of Summary Compensation and Plan-Based Awards Tables — Material Terms of Plan-Based Awards.” |
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All Other | ||||||||||||||||||||||||||||
Option | ||||||||||||||||||||||||||||
Awards: | Exercise | |||||||||||||||||||||||||||
Number of | or Base | |||||||||||||||||||||||||||
Grant | Estimated Future Payouts Under | Securities | Price of | |||||||||||||||||||||||||
Date | Non-Equity Incentive Plan | Underlying | Option | |||||||||||||||||||||||||
Grant | Fair Value | Awards(4) | Options | Awards | ||||||||||||||||||||||||
Name & Principal Position | Date | (3) | Threshold | Target | Maximum | (#) | ($/Share) | |||||||||||||||||||||
Roger D. Linquist | $ | 0 | $ | 480,000 | $ | 960,000 | — | — | ||||||||||||||||||||
President and CEO | 3/14/2006 | $ | 1,676,633 | — | — | — | 513,900 | 7.15 | ||||||||||||||||||||
12/22/2006 | $ | 8,907,975 | — | — | — | 2,250,000 | 11.33 | |||||||||||||||||||||
J. Braxton Carter | $ | 0 | $ | 221,250 | $ | 442,500 | — | — | ||||||||||||||||||||
Senior VP/CFO | 3/14/2006 | $ | 446,319 | — | — | — | 136,800 | 7.15 | ||||||||||||||||||||
12/22/2006 | $ | 2,375,460 | — | — | — | 600,000 | 11.33 | |||||||||||||||||||||
Robert A. Young | $ | 0 | $ | 255,000 | $ | 510,000 | — | — | ||||||||||||||||||||
Executive VP Market | 3/14/2006 | $ | 745,823 | — | — | — | 228,600 | 7.15 | ||||||||||||||||||||
Operations — East | 12/22/2006 | $ | 2,375,460 | — | — | — | 600,000 | 11.33 | ||||||||||||||||||||
Mark A. Stachiw | $ | 0 | $ | 149,500 | $ | 299,000 | — | — | ||||||||||||||||||||
Senior VP/General | 3/14/2006 | $ | 61,663 | — | — | — | 18,900 | 7.15 | ||||||||||||||||||||
Counsel and | 3/14/2006 | $ | 195,754 | — | — | — | 60,000 | 7.15 | ||||||||||||||||||||
Secretary(1) | 12/22/2006 | $ | 1,781,595 | — | — | — | 450,000 | 11.33 | ||||||||||||||||||||
Malcolm M. Lorang | $ | 0 | $ | 143,000 | $ | 286,000 | — | |||||||||||||||||||||
Senior VP/Chief | 3/14/2006 | $ | 178,136 | — | — | — | 54,600 | 7.15 | �� | |||||||||||||||||||
Technology Officer(2) | 3/14/2006 | $ | 195,754 | — | — | — | 60,000 | 7.15 | ||||||||||||||||||||
12/22/2006 | $ | 593,865 | — | — | — | 150,000 | 11.33 |
(1) | Mr. Stachiw became a Senior Vice President during 2006. | |
(2) | Mr. Lorang became a Senior Vice president during 2006. | |
(3) | The value of the option awards for 2006 is determined using the fair value recognition provisions of SFAS 123(R)which was effective January 1, 2006. | |
(4) | During 2005 and 2006 MetroPCS Communications awarded annual cash incentive bonuses pursuant to a written Bonus Opportunity Plan. This plan provides for the award of annual cash bonuses based upon targets and maximum bonus payouts set by the board of directors at the beginning of each fiscal year. See “— Discussion of Summary Compensation and Plan-Based Awards Tables — Material Terms of Plan-Based Awards.” The actual amount paid to each named executive officer pursuant to the Bonus Opportunity Plan for the fiscal year ended December 31, 2006 is set forth in the Summary Compensation Table under the column titled “Non-Equity Incentive Plan Compensation.” See “— Summary of Compensation.” |
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• | incentivize and reward individuals whose accountability, performance and potential is critical to our success; | |
• | encourage long-term focus and provide a strong link to stockholder interests and foster a shared commitment to move the business towards our long-range objectives; | |
• | deliver a competitive “total reward” package to attract and retain staff in a highly competitive industry; and | |
• | create a direct link between company results and employee rewards. |
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
Equity | ||||||||||||||||||||||||||||||||||||
Incentive | ||||||||||||||||||||||||||||||||||||
Equity | Plan | |||||||||||||||||||||||||||||||||||
Incentive | Awards: | |||||||||||||||||||||||||||||||||||
Awards: | Market | |||||||||||||||||||||||||||||||||||
Number | or Payout | |||||||||||||||||||||||||||||||||||
Equity | of | Value of | ||||||||||||||||||||||||||||||||||
Incentive | Market | Unearned | Unearned | |||||||||||||||||||||||||||||||||
Plan | Value of | Shares, | Shares, | |||||||||||||||||||||||||||||||||
Number of | Number of | Awards; | Number of | Shares or | Units or | Units or | ||||||||||||||||||||||||||||||
Securities | Securities | Securities | Shares | Units of | Other | Other | ||||||||||||||||||||||||||||||
Underlying | Underlying | Underlying | or Units of | Stock | Rights | Rights | ||||||||||||||||||||||||||||||
Unexercised | Unexercised | Unexercised | Option | Option | Stock that | that Have | that Have | that Have | ||||||||||||||||||||||||||||
Options (#) | Options (#) | Unearned | Exercise | Expiration | Have Not | Not | Not | Not | ||||||||||||||||||||||||||||
Name | Exercisable(1) | Unexercisable(1) | Options (#) | Price | Date | Vested (#) | Vested ($) | Vested (#) | Vested ($) | |||||||||||||||||||||||||||
Roger D. Linquist | 25,155 | (2) | — | — | $ | 5.49 | 3/11/2014 | — | — | — | — | |||||||||||||||||||||||||
President and CEO | 520,800 | (3) | — | — | $ | 7.13 | 8/3/2015 | — | — | — | — | |||||||||||||||||||||||||
1,209 | (4) | 1,209 | (4) | — | $ | 7.15 | 12/30/2015 | — | — | — | — | |||||||||||||||||||||||||
— | 513,900 | (13) | $ | 7.15 | 3/14/2016 | |||||||||||||||||||||||||||||||
— | 2,250,000 | (15) | $ | 11.33 | 12/22/2016 | |||||||||||||||||||||||||||||||
J. Braxton Carter | 6,969 | (2) | — | — | $ | 5.49 | 3/11/2014 | — | — | — | — | |||||||||||||||||||||||||
SVP/CFO | 60,000 | (5) | — | — | $ | 6.31 | 3/31/2015 | — | — | — | — | |||||||||||||||||||||||||
165,057 | (3) | — | — | $ | 7.13 | 8/3/2015 | — | — | — | — | ||||||||||||||||||||||||||
3,516 | (3) | 4,527 | (3) | — | $ | 7.13 | 8/3/2015 | |||||||||||||||||||||||||||||
333 | (4) | 336 | (4) | — | $ | 7.15 | 12/30/2015 | |||||||||||||||||||||||||||||
— | 136,800 | (13) | $ | 7.15 | 3/14/2016 | |||||||||||||||||||||||||||||||
— | 600,000 | (16) | $ | 11.33 | 12/22/2016 | |||||||||||||||||||||||||||||||
Robert A. Young | 7,911 | (2) | — | — | $ | 5.49 | 3/11/2014 | — | — | — | — | |||||||||||||||||||||||||
EVP Market | 126,393 | (3) | 162,507 | (3) | — | $ | 7.13 | 8/3/2015 | — | — | — | — | ||||||||||||||||||||||||
Operations | 381 | (4) | 381 | (4) | — | $ | 7.15 | 12/30/2015 | — | — | — | — | ||||||||||||||||||||||||
— | 228,600 | (13) | $ | 7.15 | 3/14/2016 | |||||||||||||||||||||||||||||||
— | 600,000 | (16) | $ | 11.33 | 12/22/2016 |
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Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
Equity | ||||||||||||||||||||||||||||||||||||
�� | Incentive | |||||||||||||||||||||||||||||||||||
Equity | Plan | |||||||||||||||||||||||||||||||||||
Incentive | Awards: | |||||||||||||||||||||||||||||||||||
Awards: | Market | |||||||||||||||||||||||||||||||||||
Number | or Payout | |||||||||||||||||||||||||||||||||||
Equity | of | Value of | ||||||||||||||||||||||||||||||||||
Incentive | Market | Unearned | Unearned | |||||||||||||||||||||||||||||||||
Plan | Value of | Shares, | Shares, | |||||||||||||||||||||||||||||||||
Number of | Number of | Awards; | Number of | Shares or | Units or | Units or | ||||||||||||||||||||||||||||||
Securities | Securities | Securities | Shares | Units of | Other | Other | ||||||||||||||||||||||||||||||
Underlying | Underlying | Underlying | or Units of | Stock | Rights | Rights | ||||||||||||||||||||||||||||||
Unexercised | Unexercised | Unexercised | Option | Option | Stock that | that Have | that Have | that Have | ||||||||||||||||||||||||||||
Options (#) | Options (#) | Unearned | Exercise | Expiration | Have Not | Not | Not | Not | ||||||||||||||||||||||||||||
Name | Exercisable(1) | Unexercisable(1) | Options (#) | Price | Date | Vested (#) | Vested ($) | Vested (#) | Vested ($) | |||||||||||||||||||||||||||
Mark A. Stachiw | 120,000 | (6) | — | — | $ | 5.47 | 10/12/2014 | — | — | — | — | |||||||||||||||||||||||||
SVP/General Counsel | 37,500 | (7) | 82,500 | (7) | — | $ | 7.15 | 9/21/2015 | — | — | — | — | ||||||||||||||||||||||||
and Secretary | 16,608 | (4) | 16,608 | (4) | — | $ | 7.15 | 12/30/2015 | — | — | — | — | ||||||||||||||||||||||||
— | 18,900 | (13) | $ | 7.15 | 3/14/2016 | |||||||||||||||||||||||||||||||
— | 60,000 | (13) | $ | 7.15 | 3/14/2016 | |||||||||||||||||||||||||||||||
— | 450,000 | (16) | $ | 11.33 | 12/22/2016 | |||||||||||||||||||||||||||||||
Malcolm M. Lorang | 285,444 | (8) | — | — | $ | 0.08 | 7/1/2009 | — | — | — | — | |||||||||||||||||||||||||
SVP/Chief Technology | 36,792 | (9) | — | — | $ | 1.57 | 7/1/2012 | — | — | — | — | |||||||||||||||||||||||||
Officer | 24,108 | (10) | — | — | $ | 1.92 | 7/1/2012 | — | — | — | — | |||||||||||||||||||||||||
21,093 | (11) | — | — | $ | 1.57 | 10/30/2013 | — | — | — | — | ||||||||||||||||||||||||||
46,407 | (12) | — | — | $ | 3.13 | 10/30/2013 | — | — | — | — | ||||||||||||||||||||||||||
23,061 | (2) | — | — | $ | 5.49 | 3/11/2014 | — | — | — | — | ||||||||||||||||||||||||||
68,700 | (3) | — | — | $ | 7.13 | 8/3/2015 | — | — | — | — | ||||||||||||||||||||||||||
8,592 | (4) | 8,589 | (4) | — | $ | 7.15 | 12/30/2015 | — | — | — | — | |||||||||||||||||||||||||
— | 54,600 | (13) | $ | 7.15 | 3/14/2016 | |||||||||||||||||||||||||||||||
— | 150,000 | (14) | — | $ | 11.33 | 12/22/2016 | — | — | — | — |
(1) | Unless otherwise noted, options vest over a period of four years as follows: twenty-five percent (25%) of the option vests on the first anniversary of service beginning on the “Vesting Commencement Date” (as defined in the Employee Non-Qualified Option Grant Agreement). The remainder vests upon the optionee’s completion of each additional month of service, in a series of thirty-six (36) successive, equal monthly installments beginning with the first anniversary of the Vesting Commencement Date. | |
(2) | Options granted on March 11, 2004. Options repriced from $4.97 to $5.49 on December 28, 2005. | |
(3) | Options granted on August 3, 2005. | |
(4) | Options granted on December 30, 2005 and vest over a one-year period as follows: fifty percent (50%) of the underlying shares vest on January 1, 2006 and the remaining fifty percent (50%) of the shares vest on January 1, 2007. | |
(5) | Options granted on March 31, 2005. | |
(6) | Options granted on October 12, 2004. Options repriced from $3.97 to $5.47 on December 28, 2005. | |
(7) | Options granted on September 21, 2005. | |
(8) | Options granted July 1, 1999 and vested ratably in a series of forty eight (48) successive equal monthly installments ending July 1, 2003. | |
(9) | Options granted on July 1, 2002. | |
(10) | Options granted on July 1, 2002. Options repriced from $1.57 to $1.92 on December 28, 2005. | |
(11) | Options granted on October 30, 2003. | |
(12) | Options granted on October 30, 2003. Options repriced from $1.57 to $3.13 on December 28, 2005. | |
(13) | Options granted on March 14, 2006. | |
(14) | Options granted on December 22, 2006 and vest over a period of 2 years ending December 22, 2008. | |
(15) | Options granted on December 22, 2006 and vest over a period of 3 years ending December 22, 2008. | |
(16) | Options granted on December 22, 2006. |
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• | an annual retainer of $15,000, plus $2,000 if such member serves as the chairman of the finance, compensation or the nominating and governance committee of the board of directors and $5,000 if such member serves as chairman of the audit committee of the board of directors, which amount may be payable in cash, common stock, or a combination of cash and common stock; | |
• | any payments of annual retainer made in common stock shall be for a number of shares that is equal to (a) the portion of the annual retainer to be paid in common stock divided by the fair market value of the common stock on the date of payment of the annual retainer (b) times three; | |
• | an initial grant of 120,000 options to purchase common stock plus an additional 30,000 or 9,000 options to purchase common stock if the member serves as the chairman of the audit committee or as chairman of any of the other committees of the board of directors, respectively; | |
• | an annual grant of 30,000 options to purchase common stock plus an additional 15,000 or 6,000 options to purchase common stock if the member serves as the chairman of the audit committee or as chairman of any of the other committees of the board of directors, respectively; | |
• | $1,500 for each in-person board of directors meeting and $750 for each telephonic meeting of the board of directors attended; and | |
• | $1,500 for each in-person Committee Paid Event (as defined in our Non-Employee Director Remuneration Plan) and $750 for each telephonic Committee Paid Event attended and the chairman of the committee receives an additional $500 for each in-person Committee Paid Event and $250 for each telephonic Committee Paid Event attended. |
Change in | ||||||||||||||||||||||||||||
Pension Value & | ||||||||||||||||||||||||||||
Non-qualified | ||||||||||||||||||||||||||||
Fees Earned | Non-Equity | Deferred | ||||||||||||||||||||||||||
or Paid | Stock | Option | Incentive Plan | Compensation | All Other | |||||||||||||||||||||||
Name | in Cash | Awards(1) | Awards(2)(11) | Compensation | Earnings | Compensation | Total | |||||||||||||||||||||
W. Michael Barnes(3) | $ | 29,750 | $ | 59,981 | $ | 196,226 | — | — | — | $ | 285,957 | |||||||||||||||||
Harry F. Hopper, III(4) | $ | 13,250 | $ | 44,980 | $ | 46,825 | — | — | — | $ | 105,055 | |||||||||||||||||
Arthur C. Patterson(5) | $ | 44,250 | $ | 50,989 | $ | 115,270 | — | — | — | $ | 210,509 | |||||||||||||||||
John Sculley(6) | $ | 23,000 | $ | 50,960 | $ | 98,907 | — | — | — | $ | 172,867 | |||||||||||||||||
James F. Wade(7) | $ | 12,000 | $ | 50,989 | $ | 42,440 | — | — | — | $ | 105,429 | |||||||||||||||||
Walker C. Simmons(8) | $ | 5,250 | $ | 44,980 | $ | 79,174 | — | — | — | $ | 129,404 | |||||||||||||||||
C. Kevin Landry(9) | $ | 64,055 | $ | 0 | $ | 167,414 | — | — | — | $ | 231,469 | |||||||||||||||||
James N. Perry, Jr.(10) | $ | 45,250 | $ | 61,719 | $ | 176,267 | — | — | — | $ | 283,236 |
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(1) | Stock awards issued to members of the board of directors are recorded at market value on the date of issuance. | |
(2) | The value of the option awards is determined using the fair value recognition provisions of SFAS 123(R), which was effective January 1, 2006. | |
(3) | Includes 8,385 stock awards and 197,487 option awards outstanding as of December 31, 2006. | |
(4) | Includes 6,288 stock awards and 0 option awards outstanding as of December 31, 2006. Mr. Hopper resigned as a director in May 2006. Mr. Hopper’s resignation was not caused by a disagreement with us or management. | |
(5) | Includes 7,128 stock awards and 376,524 option awards outstanding as of December 31, 2006. | |
(6) | Includes 6,978 stock awards and 580,428 option awards outstanding as of December 31, 2006. | |
(7) | Includes 7,128 stock awards and 295,305 option awards outstanding as of December 31, 2006. | |
(8) | Includes 5,190 stock awards and 120,000 option awards outstanding as of December 31, 2006. Mr. Simmons previously served as a director from December 2004 until March 2005, when he resigned. Mr. Simmons’ resignation was not caused by a disagreement with us or management. Mr. Simmons was reappointed to the board in June 2006. | |
(9) | Includes 0 stock awards and 150,000 option awards outstanding as of December 31, 2006. | |
(10) | Includes 8,628 stock awards and 159,000 option awards outstanding as of December 31, 2006. | |
(11) | The following summarizes the grant date, fair value of each award granted during 2006, computed in accordance with SFAS No. 123(R): |
Number of | Exercise or | |||||||||||||||
Securities | Base Price | |||||||||||||||
Underlying | of Option | Grant Date | ||||||||||||||
Grant | Options | Awards | Fair Value | |||||||||||||
Name | Date | (#) | ($/share) | ($) | ||||||||||||
W. Michael Barnes | 3/14/2006 | 45,000 | $ | 7.15 | $ | 146,816 | ||||||||||
Harry F. Hopper, III | 3/14/2006 | 30,000 | $ | 7.15 | $ | 97,877 | ||||||||||
Arthur C. Patterson | 3/14/2006 | 39,000 | $ | 7.15 | $ | 127,240 | ||||||||||
John Sculley | 3/14/2006 | 30,000 | $ | 7.15 | $ | 97,877 | ||||||||||
6/28/2006 | 9,000 | $ | 7.54 | $ | 31,518 | |||||||||||
James F. Wade | 3/14/2006 | 36,000 | $ | 7.15 | $ | 117,452 | ||||||||||
Walker C. Simmons | 12/22/2006 | 120,000 | $ | 11.33 | $ | 475,092 | ||||||||||
C. Kevin Landry | 3/14/2006 | 30,000 | $ | 7.15 | $ | 97,877 | ||||||||||
James N. Perry, Jr. | 3/14/2006 | 39,000 | $ | 7.15 | $ | 127,240 |
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• | each of our directors; | |
• | each named executive officer; | |
• | all of our directors and executive officers as a group; and | |
• | each person known by us to beneficially own more than 5% of the outstanding shares of our common stock. |
Common Stock | ||||||||
Beneficially Owned | ||||||||
Number | Percentage | |||||||
Directors and Named Executive Officers(1): | ||||||||
Roger D. Linquist(2) | 7,602,552 | 2.19 | % | |||||
J. Braxton Carter(3) | 297,331 | * | ||||||
Robert A. Young(4) | 281,153 | * | ||||||
Mark A. Stachiw(5) | 183,447 | * | ||||||
Malcolm M. Lorang(6) | 748,848 | * | ||||||
John Sculley(7) | 1,380,961 | * | ||||||
James F. Wade(8)(15) | 25,021,017 | 7.21 | % | |||||
