EXHIBIT 99.1
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
CHAPTER 11 CASE NO. 01-12974 (SMB)
TELIGENT, INC., et al.,1
------------------------
DEBTOR
Monthly Operating Statement for
Period February 1, 2002 to February 28, 2002
Debtor's Address
Teligent, Inc.
460 Herndon Parkway, Suite 100
Herndon, VA 20170
Period Disbursement: $ 6,516,606.88
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Debtor's Attorney
KIRKLAND & ELLIS
200 East Randolph Drive
Chicago, Illinois 60601
Period Operating Loss: $(5,359,471)
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The undersigned, having reviewed the attached report and being familiar
with the Debtors' financial affairs, verifies under the penalty of perjury that
the information contained therein is complete, accurate and trustful to the best
of my knowledge. The Debtors have had numerous members of their senior
management team depart, including the chief financial officer and the chief
executive officer. Accordingly, the information contained in this report is
qualified in its entirety by the generally available information at the time of
its preparation. The Debtors reserve the right to amend this report should they
deem it necessary.
The undersigned also verifies that, to the best of my knowledge, all
insurance policies, including workers compensation and disability insurance,
have been paid currently.
March 15, 2002 By: /s/ Barbara A. Sweasy
-------------------------
Barbara A. Sweasy
Vice President, Taxes
Indicate if this is an amended statement by checking here.
Amended Statement____________
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1 The Debtors are the following entities: Teligent, Inc.; Teligent Services,
Inc.; American Long Lines, Inc.; Association Communications, Inc.; Auctel, Inc.;
BackLink, L.L.C.; Easton Telecom Services, Inc.; Executive Conference, Inc.;
First Mark Communications, Inc.; InfiNet Telecommunications, Inc.; Jtel, L.L.C.;
KatLink, L.L.C.; OMC Communications, Inc.; Quadrangle Investments, Inc.;
Telecommunications Concepts, Inc.; Teligent Communications, L.L.C.; Teligent
License Co. I L.L.C.; Teligent License Co. II, L.L.C.; Teligent of Virginia,
Inc.; Teligent Professional Services, Inc.; and Teligent Telecommunications,
L.L.C.
TELIGENT, INC. (Domestic Subsidiaries)
(Debtor-in-Possession)
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, In thousands)
February 28,
2002
-------------
Assets
Current assets:
Cash and cash equivalents $ 24,493
Accounts receivable, net of allowance for doubtful
account of $21,412 5,555
Prepaid expenses and other current assets 2,146
Restricted cash and investments 17,944
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Total current assets 50,138
Property and equipment, net of accumulated depreciation
of $205,251 90,994
Intangible assets, net of accumulated amortization
of $15,132 36,770
Other assets 2,413
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Total assets $ 180,315
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Liabilities and Stockholders' Deficit
Current liabilities:
Short-term borrowings $ 85,232
Accounts payable 34,186
Accrued expenses 8,812
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Total current liabilities 128,230
Other noncurrent liabilities 6,173
Liabilities subject to compromise 1,490,473
Series A preferred stock 538,953
Stockholders' deficit:
Intercompany receivable (56,395)
Common stock 637
Additional paid-in capital 797,397
Accumulated deficit (2,725,153)
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Total stockholders' deficit (1,983,514)
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Total liabilities and stockholders' deficit $ 180,315
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2
TELIGENT, INC. (Domestic Subsidiaries)
(Debtor-in-Possession)
CONDENSED CONSOLIDATED STATEMENT OF OPERATION
(Unaudited, in thousands, except per share amounts)
Month ended
February 28, 2002
-----------------
Revenues:
Communications services, net $ 272
Costs and expenses:
Cost of services 2,087
Sales, general and administrative 1,147
Restructuring (346)
Asset impairment -
Depreciation and amortization 3,319
-----------------
Total costs and expenses 6,207
-----------------
Loss from operations (5,935)
Interest income, net 32
Other income 73
Reorganization items (885)
-----------------
Loss before income tax (6,715)
Income tax -
-----------------
Net loss (6,715)
=================
Basic and diluted net loss per common share $ (0.11)
=================
Weighted average common shares outstanding 63,701
=================
3
TELIGENT, INC. (Domestic Subsidiaries)
(Debtor-in-Possession)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
Month ended
February 28, 2002
-----------------
Cash flows from operating activities:
Net loss $ (6,715)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 3,319
Net changes in current assets and current liabilities:
Accounts receivable 415
Prepaid expenses and other current assets 262
Accounts payable (2,609)
Accrued expenses (1,118)
-----------------
Net cash used in operating activities (6,446)
