<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
Commission file number: 000-22939
NEXTLINK Communications, Inc.
NEXTLINK CAPITAL, INC.
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(Exact name of registrant as specified in its charter)
Delaware 91-1738221
Washington 91-1716062
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
500 108th Avenue NE, Suite 2200, Bellevue, WA 98004
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(Address of principal executive offices) (Zip Code)
(425) 519-8900
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(Registrant's telephone number, including area code)
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
--- ---
As of April 29, 1999, the number of shares of Class A and Class B common
stock of NEXTLINK Communications, Inc. issued and outstanding was 31,523,128
and 29,184,372 , respectively, and there were 1,000 shares of common stock of
NEXTLINK Capital, Inc., all of which 1,000 shares were held by NEXTLINK
Communications, Inc.
NEXTLINK Capital, Inc. meets the conditions set forth in General Instruction
H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with the
reduced disclosure format.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1(a). FINANCIAL STATEMENTS
NEXTLINK COMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(AMOUNTS AS OF MARCH 31, 1999 ARE UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
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<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................................... $ 388,696 $ 319,496
Marketable securities......................................... 855,710 1,158,566
Accounts receivable, net...................................... 46,823 36,115
Other current assets.......................................... 19,016 16,480
Pledged securities............................................ 21,821 21,500
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Total current assets...................................... 1,332,066 1,552,157
Property and equipment, net........................................ 701,546 594,408
Investment in equity securities.................................... 139,810 --
Other assets, net.................................................. 333,256 336,541
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Total assets.............................................. $ 2,506,678 $ 2,483,106
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LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable.............................................. $ 39,976 $ 61,175
Accrued expenses.............................................. 32,829 45,056
Accrued interest payable...................................... 61,105 34,670
Current portion of long-term obligations...................... 2,760 2,755
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Total current liabilities................................. 136,670 143,656
Long-term debt..................................................... 2,023,032 2,013,192
Other long-term liabilities........................................ 16,304 16,553
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Total liabilities......................................... 2,176,006 2,173,401
Commitments and contingencies
Redeemable preferred stock, par value $0.01 per share, 25,000,000
shares authorized; 14% Preferred, aggregate liquidation preference
$384,191, 7,508,588 and 7,254,675 shares issued and outstanding in
1999 and 1998, respectively; 6 1/2% Convertible Preferred, aggregate
liquidation preference $200,000; 4,000,000 shares issued and
outstanding in 1999 and 1998, respectively...................... 569,518 556,168
Shareholders' deficit:
Common Stock, par value $0.02 per share, stated at amounts paid
in; Class A, 110,334,000 shares authorized, 25,712,771 and
24,170,117 shares issued and outstanding in 1999 and 1998,
respectively; Class B, 44,133,600 shares authorized, 29,184,372
and 30,297,902 shares issued and outstanding in 1999 and 1998,
respectively................................................ 360,213 354,525
Deferred compensation......................................... (10,399) (11,370)
Accumulated other comprehensive income........................ 119,844 --
Accumulated deficit........................................... (708,504) (589,618)
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Total shareholders' deficit............................... (238,846) (246,463)
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Total liabilities and shareholders' deficit............... $ 2,506,678 $ 2,483,106
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</TABLE>
See accompanying notes to unaudited interim consolidated
financial statements.
<PAGE>
NEXTLINK COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------------------------
1999 1998
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<S> <C> <C>
Revenue............................................................ $ 48,586 $ 26,545
Costs and expenses:
Operating........................................................ 43,699 24,550
Selling, general and administrative.............................. 52,334 31,957
Deferred compensation............................................ 1,059 624
Depreciation..................................................... 19,037 6,494
Amortization..................................................... 3,816 3,689
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Total costs and expenses.................................... 119,945 67,314
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Loss from operations............................................... (71,359) (40,769)
Interest income.................................................... 19,763 11,735
Interest expense................................................... (50,690) (23,278)
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Net loss........................................................... $ (102,286) $ (52,312)
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Preferred stock dividends and accretion of preferred stock
redemption obligation, including issue costs..................... (16,600) (11,551)
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Net loss applicable to common shares............................... $ (118,886) $ (63,863)
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Net loss per share (basic and diluted)............................. $ (2.17) $ (1.19)
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Shares used in computation of net loss per share................... 54,757,953 53,482,222
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</TABLE>
See accompanying notes to unaudited interim consolidated
financial statements.
<PAGE>
NEXTLINK COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------------------------
1999 1998
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<S> <C> <C>
OPERATING ACTIVITIES:
Net loss............................................................ $ (102,286) $ (52,312)
Adjustments to reconcile net loss to net cash used in operating activities:
Deferred compensation expense.................................. 1,059 624
Equity in loss of affiliate.................................... 1,012 723
Depreciation and amortization.................................. 22,853 10,183
Accretion of interest on senior notes.......................... 9,840 --
Changes in assets and liabilities:
Accounts receivable............................................ (10,708) 591
Other assets................................................... (4,400) (7,940)
Accounts payable............................................... (32,546) (1,946)
Accrued expenses and other liabilities......................... (14,330) 5,316
Accrued interest payable....................................... 26,435 22,697
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Net cash used in operating activities............................... (103,071) (22,064)
INVESTING ACTIVITIES:
Purchase of property and equipment.................................. (112,051) (44,501)
Assets acquired in network lease agreement.......................... -- (92,000)
Contribution to NEXTBAND for purchase of spectrum licenses.......... -- (25,000)
Purchase of marketable securities................................... (1,132,957) (1,248,157)
Sale of marketable securities....................................... 1,415,847 968,757
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Net cash provided by (used in) investing activities................. 170,839 (440,901)
</TABLE>
-- Continued --
<PAGE>
NEXTLINK COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONT'D)
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------------------------
1999 1998
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<S> <C> <C>
FINANCING ACTIVITIES:
Net proceeds from issuance of redeemable preferred stock............ $ -- $ 193,900
Repayment of note payable and other obligations..................... (918) (9,008)
Proceeds from issuance of common stock upon exercise of stock options 5,600 235
Dividends paid on convertible preferred stock....................... (3,250) --
Proceeds from issuance of senior notes (net of discount)............ -- 334,328
Costs incurred in connection with financing......................... -- (7,537)
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Net cash provided by financing activities........................... 1,432 511,918
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Net increase in cash and cash equivalents........................... 69,200 48,953
Cash and cash equivalents, beginning of period...................... 319,496 389,074
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Cash and cash equivalents, end of period............................ $ 388,696 $ 438,027
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SUPPLEMENTAL CASH FLOW DISCLOSURES:
Noncash financing and investing activities:
Redeemable preferred stock dividends, paid in redeemable
preferred shares............................................. $ 3,250 $ 11,064
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Accrued redeemable preferred stock dividends, payable in
redeemable preferred shares, and accretion of preferred stock
redemption obligation and issue costs........................ $ 13,350 $ 488
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Accrued contribution to NEXTBAND for purchase of spectrum
licenses..................................................... $ -- $ 42,354
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Cash paid for interest............................................ $ 15,959 $ 587
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</TABLE>
See accompanying notes to unaudited interim consolidated
financial statements.
