UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
CHAPTER 11 CASE NO. 01-12974 (SMB)
TELIGENT, INC., ET AL.,(1)
DEBTOR
MONTHLY OPERATING STATEMENT FOR
PERIOD SEPTEMBER 1, 2001 TO SEPTEMBER 30, 2001
DEBTOR'S ADDRESS
----------------
Teligent, Inc.
8065 Leesburg Pike, Suite 400
Vienna, Virginia 22182
Period Disbursement: $24,358,971
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DEBTOR'S ATTORNEY
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KIRKLAND & ELLIS
200 East Randolph Drive
Chicago, Illinois 60601
Period Operating Loss: $ (304,904,000)
---------------
The undersigned, having reviewed the attached report and being familiar
with the Debtor's financial affairs, verifies under the penalty of perjury that
the information contained therein is complete, accurate and trustful to the best
of my knowledge. The Debtors have had numerous members of their senior
management team, including the chief financial officer and the chief executive
officer, recently depart. Accordingly, the information contained in this report
is qualified in its entirety by the generally available information at the time
of its preparation. The Debtors reserve the right to amend this report should
they deem it necessary.
The undersigned also verifies that, to the best of my knowledge, all
insurance policies, including workers compensation and disability insurance,
have been paid currently.
October 15, 2001 By: /s/ Barbara A. Sweasy
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Barbara A. Sweasy
Vice President, Taxes
Indicate if this is an amended statement by checking here.
Amended Statement____________
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(1)The Debtors are the following entities: Teligent, Inc.; Teligent Services,
Inc.; American Long Lines, Inc.; Association Communications, Inc.; Auctel,
Inc.; BackLink, L.L.C.; Easton Telecom Services, Inc.; Executive Conference,
Inc.; First Mark Communications, Inc.; InfiNet Telecommunications, Inc.;
Jtel, L.L.C.; KatLink, L.L.C.; OMC Communications, Inc.; Quadrangle
Investments, Inc.; Telecommunications Concepts, Inc.; Teligent
Communications, L.L.C.; Teligent License Co. I L.L.C.; Teligent License Co.
II, L.L.C.; Teligent of Virginia, Inc.; Teligent Professional Services, Inc.;
and Teligent Telecommunications, L.L.C.
TELIGENT, INC. (DOMESTIC SUBSIDIARIES)
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED, IN THOUSANDS)
SEPTEMBER 30,
2001
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ASSETS
Current assets:
Cash and cash equivalents $ 55,251
Accounts receivable, net of allowance for doubtful
account of $29,304 30,002
Prepaid expenses and other current assets 5,739
Restricted cash and investments 391
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Total current assets 91,383
Property and equipment, net of accumulated depreciation
of $175,792 248,433
Intangible assets, net of accumulated amortization
of $21,189 117,406
Other assets 2,701
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Total assets $ 459,923
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LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 21,533
Accrued expenses 21,674
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Total current liabilities 43,207
Other noncurrent liabilities 6,173
Liabilities subject to compromise 1,620,404
Series A preferred stock 538,953
Stockholders' deficit:
Intercompany receivable (56,269)
Common stock 637
Additional paid-in capital 796,980
Accumulated deficit (2,490,162)
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Total stockholders' deficit (1,748,814)
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Total liabilities and stockholders' deficit $ 459,923
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See notes to unaudited condensed consolidated financial statements.
1
TELIGENT, INC. (DOMESTIC SUBSIDIARIES)
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENT OF OPERATION
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
MONTH ENDED
SEPTEMBER 30, 2001
------------------------------
REVENUES:
Communications services, net $ 9,176
COSTS AND EXPENSES:
Cost of services 14,849
Sales, general and administrative 11,338
Restructuring 494
Asset impairment 277,175
28
Depreciation and amortization 10,196
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Total costs and expenses 314,080
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Loss from operations (304,904)
Interest income 139
Interest expense (102)
Other expense (2,227)
Reorganization items (1,728)
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Net loss (308,822)
==============================
Basic and diluted net loss per common share $ (4.85)
==============================
Weighted average common shares outstanding 63,701
==============================
See notes to unaudited condensed consolidated financial statements.