Arthur C. Patterson(9)(14) | 36,672,455 | 10.56 | % | |||||
W. Michael Barnes(10) | 213,531 | * | ||||||
C. Kevin Landry(11)(17) | 37,809,568 | 10.90 | % | |||||
James N. Perry, Jr.(12)(16) | 38,693,062 | 11.15 | % | |||||
Walker C. Simmons(13) | — | — | ||||||
All directors and executive officers as a group (12 persons) | 148,903,925 | 42.47 | % | |||||
Beneficial Owners of More Than 5%: | ||||||||
Accel Partners, et al(14) | 31,612,443 | 9.10 | % | |||||
428 University Ave | ||||||||
Palo Alto, CA 94301 | ||||||||
First Plaza Group Trust | 22,524,561 | 6.49 | % | |||||
One Chase Manhattan Plaza, 17th Floor | ||||||||
New York, NY 10005 | ||||||||
M/C Venture Partners, et al(15)(8) | 25,021,017 | 7.21 | % | |||||
75 State Street | ||||||||
Boston, MA 02109 |
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Common Stock | ||||||||
Beneficially Owned | ||||||||
Number | Percentage | |||||||
Madison Dearborn Capital Partners IV, L.P.(16)(12) | 38,576,812 | 11.12 | % | |||||
Three First National Plaza, Suite 3800 | ||||||||
Chicago, IL 60602 | ||||||||
TA Associates, et al(17)(11) | 37,809,568 | 10.90 | % | |||||
John Hancock Tower — 56th Floor | ||||||||
200 Clarendon Street | ||||||||
Boston, MA 012116 | ||||||||
T. Rowe Price Associates, Inc.(18) | 21,344,252 | 6.15 | % | |||||
100 East Pratt Street | ||||||||
Baltimore, Maryland 21202 |
* | Represents less than 1% | |
(1) | Unless otherwise indicated, the address of each person isc/o MetroPCS Communications, Inc., 8144 Walnut Hill Lane, Suite 800, Dallas, Texas 75231. | |
(2) | Includes 751,791 shares of common stock issuable upon exercise of options granted under our Equity Compensation Plans, 5,320,761 shares of common stock held directly by Mr. Linquist, and 1,530,000 shares of common stock held by THCT Partners, LTD, a partnership with which Mr. Linquist is affiliated and may be deemed to be a member of a “group” underSection 13d-3 of the Exchange Act and may be deemed to share voting and/or investment power with respect to the shares owned by such entities. Mr. Linquist disclaims beneficial ownership of such shares, except to the extent of his interest in such shares arising from his interests in THCT Partners, LTD. Mr. Linquist has dispositive power with respect to the common stock held by THCT Partners, LTD. | |
(3) | Includes 281,370 shares of common stock issuable upon exercise of options granted under our Equity Compensation Plans. | |
(4) | Includes 265,835 shares of common stock issuable upon exercise of options granted under our Equity Compensation Plans. | |
(5) | Includes 183,447 shares of common stock issuable upon exercise of options granted under our Equity Compensation Plans. | |
(6) | Includes 570,648 shares of common stock issuable upon exercise of options granted under our Equity Compensation Plans. | |
(7) | Includes 571,928 shares of common stock issuable upon exercise of options granted under our Equity Compensation Plans. | |
(8) | Includes 289,311 shares of common stock issuable upon exercise of options granted under our Equity Compensation Plans. All shares attributed to Mr. Wade are owned directly by M/C Venture Investors, LLC, M/C Venture Partners IV, LP, M/C Venture Partners V, LP, and Chestnut Venture Partners LP, with which Mr. Wade is affiliated and may be deemed to be a member of a “group” (hereinafter referred to as M/C Venture Partners, et al) underSection 13d-3 of the Exchange Act and may be deemed to share voting and/or investment power with respect to the shares owned by such entities. Mr. Wade disclaims beneficial ownership of such shares, except to the extent of his interest in such shares arising from his interests in M/C Venture Partners, et al. | |
(9) | Includes 369,273 shares of common stock issuable upon exercise of options granted to Mr. Patterson under our Equity Compensation Plans and 12,888 shares of common stock held directly by Mr. Patterson. All other shares attributed to Mr. Patterson are owned directly by Accel Internet Fund III L.P., Accel Investors ‘94 L.P., Accel Investors ‘99 L.P., Accel IV L.P., Accel Keiretsu L.P., Accel VII L.P., ACP Family Partnership L.P. and Ellmore C. Patterson Partners, with which Mr. Patterson is affiliated and may be deemed to be a member of a “group” underSection 13d-3 of the Exchange Act and may be deemed to share voting and/or investment power with respect to the shares owned by such entities. Mr. Patterson disclaims beneficial ownership of such shares, except to the extent of his interest in such shares arising from his interests in Accel Partners, et al. | |
(10) | Includes 189,987 shares of common stock issuable upon exercise of options granted under our Equity Compensation Plans. | |
(11) | Includes 108,333 shares of common stock issuable upon exercise of stock options granted to Mr. Landry under our Equity Compensation Plans and 3,969 shares of common stock held directly by Mr. Landry. All other shares attributed to Mr. Landry are owned directly by TA Atlantic and Pacific V L.P., TA Investors II L.P., TA IX L.P., TA Strategic Partners Fund A L.P., TA Strategic Partners Fund B L.P. and TA/Atlantic and Pacific IV L.P., with which Mr. Landry is affiliated and may be deemed to be a member of a “group” (hereinafter referred to as TA Associates, et al) underSection 13d-3 of the Exchange Act and may be deemed to share voting and/or investment power with respect to the shares owned by such entities. Mr. Landry disclaims beneficial ownership of such shares, except to the extent of his interest in such shares arising from his interests in TA Associates, et al. | |
(12) | Includes 111,750 shares of common stock issuable upon exercise of options granted to Mr. Perry under our Equity Compensation Plans and 4,500 shares of common stock held directly by Mr. Perry. All other shares attributed to Mr. Perry are owned directly by Madison Dearborn Capital Partners IV, L.P. and Madison Dearborn Partners IV, L.P. with which Mr. Perry is affiliated and may be deemed to be a member of a “group” (hereinafter referred to as Madison Dearborn Capital Partners IV, L.P., et al) underSection 13d-3 of the Exchange Act and may be deemed to share voting and/or investment power with respect to the shares owned by |
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such entities. Mr. Perry disclaims beneficial ownership of such shares, except to the extent of his interest in such shares arising from his interests in Madison Dearborn Capital Partners IV, L.P., et al. | ||
(13) | Mr. Simmons is a member of Wachovia Capital Partners (“WCP”) and holds all securities received as director compensation for the benefit of WCP, including 9,159 shares of common stock and 60,833 shares of common stock issuable upon exercise of options granted under our Equity Compensation Plans. Mr. Simmons disclaims beneficial ownership of all such securities as well as the shares of common stock owned by WCP and its affiliates, except to the extent of his pecuniary interest therein. | |
(14) | Accel Partners, et al (consisting of Accel Internet Fund III L.P., Accel Investors ‘94 L.P., Accel Investors ‘99 L.P., Accel IV LP, Accel Keiretsu L.P. and Accel VII L.P.) may be deemed to be a “group” underSection 13d-3 of the Exchange Act. Includes 31,243,170 shares of common stock and 369,273 shares of common stock issuable upon exercise of options granted under our Equity Compensation Plans, which are held directly by Arthur C. Patterson. | |
(15) | M/C Venture Partners, et al (consisting of M/C Venture Investors, LLC, M/C Venture Partners IV, LP, M/C Venture Partners V, LP, and Chestnut Venture Partners LP) may be deemed to be a “group” underSection 13d-3 of the Exchange Act. Includes an aggregate of 289,311 shares of common stock issuable upon exercise of options granted under our Equity Compensation Plans. | |
(16) | Madison Dearborn Capital Partners IV, L.P., et al (consisting of Madison Dearborn Capital Partners IV, L.P. and Madison Dearborn Partners IV, L.P.) may be deemed to be a “group” underSection 13d-3 of the Exchange Act. Includes 4,500 shares of common stock and 111,750 shares of common stock issuable upon exercise of options granted under our Equity Compensation Plans, which are held directly by Mr. Perry. | |
(17) | TA Associates, et al (consisting of TA Atlantic and Pacific V L.P., TA Investors II L.P., TA IX L.P., TA Strategic Partners Fund A L.P., TA Strategic Partners Fund B L.P. and TA/Atlantic and Pacific IV L.P.) may be deemed to be a “group” underSection 13d-3 of the Exchange Act. Includes 3,969 shares of common stock and 108,333 shares of common stock issuable upon exercise of options granted under our Equity Compensation Plans, which are held directly by Mr. Landry. | |
(18) | Based on aForm 13-F filed on August 14, 2007 by T. Rowe Price Associates, Inc. (“Price Associates”), in its capacity as investment manager as to holdings as of June 30, 2007 and as updated by conversations with such owner, it is our belief that Price Associates beneficially owned the number of shares indicated as of August 31, 2007. Price Associates has sole dispositive power for the entire holding of 21,344,252 shares and has sole voting power for 6,115,665 shares. Price Associates is deemed to be a beneficial owner of such securities; however, Price Associates expressly disclaims that it is, in fact, the beneficial owner of such securities. |
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• | general unsecured obligations of Issuer; | |
• | pari passuin right of payment with all existing and future unsecured senior Indebtedness of Issuer; | |
• | senior in right of payment to any future subordinated Indebtedness of Issuer to the extent that such future Indebtedness provides by its terms that it is subordinated to the notes; and | |
• | unconditionally guaranteed on a senior unsecured basis by the Guarantors. |
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• | a general unsecured obligation of that Guarantor; | |
• | pari passuin right of payment with all existing and future unsecured senior Indebtedness of that Guarantor; and | |
• | senior in right of payment to any future subordinated Indebtedness of that Guarantor to the extent that such future Indebtedness provides by its terms that it is subordinated to the guarantees. |
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Year | Percentage | |||
2010 | 104.625 | % | ||
2011 | 102.313 | % | ||
2012 and thereafter | 100.000 | % |
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• | dealers or traders in securities or currency; | |
• | tax-exempt entities; | |
• | banks, thrifts, insurance companies, and other financial institutions; | |
• | regulated investment companies; | |
• | real estate investment trusts; | |
• | persons that hold the notes as part of a “straddle,” a “hedge” against currency risk or a “conversion transaction”; | |
• | U.S. holders (as defined below) that have a “functional currency” other than the U.S. dollar; | |
• | holders subject to the alternative minimum tax; | |
• | a person who acquires the notes in connection with employment or other performance of services; | |
• | pass-through entities (e.g., partnerships and grantor trusts) and simple trusts and investors who hold the notes through such entities; and | |
• | certain former citizens or residents of the United States who may be subject to tax pursuant to the provisions of the Code applicable to expatriates. |
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• | you should not recognize gain or loss upon receipt of the new notes for the old notes; | |
• | your adjusted tax basis in the new notes should equal your adjusted tax basis in the old notes immediately before the exchange; and | |
• | your holding period for the new notes should include your holding period for the old notes. |
• | you are a beneficial owner of a new note; | |
• | you are: |
• | an individual citizen or resident of the U.S., including an alien individual who is a lawful permanent resident of the U.S. or who meets the substantial presence residence test under federal income tax laws; | |
• | a corporation or other entity treated as a corporation for U.S. federal income tax purposes that is created or organized in or under the laws of the United States, any of the 50 states or the District of Columbia; | |
• | an estate the income of which is subject to U.S. federal income taxation regardless of its source; or | |
• | a trust (i) if a U.S. court is able to exercise primary supervision over administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust, or (ii) that has a valid election in place under applicable Treasury Regulations to be treated as a United States person; and |
• | your status as a U.S. holder is not overridden under the provisions of any applicable treaty. |
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• | you provide an incorrect taxpayer identification number; | |
• | you fail to furnish timely your social security or other taxpayer identification number after a request for such information; | |
• | the IRS issues a notification that you are subject to backup withholding for failure to report properly interest or dividends; or | |
• | you fail, under certain circumstances, to provide a certified statement, signed under penalty of perjury, that the taxpayer identification number provided is your correct number, that you have not received notice of under-reporting from the IRS, and that you are not subject to backup withholding. |
• | you cannot be: |
• | an actual or constructive owner of 10% or more of the total voting power of all our voting stock; | |
• | a controlled foreign corporation related (directly or indirectly) to us through stock ownership; or | |
• | a bank receiving interest described in Section 881(c)(3)(A) of the Code; and |
• | you must properly certify as to your foreign status. |
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• | such gain is effectively connected with your conduct of a trade or business within the United States (or, in the case of an applicable treaty, attributable to your permanent establishment in the United States); | |
• | you are an individual who is present in the United States for a period or periods aggregating 183 days or more during the taxable year of the disposition and certain other conditions are satisfied; or | |
• | you are subject to tax pursuant to the provisions of the Code applicable to expatriates. |
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• | in theover-the-counter market, | |
• | in negotiated transactions, | |
• | through the writing of options on the new notes or a combination of such methods of resale, | |
• | at market prices prevailing at the time of resale, | |
• | at prices related to such prevailing market prices, or | |
• | at negotiated prices. |
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Page | ||||
Audited Consolidated Financial Statements: | ||||
F-2 | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-8 | ||||
F-9 | ||||
Unaudited Interim Condensed Consolidated Financial Statements: | ||||
F-52 | ||||
F-53 | ||||
F-54 | ||||
F-55 |
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Consolidated Balance Sheets
As of December 31, 2006 and 2005
(in thousands, except share and per share information)
2006 | 2005 | |||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 161,498 | $ | 112,709 | ||||
Short-term investments | 390,651 | 390,422 | ||||||
Restricted short-term investments | 607 | 50 | ||||||
Inventories, net | 92,915 | 39,431 | ||||||
Accounts receivable (net of allowance for uncollectible accounts of $1,950 and $2,383 at December 31, 2006 and 2005, respectively) | 28,140 | 16,028 | ||||||
Prepaid expenses | 33,109 | 21,430 | ||||||
Deferred charges | 26,509 | 13,270 | ||||||
Deferred tax asset | 815 | 2,122 | ||||||
Other current assets | 24,283 | 16,640 | ||||||
Total current assets | 758,527 | 612,102 | ||||||
Property and equipment, net | 1,256,162 | 831,490 | ||||||
Restricted cash and investments | — | 2,920 | ||||||
Long-term investments | 1,865 | 5,052 | ||||||
FCC licenses | 2,072,885 | 681,299 | ||||||
Microwave relocation costs | 9,187 | 9,187 | ||||||
Other assets | 54,496 | 16,931 | ||||||
Total assets | $ | 4,153,122 | $ | 2,158,981 | ||||
CURRENT LIABILITIES: | ||||||||
Accounts payable and accrued expenses | $ | 325,681 | $ | 174,220 | ||||
Current maturities of long-term debt | 16,000 | 2,690 | ||||||
Deferred revenue | 90,501 | 56,560 | ||||||
Other current liabilities | 3,447 | 2,147 | ||||||
Total current liabilities | 435,629 | 235,617 | ||||||
Long-term debt, net | 2,580,000 | 902,864 | ||||||
Deferred tax liabilities | 177,197 | 146,053 | ||||||
Deferred rents | 22,203 | 14,739 | ||||||
Redeemable minority interest | 4,029 | 1,259 | ||||||
Other long-term liabilities | 26,316 | 20,858 | ||||||
Total liabilities | 3,245,374 | 1,321,390 | ||||||
COMMITMENTS AND CONTINGENCIES (See Note 10) | ||||||||
SERIES D CUMULATIVE CONVERTIBLE REDEEMABLE PARTICIPATING PREFERRED STOCK, par value $0.0001 per share, 4,000,000 shares designated, 3,500,993 shares issued and outstanding at December 31, 2006 and 2005; Liquidation preference of $447,388 and $426,382 at December 31, 2006 and 2005, respectively | 443,368 | 421,889 | ||||||
SERIES E CUMULATIVE CONVERTIBLE REDEEMABLE PARTICIPATING PREFERRED STOCK, par value $0.0001 per share, 500,000 shares designated, 500,000 shares issued and outstanding at December 31, 2006 and 2005; Liquidation preference of $54,019 and $51,019 at December 31, 2006 and 2005, respectively | 51,135 | 47,796 | ||||||