<PAGE>
NEXTLINK COMMUNICATIONS, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of NEXTLINK
Communications, Inc., a Delaware corporation, and its majority-owned
subsidiaries (collectively referred to as the Company). The Company, through
predecessor entities, was formed on September 16, 1994 and, through its
subsidiaries, provides high-quality telecommunications services in selected
markets in the United States. The Company is a majority-owned subsidiary of
Eagle River Investments, L.L.C. (Eagle River).
The Company's financial statements include 100% of the assets,
liabilities and results of operations of subsidiaries in which the Company
has a controlling interest of greater than 50%. The Company's investments in
unconsolidated companies in which the Company has a 20% interest or more are
accounted for on the equity method. Investments in entities in which the
Company has voting interests of not more than 20% are accounted for on the
cost method. All significant intercompany accounts and transactions have been
eliminated.
The interim financial statements are unaudited and have been prepared
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules
and regulations. These condensed consolidated financial statements should be
read in conjunction with the audited consolidated financial statements and
notes thereto included in the Company's 1998 Form 10-K as filed with the
Securities and Exchange Commission on March 29, 1999.
The financial information included herein reflects all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion
of management, necessary for a fair presentation of the results for interim
periods. The results of operations for the three month period ended March 31,
1999 are not necessarily indicative of the results to be expected for the
full year.
2. STRATEGIC AGREEMENT
In January 1999, the Company entered into a strategic agreement with
Covad Communications Group, Inc. (Covad). Pursuant to this agreement, the
Company will become a preferred provider to Covad for local transport and
colocation services for Covad's regional data centers. The Company has also
invested $20.0 million in Covad under this agreement, and Covad will become
the Company's preferred provider of DSL services where the Company elects not
to provide its own such services. Covad is a leading provider of high-speed
digital communications services using DSL technology.
For the three months ended March 31, 1999, the Company's unrealized gain
on its $20.0 million equity investment in Covad was $119.8 million. This
unrealized gain was reported as "other comprehensive income" in accordance
with SFAS No. 130, "Reporting Comprehensive Income".
3. RECLASSIFICATIONS
Certain reclassifications have been made to prior period amounts in
order to conform to the current presentation.
<PAGE>
4. REPORTABLE SEGMENTS
The Company's interactive voice response segment contributed the
following percentages to the Company's total:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
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1999 1998
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<S> <C> <C>
Revenue......................................................... 9.8% 17.7%
Net loss (excluding corporate overhead)......................... 2.4% 1.2%
</TABLE>
5. SUBSEQUENT EVENTS
ACQUISITIONS
In April 1999, NEXTLINK acquired WNP Communications, Inc. for $698.2
million. Of this amount, $157.7 million was paid in cash to the FCC for
license fees, including interest. The remainder was paid to stockholders of
WNP, and consisted of $190.1 million in cash and 5,715,831 shares of Class A
common stock. In this transaction, the Company acquired 39 A block LMDS
wireless licenses covering an area where approximately 98 million people live
or work and one B block LMDS wireless license covering an area where
approximately 16 million people live or work. The Company plans to use the
fixed wireless licenses acquired in the WNP transaction to extend the reach
of its fiber networks and to connect additional customers directly to its
fiber networks.
In March 1999, the Company entered into a definitive agreement with
Nextel Communications, Inc. to acquire Nextel's 50% interest in NEXTBAND for
approximately $137.7 million. NEXTBAND owns 13 A block LMDS licenses and 29 B
block licenses. This transaction has not yet closed.
FINANCINGS
On May 5, 1999, NEXTLINK and certain NEXTLINK stockholders filed a
registration statement offering 8,600,000 shares of Class A common stock to
the public. Of the total shares to be offered, the Company is offering
4,982,050 newly issued shares of Class A common stock, and certain selling
stockholders are offering 3,617,950 shares of Class A common stock already
owned.
On May 5, 1999, NEXTLINK also filed a registration statement
concurrently offering approximately $750.0 million in Senior and Senior
Discount Notes, due 2009. The proposed sales of the Company's Class A common
stock and Senior and Senior Discount Notes due 2009 are not contingent on one
another.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1(b). FINANCIAL STATEMENTS
NEXTLINK CAPITAL, INC.
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
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<S> <C> <C>
ASSETS
Cash in bank........................................................... $ 100 $ 100
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SHAREHOLDER'S EQUITY
Common stock, no par value,
1,000 shares authorized, issued and outstanding................... $ 100 $ 100
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</TABLE>
NOTES TO BALANCE SHEETS
1. DESCRIPTION
NEXTLINK Capital, Inc. (NEXTLINK Capital) is a Washington corporation
and a wholly owned subsidiary of NEXTLINK Communications, Inc. (NEXTLINK).
NEXTLINK Capital was formed for the sole purpose of obtaining financing from
external sources and is a joint obligor on the 12 1/2% Senior Notes due April
15, 2006 of NEXTLINK. NEXTLINK Capital was initially funded with a $100
contribution from NEXTLINK and has had no operations to date.
2. BASIS OF PRESENTATION
The interim financial statements have been prepared without an audit,
pursuant to the rules and regulations of the Securities and Exchange
Commission. These consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and notes
thereto included in the Company's 1998 Form 10-K as filed with the Securities
and Exchange Commission on March 29, 1999.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Since 1996, we have provided high-quality telecommunications services to
the rapidly growing business market. To serve our customers' broad and
expanding telecommunications needs, we have assembled a unique collection of
high-bandwidth, local and national network assets. We intend to integrate
these assets into a seamless network that will support the most advanced
communications technologies available, and make us the provider best
positioned to deliver the broad variety of data and voice applications our
customers require.
To accomplish this:
- we have built 23 high bandwidth, or broadband, local networks
in 14 states, generally located in the central business
districts of the cities we serve, and we are continuing to
build additional networks;
- we have become the nation's largest holder of broadband fixed
wireless spectrum with FCC licenses covering 95% of the population
of the 30 largest U.S. cities, which we will use to extend the
reach of our networks to additional customers; and
- we have acquired exclusive interests in a national broadband
network now being built to traverse over 16,000 miles and to
connect more than 50 cities, including all of the largest
cities that our current and planned local networks serve.
We currently operate local networks in 38 cities. We serve larger
cities, such as New York, Los Angeles, Chicago, Atlanta, the San Francisco
Bay Area, Denver, Dallas and Miami, medium-sized markets, such as Salt Lake
City and Nashville, and clusters of smaller markets in Orange County,
California and central Pennsylvania. We are currently building additional
local networks, and plan to have operational networks in most of the 30
largest U.S. cities by the end of 2000. We launched service in San Diego
earlier this year, and the next phase of our expansion plan includes the
launch of service in Washington D.C. and Seattle in the second quarter of
1999, and in Newark, Detroit, Boston, Phoenix and Houston by the end of 1999.
Our networks typically encircle a city's central business district and
connect to our central offices. We build our own networks wherever possible,
which enables us to deliver higher quality services and will enable us to
deliver new services, which we expect will increase our operating margins.
