SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
----------------------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from_____________________to__________________________
Commission File Number 0-28262
- --------------------------------------------------------------------------------
AERIAL COMMUNICATIONS, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 39-1706857
- ------------------------------ -------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
8410 West Bryn Mawr, Suite 1100, Chicago, Illinois 60631
-------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (773) 399-4200
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at April 30, 1997
----------------------- -------------------------------
Common Shares, $1 par value 31,494,655 Shares
Series A Common Shares, $1 par value 40,000,000 Shares
- --------------------------------------------------------------------------------
<PAGE>
AERIAL COMMUNICATIONS, INC.
---------------------------
1ST QUARTER REPORT ON FORM 10-Q
-------------------------------
INDEX
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Page No.
--------
Part I. Financial Information
Management's Discussion and Analysis of
Results of Operations and Financial Condition 2-5
Consolidated Statements of Operations -
Three Months Ended March 31, 1997 and 1996 6
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1997 and 1996 7
Consolidated Balance Sheets -
March 31, 1997 and December 31, 1996 8-9
Notes to Consolidated Financial Statements 10-11
Part II. Other Information 12
Signatures 13
<PAGE>
PART I. FINANCIAL INFORMATION
-----------------------------
AERIAL COMMUNICATIONS, INC.
---------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
-------------------------------------------------------------
AND FINANCIAL CONDITION
-----------------------
RESULTS OF OPERATIONS
- ---------------------
Aerial Communications, Inc. (the "Company" - NASDAQ symbol: AERL), an
82.8%-owned subsidiary of Telephone and Data Systems, Inc. ("TDS"), was formed
to acquire Personal Communications Services ("PCS") licenses from the Federal
Communications Commission ("FCC"), construct PCS networks in its Major Trading
Areas ("MTAs") and offer wireless PCS communications services in these areas.
Since its acquisition of PCS licenses in the FCC broadband Block A and Block B
PCS auction, which concluded in March of 1995, the Company has been devoting its
efforts to recruiting an experienced management team, developing and executing a
business plan, raising capital and designing and constructing a PCS network in
each of its MTAs (Minneapolis, Tampa-St. Petersburg-Orlando, Houston,
Pittsburgh, Kansas City and Columbus).
The Company's focus in 1997 has been the preparation of each of its markets for
initial service launch and the development of it PCS business. The Columbus MTA
launched service on March 27, 1997. The Company expects to launch service in its
five remaining MTAs during the second quarter.
Significant progress has been made in site acquisition and construction. Across
all six markets, the Company expects to launch with approximately 600 cell sites
in service. Upon completion of all phases of its build-out in 1997, more than
1,000 cell sites are planned to be in service.
A number of municipalities have adopted cell site zoning moratoria slowing the
task of network build-out. The Company has taken steps to mitigate the impact of
all such moratoria affecting its build-out. Moratoria have been particularly
challenging for all wireless providers in the Orlando/Orange County, Florida
area.
The Company is currently capitalizing, as work in process, expenditures for the
design, construction and testing of the Company's PCS networks as well as the
cost to relocate dedicated private microwave links currently operating in the
Company's spectrum. Costs associated with developing information systems are
also capitalized. The Company capitalizes interest on such PCS network and
information system expenditures where appropriate.
Three Months Ended 3/31/97 Compared to Three Months Ended 3/31/96
Development costs increased $3.1 million in the first quarter of 1997 primarily
due to a $2.8 million increase in advertising expense and a $0.5 million
increase in consulting fees offset by a $0.2 million decrease in legal expenses.
Development costs are incurred in the development of the Company's business and
marketing plans in the continuing effort to prepare the Company's MTAs for
commercial PCS services.
General and administrative expenses increased $12.7 million in the first quarter
of 1997, primarily as a result of the growth of the Company's management and
operating teams and the resulting
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<PAGE>
increases in salaries, employee benefit costs and overhead expenses. The Company
had 759 employees at March 31, 1997, compared to 70 employees at March 31, 1996.
The increase in employees relates to the Company adding approximately 200 sales
employees across its MTAs and 140 customer service employees at its National
Operations Center in Tampa, with the balance of the additions coming primarily
from the areas of marketing, engineering and operations, finance, and
information technology.
