1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to ______________
Commission File Number 0-19656
NEXTEL COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 36-3939651
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1505 FARM CREDIT DRIVE, MCLEAN, VA 22102
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (703) 394-3000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: Yes X No
----- -----
Indicate the number of shares outstanding of each of issuer's classes of
common stock as of the latest practicable date:
Number of Shares Outstanding
Title of Class on August 1, 1997
-------------- -----------------
Class A Common Stock, $0.001 par value 239,991,757
Class B Non-Voting Common Stock, 17,830,000
$0.001 par value
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NEXTEL COMMUNICATIONS, INC.
INDEX
NO. PAGE
- --- ----
PART I FINANCIAL INFORMATION.
Item 1. Financial Statements - Unaudited.
Condensed Consolidated Balance Sheets -
As of June 30, 1997 and December 31, 1996. 3
Condensed Consolidated Statements of Operations -
For the Six Months Ended June 30, 1997 and 1996. 4
Condensed Consolidated Statements of Operations -
For the Three Months Ended June 30, 1997 and 1996. 5
Condensed Consolidated Statement of Changes in Stockholders' Equity -
For the Six Months Ended June 30, 1997. 6
Condensed Consolidated Statements of Cash Flows -
For the Six Months Ended June 30, 1997 and 1996. 7
Notes to Condensed Consolidated Interim Financial
Statements. 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 11
PART II OTHER INFORMATION.
Item 1. Legal Proceedings. 24
Item 2. Changes in Securities. 24
Item 4. Submission of Matters to a Vote of Security Holders. 25
Item 6. Exhibits and Reports on Form 8-K. 26
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PART I
ITEM 1. FINANCIAL STATEMENTS - UNAUDITED.
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
UNAUDITED
JUNE 30, DECEMBER 31,
1997 1996
---------- ----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents (of which $379,076
is restricted as of June 30, 1997) $ 538,783 $ 139,681
Marketable securities (of which $69,962
is restricted as of June 30, 1997) 72,712 5,012
Accounts and notes receivable, less allowance for doubtful
accounts of $14,199 and $10,774 178,770 90,392
Radio and accessory inventory 69,649 45,168
Prepaid expenses and other 34,479 28,844
---------- ----------
Total current assets 894,393 309,097
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation
of $411,379 and $314,808 2,242,803 1,803,739
INTANGIBLE ASSETS, net of accumulated amortization
of $659,971 and $566,327 4,238,168 4,076,300
OTHER ASSETS 453,460 283,303
---------- ----------
$ 7,828,824 $ 6,472,439
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable, accrued expenses and other $ 422,065 $ 374,220
Current portion of long-term debt 2,556 1,524
---------- ----------
Total current liabilities 424,621 375,744
LONG-TERM DEBT 4,336,264 2,783,041
DEFERRED INCOME TAXES 484,967 505,516
OTHER 10,388 --
---------- ----------
Total liabilities 5,256,240 3,664,301
---------- ----------
CONTINGENCIES (NOTE 6)
STOCKHOLDERS' EQUITY
Preferred stock, Class A convertible redeemable,
8,163,265 shares issued and outstanding 300,000 300,000
Preferred stock, Class B convertible, 82 shares issued and outstanding -- --
Common stock, Class A, 225,780,866 and 211,374,665 shares issued,
224,233,708 and 209,753,097 shares outstanding 226 211
Common stock, Class B, non-voting convertible, 17,830,000 shares
issued and outstanding 18 18
Paid-in capital 3,903,458 3,672,908
Accumulated deficit (1,617,724) (1,135,251)
Treasury shares, at cost, 1,547,158 and 1,621,568 shares (29,814) (31,400)
Unrealized gain on investments 27,684 14,993
Notes receivable from stockholders (613) (1,100)
Deferred compensation, net (10,651) (12,241)
---------- ----------
Total stockholders' equity 2,572,584 2,808,138
---------- ----------
$ 7,828,824 $ 6,472,439
========== ==========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
UNAUDITED
1997 1996
------------ ------------
REVENUES
Radio service revenue $ 243,530 $ 125,853
Analog equipment sales and maintenance 13,084 20,084
------------ ------------
256,614 145,937
------------ ------------
OPERATING EXPENSES
Cost of radio service revenue 114,566 107,708
Cost of analog equipment sales and maintenance 8,088 14,719
Selling, general and administrative 314,355 144,045
Depreciation and amortization 224,704 186,829
------------ ------------
661,713 453,301
------------ ------------
OPERATING LOSS (405,099) (307,364)
------------ ------------
OTHER INCOME (EXPENSE)
Interest Expense (172,456) (106,741)
Interest Income 12,286 13,209
Other (3,134) --
------------ ------------
(163,304) (93,532)
------------ ------------
LOSS BEFORE INCOME TAX BENEFIT (568,403) (400,896)
INCOME TAX BENEFIT 85,930 152,150
------------ ------------
NET LOSS $ (482,473) $ (248,746)
============ ============
NET LOSS PER COMMON SHARE $ (2.01) $ (1.13)
============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 239,591,000 219,279,000
============ ============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1997 AND 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
UNAUDITED
1997 1996
------------ ------------
REVENUES
Radio service revenue $ 139,845 $ 67,755
Analog equipment sales and maintenance 6,093 9,864
------------ ------------
145,938 77,619
------------ ------------
OPERATING EXPENSES
Cost of radio service revenue 60,808 58,015
Cost of analog equipment sales and maintenance 3,685 7,113
Selling, general and administrative 181,979 78,756
Depreciation and amortization 114,501 94,155
------------ ------------
360,973 238,039
------------ ------------
OPERATING LOSS (215,035) (160,420)
------------ ------------
OTHER INCOME (EXPENSE)
Interest expense (97,189) (57,321)
Interest income 8,304 6,585
Other (4,197) --
------------ ------------
(93,082) (50,736)
------------ ------------
LOSS BEFORE INCOME TAX BENEFIT (308,117) (211,156)
INCOME TAX BENEFIT 46,494 81,128
------------ ------------
NET LOSS $ (261,623) $ (130,028)
============ ============
NET LOSS PER COMMON SHARE $ (1.08) $ (0.58)
============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 241,831,000 224,783,000
============ ============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(DOLLARS IN THOUSANDS)
UNAUDITED
Class A Class B
Preferred Stock Preferred Stock
Shares Amount Shares Amount
------ ------ ------ ------
BALANCE, January 1, 1997 8,163,265 $300,000 82 $ --
Issuance of common stock:
Exercise of options and warrants
Employee stock purchase plan
Acquisitions
Issuance of warrants of subsidiary in
connection with private placement
(Note 3)
Repurchase of Comcast option
Issuance of McCaw option to
purchase common stock
Deferred compensation
Collection of notes receivable, net of
accrued interest
Unrealized gain on investments
Net loss
--------- -------- -- -------
BALANCE, June 30, 1997 8,163,265 $300,000 82 $ --
========= ======== == =======
Class A Class B
Common Stock Common Stock Paid-in
Shares Amount Shares Amount Capital
------ ------ ------ ------ -------
BALANCE, January 1, 1997 211,374,665 $ 211 17,830,000 $18 $(3,672,908)
Issuance of common stock:
Exercise of options and warrants 1,141,844 2 9,522
Employee stock purchase plan (875)
Acquisitions 13,264,357 13 203,607
Issuance of warrants of subsidiary in
connection with private placement
(Note 3) 14,800
Repurchase of Comcast option (25,000)
Issuance of McCaw option to
purchase common stock 24,743
Deferred compensation 3,753
Collection of notes receivable, net of
accrued interest
Unrealized gain on investments
Net loss
----------- ---- ---------- --- -----------
BALANCE, June 30, 1997 225,780,866 $226 17,830,000 $18 $(3,903,458)
=========== ==== ========== === ===========
Unrealized Receivable
Accumulated Treasury Gain on from Deferred
Deficit Shares Investments Stockholders Compensation
------- ------ ----------- ------------ ------------
BALANCE, January 1, 1997 $(1,135,251) $(31,400) $14,993 $(1,100) $(12,241)
Issuance of common stock:
Exercise of options and warrants (494)
Employee stock purchase plan 2,080
Acquisitions
Issuance of warrants of subsidiary in
connection with private placement
(Note 3)
Repurchase of Comcast option
Issuance of McCaw option to
purchase common stock
Deferred compensation 1,590
Collection of notes receivable, net of
accrued interest 487
Unrealized gain on investments 12,691
Net loss (482,473)
----------- -------- ------- ----- --------
BALANCE, June 30, 1997 $(1,617,724) $(29,814) $27,684 $(613) $(10,651)
=========== ======== ======= ===== ========
The accompanying notes are an integral part of this condensed consolidated
financial statement.
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NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(DOLLARS IN THOUSANDS)
UNAUDITED
1997 1996
----------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (482,473) $ (248,746)
Adjustment to reconcile net loss to net
cash used in operating activities 232,841 72,775
----------- ----------
Net cash used in operating activities (249,632) (175,971)
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for acquisitions and purchase of licenses,
net of cash acquired (38,264) 58,742
Other investments and advances to affiliates (55,561) (21,150)
Capital expenditures (539,947) (25,552)
Purchases of marketable securities (67,610) (5,960)
Other (2,401) 2,414
----------- ----------
Net cash (used in) provided by investing activities (703,783) 8,494
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from private placement of debt securities 500,003 --
Long-term borrowings 928,000 --
Other long-term borrowings (repayments), net 378 (822)
Debt issuance costs (84,950) --
Common stock and options issued 33,599 105,004
Option repurchase and other (24,513) (17)
----------- ----------
Net cash provided by financing activities 1,352,517 104,165
----------- ----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 399,102 (63,312)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 139,681 340,826
----------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 538,783 $ 277,514
=========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 46,664 $ 10,281
=========== ==========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
UNAUDITED
NOTE 1 - BASIS OF PRESENTATION.