Our goal is to provide our customers with complete voice and data
network solutions for all of their communications needs, using our own fiber,
switches and other facilities to the greatest extent possible. To reduce our
reliance on the physical connection for the short distance --referred to as
the "first mile"-- between our customers and our fiber optic networks, which
is currently often leased from the dominant carrier, we intend to increase
the number of customers connected directly to our networks. In some cases, we
will construct a new fiber optic extension from our network to the customer's
premises. In other cases, we will deploy a high-bandwidth wireless connection
between an antenna on the roof of the customer's premises and an antenna
attached to our fiber rings. These wireless connections offer high-quality
broadband capacity and often cost less than fiber to install. We expect to
deploy wireless first mile extensions in 25 markets by the end of 2000.
Our networks support a variety of communications technologies, which
permits us to offer our customers a set of technology options to meet our
customers' changing needs, and introduce new technologies as they become
available. For example, we have begun to add new technologies to our networks
including Internet Protocol, or IP, routers and switches, and Asynchronous
Transfer Mode, or ATM, switches. ATM switches will enable us to meet the
demands of large, high-volume customers, while IP routers and switches will
enable us to carry Internet traffic more efficiently and to provide more
services. However, we intend to remain flexible in our technology choices, to
serve our customers' present needs and to take advantage of the future
opportunities that technological advances may bring.
<PAGE>
The table below provides selected key financial and operating data
(dollars are in thousands):
<TABLE>
<CAPTION>
AS OF AND
FOR THE THREE MONTHS ENDED
MARCH 31,
1999 1998
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<S> <C> <C>
FINANCIAL DATA:
Gross property and equipment.............................. $ 801,344 $ 341,664
EBITDA (1) ............................................... $ (47,447) $ (29,962)
OPERATING DATA (2):
Route miles (3)........................................... 2,897 2,036
Fiber miles (4)........................................... 223,463 141,788
On-net buildings connected (5)............................ 854 571
Off-net buildings connected (6)........................... 13,950 5,947
Switches installed........................................ 22 14
Access lines in service (7)............................... 224,713 72,834
Employees................................................. 2,539 1,499
</TABLE>
(1) EBITDA represents net loss before interest expense, interest income,
depreciation, amortization and deferred compensation expense. EBITDA is
commonly used to analyze companies on the basis of operating
performance, leverage and liquidity. While EBITDA should not be
construed as a substitute for operating income or a better measure of
liquidity than cash flow from operating activities, which are
determined in accordance with generally accepted accounting principles,
it is included herein to provide additional information with respect to
our ability to meet future debt service, capital expenditure and
working capital requirements.
(2) The operating data includes 100% of the statistics of the Las Vegas
network, which we manage and in which we have a 40% membership
interest.
(3) Route miles refers to the number of miles of the telecommunications
path in which our owned or leased fiber optic cables are installed.
(4) Fiber miles refers to the number of route miles installed along a
telecommunications path, multiplied by our estimate of the number of
fibers along that path.
(5) Represents buildings physically connected to our networks, excluding
those connected by unbundled incumbent local exchange carrier (ILEC)
facilities.
(6) Represents buildings connected to our networks through leased or
unbundled ILEC facilities.
(7) Represents the number of access lines in service, including those
lines that are provided through resale of services. We serviced
2,894 resold access lines as of March 31, 1999. We define an access
line as a telephone connection between a customer purchasing local
telephone services and us. This connection does not include the
concept of access line equivalents (ALEs), and is a one-for-one
relationship with no multipliers used for trunk ratios, except for
those trunks over which primary rate interface (PRI) service is
provided, which are counted as 23 access lines.
<PAGE>
RESULTS OF OPERATIONS
Revenue increased 83% to $48.6 million during the first quarter of 1999,
from $26.5 million in the same period in 1998. Revenue reported consisted of
the following components (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1999 1998
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<S> <C> <C>
Bundled local and long distance, and dedicated services....... $ 34,869 $ 10,988
Shared tenant services........................................ 3,013 3,287
Long distance telephone services.............................. 5,939 7,022
Enhanced services............................................. 4,765 5,248
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Total revenue................................................. $ 48,586 $ 26,545
========== ===========
</TABLE>
The increase in total revenue was driven by 217% growth in revenues from
bundled local and long distance services and dedicated services, which
resulted from an increase in customer access lines installed. Our quarterly
installation rate of customer access lines increased from 22,703 in the first
quarter of 1998 to 50,531 during the first quarter of 1999. As of March 31,
1999, we had 224,713 access lines in service, compared to 72,834 as of March
31, 1998. Enhanced revenue consists primarily of interactive voice response
(IVR) services.
We began offering switched local and long distance services in our first
seven markets in July 1996, 18 markets during 1997 and 12 additional markets
during 1998. Most recently, we launched services in San Diego during the
first quarter of 1999. In addition, since January 1995, NEXTLINK has offered
private leased line, or dedicated services.
Operating expenses consist of costs directly related to providing
facilities-based network and enhanced communications services and also
include salaries and benefits and related costs of operations and engineering
personnel. Operating expenses increased 78% during the first quarter of 1999
to $43.7 million, an increase of $19.1 million over the same period in 1998.
These increases primarily resulted from:
- increased network costs related to provisioning higher volumes of
local, long distance and enhanced services;
- an increase in the number of our employees; and
- an increase in other related costs primarily to expand our local
and long distance service businesses in our existing and planned
markets.
Selling, general and administrative expenses include salaries and
related personnel costs, facilities expenses, sales and marketing,
information systems costs, consulting and legal fees and equity in loss of
affiliates. Selling, general and administrative expenses increased 64% for
the three months ended March 31, 1999 as compared to the corresponding period
in 1998. The increase was primarily due to an increase in the number of our
employees, as well as other costs associated with the expansion of our local
and long distance service businesses in our existing and planned markets.
We recorded deferred compensation expense in connection with options
granted under our Equity Option Plan until April 1997, and our Stock Option
Plan, which replaced the Equity Option Plan, subsequent to April 1997. The
stock options granted under the Equity Option Plan were considered
compensatory and we accounted for them on a basis similar to that used for
stock appreciation rights. All options outstanding under the Equity Option
Plan were regranted under the Stock Option Plan with terms and conditions
substantially the same as under the Equity Option Plan. As a result, we
continue to record deferred compensation expense for the compensatory stock
options issued
<PAGE>
under both plans over their vesting periods, based on the excess of the fair
value at the date of grant over their exercise prices.
Depreciation expense increased primarily due to placement in service of
additional telecommunications network assets, including switches, fiber optic
cable, network electronics and related equipment. We expect depreciation
expense to continue to increase as we expand our networks and install
additional equipment associated with voice and data technologies.
Interest expense increased 118% in the first quarter of 1999 over the
prior year due to an increase in our average outstanding indebtedness over
the respective periods. For more information, see "Liquidity and Capital
Resources." Pursuant to Statement of Financial Accounting Standards No. 34,
we capitalize a portion of our interest costs as part of the construction
cost of our communications networks. Capitalized interest during the first
quarter of 1999 totaled $2.8 million. Interest income results from investment
of excess cash and certain securities that have been pledged as collateral
for interest payments on the 12 1/2% senior notes. The increase in interest
income during the first quarter of 1999 over 1998 corresponded to the
increase in our average outstanding cash balances.