Interest income-other increased $1.0 million in the first quarter of 1997 due
primarily to interest income earned on the excess proceeds from the Company's
November 1996 sale of Series A Zero Coupon Notes pending use in PCS network
development and construction.
Investment losses were $0.5 million in the first quarter of 1997 and represent
the Company's share of losses of the Wireless Alliance, LLC, a joint venture
associated with the Company's Minneapolis MTA and designed to extend the PCS
footprint to areas that were not in the Company's initial build-out.
Interest expense-affiliate represents interest on amounts borrowed under the
Revolving Credit Agreement with TDS and fees paid to TDS for serving as
guarantor on the Series A Zero Coupon Notes, less interest capitalized. Interest
expense-affiliate decreased $0.7 million in the first quarter of 1997, primarily
due to a decrease in the average borrowings under the Revolving Credit Agreement
and an increase in interest capitalization. Interest capitalized totaled $0.7
million in 1997 and $0.2 million in 1996.
Interest expense-other was $0.4 million in the first quarter of 1997 and relates
to the Series A Zero Coupon Notes issued in November 1996, less interest
capitalized. The Company capitalized interest of $1.6 million related to the
Series A Zero Coupon Notes in the first quarter of 1997.
Income tax expense increased $0.5 million in the first quarter of 1997,
primarily due to an increase in the estimated valuation allowance associated
with deferred tax assets generated by net operating losses.
For federal income tax purposes, the Company is included in the TDS consolidated
tax return. The Company and TDS entered into a tax allocation agreement which
became effective January 1, 1996, pursuant to which, the Company calculates its
losses and credits as if it were a separate affiliated group and will carry
forward its losses and credits, if any, to reduce future tax liabilities. For
financial reporting purposes, the Company computes its federal income taxes as
if it were not a member of the TDS consolidated group but filed a separate
return.
The weighted average Common and Series A Common Shares increased by 12.3 million
between the first quarter of 1997 and the first quarter of 1996 due primarily to
12,250,000 Common Shares issued on April 25, 1996, in connection with the
Company's initial public offering ("IPO").
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The costs of development, construction and start-up activities of the Company
will require substantial capital. From inception through March 31, 1997, the
Company had expended $304.4 million for its licenses, including capitalized
interest, $375.8 million for all other capital expenditures and incurred
cumulative net losses of $68.2 million. The Company expects to incur significant
operating losses and to generate negative cash flow from operating activities
during the
-3-
<PAGE>
next several years, while it develops and constructs its PCS networks and builds
its customer base.
Cash flows used by operating activities were $26.2 million in the first quarter
of 1997 compared to $6.2 million in 1996. Cash used in 1997 resulted primarily
from the $22.3 million net loss for the quarter and an increase in inventory of
$4.0 million. The cash used in 1996 resulted primarily from the $6.7 million net
loss generated for the quarter.
Cash flows from financing activities provided $82.8 million during the first
quarter of 1997 compared to $30.6 million during 1996. Cash provided in 1997 was
due primarily to $82.6 million in borrowings under the Revolving Credit
Agreement (See Note 5-Revolving Credit Agreement). In 1996 the Company received
from TDS $28.8 million representing the balance due in connection with TDS's
$289.2 million contribution to the equity capital of the Company in 1995.
Obligations under the Revolving Credit Agreement also increased $1.8 million in
1996.
Cash flows used in investing activities totaled $84.7 million for the first
quarter of 1997 compared to $10.9 million for 1996. Cash used in 1997 resulted
primarily from $76.7 million in additions to work in process and $7.9 million in
additions to property and equipment. Cash requirements in 1996 consisted
primarily of additions to work in process of $8.7 million and additions to
property and equipment of $1.3 million.
While start-up activities may be impacted by many factors, the Company
anticipates that the development of its PCS networks and services will require
substantial capital over the next several years. For 1997 the Company estimates
that the aggregate funds required for construction expenditures (including
microwave relocation) will total approximately $345 million. The Company plans
to have completed all phases of its network build-out by the end of 1997. The
Company estimates requiring $255 million for working capital requirements to
fund operations in 1997.