The condensed consolidated interim financial statements of Nextel
Communications, Inc. and subsidiaries ("Nextel" or the "Company") included
herein have been prepared by the Company without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission (the "Commission")
and reflect all adjustments that are, in the opinion of management, necessary
for a fair statement of the results for the interim periods. All adjustments
made were normal recurring accruals.
The interim financial statements should be read in conjunction with the
financial statements and notes thereto contained in the Company's Annual Report
on Form 10-K for the year ended December 31, 1996. Operating results for the
interim periods are not necessarily indicative of results for an entire year.
Total cash and non-cash capital expenditures for the six months ended June
30, 1997 were $535.1 million which is net of the decrease in vendor accounts
payable of $29.9 million from December 31, 1996. Under its vendor financing
agreements in effect through September 30, 1996, the Company directly financed
certain of its equipment purchases. During the six months ended June 30, 1996,
the total equipment acquired under these vendor financing agreements was $35.3
million, resulting in total cash and non-cash capital expenditures of $73.6
million. Total capital expenditures includes interest capitalized in
connection with the construction and development of the Company's advanced
mobile communications systems employing digital technology with a multi-site
configuration permitting frequency reuse (the "Digital Mobile networks") of
approximately $25.1 million and $12.8 million during the six months ended June
30, 1997 and 1996, respectively.
As of June 30, 1997, approximately $449.0 million of cash, cash
equivalents and marketable securities held by McCaw International, Ltd. ("McCaw
International"), an indirect wholly-owned subsidiary of Nextel, and its
subsidiaries were not available to fund any of the cash needs of Nextel's
domestic Digital Mobile and analog specialized mobile radio ("SMR") businesses
due to the restrictions contained in the indenture related to the 10-year
discount notes (see Note 3) issued by McCaw International in March 1997 (the
"MIL Indenture"). The funds are invested in compliance with the MIL Indenture
which restricts the type, quality and maturity of such investments.
Marketable securities are stated at cost as it is the Company's intent to
hold these securities to maturity.
Certain prior period amounts have been reclassified to conform to the
1997 presentation.
NOTE 2 - SIGNIFICANT TRANSACTIONS.
In January 1997, the Company, through a wholly-owned subsidiary,
purchased additional common shares of Corporacion Mobilcom S.A. de C.V., a
Mexican SMR operator ("Mobilcom") at a cost of $16.5 million, in exchange for
shares of Nextel Class A Common Stock, par value $0.001 per share ("Nextel
Common Stock"). As a result of a series of additional cash contributions
through June 30, 1997 aggregating $24.6 million, the Company has increased its
equity interest in Mobilcom to approximately 48.1%.
In January 1997, Nextel acquired 81% of the outstanding shares of
Wireless Ventures of Brazil, Inc. ("WVB"), an operator of analog SMR systems in
Brazil, for a purchase price of $186.3 million which was paid with
approximately 11,964,000 shares of Nextel Common Stock, through a merger of WVB
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with a wholly-owned subsidiary of Nextel. Nextel simultaneously contributed
its interest in WVB, which was renamed McCaw International (Brazil), Ltd., to
McCaw International.
As more fully described in "Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Recent Transactions and
Developments," on March 20, 1997, the Company completed the purchase of an
option to acquire 25,000,000 shares of Nextel Common Stock (the "Comcast
Option") from an affiliate of Comcast Corporation, for an aggregate purchase
price of $25.0 million.
NOTE 3 - LONG-TERM DEBT.
JUNE 30, DECEMBER 31,
1997 1996
----------- -----------
(IN THOUSANDS)
11.5% Senior redeemable discount notes due 2003,
net of unamortized discount of $64,205 and $89,024 $ 461,650 $ 436,831
9.75% Senior redeemable discount notes due 2004,
net of unamortized discount of $161,093 and
$205,773 965,342 920,662
10.125% Senior redeemable OneComm discount notes due
2004, net of unamortized discount of $132,956
and $151,810 276,920 258,066
12.25% Senior redeemable Dial Page discount notes due
2004, net of unamortized discount of $160,390
and $186,584 381,440 355,246
10.25% Senior redeemable Dial Page discount notes due
2005, net of unamortized discount of $40,032
and $45,192 75,133 69,973
13% Senior redeemable McCaw International discount
notes due 2007 net of unamortized discount of $445,293 506,170 --
Bank credit facility, interest payable quarterly at
an adjusted rate calculated either on the prime
rate or LIBOR (8.19% to 8.81%) 1,441,000 590,000
Vendor credit facility at 2% over the prime rate (10.5%) 227,000 150,000
Other 4,165 3,787
----------- -------------
4,338,820 2,784,565
Less current portion 2,556 1,524
----------- -------------
$ 4,336,264 $ 2,783,041
=========== =============
In March 1997, McCaw International completed a private placement of
951,463 units (the "McCaw International Private Placement") yielding
approximately $500.0 million in gross proceeds. Each unit is comprised of a
10-year senior discount note and a warrant to purchase 0.10616 shares of McCaw
International common stock. The notes have a 13% yield to maturity, are
noncallable for five years, and require no interest payments for the first five
years. The warrants are exercisable at a price of $36.45 per share and expire
in March 2007. On a fully-diluted basis, the warrants would entitle the
holders to purchase, in the aggregate, approximately 1% of McCaw
International's common stock.
As more fully discussed in "Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Recent Transactions and
Developments," Nextel obtained the consent from the holders of the five
outstanding issues of Senior Redeemable Discount Notes (the "Nextel Notes"), to
certain amendments to and waivers of certain provisions of the indentures
relating to the Nextel Notes (the "Nextel Indentures") pursuant to a consent
solicitation at a cost of approximately $67.2 million.
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NOTE 4 - DIGITAL MOBILE NETWORK EQUIPMENT SALES AND RELATED COSTS.
Equipment sales and related costs for the operation of the Digital Mobile
networks are classified within selling, general and administrative expenses as
follows (in thousands):
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- ---------------------------
1997 1996 1997 1996
--------- --------- --------- ----------
Equipment sales $ 55,393 $ 33,127 $ 98,676 $ 58,294
Cost of equipment sales 84,182 38,640 146,316 67,049
----------- ----------- ----------- ----------
$ (28,789) $ (5,513) $ (47,640) $ (8,755)
=========== =========== =========== ==========
The loss generated from the sale of subscriber units used in the Digital
Mobile networks primarily results from the Company's subsidy of digital
subscriber units and other related digital equipment sales and represents
marketing costs for the Digital Mobile networks. The cost of equipment sales
includes the cost of the digital subscriber units and other related digital
equipment, as well as current period order fulfillment and installation related
expenses.
NOTE 5 - SUBSEQUENT EVENTS.
As more fully discussed in "Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Recent Transactions and
Developments," on June 16, 1997 Nextel entered into an agreement with Digital
Radio, L.L.C., an entity controlled by Craig O. McCaw (the "McCaw Investor")
setting forth the principal terms and conditions on which the McCaw Investor
would exercise in full its option (the "First Option") to purchase 15,000,000
shares of Nextel Common Stock for an aggregate purchase price of $232.5 million
(the "Option Commitment"). Such Option Commitment was consummated by the McCaw
Investor's exercise in full of the First Option on July 28, 1997 (the "Option
Closing").
As more fully discussed in " Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Recent Transactions and
Developments," on July 21, 1997, the Company completed a private placement of
500,000 shares of 13% Series D Exchangeable Preferred Stock (the "Series D
Preferred Stock") with a liquidation preference of $1,000 per share yielding
approximately $482.0 million in net cash proceeds. The Series D Preferred
Stock is mandatorily redeemable in July 2009.
NOTE 6 - CONTINGENCIES.
See Part II, Item 1. "Legal Proceedings" for a discussion of certain
lawsuits and other legal matters.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Overview.
The following is a discussion of the condensed consolidated financial
condition and results of operations of Nextel for the six months ended June 30,
1996 and 1997, and certain factors that could affect Nextel's prospective
financial condition and should be read in conjunction with the Company's Annual
Report on Form 10-K for the year ended December 31, 1996 and the Quarterly
Report on Form 10-Q for the three months ended March 31, 1997.
Nextel's business consists principally of providing a wide array of
digital and analog wireless communications services to its customers in the
United States, in each case utilizing frequencies licensed to its subsidiaries
by the Federal Communications Commission ("FCC"). Nextel provides a
differentiated package of integrated digital wireless communications services
under the Nextel brand name to customers of the various networks constructed
and operated by Nextel's subsidiaries in and around major metropolitan
population centers throughout the country. Collectively, Nextel's operations
constitute one of the largest integrated wireless communications networks
utilizing a single digital transmission technology currently offering
commercial service in the United States. Through its digital and analog
wireless communications networks, Nextel is the leading provider of SMR
wireless communications services in nearly all 48 states in the continental
United States and in Hawaii. Nextel has significant SMR spectrum holdings in
and around every major business and population center in the country, including
all of the top 50 metropolitan market areas in the United States.
The Company's operating revenues primarily arise from its digital and
analog wireless communications businesses in the United States, particularly
the mobile telephone service and two-way radio service and to a lesser extent,
from sales and maintenance of related equipment. The Company's business plans
and efforts are to a large extent directed toward replacing the remaining
traditional analog SMR systems that it currently operates with Digital Mobile
networks. A customer using the Company's Digital Mobile network is able to
access mobile telephone services, two-way dispatch, paging and alphanumeric
short-messaging service, and in the future is expected to be able to access
data transmission. The Company is implementing its Digital Mobile networks
utilizing digital technology developed and manufactured by Motorola, Inc.
("Motorola") (such technology is referred to as the "integrated Digital
Enhanced Network" or "iDEN"). As of June 30, 1997, Nextel's Digital Mobile
networks were operating in major metropolitan areas throughout the United
States in which approximately 50% of the total United States population lives
or works.