LIQUIDITY AND CAPITAL RESOURCES
Our business is capital intensive and, as such, has required and will
continue to require substantial capital investment. We build high capacity
networks with broad market coverage, a strategy that initially increases our
level of capital expenditures and operating losses and requires us to make a
substantial portion of our capital investments before we realize any revenue
from them. These capital expenditures, together with the associated early
operating expenses, will continue to result in negative cash flow unless and
until we are able to establish an adequate customer base. We believe,
however, that over the long term this strategy will enhance our financial
performance by increasing the traffic flow over our networks.
During the first three months of 1999, we used $103.1 million in cash
for operating activities, compared to $22.1 million for the same period in
the prior year. The increase was primarily due to a substantial increase in
our activities associated with the continued development and expansion of
local and long distance service operations. In addition, during the first
three months of 1999, we invested $112.1 million in property and equipment.
During the same period in 1998, we invested $44.5 million in property and
equipment, and $117.0 million in acquisitions of telecommunications assets
and equity investments in telecommunications businesses.
Our current 1999 and 2000 plans call for approximately $2,000 million in
total capital expenditures (including the commitments of the INTERNEXT joint
venture described below), of which $112.1 million was spent in the first
quarter of 1999. Our actual capital spending may be higher or lower than
these amounts. We expect to make substantial capital expenditures relating to
our existing and planned network development and operations. These
expenditures include:
- the purchase and installation of switches, routers, servers and
other data-related equipment and related electronics in existing
networks and in networks to be constructed or acquired in new or
adjacent markets;
- the purchase and installation of fiber optic cable and electronics
to expand existing networks and develop new networks, including the
connection of new buildings;
- the development of our comprehensive information technology
platform;
- the purchase and installation of equipment associated with the
deployment of LMDS using our LMDS spectrum;
- funding of the INTERNEXT venture described below, and related
expenses we expect to incur in building our national network;
<PAGE>
- the purchase and installation of equipment associated with
deployment of Digital Subscriber Line, or DSL Services; and
- the funding of operating losses and working capital.
Our strategic plan calls also for expansion into additional market
areas. This expansion will require significant additional capital for:
- potential acquisitions of businesses or assets;
- design, development and construction of new networks; and
- the funding of operating losses and working capital during the
start-up phase of each market.
As of March 31, 1999, we had unrestricted cash and investments of
$1,244.4 million.
On May 5, 1999, NEXTLINK and certain NEXTLINK stockholders filed a
registration statement offering 8,600,000 shares of Class A common stock to
the public. Of the total shares to be offered, the Company is offering
4,982,050 newly issued shares of Class A common stock, and certain selling
stockholders are offering 3,617,950 shares of Class A common stock already
owned.
On May 5, 1999, NEXTLINK also filed a registration statement
concurrently offering approximately $750.0 million in Senior and Senior
Discount Notes, due 2009. The proposed sales of the Company's Class A common
stock and Senior and Senior Discount Notes due 2009 are not contingent on one
another.
In April 1999, we acquired WNP Communications, Inc. for $698.2 million.
Of this amount, $157.7 million was paid in cash to the FCC for license fees,
including interest. The remainder was paid to stockholders of WNP, and
consisted of $190.1 million in cash and 5,715,831 shares of Class A common
stock. In this transaction, we acquired 39 A block local multipoint
distribution services, or LMDS, wireless licenses covering an area where
approximately 98 million people live or work and one B block LMDS wireless
license covering an area where approximately 16 million people live or work.
We plan to use the fixed wireless licenses acquired in the WNP transaction to
extend the reach of our fiber networks and to connect additional customers
directly to our fiber networks. Deploying the technologies associated with our
LMDS strategy will require additional capital expenditures.
In January 1998, we formed NEXTBAND, a joint venture that is owned 50%
each by us and Nextel. NEXTBAND owns LMDS licenses in 42 markets throughout
the U.S. In March 1999, we entered into a definitive agreement to acquire
Nextel's 50% interest in NEXTBAND for approximately $137.7 million,
consisting of at least $68.9 million in cash, with the remainder payable at
our election in cash or shares of Class A common stock. The purchase price
was determined based on a formula derived from the purchase price paid in the
WNP merger. The minimum cash consideration will increase by an amount equal
to 25% of the proceeds NEXTLINK receives in a proposed offering of shares of
its Class A common stock, up to the amount of the total purchase price.
In January 1999, we entered into a strategic agreement with Covad
Communications Group, Inc., a leading provider of high-speed digital
communications services using DSL technology. Pursuant to this agreement, we
will become a preferred provider to Covad for local transport and colocation
services for Covad's regional data centers. We also invested $20.0 million in
Covad under this agreement, and Covad will become a preferred provider to us
of DSL services, where we elect not to provide such services ourselves.
In July 1998, we formed INTERNEXT L.L.C., which is beneficially owned
50% each by us and Eagle River Investments L.L.C., and is managed by us.
INTERNEXT entered into an agreement with Level 3 Communications, Inc. Level 3
is constructing a national fiber optic network that is expected to cover more
than 16,000 route miles with six or more conduits and connect 50 cities in
the United States and Canada. Pursuant to this agreement,
<PAGE>
INTERNEXT will receive an exclusive interest in 24 fibers in a shared, filled
conduit, one entire empty conduit and the right to 25% of the fibers pulled
through the sixth and any additional conduits in the network. INTERNEXT will
pay $700.0 million in exchange for these rights, the majority of which will
be payable as segments of the network are completed and accepted by
INTERNEXT, which is expected to occur substantially during 2000 and 2001.
NEXTLINK has guaranteed 50% of the financial obligations of INTERNEXT under
this agreement and, together with Eagle River, has also guaranteed the
performance of certain other obligations of INTERNEXT.
In addition, our operating flexibility with respect to certain business
matters is, and will continue to be, limited by covenants associated with our
outstanding senior notes. Among other things, these covenants limit the
ability of us and our subsidiaries to incur additional indebtedness, create
liens upon assets, apply the proceeds from the disposal of assets, make
dividend payments and other distributions on capital stock and redeem capital
stock. A covenant in the indenture for the 10 3/4% senior notes, requires us
to use the net proceeds from the sale of those notes to fund not more than
80% of the cost of expenditures relating to the construction, improvement and
acquisition of new and existing networks and services and direct or indirect
investments in certain joint ventures, including NEXTBAND and INTERNEXT, and
to fund similar expenditures. We expect to fund the remainder of these costs
with the proceeds of equity offerings.
In addition, the terms of our 14% Senior Exchangeable Redeemable
Preferred Stock contain covenants that may limit our flexibility in incurring
additional indebtedness and issuing additional preferred shares. We were in
compliance with all covenants associated with our notes and the 14% preferred
stock as of March 31, 1999.
IMPACT OF YEAR 2000
Certain of NEXTLINK's older computer systems and applications were
written to define a given year with abbreviated dates using the last two
digits in a year rather than the entire four digits. As a result, when
computer systems attempt to process dates both before and after January 1,
2000, two digit year fields may create processing ambiguities that can cause
errors and system failures. For example, systems and applications may have
time-sensitive software that recognize an abbreviated year "00" as the year
1900 rather than the year 2000. These errors or failures may have limited
effects, or the effects may be widespread, depending on the computer chip,
system, or software, and its location and function.
