1
WILMER, CUTLER & PICKERING
COUNSEL FOR DEBTORS AND DEBTORS-IN-POSSESSION
WASHINGTON, D.C. 20037-1420
(202) 663-6000
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
IN RE:
IRIDIUM LLC
IRIDIUM OPERATING LLC CASE NO. 99-45005-CB
IRIDIUM IP LLC (JOINTLY ADMINISTERED)
IRIDIUM CAPITAL CORPORATION CHAPTER 11
IRIDIUM ROAMING LLC
IRIDIUM (POTOMAC) LLC
MONTHLY OPERATING STATEMENT
FOR THE PERIOD SEPTEMBER 14, 1999 THROUGH SEPTEMBER 30, 1999
AND FOR THE PERIOD OCTOBER 1, 1999 THROUGH OCTOBER 31, 1999
FOR THE PERIOD SEPTEMBER 14, 1999 THROUGH SEPTEMBER 30, 1999:
DISBURSEMENTS: (IN THOUSANDS) $11,169
--------------
OPERATING LOSS: (IN THOUSANDS) $67,735
--------------
FOR THE PERIOD OCTOBER 1, 1999 THROUGH OCTOBER 31, 1999:
DISBURSEMENTS: (IN THOUSANDS) $15,439
--------------
OPERATING LOSS: (IN THOUSANDS) $111,669
--------------
THIS OPERATING STATEMENT MUST BE SIGNED BY A REPRESENTATIVE OF THE DEBTORS
THE UNDERSIGNED, HAVING REVIEWED THE ATTACHED AND BEING FAMILIAR WITH THE
DEBTORS' FINANCIAL AFFAIRS, VERIFIES UNDER THE PENALTY OF THE PERJURY, THAT THE
INFORMATION CONTAINED THEREIN IS COMPLETE, ACCURATE AND TRUTHFUL TO THE BEST OF
MY KNOWLEDGE.
DATE: NOVEMBER 29, 1999 /s/ DAVID R. GIBSON
---------------------------------
DAVID R. GIBSON,
CHIEF FINANCIAL OFFICER
INDICATE IF THIS IS AN AMENDED STATEMENT BY CHECKING HERE:
AMENDED STATEMENT ________
2
HEADNOTE
These unaudited consolidated financial statements have been prepared for the
purpose of filing with the United States Bankruptcy Court for the Southern
District of New York. These consolidated financial statements have not been
prepared in accordance with generally accepted accounting principles ("GAAP")
because Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
("SFAS 121") has not been applied, and certain other disclosures required under
GAAP have been omitted. The Company expects that, upon application of SFAS 121,
the carrying amount of its long-lived assets will be written down by a material
amount; however, at this time it is not possible to determine such amount. In
the opinion of management, all other accounting principles applicable to the
Company have been applied in the accompanying consolidated financial statements
and all adjustments necessary for a fair presentation of such information have
been made. However, there could also be year-end audit adjustments and
adjustments as a result of the Company's filing for protection under Chapter 11
of the United States Bankruptcy Code.
IRIDIUM LLC
(DEBTOR-IN-POSSESSION)
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
UNAUDITED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
9/30/99 10/31/99
--------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 208,185 $ 195,441
Accounts receivable, net of allowance 1,882 2,957
Due from Affiliates, net of allowance 2,061 994
Prepaid expenses and other current assets 22,788 20,399
----------- -----------
Total current assets 234,916 219,791
Property and equipment, net 3,151,444 3,105,243
Other assets 21,807 20,431
----------- -----------
Total assets $ 3,408,167 $ 3,345,465
=========== ===========
LIABILITIES AND MEMBERS' DEFICIT
Liabilities not subject to compromise
Current liabilities:
Accounts payable and accrued expenses $ 13,797 $ 15,000
Due to Member 72,511 118,240
Due to Affiliates 696 1,348
Senior Secured Bank Facility 800,000 800,000
----------- -----------
Total current liabilities 887,004 934,588
Deferred liabilities 56,590 58,247
Liabilities subject to compromise
Guaranteed bank facility 740,000 740,000
Senior Notes A, B, C and D 1,450,000 1,450,000
Senior Subordinated Notes 377,060 377,060
Due to Member 568,801 568,896
Due to Affiliates 316 410
Pre-petition interest payable 106,751 106,751
Pre-petition accounts payable - trade 12,557 12,819
Pre-petition accrued liabilities 4,211 3,486
----------- -----------
3,259,696 3,259,422
----------- -----------
Total Liabilities 4,203,290 4,252,257
----------- -----------
Members' Deficit
Class 2 Interests 50,258 50,258
Class 1 Interests 2,352,821 2,352,821
Adjustment for minimum pension liability (1,812) (1,812)
Deficit accumulated during the development stage (3,196,390) (3,308,059)
----------- -----------
Total members' deficit (795,123) (906,792)
----------- -----------
Total liabilities and members' deficit $ 3,408,167 $ 3,345,465
=========== ===========
The accompanying notes are an integral part of the financial statements.