Prior to the second quarter of 1996, Nextel implemented its Digital
Mobile networks in its market areas using Motorola's first generation iDEN
technology. During that time frame, Nextel encountered certain technology and
system performance issues relating primarily to the voice transmission quality
of the mobile telephone service. In response to these issues, Nextel and
Motorola took action on several fronts to address system performance issues in
general, and voice transmission quality concerns in particular. See Part I,
Item 1, "Business -- Nextel's Digital Mobile Networks -- Experience with First
Generation iDEN Systems Implementation," in Nextel's Annual Report on Form 10-K
for the year ended December 31, 1996. Additionally, Nextel, together with
Motorola, in 1995 began pursuing a program directed toward development and
deployment of modifications to the first generation iDEN technology platform,
which modifications were targeted specifically at improving the voice
transmission quality of the mobile telephone service. Nextel commenced the
full-scale commercial launch of its first Digital Mobile networks incorporating
the modified iDEN technology ("Reconfigured iDEN") in the Chicago metropolitan
market late in the third quarter of 1996. Subsequently in 1996, Nextel
commenced full-scale commercial launches of the Reconfigured iDEN Digital
Mobile networks in the Atlanta, Boston, Denver, Detroit, and Las Vegas
metropolitan market areas, in each case accompanied by an aggressive,
regionally focused marketing campaign. During the first half of 1997, Nextel
commenced commercial launches of its Reconfigured iDEN technology on the Nextel
national digital network throughout the
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Pacific Northwest, metropolitan Washington D.C. and in cities in California,
North Carolina, New York, Maryland, Missouri, Pennsylvania, Minnesota, Texas,
Kansas, and Oklahoma, including San Francisco, Charlotte, Raleigh/Durham,
Greensboro/Winston-Salem, Los Angeles, New York, San Diego, St. Louis, Seattle,
Portland, Baltimore, Philadelphia, Minneapolis/St. Paul, Dallas/Fort Worth,
Kansas City, Topeka, Wichita, Oklahoma City, and Tulsa. Subsequent to June 30,
1997, Nextel commenced commercial launches in cities in Texas, Florida,
Pennsylvania and Ohio, which included Houston, Miami/Fort Lauderdale, Tampa/St.
Petersburg, Orlando, Jacksonville, Pittsburgh, Cleveland, and Columbus.
Since December 31, 1994, the number of subscriber units in service on
Nextel's Digital Mobile network has increased substantially, reflecting
acquisitions, the commencement of Digital Mobile network service in certain
markets and increased sales in markets in which Digital Mobile network services
are provided. As a result, the number of subscriber units in service on
Nextel's Digital Mobile network increased from 13,500 at December 31, 1994, to
85,000 at December 31, 1995, to 300,300 at December 31, 1996 and to 624,400 at
June 30, 1997. Nextel's business and marketing strategy for its Digital Mobile
networks continues to be based on, and reflect, a principal focus on
multi-service business users in its markets with Digital Mobile networks.
The ability of Nextel to continue to add increasing numbers of
subscribers on its Digital Mobile network is dependent on a variety of factors.
Among the more important of such factors is Nextel's ability to successfully
plan for additional system capacity in its market areas at levels adequate to
accommodate anticipated new subscribers and the related increases in system
usage. One important factor influencing system capacity is the amount of
spectrum available to Nextel in a particular market area. Although Nextel
intends to continue to pursue opportunities to acquire additional SMR spectrum
in its market areas, Nextel believes that its present holdings of 800 MHz
spectrum are generally adequate for the current and reasonably foreseeable
operation of its Digital Mobile network. In addition, Nextel requires that a
sufficient quantity of cell sites, system infrastructure equipment and
subscriber units of the appropriate models and types, be made available to meet
the demand and preferences of potential subscribers to the Digital Mobile
networks. Nextel's ability to successfully add customers on its Digital Mobile
networks also depends upon the adequacy and efficiency of the Company's
information systems, business processes and related support functions. Any
inability of the Company to timely meet Digital Mobile network capacity needs,
to have access to suitable cell sites, infrastructure and subscriber equipment
in any one or more of its market areas, or to develop, when and as required,
improvements or expansions to its systems and processes that are adequate to
meet desired levels of customer activation and demand for wireless services on
the Digital Mobile network could decrease or postpone subscriber growth,
thereby adversely affecting Nextel's revenues, business and prospects.
Nextel is implementing its recently revised business plan, which
contemplates an accelerated deployment during 1997 and 1998 of the Reconfigured
iDEN technology platform throughout markets in the United States in which the
Company plans to establish Digital Mobile networks (including primary
connecting routes between certain markets). Nextel estimates that system
infrastructure and other system capital costs to be incurred during the period
from March 31, 1997 through the end of 1998 to implement the business plan
would be approximately $1,450,000,000. See "-- Future Capital Needs and
Resources" and "-- Forward Looking Statements." Nextel believes that the
implementation of the accelerated build-out contemplated by its business plan
will better position Nextel both to achieve its strategic objectives relating
to its United States operations and to prepare for emerging competition in the
wireless communications industry, especially from certain current operators
that, on their existing cellular frequencies or on PCS frequencies, are in the
process of converting their wireless communications systems to digital
technology formats and are moving to provide "nationwide coverage" on the
resulting systems. Nextel believes that a significant strategic advantage may
exist in being "first to market," particularly in comparison to the new
"entrepreneur block" PCS licensees and other existing or potential regional
wireless communications service providers, which may encounter significant
financial and other challenges in replicating or overtaking Nextel's industry
position assuming Nextel
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successfully concludes its nationwide Digital Mobile network build-out plan and
develops a sufficient customer base in its markets. Although Nextel already
has taken a number of significant steps in anticipation of implementing this
business plan (including obtaining modifications to certain terms contained in
the Nextel Indentures, to provide the flexibility required to assemble and
utilize the necessary financing for such business plan), and further actions
currently are underway to reach that objective, several of the actions that
must be taken to enable Nextel to implement its business plan are dependent on
certain actions by or responses from third parties, which as yet have not been
secured. See "-- Future Capital Needs and Resources" and "-- Forward Looking
Statements."
RECENT TRANSACTIONS AND DEVELOPMENTS.
PREFERRED STOCK ISSUANCE. On July 21, 1997, Nextel completed the sale of
500,000 shares of its Series D Preferred Stock with a liquidation preference of
$1,000 per share. Nextel received approximately $482,000,000 in net cash
proceeds from the sale of the Series D Preferred Stock.
Dividends on the Series D Preferred Stock accrue at an annual rate of 13%
of the liquidation preference, are cumulative from the date of issuance and are
payable quarterly in cash or, on or prior to July 15, 2002, at the sole option
of Nextel, in additional shares of Series D Preferred Stock. The Series D
Preferred Stock is mandatorily redeemable on July 15, 2009 at the liquidation
preference plus accrued and unpaid dividends, and is redeemable in whole or in
part, at the option of Nextel, at any time after December 15, 2005, at a price
equal to the liquidation preference plus accrued and unpaid dividends, and, in
certain circumstances, after July 15, 2002 at specified redemption prices. Up
to 35% of the Series D Preferred Stock may be redeemed on or prior to July 15,
2000, in whole or in part, at the option of Nextel, in certain circumstances,
at 113% of the liquidation preference plus accrued and unpaid dividends from
the proceeds of one or more sales of Nextel Common Stock. The Series D
Preferred Stock is also exchangeable, in whole but not in part, at the option
of Nextel, at any time after December 15, 2005 and in certain circumstances
sooner, into Nextel subordinated debentures.
The shares of Series D Preferred Stock were issued in a private placement
transaction and have not been registered with the Commission under the
Securities Act of 1933, as amended (the "Securities Act"), and may not be sold
absent registration or an applicable exemption from the registration
requirements. In connection with the issuance of the Series D Preferred Stock,
Nextel has agreed to use its best efforts to file with the Commission and cause
to become effective a registration statement with respect to a registered offer
to exchange the then outstanding Series D Preferred Stock for an equal number
of shares of 13% Series D Exchangeable Preferred Stock that have been
registered pursuant to the Securities Act (the "Exchange Offer"). In the event
that the Exchange Offer is not consummated prior to specified dates, the
dividend accrual rate applicable to the Series D Preferred Stock will increase
by specified amounts until the Exchange Offer is consummated or certain other
requirements are met.
Terms of the Series D Preferred Stock are set forth in the Certificate of
Designation which has been filed with the Commission, and is incorporated
herein by reference.
CONSENT SOLICITATION. Under the terms of Nextel's public indentures as
in effect prior to June 13, 1997 (the "Former Version Indentures") relating to
the Nextel Notes, Nextel and its subsidiaries that are "restricted
subsidiaries" for purposes of such Indentures (the "restricted subsidiaries")
could not have incurred debt (other than certain categories of "Permitted Debt"
(as defined in such Indentures)) unless certain tests were met. Because such
terms of the Former Version Indentures could have had the effect of limiting
Nextel's ability to borrow the funds necessary to implement its business plan,
Nextel sought the consent of the holders of the Nextel Notes to certain
amendments to the Former Version Indentures pursuant to a consent solicitation
(the "Consent Solicitation"). On June 13, 1997, Nextel obtained the consent of
the requisite number of holders of the Nextel Notes to certain amendments and
waivers to specific provisions of the Former Version Indentures. Also on that
date, Nextel and the Trustee under such Former Version Indentures executed
supplemental indentures (the "Supplemental
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Indentures") to each of the Former Version Indentures implementing such
amendments and waivers. The amendments include, among other things, certain
modifications to the debt incurrence limitations of the Former Version
Indentures to allow Nextel to incur additional indebtedness, by (i) increasing
the amount of permitted debt by $350,000,000 and providing additional
flexibility to allocate the total amount of permitted debt among the existing
categories of permitted debt; (ii) allowing Nextel to incur indebtedness in
excess of such permitted debt, in the period prior to January 1, 2000, based on
the amount and timing of any net cash proceeds received by Nextel from new
equity issuances (such new equity issuances include the net cash proceeds
received by Nextel in connection with issuance of the Series D Preferred Stock,
but would exclude equity funds from several other identified sources, including
most significantly equity investment proceeds received from affiliates of Craig
O. McCaw in 1997 in connection with the exercise of the First Option and (iii)
making Nextel's ability to incur additional indebtedness on and after January
1, 2000 a function of satisfaction of a new interest coverage ratio test. See
"-- Liquidity and Capital Resources" and "-- Future Capital Needs and
Resources." The Supplemental Indentures also authorize Nextel to transfer to
its unrestricted subsidiary group the approximate 17% equity interest in
Clearnet currently held directly by Nextel, which Nextel intends to accomplish
in the near future and also implemented certain technical amendments.