STATE OF READINESS
NEXTLINK is currently assessing the impact of the Year 2000, and has
adopted a formal Year 2000 plan, or the Plan. The purpose of the Plan will be
to develop and perform reasonable steps intended to prevent NEXTLINK's
critical operational functions from being impaired due to the Year 2000
problem. The first phase of NEXTLINK's Year 2000 assessment, which has been
completed, includes:
- taking an inventory of priority systems and equipment to
determine the extent of remediation required for Year 2000
readiness (generally defined as the ability of information
systems to accurately process data from, into and between the
twentieth and twenty-first centuries, including leap year
calculations),
- developing a strategy to manage vendors' and other outside
entities' progress toward Year 2000 compliance,
- designing a company-wide Year 2000 communications plan, and
- creating a risk assessment and impact analysis from which the
Plan is developed.
NEXTLINK has engaged outside consultants to aid in formulating and
implementing the Plan.
NEXTLINK's assessments to date have indicated that its major operational
support systems, including its billing, order management, network management,
and financial systems are Year 2000 ready. In addition,
<PAGE>
NEXTLINK has received positive confirmation from its vendor that NEXTLINK's
Nortel DMS 500 switches are also Year 2000 compliant.
NEXTLINK does not have control of outside entities or their systems.
However, NEXTLINK's Plan will include ongoing identification of and contact
with such outside entities whose systems may have a substantial effect on
NEXTLINK's ability to continue to conduct the critical aspects of its
operations without disruption from Year 2000 problems. In the event such
outside systems are identified, NEXTLINK will work with the outside entities
in a reasonable attempt to inventory, assess, analyze, and develop
contingency plans for NEXTLINK's connections to these outside entities and
their systems and to determine the extent to which they are, or can be made
to be, Year 2000 compliant.
COSTS TO ADDRESS YEAR 2000 ISSUES
NEXTLINK has not incurred material historical costs for Year 2000
awareness, inventory, assessment, analysis, conversion, or contingency
planning. Further, NEXTLINK anticipates that its future costs for these
purposes will not be material.
Year 2000 costs are difficult to estimate accurately because of
unanticipated vendor delays, technical difficulties, and similar events.
Although management believes that its estimates are reasonable, NEXTLINK
cannot assure you that the actual costs of implementing the Plan will not
differ materially from the estimated costs or that NEXTLINK will not be
materially adversely affected by Year 2000 issues. Furthermore, the estimated
costs of implementing the Plan do not consider the costs, if any, that might
be incurred as a result of Year 2000-related failures that occur despite
NEXTLINK's implementation of the Plan.
YEAR 2000 RISK FACTORS
Between now and the year 2000 there will be increased competition for
people with the technical and managerial skills necessary to deal with the
Year 2000 problem. NEXTLINK believes it employs an adequate number of
personnel skilled in dealing with the Year 2000 problem and has retained
outside consultants who bring additional skilled people to deal with the Year
2000 problem as it affects NEXTLINK. Nevertheless, NEXTLINK could face
shortages of skilled personnel or other resources, such as Year 2000
compliant computer chips. These shortages might delay or otherwise impair
NEXTLINK's ability to assure that its critical systems are Year 2000
compliant. Outside entities could face similar problems that could materially
affect NEXTLINK. NEXTLINK believes that the possible impact of the shortage
of skilled people and resources is not, and will not be, unique to NEXTLINK.
NEXTLINK believes that its critical systems will be Year 2000 ready
before January 1, 2000. However, there is no assurance that the Plan will
succeed in accomplishing its purposes and unforeseen circumstances may arise
during implementation of the Plan that would materially and adversely affect
NEXTLINK.
NEXTLINK is taking reasonable steps to identify, assess, and, where
appropriate, replace devices that contain embedded chips. Despite these
reasonable efforts, NEXTLINK may not be able to find and remediate all
embedded chips in all of NEXTLINK's systems. Further, outside entities on
which NEXTLINK depends also may not be able to find and remediate all
embedded chips in their systems. Some chips that are not Year 2000 compliant
may create system disruptions or failures, which may, in turn, cause
disruptions or failures in other systems. These cascading problems could
impair NEXTLINK's ability to serve its customers and otherwise fulfill
contractual and legal obligations. NEXTLINK believes that the possible
adverse impact of the embedded chip problem is not, and will not be, unique
to NEXTLINK.
NEXTLINK cannot ensure that suppliers upon which it depends for
essential supplies and services will convert and test their critical systems
and processes in a timely manner. Failure or delay by all or some of these
entities, including federal, state, or local governments, to make their
systems and processes Year 2000 compliant could create substantial
disruptions having a material adverse effect on NEXTLINK's operations.
<PAGE>
In a recent Securities and Exchange Commission release regarding Year
2000 disclosure, the Securities and Exchange Commission stated that public
companies must disclose the most reasonably likely worst case Year 2000
scenario. Although it is not possible to assess the likelihood of any of the
following events, each must be included in a consideration of worst case
scenarios: widespread disruption of the services provided by common
communications carriers; similar disruption to the means and modes of
transportation for NEXTLINK and its employees, contractors, suppliers, and
customers; significant disruption to NEXTLINK's ability to gain access to,
and remain working in, office buildings and other facilities; the failure of
substantial numbers of NEXTLINK's critical computer hardware and software
systems, including both internal business systems and systems controlling
operational facilities such as electrical generation, transmission, and
distribution systems; and the failure of outside entities' systems, including
systems related to banking and finance. Among other things, NEXTLINK could
face substantial claims by customers or loss of revenue due to service
interruptions, inability to fulfill contractual obligations or to bill
customers accurately and on a timely basis, and increased expenses associated
with litigation, stabilization of operations following critical system
failures, and the execution of contingency plans. NEXTLINK could also
experience an inability by customers and others to pay, on a timely basis or
at all, obligations owed to NEXTLINK. Under these circumstances, the adverse
effects on NEXTLINK would be material, although not quantifiable at this
time. Further, the cumulative effect of these failures could have a
substantial adverse effect on the economy, domestically and internationally.
The adverse effect on NEXTLINK from a domestic or global recession or
depression also could be material, although not quantifiable at this time.
NEXTLINK will continue to monitor business conditions to assess and quantify
material adverse effects, if any, that may result from the Year 2000 problem.
CONTINGENCY PLANS
As part of the Plan, NEXTLINK is developing contingency plans that deal
with internal aspects of the Year 2000 problem. Despite its good faith and
reasonable efforts, NEXTLINK may not have satisfactorily addressed the Year
2000 problem with respect to its critical internal systems. NEXTLINK plans to
address all Year 2000 problems as it does with any problem that occurs with
its networks and systems. At this point in NEXTLINK's Year 2000 program,
based on information gathered to date, and because NEXTLINK's information
technology and fiber optic switched telephone networks systems and
infrastructure has been deployed only since 1995 and corporate policy
requires all hardware and software vendors to warrant that their systems are
Year 2000 compliant, we do not believe that any date-related problems that do
occur on or after January 1, 2000 will be of the type that cannot be
addressed using practices for addressing any network or system problem.
