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United States Securities and Exchange Commission
Form 10-Q
(Mark One)
[X] |
Quarterly report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 For the quarterly period ended September 30, 1999 |
|
or | ||
[ ] |
Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 For the transition period from to . |
Commission File Number: 0-21213
LCC International, Inc.
Delaware | 54-1807038 | |
(State of Incorporation) | (IRS Employer Identification Number) | |
7925 Jones Branch Drive, McLean, VA | 22102 | |
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code: (703) 873-2000
Not Applicable
(Former name, former address and former fiscal year, if changed, since last report.)
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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.
As of November 4, 1999, the registrant had outstanding 11,110,910 shares of Class A Common Stock, par value $0.01 per share (the Class A Common Stock) and 8,460,984 shares of Class B Common Stock, par value $0.01 per share (the Class B Common Stock).
LCC International, Inc. and Subsidiaries
Quarterly Report on Form 10-Q
INDEX
Page | ||||||
Number | ||||||
PART I: | FINANCIAL INFORMATION | |||||
ITEM 1: | FINANCIAL STATEMENTS | |||||
Condensed consolidated statements of operations for the three and nine month periods ended September 30, 1998 and 1999 | 3 | |||||
Condensed consolidated balance sheets as of December 31, 1998 and September 30, 1999 | 4 | |||||
Condensed consolidated statements of cash flows for the nine months ended September 30, 1998 and 1999 | 5 | |||||
Notes to condensed consolidated financial statements | 6 | |||||
ITEM 2: | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL | |||||
CONDITION AND RESULTS OF OPERATIONS | 11 | |||||
PART II: | OTHER INFORMATION | 17 | ||||
ITEM 1: | Legal Proceedings | 17 | ||||
ITEM 2: | Changes in Securities | 17 | ||||
ITEM 3: | Defaults Upon Senior Securities | 17 | ||||
ITEM 4: | Submission of Matters to a Vote of Security Holders | 17 | ||||
ITEM 5: | Other Information | 17 | ||||
ITEM 6: | Exhibits and Reports on Form 8-K | 17 |
2
PART I. FINANCIAL INFORMATION
LCC International, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
Three months ended | Nine months ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
1998 | 1999 | 1998 | 1999 | ||||||||||||||
REVENUES: | |||||||||||||||||
Services | $ | 21,988 | $ | 17,437 | $ | 66,083 | $ | 50,561 | |||||||||
Tower ownership and management | 248 | 805 | 576 | 1,485 | |||||||||||||
22,236 | 18,242 | 66,659 | 52,046 | ||||||||||||||
COST OF REVENUES: | |||||||||||||||||
Services | 17,675 | 13,257 | 49,291 | 37,218 | |||||||||||||
Tower ownership and management | 143 | 276 | 325 | 801 | |||||||||||||
17,818 | 13,533 | 49,616 | 38,019 | ||||||||||||||
GROSS PROFIT | 4,418 | 4,709 | 17,043 | 14,027 | |||||||||||||
OPERATING EXPENSES: | |||||||||||||||||
Sales and marketing | 870 | 1,259 | 2,656 | 4,058 | |||||||||||||
General and administrative | 8,145 | 4,045 | 17,017 | 13,557 | |||||||||||||
Non-cash compensation | 35 | | 253 | (12 | ) | ||||||||||||
Depreciation and amortization | 679 | 790 | 1,702 | 2,329 | |||||||||||||
9,729 | 6,094 | 21,628 | 19,932 | ||||||||||||||
OPERATING LOSS | (5,311 | ) | (1,385 | ) | (4,585 | ) | (5,905 | ) | |||||||||
OTHER INCOME (EXPENSE): | |||||||||||||||||
Interest income | 151 | 207 | 656 | 427 | |||||||||||||
Interest expense | (574 | ) | (428 | ) | (1,720 | ) | (2,023 | ) | |||||||||
Other expense | (104 | ) | (54 | ) | (356 | ) | (1,398 | ) | |||||||||
(527 | ) | (275 | ) | (1,420 | ) | (2,994 | ) | ||||||||||
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | (5,838 | ) | (1,660 | ) | (6,005 | ) | (8,899 | ) | |||||||||
BENEFIT FOR INCOME TAXES | (2,312 | ) | (500 | ) | (2,378 | ) | (2,680 | ) | |||||||||
LOSS FROM CONTINUING OPERATIONS | (3,526 | ) | (1,160 | ) | (3,627 | ) | (6,219 | ) | |||||||||
LOSS FROM DISCONTINUED OPERATIONS | |||||||||||||||||
NET OF TAX BENEFITS | (3,553 | ) | | (5,349 | ) | | |||||||||||
NET LOSS | $ | (7,079 | ) | $ | (1,160 | ) | $ | (8,976 | ) | $ | (6,219 | ) | |||||
NET LOSS PER SHARE: | |||||||||||||||||
CONTINUING OPERATIONS | |||||||||||||||||
Basic | $ | ( 0.22 | ) | $ | (0.06 | ) | $ | (0.23 | ) | $ | (0.38 | ) | |||||
Diluted | $ | ( 0.22 | ) | $ | (0.06 | ) | $ | (0.23 | ) | $ | (0.38 | ) | |||||
DISCONTINUED OPERATIONS | |||||||||||||||||
Basic | $ | (0.23 | ) | | $ | (0.35 | ) | | |||||||||
Diluted | $ | (0.23 | ) | | $ | (0.35 | ) | | |||||||||
NET LOSS PER SHARE | |||||||||||||||||
Basic | $ | (0.45 | ) | $ | (0.06 | ) | $ | (0.58 | ) | $ | (0.38 | ) | |||||
Diluted | $ | (0.45 | ) | $ | (0.06 | ) | $ | (0.58 | ) | $ | (0.38 | ) | |||||
WEIGHTED AVERAGE SHARES USED IN THE CALCULATION OF NET LOSS PER SHARE: | |||||||||||||||||
Basic | 15,574 | 18,133 | 15,472 | 16,487 | |||||||||||||
Diluted | 15,574 | 18,133 | 15,472 | 16,487 | |||||||||||||
See accompanying notes to condensed consolidated financial statements.