In connection with the Consent Solicitation, Nextel has made consent
payments totaling approximately $67,150,000 to validly consenting holders of
the Nextel Notes (the "Consenting Holders"). The Commission declared effective
Nextel's registration statement on Form S-3 relating to the offering of
approximately 4,200,000 shares of Nextel Common Stock exclusively to Consenting
Holders at a per share price of $16.14 on or about August 8, 1997. At the date
hereof, Nextel is not able to predict how many of the shares of Nextel Common
Stock included in such offering will be subscribed for by Consenting Holders.
The foregoing statements relating to the Nextel Indentures are summaries
of the relevant provisions and do not purport to be complete. Where reference
is made to particular provisions of the Nextel Indentures, such provisions,
including the definitions of certain terms, are incorporated by reference as
part of such summaries, and are qualified in their entirety by such reference.
Each of the Former Version Indentures and the Supplemental Indentures has
previously been filed with the Commission, and each of the Former Version
Indentures, as amended and supplemented by the appropriate Supplemental
Indenture, is incorporated herein by reference.
MCCAW INVESTOR EXERCISE COMMITMENT. Pursuant to the Option Commitment,
the McCaw Investor exercised in full the First Option to purchase 15,000,000
shares of Nextel Common Stock for an aggregate purchase price of $232,500,000
on July 28, 1997. In consideration for the Option Commitment and a payment of
a nominal purchase price, Nextel issued to the McCaw Investor a contingent
equity instrument (the "CEI") which would have been convertible into shares of
Nextel Common Stock if the average closing price for a share of Nextel Common
Stock during the 20 trading days immediately preceding the Option Closing (the
"Average Trading Price") was less than $15.50 per share. Because the Average
Trading Price exceeded $15.50, the CEI automatically expired and was canceled.
The remaining options held by the McCaw Investor to purchase up to 20,000,000
additional shares of Nextel Common Stock (not including the New Option, which
is defined and tracked separately below) remain in effect as originally issued.
In connection with the Option Commitment, the McCaw Investor also agreed to
provide up to $50,000,000 in debt financing (subject to certain conditions) to
Nextel (the "McCaw Investor Borrowings"). See "-- Liquidity and Capital
Resources" and "-- Future Capital Needs and Resources." At the present time,
however, Nextel is not taking steps to meet the conditions to access the McCaw
Investor Borrowings.
On March 20, 1997, Nextel completed the purchase of the Comcast Option
for an aggregate purchase price of $25,000,000. In connection with the
agreements relating to the Option Commitment, Nextel reached an agreement with
an affiliate of Craig O. McCaw (such affiliate, the "Purchaser"), pursuant to
which the Purchaser acquired, for an aggregate purchase price of $25,000,000,
an option, in
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replacement of the Comcast Option, to purchase 25,000,000 shares of Nextel
Common Stock (the "New Option"), 15,000,000 shares of which are purchasable at
an exercise price of $16.00 per share and 10,000,000 shares of which are
purchasable at an exercise price of $18.00 per share, at any time through July
28, 1998. The New Option, and any shares of Nextel Common Stock issued upon
exercise thereof, are transferable, subject to certain limitations. In
addition, one direct transferee of the Purchaser will be entitled to designate
one nominee for election to Nextel's Board of Directors, provided that such
party (i) has exercised the transferred portion of the New Option and continues
to own at least 10,000,000 shares of Nextel Common Stock obtained on such
exercise; (ii) is not an affiliate of Craig O. McCaw and (iii) does not hold a
5% or greater equity ownership interest in any entity that provides
terrestrial-based wireless communications services in competition with Nextel
in any of its markets. Shares issuable upon exercise of the New Option will be
entitled to certain demand and piggyback registration rights, which would be
assignable to transferees in certain circumstances. There can be no assurance
that the Purchaser or any transferee will elect to exercise the New Option.
The arrangements pertinent to the New Option, the exercise of the First Option
and the McCaw Investor Borrowings are set forth in definitive agreements
entered into among the relevant parties, which definitive agreements have been
filed with the Commission and are incorporated herein by reference.
RESULTS OF OPERATIONS.
SIX MONTHS ENDED JUNE 30, 1997 VS. SIX MONTHS ENDED JUNE 30, 1996.
Total revenues for the six months ended June 30, 1997 increased 76% to
$256,614,000, as compared to $145,937,000 for the six months ended June 30,
1996. Radio service revenue for the six months ended June 30, 1997 increased
94% to $243,530,000, as compared to $125,853,000 for the six months ended June
30, 1996. The increase in radio service revenue is primarily attributable to
subscriber growth in Digital Mobile markets launched in the second half of 1996
and the first half of 1997. In addition, average revenue per digital unit
increased from $48.00 to $61.00 for the six months ended June 30, 1996 and
1997, respectively.
The total number of digital subscriber units in service as of June 30,
1997 was approximately 624,400, as compared to approximately 176,000 digital
subscriber units in service as of June 30, 1996. This increase primarily
reflects the continued national expansion of the Company's Digital Mobile
networks. In addition, Nextel also had approximately 678,200 analog subscriber
units in service as of June 30, 1997.
The average churn rate for the Digital Mobile networks operation
increased slightly from approximately 0.7% per month for the six months ended
June 30, 1996 to approximately 1.0% per month for the six months ended
June 30, 1997.
Total analog equipment sales and maintenance revenue for the six months
ended June 30, 1997 decreased 35% to $13,084,000, as compared to $20,084,000
for the six months ended June 30, 1996. The decrease in analog SMR unit sales
is a result of the Company's focus on digital unit sales, the declining
competitiveness of SMR services and related subscriber equipment utilizing
analog technology and the migration of analog subscriber units to the Digital
Mobile networks.
Cost of radio service revenue for the six months ended June 30, 1997
increased 6% to $114,566,000, as compared to $107,708,000 for the six months
ended June 30, 1996, primarily resulting from an increase in digital subscriber
units placed in service which was attributable to the commencement of Digital
Mobile network service in certain markets during the first half of 1997 and the
second half of 1996. There are certain direct costs associated with the
Digital Mobile networks, such as site rental and telecommunications expenses,
which are expected to increase as additional Digital Mobile networks are placed
into service.
Selling, general and administrative expenses for the six months ended
June 30, 1997 increased 118% to $314,355,000, as compared to $144,045,000 for
the six months ended June 30, 1996. Selling
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expenses increased primarily due to increased sales and marketing labor costs
and related commission expenses. Also contributing to the increase was the
rollout of aggressive national and regional marketing campaigns associated with
the full-scale commercial launch of the Digital Mobile networks. The increase
in general and administrative expenses is primarily related to increased
staffing and other activities supporting implementation and operation of the
Digital Mobile networks. The Company includes the loss generated from the sale
of digital subscriber units in selling, general and administrative expenses, as
the loss primarily represents marketing costs for the Digital Mobile networks.
The loss on Digital Mobile equipment sales for the six months ended June 30,
1997 increased by $38,885,000 to $47,640,000 as compared to the loss for the
six months ended June 30, 1996. The increase primarily reflects the continued
effect of customer subsidies and discounts on increased sales of digital
subscriber units and other related digital equipment and the effect of
migrating customers from traditional analog SMR systems to Digital Mobile
network systems. The Company anticipates that it will continue to offer
customers subsidies and/or discounts in connection with the sale and
installation of digital subscriber units.
Depreciation and amortization for the six months ended June 30, 1997
increased 20% to $224,704,000, as compared to $186,829,000 for the six months
ended June 30, 1996, reflecting the effect of the activation of additional
Digital Mobile networks, the expansion of existing Digital Mobile networks and
the effect of certain asset and license acquisitions during the second half of
1996 and the first half of 1997. System assets relating to the development of
Digital Mobile networks represent the largest portion of capital expenditures
during the period. Depreciation of such assets begins upon commencement of
commercial service in each market. The Company anticipates that depreciation
and amortization expense will continue to increase as additional Digital Mobile
networks are activated or expanded.
Interest expense for the six months ended June 30, 1997 increased 62% to
$172,456,000, as compared to $106,741,000 for the six months ended June 30,
1996. The increase reflects higher debt balances primarily attributable to
additional borrowings under the Company's bank and vendor credit facilities.
Interest expense has also increased as a result of the completion of the McCaw
International Private Placement.
Interest income for the six months ended June 30, 1997 decreased 7% to
$12,286,000, as compared to $13,209,000 for the six months ended June 30, 1996.
The decrease reflects lower average cash balances available for investment
during the six months ended June 30, 1997 as compared to the prior year.
The income tax benefit for the six months ended June 30, 1997 decreased
44% to $85,930,000, as compared to $152,150,000 for the six months ended June
30, 1996. These benefits were derived from the recognition of net operating
losses which can be utilized against existing deferred tax liabilities. The
effective tax rate of 15% for the six months ended June 30, 1997 decreased from
38% for the six months ended June 30, 1996. In certain circumstances,
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," limits the recognition of income tax benefits for net operating losses
to the amount of deferred tax liabilities that are expected to reverse within
the statutory carry forward period. This limitation resulted in a substantial
reduction in the Company's effective tax rate for 1997 as compared to its
effective tax rate for 1996. The decrease is not expected to have an impact on
the Company's ability to utilize its net operating losses for income tax
purposes.
THREE MONTHS ENDED JUNE 30, 1997 VS. THREE MONTHS ENDED JUNE 30, 1996.