STOCKHOLDERS’ EQUITY: | ||||||||
Preferred stock, par value $0.0001 per share, 25,000,000 shares authorized at December 31, 2006 and 2005, 4,000,000 of which have been designated as Series D Preferred Stock and 500,000 of which have been designated as Series E Preferred Stock; no shares of preferred stock other than Series D & E Preferred Stock (presented above) issued and outstanding at December 31, 2006 and 2005 | — | — | ||||||
Common Stock, par value $0.0001 per share, 300,000,000 shares authorized, 157,052,097 and 155,327,094 shares issued and outstanding at December 31, 2006 and 2005, respectively | 16 | 15 | ||||||
Additional paid-in capital | 166,315 | 149,584 | ||||||
Deferred compensation | — | (178 | ) | |||||
Retained earnings | 245,690 | 216,702 | ||||||
Accumulated other comprehensive income | 1,224 | 1,783 | ||||||
Total stockholders’ equity | 413,245 | 367,906 | ||||||
Total liabilities and stockholders’ equity | $ | 4,153,122 | $ | 2,158,981 | ||||
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Consolidated Statements of Income and Comprehensive Income
For the Years Ended December 31, 2006, 2005 and 2004
(in thousands, except share and per share information)
2006 | 2005 | 2004 | ||||||||||
REVENUES: | ||||||||||||
Service revenues | $ | 1,290,947 | $ | 872,100 | $ | 616,401 | ||||||
Equipment revenues | 255,916 | 166,328 | 131,849 | |||||||||
Total revenues | 1,546,863 | 1,038,428 | 748,250 | |||||||||
OPERATING EXPENSES: | ||||||||||||
Cost of service (exclusive of depreciation and amortization expense of $122,606, $81,196 and $57,572, shown separately below) | 445,281 | 283,212 | 200,806 | |||||||||
Cost of equipment | 476,877 | 300,871 | 222,766 | |||||||||
Selling, general and administrative expenses (exclusive of depreciation and amortization expense of $12,422, $6,699 and $4,629, shown separately below) | 243,618 | 162,476 | 131,510 | |||||||||
Depreciation and amortization | 135,028 | 87,895 | 62,201 | |||||||||
Loss (gain) on disposal of assets | 8,806 | (218,203 | ) | 3,209 | ||||||||
Total operating expenses | 1,309,610 | 616,251 | 620,492 | |||||||||
Income from operations | 237,253 | 422,177 | 127,758 | |||||||||
OTHER EXPENSE (INCOME): | ||||||||||||
Interest expense | 115,985 | 58,033 | 19,030 | |||||||||
Accretion of put option in majority-owned subsidiary | 770 | 252 | 8 | |||||||||
Interest and other income | (21,543 | ) | (8,658 | ) | (2,472 | ) | ||||||
Loss (gain) on extinguishment of debt | 51,518 | 46,448 | (698 | ) | ||||||||
Total other expense | 146,730 | 96,075 | 15,868 | |||||||||
Income before provision for income taxes | 90,523 | 326,102 | 111,890 | |||||||||
Provision for income taxes | (36,717 | ) | (127,425 | ) | (47,000 | ) | ||||||
Net income | 53,806 | 198,677 | 64,890 | |||||||||
Accrued dividends on Series D Preferred Stock | (21,006 | ) | (21,006 | ) | (21,006 | ) | ||||||
Accrued dividends on Series E Preferred Stock | (3,000 | ) | (1,019 | ) | — | |||||||
Accretion on Series D Preferred Stock | (473 | ) | (473 | ) | (473 | ) | ||||||
Accretion on Series E Preferred Stock | (339 | ) | (114 | ) | — | |||||||
Net income applicable to common stock | $ | 28,988 | $ | 176,065 | $ | 43,411 | ||||||
Net income | $ | 53,806 | $ | 198,677 | $ | 64,890 | ||||||
Other comprehensive income: | ||||||||||||
Unrealized losses onavailable-for-sale securities, net of tax | (1,211 | ) | (28 | ) | (240 | ) | ||||||
Unrealized gains on cash flow hedging derivatives, net of tax | 1,959 | 1,914 | — | |||||||||
Reclassification adjustment for gains and losses included in net income, net of tax | (1,307 | ) | 168 | 41 | ||||||||
Comprehensive income | $ | 53,247 | $ | 200,731 | $ | 64,691 | ||||||
Net income per common share: (See Note 17) | ||||||||||||
Net income per common share — basic | $ | 0.11 | $ | 0.71 | $ | 0.18 | ||||||
Net income per common share — diluted | $ | 0.10 | $ | 0.62 | $ | 0.15 | ||||||
Weighted average shares: | ||||||||||||
Basic | 155,820,381 | 135,352,396 | 126,722,051 | |||||||||
Diluted | 159,696,608 | 153,610,589 | 150,633,686 | |||||||||
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Consolidated Statements of Stockholders’ Equity
For the Years Ended December 31, 2006, 2005 and 2004
(in thousands, except share information)
Accumulated | ||||||||||||||||||||||||||||||||
Additional | Other | |||||||||||||||||||||||||||||||
Number | Paid-In | Subscriptions | Deferred | Retained | Comprehensive | |||||||||||||||||||||||||||
of Shares | Amount | Capital | Receivable | Compensation | Earnings | Income (Loss) | Total | |||||||||||||||||||||||||
BALANCE, December 31, 2003 | 110,159,094 | $ | 11 | $ | 78,414 | $ | (92 | ) | $ | (4,154 | ) | $ | (2,774 | ) | $ | (72 | ) | $ | 71,333 | |||||||||||||
Exercise of Common Stock options | 635,928 | — | 416 | — | — | — | — | 416 | ||||||||||||||||||||||||
Exercise of Common Stock warrants | 19,501,020 | 2 | 42 | — | — | — | — | 44 | ||||||||||||||||||||||||
Reverse stock split — fractional shares redeemed | (261 | ) | — | — | — | — | — | — | — | |||||||||||||||||||||||
Accrued interest on subscriptions receivable | — | — | 6 | (6 | ) | — | — | — | — | |||||||||||||||||||||||
Deferred stock-based compensation | — | — | 9,606 | — | (9,606 | ) | — | — | — | |||||||||||||||||||||||
Amortization of deferred stock-based compensation expense | — | — | — | — | 10,429 | — | — | 10,429 | ||||||||||||||||||||||||
Accrued dividends on Series D Preferred Stock | — | — | — | — | — | (21,006 | ) | — | (21,006 | ) | ||||||||||||||||||||||
Accretion on Series D Preferred Stock | — | — | — | — | — | (473 | ) | — | (473 | ) | ||||||||||||||||||||||
Net income | — | — | — | — | — | 64,890 | — | 64,890 | ||||||||||||||||||||||||
Unrealized loss onavailable-for-sale securities, net of reclassification adjustment and tax | — | — | — | — | — | — | (199 | ) | (199 | ) | ||||||||||||||||||||||
BALANCE, December 31, 2004 | 130,295,781 | $ | 13 | $ | 88,484 | $ | (98 | ) | $ | (3,331 | ) | $ | 40,637 | $ | (271 | ) | $ | 125,434 |
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Accumulated | ||||||||||||||||||||||||||||||||
Additional | Other | |||||||||||||||||||||||||||||||
Number | Paid-In | Subscriptions | Deferred | Retained | Comprehensive | |||||||||||||||||||||||||||
of Shares | Amount | Capital | Receivable | Compensation | Earnings | Income (Loss) | Total | |||||||||||||||||||||||||
Common Stock issued | 79,437 | — | 483 | — | — | — | — | 483 | ||||||||||||||||||||||||
Exercise of Common Stock options | 22,669,671 | 2 | 8,603 | — | — | — | — | 8,605 | ||||||||||||||||||||||||
Exercise of Common Stock warrants | 2,282,205 | — | 605 | — | — | — | — | 605 | ||||||||||||||||||||||||
Accrued interest on subscriptions receivable | — | — | 5 | (5 | ) | — | — | — | — | |||||||||||||||||||||||
Proceeds from repayment of subscriptions receivable | — | — | — | 103 | — | — | — | 103 | ||||||||||||||||||||||||
Forfeiture of unvested stock compensation | — | — | (2,887 | ) | — | 2,887 | — | — | — | |||||||||||||||||||||||
Deferred stock-based compensation | — | — | �� | 2,330 | — | (2,330 | ) | — | — | — | ||||||||||||||||||||||
Amortization of deferred stock-based compensation expense | — | — | — | — | 2,596 | — | — | 2,596 | ||||||||||||||||||||||||
Accrued dividends on Series D Preferred Stock | — | — | — | — | — | (21,006 | ) | — | (21,006 | ) | ||||||||||||||||||||||
Accrued dividends on Series E Preferred Stock | — | — | — | — | — | (1,019 | ) | — | (1,019 | ) | ||||||||||||||||||||||
Accretion on Series D Preferred Stock | — | — | — | — | — | (473 | ) | — | (473 | ) | ||||||||||||||||||||||
Accretion on Series E Preferred Stock | — | — | — | — | — | (114 | ) | — | (114 | ) | ||||||||||||||||||||||
Tax benefits from the exercise of Common Stock options | — | — | 51,961 | — | — | — | — | 51,961 | ||||||||||||||||||||||||
Net income | — | — | — | — | — | 198,677 | — | 198,677 | ||||||||||||||||||||||||
Unrealized losses onavailable-for-sale securities, net of tax | — | — | — | — | — | — | (28 | ) | (28 | ) | ||||||||||||||||||||||
Reclassification adjustment for losses included in net income, net of tax | — | — | — | — | — | — | 168 | 168 | ||||||||||||||||||||||||
Unrealized gain on cash flow hedging derivative, net of tax | — | — | — | — | — | — | 1,914 | 1,914 | ||||||||||||||||||||||||
BALANCE, December 31, 2005 | 155,327,094 | $ | 15 | $ | 149,584 | $ | — | $ | (178 | ) | $ | 216,702 | $ | 1,783 | $ | 367,906 |
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Accumulated | ||||||||||||||||||||||||||||||||
Additional | Other | |||||||||||||||||||||||||||||||
Number | Paid-In | Subscriptions | Deferred | Retained | Comprehensive | |||||||||||||||||||||||||||
of Shares | Amount | Capital | Receivable | Compensation | Earnings | Income (Loss) | Total | |||||||||||||||||||||||||
Common Stock issued | 49,725 | — | 314 | — | — | — | — | 314 | ||||||||||||||||||||||||
Exercise of Common Stock options | 1,148,328 | 1 | 2,743 | — | — | — | — | 2,744 | ||||||||||||||||||||||||
Exercise of Common Stock warrants | 526,950 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Reversal of deferred compensation upon adoption of SFAS No. 123(R) | — | — | (178 | ) | — | 178 | — | — | — | |||||||||||||||||||||||
Stock-based compensation | — | — | 14,472 | — | — | — | — | 14,472 | ||||||||||||||||||||||||
Accrued dividends on Series D Preferred Stock | — | — | — | — | — | (21,006 | ) | — | (21,006 | ) | ||||||||||||||||||||||
Accrued dividends on Series E Preferred Stock | — | — | — | — | — | (3,000 | ) | — | (3,000 | ) | ||||||||||||||||||||||
Accretion on Series D Preferred Stock | — | — | — | — | — | (473 | ) | — | (473 | ) | ||||||||||||||||||||||
Accretion on Series E Preferred Stock | — | — | — | — | — | (339 | ) | — | (339 | ) | ||||||||||||||||||||||
Reduction due to the tax impact of Common Stock option forfeitures | — | — | (620 | ) | — | — | — | — | (620 | ) | ||||||||||||||||||||||
Net income | — | — | — | — | — | 53,806 | — | 53,806 | ||||||||||||||||||||||||
Unrealized losses onavailable-for-sale securities, net of tax | — | — | — | — | — | — | (1,211 | ) | (1,211 | ) | ||||||||||||||||||||||
Unrealized gains on cash flow hedging derivatives, net of tax | — | — | — | — | — | — | 1,959 | 1,959 | ||||||||||||||||||||||||
Reclassification adjustment for gains included in net income, net of tax | — | — | — | — | — | — | (1,307 | ) | (1,307 | ) | ||||||||||||||||||||||
BALANCE, December 31, 2006 | 157,052,097 | $ | 16 | $ | 166,315 | $ | — | $ | — | $ | 245,690 | $ | 1,224 | $ | 413,245 | |||||||||||||||||
F-7
Table of Contents
2006 | 2005 | 2004 | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||
Net income | $ | 53,806 | $ | 198,677 | $ | 64,890 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 135,028 | 87,895 | 62,201 | |||||||||
Provision for uncollectible accounts receivable | 31 | 129 | 125 | |||||||||
Deferred rent expense | 7,464 | 4,407 | 3,466 | |||||||||
Cost of abandoned cell sites | 3,783 | 725 | 1,021 | |||||||||
Stock-based compensation expense | 14,472 | 2,596 | 10,429 | |||||||||
Non-cash interest expense | 6,964 | 4,285 | 2,889 | |||||||||
Loss (gain) on disposal of assets | 8,806 | (218,203 | ) | 3,209 | ||||||||
Loss (gain) on extinguishment of debt | 51,518 | 46,448 | (698 | ) | ||||||||
(Gain) loss on sale of investments | (2,385 | ) | (190 | ) | 576 | |||||||
Accretion of asset retirement obligation | 769 | 423 | 253 | |||||||||
Accretion of put option in majority-owned subsidiary | 770 | 252 | 8 | |||||||||
Deferred income taxes | 32,341 | 125,055 | 44,441 | |||||||||
Changes in assets and liabilities: | ||||||||||||
Inventories | (53,320 | ) | (5,717 | ) | (16,706 | ) | ||||||
Accounts receivable | (12,143 | ) | (7,056 | ) | (714 | ) | ||||||
Prepaid expenses | (6,538 | ) | (2,613 | ) | (1,933 | ) | ||||||
Deferred charges | (13,239 | ) | (4,045 | ) | (2,727 | ) | ||||||
Other assets | (9,231 | ) | (5,580 | ) | (2,243 | ) | ||||||
Accounts payable and accrued expenses | 108,492 | 41,204 | (31,304 | ) | ||||||||
Deferred revenue | 33,957 | 16,071 | 10,317 | |||||||||
Other liabilities | 3,416 | (1,547 | ) | 2,879 | ||||||||
Net cash provided by operating activities | 364,761 | 283,216 | 150,379 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||
Purchases of property and equipment | (550,749 | ) | (266,499 | ) | (250,830 | ) | ||||||
Change in prepaid purchases of property and equipment | (5,262 | ) | (11,800 | ) | — | |||||||
Proceeds from sale of property and equipment | 3,021 | 146 | — | |||||||||
Purchase of investments | (1,269,919 | ) | (739,482 | ) | (158,672 | ) | ||||||
Proceeds from sale of investments | 1,272,424 | 386,444 | 307,220 | |||||||||
Change in restricted cash and investments | 2,406 | (107 | ) | (1,511 | ) | |||||||
Purchases of and deposits for FCC licenses | (1,391,586 | ) | (503,930 | ) | (87,025 | ) | ||||||
Proceeds from sale of FCC licenses | — | 230,000 | — | |||||||||
Microwave relocation costs | — | — | (63 | ) | ||||||||
Net cash used in investing activities | (1,939,665 | ) | (905,228 | ) | (190,881 | ) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||
Change in book overdraft. | 11,368 | (565 | ) | 5,778 | ||||||||
Payment upon execution of cash flow hedging derivative | — | (1,899 | ) | — | ||||||||
Proceeds from bridge credit agreements | 1,500,000 | 540,000 | — | |||||||||
Proceeds from Senior Secured Credit Facility | 1,600,000 | — | — | |||||||||
Proceeds from 91/4% Senior Notes Due 2014 | 1,000,000 | — | — | |||||||||
Proceeds from Credit Agreements | — | 902,875 | — | |||||||||
Proceeds from short-term notes payable | — | — | 1,703 | |||||||||
Debt issuance costs | (58,789 | ) | (29,480 | ) | (164 | ) | ||||||
Repayment of debt | (2,437,985 | ) | (754,662 | ) | (14,215 | ) | ||||||
Proceeds from minority interest in majority-owned subsidiary | 2,000 | — | 1,000 | |||||||||
Proceeds from termination of cash flow hedging derivative | 4,355 | — | — | |||||||||
Proceeds from repayment of subscriptions receivable | — | 103 | — | |||||||||
Proceeds from issuance of preferred stock, net of issuance costs | — | 46,662 | 5 | |||||||||
Proceeds from exercise of stock options and warrants | 2,744 | 9,210 | 460 | |||||||||
Net cash provided by (used in) financing activities | 1,623,693 | 712,244 | (5,433 | ) | ||||||||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 48,789 | 90,232 | (45,935 | ) | ||||||||
CASH AND CASH EQUIVALENTS, beginning of period | 112,709 | 22,477 | 68,412 | |||||||||
CASH AND CASH EQUIVALENTS, end of period | $ | 161,498 | $ | 112,709 | $ | 22,477 | ||||||
F-8
Table of Contents
1. | Organization and Business Operations: |
F-9
Table of Contents
2. | Summary of Significant Accounting Policies: |
• | allowance for uncollectible accounts receivable; | |
• | valuation of inventories; | |
• | estimated useful life of assets; | |
• | impairment of long-lived assets and indefinite-lived assets; | |
• | likelihood of realizing benefits associated with temporary differences giving rise to deferred tax assets; | |
• | reserves for uncertain tax positions; | |
• | estimated customer life in terms of amortization of certain deferred revenue; | |
• | valuation of common stock; and | |
• | stock-based compensation expense. |
F-10
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2006 | 2005 | 2004 | ||||||||||
Balance at beginning of period | $ | 2,383 | $ | 2,323 | $ | 962 | ||||||
Additions: | ||||||||||||
Charged to costs and expenses | 31 | 129 | 125 | |||||||||
Direct reduction to revenue and other accounts | 929 | 1,211 | 2,804 | |||||||||
Deductions | (1,393 | ) | (1,280 | ) | (1,568 | ) | ||||||
Balance at end of period | $ | 1,950 | $ | 2,383 | $ | 2,323 | ||||||
2006 | 2005 | |||||||
Prepaid vendor purchases | $ | 16,898 | $ | 11,801 | ||||
Prepaid rent | 9,089 | 6,347 | ||||||
Prepaid maintenance and support contracts | 1,846 | 1,393 | ||||||
Prepaid insurance | 3,047 | 1,020 | ||||||
Other | 2,229 | 869 | ||||||
Prepaid expenses | $ | 33,109 | $ | 21,430 | ||||
F-11
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2006 | 2005 | |||||||
Construction-in-progress | $ | 193,856 | $ | 98,078 | ||||
Network infrastructure | 1,329,986 | 905,924 | ||||||
Office equipment | 31,065 | 17,059 | ||||||
Leasehold improvements | 21,721 | 16,608 | ||||||
Furniture and fixtures | 5,903 | 4,000 | ||||||
Vehicles | 207 | 118 | ||||||
1,582,738 | 1,041,787 | |||||||
Accumulated depreciation | (326,576 | ) | (210,297 | ) | ||||
Property and equipment, net | $ | 1,256,162 | $ | 831,490 | ||||
F-12
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F-13
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F-14
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2005 | 2004 | |||||||
Net income applicable to common stock — as reported | $ | 176,065 | $ | 43,411 | ||||
Add: Amortization of deferred compensation determined under the intrinsic method for employee stock awards, net of tax | 1,584 | 6,036 | ||||||
Less: Total stock-based employee compensation expense determined under the fair value method for employee stock awards, net of tax | (3,227 | ) | (5,689 | ) | ||||
Net income applicable to common stock — pro forma | $ | 174,422 | $ | 43,758 | ||||
Basic net income per common share: | ||||||||
As reported | $ | 0.71 | $ | 0.18 | ||||
Pro forma | $ | 0.70 | $ | 0.18 | ||||
Diluted net income per common share: | ||||||||
As reported | $ | 0.62 | $ | 0.15 | ||||
Pro forma | $ | 0.62 | $ | 0.15 | ||||
F-15
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2006 | 2005 | |||||||