2
TELIGENT, INC. (DOMESTIC SUBSIDIARIES)
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
MONTH ENDED
SEPTEMBER 30, 2001
----------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (308,822)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 10,196
Loss on sale and disposal of assets due to Chapter 11 proceeding 2,546
Asset impairment, net of cash 277,175
Restructuring, net of cash 494
Stock-based and other noncash compensation 28
Changes in current assets and current liabilities:
Accounts receivable 6,306
Prepaid expenses and other current assets 1,520
Accounts payable (12,798)
Accrued expenses 9,085
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Net cash used in operating activities (14,270)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Change in restricted cash 1,823
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Net cash provided by investing activities 1,823
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt -
----------------------------
Net cash provided by financing activities -
----------------------------
Net change in cash and cash equivalents (12,447)
Cash and cash equivalents, beginning of period 67,698
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Cash and cash equivalents, end of period $ 55,251
============================
See notes to unaudited condensed consolidated financial statements.
3
TELIGENT, INC. (DOMESTIC SUBSIDIARIES)
(DEBTOR-IN-POSSESSION)
SUPPLEMENTAL INFORMATION
(UNAUDITED, IN THOUSANDS)
MONTH ENDED
SEPTEMBER 30, 2001
------------------------------
a Wages paid $ 5,404
b Payroll taxes withheld 1,367
c Employer tax 364
d Gross Sales 9,176
e Sales and use taxes due 2,300
f Property taxes 818
g-a Other taxes, fees - Trust Fund 2,094
g-b Other taxes, fees - non Trust Fund 1,561
TELIGENT, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. PETITION FOR RELIEF UNDER CHAPTER 11
On May 21, 2001, the Company and all of its direct and indirect
domestic subsidiaries filed voluntary petitions for relief under Chapter 11 of
the U.S. Bankruptcy Code in the United States Bankruptcy Court for the Southern
District of New York in order to facilitate the restructuring of the Company's
long-term debt and other obligations. The 21 separate cases were procedurally
(but not substantively) consolidated for joint administration. Each of the
Company and the subsidiaries included in the filings will continue to operate
their businesses as debtors in possession during the reorganization proceeding.
The bankruptcy petitions were filed in order to preserve cash and to give the
Company and its domestic subsidiaries the opportunity to restructure their debt.
The Company's foreign subsidiaries were not part of the Chapter 11 filing.
In conjunction with the filing of the petitions, the Company entered
into an interim arrangement with its lenders to provide funds, subject to
certain conditions, for near-term operations. The Bankruptcy Court approved the
interim arrangement with the Company's lenders on May 21, 2001. A hearing on the
interim arrangement was held on June 13, 2001, where the Court approved further
interim financing from the Company's lenders and approved a streamlined process
whereby further Court approvals will be unnecessary for additional interim
funding. While under the protection of Chapter 11, the Company may sell or
otherwise dispose of assets and liquidate or settle liabilities for amounts
other than those reflected in the consolidated financial statements. The
financial statements do not include any adjustments that might be necessary as a
result of the outcome of the uncertainties discussed herein, including the
effects of any plan of reorganization or liquidation.
Based on the aforementioned bankruptcy coupled with the violation of
certain debt-covenants, the Company is in default on all of its indebtedness.
The Company has classified all of its debt in the accompanying unaudited
condensed consolidated balance sheet at September 30, 2001 as liabilities
subject to compromise. In addition, as a result of these bankruptcy proceedings,
substantially all of the liabilities, litigation and claims against the Debtors
in existence at the petition date are stayed unless the stay is modified or
lifted or payment is otherwise authorized by the Bankruptcy Court.