Total revenues for the three months ended June 30, 1997 increased 88% to
$145,938,000, as compared to $77,619,000 for the three months ended June 30,
1996. Radio service revenue for the three months ended June 30, 1997 increased
106% to $139,845,000, as compared to $67,755,000 for the three months ended
June 30, 1996. The increase in radio service revenue is primarily attributable
to subscriber
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growth in Digital Mobile markets launched in the second half of 1996 and the
first half of 1997. In addition, average revenue per unit increased from
$52.00 to $63.00 for the three months ended June 30, 1996 and 1997,
respectively.
The average churn rate for the Digital Mobile networks operation
increased slightly from approximately 0.6% per month for the three months ended
June 30, 1996 to approximately 1.0% for the three months ended June 30, 1997.
Total analog equipment sales and maintenance revenue for the three months
ended June 30, 1997 decreased 38% to $6,093,000, as compared to $9,864,000 for
the three months ended June 30, 1996. The decrease in analog SMR unit sales is
a result of the Company's focus on digital unit sales, the declining
competitiveness of SMR services and related subscriber equipment utilizing
analog technology, and the migration of analog subscriber units to the Digital
Mobile networks.
Cost of radio service revenue for the three months ended June 30, 1997
increased 5% to $60,808,000, compared to $58,015,000 for the three months ended
June 30, 1996, primarily resulting from an increase in digital subscriber units
in service attributable to the commencement of Digital Mobile network service
in certain markets during the first half of 1997 and the second half of 1996.
There are certain direct costs associated with the Digital Mobile networks,
such as site rental and telecommunications expenses, which are expected to
increase as additional Digital Mobile networks are placed into service.
Selling, general and administrative expenses for the three months ended
June 30, 1997 increased 131% to $181,979,000, as compared to $78,756,000 for
the three months ended June 30, 1996. Selling expenses increased primarily due
to increased sales and marketing labor costs and related commission expenses.
Also contributing to the increase was the rollout of aggressive national and
regional marketing campaigns associated with the full-scale commercial launch
of the Digital Mobile networks. The increase in general and administrative
expenses is also related to increased staffing and other activities supporting
implementation and operation of the Digital Mobile networks. The Company
includes the loss generated from the sale of digital subscriber units in
selling, general and administrative expenses, as the loss primarily represents
marketing costs for the Digital Mobile networks. The loss on Digital Mobile
equipment sales for the three months ended June 30, 1997 increased by
$23,276,000 to $28,789,000, as compared to the loss for the three months ended
June 30, 1996. The increase primarily reflects the continued effect of
customer subsidies and discounts on increased sales of digital subscriber units
and other related digital equipment and the effect of migrating customers from
traditional analog SMR systems to Digital Mobile network systems. The Company
anticipates that it will continue to offer customers subsidies and/or discounts
in connection with the sale and installation of digital subscriber units.
Depreciation and amortization for the three months ended June 30, 1997
increased 22% to $114,501,000, as compared to $94,155,000 for the three months
ended June 30, 1996, reflecting the effect of the activation of additional
Digital Mobile networks, the expansion of existing Digital Mobile networks and
the effect of certain asset and license acquisitions during the second half of
1996 and the first half of 1997. System assets relating to the development of
Digital Mobile networks represent the largest portion of capital expenditures
during the period. Depreciation of such assets begins upon commencement of
commercial service in each market. The Company anticipates that depreciation
and amortization expense will continue to increase as additional Digital Mobile
networks are activated or expanded.
Interest expense for the three months ended June 30, 1997 increased 70%
to $97,189,000, as compared to $57,321,000 for the three months ended June 30,
1996. The increase reflects higher debt balances primarily attributable to
additional borrowings under the Company's bank and vendor credit facilities.
Interest expense has also increased as a result of the completion of the McCaw
International Private Placement.
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Interest income for the three months ended June 30, 1997 increased 26% to
$8,304,000, as compared to $6,585,000 for the three months ended June 30, 1996.
The increase relates to the interest earned on the unused proceeds from the
McCaw International Private Placement.
The income tax benefit for the three months ended June 30, 1997 decreased
43% to $46,494,000, as compared to $81,128,000 for the three months ended June
30, 1996. These benefits were derived from the recognition of net operating
losses which can be utilized against existing deferred tax liabilities. The
effective tax rate of 15% for the three months ended June 30, 1997 decreased
from 38% for the three months ended June 30, 1996. In certain circumstances,
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," limits the recognition of income tax benefits for net operating losses
to the amount of deferred tax liabilities that are expected to reverse within
the statutory carryforward period. This limitation resulted in a substantial
reduction in the Company's effective tax rate for 1997 as compared to its
effective tax rate for 1996. The decrease is not expected to have an impact on
the Company's ability to utilize its net operating losses for income tax
purposes.
LIQUIDITY AND CAPITAL RESOURCES.
Nextel had net losses of $482,473,000 and $248,746,000 for the six months
ended June 30, 1997 and 1996, respectively. Total expenses associated with
developing and operating the Digital Mobile networks have more than offset
digital service revenues and the operating earnings of the analog SMR
operations, and are expected to continue to offset such operating earnings for
the next several years. Nextel has consistently used external sources of
funds, primarily from equity issuances and the incurrence of debt, to fund
operations, acquisitions, capital expenditures and other non-operating needs.
For the next several years, Nextel anticipates using its existing cash and
investments and externally generated funds from debt and equity sources as
discussed below to cover future needs, including the design, implementation and
operation of the Digital Mobile networks.
Since December 31, 1996 working capital has increased by $536,419,000 to
$469,772,000 as of June 30, 1997. The increase in working capital is primarily
a result of the increase in cash and cash equivalents resulting from the net
proceeds of $482,000,000 generated by the McCaw International Private
Placement, an $88,378,000 increase in accounts receivable and a $24,481,000
increase in inventory, offset by a $47,845,000 increase in accounts payable and
accrued liabilities.
BANK AND VENDOR CREDIT FACILITY. Effective September 30, 1996, Nextel,
Nextel Finance Company, a wholly-owned subsidiary of Nextel ("NFC"), and
certain subsidiaries of Nextel entered into definitive agreements with respect
to a secured credit facility arranged by Chase Securities, Inc., J.P. Morgan
Securities, Inc. and Toronto-Dominion Securities (USA), Inc. (the "Bank Credit
Facility"). Concurrently therewith, Nextel, NFC and certain subsidiaries of
Nextel entered into definitive agreements with respect to the amendment,
restatement and consolidation of the previously existing financing arrangements
with Motorola and NTFC Capital Corporation ("NTFC") (the "Vendor Credit
Facility" and collectively with the Bank Credit Facility, the "Bank and Vendor
Credit Facilities"). The credit agreement relating to the Bank Credit Facility
(the "Bank Credit Agreement") currently provides for up to $1,655,000,000 of
secured financing, consisting of a $1,085,000,000 revolving loan and
$570,000,000 in term loans. The credit agreement relating to the Vendor Credit
Facility (the "Vendor Credit Agreement") currently provides for up to
$345,000,000 of secured financing, consisting of a $195,000,000 revolving loan
and $150,000,000 in term loans. Borrowings under the Bank and Vendor Credit
Facilities are ratably secured by liens on assets of Nextel's subsidiaries that
are "restricted" subsidiaries under the terms of the Nextel Indentures. At
June 30, 1997, Nextel had drawn approximately $1,441,000,000 of its available
financing under the Bank Credit Facility, leaving an aggregate of approximately
$214,000,000 available for borrowing under such facility, and had drawn
$227,000,000 of its available financing under the Vendor Credit Facility,
leaving an aggregate of approximately $118,000,000 available for borrowing
under such facility, subject in each case to the satisfaction or waiver of
applicable borrowing conditions.
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ADDITIONAL BANK AND VENDOR FINANCING. Nextel and certain lenders have
entered into a commitment letter and related term sheet dated July 11, 1997
setting forth the terms and conditions on which Nextel could gain access to
$250,000,000 in additional secured financing, thereby increasing the aggregate
amount available under the Bank Credit Facility to $1,905,000,000. Nextel has
obtained the requisite consent of certain lenders and Motorola which would
enable Nextel to gain access to such $250,000,000 in additional financing.
Nextel has also reached an understanding with Motorola regarding the terms and
conditions pursuant to which Nextel could access up to an additional
$450,000,000 of equipment financing to be made available by Motorola (the
"Additional Motorola Financing") such contemplated increases in the amounts
available under the Bank and Vendor Credit Facilities, and the other amounts
constituting the Additional Motorola financing are more fully described below
(see "-- Future Capital Needs and Resources").
NEXTEL SERIES D EXCHANGEABLE PREFERRED STOCK PRIVATE PLACEMENT. As more
fully described above, Nextel completed a private placement of 500,000 shares
of its Series D Preferred Stock on July 21, 1997, yielding approximately
$482,000,000 in net proceeds. See "-- Recent Transactions and Developments".
CASH FLOWS. Net cash used in operating activities for the six months
ended June 30, 1997 was $249,632,000 as compared to $175,971,000 for the six
months ended June 30, 1996. This increase of approximately $73,661,000 is
primarily attributable to the increase in costs related to the implementation
and operation of the Digital Mobile networks. Net cash used in investing
activities was $703,783,000 for the six months ended June 30, 1997, which is
primarily related to cash paid for system capital expenditures of $539,947,000
for the build-out of the Digital Mobile networks. Financing activities during
the six months ended June 30, 1997 consisted primarily of net borrowings of
$928,000,000, as well as proceeds from the McCaw International Private
Placement of $500,003,000, offset by $84,950,000 of capitalized debt issuance
costs related to the McCaw International Private Placement and the Consent
Solicitation. As a result of the above activities, cash and cash equivalents
increased $399,102,000 during the six months ended June 30, 1997.
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FUTURE CAPITAL NEEDS AND RESOURCES.
