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 the
Period June 1, 2002 to June 30, 2002
Debtor's Address
Teligent, Inc.
460 Herndon Parkway, Suite 100
Herndon, VA 20170
Period Disbursement: $2,738,744
Debtor's Attorney
KIRKLAND & ELLIS
200 East Randolph Drive
Chicago, Illinois 60601
Period Operating Loss: ($1,755,000)
The undersigned, having reviewed the attached report and being familiar
with the Debtor's financial affairs, verifies under the penalty of perjury that
the information contained therein is complete, accurate and trustful to the best
of my knowledge. The Debtors have had numerous members of their senior and
middle management team, including the chief financial officer, chief executive
officer, and numerous managers with finance responsibilities, depart.
Accordingly, the information contained in this report is qualified in its
entirety by the generally available information at the time of its preparation.
The Debtors reserve the right to amend this report should they deem it
necessary.
The undersigned also verifies that, to the best of my knowledge, all
insurance policies, including workers compensation and disability insurance,
have been paid currently.
July 15, 2002 By: /s/ Barbara A. Sweasy
-------------------------
Barbara A. Sweasy
Assistant Treasurer
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.; Xandu Shell Corp. (f/k/a American Long Lines, Inc.);
Association Communications, Inc.; Auctel, Inc.; BackLink, L.L.C.; Winston
Shell Corp. (f/k/a Easton Telecom Services, Inc.); Quincy Shell Corp.
(f/k/a Executive Conference, Inc.); FirstMark Communications, Inc.; Sawyer
Shell Corp. (f/k/a InfiNet Telecommunications, Inc.); JTel, L.L.C.; KatLink,
L.L.C.; OMC Communications, Inc.; Quadrangle Investments, Inc.; Atlantis
II Shell Corp. (f/k/a 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)
June 30,
2002
-----------
Assets
Current assets:
Cash and cash equivalents $ 13,320
Accounts receivable, net of allowance for doubtful
account of $8,605 2,426
Prepaid expenses and other current assets 707
Restricted cash and investments 13,878
-----------
Total current assets 30,331
Property and equipment, net of accumulated depreciation
of $3,623 12,401
Intangible assets, net of accumulated amortization
of $16,283 35,619
Other assets 221
-----------
Total assets $ 78,572
===========
Liabilities and Stockholders' Deficit
Current liabilities:
Short-term borrowings $ 74,482
Accounts payable 26,883
Accrued expenses 6,833
-----------
Total current liabilities 108,198
Other noncurrent liabilities 5,077
Liabilities subject to compromise 1,481,959
Series A preferred stock 538,953
Stockholders' deficit:
Intercompany receivable (46,378)
Common stock 637
Additional paid-in capital 797,397
Accumulated deficit (2,807,271)
-----------
Total stockholders' deficit (2,055,615)
-----------
Total liabilities and stockholders' deficit $ 78,572
===========
2
TELIGENT, INC. (Domestic Subsidiaries)
(Debtor-in-Possession)
CONDENSED CONSOLIDATED STATEMENT OF OPERATION
(Unaudited, in thousands, except per share amounts)
Month ended
June 30, 2002
--------------
Revenues:
Communications services, net $ 378
Costs and expenses:
Cost of services 1,093
Sales, general and administrative 626
Restructuring (9)
Depreciation and amortization 423
--------------
Total costs and expenses 2,133
--------------
Loss from operations (1,755)
Interest expense 27
Reorganization items (1,542)
--------------
Loss before income tax (240)
Extraordinary items (98)
--------------
Net Income (142)
==============
Basic and diluted net loss per common share $ -
==============
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
June 30, 2002
---------------
Cash flows from operating activities:
Net loss $ (142)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 423
Gain on sale and disposal of assets due to Chapter 11
proceeding 33
Gain on allowance for doubtful accounts receivable
previously written-off (237)
Net changes in current assets and current liabilities:
Accounts receivable (226)
Prepaid expenses and other current assets 2,138
Accounts payable (3,497)
Accrued expenses (201)
---------------
Net cash used in operating activities (1,709)
---------------
Cash flows from investing activities:
Purchase of property and equipment (17)
Proceeds from sale of assets 33
Change in restricted cash 9
---------------
Net cash provided by investing activities 25
---------------
Cash flows from financing activities:
---------------
Net cash used in financing activities -
---------------
Net change in cash and cash equivalents (1,684)
Cash and cash equivalents, beginning of period 15,004
---------------
Cash and cash equivalents, end of period $ 13,320
===============
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TELIGENT, INC. (Domestic Subsidiaries)
(Debtor-in-Possession)
Supplemental Information
(Unaudited, in thousands)
Month ended
June 30, 2002
--------------
a Wages and severance paid $ 515
b Payroll taxes withheld 144
c Employer tax 31
d Gross Sales 378
e Sales and use taxes due 114
f Property taxes -
g-a Other taxes, fees - Trust Fund, net 175
g-b Other taxes, fees - non Trust Fund, net 139
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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 U.S. 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 June 30, 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 its eleven remaining retail local 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.
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, 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.
On May 21, 2002, the Company filed a proposed plan of reorganization,
disclosure statement and related solicitation materials with the Court. After
several amendments to those documents, the Court entered an order on or about
July 10, 2002 approving the form of the disclosure statement, as amended, and
authorized the Company to commence soliciting votes and consents to the plan of
reorganization, as amended. All of the relevant documents can be viewed at
http://www.bmccorp.net/teligent/.