Beginning asset retirement obligations | $ | 3,522 | $ | 1,893 | ||||
Liabilities incurred | 2,394 | 1,206 | ||||||
Accretion expense | 769 | 423 | ||||||
Ending asset retirement obligations | $ | 6,685 | $ | 3,522 | ||||
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3. | Majority-Owned Subsidiary: |
F-17
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4. | Short-Term Investments: |
2006 | ||||||||||||||||
Gross | Gross | Aggregate | ||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
United States government and agencies | $ | 2,000 | $ | — | $ | (15 | ) | $ | 1,985 | |||||||
Auction rate securities | 290,055 | — | (30 | ) | 290,025 | |||||||||||
Corporate bonds | 98,428 | 213 | — | 98,641 | ||||||||||||
Total short-term investments | $ | 390,483 | $ | 213 | $ | (45 | ) | $ | 390,651 | |||||||
2005 | ||||||||||||||||
Gross | Gross | Aggregate | ||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
United States government and agencies | $ | 28,999 | $ | — | $ | (241 | ) | $ | 28,758 | |||||||
Auction rate securities | 333,819 | — | — | 333,819 | ||||||||||||
Corporate bonds | 27,788 | 57 | — | 27,845 | ||||||||||||
Total short-term investments | $ | 390,606 | $ | 57 | $ | (241 | ) | $ | 390,422 | |||||||
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Table of Contents
Aggregate | ||||||||
Amortized | Fair | |||||||
Cost | Value | |||||||
Less than one year | $ | 215,618 | $ | 215,801 | ||||
Due in 1 - 2 years | — | — | ||||||
Due in 2 - 5 years | — | — | ||||||
Due after 5 years | 174,865 | 174,850 | ||||||
Total | $ | 390,483 | $ | 390,651 | ||||
5. | Derivative Instruments and Hedging Activities: |
F-19
Table of Contents
6. | Intangible Assets: |
Microwave | ||||||||
Relocation | ||||||||
FCC Licenses | Costs | |||||||
Balance at December 31, 2004 | $ | 154,144 | $ | 9,566 | ||||
Additions | 528,930 | — | ||||||
Reductions | (1,775 | ) | (379 | ) | ||||
Balance at December 31, 2005 | $ | 681,299 | $ | 9,187 | ||||
Additions | 1,391,586 | — | ||||||
Balance at December 31, 2006 | $ | 2,072,885 | $ | 9,187 | ||||
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7. | Accounts Payable and Accrued Expenses: |
2006 | 2005 | |||||||
Accounts payable | $ | 90,084 | $ | 29,430 | ||||
Book overdraft. | 21,288 | 9,920 | ||||||
Accrued accounts payable | 111,974 | 69,611 | ||||||
Accrued liabilities | 9,405 | 7,590 | ||||||
Payroll and employee benefits | 20,645 | 12,808 | ||||||
Accrued interest | 24,529 | 17,578 | ||||||
Taxes, other than income | 42,882 | 23,211 | ||||||
Income taxes | 4,874 | 4,072 | ||||||
Accounts payable and accrued expenses | $ | 325,681 | $ | 174,220 | ||||
F-21
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8. | Long-Term Debt: |
2006 | 2005 | |||||||
Microwave relocation obligations | $ | — | $ | 2,690 | ||||
Credit Agreements | — | 900,000 | ||||||
91/4% Senior Notes | 1,000,000 | — | ||||||
Senior Secured Credit Facility | 1,596,000 | — | ||||||
Total | 2,596,000 | 902,690 | ||||||
Add: unamortized premium on debt | — | 2,864 | ||||||
Total debt | 2,596,000 | 905,554 | ||||||
Less: current maturities | (16,000 | ) | (2,690 | ) | ||||
Total long-term debt | $ | 2,580,000 | $ | 902,864 | ||||
For the Year Ending December 31, | ||||
2007 | $ | 16,000 | ||
2008 | 16,000 | |||
2009 | 16,000 | |||
2010 | 16,000 | |||
2011 | 16,000 | |||
Thereafter | 2,516,000 | |||
Total | $ | 2,596,000 | ||
F-22
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F-23
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F-24
Table of Contents
9. | Concentrations: |
For the Year Ending December 31, | ||||
2007 | $ | 88,639 | ||
2008 | 89,782 | |||
2009 | 91,091 | |||
2010 | 92,570 | |||
2011 | 86,707 | |||
Thereafter | 279,415 | |||
Total | $ | 728,204 | ||
F-25
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11. | Series D Cumulative Convertible Redeemable Participating Preferred Stock: |
F-26
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• | the per share liquidation value, plus | |
• | the greater of: | |
• | the amount of all accrued and unpaid dividends and distributions on such share, and | |
• | the amount that would have been paid in respect of such share had it been converted into common stock immediately prior to the event that triggered payment of the liquidation preference, net of the liquidation value of the Series D Preferred Stock and the Series E Preferred Stock. |
12. | Series E Cumulative Convertible Redeemable Participating Preferred Stock: |
F-27
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13. | Capitalization: |
F-28
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14. | Share-Based Payments: |
F-29
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2006 | 2005 | 2004 | ||||||||||
Expected dividends | 0.00 | % | 0.00 | % | 0.00 | % | ||||||
Expected volatility | 35.04 | % | 50.00 | % | 55.00 | % | ||||||
Risk-free interest rate | 4.64 | % | 4.24 | % | 3.22 | % | ||||||
Expected lives in years | 5.00 | 5.00 | 5.00 | |||||||||
Weighted-average fair value of options: | ||||||||||||
Granted at below fair value | $ | 10.16 | $ | — | $ | 2.88 | ||||||
Granted at fair value | $ | 3.75 | $ | 3.44 | $ | 2.64 | ||||||
Weighted-average exercise price of options: | ||||||||||||
Granted at below fair value | $ | 1.49 | $ | — | $ | 4.46 | ||||||
Granted at fair value | $ | 9.95 | $ | 7.13 | $ | 5.25 |
F-30
Table of Contents
2006 | 2005 | 2004 | ||||||||||||||||||||||
Weighted | Weighted | Weighted | ||||||||||||||||||||||
Average | Average | Average | ||||||||||||||||||||||
Exercise | Exercise | Exercise | ||||||||||||||||||||||
Shares | Price | Shares | Price | Shares | Price | |||||||||||||||||||
Outstanding, beginning of year | 14,502,210 | $ | 4.18 | 32,448,855 | $ | 0.92 | 31,057,182 | $ | 0.61 | |||||||||||||||
Granted | 11,369,793 | $ | 9.65 | 5,838,534 | $ | 7.13 | 2,671,518 | $ | 4.76 | |||||||||||||||
Exercised | (1,148,328 | ) | $ | 2.39 | (22,669,671 | ) | $ | 0.38 | (635,928 | ) | $ | 0.65 | ||||||||||||
Forfeited | (1,224,213 | ) | $ | 4.22 | (1,115,508 | ) | $ | 4.04 | (643,917 | ) | $ | 2.02 | ||||||||||||
Outstanding, end of year | 23,499,462 | $ | 6.91 | 14,502,210 | $ | 4.18 | 32,448,855 | $ | 0.92 | |||||||||||||||
Options vested or expected to vest at year-end | 20,127,759 | $ | 6.55 | |||||||||||||||||||||
Options exercisable at year-end | 10,750,692 | $ | 3.78 | 10,985,577 | $ | 3.23 | 32,448,855 | $ | 0.92 | |||||||||||||||
Options vested at year-end | 8,940,615 | $ | 3.59 | 6,696,330 | $ | 1.87 | 26,976,972 | $ | 0.49 | |||||||||||||||
Options Outstanding | Options Vested | |||||||||||||||||||
Weighted | Weighted | Weighted | ||||||||||||||||||
Average | Average | Average | ||||||||||||||||||
Number of | Contractual | Exercise | Number of | Exercise | ||||||||||||||||
Exercise Price | Shares | Life | Price | Shares | Price | |||||||||||||||
$0.08 - $ 0.33 | 851,991 | 5.93 | $ | 0.12 | 851,991 | $ | 0.12 | |||||||||||||
$0.34 - $ 1.57 | 3,733,773 | 4.74 | $ | 1.57 | 3,728,109 | $ | 1.57 | |||||||||||||
$1.58 - $ 6.31 | 2,961,708 | 6.80 | $ | 3.97 | 2,083,725 | $ | 3.72 | |||||||||||||
$6.32 - $ 7.15 | 7,872,015 | 8.58 | $ | 7.14 | 2,255,292 | $ | 7.14 | |||||||||||||
$7.16 - $11.33 | 8,079,975 | 9.64 | $ | 10.95 | 21,498 | $ | 11.07 |
F-31
Table of Contents
Weighted | ||||||||
Average | ||||||||
Grant-Date | ||||||||
Stock Option Grants | Shares | Fair Value | ||||||
Unvested balance, January 1, 2006 | 7,582,659 | $ | 3.00 | |||||
Grants | 11,369,793 | $ | 3.98 | |||||
Vested shares | (3,679,491 | ) | $ | 3.64 | ||||
Forfeitures | (639,012 | ) | $ | 3.10 | ||||
Unvested balance, December 31, 2006 | 14,633,949 | $ | 3.60 | |||||
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Weighted | Weighted | Weighted | ||||||||||||||
Number of | Average | Average | Average | |||||||||||||
Options | Exercise | Market Value | Intrinsic Value | |||||||||||||
Grants Made During the Quarter Ended | Granted | Price | per Share | per Share | ||||||||||||
March 31, 2006 | 2,869,989 | $ | 7.15 | $ | 7.15 | $ | 0.00 | |||||||||
June 30, 2006 | 534,525 | $ | 7.54 | $ | 7.54 | $ | 0.00 | |||||||||
September 30, 2006 | 418,425 | $ | 8.67 | $ | 8.67 | $ | 0.00 | |||||||||
December 31, 2006 | 7,546,854 | $ | 10.81 | $ | 11.33 | $ | 0.53 |
F-33
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15. | Employee Benefit Plan: |
16. | Income Taxes: |
2006 | 2005 | 2004 | ||||||||||
Current: | ||||||||||||
Federal | $ | 674 | $ | (233 | ) | $ | 197 | |||||
State | 3,702 | 2,603 | 2,502 | |||||||||
4,376 | 2,370 | 2,699 | ||||||||||
Deferred: | ||||||||||||
Federal | 29,959 | 114,733 | 39,056 | |||||||||
State | 2,382 | 10,322 | 5,245 | |||||||||
32,341 | 125,055 | 44,301 | ||||||||||
Provision for income taxes | $ | 36,717 | $ | 127,425 | $ | 47,000 | ||||||
2006 | 2005 | |||||||
Deferred tax assets: | ||||||||
Start-up costs capitalized for tax purposes | $ | — | $ | 866 | ||||
Net operating loss carry forward | 83,787 | 85,152 | ||||||
Net basis difference in FCC licenses | — | 1,428 | ||||||
Revenue deferred for book purposes | 9,407 | 5,007 | ||||||
Allowance for uncollectible accounts | 1,214 | 1,272 | ||||||
Deferred rent expense | 8,311 | 5,747 | ||||||
Deferred compensation | 5,636 | 2,818 | ||||||
Asset retirement obligation | 592 | 347 | ||||||
Accrued vacation | 1,004 | 603 | ||||||
Partnership interest | 7,130 | 392 |
F-34
Table of Contents
2006 | 2005 | |||||||
Alternative Minimum Tax credit carryforward | 666 | — | ||||||
Other | 1,011 | 558 | ||||||
Total deferred tax assets | 118,758 | 104,190 | ||||||
Deferred tax liabilities: | ||||||||
Depreciation | (188,484 | ) | (157,083 | ) | ||||
Deferred cost of handset sales | (10,251 | ) | (4,867 | ) | ||||
Net basis difference in FCC licenses | (9,802 | ) | — | |||||
Prepaid insurance | (1,174 | ) | (374 | ) | ||||
Gain deferral related to like kind exchange | (83,467 | ) | (83,699 | ) | ||||
Other comprehensive income | (949 | ) | (1,331 | ) | ||||
Other | (1,013 | ) | (573 | ) | ||||
Total deferred tax liabilities | (295,140 | ) | (247,927 | ) | ||||
Subtotal | (176,382 | ) | (143,737 | ) | ||||
Valuation allowance | — | (194 | ) | |||||
Net deferred tax liability | $ | (176,382 | ) | $ | (143,931 | ) | ||
2006 | 2005 | |||||||
Current deferred tax asset | $ | 815 | $ | 2,122 | ||||
Non-current deferred tax liability | (177,197 | ) | (146,053 | ) | ||||
Net deferred tax liability | $ | (176,382 | ) | $ | (143,931 | ) | ||
F-35
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2006 | 2005 | 2004 | ||||||||||
U.S. federal income tax provision at statutory rate | $ | 31,683 | $ | 114,136 | $ | 39,117 | ||||||
Increase (decrease) in income taxes resulting from: | ||||||||||||
State income taxes, net of federal income tax impact | 2,386 | 10,865 | 5,187 | |||||||||
Change in valuation allowance | (194 | ) | 52 | 58 | ||||||||
Provision for tax uncertainties | 2,557 | 2,274 | 2,561 | |||||||||
Permanent items | 218 | 98 | 15 | |||||||||
Other | 67 | — | 62 | |||||||||
Provision for income taxes | $ | 36,717 | $ | 127,425 | $ | 47,000 | ||||||
F-36
Table of Contents
17. | Net Income Per Common Share: |
2006 | 2005 | 2004 | ||||||||||
Basic EPS — Two Class Method: | ||||||||||||
Net income | $ | 53,806 | $ | 198,677 | $ | 64,890 | ||||||
Accrued dividends and accretion: | ||||||||||||
Series D Preferred Stock | (21,479 | ) | (21,479 | ) | (21,479 | ) | ||||||
Series E Preferred Stock | (3,339 | ) | (1,133 | ) | — | |||||||
Net income applicable to common stock | $ | 28,988 | $ | 176,065 | $ | 43,411 | ||||||
Amount allocable to common shareholders | 57.1 | % | 54.4 | % | 53.1 | % | ||||||
Rights to undistributed earnings | $ | 16,539 | $ | 95,722 | $ | 23,070 | ||||||
Weighted average shares outstanding — basic | 155,820,381 | 135,352,396 | 126,722,051 | |||||||||
Net income per common share — basic | $ | 0.11 | $ | 0.71 | $ | 0.18 | ||||||
Diluted EPS: | ||||||||||||
Rights to undistributed earnings | $ | 16,539 | $ | 95,722 | $ | 23,070 | ||||||
Weighted average shares outstanding — basic | 155,820,381 | 135,352,396 | 126,722,051 | |||||||||
Effect of dilutive securities: | ||||||||||||
Warrants | 147,257 | 2,689,377 | 6,642,015 | |||||||||
Stock options | 3,728,970 | 15,568,816 | 17,269,621 | |||||||||
Weighted average shares outstanding — diluted | 159,696,608 | 153,610,589 | 150,633,687 | |||||||||
Net income per common share — diluted | $ | 0.10 | $ | 0.62 | $ | 0.15 | ||||||
F-37
Table of Contents
18. | Segment Information: |
• | Core Markets, which include Atlanta, Miami, San Francisco, and Sacramento, are aggregated because they are reviewed on an aggregate basis by the chief operating decision maker, they are similar in respect to their products and services, production processes, class of customer, method of distribution, and regulatory environment and currently exhibit similar financial performance and economic characteristics. | |
• | Expansion Markets, which include Dallas/Ft. Worth, Detroit, Tampa/Sarasota/Orlando and Los Angeles, are aggregated because they are reviewed on an aggregate basis by the chief operating decision maker, they are similar in respect to their products and services, production processes, class of customer, method of distribution, and regulatory environment and have similar expected long-term financial performance and economic characteristics. |
F-38
Table of Contents
Core | Expansion | |||||||||||||||
Year Ended December 31, 2006 | Markets | Markets | Other | Total | ||||||||||||
Service revenues | $ | 1,138,019 | $ | 152,928 | $ | — | $ | 1,290,947 | ||||||||
Equipment revenues | 208,333 | 47,583 | — | 255,916 | ||||||||||||
Total revenues | 1,346,352 | 200,511 | — | 1,546,863 | ||||||||||||
Cost of service(1) | 338,923 | 106,358 | — | 445,281 | ||||||||||||
Cost of equipment | 364,281 | 112,596 | — | 476,877 | ||||||||||||
Selling, general and administrative expenses(2) | 158,100 | 85,518 | — | 243,618 | ||||||||||||
Adjusted EBITDA (deficit)(3) | 492,773 | (97,214 | ) | — | ||||||||||||
Depreciation and amortization | 109,626 | 21,941 | 3,461 | 135,028 | ||||||||||||
Stock-based compensation expense | 7,725 | 6,747 | — | 14,472 | ||||||||||||
Income (loss) from operations | 367,109 | (126,387 | ) | (3,469 | ) | 237,253 | ||||||||||
Interest expense | — | — | 115,985 | 115,985 | ||||||||||||
Accretion of put option in majority-owned subsidiary | — | — | 770 | 770 | ||||||||||||
Interest income | — | — | (21,543 | ) | (21,543 | ) | ||||||||||
Loss on extinguishment of debt | — | — | 51,518 | 51,518 | ||||||||||||
Income (loss) before provision for income taxes | 367,109 | (126,387 | ) | (150,199 | ) | 90,523 | ||||||||||
Capital expenditures | 217,215 | 314,308 | 19,226 | 550,749 | ||||||||||||
Total assets(4) | 945,699 | 1,064,243 | 2,143,180 | 4,153,122 |
Core | Expansion | |||||||||||||||
Year Ended December 31, 2005 | Markets | Markets | Other | Total | ||||||||||||
Service revenues | $ | 868,681 | $ | 3,419 | $ | — | $ | 872,100 | ||||||||
Equipment revenues | 163,738 | 2,590 | — | 166,328 | ||||||||||||
Total revenues | 1,032,419 | 6,009 | — | 1,038,428 | ||||||||||||
Cost of service | 271,437 | 11,775 | — | 283,212 | ||||||||||||
Cost of equipment | 293,702 | 7,169 | — | 300,871 | ||||||||||||
Selling, general and administrative expenses(2) | 153,321 | 9,155 | — | 162,476 | ||||||||||||
Adjusted EBITDA (deficit)(3) | 316,555 | (22,090 | ) | — | ||||||||||||
Depreciation and amortization | 84,436 | 2,030 | 1,429 | 87,895 | ||||||||||||
Stock-based compensation expense | 2,596 | — | — | 2,596 | ||||||||||||
Income (loss) from operations | 219,777 | (24,370 | ) | 226,770 | 422,177 | |||||||||||
Interest expense | — | — | 58,033 | 58,033 | ||||||||||||
Accretion of put option in majority-owned subsidiary | — | — | 252 | 252 | ||||||||||||
Interest income | — | — | (8,658 | ) | (8,658 | ) | ||||||||||
Loss on extinguishment of debt | — | — | 46,448 | 46,448 | ||||||||||||
Income (loss) before provision for income taxes | 219,777 | (24,370 | ) | 130,695 | 326,102 | |||||||||||
Capital expenditures | 171,783 | 90,871 | 3,845 | 266,499 | ||||||||||||
Total assets | 701,675 | 378,671 | 1,078,635 | 2,158,981 |
F-39
Table of Contents
(1) | Cost of service for the year ended December 31, 2006 includes $1.3 million of stock-based compensation expense disclosed separately. | |
(2) | Selling, general and administrative expenses include stock-based compensation expense disclosed separately. For the years ended December 31, 2006 and 2005, selling, general and administrative expenses include $13.2 million and $2.6 million, respectively, of stock-based compensation expense. | |
(3) | Adjusted EBITDA (deficit) is presented in accordance with SFAS No. 131 as it is the primary financial measure utilized by management to facilitate evaluation of each segments’ ability to meet future debt service, capital expenditures and working capital requirements and to fund future growth. | |
(4) | Total assets as of December 31, 2006 include the Auction 66 AWS licenses that the Company was granted on November 29, 2006 for a total aggregate purchase price of approximately $1.4 billion. These AWS licenses are presented in the “Other” column as the Company has not allocated the Auction 66 licenses to its reportable segments as of December 31, 2006. |
2006 | 2005 | |||||||
Segment Adjusted EBITDA (Deficit): | ||||||||
Core Markets Adjusted EBITDA | $ | 492,773 | $ | 316,555 | ||||
Expansion Markets Adjusted EBITDA (Deficit) | (97,214 | ) | (22,090 | ) | ||||
Total | 395,559 | 294,465 | ||||||