Nextel anticipates that, for the foreseeable future, it will be utilizing
significant amounts of its available cash for capital expenditures for the
construction of Digital Mobile networks, operating expenses relating both to
the Digital Mobile networks and to the analog SMR networks, potential
acquisitions (including the acquisition of rights to spectrum through the
contemplated 800 MHz spectrum auction process), debt service requirements and
other general corporate purposes. Nextel anticipates that its cash utilization
for capital expenditures and other investing activities and operating losses
will continue to exceed its cash flows from operating activities over the next
several years. During the ongoing start-up phase of its Digital Mobile
networks, Nextel expects that it will need to utilize its existing cash and
funding from outside sources to meet its cash needs resulting from such
activities and losses. Nextel's aggregate cash, cash equivalents and
marketable securities at June 30, 1997 totaled approximately $611,495,000 of
which approximately $449,038,000 represents cash, cash equivalents and
marketable securities held by McCaw International and its subsidiaries, which
are not available to fund any of the cash needs of Nextel's domestic Digital
Mobile and analog SMR businesses, due to restrictions contained in the
provisions of the MIL Indenture.
The Company is currently implementing its business plan to accelerate and
expand the deployment of its Digital Mobile networks in its domestic markets
during 1997 and 1998. To implement such plan, Nextel estimates that the
external funding required to meet the cash needs of its domestic business
activities during the period from March 31, 1997 through the end of 1998,
principally including the funding of anticipated capital expenditures and
potential acquisitions (including potential acquisitions of licenses in the
FCC's proposed 800 MHz spectrum auction) and operating losses, will be
approximately $2,500,000,000 which includes approximately $1,450,000,000 of
system infrastructure and other system capital costs expected to be incurred
during this period. As noted below, such estimates are based on a number of
significant assumptions.
To fully implement its business plan, Nextel would need to obtain
additional amounts of debt or equity financing beyond that available under the
Bank and Vendor Credit Facilities currently in place. (See "-- Liquidity and
Capital Resources").
The Bank Credit Agreement contemplates that, with the consent of the
lenders holding a majority of the outstanding loans and available commitments
under the Bank Credit Agreement and under the Vendor Credit Agreement Nextel
may borrow up to an additional $250,000,000 (subject to certain limitations)
under the Bank Credit Facility (the "Additional Bank Borrowings"). Nextel and
certain lenders have entered into a commitment letter and related term sheet
dated July 11, 1997 setting forth the terms and conditions on which Nextel
could gain access to $250,000,000 in Additional Bank Borrowings. The Bank
Credit Agreement and the Vendor Credit Agreement also contemplate that
borrowings under the Vendor Credit Facility may be increased by up to
$50,000,000 (subject to certain limitations) (the "Additional Vendor
Borrowings"). The remaining funds available for borrowings under the Bank and
Vendor Credit Facilities (including, if successfully structured, the increased
amounts contemplated pursuant to the Additional Bank Borrowings and the
Additional Vendor Borrowings) may be drawn upon prior to the final maturity
date of such facilities in 2003, although the amount available under such
facilities will be reduced to reflect scheduled amortization commencing in
2001.
Nextel has also reached an understanding with Motorola regarding the
terms and conditions pursuant to which Nextel could access up to an additional
$450,000,000 of equipment financing through Motorola consisting of (i)
$50,000,000 in Additional Vendor Borrowings, (ii) up to an additional
$200,000,000 in secured borrowings (which could be drawn through March 1999 and
only as a term loan) that are to be second in ranking to the borrowings made
pursuant to both the Vendor Credit Agreement and Nextel's existing Bank Credit
Agreement (the "Second Secured Borrowings")), and (iii) up to an additional
$200,000,000 in borrowings that would be required to be ratably secured on an
equal
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ranking with borrowings pursuant to the Vendor Credit Agreement and the Bank
Credit Agreement (the "Senior Secured Borrowings"). Availability of such
additional financing is subject to a number of conditions that have not yet
been satisfied, including, among others, with respect to the Second Secured
Borrowings, the prior borrowing of all amounts available under the Vendor
Credit Agreement (including the $50,000,000 in Additional Vendor Borrowings
pursuant thereto described above) and under the Bank Credit Agreement
(including, with respect to the second $100,000,000 of the Second Secured
Borrowings, the borrowing of $250,000,000 in Additional Bank Borrowings
pursuant to the Bank Credit Agreement described above and the receipt of the
approval from a majority of the secured parties under the Vendor Credit
Agreement and the Bank Credit Agreement. The availability of the Senior
Secured Borrowings is subject to a number of additional conditions, including
the unanimous approval of the secured parties under the Bank Credit Agreement
and the Vendor Credit Agreement. Nextel is currently not taking steps to meet
such additional conditions and accordingly, Nextel has assumed for planning
purposes that none of the funds constituting the Senior Secured Borrowings will
be available during 1997 and 1998.
The Company has obtained written commitments from the relevant lending
parties, and has obtained certain of the required consents and approvals of
third parties required to access the Additional Bank Borrowings, the Additional
Vendor Borrowings and the Second Secured Borrowings. Nextel and the relevant
lending parties contemplate negotiating and entering into appropriate
definitive agreements implementing the terms of the financing arrangements
relating to the Additional Bank Borrowings, the Additional Vendor Borrowings
and the Second Secured Borrowings, as described above, and Nextel is now or
shortly will commence seeking the remaining consents and approvals required to
gain access to such additional financing. The availability of all of such
additional financing is also subject to Nextel's satisfying certain
requirements under the Nextel Indentures, which require Nextel to issue new
equity for cash as a condition to obtaining access to all amounts not
constituting "Permitted Indebtedness" (as such term is defined in the Nextel
Indentures) under the Bank Credit Facility and the Vendor Credit Facility, the
Additional Bank Borrowings, the Additional Vendor Borrowings and the Second
Secured Borrowings referred to above. Nextel's receipt of the $482,000,000 in
net cash proceeds from the issuance of the Series D Preferred Stock (the
"Preferred Stock Proceeds") is sufficient to enable Nextel to access all such
funding sources under the requirements of the Nextel Indentures.
To the extent any of the aforementioned proceeds from equity issuances or
financing arrangements are not available or are not sufficient to meet Nextel's
funding needs, it will be necessary for Nextel to obtain alternate sources of
financing. Assuming that (i) Nextel secures access to all of the available
funds under the Bank Credit Facility and the Vendor Credit Facility, and enters
into appropriate definite agreements to obtain access to the $250,000,000 in
Additional Bank Borrowings and to the $50,000,000 Additional Vendor Borrowings;
(ii) Nextel obtains access to the $200,000,000 in Second Secured Borrowings and
(iii) the New Option is exercised and Nextel receives the proceeds therefrom of
approximately $420,000,000, the Company believes that such amounts, coupled
with the Company's available cash and cash equivalents (including the Preferred
Stock Proceeds and the $232,500,000 in proceeds from the exercise of the First
Option), will provide funds that in the aggregate are expected to be
substantially sufficient to implement the Company's business plan and meet the
other cash needs of its domestic business activities through the end of 1998.
Thereafter, Nextel may require substantial additional financing. See "--
Forward Looking Statements."
The availability of borrowings pursuant to the Bank and Vendor Credit
Facilities, and the availability of the Additional Bank Borrowings, the
Additional Vendor Borrowings and the Second Secured Borrowings, if structured
successfully, are expected to be subject to certain conditions, and there can
be no assurance that such conditions will be met. Moreover, there can be no
assurance that the Additional Bank Borrowings, the Additional Vendor Borrowings
or the Second Secured Borrowings will be available, that the New Option will be
exercised and that Nextel will receive the proceeds therefrom or that any of
the other outstanding options will be exercised. The Bank Credit Facility, the
Vendor Credit Facility, the terms of the Nextel Indentures and the terms of
Nextel's Certificate of Designation
21
22
relating to the Series D Preferred Stock contain and will continue to contain
provisions that operate to limit the amount of borrowings that may be incurred
by Nextel. In addition, Nextel's capital needs, and its ability to adequately
address those needs through debt or equity funding sources, are subject to a
variety of factors that cannot presently be predicted with certainty, such as
the commercial success of Nextel's Digital Mobile networks incorporating the
Reconfigured iDEN technology, the amount and timing of Nextel's capital
expenditures and operating losses, and the market price of the Nextel Common
Stock. See"-- Forward Looking Statements."
Nextel currently is aware of numerous factors and considerations, any one
or more of which could have a material effect on the timing and/or amount of
the future funding to be required by Nextel, but the Company cannot currently
quantify with precision either the magnitude or the certainty of the effects
associated with any such factors. These factors include: (i) the timing of the
anticipated 800 MHz spectrum auction process (which is currently scheduled to
commence in the fall of 1997), and the amounts required to be bid to acquire
any or all of the available spectrum blocks in the major metropolitan market
areas where Nextel currently operates, or currently plans to operate its
Digital Mobile networks; (ii) the amounts that may be required to accomplish
retuning or acquisition of 800 MHz incumbent channels in spectrum blocks that
may be acquired by Nextel in the 800 MHz spectrum auction process; (iii) the
cash amounts, if any, received by Nextel in connection with its offering of the
Nextel Common Stock to Consenting Holders (assuming the consummation of such
offering); (iv) the uncertainty with respect to the success and/or timing of
the continuing development and deployment activities relating to the
Reconfigured iDEN technology format and assuming successful and timely
completion of such efforts, the uncertainty with respect to the success of
commercial introduction and customer acceptance of Nextel's Digital Mobile
network services in new market areas using such technology; (v) the potential
commercial opportunities and risks associated with implementation of Nextel's
accelerated business plan and (vi) the net impact on Nextel's capital budget of
certain developments currently expected to increase capital needs (e.g., the
additional capital needed if Nextel acquires for cash additional spectrum in
certain markets to increase the capacity and/or efficiency of Nextel's
operating Digital Mobile networks in such markets, the additional capital
needed for more extensive construction of Digital Mobile networks in additional
market areas acquired or that may be acquired in the future, and the
expenditures associated with analog SMR station construction requirements under
the currently effective FCC 800 MHz channel licensing approach) that may be
offset (whether wholly or partially) by other developments anticipated to (or
to have the potential to) reduce capital needs (e.g., co-location of antenna
and/or transmitter sites with other providers of wireless services in the
relevant markets, reductions in infrastructure and subscriber unit prices
obtained from Motorola pursuant to the Second Equipment Agreement Amendment and
a new agreement entered into on March 27, 1997, alternative and more economical
means for increasing system capacity, other than constructing additional cell
sites and/or installing additional base radios, such as use of so-called "smart
antennas," mini-cells and software-driven and/or system design performance
enhancements). Many of the foregoing factors involve elements wholly or
partially beyond Nextel's control or influence. Other considerations in
addition to the factors identified above may significantly affect Nextel's
decisions to seek additional financing, including general economic conditions,
conditions in the telecommunications and/or wireless communications industry
and the feasibility and attractiveness of structuring particular financings for
specific purposes (e.g., separate capital-raising activities with respect to
international activities and opportunities). See "-- Forward Looking
Statements."