3
LCC International, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
December 31, | September 30, | |||||||||
1998 | 1999 | |||||||||
(Unaudited) | ||||||||||
ASSETS: | ||||||||||
Current assets: | ||||||||||
Cash and cash equivalents | $ | 4,240 | $ | 3,047 | ||||||
Short-term investments | 113 | 113 | ||||||||
Receivables, net of allowance for doubtful accounts of $10,453 and $8,043 at December 31, 1998 and September 30, 1999, respectively: | ||||||||||
Trade accounts receivable | 13,028 | 13,521 | ||||||||
Due from related parties and affiliates | 611 | 1,205 | ||||||||
Unbilled | 6,078 | 4,263 | ||||||||
Deferred income taxes, net | 12,050 | 10,286 | ||||||||
Prepaid expenses and other current assets | 3,072 | 2,957 | ||||||||
Net assets of discontinued operations | 9,139 | 11,165 | ||||||||
Total current assets | 48,331 | 46,557 | ||||||||
Property and equipment, net | 22,132 | 36,250 | ||||||||
Deferred income taxes, net | 12,705 | 8,286 | ||||||||
Other assets | 1,036 | 2,176 | ||||||||
$ | 84,204 | $ | 93,269 | |||||||
LIABILITIES AND SHAREHOLDERS EQUITY: | ||||||||||
Current liabilities: | ||||||||||
Line of credit | $ | | $ | 13,577 | ||||||
Accounts payable | 4,637 | 3,391 | ||||||||
Note payable | | 1,100 | ||||||||
Accrued expenses | 8,153 | 11,337 | ||||||||
Accrued employee compensation and benefits | 9,702 | 9,804 | ||||||||
Deferred revenue | 277 | 6,736 | ||||||||
Income taxes payable | 7,894 | 6,895 | ||||||||
Obligations under incentive plans | 55 | | ||||||||
Other current liabilities | 3,142 | 2,816 | ||||||||
Total current liabilities | 33,860 | 55,656 | ||||||||
Convertible subordinated debt | 50,000 | | ||||||||
Other liabilities | 115 | 656 | ||||||||
Total liabilities | 83,975 | 56,312 | ||||||||
Preferred stock: | ||||||||||
10,000 shares authorized; -0- shares issued and outstanding | | | ||||||||
Class A common stock, $.01 par value: | ||||||||||
70,000 shares authorized; 7,180 and 11,012 shares issued and outstanding at December 31, 1998 and September 30, 1999, respectively | 72 | 110 | ||||||||
Class B common stock, $.01 par value: | ||||||||||
20,000 shares authorized; 8,461 shares issued and outstanding at December 31, 1998 and September 30, 1999 | 85 | 85 | ||||||||
Paid-in capital | 37,130 | 80,291 | ||||||||
Accumulated deficit | (33,590 | ) | (39,809 | ) | ||||||
Note receivable from shareholder | (2,100 | ) | (2,100 | ) | ||||||
Subtotal | 1,597 | 38,577 | ||||||||
Accumulated other comprehensive loss foreign currency translation adjustments | (1,368 | ) | (1,620 | ) | ||||||
Total shareholders equity | 229 | 36,957 | ||||||||
$ | 84,204 | $ | 93,269 | |||||||
See accompanying notes to condensed consolidated financial statements.
4
LCC International, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
Nine Months Ended | |||||||||||
September 30, | |||||||||||
1998 | 1999 | ||||||||||
Cash flows from operating activities: | |||||||||||
Loss from continuing operations | $ | (3,627 | ) | $ | (6,219 | ) | |||||
Adjustments to reconcile loss from continuing operations to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | 1,702 | 2,495 | |||||||||
Provision for doubtful accounts | 2,481 | | |||||||||
Non-cash compensation | 265 | (14 | ) | ||||||||
Loss from investments in joint ventures, net | 267 | | |||||||||
Changes in operating assets and liabilities | |||||||||||
Trade, unbilled, and other receivables | (5,962 | ) | (231 | ) | |||||||
Accounts payable and accrued expenses | 7,626 | 2,280 | |||||||||
Other current assets and liabilities | (6,577 | ) | 8,008 | ||||||||
Other non-current assets and liabilities | 1,962 | (7,654 | ) | ||||||||
Net cash used in operating activities | (1,863 | ) | (1,335 | ) | |||||||
Cash flows from investing activities: | |||||||||||
Decrease in short term investments, net | 8,552 | | |||||||||
Purchases of property and equipment | (13,034 | ) | (14,659 | ) | |||||||
Investment in joint ventures and affiliates | 289 | (1,100 | ) | ||||||||
Net cash used in investing activities | (4,193 | ) | (15,759 | ) | |||||||
Cash flows from financing activities: | |||||||||||
Proceeds from issuance of common stock, net | 588 | 361 | |||||||||
Proceeds from exercise of options | 2,620 | 108 | |||||||||
Proceeds from notes payable/line of credit | | 25,161 | |||||||||
Payment on line of credit | | (5,484 | ) | ||||||||
Net cash provided by financing activities | 3,208 | 20,146 | |||||||||
Net increase (decrease in) cash and cash equivalents continuing operations | (2,848 | ) | 3,052 | ||||||||
Net decrease in cash and cash equivalents discontinued operations | (5,395 | ) | (4,245 | ) | |||||||
Net decrease in cash and cash equivalents | (8,243 | ) | (1,193 | ) | |||||||
Cash and cash equivalents at beginning of period | 14,878 | 4,240 | |||||||||
Cash and cash equivalents at end of period | $ | 6,635 | $ | 3,047 | |||||||
Supplemental disclosures of cash flow information: | |||||||||||
Cash paid during the nine months for: | |||||||||||
Interest | $ | 1,164 | $ | 1,573 | |||||||
Income taxes | 1,314 | $ | 2,760 |
Supplemental disclosures of non-cash investing and financing activities:
In July 1999, the Company issued approximately 2.8 million shares of Class A common stock in exchange for its 4.4% convertible subordinated notes. As a result, both long-term debt and long-term deferred tax assets were reduced by $50.0 million and $12.6 million, respectively, and shareholders equity increased $37.4 million. | |
In August 1999, the Company issued approximately 0.9 million shares of Class A common stock in exchange for its 9.0% convertible notes payable. As a result, current debt was reduced by $5.0 million, accrued interest $0.2 million, and shareholders equity increased $5.2 million. |
See accompanying notes to condensed consolidated financial statements.
