UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999.
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 000-23387
TELIGENT, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 54-1866562
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
8065 LEESBURG PIKE
SUITE 400
VIENNA, VIRGINIA 22182
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: 703.762.5100
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 [_].
The number of shares outstanding of each of the registrant's classes of common
stock as of August 10, 1999 was as follows:
Common Stock, Class A 9,490,889
Common Stock, Class B 44,426,299
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
As of June 30, 1999 (unaudited) and December 31, 1998 3
Unaudited Condensed Consolidated Statements of Operations
for the three months and six months ended June 30, 1999
and 1998 4
Unaudited Condensed Consolidated Statements of Cash Flows
for the six months ended June 30, 1999 and 1998 5
Notes to Unaudited Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 7
Item 3. Quantitative and Qualitative Disclosure About Market Risk 14
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES
EXHIBIT INDEX
- 2 -
TELIGENT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, December 31,
1999 1998
----------- -----------
(unaudited)
ASSETS
Cash and cash equivalents ............................ $ 386,088 $ 416,247
Prepaid expenses and other current assets ............ 13,993 8,155
Restricted cash and investments ...................... 37,499 32,184
--------- ---------
Total current assets .............................. 437,580 456,586
Property and equipment, net .......................... 256,526 180,726
Restricted cash and investments ...................... 16,749 33,117
Intangible assets, net ............................... 80,686 83,857
Other assets ......................................... 8,171 9,148
--------- ---------
Total assets ...................................... $ 799,712 $ 763,434
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Accounts payable ..................................... $ 164,537 $ 135,158
Accrued interest and other ........................... 23,952 19,020
--------- ---------
Total current liabilities ......................... 188,489 154,178
Long-term debt 792,006 576,058
Other noncurrent liabilities 2,643 2,145
Committments and contingencies
Stockholders' equity (deficit)
Common stock ......................................... 530 526
Additional paid-in capital ........................... 480,786 463,685
Accumulated (deficit) ................................ (664,742) (433,158)
--------- ---------
Total stockholders' equity (deficit) .............. (183,426) 31,053
--------- ---------
Total liabilities and stockholders' equity (deficit) . $ 799,712 $ 763,434
========= =========
See notes to condensed consolidated financial statements.
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TELIGENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except share and per share information)
Three Months Ended June 30, Six Months Ended June 30,
1999 1998 1999 1998
------------ ----------- ----------- ---------
Revenues:
Communications services .................. $ 3,961 $ 143 $ 5,484 $ 241
Costs and expenses:
Cost of services ......................... 43,834 17,903 78,250 25,288
Sales, general and administrative ........ 49,855 25,002 95,234 42,913
Stock-based and other noncash compensation 7,937 8,189 15,801 16,143
Depreciation and amortization ............ 10,087 2,080 17,483 3,653
------------ ------------ ------------ ------------
Total costs and expenses ............. 111,713 53,174 206,768 87,997
------------ ------------ ------------ ------------
Loss from operations ..................... (107,752) (53,031) (201,284) (87,756)
Interest and other income ..................... 4,193 9,963 9,373 18,058
Interest expense .............................. (19,913) (16,067) (39,675) (27,996)
------------ ------------ ------------ ------------
Net loss ...................................... $ (123,472) $ (59,135) $ (231,586) $ (97,694)
============ ============ ============ ============
Basic and diluted net loss per share .......... $ (2.34) $ (1.12) $ (4.39) $ (1.86)
============ ============ ============ ============
Weighted average common shares outstanding .... 52,828,466 52,591,864 52,751,915 52,588,640
============ ============ ============ ============
See notes to condensed consolidated financial statements.