Depreciation and amortization | (135,028 | ) | (87,895 | ) | ||||
Loss (gain) on disposal of assets | (8,806 | ) | 218,203 | |||||
Non-cash compensation expense | (14,472 | ) | (2,596 | ) | ||||
Interest expense | (115,985 | ) | (58,033 | ) | ||||
Accretion of put option in majority-owned subsidiary | (770 | ) | (252 | ) | ||||
Interest and other income | 21,543 | 8,658 | ||||||
(Gain) loss on extinguishment of debt | (51,518 | ) | (46,448 | ) | ||||
Consolidated income before provision for income taxes | $ | 90,523 | $ | 326,102 | ||||
19. | Guarantor Subsidiaries: |
F-40
Table of Contents
As of December 31, 2006
Non- | ||||||||||||||||||||||||
Guarantor | Guarantor | |||||||||||||||||||||||
Parent | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
CURRENT ASSETS: | ||||||||||||||||||||||||
Cash and cash equivalents | $ | 15,714 | $ | 99,301 | $ | 257 | $ | 46,226 | $ | — | $ | 161,498 | ||||||||||||
Short-term investments | 45,365 | 345,286 | — | — | — | 390,651 | ||||||||||||||||||
Restricted short-term investments | — | 556 | — | 51 | — | 607 | ||||||||||||||||||
Inventories, net | — | 81,339 | 11,576 | — | — | 92,915 | ||||||||||||||||||
Accounts receivable, net | — | 29,348 | — | 1,005 | (2,213 | ) | 28,140 | |||||||||||||||||
Prepaid expenses | — | 8,107 | 23,865 | 1,137 | — | 33,109 | ||||||||||||||||||
Deferred charges | — | 26,509 | — | — | — | 26,509 | ||||||||||||||||||
Deferred tax asset | — | 815 | — | — | — | 815 | ||||||||||||||||||
Current receivable from subsidiaries | — | 4,734 | — | — | (4,734 | ) | — | |||||||||||||||||
Other current assets | 97 | 9,478 | 15,354 | 120 | (766 | ) | 24,283 | |||||||||||||||||
Total current assets | 61,176 | 605,473 | 51,052 | 48,539 | (7,713 | ) | 758,527 | |||||||||||||||||
Property and equipment, net | — | 14,077 | 1,158,442 | 83,643 | — | 1,256,162 | ||||||||||||||||||
Long-term investments | — | 1,865 | — | — | — | 1,865 | ||||||||||||||||||
Investment in subsidiaries | 320,783 | 939,009 | — | — | (1,259,792 | ) | — | |||||||||||||||||
FCC licenses | 1,391,410 | — | 387,876 | 293,599 | — | 2,072,885 | ||||||||||||||||||
Microwave relocation costs | — | — | 9,187 | — | — | 9,187 | ||||||||||||||||||
Long-term receivable from subsidiaries | — | 456,070 | — | — | (456,070 | ) | — | |||||||||||||||||
Other assets | 399 | 51,477 | 4,078 | 5,810 | (7,268 | ) | 54,496 | |||||||||||||||||
Total assets | $ | 1,773,768 | $ | 2,067,971 | $ | 1,610,635 | $ | 431,591 | $ | (1,730,843 | ) | $ | 4,153,122 | |||||||||||
CURRENT LIABILITIES: | ||||||||||||||||||||||||
Accounts payable and accrued expenses | $ | 401 | $ | 138,953 | $ | 161,663 | $ | 29,614 | $ | (4,950 | ) | $ | 325,681 | |||||||||||
Current maturities of long-term debt | — | 16,000 | — | 4,734 | (4,734 | ) | 16,000 | |||||||||||||||||
Deferred revenue | — | 19,030 | 71,471 | — | — | 90,501 | ||||||||||||||||||
Advances to subsidiaries | 865,612 | (1,207,821 | ) | 341,950 | — | 259 | — | |||||||||||||||||
Other current liabilities | — | 31 | 3,416 | 757 | (757 | ) | 3,447 | |||||||||||||||||
Total current liabilities | 866,013 | (1,033,807 | ) | 578,500 | 35,105 | (10,182 | ) | 435,629 | ||||||||||||||||
Long-term debt | — | 2,580,000 | — | 4,540 | (4,540 | ) | 2,580,000 | |||||||||||||||||
Long-term note to parent | — | — | — | 456,070 | (456,070 | ) | — | |||||||||||||||||
Deferred tax liabilities | 7 | 177,190 | — | — | — | 177,197 | ||||||||||||||||||
Deferred rents | — | — | 21,784 | 419 | — | 22,203 | ||||||||||||||||||
Redeemable minority interest | — | 4,029 | — | — | — | 4,029 | ||||||||||||||||||
Other long-term liabilities | — | 19,517 | 6,285 | 514 | — | 26,316 | ||||||||||||||||||
Total liabilities | 866,020 | 1,746,929 | 606,569 | 496,648 | (470,792 | ) | 3,245,374 | |||||||||||||||||
COMMITMENTS AND CONTINGENCIES (See Note 10) | ||||||||||||||||||||||||
SERIES D PREFERRED STOCK | 443,368 | — | — | — | — | 443,368 | ||||||||||||||||||
SERIES E PREFERRED STOCK | 51,135 | — | — | — | — | 51,135 | ||||||||||||||||||
STOCKHOLDERS’ EQUITY: | ||||||||||||||||||||||||
Preferred stock | — | — | — | — | — | — | ||||||||||||||||||
Common stock | 16 | — | — | — | — | 16 | ||||||||||||||||||
Additional paid-in capital | 166,315 | — | — | 20,000 | (20,000 | ) | 166,315 | |||||||||||||||||
Retained earnings (deficit) | 245,690 | 319,863 | 1,004,066 | (85,057 | ) | (1,238,872 | ) | 245,690 | ||||||||||||||||
Accumulated other comprehensive income | 1,224 | 1,179 | — | — | (1,179 | ) | 1,224 | |||||||||||||||||
Total stockholders’ equity | 413,245 | 321,042 | 1,004,066 | (65,057 | ) | (1,260,051 | ) | 413,245 | ||||||||||||||||
Total liabilities and stockholders’ equity | $ | 1,773,768 | $ | 2,067,971 | $ | 1,610,635 | $ | 431,591 | $ | (1,730,843 | ) | $ | 4,153,122 | |||||||||||
F-41
Table of Contents
As of December 31, 2005
Non- | ||||||||||||||||||||||||
Guarantor | Guarantor | |||||||||||||||||||||||
Parent | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
CURRENT ASSETS: | ||||||||||||||||||||||||
Cash and cash equivalents | $ | 10,624 | $ | 95,772 | $ | 219 | $ | 6,094 | $ | — | $ | 112,709 | ||||||||||||
Short-term investments | 24,223 | 366,199 | — | — | — | 390,422 | ||||||||||||||||||
Inventories, net | — | 34,045 | 5,386 | — | — | 39,431 | ||||||||||||||||||
Accounts receivable, net | — | 16,852 | — | — | (824 | ) | 16,028 | |||||||||||||||||
Prepaid expenses | — | — | 21,412 | 18 | — | 21,430 | ||||||||||||||||||
Deferred charges | — | 13,270 | — | — | — | 13,270 | ||||||||||||||||||
Deferred tax asset | — | 2,122 | — | — | — | 2,122 | ||||||||||||||||||
Other current assets | 208 | 2,364 | 14,118 | — | — | 16,690 | ||||||||||||||||||
Total current assets | 35,055 | 530,624 | 41,135 | 6,112 | (824 | ) | 612,102 | |||||||||||||||||
Property and equipment, net | — | — | 829,457 | 2,033 | — | 831,490 | ||||||||||||||||||
Restricted cash and investments | — | 2,917 | 3 | — | — | 2,920 | ||||||||||||||||||
Long-term investments | — | 16,385 | — | — | (11,333 | ) | 5,052 | |||||||||||||||||
Investment in subsidiaries | 243,671 | 710,963 | — | — | (954,634 | ) | — | |||||||||||||||||
FCC licenses | — | — | 387,700 | 293,599 | — | 681,299 | ||||||||||||||||||
Microwave relocation costs | — | — | 9,187 | — | — | 9,187 | ||||||||||||||||||
Long-term receivable from subsidiaries | — | 320,630 | — | — | (320,630 | ) | — | |||||||||||||||||
Other assets | — | 15,360 | 1,571 | — | — | 16,931 | ||||||||||||||||||
Total assets | $ | 278,726 | $ | 1,596,879 | $ | 1,269,053 | $ | 301,744 | $ | (1,287,421 | ) | $ | 2,158,981 | |||||||||||
CURRENT LIABILITIES: | ||||||||||||||||||||||||
Accounts payable and accrued expenses | $ | 321 | $ | 58,104 | $ | 125,362 | $ | 2,590 | $ | (12,157 | ) | $ | 174,220 | |||||||||||
Current maturities of long-term debt | — | — | 2,690 | — | — | 2,690 | ||||||||||||||||||
Deferred revenue | — | 9,158 | 47,402 | — | — | 56,560 | ||||||||||||||||||
Advances to subsidiaries | (559,186 | ) | 218,278 | 340,908 | — | — | — | |||||||||||||||||
Other current liabilities | — | — | 2,147 | — | — | 2,147 | ||||||||||||||||||
Total current liabilities | (558,865 | ) | 285,540 | 518,509 | 2,590 | (12,157 | ) | 235,617 | ||||||||||||||||
Long-term debt, net | — | 902,864 | — | — | — | 902,864 | ||||||||||||||||||
Long-term note to parent | — | — | — | 320,630 | (320,630 | ) | — | |||||||||||||||||
Deferred tax liabilities | — | 146,053 | — | — | — | 146,053 | ||||||||||||||||||
Deferred rents | — | — | 14,739 | — | — | 14,739 | ||||||||||||||||||
Redeemable minority interest | — | 1,259 | — | — | — | 1,259 | ||||||||||||||||||
Other long-term liabilities | — | 17,233 | 3,625 | — | — | 20,858 | ||||||||||||||||||
Total liabilities | (558,865 | ) | 1,352,949 | 536,873 | 323,220 | (332,787 | ) | 1,321,390 | ||||||||||||||||
COMMITMENTS AND CONTINGENCIES (See Note 10) | ||||||||||||||||||||||||
SERIES D PREFERRED STOCK | 421,889 | — | — | — | — | 421,889 | ||||||||||||||||||
SERIES E PREFERRED STOCK | 47,796 | — | — | — | — | 47,796 | ||||||||||||||||||
STOCKHOLDERS’ EQUITY: | ||||||||||||||||||||||||
Preferred stock | — | — | — | — | — | — | ||||||||||||||||||
Common stock | 15 | — | — | — | — | 15 | ||||||||||||||||||
Additional paid-in capital | 149,584 | — | — | 20,000 | (20,000 | ) | 149,584 | |||||||||||||||||
Subscriptions receivable | — | — | — | (13,333 | ) | 13,333 | — | |||||||||||||||||
Deferred compensation | (178 | ) | (178 | ) | (178 | ) | — | 356 | (178 | ) | ||||||||||||||
Retained earnings (deficit) | 216,702 | 242,357 | 732,358 | (28,143 | ) | (946,572 | ) | 216,702 | ||||||||||||||||
Accumulated other comprehensive income | 1,783 | 1,751 | — | — | (1,751 | ) | 1,783 | |||||||||||||||||
Total stockholders’ equity | 367,906 | 243,930 | 732,180 | (21,476 | ) | (954,634 | ) | 367,906 | ||||||||||||||||
Total liabilities and stockholders’ equity | $ | 278,726 | $ | 1,596,879 | $ | 1,269,053 | $ | 301,744 | $ | (1,287,421 | ) | $ | 2,158,981 | |||||||||||
F-42
Table of Contents
Year Ended December 31, 2006
Guarantor | Non-Guarantor | |||||||||||||||||||||||
Parent | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
REVENUES: | ||||||||||||||||||||||||
Service revenues | $ | — | $ | 695 | $ | 1,290,945 | $ | 1,005 | $ | (1,698 | ) | $ | 1,290,947 | |||||||||||
Equipment revenues | — | 11,900 | 244,016 | — | — | 255,916 | ||||||||||||||||||
Total revenues | — | 12,595 | 1,534,961 | 1,005 | (1,698 | ) | 1,546,863 | |||||||||||||||||
OPERATING EXPENSES: | ||||||||||||||||||||||||
Cost of service (excluding depreciation and amortization expense shown separately below) | — | — | 434,987 | 11,992 | (1,698 | ) | 445,281 | |||||||||||||||||
Cost of equipment | — | 11,538 | 465,339 | — | — | 476,877 | ||||||||||||||||||
Selling, general and administrative expenses (excluding depreciation and amortization expense shown separately below) | — | 362 | 227,723 | 15,533 | — | 243,618 | ||||||||||||||||||
Depreciation and amortization | — | — | 134,708 | 320 | — | 135,028 | ||||||||||||||||||
Loss on disposal of assets | — | — | 8,806 | — | — | 8,806 | ||||||||||||||||||
Total operating expenses | — | 11,900 | 1,271,563 | 27,845 | (1,698 | ) | 1,309,610 | |||||||||||||||||
Income from operations | — | 695 | 263,398 | (26,480 | ) | — | 237,253 | |||||||||||||||||
OTHER EXPENSE (INCOME): | ||||||||||||||||||||||||
Interest expense | 17,161 | 115,575 | (7,370 | ) | 30,956 | (40,337 | ) | 115,985 | ||||||||||||||||
Earnings from consolidated subsidiaries | (77,506 | ) | (214,795 | ) | — | — | 292,301 | — | ||||||||||||||||
Accretion of put option in majority-owned subsidiary | — | 770 | — | — | — | 770 | ||||||||||||||||||
Interest and other income | (2,807 | ) | (57,493 | ) | (699 | ) | (882 | ) | 40,338 | (21,543 | ) | |||||||||||||
Loss on extinguishment of debt | 9,345 | 42,415 | (242 | ) | — | — | 51,518 | |||||||||||||||||
Total other expense | (53,807 | ) | (113,528 | ) | (8,311 | ) | 30,074 | 292,302 | 146,730 | |||||||||||||||
Income before provision for income taxes | 53,807 | 114,223 | 271,709 | (56,914 | ) | (292,302 | ) | 90,523 | ||||||||||||||||
Provision for income taxes | — | (36,717 | ) | — | — | — | (36,717 | ) | ||||||||||||||||
Net income (loss) | $ | 53,807 | $ | 77,506 | $ | 271,709 | $ | (56,914 | ) | $ | (292,302 | ) | $ | 53,806 | ||||||||||
F-43
Table of Contents
Year Ended December 31, 2005
Guarantor | Non-Guarantor | |||||||||||||||||||||||
Parent | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
REVENUES: | ||||||||||||||||||||||||
Service revenues | $ | — | $ | — | $ | 872,100 | $ | — | $ | — | $ | 872,100 | ||||||||||||
Equipment revenues | — | 13,960 | 152,368 | — | — | 166,328 | ||||||||||||||||||
Total revenues | — | 13,960 | 1,024,468 | — | — | 1,038,428 | ||||||||||||||||||
OPERATING EXPENSES: | ||||||||||||||||||||||||
Cost of service (excluding depreciation and amortization expense shown separately below) | — | — | 283,175 | 37 | — | 283,212 | ||||||||||||||||||
Cost of equipment | — | 12,837 | 288,034 | — | — | 300,871 | ||||||||||||||||||
Selling, general and administrative expenses (excluding depreciation and amortization expense shown separately below) | 274 | 2,893 | 158,287 | 1,022 | — | 162,476 | ||||||||||||||||||
Depreciation and amortization | — | 120 | 87,775 | — | — | 87,895 | ||||||||||||||||||
Gain on disposal of assets | — | — | (218,203 | ) | — | — | (218,203 | ) | ||||||||||||||||
Total operating expenses | 274 | 15,850 | 599,068 | 1,059 | — | 616,251 | ||||||||||||||||||
Income from operations | (274 | ) | (1,890 | ) | 425,400 | (1,059 | ) | — | 422,177 | |||||||||||||||
OTHER EXPENSE (INCOME): | ||||||||||||||||||||||||
Interest expense | — | 58,482 | (444 | ) | 26,997 | (27,002 | ) | 58,033 | ||||||||||||||||
Earnings from consolidated subsidiaries | (198,335 | ) | (396,060 | ) | — | — | 594,395 | — | ||||||||||||||||
Accretion of put option in majority-owned subsidiary | — | 252 | — | — | — | 252 | ||||||||||||||||||
Interest and other income | (615 | ) | (34,913 | ) | (1 | ) | (131 | ) | 27,002 | (8,658 | ) | |||||||||||||
Loss on extinguishment of debt | — | 44,589 | 1,859 | — | — | 46,448 | ||||||||||||||||||
Total other expense | (198,950 | ) | (327,650 | ) | 1,414 | 26,866 | 594,395 | 96,075 | ||||||||||||||||
Income before provision for income taxes | 198,676 | 325,760 | 423,986 | (27,925 | ) | (594,395 | ) | 326,102 | ||||||||||||||||
Provision for income taxes | — | (127,425 | ) | — | — | — | (127,425 | ) | ||||||||||||||||
Net income (loss) | $ | 198,676 | $ | 198,335 | $ | 423,986 | $ | (27,925 | ) | $ | (594,395 | ) | $ | 198,677 | ||||||||||
F-44
Table of Contents
Year Ended December 31, 2004
Guarantor | Non-Guarantor | |||||||||||||||||||||||
Parent | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
REVENUES: | ||||||||||||||||||||||||
Service revenues | $ | — | $ | — | $ | 616,401 | $ | — | $ | — | $ | 616,401 | ||||||||||||
Equipment revenues | — | 11,720 | 120,129 | — | — | 131,849 | ||||||||||||||||||
Total revenues | — | 11,720 | 736,530 | — | — | 748,250 | ||||||||||||||||||
OPERATING EXPENSES: | ||||||||||||||||||||||||
Cost of service (excluding depreciation and amortization expense shown separately below) | — | — | 200,806 | — | — | 200,806 | ||||||||||||||||||
Cost of equipment | — | 10,944 | 211,822 | — | — | 222,766 | ||||||||||||||||||
Selling, general and administrative expenses (excluding depreciation and amortization expense shown separately below) | 2,631 | 38,956 | 89,761 | 162 | — | 131,510 | ||||||||||||||||||
Depreciation and amortization | — | 915 | 61,286 | — | — | 62,201 | ||||||||||||||||||
Loss on disposal of assets | — | 24 | 3,185 | — | — | 3,209 | ||||||||||||||||||
Total operating expenses | 2,631 | 50,839 | 566,860 | 162 | — | 620,492 | ||||||||||||||||||
Income from operations | (2,631 | ) | (39,119 | ) | 169,670 | (162 | ) | — | 127,758 | |||||||||||||||
OTHER EXPENSE (INCOME): | ||||||||||||||||||||||||
Interest expense | — | 16,723 | 2,307 | 56 | (56 | ) | 19,030 | |||||||||||||||||
Earnings from consolidated subsidiaries | (66,600 | ) | (167,843 | ) | — | — | 234,443 | — | ||||||||||||||||
Accretion of put option in majority-owned subsidiary | — | 8 | — | — | — | 8 | ||||||||||||||||||
Interest and other income | — | (2,528 | ) | — | — | 56 | (2,472 | ) | ||||||||||||||||
Gain on extinguishment of debt | — | — | (698 | ) | — | — | (698 | ) | ||||||||||||||||
Total other expense | (66,600 | ) | (153,640 | ) | 1,609 | 56 | 234,443 | 15,868 | ||||||||||||||||
Income before provision for income taxes | 63,969 | 114,521 | 168,061 | (218 | ) | (234,443 | ) | 111,890 | ||||||||||||||||
Provision for income taxes | 921 | (47,921 | ) | — | — | — | (47,000 | ) | ||||||||||||||||
Net income (loss) | $ | 64,890 | $ | 66,600 | $ | 168,061 | $ | (218 | ) | $ | (234,443 | ) | $ | 64,890 | ||||||||||
F-45
Table of Contents
Year Ended December 31, 2006
Guarantor | Non-Guarantor | |||||||||||||||||||||||
Parent | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||||||||||
Net income (loss) | $ | 53,807 | $ | 77,504 | $ | 271,709 | $ | (56,914 | ) | $ | (292,300 | ) | $ | 53,806 | ||||||||||
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: | ||||||||||||||||||||||||
Depreciation and amortization | — | — | 134,708 | 320 | — | 135,028 | ||||||||||||||||||
Provision for uncollectible accounts receivable | — | 31 | — | — | — | 31 | ||||||||||||||||||
Deferred rent expense | — | — | 7,045 | 419 | — | 7,464 | ||||||||||||||||||
Cost of abandoned cell sites | — | — | 1,421 | 2,362 | — | 3,783 | ||||||||||||||||||
Non-cash interest expense | 4,810 | 1,681 | 473 | 40,129 | (40,129 | ) | 6,964 | |||||||||||||||||
Loss on disposal of assets | — | — | 8,806 | — | — | 8,806 | ||||||||||||||||||
Loss (gain) on extinguishment of debt | 9,345 | 42,415 | (242 | ) | — | — | 51,518 | |||||||||||||||||
Gain on sale of investments | (815 | ) | (1,570 | ) | — | — | — | (2,385 | ) | |||||||||||||||
Accretion of asset retirement obligation | — | — | 706 | 63 | — | 769 | ||||||||||||||||||
Accretion of put option in majority-owned subsidiary | — | 770 | — | — | — | 770 | ||||||||||||||||||
Deferred income taxes | (613 | ) | 32,954 | — | — | — | 32,341 | |||||||||||||||||
Stock-based compensation expense | — | — | 14,472 | — | — | 14,472 | ||||||||||||||||||
Changes in assets and liabilities | 1,334,686 | (1,758,916 | ) | 29,988 | 13,162 | 432,474 | 51,394 | |||||||||||||||||
Net cash provided by (used in) operating activities | 1,401,220 | (1,605,131 | ) | 469,086 | (459 | ) | 100,045 | 364,761 | ||||||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||||||||||