5
LCC International, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Note 1: Description of Operations
LCC International, Inc. and subsidiaries (also referred to as the Company) is one of the worlds largest independent suppliers of integrated end to end infrastructure consulting services relating to the design, engineering and build-out of wireless communications systems. The Companys businesses are as follows:
Services
Engineering and design services The Company provides engineering and design services for cellular phone system operators, personal communication system (PCS) operators and other wireless communication system providers.
Program management services The Company provides network deployment services (including program management, site acquisition, zoning, regulatory compliance, construction and construction management services) related to the build-out of wireless communications systems.
Towers
Tower ownership and management The Company acquires, builds, owns and manages multi-tenant telecommunications towers and leases space thereon to wireless communication carriers.
Note 2: Basis of Presentation
The condensed consolidated financial statements of LCC International, Inc. and subsidiaries included herein have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission and reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the interim period.
Certain information and footnote disclosure normally included in the financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 1998. Operating results for the interim periods are not necessarily indicative of results for an entire year.
Certain reclassifications of prior year amounts have been made to conform with the current year presentation.
Note 3: Other Comprehensive Income (loss)
During the first quarter of 1998, the Company adopted Statement of Financial Accounting Standards No. 130 (SFAS No. 130), Reporting Comprehensive Income, which established standards for reporting and displaying comprehensive income and its components in the financial statements. Comprehensive income is defined as net income plus the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Other comprehensive income refers to revenues, expenses, gains and losses that under generally accepted accounting principles are included in comprehensive income, but excluded from net income. Other comprehensive income consists solely of foreign currency
6
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
1998 | 1999 | 1998 | 1999 | |||||||||||||
Net income (loss) | $ | (7,079 | ) | $ | (1,160 | ) | $ | (8,976 | ) | $ | (6,219 | ) | ||||
Other comprehensive income (loss), before tax | 809 | (160 | ) | 317 | (360 | ) | ||||||||||
Income tax provision (benefit) related to items of comprehensive income | 284 | (48 | ) | 130 | (108 | ) | ||||||||||
Other comprehensive income (loss), net of tax | 525 | (112 | ) | 187 | (252 | ) | ||||||||||
Comprehensive income (loss) | $ | (6,554 | ) | $ | (1,272 | ) | $ | (8,789 | ) | $ | (6,471 | ) | ||||
Note 4: Investment in Tecnosistemi
In September 1999, the Company, through its wholly owned subsidiary, LCC, United Kingdom, Limited, acquired 19.9% of Tecnosistemi S.p.A. (formerly, Italtel Sistemi, S.p.A.) for $1.1 million. Tecnosistemi is an Italian telecommunications services company, and is a recently spun off division of the Italtel Group whose major shareholders were Siemens and Telecom Italia. Tecneudosia, a market leader in the design and manufacturing of shelters for fixed and mobile telecom operators and suppliers acquired 22% of Tecnosistemi, and the right to acquire the 30% interest retained by the Italtel Group. The Italtel Group will maintain a 30% interest in Tecnosistemi for a period of one year from the closing at which time Tecneudosia intends to assume such interest. In connection with the transaction, the Italtel Group undertook to: (1) repay all losses reflected on Tecnosistemis financial statements for the fiscal year ending December 31, 1999, (2) pay to Tecnosistemi up to Lire 95 billion, as necessary, during the years 2000, 2001 and 2002, to cover costs incurred by Tecnosistemi to reorganize its operations, and (3) purchase from Tecnosistemi, on an exclusive basis, those services required by the Italtel Group and offered by Tecnosistemi in Italy.