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HEADNOTE
These unaudited consolidated financial statements have been prepared for the
purpose of filing with the United States Bankruptcy Court for the Southern
District of New York. These consolidated financial statements have not been
prepared in accordance with generally accepted accounting principles ("GAAP")
because Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
("SFAS 121") has not been applied, and certain other disclosures required under
GAAP have been omitted. The Company expects that, upon application of SFAS 121,
the carrying amount of its long-lived assets will be written down by a material
amount; however, at this time it is not possible to determine such amount. In
the opinion of management, all other accounting principles applicable to the
Company have been applied in the accompanying consolidated financial statements
and all adjustments necessary for a fair presentation of such information have
been made. However, there could also be year-end audit adjustments and
adjustments as a result of the Company's filing for protection under Chapter 11
of the United States Bankruptcy Code.
IRIDIUM LLC
(DEBTOR-IN-POSSESSION)
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
UNAUDITED CONSOLIDATED STATEMENT OF LOSS
(IN THOUSANDS)
PERIOD FROM PERIOD FROM
SEPTEMBER 14, 1999 OCTOBER 1, 1999
THROUGH SEPTEMBER THROUGH OCTOBER
30, 1999 31, 1999
------------------ ----------------
Revenue $ 591 $ 1,225
Costs and expenses:
Sales, general and administrative 9,908 10,841
Pension expense adjustment (380) (1,770)
Operations and maintenance expense 14,285 25,209
Depreciation and amortization 39,147 69,298
Interest expense, net 3,567 7,519
--------- ---------
66,527 111,097
--------- ---------
Loss before reorganization items 65,936 109,872
--------- ---------
Reorganization expense items:
Professional fees 1,104 2,847
Workforce reduction costs 1,140 (19)
Interest earned on accumulated cash resulting from Chapter 11 proceeding (445) (1,031)
--------- ---------
1,799 1,797
--------- ---------
Net Loss $ 67,735 $ 111,669
========= =========
The accompanying notes are an integral part of the financial statements.
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HEADNOTE
These unaudited consolidated financial statements have been prepared for the
purpose of filing with the United States Bankruptcy Court for the Southern
District of New York. These consolidated financial statements have not been
prepared in accordance with generally accepted accounting principles ("GAAP")
because Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
("SFAS 121") has not been applied, and certain other disclosures required under
GAAP have been omitted. The Company expects that, upon application of SFAS 121,
the carrying amount of its long-lived assets will be written down by a material
amount; however, at this time it is not possible to determine such amount. In
the opinion of management, all other accounting principles applicable to the
Company have been applied in the accompanying consolidated financial statements
and all adjustments necessary for a fair presentation of such information have
been made. However, there could also be year-end audit adjustments and
adjustments as a result of the Company's filing for protection under Chapter 11
of the United States Bankruptcy Code.