-----------------
Cash flows from investing activities:
Proceeds from sale of subsidiaries -
Change in restricted cash -
-----------------
Net cash provided by investing activities -
-----------------
Cash flows from financing activities:
Principal payment on postpetition loan -
-----------------
Net cash used in financing activities -
-----------------
Net change in cash and cash equivalents (6,446)
Cash and cash equivalents, beginning of period 30,363
-----------------
Cash and cash equivalents, end of period $ 23,917
=================
4
TELIGENT, INC. (Domestic Subsidiaries)
(Debtor-in-Possession)
Supplemental Information
(Unaudited, in thousands)
Month ended
February 28, 2002
-------------------
a Wages and severance paid $ 1,519
b Payroll taxes withheld 538
c Employer tax 115
d Gross Sales 272
e Sales and use taxes due 11
f Property taxes -
g-a Other taxes, fees - Trust Fund, net 29
g-b Other taxes, fees - non Trust Fund, net 726
5
TELIGENT, INC. (Domestic Subsidiaries)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. PETITION FOR RELIEF UNDER CHAPTER 11
On May 21, 2001, the Company and all of its direct and indirect
domestic subsidiaries filed voluntary petitions for relief under Chapter 11 of
the U.S. Bankruptcy Code in the United States Bankruptcy Court for the Southern
District of New York in order to facilitate the restructuring of the Company's
long-term debt and other obligations. The 21 separate cases were procedurally
(but not substantively) consolidated for joint administration. Each of the
Company and the subsidiaries included in the filings will continue to operate
their businesses as debtors in possession during the reorganization proceeding.
The bankruptcy petitions were filed in order to preserve cash and to give the
Company and its domestic subsidiaries the opportunity to restructure their debt.
The Company's foreign subsidiaries were not part of the Chapter 11 filing.
In conjunction with the filing of the petitions, the Company entered
into an interim arrangement with its lenders to provide funds, subject to
certain conditions, for near-term operations. The Bankruptcy Court approved the
interim arrangement with the Company's lenders on May 21, 2001. A hearing on the
interim arrangement was held on June 13, 2001, where the Court approved further
interim financing from the Company's lenders and approved a streamlined process
whereby further Court approvals will be unnecessary for additional interim
funding. While under the protection of Chapter 11, the Company may sell or
otherwise dispose of assets and liquidate or settle liabilities for amounts
other than those reflected in the consolidated financial statements. The
financial statements do not include any adjustments that might be necessary as a
result of the outcome of the uncertainties discussed herein, including the
effects of any plan of reorganization or liquidation.
Based on the aforementioned bankruptcy coupled with the violation of
certain debt-covenants, the Company is in default on all of its indebtedness in
existence as of the petition date. The Company has classified this debt in the
accompanying unaudited condensed consolidated balance sheet at February 28, 2002
as liabilities subject to compromise. In addition, as a result of these
bankruptcy proceedings, substantially all of the liabilities, litigation and
claims against the Debtors in existence at the petition date are stayed unless
the stay is modified or lifted or payment is otherwise authorized by the
Bankruptcy Court.
On August 23, 2001, certain of the Debtors entered into an Asset
Purchase Agreement (the "Agreement") with Teligent Acquisition Corp. ("TAC") for
the sale and purchase of substantially all of the Company's core domestic
business and assets. Under the Agreement, TAC agreed to pay, subject to certain
financing and regulatory contingencies, in excess of $115 million for the
Company's core domestic fixed wireless business and assets. The Agreement is
subject to numerous approvals, including the U. S. Bankruptcy Court, the Federal
Communications Commission, the Department of Justice, and state regulatory
agencies.
On August 24, 2001, the Company announced it would restructure retail
operations in twelve of its markets: Atlanta, Charlotte, Denver, Detroit,
Indianapolis, Kansas City, Minneapolis, Orlando, Portland, San Francisco, San
Antonio and Seattle. Eleven markets will remain after the Company's retail
operations in these twelve markets are restructured.
On August 24, 2001, the Debtors filed a motion with the U. S.
Bankruptcy Court requesting authority to sell the Company's core assets to TAC,
subject to higher and better offers. The hearing to consider and approve the
transaction with TAC, or an alternative higher and better offer, was initially
scheduled for October 3, 2001. After the initial adjournment on October 12,
2001, the Company requested that the Court further adjourn the hearing regarding
the transaction with TAC until October 30, 2001. The Court granted the request
and adjourned the hearing until October 30, 2001.