- 4 -
TELIGENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
Six Months Ended June 30,
1999 1998
---------- ----------
Cash flows from operating activities:
Net loss ................................................ $(231,586) $ (97,694)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization .................... 17,483 3,653
Amortization of debt discount and issue costs .... 17,921 10,745
Stock-based and other noncash compensation ....... 15,801 16,143
Other ............................................ 978 (75)
Changes in current assets and current liabilities:
Prepaid expenses and other current assets ..... (8,020) (869)
Accounts payable .............................. (920) 8,296
Accrued interest and other .................... 4,931 5,817
--------- ---------
Net cash used in operating activities ...... (183,412) (53,984)
--------- ---------
Cash flows from investing activities:
Restricted cash and investments ..................... 11,052 14,324
Purchase of property and equipment .................. (61,257) (41,467)
--------- ---------
Net cash used in investing activities ............ (50,205) (27,143)
--------- ---------
Cash flows from financing activities:
Proceeds from long-term debt ........................ 200,000 250,703
Debt financing costs ................................ (529) (7,558)
Proceeds from exercise of common stock options ...... 3,987 57
--------- ---------
Net cash provided by financing activities ........ 203,458 243,202
--------- ---------
Net (decrease) increase in cash and equivalents ......... (30,159) 162,075
Cash and cash equivalents, beginning of period .......... 416,247 424,901
--------- ---------
Cash and cash equivalents, end of period ................ $ 386,088 $ 586,976
========= =========
See notes to condensed consolidated financial statements.
- 5 -
TELIGENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. The Company
Teligent, Inc. ("Teligent" or the "Company") is a full-service,
facilities-based communications company offering small and medium-sized business
customers local, long-distance, high-speed data and dedicated Internet services
over its digital SmartWave(tm) local networks. The SmartWave(tm) local networks
integrate point-to-point and point-to-multipoint wireless technologies with
traditional broadband wireline technology.
2. Significant Accounting Policies
Basis of Presentation
- ---------------------
The unaudited condensed consolidated financial statements included herein
have been prepared by the Company in accordance with the rules and regulations
of the Securities and Exchange Commission ("SEC"). In the opinion of the
Company's management, all adjustments and reclassifications of a normal and
recurring nature necessary to present fairly the financial position, results of
operations and cash flows for the periods presented have been made. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles ("GAAP")
have been condensed or omitted pursuant to SEC rules and regulations. These
condensed consolidated unaudited financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the period ending December 31, 1998
filed with the SEC. The results of operations for the three months and six
months ending June 30, 1999 are not necessarily indicative of the results that
may be expected for the full year.
Consolidation
- -------------
The condensed consolidated financial statements include the accounts of the
Company and its subsidiaries after elimination of all significant intercompany
transactions.
Reclassifications
- -----------------
Certain amounts in the prior periods' financial statements have been
reclassified to conform to the current year's presentation.
3. Supplemental Disclosure of Cash Flow Information
Investing Activities
- --------------------
During the six months ended June 30, 1999 and 1998, the Company incurred
capital expenditures of approximately $91.6 million and $65.5 million,
respectively, of which $30.3 million and $24.0 million, respectively, was
accrued, and is not reflected in the accompanying condensed consolidated
statements of cash flows.
- 6 -
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Except for any historical information contained herein, the matters
discussed in this quarterly report on Form 10-Q contain certain "forward-looking
statements" within the meaning of Section 21E of the Private Securities
Litigation Reform Act of 1995, and should be read in conjunction with the
Company's 1998 Annual Report on Form 10-K for the fiscal year ended December 31,
1998. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors including, without limitation, economic, key
employee, vendor, competitive, governmental, regulatory and technological
factors affecting the Company's growth, operations, markets, products, services,
licenses and other factors discussed in the Company's other filings with the
Securities and Exchange Commission. These factors may cause the actual results,
performance or achievements of the Company, or industry results, to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Given these
uncertainties, prospective investors are cautioned not to place undue reliance
on such forward-looking statements.\
The forward-looking statements are included in, without limitation,
"Overview and Results of Operations" and "Liquidity and Capital Resources." The
Company, in the preparation of its financial statements, also makes various
estimates and assumptions that are forward-looking statements.
In this Quarterly Report on Form 10-Q, we refer to Teligent, Inc., a
Delaware corporation, as "Teligent," the "Company," "we," "us," and "our." Where
applicable, such references refer to Teligent's limited liability company
predecessor.