Purchases of property and equipment | — | (19,326 | ) | (472,020 | ) | (59,403 | ) | — | (550,749 | ) | ||||||||||||||
Change in prepaid purchases of property and equipment | — | (7,826 | ) | 2,564 | — | — | (5,262 | ) | ||||||||||||||||
Proceeds from sale of property and equipment | — | — | 3,021 | — | — | 3,021 | ||||||||||||||||||
Purchase of investments | (326,517 | ) | (943,402 | ) | — | — | — | (1,269,919 | ) | |||||||||||||||
Proceeds from sale of investments | 333,159 | 939,265 | — | — | — | 1,272,424 | ||||||||||||||||||
Change in restricted cash and investments | — | 2,448 | 9 | (51 | ) | — | 2,406 | |||||||||||||||||
Purchases of and deposits for FCC licenses | (1,391,410 | ) | — | (176 | ) | — | — | (1,391,586 | ) | |||||||||||||||
Net cash used in investing activities | (1,384,768 | ) | (28,841 | ) | (466,602 | ) | (59,454 | ) | — | (1,939,665 | ) | |||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||||||||||
Change in book overdraft. | — | 11,368 | — | — | — | 11,368 | ||||||||||||||||||
Proceeds from bridge credit agreements | 1,500,000 | — | — | — | — | 1,500,000 | ||||||||||||||||||
Proceeds from Senior Secured Credit Facility | — | 1,600,000 | — | — | — | 1,600,000 | ||||||||||||||||||
Proceeds from 91/4% Senior Notes | — | 1,000,000 | — | — | — | 1,000,000 | ||||||||||||||||||
Proceeds from minority interest in subsidiary | — | 2,000 | — | — | — | 2,000 | ||||||||||||||||||
Proceeds from long-term note to parent | — | — | — | 100,045 | (100,045 | ) | — | |||||||||||||||||
Debt issuance costs | (14,106 | ) | (44,683 | ) | — | — | — | (58,789 | ) | |||||||||||||||
Repayment of debt | (1,500,000 | ) | (935,539 | ) | (2,446 | ) | — | — | (2,437,985 | ) | ||||||||||||||
Proceeds from termination of cash flow hedging derivative | — | 4,355 | — | — | — | 4,355 | ||||||||||||||||||
Proceeds from exercise of stock options and warrants | 2,744 | — | — | — | — | 2,744 | ||||||||||||||||||
Net cash (used in) provided by financing activities | (11,362 | ) | 1,637,501 | (2,446 | ) | 100,045 | (100,045 | ) | 1,623,693 | |||||||||||||||
INCREASE IN CASH AND CASH EQUIVALENTS | 5,090 | 3,529 | 38 | 40,132 | — | 48,789 | ||||||||||||||||||
CASH AND CASH EQUIVALENTS, beginning of period | 10,624 | 95,772 | 219 | 6,094 | — | 112,709 | ||||||||||||||||||
CASH AND CASH EQUIVALENTS, end of period | $ | 15,714 | $ | 99,301 | $ | 257 | $ | 46,226 | $ | — | $ | 161,498 | ||||||||||||
F-46
Table of Contents
Year Ended December 31, 2005
Guarantor | Non-Guarantor | |||||||||||||||||||||||
Parent | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||||||||||
Net income (loss) | $ | 198,928 | $ | 198,587 | $ | 423,986 | $ | (27,925 | ) | $ | (594,899 | ) | $ | 198,677 | ||||||||||
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: | ||||||||||||||||||||||||
Depreciation and amortization | — | 120 | 87,775 | — | — | 87,895 | ||||||||||||||||||
Provision for uncollectible accounts receivable | — | 129 | — | — | — | 129 | ||||||||||||||||||
Deferred rent expense | — | (72 | ) | 4,479 | — | — | 4,407 | |||||||||||||||||
Cost of abandoned cell sites | — | — | 725 | — | — | 725 | ||||||||||||||||||
Non-cash interest expense | — | 3,695 | 590 | 26,997 | (26,997 | ) | 4,285 | |||||||||||||||||
Gain on disposal of assets | — | — | (218,203 | ) | — | — | (218,203 | ) | ||||||||||||||||
Loss on extinguishment of debt | — | 44,589 | 1,859 | — | — | 46,448 | ||||||||||||||||||
Gain on sale of investments | (154 | ) | (36 | ) | — | — | — | (190 | ) | |||||||||||||||
Accretion of asset retirement obligation | — | 1 | 422 | — | — | 423 | ||||||||||||||||||
Accretion of put option in majority-owned subsidiary | — | — | — | — | 252 | 252 | ||||||||||||||||||
Deferred income taxes | 52,882 | 72,173 | — | — | — | 125,055 | ||||||||||||||||||
Stock-based compensation expense | — | — | 2,596 | — | — | 2,596 | ||||||||||||||||||
Changes in assets and liabilities | (272,868 | ) | (608,004 | ) | 13,857 | 862 | 896,870 | 30,717 | ||||||||||||||||
Net cash (used in) provided by operating activities | (21,212 | ) | (288,818 | ) | 318,086 | (66 | ) | 275,226 | 283,216 | |||||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||||||||||
Purchases of property and equipment | — | — | (266,033 | ) | (466 | ) | — | (266,499 | ) | |||||||||||||||
Change in prepaid purchases of property and equipment | — | — | (11,800 | ) | — | — | (11,800 | ) | ||||||||||||||||
Proceeds from sale of property and equipment | — | — | 146 | — | — | 146 | ||||||||||||||||||
Purchase of investments | (54,262 | ) | (685,220 | ) | — | — | — | (739,482 | ) | |||||||||||||||
Proceeds from sale of investments | 30,225 | 356,219 | — | — | — | 386,444 | ||||||||||||||||||
Change in restricted cash and investments | — | (121 | ) | 14 | — | — | (107 | ) | ||||||||||||||||
Purchases of FCC licenses | — | — | (235,330 | ) | (268,600 | ) | — | (503,930 | ) | |||||||||||||||
Proceeds from sale of FCC licenses | — | — | 230,000 | — | — | 230,000 | ||||||||||||||||||
Net cash used in investing activities | (24,037 | ) | (329,122 | ) | (283,003 | ) | (269,066 | ) | — | (905,228 | ) | |||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||||||||||
Change in book overdraft. | — | (565 | ) | — | — | — | (565 | ) | ||||||||||||||||
Payment upon execution of cash flow hedging derivative | — | (1,899 | ) | — | — | — | (1,899 | ) | ||||||||||||||||
Proceeds from Credit Agreements | — | 902,875 | — | — | — | 902,875 | ||||||||||||||||||
Proceeds from Bridge Credit Agreements | — | 540,000 | — | — | — | 540,000 | ||||||||||||||||||
Proceeds from long-term note to parent | — | — | — | 275,226 | (275,226 | ) | — | |||||||||||||||||
Debt issuance costs | — | (29,480 | ) | — | — | — | (29,480 | ) | ||||||||||||||||
Repayment of debt | — | (719,671 | ) | (34,991 | ) | — | — | (754,662 | ) | |||||||||||||||
Proceeds from repayment of subscriptions receivable | — | 103 | — | — | — | 103 | ||||||||||||||||||
Proceeds from issuance of preferred stock, net of issuance costs | 46,662 | — | — | — | — | 46,662 | ||||||||||||||||||
Proceeds from exercise of stock options and warrants | 9,210 | — | — | — | — | 9,210 | ||||||||||||||||||
Net cash provided by (used in) financing activities | 55,872 | 691,363 | (34,991 | ) | 275,226 | (275,226 | ) | 712,244 | ||||||||||||||||
INCREASE IN CASH AND CASH EQUIVALENTS | 10,623 | 73,423 | 92 | 6,094 | — | 90,232 | ||||||||||||||||||
CASH AND CASH EQUIVALENTS, beginning of period | 1 | 22,349 | 127 | — | — | 22,477 | ||||||||||||||||||
CASH AND CASH EQUIVALENTS, end of period | $ | 10,624 | $ | 95,772 | $ | 219 | $ | 6,094 | $ | — | $ | 112,709 | ||||||||||||
F-47
Table of Contents
Year Ended December 31, 2004
Guarantor | Non-Guarantor | |||||||||||||||||||||||
Parent | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||||||||||
Net income (loss) | $ | 54,294 | $ | 66,609 | $ | 168,061 | $ | (218 | ) | $ | (223,856 | ) | $ | 64,890 | ||||||||||
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | ||||||||||||||||||||||||
Depreciation and amortization | — | 915 | 61,286 | — | — | 62,201 | ||||||||||||||||||
Provision for uncollectible accounts receivable | — | 125 | — | — | — | 125 | ||||||||||||||||||
Deferred rent expense | — | 15 | 3,451 | — | — | 3,466 | ||||||||||||||||||
Cost of abandoned cell sites | — | — | 1,021 | — | — | 1,021 | ||||||||||||||||||
Non-cash interest expense | — | 470 | 2,419 | 56 | (56 | ) | 2,889 | |||||||||||||||||
Loss (gain) on disposal of assets | — | 24 | 3,185 | — | — | 3,209 | ||||||||||||||||||
(Gain) loss on extinguishment of debt | — | — | (698 | ) | — | — | (698 | ) | ||||||||||||||||
(Gain) loss on sale of investments | — | 576 | — | — | — | 576 | ||||||||||||||||||
Accretion of asset retirement obligation | — | (1 | ) | 254 | — | — | 253 | |||||||||||||||||
Accretion of put option in majority-owned subsidiary | — | — | — | — | 8 | 8 | ||||||||||||||||||
Deferred income taxes | (921 | ) | 45,362 | — | — | — | 44,441 | |||||||||||||||||
Stock-based compensation expense | — | 10,429 | — | — | — | 10,429 | ||||||||||||||||||
Changes in assets and liabilities | (53,837 | ) | (314,588 | ) | 77,929 | 143 | 247,922 | (42,431 | ) | |||||||||||||||
Net cash (used in) provided by operating activities | (464 | ) | (190,064 | ) | 316,908 | (19 | ) | 24,018 | 150,379 | |||||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||||||||||
Purchases of property and equipment | — | (1,558 | ) | (249,272 | ) | — | — | (250,830 | ) | |||||||||||||||
Purchase of investments | — | (158,672 | ) | — | — | — | (158,672 | ) | ||||||||||||||||
Proceeds from sale of investments | — | 307,220 | — | — | — | 307,220 | ||||||||||||||||||
Change in restricted cash and investments | — | (1,511 | ) | — | — | — | (1,511 | ) | ||||||||||||||||
Purchases of FCC licenses | — | (8,700 | ) | (53,325 | ) | — | — | (62,025 | ) | |||||||||||||||
Deposit to FCC for licenses | — | — | — | (25,000 | ) | — | (25,000 | ) | ||||||||||||||||
Microwave relocation costs | — | — | (63 | ) | — | — | (63 | ) | ||||||||||||||||
Net cash provided by (used in) investing activities | — | 136,779 | (302,660 | ) | (25,000 | ) | — | (190,881 | ) | |||||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||||||||||
Change in book overdraft. | — | 5,778 | — | — | — | 5,778 | ||||||||||||||||||
Proceeds from short-term notes payable | — | 1,703 | — | — | — | 1,703 | ||||||||||||||||||
Proceeds from long-term note to parent | — | — | — | 18,352 | (18,352 | ) | — | |||||||||||||||||
Proceeds from capital contributions | — | — | — | 6,667 | (6,667 | ) | — | |||||||||||||||||
Debt issuance costs | — | (164 | ) | — | — | — | (164 | ) | ||||||||||||||||
Repayment of debt | — | — | (14,215 | ) | — | — | (14,215 | ) | ||||||||||||||||
Proceeds from minority interest in majority-owned subsidiary | — | — | — | — | 1,000 | 1,000 | ||||||||||||||||||
Proceeds from issuance of preferred stock, net of issuance costs | 5 | — | — | — | — | 5 | ||||||||||||||||||
Proceeds from exercise of stock options and warrants | 460 | — | — | — | — | 460 | ||||||||||||||||||
Net cash provided by (used in) financing activities | 465 | 7,317 | (14,215 | ) | 25,019 | (24,019 | ) | (5,433 | ) | |||||||||||||||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 1 | (45,968 | ) | 33 | — | (1 | ) | (45,935 | ) | |||||||||||||||
CASH AND CASH EQUIVALENTS, beginning of period | — | 68,318 | 94 | — | — | 68,412 | ||||||||||||||||||
CASH AND CASH EQUIVALENTS, end of period | $ | 1 | $ | 22,350 | $ | 127 | $ | — | $ | (1 | ) | $ | 22,477 | |||||||||||
F-48
Table of Contents
20. | Related-Party Transactions: |
21. | Supplemental Cash Flow Information: |
Year Ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(In thousands) | ||||||||||||
Cash paid for interest | $ | 86,380 | $ | 41,360 | $ | 19,180 | ||||||
Cash paid for income taxes | 3,375 | — | — |
F-49
Table of Contents
22. | Fair Value of Financial Instruments: |
2006 | 2005 | |||||||||||||||||||
Carrying | Carrying | |||||||||||||||||||
Amount | Fair Value | Amount | Fair Value | |||||||||||||||||
Microwave relocation obligations | $ | — | $ | — | $ | 2,690 | $ | 2,690 | ||||||||||||
Credit Agreements | — | — | 900,000 | 861,380 | ||||||||||||||||
Senior Secured Credit Facility | 1,596,000 | 1,597,219 | — | — | ||||||||||||||||
91/4% Senior Notes | 1,000,000 | 1,032,500 | — | — | ||||||||||||||||
Cash flow hedging derivatives | 1,865 | 1,865 | 5,052 | 5,052 | ||||||||||||||||
Short-term investments | 390,651 | 390,651 | 390,422 | 390,422 |
Three Months Ended | ||||||||||||||||
March 31, | June 30, | September 30, | December 31, | |||||||||||||
2005 | 2005 | 2005 | 2005 | |||||||||||||
Total revenues | $ | 235,956 | $ | 250,689 | $ | 263,555 | $ | 288,229 | ||||||||
Income from operations(1) | 45,841 | 284,303 | 47,778 | 44,256 | ||||||||||||
Net income(1) | 22,800 | 136,482 | 20,556 | 18,841 | ||||||||||||
Net income per common share — basic | $ | 0.07 | $ | 0.54 | $ | 0.06 | $ | 0.05 | ||||||||
Net income per common share — diluted | $ | 0.06 | $ | 0.46 | $ | 0.05 | $ | 0.04 |
Three Months Ended | ||||||||||||||||
March 31, | June 30, | September 30, | December 31, | |||||||||||||
2006 | 2006 | 2006 | 2006 | |||||||||||||
Total revenues | $ | 329,461 | $ | 368,194 | $ | 396,116 | $ | 453,092 | ||||||||
Income from operations | 46,999 | 54,099 | 69,394 | 66,761 | ||||||||||||
Net income (loss)(2) | 18,369 | 22,989 | 29,266 | (16,818 | ) | |||||||||||
Net income (loss) per common share — basic | $ | 0.04 | $ | 0.06 | $ | 0.08 | $ | (0.15 | ) | |||||||
Net income (loss) per common share — diluted | $ | 0.04 | $ | 0.06 | $ | 0.08 | $ | (0.15 | ) |
F-50
Table of Contents
(1) | During the three months ended June 30, 2005, the Company recorded on a gain on the sale of PCS spectrum in the amount of $228.2 million. | |
(2) | During the three months ended December 31, 2006, the Company repaid all of its outstanding obligations under the Credit Agreements, the Secured Bridge Credit Facility and the Unsecured Bridge Credit Facility resulting in a loss on extinguishment of debt in the amount of approximately $51.8 million. |
24. | Subsequent Events: |
F-51
Table of Contents
Condensed Consolidated Balance Sheets
(In thousands, except share and per share information)
(Unaudited)
June 30, | December 31, | |||||||
2007 | 2006 | |||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 227,836 | $ | 161,498 | ||||
Short-term investments | 1,539,438 | 390,651 | ||||||
Restricted short-term investments | — | 607 | ||||||
Inventories, net | 90,000 | 92,915 | ||||||
Accounts receivable (net of allowance for uncollectible accounts of $2,306 and $1,950 at June 30, 2007 and December 31, 2006, respectively) | 29,533 | 28,140 | ||||||
Prepaid expenses | 44,667 | 33,109 | ||||||
Deferred charges | 25,423 | 26,509 | ||||||
Deferred tax asset | 815 | 815 | ||||||
Other current assets | 20,998 | 24,283 | ||||||
Total current assets | 1,978,710 | 758,527 | ||||||
Property and equipment, net | 1,534,402 | 1,256,162 | ||||||
Long-term investments | 8,573 | 1,865 | ||||||
FCC licenses | 2,072,895 | 2,072,885 | ||||||
Microwave relocation costs | 9,600 | 9,187 | ||||||
Other assets | 62,165 | 54,496 | ||||||
Total assets | $ | 5,666,345 | $ | 4,153,122 | ||||
CURRENT LIABILITIES: | ||||||||
Accounts payable and accrued expenses | $ | 402,538 | $ | 325,681 | ||||
Current maturities of long-term debt | 16,000 | 16,000 | ||||||
Deferred revenue | 102,869 | 90,501 | ||||||
Other current liabilities | 4,228 | 3,447 | ||||||
Total current liabilities | 525,635 | 435,629 | ||||||
Long-term debt, net | 2,995,355 | 2,580,000 | ||||||
Deferred tax liabilities | 241,308 | 177,197 | ||||||
Deferred rents | 26,297 | 22,203 | ||||||
Redeemable minority interest | 4,521 | 4,029 | ||||||
Other long-term liabilities | 30,787 | 26,316 | ||||||
Total liabilities | 3,823,903 | 3,245,374 | ||||||
COMMITMENTS AND CONTINGENCIES (See Note 10) | ||||||||
SERIES D CUMULATIVE CONVERTIBLE REDEEMABLE PARTICIPATING PREFERRED STOCK, par value $0.0001 per share, 4,000,000 shares designated at December 31, 2006, 0 and 3,500,993 shares issued and outstanding at June 30, 2007 and December 31, 2006, respectively; Liquidation preference of $447,388 at December 31, 2006 | — | 443,368 | ||||||
SERIES E CUMULATIVE CONVERTIBLE REDEEMABLE PARTICIPATING PREFERRED STOCK, par value $0.0001 per share, 500,000 shares designated at December 31, 2006, 0 and 500,000 shares issued and outstanding at June 30, 2007 and December 31, 2006, respectively; Liquidation preference of $54,019 at December 31, 2006 | — | 51,135 | ||||||
OPTIONS SUBJECT TO RESCISSION (See Note 11) | 1,437 | — | ||||||
STOCKHOLDERS’ EQUITY: | ||||||||
Preferred stock, par value $0.0001 per share, 100,000,000 shares authorized, 4,000,000 of which were designated as Series D Preferred Stock and 500,000 of which were designated as Series E Preferred Stock at December 31, 2006; no shares of preferred stock other than Series D & E Preferred Stock (presented above) issued and outstanding at June 30, 2007 and December 31, 2006 | — | — | ||||||
Common Stock, par value $0.0001 per share, 1,000,000,000 shares authorized, 346,728,450 and 157,052,097 shares issued and outstanding at June 30, 2007 and December 31, 2006, respectively | 35 | 16 | ||||||
Additional paid-in capital | 1,502,290 | 166,315 | ||||||
Retained earnings | 332,453 | 245,690 | ||||||
Accumulated other comprehensive income | 6,227 | 1,224 | ||||||
Total stockholders’ equity | 1,841,005 | 413,245 | ||||||
Total liabilities and stockholders’ equity | $ | 5,666,345 | $ | 4,153,122 | ||||
F-52
Table of Contents
Condensed Consolidated Statements of Income and Comprehensive Income
(In thousands, except share and per share information)
(Unaudited)
For the Six Months Ended | ||||||||
June 30, | ||||||||
2007 | 2006 | |||||||
REVENUES: | ||||||||
Service revenues | $ | 918,857 | $ | 583,260 | ||||
Equipment revenues | 169,005 | 114,395 | ||||||
Total revenues | 1,087,862 | 697,655 | ||||||
OPERATING EXPENSES: | ||||||||
Cost of service (excluding depreciation and amortization expense of $71,827 and $54,289, shown separately below) | 307,562 | 199,987 | ||||||
Cost of equipment | 306,747 | 212,916 | ||||||
Selling, general and administrative expenses (excluding depreciation and amortization expense of $8,677 and $5,287, shown separately below) | 155,654 | 111,701 | ||||||
Depreciation and amortization | 80,504 | 59,576 | ||||||
Loss on disposal of assets | 2,657 | 12,377 | ||||||
Total operating expenses | 853,124 | 596,557 | ||||||