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On October 30, 2001, the Company requested that the U.S. Bankruptcy
Court adjourn the hearing regarding the TAC transaction until November 15, 2001
which request was granted by the Court.
On November 14, 2001, the U.S. Bankruptcy Court authorized the Company
to substantially reduce its workforce, file regulatory applications and notices
regarding the discontinuance of certain services to a substantial number of
customers in eleven markets, and issue notices to such affected customers. These
actions to further restructure the Company's operations were taken due to its
inability to attract a suitable investor and/or purchaser in the time frame
anticipated. The Company will continue to provide facilities-based private line,
transport, and wholesale services as well as resold services in all 74 markets
where it holds fixed-wireless licenses.
On November 15, 2001, the Company provided notice to TAC terminating
the Agreement due to TAC's inability to raise the funding required under the
Agreement. The Agreement requires the Company to reimburse TAC for certain
transaction-related expenses following the termination of the Agreement.
On November 30, 2001, Executive Conference, Inc. ("ECI"), a wholly
owned domestic subsidiary of the Company, entered into an Asset Purchase
Agreement (the "Purchase Agreement") with Summit Acquisition LLC ("Summit") for
the sale and purchase of substantially all of ECI's assets. Under the terms of
the Purchase Agreement, Summit has agreed to pay $60 million in cash for ECI's
assets. ECI is a provider of teleconferencing services.
On December 12, 2001, the ECI filed a motion with the U. S. Bankruptcy
Court requesting authority to sell ECI's assets to Summit, subject to higher and
better offers. On December 28, 2001, an auction was held for the assets of ECI
and the transaction with Summit was determined to be the highest and best offer
for such assets. On January 3, 2002, the U.S. Bankruptcy Court approved the
transaction with Summit, which was consummated on January 7, 2002.
2. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
include the results of Teligent, Inc. and all of its direct and indirect
domestic subsidiaries for the month ended February 28, 2002. The Company's
foreign subsidiaries are not part of the Chapter 11 filing and therefore are not
included in these statements. These financial statements have been prepared on a
going concern basis, which contemplates continuity of operations, realization of
assets and liquidation of liabilities in the ordinary course of business. These
statements include intercompany balances that would be eliminated, in accordance
with generally accepted accounting principles, when the results of the Company
are consolidated with all of its foreign subsidiaries.
3. SIGNIFICANT ACCOUNTING POLICIES
The unaudited condensed consolidated financial statements have been
prepared in conformity with generally accepted accounting principles and it
requires management to make estimated and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual results
could differ from those estimates.
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4. DEBT
Total debt consists of the following (in thousands):
11.5% Senior Notes due 2007.................. $300,000
11.5% Senior Discount Notes due 2008......... 361,802
Credit Facility.............................. 759,998
Other........................................ 80
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Total debt $1,421,880
==========
The Company is in default on all of its indebtedness as a result of its
failure to deliver definitive documentation with respect to financing within the
time period required by the Amendment to the Credit Facility (described in
detail below), and because of the bankruptcy filing. As a result of the
bankruptcy filing, all of its outstanding debt in existence as of the
prepetition date has been classified as liabilities subject to compromise.
Senior Notes Offering
In November 1997, the Company issued $300 million of 111/2% Senior Notes
due 2007 (the "Senior Notes"). The Company used $93.9 million of the net
proceeds of this offering to purchase a portfolio of Treasury securities which
were pledged as collateral for the payment of interest on the Senior Notes
through December 1, 2000.
On or after December 1, 2002, the Notes will be redeemable at the option of
the Company, in whole at any time or in part from time to time, at prices
ranging from 100% to 105.75% (expressed in percentages of the principal amount
thereof).
Upon the occurrence of a change in control, as defined in the Senior Notes
agreement, each holder of the Senior Notes will have the right to require the
Company to repurchase all or any part of such holder's Senior Notes at a
purchase price in cash equal to 101% of the principal amount.
Senior Discount Notes Offering
On February 20, 1998, the Company completed an offering (the "Discount
Notes Offering") of $440 million 111/2% Senior Discount Notes due 2008 (the
"Senior Discount Notes"). The Company received $243.1 million in net proceeds
from the Discount Notes Offering, after deductions for offering expenses of $7.6
million. Under a 1998 exchange offer, all outstanding Senior Discount Notes were
exchanged for 111/2% Series B Discount Notes due 2000 (the "New Discount Notes")
which have been registered under the Securities Act of 1933, as amended. The New
Discount Notes are identical in all material respects to the Senior Discount
Notes.