The following discussion should be read in connection with the attached
condensed consolidated financial statements and notes thereto, and with the
Company's audited financial statements and notes thereto as of and for the year
ended December 31, 1998, included in the Company's Annual Report on Form 10-K.
Overview and Results of Operations
Teligent offers small and medium-sized business customers local, long
distance, high-speed data and dedicated Internet services over our digital
SmartWave(tm) local networks. Our SmartWave(tm) local networks integrate
point-to-point and point-to-multipoint wireless technologies with traditional
broadband wireline technology. By integrating these technologies, we believe we
are able to increase local network efficiency and significantly lower network
costs. We are currently offering commercial service using our SmartWave(tm)
local networks in 29 of the nation's largest markets, comprising more than 467
cities and towns with a combined population of more than 85 million.
Our losses, as well as our negative operating cash flow have been
significant to date, and we expect both to continue until we develop a customer
base that will generate sufficient revenues to fund operating expenses. After we
initiate service in most of our of markets, we expect to have positive operating
margins over time by increasing the number of customers and selling them
additional capacity without significantly increasing related capital
expenditures, costs of building access rights and other operating costs. We
expect that operating and net losses and negative operating cash flow throughout
the remainder of 1999 will increase over 1998 as we complete our first full year
- 7 -
of providing commercial service. Our ability to generate positive cash flow in
the future will depend in part on the extent of capital expenditures in current
and new markets, competition in our current market areas and any potential
adverse regulatory developments. Our operations will depend on various financing
sources to fund our growth as well as continued losses from operations. There
can be no assurance that such funding will be available, or available on terms
acceptable to us. See "Liquidity and Capital Resources."
Year 2000
- ---------
An issue affecting Teligent and other companies is whether computer systems
and applications will recognize and process date data for the Year 2000 and
beyond. The "Year 2000 issue" arises primarily because many computer programs
were written using two, rather than four, digits to identify the applicable
year. As a result, date-sensitive computer programs may recognize a two-digit
code for a year in the next century as one related to this century. For example,
"00," entered in a date field for the Year 2000 may be interpreted as the Year
1900, resulting in system failures or miscalculations and disruption of
operations.
We use the term "Year 2000 ready" to describe the status of our systems,
applications, and services. To be considered Year 2000 ready, the system,
application, or service must undergo certain inventory, assessment,
testing/remediation, and/or implementation processes and, to the extent
applicable, be able to read, compute, store, process, display, and print
calendar dates falling before, on, and after December 31, 1999, without material
interruption or degradation of performance, provided that all other products
(for example, hardware, software, and firmware) used in combination with the
system, application, or service are Year 2000 ready.
Our first priority in our Year 2000 effort is to protect mission-critical
operations from material service interruptions that could occur as a result of
the Year 2000 transition. Teligent defines mission-critical operations as those
systems and applications that are vital to the provision of voice, video and
data switching, processing and transport services to our customers. To that end,
in September 1998, management presented a report to the Audit Committee
outlining issues and areas that management felt should be considered in
connection with our preparation of a Year 2000 plan. Around that same time, we
appointed a Year 2000 committee to lead the Company-wide effort to assess the
scope of our risks and ensure our applications will function properly. Our Year
2000 committee consists of senior executives and other key personnel charged
with the responsibility of directing Teligent's Year 2000 activities and
facilitating timely resolution of issues, obstacles and decisions relating to
the Year 2000 effort.
Our approach to addressing the Year 2000 challenge is consistent with
industry practice and is organized into four key phases:
* Inventory -- identify related data for any element within the Teligent
enterprise that may be impacted by the Year 2000 date change;
* Assessment -- analyze our Year 2000 exposure based on available
information and determine risks to Teligent's business continuity. Risk is a
factor of the likelihood of Year 2000 problems occurring and the impact of such
occurrences on the Company;
- 8 -
* Test & Remediate -- validate the assessment, determine remediation
approach, and take remediation action if we deem it necessary and appropriate.
Remediation may entail repair, replacement, manual work-arounds, or, in some
cases, no action. In this phase we will develop mitigation and contingency plans
for mission critical aspects of our business; and
* Implement -- place mitigation and contingency plans into effect in order
of priority based on mission criticality, and, where necessary, validate
remediation action.