On August 23, 2001, certain of the Debtors entered into an Asset
Purchase Agreement (the "Agreement") with Teligent Acquisition Corp. ("TAC") for
the sale and purchase of substantially all of the Company's core domestic
business and assets. Under the Agreement, TAC agreed to pay, subject to certain
financing and regulatory contingencies, in excess of $115 million for the
Company's core domestic fixed wireless business and assets. The Agreement is
subject to numerous approvals, including the U. S. Bankruptcy Court, the Federal
Communications Comission, the Department of Justice, and state regulatory
agencies.
On August 24, 2001, the Company announced it would restructure retail
operations in twelve of its markets: Atlanta, Charlotte, Denver, Detroit,
Indianapolis, Kansas City, Minneapolis, Orlando, Portland, San Francisco, San
Antonio and Seattle. Eleven markets will remain after the Company's retail
operations in these twelve markets are restructured.
On August 24, 2001, the Debtors filed a motion with the U. S.
Bankruptcy Court requesting authority to sell the Company's core assets to
Teligent Acquisition Corporation ("TAC"), subject to higher and better offers.
The hearing to consider and approve the transaction with TAC, or an alternative
higher and better offer, was initially scheduled for October 3, 2001. After the
initial adjournment on October 12, 2001, the Company requested that the Court
further adjourn the hearing regarding the transaction with TAC until October 30,
2001. The Court granted the request and adjourned the hearing until October 30,
2001.
2
2. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
include the results of Teligent, Inc. and all of its direct and indirect
domestic subsidiaries for the month ended September 30, 2001. The Company's
foreign subsidiaries are not part of the Chapter 11 filing and therefore are not
included in these statements. These financial statements have been prepared on a
going concern basis, which contemplates continuity of operations, realization of
assets and liquidation of liabilities in the ordinary course of business. These
statements include intercompany balances that would be eliminated, in accordance
with generally accepted accounting principles, when the results of the Company
are consolidated with all of its foreign subsidiaries.
3. SIGNIFICANT ACCOUNTING POLICIES
The unaudited condensed consolidated financial statements have been
prepared using the accounting policies disclosed in the related annual audited
financial statements.
4. DEBT
Total debt consists of the following (in thousands):
11.5% Senior Notes due 2007............................................................ $ 300,000
11.5% Senior Discount Notes due 2008................................................... 361,802
Credit Facility........................................................................ 800,000
Other.................................................................................. 80
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Total debt $1,461,882
=========
The Company is in default on all of its indebtedness as a result of its
failure to deliver definitive documentation with respect to financing within the
time period required by the Amendment to the Credit Facility (described in
detail below), and because of the bankruptcy filing. As a result of the
bankruptcy filing, all of its outstanding debt has been classified as
liabilities subject to compromise.
Senior Notes Offering
In November 1997, the Company issued $300 million of 11 1/2% Senior Notes
due 2007 (the "Senior Notes"). The Company used $93.9 million of the net
proceeds of this offering to purchase a portfolio of Treasury securities which
were pledged as collateral for the payment of interest on the Senior Notes
through December 1, 2000.
On or after December 1, 2002, the Notes will be redeemable at the option of
the Company, in whole at any time or in part from time to time, at prices
ranging from 100.00% to 105.75% (expressed in percentages of the principal
amount thereof).
Upon the occurrence of a change in control, as defined in the Senior Notes
agreement, each holder of the Senior Notes will have the right to require the
Company to repurchase all or any part of such holder's Senior Notes at a
purchase price in cash equal to 101% of the principal amount.
Senior Discount Notes Offering
3
On February 20, 1998, the Company completed an offering (the "Discount
Notes Offering") of $440 million 11 1/2% Senior Discount Notes due 2008 (the
"Senior Discount Notes"). The Company received $243.1 million in net proceeds
from the Discount Notes Offering, after deductions for offering expenses of
$7.6 million. Under a 1998 exchange offer, all outstanding Senior Discount
Notes were exchanged for 11 1/2% Series B Discount Notes due 2000 (the "New
Discount Notes") which have been registered under the Securities Act of 1933,
as amended. The New Discount Notes are identical in all material respects to
the Senior Discount Notes.