On or after March 1, 2003, the New Discount Notes will be redeemable at the
option of the Company on terms similar to those of the Senior Notes. In
addition, the New Discount Notes contain change in control repurchase
commitments similar to the Senior Notes.
Credit Facility
On July 2, 1998, the Company entered into a credit agreement, as
subsequently amended, (the "Bank Credit Agreement") with certain lenders,
providing for credit facilities up to an aggregate of $800 million (the "Credit
Facility"). Availability of funds under the Credit Facility were subject to
certain conditions as defined in the Bank Credit Agreement, all of which were
met prior to the draw down of the entire facility in January 2001. Substantially
all of the Company's assets secure the obligations under the Bank Credit
Agreement.
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The Credit Facility is structured into three separate tranches consisting
of a term loan facility, a delayed draw term loan facility and a revolving
credit facility, each of which has a final maturity of eight years. Interest
accrues on $575 million of outstanding borrowings based on a floating rate tied
to the prevailing LIBOR rate and adjusts based on the attainment of certain key
revenue and leverage benchmarks. The remaining $214.7 million accrued interest
at a fixed rate of 11.125% per annum. The Company incurred commitment and other
fees in connection with obtaining the Credit Facility totaling $19.9 million,
which was being amortized over eight years. As a result of the bankruptcy
filing, unamortized commitment fees including those incurred in connection with
obtaining the Credit Facility were written off as reorganization charges in the
amount of $28.0 million. The Credit Facility contains certain financial and
other covenants that restrict, among other things, the Company's ability to (a)
incur or create additional debt, (b) enter into mergers or consolidations, (c)
dispose of a significant amount of assets, (d) pay cash dividends, or (e) change
the nature of its business. The amounts outstanding under the Credit Facility
are subject to mandatory prepayments in certain circumstances.
The Company executed an Amendment and Consent (the "Amendment") to the Bank
Credit Agreement subsequent to December 31, 2000. Pursuant to the Amendment, the
interest rates applicable to borrowings under the Credit Facility were
increased. The Amendment also increased the maximum aggregate principal amount
under the optional term loan tranche of the Credit Facility from $400 million to
$600 million, of which $350 million can be utilized as vendor loans. The
optional term loan tranche is not a binding commitment of the lenders, rather it
provides a vehicle for any of the lenders to loan the Company additional funds
under the Credit Facility.
The Amendment also changed several of the covenants applicable to the
Company. The Company received a waiver for default of the fixed charge coverage
ratio for the period ending December 31, 2000 from the lenders as part of the
Amendment, and the test was eliminated for the first quarter of 2001. The
Company was in compliance with all other debt covenants of the Credit Facility
as of December 31, 2000. The Amendment also requires the Company to maintain
substantially all of its cash and cash equivalents in a collateral and
securities account with lender bank (the "Collateral Account") and the remainder
of its funds in a separate operating account. The Amendment also contains a
waiver that permitted the explanatory paragraph included in the Company's
auditor's opinion for the year ended December 31, 2000.
As part of the Amendment, the Company was required to deliver definitive
documentation with respect to vendor financing (in an aggregate amount of at
least $250 million) and convertible notes (in an aggregate amount of at least
$100 million), no later than April 30, 2001, which requirement was subsequently
waived to May 21, 2001. The Company was not successful in securing the
additional financing and on May 21, 2001 (the "Petition Date"), the Company
filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy
Code.
On June 13, 2001, the U.S. Bankruptcy Court issued an order permitting the
Company to continue to use amounts on deposit in the Collateral Account as well
as cash generated from the operation of the Company's businesses, subject to
periodic budgets to be approved by the Company's senior lenders. The Order also:
(a) converts the prepetition outstanding Credit Facility to a postpetition loan
with superpriority status by a maximum amount equal to (i) the cash drawn from
the Collateral Account by the Company during the bankruptcy, and (ii) the
proceeds from accounts receivable; (b) limits the postpetition loan to the
balances in the Collateral Account and accounts receivable in existence as of
the petition date. On January 8, 2002, the Company transferred $57.6 million of
the proceeds from the sale of the assets of ECI to the Company's senior lenders.
The Company's senior lenders have applied $40.0 million to the payment of the
postpetition loan and the remaining $17.6 million is being held by the senior
lenders. As of February 28, 2002, the Company has classified $85.2 million as a
postpetition loan, subject to a final accounting of the cash collections of
prepetition accounts receivables in existence as of the petition date.