IRIDIUM LLC
(DEBTOR-IN-POSSESSION)
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
PERIOD FROM
SEPTEMBER 14, PERIOD FROM
1999 THROUGH OCTOBER 1, 1999
SEPTEMBER 30, THROUGH OCTOBER
1999 31, 1999
-------------- ----------------
Cash flows from operating activities:
Net loss before reorganization items $ (65,936) $(109,872)
Adjustments to reconcile net loss before reorganization
items to net cash used:
Depreciation and amortization 39,147 69,298
Amortization of financing costs 740 1,306
Changes in assets and liabilities:
Decrease (Increase) in accounts receivable 131 (1,075)
Decrease in prepaid expenses and other current assets 1,304 2,389
(Increase) Decrease in due to/from affiliates (514) 1,813
Decrease in other assets 52 41
Increase in accounts payable and accrued expenses 12,000 21,037
Increase in other liabilities 2,139 1,657
--------- ---------
(10,937) (13,406)
--------- ---------
Net loss from reorganization items (1,799) (1,797)
Adjustments to reconcile net loss from reorganization
items to net cash used:
Changes in assets and liabilities:
Increase in accounts payable and accrued expenses 2,244 2,527
--------- ---------
445 730
--------- ---------
Net cash used in operating activities (10,491) (12,676)
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment (3) (68)
--------- ---------
Net cash used in investing activities (3) (68)
--------- ---------
Cash flows from financing activities:
Reorganization items - -
--------- ---------
Net cash provided by financing activities - -
--------- ---------
Increase (decrease) in cash and cash equivalents (10,494) (12,744)
Cash and cash equivalents, beginning of period 218,680 208,185
--------- ---------
Cash and cash equivalents, end of period $ 208,186 $ 195,441
========= =========
Supplemental disclosures of cash flow information:
Interest paid 6,312 6,318
Cash paid for reorganization items:
Professional fees - 301
Interest earned on accumulated cash resulting from
Chapter 11 proceeding (445) (1,031)
--------- ---------
(445) (730)
========= =========
The accompanying notes are an integral part of the financial statements.
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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
Iridium LLC (the "Parent" or the "Company") and its subsidiaries have completed
their efforts to develop and deploy a global wireless personal communication
system (the "Iridium System"). Iridium commenced commercial satellite phone
service on November 1, 1998 and commercial satellite paging service on November
15, 1998. The Parent's transition from a development stage limited liability
company to an operating limited liability company has been adversely affected by
various factors, including much slower than expected subscriber growth. As a
result of these factors, on August 13, 1999, bankruptcy petitions were filed
with respect to the Parent and certain of their affiliates. See Note 3 for a
description of the bankruptcy proceedings.
2. BASIS OF PRESENTATION
The unaudited consolidated financial statements include the accounts of the
Parent and its wholly-owned subsidiaries, Iridium Operating LLC ("Iridium"),
Iridium Geolink LLC, Iridium Promotions Inc. and Iridium Aero Acquisition Sub,
Inc. and Iridium's wholly-owned subsidiaries, Iridium Capital Corporation,
Iridium Roaming LLC, Iridium IP LLC, Iridium (Potomac) LLC, Iridium Facilities
Corporation and Iridium Canada Facilities, Inc. All significant intercompany
transactions have been eliminated.
These unaudited consolidated financial statements have been prepared for the
purpose of filing with the United States Bankruptcy Court for the Southern
District of New York. These consolidated financial statements have not been
prepared in accordance with generally accepted accounting principles ("GAAP")
because Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
("SFAS 121") has not been applied, and certain other disclosures required under
GAAP have been omitted.
SFAS 121 requires the Company to evaluate the recoverability of its long-lived
assets whenever events or circumstances indicate that the carrying amount of
such assets may be impaired. If considered impaired, SFAS 121 requires that the
long-lived assets be written down to fair value. The Company's long-lived assets
are comprised of the Iridium Space System and related assets. The Company
expects that, upon application of SFAS 121, the carrying amount of its
long-lived assets will be written down by a material amount; however, at this
time it is not possible to determine such amount. The accompanying unaudited
consolidated financial statements also omit certain disclosures required under
GAAP, including inception-to-date financial information for development stage
enterprises and earnings (loss) per membership interest data.
With the exceptions described above, in the opinion of management, all other
accounting principles applicable to the Company have been applied in the
accompanying unaudited consolidated financial statements and all adjustments
necessary for a fair presentation of such information have been made. However,
there could also be year-end audit adjustments and adjustments to certain other
accounts as a result of the Company's filing for protection under Chapter 11 of
the United States Bankruptcy Code.
In connection with the bankruptcy proceedings the Company has adopted AICPA
Statement of Position 90-7, "Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code" ("SOP 90-7"). SOP 90-7 requires entities in
bankruptcy to present their pre-petition liabilities on the basis of the
expected amount of allowed claims in accordance with Statement of Financial
Accounting Standards No. 5, "Accounting for Contingencies".