Note 5: Line of Credit
In March 1999, the Company amended and restated its credit facility, originally established in 1996, with The Chase Manhattan Bank, as Administrative Agent (Chase) (together with the LCC Europe Credit Facility, as defined below, the Credit Facility). The Credit Facility, during the quarter, consisted of a revolving loan and letter of credit facility in an aggregate amount not to exceed $20.0 million for the Company and $2.5 million for LCC Europe (the LCC Europe Credit Facility). The maximum amount available for drawing under the Credit Facility is the sum of (1) the lesser of $10.0 million or 85% of the amount of the Companys receivables which are deemed eligible as a basis for obtaining credit and (2) an aggregate amount, not to exceed $12.5 million, which is secured by a collateralized guaranty of Dr. Rajendra Singh, Board member of the Company and Chairman of Telcom Ventures, the Companys largest shareholder, to the extent that Dr. Singh has deposited the required collateral with Chase. Dr. Singh is not contractually committed to provide any collateral to Chase. On October 19, 1999, in connection with the issuance of Chases consent for the Company to sell the assets of its discontinued operations (See Note 9: Subsequent Events) the Credit Facility was amended to eliminate that portion of the facility related to the discontinued operations, the $2.5 million LCC Europe Credit Facility, and to reduce the revolving credit facility by $2.0 million (reducing the $12.5 million available under (2) above), providing an aggregate credit facility of $18.0 million. The revolving loan commitment will expire in March 2000. The Company does not currently use interest rate derivative instruments to manage its exposure to interest rate changes. During the quarter, Dr. Singh, through Eurofon De Portugal, Inc. (a Singh affiliated Company), had provided sufficient collateral for LCC to draw $9.9 million of the $12.5 million portion of the Credit Facility that requires collateralization, and $5.9 million as of September 30, 1999. This collateral was withdrawn as borrowings were reduced following the Companys receipt of proceeds from the sale of its discontinued operations. The Company is
7
Note 6: Note Payable
On July 13, 1999, the Company received notice of conversion from MCI Worldcom of its convertible subordinated notes in the aggregate principal amount of $50.0 million. The notes were converted into 2,841,099 shares of the Companys Class A common stock on July 27, 1999. The conversion of the subordinated note had a tax impact of $12.6 million. The Company had sufficient net operating loss carryforwards to meet this tax obligation. The conversion of the subordinated notes increased stockholders equity by $37.4 million, net of tax.
In January 1999, the Company entered into a $5.0 million convertible promissory note with Telcom Ventures. Under the terms of the note, anytime after August 1, 1999, the entire principal balance and accrued interest thereon at a rate of 9.0 percent could be converted into shares of the Companys Class A Common Stock based on a conversion price of $6.22 per share, subject to adjustment for stock split, stock dividend, recapitalization or similar events. On August 24, 1999 Telcom Ventures elected to convert its note into 845,087 shares of LCC Class A common stock.
On September 10, 1999 the Company entered into a $1.1 million promissory note with Telcom Ventures. Under the terms of the note, the entire principal balance and accrued interest thereon is due on September 1, 2000. The interest is initially established at 10.5%, with increments in the interest rate of 1.5% every 3 months beginning at March 1, 2000. The proceeds of the note were used to finance the Companys investment in Tecnosistemi. This note was prepaid in full by the Company on November 9, 1999 (See Notes 4 and 9).
Note 7: Contingencies
On February 12, 1999, the minority shareholders of the Companys majority-owned Microcell subsidiary filed a suit against the Company, the directors appointed by the Company to the Microcell Board and Microcell itself, seeking rescission of the shareholders agreement between the Company and the minority shareholders (which concerns management of Microcell, funding commitments and other matters), the appointment of a custodian or receiver, and unspecified monetary damages. The suit alleges, inter alia, breach of a fiduciary duty, usurpation of corporate opportunities, waste of Microcells corporate assets, tortious interference with Microcells prospective business relations, and violations of the shareholders agreement. On May 6, 1999, the Court ruled that the plaintiffs had served a demand letter on the Board of Directors and therefore, all the plaintiffs derivative claims were stayed pending the Boards review and consideration of the derivative claims. The Board of Directors retained advisory counsel in March 1999. On May 12, 1999, the Court dismissed plaintiffs motion for the appointment of a custodian or receiver. Plaintiffs filed an amended complaint on June 9, 1999, asserting that their claims for rescission and breach of the shareholders agreement and for the appointment of a custodian or receiver are direct claims. Defendants filed a motion to dismiss these claims which is pending. Plaintiffs also filed on June 9, 1999, a motion for a preliminary injunction on Microcells redemption of certain shares and a motion for leave to file a supplemental complaint. On July 27, 1999, the Court denied both motions. Plaintiffs then filed a motion for reargument or reconsideration which was denied on August 11, 1999. In late September 1999, advisory counsel to the Board of Directors presented its report, finding among other things, that all of the claims raised by the plaintiffs in their demand letter lacked legal merit. The Company continues to believe that the case is without merit, and intends to continue to contest the action vigorously. Since the Boards receipt of advisory counsels report, the parties have been engaged in discussions regarding an amicable resolution of their differences, and no further material action has been taken with respect to the litigation.