The Company expects 1997 capital expenditures and expenditures for start-up and
development activities to be financed using a variety of sources, including but
not limited to, borrowings under the TDS Revolving Credit Agreement, vendor
financing and minority equity interests in the MTAs. The Company had available
$167.4 million under the Revolving Credit Agreement with TDS as of March 31,
1997.
In March 1996, the Company selected Nokia Telecommunications, Inc. ("Nokia") as
its sole supplier of digital radio channel and switching infrastructure
equipment during the initial build-out of its PCS networks. Nokia has agreed to
provide up to $200 million in financing for the equipment through a Credit
Agreement with the Company dated June 19, 1996 ("Credit Agreement"). At the
Company's option it may issue, in tranches, 10-year unsecured zero coupon
promissory notes in accordance with the provisions of the Credit Agreement, the
proceeds of which are to be paid to Nokia in satisfaction of borrowings by the
Company under the Credit Agreement.
On November 4, 1996, the Company issued $226.2 million in aggregate principal
amount at maturity of Series A Zero Coupon Notes ("Notes") due in 2006. The
issue price of the Notes was 44.2% of the principal amount at maturity or $100
million, and there is no periodic payment of interest. The $100 million proceeds
of the sale of the Notes were paid to Nokia in satisfaction of all outstanding
obligations and future obligations up to $100 million of the Company under the
Credit Agreement. The per annum yield to maturity on the Notes is 8.34%
(computed on a semi-annual bond equivalent basis). The Notes will rank in the
same priority with all other unsecured
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<PAGE>
and unsubordinated indebtedness of the Company. The Notes and the obligations
under the Credit Agreement are fully and unconditionally guaranteed by TDS at an
annual fee rate of 3%. The Notes are subject to optional redemption by the
Company on and after November 1, 2001, at a purchase price equal to the issue
price plus accrued interest through the date of redemption.
In April 1996, the Company sold 12,250,000 of its Common Shares, approximately
17.2% of total outstanding shares of common stock, at a price of $17 per share
in an initial public offering. The net proceeds from the offering, after
underwriters fees, were $195.3 million. A portion of the net proceeds was
applied to the repayment of the $64.1 million then outstanding indebtedness
(including accrued interest) to TDS under the Revolving Credit Agreement.
In November 1996, the Company entered into a Member Control Agreement
("Agreement") to establish a joint venture with Rural Cellular Corporation
("RCC") to be known as the Wireless Alliance, LLC. The joint venture was formed
to build out certain rural areas covering approximately 530,000 population
equivalents in the Minneapolis MTA. The Company has agreed to contribute 20 MHz
of its Minneapolis MTA license covering certain territories as defined in the
Agreement in return for a 49% equity interest in the joint venture. RCC will be
responsible for building out the network and for the ongoing operations. It is
anticipated that the joint venture will purchase services such as network
switching and customer billing from the Company. The Company expects to benefit
from the joint venture by extending its footprint without the capital investment
required to build the network. The FCC approved the Agreement in April 1997.
The Company believes that its capital resources will be sufficient to fund its
complete network build-out and cover operating losses into the second half of
1997. In addition to the Revolving Credit Agreement with TDS, sources of
additional capital may include additional vendor financing as well as private
equity and debt financing by the Company or its subsidiaries. If sufficient
funding is not made available to the Company on terms and prices acceptable to
the Company, the Company would have to reduce its construction and development
programs, which could have a material adverse impact on the Company's financial
condition and results of future operations.
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 SAFE HARBOR CAUTIONARY
- -----------------------------------------------------------------------
STATEMENT
- ---------
This Form 10-Q contains "forward-looking" statements, as defined in the Private
Securities Litigation Reform Act of 1995, that are based on current
expectations, estimates and projections. Statements that are not historical
facts, including statements about the Company's beliefs and expectations are
forward-looking statements. These statements contain potential risks and
uncertainties and therefore, actual results may differ materially. The Company
undertakes no obligation to update publicly any forward-looking statements
whether as a result of new information, future events or otherwise.
Important factors that may affect these projections or expectations include, but
are not limited to: changes in the overall economy; changes in competition in
the Company's markets; advances in telecommunications technology; changes in the
telecommunications regulatory environment; pending and future litigation;
availability of future financing; and unanticipated changes in growth in PCS
customers, penetration rates, churn rates and the mix of products and services
offered in the Company's markets. Readers should evaluate any statements in
light of these important factors.