INFORMATION REGARDING FORWARD LOOKING STATEMENTS
Some statements and information contained in this prospectus are not
historical facts, but are "forward-looking statements", as such term is
defined in the Private Securities Litigation Reform Act of 1995. We wish to
caution you that these forward-looking statements are only predictions, and
actual events or results may differ materially as a result of risks that we
face, including those set forth under "Outlook: Issues and Uncertainties" in
our Form 10-K filed with the SEC on March 29, 1999. These forward-looking
statements can be identified by the use of forward-looking terminology such
as "believes", "expects", "plans", "may", "will", "would," "could," "should",
or "anticipates" or the negative of these words or other variations of these
words or other comparable words, or by discussions of strategy that involve
risks and uncertainties. Such forward-looking statements include, but are not
limited to:
- the number of markets we expect to serve, the expected number
of addressable business lines in markets in which we currently
provide service and the markets in which we expect to provide
service;
- our expectations regarding our ability to attract and retain
customers;
- our beliefs regarding certain competitive advantages, including
that of our national end-to-end network, the introduction of IP
and ATM technologies, our management structure and provisioning
processes and systems;
<PAGE>
- our expectation regarding the size of our sales and customer
care forces;
- our belief regarding traffic flow over our networks and the
effects and benefits of high capacity networks with broad
coverage based on a uniform technology platform;
- our plans to install additional switches, data networking
capabilities such as IP and ATM facilities and high speed
technologies such as DSL;
- our plans to implement wireless first mile connections;
- our ability to maintain technological flexibility;
- our expectation regarding the development of a national network
and the implementation of a national network end-to-end
strategy;
- our anticipated capital expenditures, funding thereof and
levels of indebtedness and our expectations regarding
additional indebtedness; and
- statements with respect to our Year 2000 project.
NEW ACCOUNTING STANDARD
In April 1998, the AICPA released Statement of Position 98-5, "Reporting
on the Costs of Start-Up Activities" (SOP 98-5). The new standard requires
that all entities expense costs of start-up activities as those costs are
incurred. SOP 98-5 defines "start-up costs" as those costs directly related
to pre-operating, pre-opening, and organization activities. This standard
must be adopted in fiscal years beginning after December 15, 1998. The
adoption of SOP 98-5 is not expected to have a material impact on the
Company's financial position.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
NEXTLINK currently has instruments sensitive to market risk relating to
exposure to changing interest rates and market prices. There have been no
material changes in market risk since December 31, 1998.
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company is not currently a party to any legal proceedings,
other than regulatory and other proceedings that are in the
normal course of its business.
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
NEXTLINK filed a registration statement on Form S-1 (File No.
333-32001) which became effective on September 26, 1997, whereby
15,200,000 shares of Class A Common Stock, $0.02 par value per
share, were sold in an initial public offering at a price of $17
per share. Of the 15,200,000 shares of Class A Common Stock
sold, 12,000,000 shares were sold by NEXTLINK and 3,200,000
shares were sold by a selling shareholder. NEXTLINK did not
receive any of the proceeds from the sale of shares by the
selling shareholder. In addition, the underwriters of the IPO,
led by Salomon Brothers Inc., exercised an option to purchase
2,280,000 additional shares of Class A Common Stock at the same
price per share. Net proceeds to NEXTLINK from the IPO totaled
approximately $226.8 million, after deducting underwriting
discounts, advisory fees and expenses aggregating approximately
$16.0 million. NEXTLINK intends to use substantially all of the
net proceeds from the IPO for expenditures relating to the
expansion of existing networks and services, the development and
acquisition of new networks and services and the funding of
operating losses and working capital. None of the net proceeds
from the IPO had been used by NEXTLINK as of March 31, 1999.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Our Board of Directors has approved amendments to the NEXTLINK
Communications, Inc. Stock Option Plan to authorize an
additional 8,145,304 shares of our Class A common stock to
be issued under the plan. These amendments also have been
approved by one of our stockholders, Eagle River Investments,
L.L.C. Eagle River holds 18,871,787 shares of our Class B common
stock, which represents shares with a majority of the total number
of votes attributable to all shares of outstanding common stock.
Our common stock is the only outstanding class of capital stock of
NEXTLINK entitled to vote on this matter. Eagle River approved the
Board's action by written consents in lieu of stockholder meetings
dated February 22, 1999 and May 3, 1999, pursuant to Section
228(a) of the Delaware General Corporation Law. Because we are a
corporation organized under the laws of the State of Delaware,
our stockholders may take action by written consent without a
meeting. The Board has not solicitied any proxies or consents
from any other stockholders in connection with this action.
The increase in number of authorized shares available under the
Stock Option Plan will become effective 20 days after the date
on which we mail an information statement to stockholders of
NEXTLINK in accordance with rules of the Securities and
Exchange Commission. We expect to mail an information statement
in the near future.
Item 5. OTHER INFORMATION
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<S> <C>
3.1 Certificate of Incorporation of NEXTLINK
Communications, Inc. (1)
3.2 By-laws of NEXTLINK Communications, Inc. (1)
3.3 Articles of Incorporation of NEXTLINK Capital, Inc. (2)
<PAGE>
3.4 By-laws of NEXTLINK Capital, Inc. (2)
4.1 Form of Exchange Note Indenture, by and among NEXTLINK Communications, Inc.
and United States Trust Company of New York, as Trustee, relating to the
Exchange Notes, including form of Exchange Notes. (3)
4.2 Certificate of Designations of the Powers, Preferences and Relative,
Participating, Optional and Other Special Rights of 14% Senior Exchangeable
Redeemable Preferred Shares and Qualifications, Limitations and
Restrictions Thereof. (1)
4.3 Form of stock certificate of 14% Senior Exchangeable Redeemable Preferred
Shares. (3)
4.4 Indenture, dated as of April 25, 1996, by and among NEXTLINK
Communications, Inc., NEXTLINK Capital, Inc. and United States Trust
Company of New York, as Trustee, relating to 12 1/2% Senior Notes due April
15, 2006, including form of global note. (2)
4.5 First Supplemental Indenture, dated as of January 31, 1997, by and among
NEXTLINK Communications, Inc., NEXTLINK Communications, L.L.C., NEXTLINK
Capital and United States Trust Company of New York, as Trustee. (3)
4.6 Indenture dated September 25, 1997, between United States Trust Company, as
Trustee and NEXTLINK Communications, Inc., relating to the 9 5/8% Senior
Notes due 2007. (3)
4.7 Indenture, dated March 3, 1998, between United States Trust Company, as
Trustee and NEXTLINK Communications, Inc., relating to the 9% Senior Notes
due 2008. (5)
4.8 Certificate of Designations of Powers, Preferences and Relative,
Participating, Optional and Other Special Rights of 6 1/2% Cumulative
Convertible Preferred Stock and Qualifications, Limitations and
Restrictions Thereof. (1)
4.9 Form of Stock Certificate of Class A common stock. (9)
4.10 Indenture dated April 1, 1998 between United Trust Company, as Trustee and
NEXTLINK Communications, Inc. relating to the 9.45% Senior Discount Notes
due 2008. (5)
4.11 Second Supplemental Indenture, dated June 3, 1998, amending Indenture dated
April 25, 1996, by and among NEXTLINK Communications, Inc., NEXTLINK
Capital, Inc. and United States Trust Company of New York, as Trustee. (1)
4.12 First Supplemental Indenture, dated June 3, 19989, amending Indenture dated
September 25. 1997, by and between NEXTLINK Communications, Inc. and United
States Trust Company of New York, as Trustee. (1)
4.13 First Supplemental Indenture, dated June 3, 1998, amending Indenture dated
March 3, 1998, by and between NEXTLINK Communications, Inc. and United
States Trust Company of New York as Trustee. (1)
4.14 First Supplemental Indenture, dated June 3, 1998, amending Indenture dated
April 1, 1998, by and between NEXTLINK Communications, Inc. and United
States Trust Company of New York, as Trustee. (1)
10.1 Stock Option Plan of NEXTLINK Communications, Inc., as amended (1)
10.2 Employee Stock Purchase Plan of NEXTLINK Communications, Inc. (1)
<PAGE>
10.3 Registration Rights Agreement dated as of January 15, 1997, between the
predecessor of NEXTLINK Communications, Inc. and the signatories listed
therein. (3)
10.4 Fiber Lease and Innerduct Use Agreement, dated as of February 23, 1998, by
and between NEXTLINK Communications, Inc. and Metromedia Fiber Netweork.