On or after March 1, 2003, the New Discount Notes will be redeemable at the
option of the Company on terms similar to those of the Senior Notes. In
addition, the New Discount Notes contain change in control repurchase
commitments similar to the Senior Notes.
Credit Facility
On July 2, 1998, the Company entered into a credit agreement, as
subsequently amended, (the "Bank Credit Agreement") with certain lenders,
providing for credit facilities up to an aggregate of $800 million (the "Credit
Facility"). Availability of funds under the Credit Facility were subject to
certain conditions as defined in the Bank Credit Agreement, all of which were
met prior to the draw down of the entire facility in January 2001. Substantially
all of the Company's assets secure the obligations under the Bank Credit
Agreement.
The Credit Facility is structured into three separate tranches consisting
of a term loan facility, a delayed draw term loan facility and a revolving
credit facility, each of which has a final maturity of eight years. Interest
accrues on $575.0 million of outstanding borrowings based on a floating rate
tied to the prevailing LIBOR rate and adjusts based on the attainment of certain
key revenue and leverage benchmarks. The remaining $214.7 million accrued
interest at a fixed rate of 11.125% per annum. The Company incurred commitment
and other fees in connection with obtaining the Credit Facility totaling $19.9
million, which was being amortized over eight years. As a result of the
bankruptcy filing, unamortized commitment fees including those incurred in
connection with obtaining the Credit Facility were written off as reorganization
charges in July 2001 in the amount of $27.6 million. The Credit Facility
contains certain financial and other covenants that restrict, among other
things, the Company's ability to (a) incur or create additional debt, (b) enter
into mergers or consolidations, (c) dispose of a significant amount of assets,
(d) pay cash dividends, or (e) change the nature of its business. The amounts
outstanding under the Credit Facility are subject to mandatory prepayments in
certain circumstances.
The Company executed an Amendment and Consent (the "Amendment") to the Bank
Credit Agreement subsequent to December 31, 2000. Pursuant to the Amendment, the
interest rates applicable to borrowings under the Credit Facility were
increased. The Amendment also increased the maximum aggregate principal amount
under the optional term loan tranche of the Credit Facility from $400 million to
$600 million, of which $350 million can be utilized as vendor loans. The
optional term loan tranche is not a binding commitment of the lenders, rather it
provides a vehicle for any of the lenders to loan the Company additional funds
under the Credit Facility.
The Amendment also changed several of the covenants applicable to the
Company. The Company received a waiver for default of the fixed charge coverage
ratio for the period ending December 31, 2000 from the lenders as part of the
Amendment, and the test was eliminated for the first quarter of 2001. The
Company was in compliance with all other debt covenants of the Credit Facility
as of December 31, 2000. The Amendment also requires the Company to maintain
substantially all of its cash and cash equivalents in a collateral and
securities account with a lender bank and the remainder of its funds in a
4
separate operating account. The Amendment also contains a waiver that permitted
the explanatory paragraph included in the Company's auditor's opinion for the
year ended December 31, 2000.
As part of the Amendment, the Company was required to deliver definitive
documentation with respect to vendor financing (in an aggregate amount of at
least $250 million) and convertible notes (in an aggregate amount of at least
$100 million), no later than April 30, 2001, which requirement was
5
subsequently waived to May 21, 2001. The Company was not successful in securing
the additional financing and on May 21, 2001 the Company filed voluntary
petitions for relief under Chapter 11 of the U.S. Bankruptcy Code.
5. EMPLOYEE BENEFIT PLANS
Employees of the Company may participate in a 401(k) retirement plan in
which eligible employees may elect to contribute, on a tax-deferred basis, up to
15% of their compensation, not to exceed annual maximums as defined in the
Internal Revenue Code. The Company matches one-half of a participant's
contribution up to 6% of the participant's compensation, vesting over 4 years.