For a more detailed discussion of certain of the factors and
considerations that could have a material effect on the timing and/or amount of
future funding required by the Company, see "Part II, Item 7, Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Future Capital Needs and Resources," in the Company's Annual Report on Form
10-K for the year ended December 31, 1996 and the Quarterly Report on Form 10-Q
for the quarter ended March 31, 1997.
22
23
FORWARD LOOKING STATEMENTS.
"SAFE HARBOR" STATEMENTS UNDER THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995. A number of the matters and subject areas discussed in the
foregoing "Management's Discussion and Analysis of Financial Condition and
Results of Operations" (including the related discussions referred to above
that are included in Nextel's Annual Report on Form 10-K for the year ended
December 31, 1996 and the Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997) that are not historical or current facts deal with potential
future circumstances and developments. The discussion of such matters and
subject areas is qualified by the inherent risks and uncertainties surrounding
future expectations generally, and also may materially differ from Nextel's
actual future experience involving any one or more of such matters and subject
areas. Nextel has attempted to identify, in context, certain of the factors
that it currently believes may cause actual future experiences and results to
differ from Nextel's current expectations regarding the relevant matter or
subject area. The operation and results of Nextel's wireless communications
business also may be subject to the effect of other risks and uncertainties in
addition to the relevant qualifying factors identified elsewhere in the
foregoing "Management's Discussion and Analysis of Financial Condition and
Results of Operations" section, including, but not limited to, general economic
conditions in the geographical areas and occupational market segments that
Nextel is targeting for its Digital Mobile network service, the availability of
adequate quantities of system infrastructure and subscriber equipment and
components to meet Nextel's service deployment and marketing plans and customer
demand, the success of efforts to improve and satisfactorily address issues
relating to Digital Mobile network performance, the successful nationwide
deployment of the Reconfigured iDEN technology, the ability to achieve market
penetration and average subscriber revenue levels sufficient to provide
financial viability to the Digital Mobile network business, Nextel's ability to
timely and successfully accomplish required scale-up of its billing, customer
care and similar back-room operations to keep pace with customer growth and
increased system usage, access to sufficient debt or equity capital to meet
Nextel's operating and financial needs, the quality and price of similar or
comparable wireless communications services offered or to be offered by
Nextel's competitors, including providers of cellular and PCS service, future
legislative or regulatory actions relating to SMR services, other wireless
communications services or telecommunications generally and other risks and
uncertainties described from time to time in Nextel's reports filed with the
Commission.
23
24
PART II
ITEM 1. LEGAL PROCEEDINGS.
The Company is involved in certain legal proceedings that are described
in its Annual Report on Form 10-K for the year ended December 31, 1996.
During the six months ended June 30, 1997, there were no material changes in
the status of those proceedings other than the legal proceeding noted below.
The Court of Chancery, New Castle County, Delaware
entered an Order dismissing the lawsuit titled Angelo Mesiero, William
Schiemann and Dennis Donnegan v. American Mobile Systems, Inc., Richard Somers,
William Wedum, Gary Howard and Nextel Communications, Inc. without prejudice.
Prior to the Court's granting of the Order to dismiss the lawsuit without
prejudice, all relevant parties to the litigation entered into a stipulation
agreeing to the dismissal of the lawsuit without prejudice. The details of
the lawsuit are described under "Item 3. Legal Proceedings" in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996.
ITEM 2. CHANGES IN SECURITIES.
(a) Inapplicable
(b) Inapplicable
(c) Recent Issues of Unregistered Securities. Nextel sold securities
that were not registered under the Securities Act in the following
transactions during the second quarter of 1997.
On April 11, 1997, Nextel entered into an agreement with the McCaw
Investor, pursuant to which the McCaw Investor committed to exercise
in full the First Option to purchase 15,000,000 shares of Nextel
Common Stock for an aggregate purchase price of $232,500,000 which
purchase was consummated on July 28, 1997. In consideration for the
McCaw Investor's Option Commitment and payment of a nominal purchase
price, Nextel agreed to issue the CEI to the McCaw Investor, which
would have been convertible into shares of Nextel Common Stock if
the Average Trading Price was less than $15.50 per share. Because
the Average Trading Price during the 20 trading days immediately
preceding the Option Closing date exceeded $15.50, the CEI
automatically expired and was canceled.
In connection with the agreements relating to the Option Commitment,
Nextel and the Purchaser reached an agreement, pursuant to which the
Purchaser acquired, effective as of June 16, 1997 for an aggregate
purchase price of $25,000,000, the New Option to purchase 15,000,000
shares which are purchasable at an exercise price of $16.00 per
share and 10,000,000 shares which are purchasable at an exercise
price of $18.00 per share at any time through July 28, 1998.
Each of the foregoing transactions was effected pursuant to the
exemption of Section 4(2) of the Securities Act in reliance upon
representations of the relevant purchasers and their agreement to
resell such securities only pursuant to a registration statement or
in a transaction exempt from the registration requirements of such
Act.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On May 15, 1997 the Company conducted the Annual Meeting of
Stockholders in Washington, D.C. Only holders of record of Nextel's Common
Stock and of Nextel Class A Convertible
24
25
Redeemable Preferred Stock, par value $0.01 per share (the "Class A Preferred
Stock") on March 28, 1997 (the "Record Date") were entitled to vote at the
Annual Meeting. Each holder of record of Nextel Common Stock at the close of
business on the Record Date was entitled to one vote per share on each matter
voted upon by the stockholders at the Annual Meeting. The holder of record of
the Nextel Preferred Stock at the close of business on the Record Date was
entitled to one vote per share of Nextel Common Stock into which its shares of
Class A Preferred Stock were convertible on the Record Date. The holder of
Class A Preferred Stock, in its capacity as such, was entitled to vote together
with the holders of Nextel Common Stock on each matter voted upon at the Annual
Meeting other than the election of directors. As of the Record Date there were
223,766,140 shares of Nextel Common Stock outstanding and 8,163,265 shares of
Class A Preferred Stock (convertible into 24,489,795 shares of Nextel Common
Stock) outstanding.
The following matters were submitted for a vote by security holders:
Proposal 1 To elect a total of three directors of the Company, each to
hold office for a three-year term ending on the date of the
third succeeding Annual Meeting of Stockholders of the Company
and until their respective successors shall have been duly
elected and qualified.
Set forth below is information regarding the 190,631,558 shares of Nextel
Common Stock voted in the election of the directors (85.192% of the total
number of shares of Nextel Common Stock entitled to vote on such matter at the
Annual Meeting).
Name For Withheld Broker Non-Vote
---- --- -------- ---------------
William Conway, Jr. 188,183,891 2,447,667 0
Keisuke Nakasaki 188,173,667 2,457,891 0
Morgan O'Brien 188,170,658 2,460,900 0
The following are the names of each of the Company's other directors
whose term of office continued after the meeting: Directors Holding
Office Until 1998: Keith Bane, Craig O. McCaw and Masaaki Torimoto;
Directors Holding Office Until 1999: Daniel F. Akerson, Robert
Cooper, Timothy M. Donahue and Dennis M. Weibling.
Proposal 2 To ratify the appointment of Deloitte & Touche LLP as the firm
of independent auditors to audit the consolidated financial
statements of the Company and its subsidiaries for fiscal year
1997.
Set forth below is information regarding the 190,631,558 shares of
Nextel Common Stock voted for Proposal 2 (85.192% of the total number of
shares of Nextel Common Stock entitled to vote on such matters at the Annual
Meeting).
Votes FOR 190,252,875
Votes AGAINST 175,062
Votes ABSTAINED 203,621
Broker NON-VOTE 0
25
26
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) List of Exhibits.
EXHIBIT NUMBER EXHIBIT DESCRIPTION
-------------- -------------------
4.1 Third Supplemental Indenture, dated as of June 13, 1997 between Nextel and The Bank of New York
(relating to the Indenture between Old Nextel and The Bank of New York, as Trustee, dated August 15,
1993 ) (filed on June 17, 1997 as Exhibit 4.1 to Nextel's Current Report on Form 8-K dated June 17,
1997 (the "June 17 Form 8-K") and incorporated herein by reference).
4.2 Third Supplemental Indenture, dated as of June 13, 1997 between Nextel and The Bank of New York
(relating to the Indenture between Old Nextel and The Bank of New York, as Trustee, dated as of
February 15, 1994 ) (filed on June 17, 1997 as Exhibit 4.2 to the June 17 Form 8-K and incorporated
herein by reference).
4.3 Fourth Supplemental Indenture, dated as of June 13, 1997 between Nextel and The Bank of New York
(relating to the Indenture for Senior Redeemable Discount Notes due 2004, dated as of April 25, 1994,
between Dial Call and The Bank of New York ) (filed on June 17, 1997 as Exhibit 4.3 to the June 17 Form
8-K and incorporated herein by reference).