Based on our efforts to date, Teligent believes its mission-critical
operations are "Year 2000 ready." Our efforts have included the deployment of
specific Year 2000 ready systems, applications or services, or the development
of alternative business processes designed to ensure that mission-critical
operations satisfy our Year 2000 readiness criteria. Given the continued growth
and complexity of Teligent's network, our efforts will continue through and
beyond the third quarter of 1999, including additional testing, monitoring, and
planning. Teligent continues to rely on representations by third parties
relating to the Year 2000 readiness of their products. Teligent issues a
detailed status report relating to its progress which is made available to
customers and others through its web site -- http://www.teligent.com.
Generally, we contractually require our key vendors and suppliers to
guarantee in writing that they are Year 2000 ready. The majority of our
mission-critical systems have been acquired from third party vendors. We have
identified certain key vendors and contacted those vendors to discuss the
readiness of their respective products. These discussions are ongoing. In the
event that a vendor or supplier is not able to provide satisfactory Year 2000
assurances, we will monitor the vendor's progress in this area and, if
appropriate, may arrange to have available an alternate vendor or supplier who
can give such assurances. Similar to other telecommunications providers, our
products and services are also dependent upon other service and
telecommunications providers. With respect to those providers with which our
systems interface and exchange data, we are initiating or continuing discussions
regarding their Year 2000 readiness.
We have not determined the exact total costs and expenses we expect to
incur relating to preparation of our systems for the Year 2000. The principal
cost identified to date is the Company's retention of external consultants
together with the cost of internal resources, both dedicated to Year 2000
program management, inventory, and assessment efforts, which costs are estimated
to be less than $5 million. Based on current assessments and compliance plans,
we do not expect that the Year 2000 issue, including the cost of making our
mission critical systems and applications Year 2000 ready, will have a material
adverse effect on our business operations, consolidated financial condition,
cash flows and results of operations.
Despite our efforts to address the Year 2000 impact on operations, we may
not be able to fully identify such impact or resolve it without disruption to
our business and without incurring significant expense. If appropriate
modifications are not made on a timely basis by our vendors or by other
providers on which we depend, or if our actual costs or timing for our Year 2000
readiness differ materially from our present estimates, Teligent's operations
and financial results could be significantly adversely affected. In particular,
there can be no assurance that the systems of other parties upon which our
business relies will be ready on a timely basis.
- 9 -
Our contingency plans are designed to minimize the disruptions or other
adverse effects resulting from Year 2000 incompatibilities with respect to
mission-critical systems. Our contingency plans contemplate an assessment of all
our critical internal information technology systems and our internal
operational systems that use computer-based controls. In addition, we are
assessing any critical disruptions due to Year 2000-related failures that are
external to Teligent. These processes will begin January 1, 2000, and will
continue as long as circumstances require.
Our contingency plans include the creation of teams that will be prepared
to respond immediately and as necessary to critical Year 2000 problems as soon
as they become known. The composition of teams that are assigned to deal with
such problems will vary according to the nature, significance, and location of
the problem.
Three Months Ended June 30, 1999 Compared to Three Months Ended June 30, 1998
- -----------------------------------------------------------------------------
We generated revenue from communications services of approximately $4.0
million for the three months ended June 30, 1999, compared with approximately
$143,000 for the three months ended June 30, 1998, as Teligent continued to grow
its customer base and expand into new markets during the second quarter of 1999.
Cost of services, consisting primarily of personnel-related costs,
telecommunications expenses, and site rent and site acquisition expenses related
to network operations, was approximately $43.8 million for the three months
ended June 30, 1999, compared with approximately $17.9 million for the
corresponding period in 1998. Service costs will increase significantly over
1998 throughout the remainder of 1999 as we expand our customer base and
implement our growth strategy.
Sales, general and administrative expenses, consisting primarily of
headcount-related costs, were approximately $49.9 million for the three months
ended June 30, 1999, compared with approximately $25 million for the
corresponding period in 1998.