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3. BANKRUPTCY PETITION
On August 13, 1999 (the "Petition Date"), certain creditors of Iridium and
Iridium Capital Corporation. filed involuntary bankruptcy petitions against them
in the United States Bankruptcy Court for the Southern District of New York (the
"Court"). Also, on August 13, 1999, the Parent, Iridium, Iridium Capital
Corporation and Iridium World Communications Ltd. ("IWCL"), a member of the
Parent, filed voluntary petitions in the United States Bankruptcy Court for the
District of Delaware. On August 16, 1999, the Court entered an agreed order,
which, among other things stayed the Delaware petitions. On September 13, 1999
(the "Conversion Date"), the Court entered an order granting the Parent,
Iridium, IWCL (which estate is being separately administered) and Iridium
Capital Corporation relief under Chapter 11 of the US Bankruptcy Code.
Additionally, on the Conversion Date, three additional Iridium subsidiaries,
Iridium IP LLC, Iridium (Potomac) LLC and Iridium Roaming LLC (together and
collectively with the other companies the "Debtors") filed voluntary petitions
under Chapter 11 relief.
Effective September 13, 1999, the Court entered an order which authorized the
Debtors to maintain their current bank accounts and cash management system.
Under the current cash management system, bank accounts are maintained and all
expenses are paid by the Parent and Iridium. The Debtors are currently operating
in accordance with a cash collateral order effective until December 15, 1999.
In Chapter 11 bankruptcy proceedings, certain claims in existence prior to the
order of relief, including pending litigation against the Company are stayed
while the Company continues its business operations as a debtor-in-possession.
These claims are reflected in the balance sheets as "Liabilities Subject to
Compromise". Additional liabilities subject to compromise may arise subsequent
to the filing date resulting from rejection of executory contracts, including
leases, and from the determination by the Court (or agreed to by parties in
interest) of allowed claims for contingencies and other disputed amounts. The
Debtors received approval from the Bankruptcy Court, effective September 13,
1999, to pay certain of its pre-petition and pre-conversion obligations,
including employee wages and related taxes and gap period claims (those claims
incurred between the Debtors' Petition Date and the Conversion Date).
Substantially all liabilities of Parent as of the Petition Date are subject to
compromise or other treatment under a plan of reorganization that must be
confirmed by the Bankruptcy Court after a vote of impaired claimants. There are
various claimants that may be affected by a plan of reorganization, including,
(1) the lenders under Iridium's $800 million secured credit facility, (2) the
lenders under Iridium's $750 million credit facility guaranteed by Motorola,
Inc.,(see Note 6) (3) the holders of Iridium's $1.45 billion of senior notes,
(4) various strategic investors with approximately $945 million of outstanding
indebtedness, (5) vendors and trade creditors, and (6) equity interests of the
Parent.
The ultimate effects of the Chapter 11 bankruptcy proceedings on each of the
various constituencies will depend on a variety of factors, including, without
limitation, the specific terms of a confirmed plan of reorganization and the
relative rank of each claim among the priorities established by the U. S.
Bankruptcy Code. In addition, there can be no assurance that the Debtors will
successfully reorganize under the Chapter 11 proceeding. Accordingly, the
ultimate effects on various claimants are not currently determinable.
4. USE OF ESTIMATES
The preparation of financial statements in accordance with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
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5. LIABILITIES SUBJECT TO COMPROMISE
Obligations classified in the September 30, and October 31, 1999 balance sheets
as liabilities subject to compromise are those obligations that were incurred
prior to the Petition Date. The ultimate disposition of such liabilities is not
currently determinable.
6. SUBSEQUENT EVENT
On November 15, 1999, Motorola paid the banks approximately $743 million to
satisfy all of its guarantee obligations under the Parent's Guaranteed Bank
Facility. Pursuant to the Motorola Memorandum of Understanding between Motorola
and the Parent, the Parent is obligated to compensate Motorola for this payment
to the banks. Any such obligation to Motorola for the payment thereof is subject
to compromise under the Chapter 11 proceedings.