Note 8: Segment Information
The Companys operating segments include Services (Engineering and Design Services and Program Management Services) and Tower ownership and management. Engineering and Design Services provides
8
Segment detail is summarized as follows (in thousands):
Tower Ownership | ||||||||||||||||||||||||||||||||||
Engineering and | Program | and | ||||||||||||||||||||||||||||||||
Design | Management | Management | Segment Total | |||||||||||||||||||||||||||||||
1998 | 1999 | 1998 | 1999 | 1998 | 1999 | 1998 | 1999 | |||||||||||||||||||||||||||
Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||||||||
From external customers | $ | 52,101 | $ | 39,597 | $ | 13,982 | $ | 10,964 | $ | 576 | $ | 1,485 | $ | 66,659 | $ | 52,046 | ||||||||||||||||||
Inter-segment revenue | 1,100 | 283 | | 61 | | | 1,100 | 344 | ||||||||||||||||||||||||||
Total revenue | $ | 53,201 | $ | 39,880 | $ | 13,982 | $ | 11,025 | $ | 576 | $ | 1,485 | $ | 67,759 | $ | 52,390 | ||||||||||||||||||
Net income (loss) | $ | 6,259 | $ | 4,860 | $ | 3,884 | $ | 911 | $ | (2,657 | ) | $ | (3,357 | ) | $ | 7,486 | $ | 2,414 | ||||||||||||||||
Total assets | $ | 32,850 | $ | 22,372 | $ | | $ | | $ | 14,986 | $ | 30,796 | ||||||||||||||||||||||
Tower Ownership | ||||||||||||||||||||||||||||||||||
Engineering and | Program | and | ||||||||||||||||||||||||||||||||
Design | Management | Management | Segment Total | |||||||||||||||||||||||||||||||
1998 | 1999 | 1998 | 1999 | 1998 | 1999 | 1998 | 1999 | |||||||||||||||||||||||||||
Three Months Ended September 30, | ||||||||||||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||||||||
From external customers | $ | 16,486 | $ | 12,731 | $ | 5,502 | $ | 4,706 | $ | 248 | $ | 805 | $ | 22,236 | $ | 18,242 | ||||||||||||||||||
Inter-segment revenue | 195 | 32 | | 10 | | | 195 | 42 | ||||||||||||||||||||||||||
Total revenue | $ | 16,681 | $ | 12,763 | $ | 5,502 | $ | 4,716 | $ | 248 | $ | 805 | $ | 22,431 | $ | 18,284 | ||||||||||||||||||
Net income (loss) | $ | (350 | ) | $ | 1,078 | $ | 1,233 | $ | 577 | $ | (1,135 | ) | $ | (1,120 | ) | $ | (252 | ) | $ | 535 | ||||||||||||||
Total assets | $ | 32,850 | $ | 22,372 | $ | | $ | | $ | 14,986 | $ | 30,796 | ||||||||||||||||||||||
A reconciliation of net income (loss) reported for the operating segments to the amount in the condensed consolidated financial statements is as follows:
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
1998 | 1999 | 1998 | 1999 | |||||||||||||
Segment total | $ | (252 | ) | $ | 535 | $ | 7,486 | $ | 2,414 | |||||||
Unallocated Corporate Expenditures | (3,248 | ) | (1,693 | ) | (11,019 | ) | (8,388 | ) | ||||||||
Eliminations | (26 | ) | (2 | ) | (94 | ) | (245 | ) | ||||||||
Loss from Continuing Operations | (3,526 | ) | (1,160 | ) | (3,627 | ) | (6,219 | ) | ||||||||
Loss from Discontinued Operations, net of tax benefits | (3,553 | ) | | (5,349 | ) | | ||||||||||
Net loss | $ | (7,079 | ) | $ | (1,160 | ) | $ | (8,976 | ) | $ | (6,219 | ) | ||||
9
Note 9: Subsequent Events
On October 22, 1999, the Company sold its products businesses, which consist of the design, development, manufacture, marketing, sale and servicing of field testing and measurement products (and related software) and network planning software for the wireless communications industry (the Products Businesses), to Ericsson Radio Systems AB, a Swedish corporation, and certain of its affiliates (Ericsson), pursuant to an Asset Purchase Agreement, dated as of August 25, 1999.
Pursuant to the Agreement, the Company transferred substantially all of the assets of the Products Businesses for a purchase price of approximately $22.5 million, which is subject to a post-closing adjustment to be made based upon any differences in the net asset value of the Products Businesses as of March 31, 1999 and as of the closing date (the Post-Closing Purchase Price Adjustment) as well as post-closing collection of certain accounts receivable of the Products Business sold to Ericsson as part of the transaction. The purchase price was determined by negotiation between the Company and Ericsson. In addition, Ericsson assumed certain of the liabilities of the Products Businesses, including, among others, certain liabilities arising with respect to the Products Businesses in the ordinary course of business consistent with past practice and certain liabilities arising under assumed contracts. As part of the transaction, the Company entered into product supply agreements and a software license and related support agreement with Ericsson pursuant to which the Company will purchase or license certain of the products which were sold to Ericsson.
To date, the Company has received cash proceeds from the transaction of approximately $18.5 million. These proceeds were applied to the Companys outstanding balance under its credit facility ($17.0 million), with the balance used as current working capital. Additional cash proceeds may be payable upon completion of the Post-Closing Purchase Price Adjustment, which is expected to occur by December 1, 1999, and post-closing collections of certain of the accounts receivable sold to Ericsson. The Company expects to realize a one-time pre-tax gain from the transaction of approximately $4.0 million, subject to any adjustments arising out of the Post-Closing Purchase Price Adjustment and the actual post-closing accounts receivable collections. The transaction will be recorded as part of the Companys fourth quarter results.
On November 9, 1999, the Company prepaid, in full, the $1.1 million promissory note issued to Telcom Ventures to fund the Companys investment in Tecnosistemi (See Note 6: Note Payable).
10
LCC International, Inc. and Subsidiaries
Managements Discussion and Analysis of
For the Three and Nine Months Ended September 30, 1998 and 1999
This quarterly report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Exchange Act of 1934. The Managements Discussion and Analysis of Financial Condition and Results of Operations include, without limitation, forward-looking statements regarding financing plans, the divestiture of the Companys product businesses, the Companys ability to pursue and secure new business opportunities, and compliance with Year 2000 issues. A more complete discussion of business risks is included in the Companys Annual Report on Form 10-K for the year ended December 31, 1998.