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5. EMPLOYEE BENEFIT PLANS
Employees of the Company may participate in a 401(k) retirement plan in
which eligible employees may elect to contribute, on a tax-deferred basis, up to
15% of their compensation, not to exceed annual maximums as defined in the
Internal Revenue Code. The Company matches one-half of a participant's
contribution up to 6% of the participant's compensation, vesting over 4 years.
During 2001, the 401(k) retirement plan experienced a partial plan termination
due to the number of employees involuntarily separated from employment.
Consequently, all employees who were separated from the Company due to a
reduction in workforce received 100% of the Company matching funds in their
401(k) account.
Effective July 1, 1999, the Company adopted the Employee Stock Purchase
Plan ("ESPP"). Under the ESPP, the Company authorized the issuance of 300,000
shares of Class A Common Stock, which allowed eligible employees to purchase
such shares at 85% of the fair value of the Class A Common Stock. As of January
2001, the Company had issued all such shares available under the ESPP.
6. RESTRUCTURING RESERVE
On November 8, 2000, the Company announced a plan to restructure its
operations in order to focus future business growth on the Company's
fixed-wireless networks. This restructuring included a workforce reduction of
600 employees associated with efforts to realign the sales, operations and real
estate organizations. As a result of this workforce reduction and organizational
realignment, the Company recorded a $14.5 million restructuring charge in the
quarter ending December 31, 2000. The charge consisted of $6.8 million for
severance and other compensation, $5.8 for net costs relating to lease
terminations, and other costs of $1.9 million. On February 15, 2001, the Company
announced an additional workforce reduction, terminating 172 employees
company-wide and recording an additional $600,000 to the restructuring reserve.
On August 24, 2001, the Company announced it would restructure retail operations
in twelve of its markets. This restructuring included a workforce reduction of
147 employees. During November 2001, the Company announced an additional
workforce reduction of 373 employees related to the reorganization of the twelve
local retail commercial markets. The Company recorded no additional
restructuring costs as a result of the August and November workforce reduction.
As of February 28, 2002, the reserve balance totaled $3.8 million, consisting of
personnel-related costs, primarily related to severance totaling $0.6 million,
office closures totaling $1.6 million and other costs of $1.6 million.
7. REORGANIZATION CHARGES
As of February 28, 2002, the Company has recorded reorganization costs
totaling approximately $3.3 million, consisting of professional fees of $3.2
million related to the bankruptcy filings and $0.1 million for other
miscellaneous expense.
8. ASSET IMPAIRMENT
Due to the Company's voluntary petition for relief under Chapter 11 of the
U.S. Bankruptcy Code, the Company believes that certain assets have been
impaired, and there is no assurance that the carrying amounts of the assets will
be realized and further asset impairments may be recognized. In addition, as the
Company realigns its service offerings to focus on its fixed-wireless wholesale
transport, private line and resale operation, certain assets have been removed
from service and remain unutilized or have been abandoned.
10
TELIGENT, INC., et al.,
Case No. 01-12974 (SMB)
Disbursements by debtors from February 1, 2002 to February 28, 2002
CASE NO. TAX ID NO. DEBTOR NAME Amount
- -------- ---------- -------------- --------
01-12974 54-1866562 Teligent, Inc. $ -
01-12975 51-0390077 Teligent Services Inc. -
01-13002 54-2006694 Teligent Professional Services, Inc.* 6,421,611.89
01-12981 54-2009508 Executive Conference, Inc. 45,250.00
01-12991 54-1993057 Quadrangle Investments, Inc. -
01-12985 31-1066400 InfiNet Telecommunications, Inc. 44,465
01-12979 54-1941227 Backlink, L.L.C. -
01-12976 23-2430439 American Long Lines, Inc. 155
01-12978 54-1878787 Auctel, Inc. -
01-13003 54-1942622 Teligent Telecommunications, L.L.C. -
01-12980 34-1713206 Easton Telecom Services, Inc. -
01-12994 54-1942632 Teligent Communications, L.L.C. -
01-13004 54-1891303 Teligent of Virginia, Inc. -
01-12990 52-1731424 OMC Communications, Inc. -
01-12977 91-1576088 Association Communications, Inc. 3,426
01-12986 54-1960620 Jtel, L.L.C. -
01-12989 54-1960861 KatLink, L.L.C. -
01-12993 54-1146458 Telecommunications Concepts, Inc. 1,699
01-12983 13-3617289 FirstMark Communications, Inc. -
01-12997 52-2056185 Teligent License Co. I, L.L.C. -
01-12999 52-2056187 Teligent License Co. II, L.L.C. -
----------------
$ 6,516,606.88
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*Payroll disbursement recorded through Teligent Services, Inc.
11