-5-
<PAGE>
AERIAL COMMUNICATIONS, INC. AND SUBSIDIARIES
--------------------------------------------
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
Unaudited
---------
Three Months Ended
March 31,
-----------------------
Cumulative
July 23, 1991 to
1997 1996 March 31, 1997
--------- -------- ---------------
(Dollars in thousands,
except per share amounts)
OPERATING EXPENSES
Development costs $ 5,087 $ 1,954 $ 24,157
General and administrative 16,527 3,792 51,203
---------- ---------- ----------
OPERATING (LOSS) (21,614) (5,746) (75,360)
OTHER INCOME, NET
Interest income - affiliate 95 185 4,583
Interest income - other 1,122 148 2,337
Investment losses (469) -- (773)
Gain on sale of PCS licenses -- -- 2,582
---------- ---------- ----------
748 333 8,729
(LOSS) BEFORE INTEREST AND
INCOME TAXES (20,866) (5,413) (66,631)
Interest expense - affiliate 634 1,305 3,750
Interest expense - other 402 -- 1,204
---------- ---------- ----------
(LOSS) BEFORE INCOME TAXES (21,902) (6,718) (71,585)
Income tax expense (benefit) 438 (47) (3,372)
---------- ---------- ----------
NET (LOSS) $ (22,340) $ (6,671) $ (68,213)
========== ========== ==========
WEIGHTED AVERAGE COMMON
AND SERIES A COMMON SHARES
(000s) 71,384 59,086 61,721
(LOSS) PER COMMON AND
SERIES A COMMON SHARE $ (0.31) $ (0.11) $ (1.11)
========== ========== ==========
The accompanying notes to consolidated
financial statements are an integral part
of these statements.
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<PAGE>
AERIAL COMMUNICATIONS, INC. AND SUBSIDIARIES
--------------------------------------------
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
Unaudited
---------
Three Months Ended
March 31,
------------------
Cumulative
July 23, 1991 to
1997 1996 March 31, 1997
--------- -------- -------------
(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net (Loss) $ (22,340) $ (6,671) $ (68,213)
Add (Deduct) adjustments to reconcile
net (loss) to net cash (used) provided
by operating activities:
Depreciation 1,136 189 3,117
Investment losses 469 -- 773
Gain on sale of PCS licenses -- -- (2,582)
Change in accounts payable - affiliates
and accrued interest - affiliate 1,095 (1,174) 1,584
Change in accounts payable - other (6,406) 2,455 3,486
Change in other accrued interest and
other liabilities 3,067 -- 8,788
Change in deferred tax liability - net 438 (248) 12,411
Change in income tax refund
receivable - affiliate -- (139) --
Change in inventory (4,042) -- (4,042)
Change in other assets and
deferred costs 373 (638) (1,413)
--------- --------- -----------
(26,210) (6,226) (46,091)
---------- --------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Change in note receivable - affiliate -- 28,836 28,836
Change in Revolving Credit
Agreement - TDS 82,567 1,781 342,925
Issuance of common stock 233 -- 195,758
---------- --------- ----------
82,800 30,617 567,519
---------- --------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in PCS licenses -- -- (305,818)
Additions to work in process (76,739) (8,743) (181,240)
Additions to property and equipment (7,868) (1,294) (28,441)
Proceeds from sale of PCS licenses -- -- 2,275
Change in temporary cash and other
investments (138) (872) (1,075)
---------- --------- ----------
(84,745) (10,909) (514,299)
--------- --------- ----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (28,155) 13,482 7,129
CASH AND CASH EQUIVALENTS-
Beginning of period 35,284 261 --
--------- --------- ----------
End of period $ 7,129 $ 13,743 $ 7,129
========= ======== ==========
The accompanying notes to consolidated financial statements are
an integral part of these statements.