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Iridium LLC
(Debtor-in-Possession)
Schedule of Taxes Paid
For the period from September 14, 1999 through October 31, 1999
Pay Period Amount
---------- ------
Gross Wages and Salaries paid 15-Sep-99 $ 1,913,575 Paid 9/13 - date bank debited account
30-Sep-99 $ 1,765,014 Paid 9/28 - date bank debited account
15-Oct-99 $ 1,620,597 Paid 10/13 - date bank debited account
31-Oct-99 $ 1,508,761 Paid 10/27 - date bank debited account
=====================
$ 6,807,947
=====================
Payroll Employer
Pay Period Withholding Contribution Amount Date Paid
---------- ----------- ------------ ------ ---------
Payroll Taxes:
Federal Withholding 15-Sep-99 $ 378,904 $ - $ 378,904 15-Sep-99
Federal Withholding 30-Sep-99 $ 341,467 $ - $ 341,467 30-Sep-99
Federal Withholding 15-Oct-99 $ 313,392 $ - $ 313,392 15-Oct-99
Federal Withholding 31-Oct-99 $ 294,600 $ - $ 294,600 31-Oct-99
State Withholding 15-Sep-99 $ 112,980 $ - $ 112,980 15-Sep-99
State Withholding 30-Sep-99 $ 101,841 $ - $ 101,841 30-Sep-99
State Withholding 15-Oct-99 $ 89,969 $ - $ 89,969 15-Oct-99
State Withholding 31-Oct-99 $ 86,607 $ - $ 86,607 31-Oct-99
FICA and Medicare 15-Sep-99 $ 77,345 $ 77,345 $ 154,690 15-Sep-99
FICA and Medicare 30-Sep-99 $ 69,223 $ 69,223 $ 138,446 30-Sep-99
FICA and Medicare 15-Oct-99 $ 62,428 $ 62,428 $ 124,856 15-Oct-99
FICA and Medicare 31-Oct-99 $ 54,817 $ 54,817 $ 109,634 31-Oct-99
Federal Unemployment Taxes 15-Sep-99 $ - $ 293 $ 293 15-Sep-99
Federal Unemployment Taxes 30-Sep-99 $ - $ 216 $ 216 30-Sep-99
Federal Unemployment Taxes 15-Oct-99 $ - $ (5) $ (5) 15-Oct-99
Federal Unemployment Taxes 31-Oct-99 $ - $ 147 $ 147 31-Oct-99
State Unemployment Taxes 15-Sep-99 $ - $ 984 $ 984 15-Sep-99
State Unemployment Taxes 30-Sep-99 $ - $ 929 $ 929 30-Sep-99
State Unemployment Taxes 15-Oct-99 $ - $ 285 $ 285 15-Oct-99
State Unemployment Taxes 31-Oct-99 $ - $ 529 $ 529 31-Oct-99
-----------------------------------------------------
$ 1,983,573 $ 266,377 $ 2,249,950
=====================================================
Period
Covered Accrued Date Paid
------- ------- ---------
Sales, Use and Excise Taxes:
Use Taxes paid - District of Columbia 9/14 - 9/30 $ 1,435 08-Oct-99
Use Taxes paid - District of Columbia 10/01 - 10/31 $ 5,764 12-Nov-99
Use Taxes paid - Virginia 9/14 - 9/30 $ 2,099 09-Oct-99
Use Taxes paid - Virginia 10/01 - 10/31 $ -
Use Taxes paid - Arizona 9/14 - 9/30 $ -
Use Taxes paid - Arizona 10/01 - 10/31 $ -
Property Taxes:
District of Columbia $79,970 Due 7/31/2000
Virginia $71,138 Due 9/30/2000
Arizona $13,000 Due 12/6/1999
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IRIDIUM LLC
(DEBTOR-IN-POSSESSION)
CASE NUMBER 99-450005(CB)
INSURANCE
I, David R. Gibson, Chief Financial Officer of Iridium LLC, the debtor and
debtor-in-possession, verify to the best of my knowledge that all insurance
policies are fully paid for the current period, and that amounts for workers
compensation and disability insurance have been paid.
/s/ DAVID R. GIBSON
----------------------------
David R. Gibson
Chief Financial Officer
Date: November 29, 1999