Stock-based and other noncash compensation expense was approximately $7.9
million for the three months ended June 30, 1999, compared with approximately
$8.2 million for the corresponding period in 1998. Depreciation and amortization
for the three months ended June 30, 1999 increased to approximately $10.1
million, compared with approximately $2.1 million for the corresponding period
in 1998, due primarily to higher capital expenditures. Depreciation expense will
increase in future quarters as we continue to add fixed assets.
Interest and other income for the three months ended June 30, 1999, was
approximately $4.2 million, compared with approximately $10.0 for the
corresponding period in 1998. This decrease was primarily the result of interest
earned on decreased levels of cash and investments in 1999 compared to 1998.
Interest expense for the three months ended June 30, 1999 was approximately
$19.9 million compared with approximately $16.1 million for the corresponding
period in 1998. This increase was due to amortization of credit facility fees
and expenses in 1999.
- 10 -
Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998
- -------------------------------------------------------------------------
We generated revenue from communications services of approximately $5.5
million for the six months ended June 30, 1999, compared with approximately
$241,000 for the corresponding period in 1998.
Cost of services, consisting primarily of personnel-related costs,
telecommunications expenses, and site rent and site acquisition expenses related
to network operations, was approximately $78.3 million for the six months ended
June 30, 1999, compared with approximately $25.3 million for the corresponding
period in 1998. This increase reflects the Company's growth and development of
its network operations.
Sales, general and administrative expenses, consisting primarily of
headcount-related costs, were approximately $95.2 million for the six months
ended June 30, 1999, compared with approximately $42.9 million for the
corresponding period in 1998.
Stock-based and other noncash compensation expense was approximately $15.8
million for the six months ended June 30, 1999, compared with approximately
$16.1 million for the corresponding period in 1998. Depreciation and
amortization for the six months ended June 30, 1999 increased to approximately
$17.5 million, compared with approximately $3.7 million for the corresponding
period in 1998.
Interest and other income for the six months ended June 30, 1999, was
approximately $9.4 million, as compared with approximately $18.1 for the
corresponding period in 1998, due to interest earned on decreased levels of cash
and investments in 1999 compared to 1998.
Interest expense for the six months ended June 30, 1999 was approximately
$39.7 million compared with approximately $28.0 million for the corresponding
period in 1998. This increase was due to amortization of credit facility fees
and expenses in 1999 and recognizing interest expense on the 11 1/2% Series B
Discount Notes due 2008, issued in February 1998.
The Company expects to generate significant operating and net losses for
the next several years.
Liquidity and Capital Resources
- -------------------------------
Shelf Registration Statement
- ----------------------------
In June 1999, we filed a Universal Shelf Registration Statement (the
"Registration Statement") with the Securities and Exchange Commission to raise
up to $1 billion by offering securities that may be comprised of any combination
of common stock, preferred stock, debt securities or depositary shares. The
Registration Statement, which was declared effective on July 22, 1999, permits
us to periodically offer such securities in amounts, prices, and terms to be
determined when the securities are issued.
We plan to use the net proceeds of any offering of these securities for
working capital, capital expenditures, operating losses and other general
corporate purposes in connection with the implementation of our business plan,
- 11 -
including acquisitions. Two million shares of common stock registered under the
Registration Statement may be offered by a selling shareholder. We will not
receive any proceeds from the sale of common stock that may be offered by the
selling shareholder.
Credit Facility
- ---------------
On July 2, 1998, we entered into a credit agreement (the "Bank Credit
Agreement") providing for credit facilities up to an aggregate of $800 million
(the "Credit Facility"). The Credit Facility will primarily be used for the
purchase of telecommunications equipment, software and services and is also
available for working capital and general corporate purposes. Availability of
funds under the Credit Facility is subject to certain conditions as defined in
the Bank Credit Agreement. As of June 30, 1999, we had a $200 million
outstanding loan balance under the Credit Facility. We may make additional
draw-downs if required later in the year.