Income from operations | 234,738 | 101,098 | ||||||
OTHER EXPENSE (INCOME): | ||||||||
Interest expense | 98,144 | 42,597 | ||||||
Accretion of put option in majority-owned subsidiary | 492 | 360 | ||||||
Interest and other income | (21,651 | ) | (10,719 | ) | ||||
Gain on extinguishment of debt | — | (244 | ) | |||||
Total other expense | 76,985 | 31,994 | ||||||
Income before provision for income taxes | 157,753 | 69,104 | ||||||
Provision for income taxes | (63,307 | ) | (27,745 | ) | ||||
Net income | 94,446 | 41,359 | ||||||
Accrued dividends on Series D Preferred Stock | (6,499 | ) | (10,417 | ) | ||||
Accrued dividends on Series E Preferred Stock | (929 | ) | (1,488 | ) | ||||
Accretion on Series D Preferred Stock | (148 | ) | (236 | ) | ||||
Accretion on Series E Preferred Stock | (107 | ) | (170 | ) | ||||
Net income applicable to Common Stock | $ | 86,763 | $ | 29,048 | ||||
Net income | $ | 94,446 | $ | 41,359 | ||||
Other comprehensive income: | ||||||||
Unrealized gain (loss) on available-for-sale securities, net of tax | 2,402 | (516 | ) | |||||
Unrealized gain on cash flow hedging derivative, net of tax | 5,129 | 1,230 | ||||||
Reclassification adjustment for gains included in net income, net of tax | (2,528 | ) | (515 | ) | ||||
Comprehensive income | $ | 99,449 | $ | 41,558 | ||||
Net income per common share: | ||||||||
Basic | $ | 0.29 | $ | 0.11 | ||||
Diluted | $ | 0.28 | $ | 0.10 | ||||
Weighted average shares: | ||||||||
Basic | 227,238,734 | 155,503,804 | ||||||
Diluted | 235,898,089 | 159,318,289 | ||||||
F-53
Table of Contents
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
For the Six Months Ended | ||||||||
June 30, | ||||||||
2007 | 2006 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income | $ | 94,446 | $ | 41,359 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 80,504 | 59,576 | ||||||
Provision for uncollectible accounts receivable | 23 | 111 | ||||||
Deferred rent expense | 4,265 | 3,376 | ||||||
Cost of abandoned cell sites | 3,832 | 638 | ||||||
Non-cash interest expense | 2,048 | 776 | ||||||
Loss on disposal of assets | 2,657 | 12,377 | ||||||
Gain on extinguishment of debt | — | (244 | ) | |||||
Gain on sale of investments | (2,241 | ) | (1,268 | ) | ||||
Accretion of asset retirement obligation | 572 | 298 | ||||||
Accretion of put option in majority-owned subsidiary | 492 | 360 | ||||||
Deferred income taxes | 62,158 | 26,496 | ||||||
Stock-based compensation expense | 11,864 | 3,969 | ||||||
Changes in assets and liabilities: | ||||||||
Inventories | 2,741 | 10,295 | ||||||
Accounts receivable | (1,415 | ) | (3,804 | ) | ||||
Prepaid expenses | (7,625 | ) | (3,074 | ) | ||||
Deferred charges | 1,086 | (8,631 | ) | |||||
Other assets | (9,332 | ) | 258 | |||||
Accounts payable and accrued expenses | 7,212 | 38,066 | ||||||
Deferred revenue | 12,383 | 16,504 | ||||||
Other liabilities | 1,639 | 1,630 | ||||||
Net cash provided by operating activities | 267,309 | 199,068 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchases of property and equipment | (347,114 | ) | (307,296 | ) | ||||
Change in prepaid purchases of property and equipment | (3,389 | ) | (708 | ) | ||||
Proceeds from sale of property and equipment | 188 | 25 | ||||||
Purchase of investments | (2,371,757 | ) | (537,806 | ) | ||||
Proceeds from sale of investments | 1,226,823 | 645,834 | ||||||
Change in restricted cash and investments | 556 | (3,174 | ) | |||||
Microwave relocation costs | (400 | ) | — | |||||
Net cash used in investing activities | (1,495,093 | ) | (203,125 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Change in book overdraft | 59,076 | 27,717 | ||||||
Proceeds from 91/4% Senior Notes | 423,500 | — | ||||||
Proceeds from initial public offering | 862,500 | — | ||||||
Debt issuance costs | (3,008 | ) | (104 | ) | ||||
Cost of raising capital | (44,266 | ) | — | |||||
Repayment of debt | (8,000 | ) | (2,011 | ) | ||||
Proceeds from minority interest in majority-owned subsidiary | — | 2,000 | ||||||
Proceeds from exercise of stock options | 4,320 | 337 | ||||||
Net cash provided by financing activities | 1,294,122 | 27,939 | ||||||
INCREASE IN CASH AND CASH EQUIVALENTS | 66,338 | 23,882 | ||||||
CASH AND CASH EQUIVALENTS, beginning of period | 161,498 | 112,709 | ||||||
CASH AND CASH EQUIVALENTS, end of period | $ | 227,836 | $ | 136,591 | ||||
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1. | Basis of Presentation: |
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2. | Share-Based Payments: |
3. | Short-Term Investments: |
As of June 30, 2007 | ||||||||||||||||
Gross | Gross | Aggregate | ||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
Auction rate securities | $ | 783,938 | $ | 2 | $ | (81 | ) | $ | 783,859 | |||||||
Corporate bonds | 740,306 | 1,780 | (3 | ) | 742,083 | |||||||||||
Certificates of deposit | 13,500 | — | (4 | ) | 13,496 | |||||||||||
Total short-term investments | $ | 1,537,744 | $ | 1,782 | $ | (88 | ) | $ | 1,539,438 | |||||||
As of December 31, 2006 | ||||||||||||||||
Gross | Gross | Aggregate | ||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
United States government and agencies | $ | 2,000 | $ | — | $ | (15 | ) | $ | 1,985 | |||||||
Auction rate securities | 290,055 | — | (30 | ) | 290,025 | |||||||||||
Corporate bonds | 98,428 | 213 | — | 98,641 | ||||||||||||
Total short-term investments | $ | 390,483 | $ | 213 | $ | (45 | ) | $ | 390,651 | |||||||
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Aggregate | ||||||||
Amortized | Fair | |||||||
Cost | Value | |||||||
Less than one year | $ | 646,680 | $ | 648,453 | ||||
Due in 1 - 2 years | — | — | ||||||
Due in 2 - 5 years | — | — | ||||||
Due after 5 years | 891,064 | 890,985 | ||||||
Total | $ | 1,537,744 | $ | 1,539,438 | ||||
4. | Property and Equipment: |
June 30, | December 31, | |||||||
2007 | 2006 | |||||||
Construction-in-progress | $ | 363,275 | $ | 193,856 | ||||
Network infrastructure | 1,506,877 | 1,329,986 | ||||||
Office equipment | 36,708 | 31,065 | ||||||
Leasehold improvements | 26,151 | 21,721 | ||||||
Furniture and fixtures | 7,003 | 5,903 | ||||||
Vehicles | 207 | 207 | ||||||
1,940,221 | 1,582,738 | |||||||
Accumulated depreciation | (405,819 | ) | (326,576 | ) | ||||
Property and equipment, net | $ | 1,534,402 | $ | 1,256,162 | ||||
5. | Accounts Payable and Accrued Expenses: |
June 30, | December 31, | |||||||
2007 | 2006 | |||||||
Accounts payable | $ | 96,140 | $ | 90,084 | ||||
Book overdraft | 80,364 | 21,288 | ||||||
Accrued accounts payable | 97,971 | 111,974 | ||||||
Accrued liabilities | 14,328 | 9,405 | ||||||
Payroll and employee benefits | 17,118 | 20,645 | ||||||
Accrued interest | 34,913 | 24,529 | ||||||
Taxes, other than income | 57,519 | 42,882 | ||||||
Income taxes | 4,185 | 4,874 | ||||||
Accounts payable and accrued expenses | $ | 402,538 | $ | 325,681 | ||||
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6. | Long-Term Debt: |
June 30, | December 31, | |||||||
2007 | 2006 | |||||||
91/4% Senior Notes | $ | 1,400,000 | $ | 1,000,000 | ||||
Senior Secured Credit Facility | 1,588,000 | 1,596,000 | ||||||
Total long-term debt | 2,988,000 | 2,596,000 | ||||||
Add: unamortized premium on debt | 23,355 | — | ||||||
Total debt | 3,011,355 | 2,596,000 | ||||||
Less: current maturities | (16,000 | ) | (16,000 | ) | ||||
Total long-term debt | $ | 2,995,355 | $ | 2,580,000 | ||||
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7. | Income Taxes: |
8. | Stockholders’ Equity: |
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9. | Net Income Per Common Share: |
Six Months Ended June 30, | ||||||||
2007 | 2006 | |||||||
Basic EPS — Two Class Method: | ||||||||
Net income | $ | 94,446 | $ | 41,359 | ||||
Accrued dividends and accretion: | ||||||||
Series D Preferred Stock | (6,647 | ) | (10,653 | ) | ||||
Series E Preferred Stock | (1,036 | ) | (1,658 | ) | ||||
Net income applicable to common stock | $ | 86,763 | $ | 29,048 | ||||
Amount allocable to common shareholders | 75.6 | % | 57.0 | % | ||||
Rights to undistributed earnings | $ | 65,618 | $ | 16,559 | ||||
Weighted average shares outstanding — basic | 227,238,734 | 155,503,804 | ||||||
Net income per common share — basic | $ | 0.29 | $ | 0.11 | ||||
Diluted EPS: | ||||||||
Rights to undistributed earnings | $ | 65,618 | $ | 16,559 | ||||
Weighted average shares outstanding — basic | 227,238,734 | 155,503,804 | ||||||
Effect of dilutive securities: | ||||||||
Warrants | — | 296,952 | ||||||
Stock options | 8,659,355 | 3,517,533 | ||||||
Weighted average shares outstanding — diluted | 235,898,089 | 159,318,289 | ||||||
Net income per common share — diluted | $ | 0.28 | $ | 0.10 | ||||
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10. | Commitments and Contingencies: |
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11. | Rescission Offer: |
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12. | Supplemental Cash Flow Information: |
Six Months | ||||||||
Ended June 30, | ||||||||
2007 | 2006 | |||||||
Cash paid for interest | $ | 90,049 | $ | 23,643 | ||||
Cash paid for income taxes | 893 | 525 |
13. | Related-Party Transactions: |
14. | Segment Information: |
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• | Core Markets, which include Atlanta, Miami, San Francisco, and Sacramento, are aggregated because they are reviewed on an aggregate basis by the chief operating decision maker, they are similar in respect to their products and services, production processes, class of customer, method of distribution, and regulatory environment and currently exhibit similar financial performance and economic characteristics. | |
• | Expansion Markets, which include Dallas/Ft. Worth, Detroit, Tampa/Sarasota/Orlando, Los Angeles, New York, Philadelphia, Boston and Las Vegas, are aggregated because they are reviewed on an aggregate basis by the chief operating decision maker, they are similar in respect to their products and services, production processes, class of customer, method of distribution, and regulatory environment and have similar expected long-term financial performance and economic characteristics. |
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Expansion | ||||||||||||||||
Six Months Ended June 30, 2007 | Core Markets | Markets | Other | Total | ||||||||||||
(In thousands) | ||||||||||||||||
Service revenues | $ | 693,481 | $ | 225,376 | $ | — | $ | 918,857 | ||||||||
Equipment revenues | 120,370 | 48,635 | — | 169,005 | ||||||||||||
Total revenues | 813,851 | 274,011 | — | 1,087,862 | ||||||||||||
Cost of service(1) | 211,046 | 96,516 | — | 307,562 | ||||||||||||
Cost of equipment | 202,929 | 103,818 | — | 306,747 | ||||||||||||
Selling, general and administrative expenses(2) | 87,684 | 67,970 | — | 155,654 | ||||||||||||
Adjusted EBITDA(3) | 318,191 | 11,572 | — | |||||||||||||
Depreciation and amortization | 56,317 | 21,597 | 2,590 | 80,504 | ||||||||||||
Stock-based compensation expense | 5,999 | 5,865 | — | 11,864 | ||||||||||||
Income (loss) from operations | 253,626 | (16,084 | ) | (2,804 | ) | 234,738 | ||||||||||
Interest expense | — | — | 98,144 | 98,144 | ||||||||||||
Accretion of put option in majority-owned subsidiary | — | — | 492 | 492 | ||||||||||||
Interest and other income | — | — | (21,651 | ) | (21,651 | ) | ||||||||||
Income (loss) before provision for income taxes | 253,626 | (16,084 | ) | (79,789 | ) | 157,753 |
Expansion | ||||||||||||||||
Six Months Ended June 30, 2006 | Core Markets | Markets | Other | Total | ||||||||||||
(In thousands) | ||||||||||||||||
Service revenues | $ | 545,741 | $ | 37,519 | $ | — | $ | 583,260 | ||||||||
Equipment revenues | 98,606 | 15,789 | — | 114,395 | ||||||||||||
Total revenues | 644,347 | 53,308 | — | 697,655 | ||||||||||||
Cost of service(1) | 161,137 | 38,850 | — | 199,987 | ||||||||||||
Cost of equipment | 173,644 | 39,272 | — | 212,916 | ||||||||||||
Selling, general and administrative expenses(2) | 75,480 | 36,221 | — | 111,701 | ||||||||||||
Adjusted EBITDA (deficit)(3) | 236,302 | (59,282 | ) | — | ||||||||||||
Depreciation and amortization | 51,671 | 6,491 | 1,414 | 59,576 | ||||||||||||
Stock-based compensation expense | 2,216 | 1,753 | — | 3,969 | ||||||||||||
Income (loss) from operations | 170,390 | (67,878 | ) | (1,414 | ) | 101,098 | ||||||||||
Interest expense | — | — | 42,597 | 42,597 | ||||||||||||
Accretion of put option in majority-owned subsidiary | — | — | 360 | 360 | ||||||||||||
Interest and other income | — | — | (10,719 | ) | (10,719 | ) | ||||||||||
Gain on extinguishment of debt | — | — | (244 | ) | (244 | ) | ||||||||||
Income (loss) before provision for income taxes | 170,390 | (67,878 | ) | (33,408 | ) | 69,104 |
(1) | Cost of service for the six months ended June 30, 2007, includes $0.7 million of stock-based compensation disclosed separately. Cost of service for the six months ended June 30, 2006, includes $0.5 million of stock-based compensation disclosed separately. | |
(2) | Selling, general and administrative expenses include stock-based compensation disclosed separately. For the six months ended June 30, 2007, selling, general and administrative expenses include $11.2 million of stock-based compensation. For the six months ended June 30, 2006, selling, general and administrative expenses include $3.5 million of stock-based compensation. | |
(3) | Core and Expansion Markets Adjusted EBITDA (deficit) is presented in accordance with SFAS No. 131 as it is the primary financial measure utilized by management to facilitate evaluation of the Company’s ability to meet future debt service, capital expenditures and working capital requirements and to fund future growth. |
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Six Months | ||||||||
Ended June 30, | ||||||||
2007 | 2006 | |||||||
(In thousands) | ||||||||
Segment Adjusted EBITDA (Deficit): | ||||||||
Core Markets Adjusted EBITDA | $ | 318,191 | $ | 236,302 | ||||
Expansion Markets Adjusted EBITDA (Deficit) | 11,572 | (59,282 | ) | |||||
Total | 329,763 | 177,020 | ||||||
Depreciation and amortization | (80,504 | ) | (59,576 | ) | ||||
Loss on disposal of assets | (2,657 | ) | (12,377 | ) | ||||
Stock-based compensation expense | (11,864 | ) | (3,969 | ) | ||||
Interest expense | (98,144 | ) | (42,597 | ) | ||||
Accretion of put option in majority-owned subsidiary | (492 | ) | (360 | ) | ||||
Interest and other income | 21,651 | 10,719 | ||||||
Gain on extinguishment of debt | — | 244 | ||||||
Consolidated income before provision for income taxes | $ | 157,753 | $ | 69,104 | ||||
15. | Guarantor Subsidiaries: |
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As of June 30, 2007
Non- | ||||||||||||||||||||||||
Guarantor | Guarantor | |||||||||||||||||||||||
Parent | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
CURRENT ASSETS: | ||||||||||||||||||||||||
Cash and cash equivalents | $ | 57,332 | $ | 143,032 | $ | 335 | $ | 27,137 | $ | — | $ | 227,836 | ||||||||||||
Short-term investments | 845,886 | 693,552 | — | — | — | 1,539,438 | ||||||||||||||||||
Inventories, net | — | 83,360 | 6,640 | — | — | 90,000 | ||||||||||||||||||
Accounts receivable, net | — | 27,579 | — | 1,954 | — | 29,533 | ||||||||||||||||||
Prepaid expenses | 165 | 13,066 | 29,425 | 2,011 | — | 44,667 | ||||||||||||||||||
Deferred charges | — | 25,423 | — | — | — | 25,423 | ||||||||||||||||||
Deferred tax asset | — | 815 | — | — | — | 815 | ||||||||||||||||||
Current receivable from subsidiaries | — | 14,163 | — | — | (14,163 | ) | — | |||||||||||||||||
Other current assets | 988 | 4,930 | 14,598 | 482 | — | 20,998 | ||||||||||||||||||
Total current assets | 904,371 | 1,005,920 | 50,998 | 31,584 | (14,163 | ) | 1,978,710 | |||||||||||||||||
Property and equipment, net | — | 53,727 | 1,312,388 | 168,287 | — | 1,534,402 | ||||||||||||||||||
Long-term investment | — | 8,573 | — | — | — | 8,573 | ||||||||||||||||||
Investment in subsidiaries | 411,139 | 1,156,883 | — | — | (1,568,022 | ) | — | |||||||||||||||||
FCC licenses | — | — | 1,779,296 | 293,599 | — | 2,072,895 | ||||||||||||||||||
Microwave relocation costs | — | — | 9,600 | — | — | 9,600 | ||||||||||||||||||
Long-term receivable from subsidiaries | — | 555,953 | — | — | (555,953 | ) | — | |||||||||||||||||
Other assets | — | 44,918 | 5,680 | 11,567 | — | 62,165 | ||||||||||||||||||
Total assets | $ | 1,315,510 | $ | 2,825,974 | $ | 3,157,962 | $ | 505,037 | $ | (2,138,138 | ) | $ | 5,666,345 | |||||||||||
CURRENT LIABILITIES: | ||||||||||||||||||||||||
Accounts payable and accrued expenses | $ | 325 | $ | 169,593 | $ | 193,107 | $ | 39,513 | $ | — | $ | 402,538 | ||||||||||||
Current payable to parent | — | — | — | 14,163 | (14,163 | ) | — | |||||||||||||||||
Current maturities of long-term debt | — | 16,000 | — | — | — | 16,000 | ||||||||||||||||||
Deferred revenue | — | 17,404 | 85,465 | — | — | 102,869 | ||||||||||||||||||
Advances to subsidiaries | (527,257 | ) | (1,049,924 | ) | 1,577,181 | — | — | — | ||||||||||||||||
Other current liabilities | — | 43 | 4,048 | 137 | — | 4,228 | ||||||||||||||||||
Total current liabilities | (526,932 | ) | (846,884 | ) | 1,859,801 | 53,813 | (14,163 | ) | 525,635 | |||||||||||||||
Long-term debt | — | 2,995,355 | — | — | — | 2,995,355 | ||||||||||||||||||
Long-term debt to parent | — | — | — | 555,953 | (555,953 | ) | — | |||||||||||||||||
Deferred tax liabilities | — | 241,308 | — | — | — | 241,308 | ||||||||||||||||||
Deferred rents | — | — | 25,167 | 1,130 | — | 26,297 | ||||||||||||||||||
Redeemable minority interest | — | 4,521 | — | — | — | 4,521 | ||||||||||||||||||