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 June 30, 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 using the accounting policies disclosed in the company's prior annual
audited financial statements. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates 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):
June 30,
2002
------------
11.5% Senior Notes due 2007....................................$ 300,000
11.5% Senior Discount Notes due 2008........................... 361,802
Credit Facility................................................ 740,000
------------
Total debt $ 1,401,802
============
The Company is in default on all of its indebtedness as a result of, among
other things, 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 11 1/2% Senior Notes
due 2007 (the "Senior Notes"). The Company used $93.9 million of the net
proceeds of this offering to purchase a portfolio of Treasury securities which
were pledged as collateral for the payment of interest on the Senior Notes
through December 1, 2000.
Senior Discount Notes Offering
On February 20, 1998, the Company completed an offering (the "Discount
Notes Offering") of $440 million 11 1/2% Senior Discount Notes due 2008 (the
"Senior Discount Notes"). The Company received $243.1 million in net proceeds
from the Discount Notes Offering, after deductions for offering expenses of $7.6
million. Under a 1998 exchange offer, all outstanding Senior Discount Notes were
exchanged for 11 1/2% Series B Discount Notes due 2000 (the "New Discount
Notes") which have been registered under the Securities Act of 1933, as amended.
The New Discount Notes are identical in all material respects to the Senior
Discount Notes.
Credit Facility
On July 2, 1998, the Company entered into a credit agreement, as
subsequently amended, (the "Bank Credit Agreement") with certain lenders,
providing for credit facilities up to an aggregate of $800 million (the "Credit
Facility"). Availability of funds under the Credit Facility were subject to
certain conditions as defined in the Bank Credit Agreement, all of which were
met prior to the draw down of the entire facility in January 2001. Substantially
all of the Company's assets secure the obligations under the Bank Credit
Agreement.
The Credit Facility is structured into three separate tranches consisting
of a term loan facility, a delayed draw term loan facility and a revolving
credit facility, each of which has a final maturity of eight years. Interest
accrues on $575 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
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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
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
extended by mutual agreement 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. As of June 30, 2002, the Company has classified $74.5 million
as a postpetition loan, subject to a final accounting of the cash collections of
prepetition accounts receivable in existence as of the petition date. On January
8, 2002, the Company paid down $40.0 million from the proceeds relating to the
sale of ECI's assets. During March, 2002 the Company paid down an additional
$20.0 million, $10 million from the Company's foreign subsidiaries, $5.0 million
from the proceeds relating to the sale of ECI's assets, and $5.0 million from
the proceeds relating to other asset sales of the company.
5. RESTRUCTURING RESERVE
As of June 30, 2002, the Company has continued restructuring its operations
in order to focus future business growth on the Company's fixed-wireless
networks. The restructuring initiatives included workforce reductions associated
with planned efforts to realign the sales, operations and real estate
organizations. At June 30, 2002, the restructuring reserve balance totaled $3.5
million consisting of personnel-related costs, primarily related to severance
totaling $1.0 million, office closures totaling $0.9 million and other costs of
$1.6 million.
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6. ASSET IMPAIRMENT
Due to the bankruptcy filing and related events the Company believes that
certain assets have been impaired. In addition, as the Company realigns its
service offerings 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. In March 2002, the Company recognized
additional asset impairment charges of $81.5 million with an effective date of
December 31, 2001. As a result of the aforementioned the Company has reduced the
current month depreciation expense by $2.4 million which reflects the
depreciation expense that would have been recognized had the equipment continued
to be used in current operations of the company. On April 30, 2002, the Company
recorded additional asset impairment charges of $2.6 million to reflect the fair
market value of certain assets.
7. REORGANIZATION CHARGES
As of June 30, 2002, the Company has recorded reorganization costs totaling
approximately $1.0 million, consisting of professional fees of $2.7 million
related to the bankruptcy filings, $(1.5) million proceeds from the sale of
assets recognized as asset impairment charges in prior period, and $(0.2)
million for other miscellaneous income.
8. 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 2002, 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's 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. No
additional shares will be distributed under the ESPP unless and until more
shares of Class A Common Stock are authorized for distribution under the ESPP.
9. EXTRAORDINARY ITEMS
As of June 30, 2002, the Company reported certain unsecured creditors'
settlements of $1.4 million as extraordinary items according to the guidelines
of the Statement of Position ("SOP") 90-7.
*****
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TELIGENT, INC., et al.,
Case No. 01-12974 (SMB)
Disbursements by debtors from June 1, 2002 to June 30, 2002
CASE NO. TAX ID NO. DEBTOR NAME Amount
- -------- ---------- ----------- --------
01-12974 54-1866562 Teligent, Inc. $ -
01-12975 51-0390077 Teligent Services Inc.* 2,712,457
01-13002 54-2006694 Teligent Professional Services, Inc. -
01-12981 54-2009508 Quincy Shell Corp.
(f/k/a Executive Conference, Inc.) 26,287
01-12991 54-1993057 Quadrangle Investments, Inc. -
01-12985 31-1066400 Sawyer Shell Corp.
(f/k/a InfiNet Telecommunications, Inc.) -
01-12979 54-1941227 Backlink, L.L.C. -
01-12976 23-2430439 Xandu Shell Corp.
(f/k/a American Long Lines, Inc.) -
01-12978 54-1878787 Auctel, Inc. -
01-13003 54-1942622 Teligent Telecommunications, L.L.C. -
01-12980 34-1713206 Winston Shell Corp.
(f/k/a 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. -
01-12986 54-1960620 Jtel, L.L.C. -
01-12989 54-1960861 KatLink, L.L.C. -
01-12993 54-1146458 Atlantis II Shell Corp.
(f/k/aTelecommunications Concepts, Inc.) -
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. -
------------
$ 2,738,744
------------
*Payroll disbursement recorded through Teligent Services, Inc.
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