Historical Cash Flows
- ---------------------
At June 30, 1999, we had working capital of approximately $249.1 million
and unrestricted cash and cash equivalents of approximately $386.1 million,
compared to working capital of approximately $302.4 million and cash of
approximately $416.2 million at December 31, 1998. The decrease in working
capital is primarily a result of lower cash levels and an increase in accounts
payable to vendors as we implement our growth strategy. We will need a
significant amount of cash to build our networks, market our services and cover
operating expenditures. Although we anticipate our existing cash and cash
equivalents on hand together with the Credit Facility will provide enough money
to carry out our current business plan into the year 2000, our management
continually evaluates potential financing options. The Company also expects that
current and future expansion and acquisitions will be financed from funds
generated from operations, borrowings under the Credit Facility, financing under
the Registration Statement and potential additional financings.
Our total assets increased from approximately $763.4 million as of December
31, 1998 to approximately $799.7 million at June 30, 1999, as lower cash and
cash equivalents levels were offset by higher property and equipment balances.
Property and equipment, net of accumulated depreciation, comprised approximately
$256.5 million at June 30, 1999 compared to approximately $180.7 million at
December 31, 1998.
We used cash in operations of approximately $183.4 million for the six
months ended June 30, 1999, due primarily to the operating loss for the period
reduced by stock-based and other noncash compensation, depreciation and
amortization, and other charges. For the same period in 1998, we used cash in
operations of approximately $54 million, due primarily to the operating loss for
the period offset primarily by stock-based and other noncash compensation.
We used cash in investing activities of approximately $50.2 million for the
six months ended June 30, 1999 relating primarily to the purchase of property
and equipment. For the same period in 1998, we used approximately $27.1 million
in investing activities relating primarily to the purchase of property and
equipment.
- 12 -
Cash flows provided by financing activities for the six months ended June
30, 1999 were approximately $203.5 million, consisting primarily of proceeds
from a $200 million draw-down of our existing credit facility in the second
quarter of 1999 and the exercise of common stock options. For the same period in
1998, cash flows from financing activities were approximately $243.2 million
consisting primarily of net proceeds from the offering of the 111/2% Series B
Discount Notes, after costs of approximately $7.6 million.
Recent Developments
- -------------------
On June 1, 1999, Liberty Media Corporation and The Associated Group, Inc.
("Associated") announced that they had signed a definitive merger agreement
pursuant to which Liberty Media will acquire Associated in a stock-for-stock
merger (the "Associated Acquisition"). Liberty Media Corporation, which holds
most of the assets included in the Liberty Media Group, is an indirect wholly
owned subsidiary of AT&T Corp.; however, the assets and businesses of Liberty
Media Group are operated by its current management, which is different from that
of AT&T.
Upon completion of the Associated Acquisition, Liberty Media would acquire
through its ownership of Associated, Associated's interest in Teligent,
representing approximately 41% (as of June 1, 1999) of the total issued and
outstanding shares of Teligent common stock as of June 1, 1999. Upon
consummation of the Associated Acquisition, Telcom DTS Investors, L.L.C.
("Telcom"), the owner of all of the Series B-2 common stock, would, depending
upon Telcom's level of stock ownership and control of Telcom by certain
individuals at that time, have the right pursuant to an agreement with
Associated to require Associated to convert all of its Series B-1 common stock
into Class A common stock and to cause one of the Series B-1 Directors
designated by Associated to resign from Teligent's board of directors so that
the Series B-1 Directors will no longer constitute a majority of the Teligent
directors. Associated has further agreed with Telcom that if Associated is
required to convert its Series B-1 common stock, then it will cause its
designees on Teligent's board of directors to cause Teligent's board of
directors to convene a meeting of Teligent's stockholders.
The Associated Acquisition merger agreement provides that, immediately
prior to the effective date of the Associated Acquisition, Associated will
replace three (or such lesser number that Liberty may designate) of the existing
Series B-1 Directors with designees of Liberty Media. However, upon a conversion
of all of the Series B-1 common stock into Class A common stock, there will be
no shares of Series B-1 common stock outstanding. As a result, if all of the
Series B-1 shares are so converted, neither Associated nor Liberty will have the
special right currently held by Associated under Teligent's certificate of
incorporation to elect directors of Teligent (except for the right to vote
generally for Teligent directors together with other holders of Teligent common
stock).