(5)
10.5 Amendment No. 1 to Fiber Lease and Innerduct Use Agreement, dated as of
March 4, 1998, by and between NEXTLINK Communications, Inc. and Metromedia
Fiber Network, Inc. (5)
10.6 Agreement and Plan of Merger, dated as of January 14, 1999, among NEXTLINK,
WNP Communications, Inc. and PCO Acquisition Corp. (7)
10.7 Registration Rights Agreement dated January 14, 1999 between the Company
and the Holders referred to therein. Cost Sharing and IRU Agreement, dated
July 18, 1998, between Level 3 Communications, LLC and INTERNEXT LLC. (7)
10.8 Consent and Indemnity Agreement of Stockholders, dated January 14, 1999, by
and among NEXTLINK Communications, Inc., WNP Communications, Inc. and
certain holders of non-voting and voting common stock of WNP
Communications, Inc. (10)
10.9 Consent and Indemnity Agreement of Preferred Stockholders, dated January
14, 1999, by and among NEXTLINK Communications, Inc., WNP Communications,
Inc. and certain holders of Series A preferred stock of WNP Communications,
Inc. (11)
10.10 NEXTBAND Interest Purchase Agreement, dated March 31, 1999, between Nextel
Spectrum Acquisition Corp. and NEXTLINK Communications, Inc. (11)
10.11 Registration Rights Agreement, dated March 31, 1999, between Nextel
Spectrum Acquisition Corp. and NEXTLINK Communications, Inc. (11)
27 Financial Data Schedule
</TABLE>
-----------------------
(1) Incorporated herein by reference to the exhibit
filed with the Registration Statement on Form S-4
of NEXTLINK Communications, Inc. (Commission File
No. 333-53975).
(2) Incorporated herein by reference to the exhibit
filed with the Registration Statement on Form S-4
of NEXTLINK Communications, L.L.C. (the predecessor
of NEXTLINK Communications, Inc.) and NEXTLINK
Capital, Inc. (Commission File No. 333-4603).
(3) Incorporated herein by reference to the exhibit
filed with the Annual Report on Form 10-KSB for the
year ended December 31, 1996 of NEXTLINK
Communications, Inc. and NEXTLINK Capital, Inc.
(Commission File Nos. 333-04603 and 333-04603-01).
(4) Incorporated herein by reference to the exhibit
filed with the Registration Statement on Form S-1
of NEXTLINK Communications, Inc. (Commission File
No. 333-32003).
(5) Incorporated herein by reference to the exhibit
filed with the Annual Report on Form 10-KSB for the
year ended December 31, 1997 of NEXTLINK
Communications, Inc. and NEXTLINK Capital, Inc.
(Commission File Nos. 333-04603 and 333-04603-01).
<PAGE>
(6) Incorporated herein by reference to the exhibit
filed with the quarterly report on Form 10-Q for
the quarterly period ended March 31, 1998 of
NEXTLINK Communications, Inc. and NEXTLINK Capital,
Inc. (Commission File No. 000-22939).
(7) Incorporated herein by reference to the exhibits
filed with the current report on form 8-K filed on
January 19, 1999 (Commission File No. 000-22939).
(8) Incorporated herein by reference to the exhibits
filed with the Registration Statement on Form S-4
of NEXTLINK Communications, Inc. (Commission File
No. 333-71749).
(9) Incorporated herein by reference to the exhibit
filed with the Registration Statement on Form S-1
of NEXTLINK Communications, Inc. (Commission File
No. 333-32001).
(10) Incorporated herein by reference to the exhibits
filed the Registration Statement on Form S-4 of
NEXTLINK Communications, Inc. (Commission File No.
333-75923)
(11) Incorporated herein by reference to the exhibits
filed with the current report on Form 8-K filed on
April 1, 1999 (Commission File No. 000-22939).
(12) Incorporated herein by reference to the exhibits
filed with the Registration Statement on Form S-3
of NEXTLINK Communications, Inc. (Commission File
No. 333-77577).
(b) Reports on Form 8-K
Current report on Form 8-K, filed January 19, 1999,
regarding the acquisition of WNP Communications, Inc.
and an agreement in principal with Nextel
Communications, Inc. to acquire the 50% interest in
NEXTBAND Communications that NEXTLINK does not currently
own.
Current report on Form 8-K, filed April 1, 1999,
regarding the definitive agreement with a subsidiary of
Nextel Communications, Inc. to acquire the 50% interest
in NEXTBAND Communications that NEXTLINK does not
currently own.
Current report on Form 8-K, filed May 11, 1999, regarding
the closing of the acquisition of WNP Communications, Inc.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
NEXTLINK Communications, Inc.
Date: May 14, 1999 By: /s/ Kathleen H. Iskra
-------------------------
Kathleen H. Iskra
Vice President, Chief Financial
Officer and Treasurer
(Principal financial and accounting
officer)
NEXTLINK Capital, Inc.