Overview
The Company is one of the worlds largest independent suppliers of integrated end to end infrastructure consulting services (including radio frequency (RF) engineering, program management, site acquisition, zoning, construction and construction management services to the wireless telecommunications industry. The Company has provided many of these services to operators of more than 200 wireless systems in more than 50 countries. In 1996 the Company entered the tower ownership and management business which consists of acquiring, developing and managing telecommunications towers.
The Companys revenues are generated through contracts for RF engineering and program management services and lease revenue from its tower ownership and management business. The Company provides engineering design services on a contract basis, usually in a customized plan for each client and generally charges for engineering services on a time and materials or fixed price basis. The Company generally provides program management services on a time and materials or fixed price basis. The Companys revenues also include reimbursement for expenses, including the living expenses of engineers on customer sites.
In March 1999, the Companys Board of Directors adopted a plan to dispose of the operations comprising its software and hardware segments (the Products Businesses). Software products develops software and data which support the design and operation of wireless communications systems. Hardware products are used in the implementation, testing and maintenance of wireless communications systems. The sale of the product segments was completed in October 1999.
Service revenues consist of revenues from engineering design services and program management services. Tower ownership and management revenues consist of lease revenue from the leasing of space on telecommunications towers to wireless communication carriers. The leases generally have initial terms of 5 to 11 years and generally include multiple options to renew upon similar terms at the option of the lessee. In general, the lease terms include periodic adjustments to base rent. The Company derives a significant portion of its total revenues from its international customers. To date, its tower ownership and management revenues have come exclusively from the leasing of RF transmission towers in the United States.
Cost of revenues consists of costs associated with engineering design and program management services and direct costs related to the tower ownership and management business. Sales and marketing expenses consist of salaries, sales commissions, bonuses, travel and other expenses required to implement the Companys marketing, sales and customer support plans. General and administrative expenses consist of the compensation, benefits, office and occupancy, and other costs required for the finance, human resources, information systems and executive office functions. Non-cash compensation consists of awards under a program for key employees adopted in 1994. Such plan was accounted for as a variable plan, and therefore, to the extent that the deemed fair market value of the Company increased, compensation expense increased accordingly. In connection with the Companys initial public offering in September 1996, the Company granted stock options to replace the awards granted under this plan.
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The key drivers of the Companys growth have historically been (i) the issuances of new or additional wireless telecommunications licenses by governmental authorities to wireless operators, (ii) increases in the number of cell sites operated and the number of subscribers served by wireless network operators, (iii) the introduction of new services or technologies, (iv) the increasing complexity of the systems deployed by wireless network operators, and (v) the expansion and optimization of existing systems by wireless network operators.
To keep pace with the subscriber growth currently anticipated by most industry analysts, the Company expects that there will continue to be significant investment by network system operators over the next few years in design, program management and tower ownership and management services.
Results of Operations
The following table and discussion provides information which management believes is relevant to an assessment and understanding of the Companys consolidated results of operations and financial condition. The discussion should be read in conjunction with the condensed consolidated financial statements and accompanying notes thereto included elsewhere herein.
Percentage of Revenues | ||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||
September 30, | September 30, | |||||||||||||||||
1998 | 1999 | 1998 | 1999 | |||||||||||||||
Revenues: | ||||||||||||||||||
Services | 98.9 | % | 95.6 | % | 99.1 | % | 97.1 | % | ||||||||||
Tower ownership and management | 1.1 | 4.4 | 0.9 | 2.9 | ||||||||||||||
Total revenues | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||
Cost of revenues | 80.1 | % | 74.2 | % | 74.4 | % | 73.0 | % | ||||||||||
Gross profit | 19.9 | % | 25.8 | % | 25.6 | % | 27.0 | % | ||||||||||
Operating expenses: | ||||||||||||||||||
Sales and marketing | 3.9 | 6.9 | 4.0 | 7.8 | ||||||||||||||
General and administrative | 36.6 | 22.2 | 25.5 | 26.0 | ||||||||||||||
Non-cash compensation | 0.2 | 0.0 | 0.4 | 0.0 | ||||||||||||||
Depreciation and amortization | 3.1 | 4.3 | 2.6 | 4.5 | ||||||||||||||
Total operating expenses | 43.8 | % | 33.4 | % | 32.5 | % | 38.3 | % | ||||||||||
Operating loss | (23.9 | )% | (7.6 | )% | (6.9 | )% | (11.3 | )% | ||||||||||
Other income (expense): | ||||||||||||||||||
Interest income | .7 | 1.1 | 1.0 | 0.8 | ||||||||||||||
Interest expense | (2.6 | ) | (2.3 | ) | (2.6 | ) | (3.9 | ) | ||||||||||
Other | (0.5 | ) | (0.3 | ) | (0.5 | ) | (2.7 | ) | ||||||||||
Total other income (expense) | (2.4 | ) | (1.5 | ) | (2.1 | ) | (5.8 | ) | ||||||||||
Loss from continuing operations before income taxes | (26.3 | ) | (9.1 | ) | (9.0 | ) | (17.1 | ) | ||||||||||
Benefit for income taxes | (10.4 | ) | (2.7 | ) | (3.6 | ) | (5.2 | ) | ||||||||||
Loss from continuing operations | (15.9 | )% | (6.4 | )% | (5.4 | )% | (11.9 | )% | ||||||||||
12
Three Months Ended September 30, 1998
Revenues. Revenues for the three months ended September 30, 1999 were $18.2 million compared to $22.2 million for the prior year, a decrease of $4.0 million or 18.0%. Engineering and design services revenue constituted $3.8 million of the revenue decline, with $3.3 million (87%) attributed to the softened market conditions in Asia Pacific and Brazil.