Effective July 1, 1999, the Company adopted the Employee Stock Purchase
Plan ("ESPP"). Under the ESPP, the Company authorized the issuance of 300,000
shares of Class A Common Stock, which allowed eligible employees to purchase
such shares at 85% of the fair value of the Class A Common Stock. As of January
2001, the Company had issued all such shares available under the ESPP.
6. RESTRUCTURING RESERVE
On November 8, 2000, the Company announced a plan to restructure its
operations in order to focus future business growth on the Company's fixed
wireless networks. This restructuring included a workforce reduction of 600
employees associated with efforts to realign the sales, operations and real
estate organizations. As a result of this work force reduction and
organizational realignment, the Company recorded a $14.5 million restructuring
charge in the quarter ending December 31, 2000. The charge consisted of $6.8
million for severance and other compensation, $5.8 for net costs relating to
lease terminations, and other costs of $1.9 million. On February 15, 2001, the
Company announced an additional workforce reduction, terminating 172 employees
company-wide and recording an additional $600,000 to the restructuring reserve.
On August 24, 2001, the Company announced it would restructure retail operations
in twelve of its markets. This restructuring included a workforce reduction of
147 employees. At August 31, no additional restructuring costs were recorded as
a result of the August work-force reduction. As of September 30, 2001, the
reserve balance totaled $5.6 million, consisting of personnel-related costs,
primarily related to severance totaling $0.6 million, office closures totaling
$3.8 million and other costs of $1.2 million.
7. REORGANIZATION CHARGES
Reorganization costs totaling approximately $61.6 million have been booked
as of September 30, 2001, consisting of professional fees of $7.1 million
related to the bankruptcy filings, $28.0 million related to the write off of
deferred debt financing costs, $6.2 million for loss on the write-off of
goodwill due to the market restructuring and $20.3 for the loss on the sale of
subsidiaries.
8. ASSET IMPAIRMENT
Due to the bankruptcy filing and related events the Company believes that
certain assets have been impaired. In addition, as the Company realigns its
service offerings in certain markets assets have been removed from service and
remain unutilized or have been abandoned. As a result of the aforementioned the
Company has reduced property and equipment by $271.4 million and goodwill and
other intangibles by $5.8 million. Furthermore, there is no assurance that the
carrying amounts of the assets will be realized and further asset impairments
may be recognized.
6
TELIGENT, INC., et al.,
Case No. 01-12974 (SMB)
Disbursements by debtors from September 1, 2001 to September 30, 2001
CASE NO. TAX ID NO. DEBTOR NAME Amount
-------- ---------- ----------- -------------------------
01-12974 54-1866562 Teligent, Inc.
01-12975 51-0390077 Teligent Services Inc. 22,793,147
01-13002 54-2006694 Teligent Professional Services, Inc.
01-12981 54-2009508 Executive Conference, Inc. 1,077,187
01-12991 54-1993057 Quadrangle Investments, Inc.
01-12985 31-1066400 InfiNet Telecommunications, Inc. 12,067
01-12979 54-1941227 Backlink, L.L.C.
01-12976 23-2430439 American Long Lines, Inc. 52
01-12978 54-1878787 Auctel, Inc.
01-13003 54-1942622 Teligent Telecommunications, L.L.C..
01-12980 34-1713206 Easton Telecom Services, Inc. 288,440
01-12994 54-1942632 Teligent Communications, L.L.C.
01-13004 54-1891303 Teligent of Virginia, Inc.
01-12990 52-1731424 OMC Communications, Inc. -
01-12977 91-1576088 Association Communications, Inc. 4,854
01-12986 54-1960620 Jtel, L.L.C.
01-12989 54-1960861 KatLink, L.L.C.
01-12993 54-1146458 Telecommunications Concepts, Inc. 183,224
01-12983 13-3617289 FirstMark Communications, Inc.
01-12997 52-2056185 Teligent License Co. I, L.L.C.
01-12999 52-2056187 Teligent License Co. II, L.L.C.
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$ 24,358,971
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*Payroll disbursement recorded through Teligent Services, Inc.