-7-
<PAGE>
AERIAL COMMUNICATIONS, INC. AND SUBSIDIARIES
--------------------------------------------
(A Development Stage Enterprise)
CONSOLIDATED BALANCE SHEETS
---------------------------
(Unaudited)
March 31, 1997 December 31, 1996
-------------- -----------------
(Dollars in thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents:
General funds $ 7,129 $ 869
Affiliated cash equivalents -- 34,415
-------------- ------------
7,129 35,284
Temporary cash investments 271 315
Note receivable 1,925 1,925
Interest receivable - affiliate -- 243
Interest receivable - other 327 508
Inventory 4,042 --
Other 598 556
-------------- ------------
14,292 38,831
-------------- ------------
FIXED ASSETS AND LICENSES
Property and equipment - net of
accumulated depreciation of
$3,117 and $1,981, respectively 25,324 18,592
Work in process 347,361 233,831
Prepaid network infrastructure costs 40,769 70,300
Investment in PCS licenses 304,354 304,354
-------------- ------------
717,808 627,077
-------------- ------------
OTHER INVESTMENTS 6,484 6,771
DEFERRED COSTS 157 148
-------------- ------------
TOTAL ASSETS $ 738,741 $ 672,827
============== ============
The accompanying notes to consolidated financial statements
are an integral part of these statements
-8-
<PAGE>
AERIAL COMMUNICATIONS, INC. AND SUBSIDIARIES
--------------------------------------------
(A Development Stage Enterprise)
CONSOLIDATED BALANCE SHEETS
---------------------------
(Unaudited)
March 31, 1997 December 31, 1996
-------------- -----------------
(Dollars in thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - affiliates $ 827 $ 489
Accounts payable - other 98,233 93,360
Accrued interest - affiliate 757 --
Microwave relocation costs payable 13,027 17,046
Contribution payable 6,453 6,453
Other 3,055 1,978
------------- -----------------
122,352 119,326
------------- -----------------
REVOLVING CREDIT AGREEMENT - TDS 82,567 --
------------- -----------------
LONG-TERM DEBT 105,733 103,743
------------- -----------------
DEFERRED TAX LIABILITY-NET 12,411 11,973
------------- -----------------
COMMON SHAREHOLDERS' EQUITY
Common shares, par value $1 per share 31,392 31,359
Series A Common Shares,
par value $1 per share 40,000 40,000
Additional paid-in capital 412,499 412,299
Deficit accumulated during
the development stage (68,213) (45,873)
------------- -----------------
415,678 437,785
------------- -----------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 738,741 $ 672,827
============= =================
The accompanying notes to consolidated financial statements
are an integral part of these statements
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<PAGE>
AERIAL COMMUNICATIONS, INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in
the financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such
rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not
misleading. It is suggested that these consolidated financial
statements be read in conjunction with the consolidated financial
statements and the notes thereto included in the Company's annual
report on Form 10-K.
The accompanying unaudited consolidated financial statements contain
all adjustments (consisting of only normal recurring items) necessary
to present fairly the financial position as of March 31, 1997, and
December 31, 1996, and the results of operations and cash flows for the
three months ended March 31, 1997 and 1996. The results of operations
for the three months ended March 31, 1997 and 1996, are not necessarily
indicative of the results to be expected for the full year.
2. Reclassification. Certain amounts reported in the first quarter of 1996
have been reclassified to conform to the current quarter presentation.
3. Net (Loss) per Common and Series A Common Share for the three months
ended March 31, 1997 and 1996, was computed based on the weighted
average number of Common and Series A Common Shares outstanding during
the period adjusted, as applicable, to give retroactive effect to the
recapitalization in conjunction with the Company's 1996 initial public
offering, as if this transaction had occurred at January 1, 1996.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings Per Share" in March
1997 which will become effective in December 1997. SFAS No. 128 had no
pro forma effect on earnings per share for the three months ended March
31, 1997 and 1996.
4. Supplemental Cash Flow Information. In the first quarter of 1997, a net
$7.3 million in additions to work in process were financed through
accounts payable-other and microwave relocation costs payable. An
additional $29.5 million in additions to work in process were financed
through a decrease in prepaid network infrastructure costs.
During the first quarter of 1997 the Company incurred interest charges
totaling $3.3 million. The interest charges were comprised of $0.6
million relating to the Revolving Credit Agreement (See Note
5-Revolving Credit Agreement), $0.7 million for TDS guarantee fees on
its Long-term debt (Series A Zero Coupon Notes) and $2.0 million in
accrued interest on the Series A Zero Coupon Notes. Of these amounts,
the Company capitalized $2.3 million relating to its work in process
expenditures. The remaining $1.0 million was charged to expense.