Date: May 14, 1999 By: /S/ Kathleen H. Iskra
-------------------------
Kathleen H. Iskra
Vice President, Chief Financial
Officer and Treasurer
(Principal financial and accounting
officer)
<PAGE>
NEXTLINK COMMUNICATIONS, INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
3.1 Certificate of Incorporation of NEXTLINK Communications, Inc. (1)
3.2 By-laws of NEXTLINK Communications, Inc. (1)
3.3 Articles of Incorporation of NEXTLINK Capital, Inc. (2)
3.4 By-laws of NEXTLINK Capital, Inc. (2)
4.1 Form of Exchange Note Indenture, by and among NEXTLINK Communications,
Inc. and United States Trust Company of New York, as Trustee, relating
to the Exchange Notes, including form of Exchange Notes. (3)
4.2 Certificate of Designations of the Powers, Preferences and Relative,
Participating, Optional and Other Special Rights of 14% Senior
Exchangeable Redeemable Preferred Shares and Qualifications, Limitations
and Restrictions Thereof. (1)
4.3 Form of stock certificate of 14% Senior Exchangeable Redeemable
Preferred Shares. (3)
4.4 Indenture, dated as of April 25, 1996, by and among NEXTLINK
Communications, Inc., NEXTLINK Capital, Inc. and United States Trust
Company of New York, as Trustee, relating to 12 1/2% Senior Notes due
April 15, 2006, including form of global note. (2)
4.5 First Supplemental Indenture, dated as of January 31, 1997, by and among
NEXTLINK Communications, Inc., NEXTLINK Communications, L.L.C., NEXTLINK
Capital and United States Trust Company of New York, as Trustee. (3)
4.6 Indenture dated September 25, 1997, between United States Trust Company,
as Trustee and NEXTLINK Communications, Inc., relating to the 9 5/8%
Senior Notes due 2007. (12)
4.7 Indenture, dated March 3, 1998, between United States Trust Company, as
Trustee and NEXTLINK Communications, Inc., relating to the 9% Senior
Notes due 2008. (5)
4.8 Certificate of Designations of Powers, Preferences and Relative,
Participating, Optional and Other Special Rights of 6 1/2% Cumulative
Convertible Preferred Stock and Qualifications, Limitations and
Restrictions Thereof. (1)
4.9 Form of Stock Certificate of Class A common stock. (9)
4.10 Indenture dated April 1, 1998 between United Trust Company, as Trustee
and NEXTLINK Communications, Inc. relating to the 9.45% Senior Discount
Notes due 2008. (5)
4.11 Second Supplemental Indenture, dated June 3, 1998, amending Indenture
dated April 25, 1996, by and among NEXTLINK Communications, Inc.,
NEXTLINK Capital, Inc. and United States Trust Company of New York, as
Trustee. (1)
4.12 First Supplemental Indenture, dated June 3, 19989, amending Indenture
dated September 25. 1997, by and between NEXTLINK Communications, Inc.
and United States Trust Company of New York, as Trustee. (1)
<PAGE>
4.13 First Supplemental Indenture, dated June 3, 1998, amending Indenture
dated March 3, 1998, by and between NEXTLINK Communications, Inc. and
United States Trust Company of New York as Trustee. (1)
4.14 First Supplemental Indenture, dated June 3, 1998, amending Indenture
dated April 1, 1998, by and between NEXTLINK Communications, Inc. and
United States Trust Company of New York, as Trustee. (1)
10.1 Stock Option Plan of NEXTLINK Communications, Inc., as amended (1)
10.2 Employee Stock Purchase Plan of NEXTLINK Communications, Inc. (1)
10.3 Registration Rights Agreement dated as of January 15, 1997, between the
predecessor of NEXTLINK Communications, Inc. and the signatories listed
therein. (3)
10.4 Fiber Lease and Innerduct Use Agreement, dated as of February 23, 1998,
by and between NEXTLINK Communications, Inc. and Metromedia Fiber
Network. (5)
10.5 Amendment No. 1 to Fiber Lease and Innerduct Use Agreement, dated as of
March 4, 1998, by and between NEXTLINK Communications, Inc. and
Metromedia Fiber Network, Inc. (5)
10.6 Agreement and Plan of Merger, dated as of January 14, 1999, among
NEXTLINK, WNP Communications, Inc. and PCO Acquisition Corp. (7)
10.7 Registration Rights Agreement dated January 14, 1999 between the Company
and the Holders referred to therein. Cost Sharing and IRU Agreement,
dated July 18, 1998, between Level 3 Communications, LLC and INTERNEXT
LLC. (7)
10.8 Consent and Indemnity Agreement of Stockholders, dated January 14, 1999,
by and among NEXTLINK Communications, Inc., WNP Communications, Inc. and
certain holders of non-voting and voting common stock of WNP
Communications, Inc. (10)
10.9 Consent and Indemnity Agreement of Preferred Stockholders, dated January
14, 1999, by and among NEXTLINK Communications, Inc., WNP
Communications, Inc. and certain holders of Series A preferred stock of
WNP Communications, Inc. (11)
10.10 NEXTBAND Interest Purchase Agreement, dated March 31, 1999, between
Nextel Spectrum Acquisition Corp. and NEXTLINK Communications, Inc. (11)
10.11 Registration Rights Agreement, dated March 31, 1999, between Nextel
Spectrum Acquisition Corp. and NEXTLINK Communications, Inc. (11)
27 Financial Data Schedule
</TABLE>
- ---------------------
(1) Incorporated herein by reference to the exhibit filed with
the Registration Statement on Form S-4 of NEXTLINK
Communications, Inc. (Commission File No. 333-53975).
(2) Incorporated herein by reference to the exhibit filed with
the Registration Statement on Form S-4 of NEXTLINK
Communications, L.L.C. (the predecessor of NEXTLINK
Communications, Inc.) and NEXTLINK Capital, Inc.
(Commission File No. 333-4603).
(3) Incorporated herein by reference to the exhibit filed with
the Annual Report on Form 10-KSB for the year ended
December 31, 1996 of NEXTLINK Communications, Inc. and
NEXTLINK Capital, Inc. (Commission File Nos. 333-04603 and
333-04603-01).
<PAGE>
(4) Incorporated herein by reference to the exhibit filed with
the Registration Statement on Form S-1 of NEXTLINK
Communications, Inc. (Commission File No. 333-32003).
(5) Incorporated herein by reference to the exhibit filed with
the Annual Report on Form 10-KSB for the year ended
December 31, 1997 of NEXTLINK Communications, Inc. and
NEXTLINK Capital, Inc. (Commission File Nos. 333-04603 and
333-04603-01).
(6) Incorporated herein by reference to the exhibit filed with
the quarterly report on Form 10-Q for the quarterly period
ended March 31, 1998 of NEXTLINK Communications, Inc. and
NEXTLINK Capital, Inc. (Commission File No. 000-22939).
(7) Incorporated herein by reference to the exhibits filed
with the current report on form 8-K filed on January 19,
1999 (Commission File No. 000-22939).
(8) Incorporated herein by reference to the exhibits filed
with the Registration Statement on Form S-4 of NEXTLINK
Communications, Inc. (Commission File No. 333-71749).
(9) Incorporated herein by reference to the exhibit filed with
the Registration Statement on Form S-1 of NEXTLINK
Communications, Inc. (Commission File No. 333-32001).
(10) Incorporated herein by reference to the exhibits filed the
Registration Statement on Form S-4 of NEXTLINK
Communications, Inc. (Commission File No. 333-75923)
(11) Incorporated herein by reference to the exhibits filed
with the current report on Form 8-K filed on April 1, 1999
(Commission File No. 000-22939).
(12) Incorporated herein by reference to the exhibits filed
with the Registration Statement on Form S-3 of NEXTLINK
Communications, Inc. (Commission File No. 333-77577).
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 388,696
<SECURITIES> 855,710
<RECEIVABLES> 46,823
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,332,066
<PP&E> 801,344
<DEPRECIATION> 99,798
<TOTAL-ASSETS> 2,506,678
<CURRENT-LIABILITIES> 136,670
<BONDS> 2,023,032
569,518
0
<COMMON> 360,213
<OTHER-SE> 599,059
<TOTAL-LIABILITY-AND-EQUITY> 2,506,678
<SALES> 0
<TOTAL-REVENUES> 48,586
<CGS> 0
<TOTAL-COSTS> 119,945
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 50,690
<INCOME-PRETAX> (102,286)
<INCOME-TAX> 0
<INCOME-CONTINUING> (102,286)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (102,286)
<EPS-PRIMARY> (2.17)
<EPS-DILUTED> (2.17)
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