Pursuant to the terms of the Associated Acquisition, Associated has agreed
with certain limited exceptions, not to sell any of its Teligent common stock or
to vote or execute a written consent or proxy with respect to its Teligent
common stock in favor of any acquisition of a 25% or greater equity interest in
Teligent. The Associated Acquisition merger agreement does not prohibit the
Series B-1 Directors from properly discharging their fiduciary duties in their
capacity as directors of Teligent.
The Associated Acquisition is subject to the approval of the stockholders
of Associated, clearance from various governmental authorities, including the
Federal Communications Commission, and satisfaction of the other conditions set
forth in the merger agreement. According to Associated, depending upon the
timing of the foregoing, the Associated Acquisition is currently expected to
close in early 2000.
- 13 -
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We have certain exposure to financial market risks, including changes in
interest rates and other relevant market prices. Specifically, a sustained
increase or decrease in interest rates would generally affect interest costs
relating to our Credit Facility. At June 30, 1999, we had an outstanding loan
balance of $200 million under the Credit Facility, which incurs interest at a
floating rate tied to prevailing LIBOR rates or aternate base rates. The
oustanding loan balance under the Credit Facility represents approximately 25%
of the Company's outstanding long-term debt.
Changes in interest rates do not have a direct impact on interest expense
relating to the Company's remaining fixed rate long-term debt, although the fair
market value of the our fixed rate debt is sensitive to changes in interest
rates. If market rates declined, our interest payments could exceed those based
on the current market rate. We currently do not use interest rate derivative
instruments to manage our exposure to interest rate changes, but may do so in
the future.
- 14 -
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Shareholders on June 16, 1999.
Following are descriptions of the matters voted on and the results of such
meeting:
Number of Shares
Matters Voted On For Against Abstain
- ---------------- --- ------- -------
1. Election of Directors:
Alex J. Mandl (1) 5,568,377 0 11,304
Myles P. Berkman (2) 21,436,689 0 N/A
David J. Berkman (2) 21,436,689 0 N/A
William H. Berkman (2) 21,436,689 0 N/A
Donald H. Jones (2) 21,436,689 0 N/A
Rajendra Singh (3) 17,206,210 0 N/A
Tetsuro Mikami (4) 5,783,400 0 N/A
2. Approval of an amendment to the Teligent, Inc. 1997 Stock Incentive Plan to
increase the number of shares of Class A common stock reserved for issuance
thereunder by 4,000,000 shares. 2,220,186 750,255 23,949
3. Adoption of Teligent, Inc. 1999 Employee Stock Purchase Plan to allow
employees of The Company to invest in shares of Class A common
stock 2,890,583 78,041 N/A
4. Proposal to ratify the Appointment of Ernst & Young LLP as the Company's
independent auditors for the
year ended December 31, 1999 5,564,037 11,121 4,523
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(1) To be elected by holders of Class A common stock and Class B common stock
(2) To be elected solely by the holder of Series B-1 common stock (3) To be
elected solely by the holder of Series B-2 common stock (4) To be elected solely
by the holder of Series B-3 common stock
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Index
(b) Reports on Form 8-K
1. Current Report on Form 8-K, filed with the Securities and
Exchange Commission on April 19, 1999, regarding the entering
into of a five-year equipment purchase agreement, dated
December 18, 1998, with Hughes Network Systems (Items 5 and
7).
- 16 -
SIGNATURES
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.
TELIGENT, INC.
(Registrant)
Date: August 13, 1999 By: /s/Abraham L. Morris
-----------------
Abraham L. Morris
Senior Vice President, Chief
Financial Officer and
Treasurer (Principal
Financial Officer)
Date: August 13, 1999 By: /s/Cindy L. Tallent
----------------
Cindy L. Tallent
Senior Vice President and
Controller
(Principal Accounting Officer)
EXHIBIT INDEX
Exhibit No. Description of Exhibit
27 Financial Data Schedule for the six months ended
June 30, 1999
99.1 Press release of Teligent, Inc. dated August 12, 1999