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<PAGE>
During the first quarter of 1996, the Company incurred interest charges
of $1.5 million related to the Revolving Credit Agreement. Of this
amount, the Company capitalized $0.2 million relating to the
development of its PCS network. The remaining $1.3 million was charged
to expense. The Company also converted $1.4 million of accrued interest
to debt under the Revolving Credit Agreement.
5. Revolving Credit Agreement. The Company entered into a Revolving Credit
Agreement with TDS on August 1, 1995, under which all of the
outstanding obligations of the Company to TDS are incorporated.
Pursuant to the Revolving Credit Agreement, the Company may borrow up
to an aggregate of $250 million at an interest rate equal to 1.5%
above prime rate until the principal becomes due, and pay on demand an
interest rate equal to 3.5% above such prime rate on any overdue
principal or overdue installment of interest. The advances made under
the Revolving Credit Agreement are unsecured. Interest on the balance
due under the Revolving Credit Agreement is payable quarterly
and no principal is payable until maturity, which is December 31, 1998.
The terms of the Revolving Credit agreement also include, among others,
restrictions on incurring certain additional indebtedness and on paying
dividends. The total amount advanced to the Company under the Revolving
Credit Agreement during the first quarter of 1997 was $82.6
million.
6. Commitments. At March 31, 1997, the Company had orders totaling
approximately $64.6 million with Nokia Telecommunications, Inc. and
certain tower vendors for infrastructure equipment as part of the
Company's initial build-out of its PCS networks.
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<PAGE>
PART II. OTHER INFORMATION
--------------------------
Item 6. Exhibits and Reports on Form 8-K.
- ------------------------------------------
(a) Exhibits
Exhibit 11 - Computation of earnings per common share.
Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K filed during the quarter ended March 31, 1997.
No Reports on Form 8-K were filed during the quarter ended March
31, 1997.
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<PAGE>
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.
AERIAL COMMUNICATIONS, INC.
---------------------------
(Registrant)
Date May 9, 1997 /s/ DONALD W. WARKENTIN
--------------------- -------------------------------
Donald W. Warkentin
President
(Chief Executive Officer)
Date May 9, 1997 /s/ J. CLARKE SMITH
--------------------- -------------------------------
J. Clarke Smith
Vice President-Finance and Administration
(Chief Financial Officer)
Date May 9, 1997 /s/ B. SCOTT DAILEY
--------------------- -------------------------------
B. Scott Dailey
Controller
(Principal Accounting Officer)
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<PAGE>
Exhibit 11
Aerial Communications, Inc. and Subsidiaries
(A Development Stage Enterprise)
Computation of Earnings Per Common Share
(in thousands, except per share amounts)
Three Months Ended March 31, 1997 1996
- --------------------------------------------------------------------------------
Primary Earnings
Net (Loss) $ (22,340) $ (6,671)
=========== ===========
Primary Shares
Weighted average number of Common and Series A
Common Shares Outstanding* 71,384 59,086
=========== ===========
Primary Earnings per Common Share
Net (Loss) $ (0.31) $ (0.11)
========== ===========
* Weighted average number of Common and Series A Common Shares Outstanding was
calculated based on the number of shares outstanding during the period
adjusted to give retroactive effect to the recapitalization in conjunction with
the Company's initial public offering, as if this transaction had occurred at
January 1, 1996.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements of Aerial Communications, Inc. as of March 31,
1997, and for the three months then ended, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 7,129
<SECURITIES> 787
<RECEIVABLES> 1,925
<ALLOWANCES> 0
<INVENTORY> 4,042
<CURRENT-ASSETS> 14,292
<PP&E> 28,441
<DEPRECIATION> 3,117
<TOTAL-ASSETS> 738,741
<CURRENT-LIABILITIES> 122,352
<BONDS> 105,733
<COMMON> 71,392
0
0
<OTHER-SE> 344,286
<TOTAL-LIABILITY-AND-EQUITY> 738,741
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 20,866
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,036
<INCOME-PRETAX> (21,906)
<INCOME-TAX> 438
<INCOME-CONTINUING> (22,340)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (22,340)
<EPS-PRIMARY> (0.31)
<EPS-DILUTED> (0.31)
</TABLE>