Cost of Revenues. Cost of revenues for the three months ended September 30, 1999 was $13.5 million compared to $17.8 million for the prior year, a decrease of $4.3 million or 24.0%. As a percentage of total revenues, cost of revenues was 74.2% and 80.1% for 1999 and 1998, respectively. The 1998 contract costs for the three months ended September 30, 1998 contained a large amount of non-billable expenditures making cost of revenue as a percent of revenue significantly higher in 1998 than 1999.
Gross Profit. Gross profit for the three months ended September 30, 1999 was $4.7 million compared to $4.4 million for the prior year, an increase of $0.3 million or 6.6%. As a percentage of total revenues, gross profit was 25.8% and 19.9% for 1999 and 1998, respectively. Gross profit as a percentage was higher in 1999 compared to 1998 as a result of the increased Cost of Revenue in 1998 discussed above.
Sales and Marketing. Sales and marketing expenses were $1.3 million for the three months ended September 30, 1999 compared to $0.9 million for the prior year, an increase of $0.4 million. The increase is due primarily to business development efforts related to the Companys Europe/ Middle East/ Africa regional office.
General and Administrative. General and administrative expenses were $4.0 million for the three months ended September 30, 1999 compared to $8.1 million for the prior year, a decrease of $4.1 million or 50.3%. General and administrative expenditures in 1998 were unusually high, driven by several large accounting transactions. The 1998 costs include a large increase in the allowance for doubtful accounts, $2.5 million, attributed to the Companys Asia-Pacific customers and costs of unsuccessful merger and acquisition activity. The 1999 general and administrative costs also received a one-time benefit of $0.3 million relative to restructure reserves recorded in 1998 that were not required.
Depreciation and Amortization. Depreciation and amortization expense was $0.8 million for the three months ended September 30, 1999 compared to $0.7 million for the prior year, an increase of $0.1 million or 16.3%. The increase is a result of increased depreciation related to the Companys tower ownership and management business.
Interest Expense. Interest expense was $0.4 million for the three months ended September 30, 1999 compared to $0.6 million for the prior year, a decrease of $0.2 million or 25.4%. The decrease in interest was caused by a reduction of $0.4 million attributable to MCI Worldcom converting its $50.0 million convertible note into equity on July 27, 1999. This savings was offset by additional interest expense on the borrowings under the Companys credit facility with Chase during the quarter.
Benefit for Income Taxes. The benefit for income taxes was $0.5 million for the three months ended September 30, 1999 compared to a benefit of $2.3 million for the prior year. The benefit for income taxes was recorded for the three months ended September 30, 1999 using an effective tax rate of 30.1%, compared to 39.6% in 1998. The difference in the effective tax rates reflects both a valuation reserve for tax benefits related to losses from foreign operations and a permanent difference arising from the deductibility of interest expense from the MCI Worldcom convertible note. The decreased tax benefit in 1999 is largely attributable to the decline in the loss from continuing operations.
Loss from Continuing Operations. The loss from continuing operations was $1.2 million for the three months ended September 30, 1999 compared to $3.5 million for the same period in the prior year. The reduction of the 1999 loss compared to 1998 was the result of the unusually high general and administrative expenditure level in 1998 caused by receivable reserves in Asia-Pacific and costs of unsuccessful merger and acquisition activity.
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Nine months Ended September 30, 1998
Revenues. Revenues for the nine months ended September 30, 1999 were $52.1 million compared to $66.7 million for the prior year, a decrease of $14.6 million or 21.9%. The 1999 revenue decline reflects the slowdown in contract awards in late 1998 for new network deployment contracts. The 1998 revenue remained high as several large contracts were completed from existing backlog. Engineering and design services revenue constituted $12.5 million of the revenue decline, with $7.9 million (63%) of this decline attributable to the softened market conditions in Asia Pacific and Brazil. Program management revenue declined $3.0 million offset by rental revenue growth of $.9 million from tower ownership and management.
Cost of Revenues. Cost of revenues for the nine months ended September 30, 1999 was $38.0 million compared to $49.6 million for the prior year, a decrease of $11.6 million or 23.4%. As a percentage of total revenues, cost of revenues was 73.0% and 74.4% for 1999 and 1998, respectively. The reduction in the cost of revenue corresponds to the reduction of revenue.
Gross Profit. Gross profit for the nine months ended September 30, 1999 was $14.0 million compared to $17.0 million for the prior year, a decrease of $3.0 million or 17.7%. As a percentage of total revenues, gross profit was 27.0% and 25.6% for 1999 and 1998, respectively.
Sales and Marketing. Sales and marketing expenses were $4.0 million for the nine months ended September 30, 1999 compared to $2.7 million for the prior year, an increase of $1.3 million. The increase is due primarily to business development efforts related to the Companys Europe/ Middle East/ Africa regional office.
General and Administrative. General and administrative expenses were $13.6 million for the nine months ended September 30, 1999 compared to $17.0 million for the prior year, a decrease of $3.5 million or 20.3%. General and administrative expenditures in 1998 were unusually high, driven by several large accounting transactions. The 1998 costs include a large increase in the allowance for doubtful accounts, $2.5 million, attributed to the Companys Asia-Pacific customers and costs of unsuccessful merger and acquisition activity.