4.4 Fifth Supplemental Indenture, dated as of June 13, 1997 between Nextel and The Bank of New York
(relating to the Indenture for Senior Discount Notes due 2005, dated as of December 22, 1993, between
Dial Call and The Bank of New York ) (filed on June 17, 1997 as Exhibit 4.4 to the June 17 Form 8-K and
incorporated herein by reference).
4.5 Third Supplemental Indenture, dated as of June 13, 1997 between Nextel and The Bank of New York
(relating to the Indenture for Senior Redeemable Discount Notes due 2004, dated as of January 13, 1994,
between OneComm (formerly called CenCall Communications Corp.) (filed on June 17, 1997 as Exhibit 4.5
to the June 17 Form 8-K and incorporated herein by reference).
4.6 Amendment No. 1 dated as of March 24, 1997 to the Bank Credit Agreement (filed on July 9, 1997 as
Exhibit 99.1 to Nextel's Current Report on Form 8-K dated July 9, 1997 (the "July 9 Form 8-K") and
incorporated herein by reference).
4.7 Amendment No. 1 dated as of March 24, 1997 to the Vendor Credit Agreement (filed on July 9, 1997 as
Exhibit 99.2 to the July 9 Form 8-K and incorporated herein by reference).
4.8 Option Exercise and Lending Commitment Agreement by and between Nextel and Digital Radio, L.L.C., dated
as of June 16, 1997 (filed on July 9, 1997 as Exhibit 10.1 to the July 9 Form 8-K and incorporated
herein by reference).
4.9 Contingent Equity Instrument by and between Digital Radio, L.L.C. and Nextel dated as of June 16, 1997
(filed on July 9, 1997 as Exhibit 10.2 to the July 9 Form 8-K and incorporated herein by reference).
26
27
EXHIBIT INDEX
EXHIBIT NUMBER EXHIBIT DESCRIPTION
-------------- -------------------
4.10 Option Purchase Agreement by and among Nextel and Unrestricted Subsidiary Funding Company and Option
Acquisition, L.L.C, dated as of June 16, 1997 (filed on July 9, 1997 as Exhibit 10.3 to the July 9 Form
8-K and incorporated herein by reference).
4.11 Option Agreement (First New Option) by and between Option Acquisition. L.L.C. and Nextel, dated as of
June 18, 1997 (filed on July 9, 1997 as Exhibit 10.4 to the July 9 Form 8-K and incorporated herein by
reference).
4.12 Option Agreement (Second New Option) by and between Option Acquisition, L.L.C. and Nextel, dated as of
June 18, 1997 (filed on July 9, 1997 as Exhibit 10.5 to the July 9 Form 8-K and incorporated herein by
reference).
4.13 Certificate of Designation for 13% Series D Exchangeable Preferred Stock (filed on July 22, 1997 as
Exhibit 4.1 to Nextel's Current Report on Form 8-K dated July 21, 1997 and incorporated herein by
reference).
4.14 Amendment No. 2 dated as of June 30, 1997 to the Bank Credit Agreement (filed on August 5, 1997 as
Exhibit 4.41 to Nextel's Registration Statement No. 333-28461 on Form S-3 (the "August S-3 Registration
Statement") and incorporated herein by reference).
4.15 Amendment No. 2 dated as of June 30, 1997 to the Vendor Credit Agreement (filed on August 5,1997 as
Exhibit 4.42 to the August S-3 Registration Statement and incorporated herein by reference).
10.1 Registration Rights Agreement (Option Acquisition) by and among Nextel Communications, Inc. and Option
Acquisition, L.L.C., dated as of June 18, 1997 (filed on July 9, 1997 as Exhibit 10.6 to the July 9
Form 8-K and incorporated herein by reference).
10.2 First Amendment to Registration Rights Agreement (amending that certain Registration Rights Agreement
dated June 29, 1995) by and among Nextel Communications, Inc., Digital Radio, L.L.C. and Option
Acquisition, L.L.C., dated as of June 18, 1997 (filed on July 9, 1997 as Exhibit 10.7 to the July 9
Form 8-K and incorporated herein by reference).
27** Financial Data Schedule.
- ----------------
** Submitted only with the electronic filing of this document with the
Commission pursuant to Regulation S-T under the Securities Act.
(b) Reports on Form 8-K.
(i) Current Report on Form 8-K dated and filed June 17, 1997 with the
Commission.
(ii) Current Report on Form 8-K dated and filed June 2, 1997 with the
Commission.
(iii) Current Report on Form 8-K dated and filed April 15, 1997 with the
Commission.
27
28
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEXTEL COMMUNICATIONS, INC.
By: /s/WILLIAM G. ARENDT
--------------------------------------
Date: August 12, 1997 William G. Arendt
Vice President and Controller
28
29
EXHIBIT INDEX
Exhibit Number Exhibit Description
-------------- -------------------
4.1 Third Supplemental Indenture, dated as of June 13, 1997 between Nextel and The Bank of New York
(relating to the Indenture between Old Nextel and The Bank of New York, as Trustee, dated August 15,
1993 ) (filed on June 17, 1997 as Exhibit 4.1 to Nextel's Current Report on Form 8-K dated June 17,
1997 (the "June 17 Form 8-K") and incorporated herein by reference).
4.2 Third Supplemental Indenture, dated as of June 13, 1997 between Nextel and The Bank of New York
(relating to the Indenture between Old Nextel and The Bank of New York, as Trustee, dated as of
February 15, 1994 ) (filed on June 17, 1997 as Exhibit 4.2 to the June 17 Form 8-K and incorporated
herein by reference).
4.3 Fourth Supplemental Indenture, dated as of June 13, 1997 between Nextel and The Bank of New York
(relating to the Indenture for Senior Redeemable Discount Notes due 2004, dated as of April 25, 1994,
between Dial Call and The Bank of New York ) (filed on June 17, 1997 as Exhibit 4.3 to the June 17
Form 8-K and incorporated herein by reference).
4.4 Fifth Supplemental Indenture, dated as of June 13, 1997 between Nextel and The Bank of New York
(relating to the Indenture for Senior Discount Notes due 2005, dated as of December 22, 1993, between
Dial Call and The Bank of New York ) (filed on June 17, 1997 as Exhibit 4.4 to the June 17 Form 8-K and
incorporated herein by reference).
4.5 Third Supplemental Indenture, dated as of June 13, 1997 between Nextel and The Bank of New York
(relating to the Indenture for Senior Redeemable Discount Notes due 2004, dated as of January 13, 1994,
between OneComm (formerly called CenCall Communications Corp.) (filed on June 17, 1997 as Exhibit 4.5
to the June 17 Form 8-K and incorporated herein by reference).
4.6 Amendment No. 1 dated as of March 24, 1997 to the Bank Credit Agreement (filed on July 9, 1997 as
Exhibit 99.1 to Nextel's Current Report on Form 8-K dated July 9, 1997 (the "July 9 Form 8-K") and
incorporated herein by reference).
4.7 Amendment No. 1 dated as of March 24, 1997 to the Vendor Credit Agreement (filed on July 9, 1997 as
Exhibit 99.2 to the July 9 Form 8-K and incorporated herein by reference).
4.8 Option Exercise and Lending Commitment Agreement by and between Nextel and Digital radio, L.L.C., dated
as of June 16, 1997 (filed on July 9, 1997 as Exhibit 10.1 to the July 9 Form 8-K and incorporated
herein by reference).
4.9 Contingent Equity Instrument by and between Digital Radio, L.L.C. and Nextel dated as of June 16, 1997
(filed on July 9, 1997 as Exhibit 10.2 to the July 9 Form 8-K and incorporated herein by reference).
30
EXHIBIT INDEX
EXHIBIT NUMBER EXHIBIT DESCRIPTION
-------------- -------------------
4.10 Option Purchase Agreement by and among Nextel and Unrestricted Subsidiary Funding Company and Option
Acquisition, L.L.C, dated as of June 16, 1997 (filed on July 9, 1997 as Exhibit 10.3 to the July 9 Form
8-K and incorporated herein by reference).
4.11 Option Agreement (First New Option) by and between Option Acquisition. L.L.C. and Nextel, dated as of
June 18, 1997 (filed on July 9, 1997 as Exhibit 10.4 to the July 9 Form 8-K and incorporated herein by
reference).
4.12 Option Agreement (Second New Option) by and between Option Acquisition, L.L.C. and Nextel, dated as of
June 18, 1997 (filed on July 9, 1997 as Exhibit 10.5 to the July 9 Form 8-K and incorporated herein by
reference).
4.13 Certificate of Designation for 13% Series D Exchangeable Preferred Stock (filed on July 22, 1997 as
Exhibit 4.1 to Nextel's Current Report on Form 8-K dated July 21, 1997 and incorporated herein by
reference).
4.14 Amendment No. 2 dated as of June 30, 1997 to the Bank Credit Agreement (filed on August 5, 1997 as
Exhibit 4.41 to Nextel's Registration Statement No. 333-28461 on Form S-3 (the "August S-3 Registration
Statement") and incorporated herein by reference).
4.15 Amendment No. 2 dated as of June 30, 1997 to the Vendor Credit Agreement (filed on August 5,1997 as
Exhibit 4.42 to the August S-3 Registration Statement and incorporated herein by reference).
10.1 Registration Rights Agreement (Option Acquisition) by and among Nextel Communications, Inc. and Option
Acquisition, L.L.C., dated as of June 18, 1997 (filed on July 9, 1997 as Exhibit 10.6 to the July 9
Form 8-K and incorporated herein by reference).
10.2 First Amendment to Registration Rights Agreement (amending that certain Registration Rights Agreement
dated June 29, 1995) by and among Nextel Communications, Inc., Digital Radio, L.L.C. and Option
Acquisition, L.L.C., dated as of June 18, 1997 (filed on July 9, 1997 as Exhibit 10.7 to the July 9
Form 8-K and incorporated herein by reference).
27 Financial Data Schedule.
ii