Other long-term liabilities | — | 20,535 | 8,324 | 1,928 | — | 30,787 | ||||||||||||||||||
Total liabilities | (526,932 | ) | 2,414,835 | 1,893,292 | 612,824 | (570,116 | ) | 3,823,903 | ||||||||||||||||
COMMITMENTS AND CONTINGENCIES (See Note 10) | ||||||||||||||||||||||||
OPTIONS SUBJECT TO RESCISSION | 1,437 | — | — | — | — | 1,437 | ||||||||||||||||||
STOCKHOLDERS’ EQUITY: | ||||||||||||||||||||||||
Preferred stock | — | — | — | — | — | — | ||||||||||||||||||
Common stock | 34 | — | — | 20,000 | (20,000 | ) | 34 | |||||||||||||||||
Additional paid-in capital | 1,502,291 | — | — | — | — | 1,502,291 | ||||||||||||||||||
Retained earnings (deficit) | 332,453 | 405,564 | 1,264,670 | (127,787 | ) | (1,542,447 | ) | 332,453 | ||||||||||||||||
Accumulated other comprehensive (loss) income | 6,227 | 5,575 | — | — | (5,575 | ) | 6,227 | |||||||||||||||||
Total stockholders’ equity | 1,841,005 | 411,139 | 1,264,670 | (107,787 | ) | (1,568,022 | ) | 1,841,005 | ||||||||||||||||
Total liabilities and stockholders’ equity | $ | 1,315,510 | $ | 2,825,974 | $ | 3,157,962 | $ | 505,037 | $ | (2,138,138 | ) | $ | 5,666,345 | |||||||||||
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As of December 31, 2006
Non- | ||||||||||||||||||||||||
Guarantor | Guarantor | |||||||||||||||||||||||
Parent | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
CURRENT ASSETS: | ||||||||||||||||||||||||
Cash and cash equivalents | $ | 15,714 | $ | 99,301 | $ | 257 | $ | 46,226 | $ | — | $ | 161,498 | ||||||||||||
Short-term investments | 45,365 | 345,286 | — | — | — | 390,651 | ||||||||||||||||||
Restricted short-term investments | — | 556 | — | 51 | — | 607 | ||||||||||||||||||
Inventories, net | — | 81,339 | 11,576 | — | — | 92,915 | ||||||||||||||||||
Accounts receivable, net | — | 29,348 | — | 1,005 | (2,213 | ) | 28,140 | |||||||||||||||||
Prepaid expenses | — | 8,107 | 23,865 | 1,137 | — | 33,109 | ||||||||||||||||||
Deferred charges | — | 26,509 | — | — | — | 26,509 | ||||||||||||||||||
Deferred tax asset | — | 815 | — | — | — | 815 | ||||||||||||||||||
Current receivable from subsidiaries | — | 4,734 | — | — | (4,734 | ) | — | |||||||||||||||||
Other current assets | 97 | 9,478 | 15,354 | 120 | (766 | ) | 24,283 | |||||||||||||||||
Total current assets | 61,176 | 605,473 | 51,052 | 48,539 | (7,713 | ) | 758,527 | |||||||||||||||||
Property and equipment, net | — | 14,077 | 1,158,442 | 83,643 | — | 1,256,162 | ||||||||||||||||||
Long-term investments | — | 1,865 | — | — | — | 1,865 | ||||||||||||||||||
Investment in subsidiaries | 320,783 | 939,009 | — | — | (1,259,792 | ) | — | |||||||||||||||||
FCC licenses | 1,391,410 | — | 387,876 | 293,599 | — | 2,072,885 | ||||||||||||||||||
Microwave relocation costs | — | — | 9,187 | — | — | 9,187 | ||||||||||||||||||
Long-term receivable from subsidiaries | — | 456,070 | — | — | (456,070 | ) | — | |||||||||||||||||
Other assets | 399 | 51,477 | 4,078 | 5,810 | (7,268 | ) | 54,496 | |||||||||||||||||
Total assets | $ | 1,773,768 | $ | 2,067,971 | $ | 1,610,635 | $ | 431,591 | $ | (1,730,843 | ) | $ | 4,153,122 | |||||||||||
CURRENT LIABILITIES: | ||||||||||||||||||||||||
Accounts payable and accrued expenses | $ | 401 | $ | 138,953 | $ | 161,663 | $ | 29,614 | $ | (4,950 | ) | $ | 325,681 | |||||||||||
Current maturities of long-term debt | — | 16,000 | — | 4,734 | (4,734 | ) | 16,000 | |||||||||||||||||
Deferred revenue | — | 19,030 | 71,471 | — | — | 90,501 | ||||||||||||||||||
Advances to subsidiaries | 865,612 | (1,207,821 | ) | 341,950 | — | 259 | — | |||||||||||||||||
Other current liabilities | — | 31 | 3,416 | 757 | (757 | ) | 3,447 | |||||||||||||||||
Total current liabilities | 866,013 | (1,033,807 | ) | 578,500 | 35,105 | (10,182 | ) | 435,629 | ||||||||||||||||
Long-term debt | — | 2,580,000 | — | 4,540 | (4,540 | ) | 2,580,000 | |||||||||||||||||
Long-term note to parent | — | — | — | 456,070 | (456,070 | ) | — | |||||||||||||||||
Deferred tax liabilities | 7 | 177,190 | — | — | — | 177,197 | ||||||||||||||||||
Deferred rents | — | — | 21,784 | 419 | — | 22,203 | ||||||||||||||||||
Redeemable minority interest | — | 4,029 | — | — | — | 4,029 | ||||||||||||||||||
Other long-term liabilities | — | 19,517 | 6,285 | 514 | — | 26,316 | ||||||||||||||||||
Total liabilities | 866,020 | 1,746,929 | 606,569 | 496,648 | (470,792 | ) | 3,245,374 | |||||||||||||||||
COMMITMENTS AND CONTINGENCIES (See Note 10) | ||||||||||||||||||||||||
SERIES D PREFERRED STOCK | 443,368 | — | — | — | — | 443,368 | ||||||||||||||||||
SERIES E PREFERRED STOCK | 51,135 | — | — | — | — | 51,135 | ||||||||||||||||||
STOCKHOLDERS’ EQUITY: | ||||||||||||||||||||||||
Preferred stock | — | — | — | — | — | — | ||||||||||||||||||
Common stock | 16 | — | — | — | — | 16 | ||||||||||||||||||
Additional paid-in capital | 166,315 | — | — | 20,000 | (20,000 | ) | 166,315 | |||||||||||||||||
Retained earnings (deficit) | 245,690 | 319,863 | 1,004,066 | (85,057 | ) | (1,238,872 | ) | 245,690 | ||||||||||||||||
Accumulated other comprehensive income | 1,224 | 1,179 | — | — | (1,179 | ) | 1,224 | |||||||||||||||||
Total stockholders’ equity | 413,245 | 321,042 | 1,004,066 | (65,057 | ) | (1,260,051 | ) | 413,245 | ||||||||||||||||
Total liabilities and stockholders’ equity | $ | 1,773,768 | $ | 2,067,971 | $ | 1,610,635 | $ | 431,591 | $ | (1,730,843 | ) | $ | 4,153,122 | |||||||||||
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Table of Contents
Six Months Ended June 30, 2007
Guarantor | Non-Guarantor | |||||||||||||||||||||||
Parent | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
REVENUES: | ||||||||||||||||||||||||
Service revenues | $ | — | $ | 1,155 | $ | 918,798 | $ | 9,766 | $ | (10,862 | ) | $ | 918,857 | |||||||||||
Equipment revenues | — | 6,646 | 162,359 | — | — | 169,005 | ||||||||||||||||||
Total revenues | — | 7,801 | 1,081,157 | 9,766 | (10,862 | ) | 1,087,862 | |||||||||||||||||
OPERATING EXPENSES: | ||||||||||||||||||||||||
Cost of service (excluding depreciation and amortization expense shown separately below) | — | — | 295,948 | 22,476 | (10,862 | ) | 307,562 | |||||||||||||||||
Cost of equipment | — | 6,385 | 300,362 | — | — | 306,747 | ||||||||||||||||||
Selling, general and administrative expenses (excluding depreciation and amortization expense shown separately below) | — | 261 | 146,064 | 9,329 | — | 155,654 | ||||||||||||||||||
Depreciation and amortization | — | — | 78,907 | 1,597 | — | 80,504 | ||||||||||||||||||
Loss on disposal of assets | — | — | 2,656 | 1 | — | 2,657 | ||||||||||||||||||
Total operating expenses | — | 6,646 | 823,937 | 33,403 | (10,862 | ) | 853,124 | |||||||||||||||||
Income (loss) from operations | — | 1,155 | 257,220 | (23,637 | ) | — | 234,738 | |||||||||||||||||
OTHER EXPENSE (INCOME): | ||||||||||||||||||||||||
Interest expense | — | 110,137 | (3,368 | ) | 20,354 | (28,979 | ) | 98,144 | ||||||||||||||||
Earnings from consolidated subsidiaries | (85,702 | ) | (217,874 | ) | — | — | 303,576 | — | ||||||||||||||||
Accretion of put option in majority-owned subsidiary | — | 492 | — | — | — | 492 | ||||||||||||||||||
Interest and other income | (8,744 | ) | (40,609 | ) | (15 | ) | (1,262 | ) | 28,979 | (21,651 | ) | |||||||||||||
Total other (income) expense | (94,446 | ) | (147,854 | ) | (3,383 | ) | 19,092 | 303,576 | 76,985 | |||||||||||||||
Income (loss) before provision for income taxes | 94,446 | 149,009 | 260,603 | (42,729 | ) | (303,576 | ) | 157,753 | ||||||||||||||||
Provision for income taxes | — | (63,307 | ) | — | — | — | (63,307 | ) | ||||||||||||||||
Net income (loss) | $ | 94,446 | $ | 85,702 | $ | 260,603 | $ | (42,729 | ) | $ | (303,576 | ) | $ | 94,446 | ||||||||||
F-71
Table of Contents
Six Months Ended June 30, 2006
Guarantor | Non-Guarantor | |||||||||||||||||||||||
Parent | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
REVENUES: | ||||||||||||||||||||||||
Service revenues | $ | — | $ | — | $ | 583,260 | $ | — | $ | — | $ | 583,260 | ||||||||||||
Equipment revenues | — | 6,390 | 108,005 | — | — | 114,395 | ||||||||||||||||||
Total revenues | — | 6,390 | 691,265 | — | — | 697,655 | ||||||||||||||||||
OPERATING EXPENSES: | ||||||||||||||||||||||||
Cost of service (excluding depreciation and amortization expense shown separately below) | — | — | 198,300 | 1,687 | — | 199,987 | ||||||||||||||||||
Cost of equipment | — | 6,206 | 206,710 | — | — | 212,916 | ||||||||||||||||||
Selling, general and administrative expenses (excluding depreciation and amortization expense shown separately below) | — | 184 | 104,710 | 6,807 | — | 111,701 | ||||||||||||||||||
Depreciation and amortization | — | — | 59,576 | — | — | 59,576 | ||||||||||||||||||
Loss on disposal of assets | — | — | 12,377 | — | — | 12,377 | ||||||||||||||||||
Total operating expenses | — | 6,390 | 581,673 | 8,494 | — | 596,557 | ||||||||||||||||||
Income (loss) from operations | — | 1,155 | 109,592 | (8,494 | ) | — | 101,098 | |||||||||||||||||
OTHER EXPENSE (INCOME): | ||||||||||||||||||||||||
Interest expense | — | 46,106 | (3,234 | ) | 17,978 | (18,253 | ) | 42,597 | ||||||||||||||||
Earnings from consolidated subsidiaries | (40,030 | ) | (87,577 | ) | — | — | 127,607 | — | ||||||||||||||||
Accretion of put option in majority-owned subsidiary | — | 360 | — | — | — | 360 | ||||||||||||||||||
Interest and other income | (1,329 | ) | (26,664 | ) | (653 | ) | (326 | ) | 18,253 | (10,719 | ) | |||||||||||||
Gain on extinguishment of debt | — | — | (244 | ) | — | — | (244 | ) | ||||||||||||||||
Total other (income) expense | (41,359 | ) | (67,775 | ) | (4,131 | ) | 17,652 | 127,607 | 31,994 | |||||||||||||||
Income (loss) before provision for income taxes | 41,359 | 67,775 | 113,723 | (26,146 | ) | (127,607 | ) | 69,104 | ||||||||||||||||
Provision for income taxes | — | (27,745 | ) | — | — | — | (27,745 | ) | ||||||||||||||||
Net income (loss) | $ | 41,359 | $ | 40,030 | $ | 113,723 | $ | (26,146 | ) | $ | (127,607 | ) | $ | 41,359 | ||||||||||
F-72
Table of Contents
Six Months Ended June 30, 2007
Guarantor | Non-Guarantor | |||||||||||||||||||||||
Parent | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||||||||||
Net income (loss) | $ | 94,446 | $ | 85,702 | $ | 260,603 | $ | (42,729 | ) | $ | (303,576 | ) | $ | 94,446 | ||||||||||
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: | ||||||||||||||||||||||||
Depreciation and amortization | — | — | 78,907 | 1,597 | — | 80,504 | ||||||||||||||||||
Provision for uncollectible accounts receivable | — | 23 | — | — | — | 23 | ||||||||||||||||||
Deferred rent expense | — | — | 3,554 | 711 | — | 4,265 | ||||||||||||||||||
Cost of abandoned cell sites | — | — | 1,112 | 2,720 | — | 3,832 | ||||||||||||||||||
Non-cash interest expense | — | 2,048 | — | 19,573 | (19,573 | ) | 2,048 | |||||||||||||||||
Loss on disposal of assets | — | — | 2,656 | 1 | — | 2,657 | ||||||||||||||||||
Gain on sale of investments | (1,473 | ) | (768 | ) | — | — | — | (2,241 | ) | |||||||||||||||
Accretion of asset retirement obligation | — | — | 469 | 103 | — | 572 | ||||||||||||||||||
Accretion of put option in majority-owned subsidiary | — | 492 | — | — | — | 492 | ||||||||||||||||||
Deferred income taxes | — | 62,158 | — | — | — | 62,158 | ||||||||||||||||||
Stock-based compensation expense | — | — | 11,864 | — | — | 11,864 | ||||||||||||||||||
Changes in assets and liabilities | (101,512 | ) | (161,976 | ) | (118,748 | ) | (8,282 | ) | 397,207 | 6,689 | ||||||||||||||
Net cash (used in) provided by operating activities | (8,539 | ) | (12,321 | ) | 240,417 | (26,306 | ) | 74,058 | 267,309 | |||||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||||||||||
Purchases of property and equipment | — | (37,247 | ) | (241,518 | ) | (59,724 | ) | (8,625 | ) | (347,114 | ) | |||||||||||||
Change in prepaid purchases of property and equipment | — | (4,780 | ) | 1,391 | — | — | (3,389 | ) | ||||||||||||||||
Proceeds from sale of property and equipment | — | — | 188 | — | — | 188 | ||||||||||||||||||
Purchase of investments | (1,403,253 | ) | (968,504 | ) | — | — | — | (2,371,757 | ) | |||||||||||||||
Proceeds from sale of investments | 630,856 | 595,967 | — | — | — | 1,226,823 | ||||||||||||||||||
Change in restricted cash and investments | — | 556 | — | — | — | 556 | ||||||||||||||||||
Microwave relocation costs | — | — | (400 | ) | — | — | (400 | ) | ||||||||||||||||
Net cash used in investing activities | (772,397 | ) | (414,008 | ) | (240,339 | ) | (59,724 | ) | (8,625 | ) | (1,495,093 | ) | ||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||||||||||
Change in book overdraft | — | 57,568 | — | 1,508 | — | 59,076 | ||||||||||||||||||
Proceeds from long-term note to parent | — | — | — | 70,000 | (70,000 | ) | — | |||||||||||||||||
Proceeds from 91/4% Senior Notes | — | 423,500 | — | — | — | 423,500 | ||||||||||||||||||
Proceeds initial public offering | 862,500 | — | — | — | — | 862,500 | ||||||||||||||||||
Debt issuance costs | — | (3,008 | ) | — | — | — | (3,008 | ) | ||||||||||||||||
Cost of raising capital | (44,266 | ) | — | — | — | — | (44,266 | ) | ||||||||||||||||
Payments on capital lease obligations | — | — | — | (432 | ) | 432 | — | |||||||||||||||||
Repayment of debt | — | (8,000 | ) | — | (4,135 | ) | 4,135 | (8,000 | ) | |||||||||||||||
Proceeds from exercise of stock options | 4,320 | — | — | — | — | 4,320 | ||||||||||||||||||
Net cash provided by (used in) financing activities | 822,554 | 470,060 | — | 66,941 | (65,433 | ) | 1,294,122 | |||||||||||||||||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 41,618 | 43,731 | 78 | (19,089 | ) | — | 66,338 | |||||||||||||||||
CASH AND CASH EQUIVALENTS, beginning of period | 15,714 | 99,301 | 257 | 46,226 | — | 161,498 | ||||||||||||||||||
CASH AND CASH EQUIVALENTS, end of period | $ | 57,332 | $ | 143,032 | $ | 335 | $ | 27,137 | $ | — | $ | 227,836 | ||||||||||||
F-73
Table of Contents
Six Months Ended June 30, 2006
Guarantor | Non-Guarantor | |||||||||||||||||||||||
Parent | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||||||||||
Net income (loss) | $ | 41,359 | $ | 40,030 | $ | 113,723 | $ | (26,146 | ) | $ | (127,607 | ) | $ | 41,359 | ||||||||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||||||||||||||||||
Depreciation and amortization | — | — | 59,576 | — | — | 59,576 | ||||||||||||||||||
Provision for uncollectible accounts receivable | — | 111 | — | — | — | 111 | ||||||||||||||||||
Deferred rent expense | — | — | 3,321 | 55 | — | 3,376 | ||||||||||||||||||
Cost of abandoned cell sites | — | — | 290 | 348 | — | 638 | ||||||||||||||||||
Non-cash interest expense | — | 297 | 479 | 17,978 | (17,978 | ) | 776 | |||||||||||||||||
Loss on disposal of assets | — | — | 12,377 | — | — | 12,377 | ||||||||||||||||||
Gain on extinguishment of debt | — | — | (244 | ) | — | — | (244 | ) | ||||||||||||||||
Gain on sale of investments | (465 | ) | (803 | ) | — | — | — | (1,268 | ) | |||||||||||||||
Accretion of asset retirement obligation | — | — | 298 | — | — | 298 | ||||||||||||||||||
Accretion of put option in majority-owned subsidiary | — | 360 | — | — | — | 360 | ||||||||||||||||||
Deferred income taxes | — | 26,496 | — | — | — | 26,496 | ||||||||||||||||||
Stock-based compensation expense | — | — | 3,969 | — | — | 3,969 | ||||||||||||||||||
Changes in assets and liabilities | (35,140 | ) | (203,650 | ) | 100,064 | 723 | 189,247 | 51,244 | ||||||||||||||||
Net cash provided by (used in) operating activities | 5,754 | (137,159 | ) | 293,853 | (7,042 | ) | 43,662 | 199,068 | ||||||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||||||||||
Purchases of property and equipment | — | (77 | ) | (291,120 | ) | (15,824 | ) | (275 | ) | (307,296 | ) | |||||||||||||
Change in prepaid purchases of property and equipment | — | — | (708 | ) | — | — | (708 | ) | ||||||||||||||||
Proceeds from sale of property and equipment | — | — | 25 | — | — | 25 | ||||||||||||||||||
Purchase of investments | (223,091 | ) | (314,715 | ) | — | — | — | (537,806 | ) | |||||||||||||||
Proceeds from sale of investments | 218,179 | 427,655 | — | — | — | 645,834 | ||||||||||||||||||
Change in restricted cash and investments | (824 | ) | (2,350 | ) | — | — | — | (3,174 | ) | |||||||||||||||
Net cash (used in) provided by investing activities | (5,736 | ) | 110,513 | (291,803 | ) | (15,824 | ) | (275 | ) | (203,125 | ) | |||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||||||||||
Change in book overdraft | — | 27,717 | — | — | — | 27,717 | ||||||||||||||||||
Proceeds from long-term note to parent | — | — | — | 30,054 | (30,054 | ) | — | |||||||||||||||||
Proceeds from capital contributions | — | — | — | 13,333 | (13,333 | ) | — | |||||||||||||||||
Debt issuance costs | — | (104 | ) | — | — | — | (104 | ) | ||||||||||||||||
Repayment of debt | — | — | (2,011 | ) | — | — | (2,011 | ) | ||||||||||||||||
Proceeds from minority interest in majority-owned subsidiary | — | 2,000 | — | — | — | 2,000 | ||||||||||||||||||
Proceeds from exercise of stock options | 337 | — | — | — | — | 337 | ||||||||||||||||||
Net cash provided by (used in) financing activities | 337 | 29,613 | (2,011 | ) | 43,387 | (43,387 | ) | 27,939 | ||||||||||||||||
INCREASE IN CASH AND CASH EQUIVALENTS | 355 | 2,967 | 39 | 20,521 | — | 23,882 | ||||||||||||||||||
CASH AND CASH EQUIVALENTS, beginning of period | 10,624 | 95,772 | 219 | 6,094 | — | 112,709 | ||||||||||||||||||
CASH AND CASH EQUIVALENTS, end of period | $ | 10,979 | $ | 98,739 | $ | 258 | $ | 26,615 | $ | — | $ | 136,591 | ||||||||||||
F-74
Table of Contents
16. | Recent Accounting Pronouncements: |
F-75