Depreciation and Amortization. Depreciation and amortization expense was $2.3 million for the nine months ended September 30, 1999 compared to $1.7 million for the prior year, an increase of $ 0.6 million or 36.8%. The increased depreciation is related to the Companys tower ownership and management business, reflecting the increased number of towers that are constructed and placed-in-service. The Company completed construction of 149 microcell towers as of September 30, 1999 compared to 57 as of September 30, 1998.
Interest Expense. Interest expense was $2.0 million for the nine months ended September 30, 1999 compared to $1.7 million for the prior year, an increase of $ 0.3 million or 17.6%. The increase is due to interest expense on borrowings under the Companys credit facility with Chase during the nine months as well as interest associated with the $5.0 million convertible promissory note with Telcom Ventures. The interest from the increased borrowings was partially offset by a reduction in interest expense of $ .4 million attributable to MCI Worldcom converting its $50.0 million convertible note into equity on July 27, 1999.
Other (Expense). Other expense was $1.4 million for the nine months ended September 30, 1999 compared to $0.4 million for the prior year, an increase of $1.0 million. The increase is due primarily to foreign currency transaction losses of approximately $1.4 million relative to the Companys Latin American operations. The majority of the losses were from the Companys Brazilian operations as a result of the devaluation of the Brazilian Real in the first quarter of 1999.
Benefit for Income Taxes. The benefit for income taxes was $2.7 million for the nine months ended September 30, 1999 compared to a benefit of $2.4 million for the prior year. The benefit for income taxes was recorded for the nine months ended September 30, 1999 using an effective tax rate of 30.1%, compared to 39.6% in 1998. The difference in the effective tax rates reflects both a valuation reserve for tax benefits related to losses from foreign operations and a permanent difference arising from the deductibility of interest expense
14
Loss from Continuing Operations. The loss from continuing operations was $6.2 million for the nine months ended September 30, 1999 compared to $3.6 million for the prior year. The loss was primarily driven by the $3.0 million reduction in gross profit associated with the decline in revenues.
Liquidity and Capital Resources
Cash and cash equivalents, were $3.0 million at September 30, 1999 compared to $4.2 million at December 31, 1998 a decrease of $1.2 million. Net cash used by operations was $1.3 million for the nine months ended September 30, 1999. Net cash used in investing activities was $15.8 million, consisting primarily of cash paid for additions to property and equipment. Approximately $13.7 million of this balance was used for the construction of telecommunications towers. Net cash provided by financing activities was $20.1 million, which largely was cash received from the Companys line of credit. Net cash used in discontinued operations was $4.2 million.
Net cash used in operations was $1.9 million for the nine months ended September 30, 1998. Net cash used by investing activities was $4.2 million, consisting primarily of a decrease in short term investments ($8.6 million) offset by cash paid for additions to property and equipment ($13.0 million). Net cash provided by financing activities was $3.2 million, largely reflecting cash received from the exercise of stock options. Net cash used by discontinued operations was $5.4 million.
Working capital was $(9.1) million at September 30, 1999 versus $14.5 million at December 31, 1998, a decrease of $23.6 million. The decrease in working capital was primarily due to an increase of borrowings under the credit facility of $13.6 million, an increase in accrued expenses of $3.2 million, and an increase in deferred revenue of $6.5 million.
In February 1998, the Company adopted a stock repurchase program pursuant to which the Company was authorized to purchase, through open market transactions, privately negotiated transactions, or in such other manner as would comply with the provisions of the Securities Exchange Act of 1934, and the rules and regulations thereunder, up to one million shares of Class A Common Stock. This program expired in February 1999. No shares were purchased by the Company under the program.
In March 1999, the Company amended and restated its credit facility with The Chase Manhattan Bank, as Administrative Agent (Chase) (the Credit Facility) which was established in 1996. The Credit Facility, as presently in effect, consists of a revolving loan and letter of credit facility in an aggregate amount not to exceed $18.0 million for the Company. The maximum amount available for drawing under the Credit Facility is the sum of (1) the lesser of $10.0 million or 85% of the amount of the Companys receivables which are deemed eligible as a basis for obtaining credit and (2) an aggregate amount, not to exceed $8.0 million, which is secured by a collateralized guaranty of Dr. Rajendra Singh, Board member of the Company and Chairman of Telcom Ventures, to the extent that Dr. Singh has deposited the required collateral with Chase. Dr. Singh is not contractually committed to provide any collateral to Chase. The revolving loan commitment will expire in March 2000. The Company is currently engaged in discussions with Chase to modify the existing credit facility to eliminate the requirement for Dr. Singh to collateralize his guarantee of the $8.0 million portion of the loan facility.
In October 1999, the Company sold its discontinued products businesses. To date the Company has received cash proceeds from the transaction of $18.5 million. Additional cash proceeds may be payable upon completion of a post-closing purchase price adjustment, which is expected to occur by December 1999. Post-closing collections of certain of the accounts receivable sold as part of the sale of the discontinued business will also provide additional proceeds. The proceeds from the sale of the discontinued business was used to reduce the line of credit ($17.0 million) and fund current operating activities.
The Company borrowed a total of $19.1 million under the Credit Facility during the nine months ended September 30, 1999. Borrowings were made to fund construction of telecommunications towers and operations of the Company. In addition, approximately $2.3 million was outstanding under the portion of the Credit Facility for LCC Europe AS at September 30, 1999, and is included in net assets of discontinued operations in
15
Impact of the Year 2000 Issue
The year 2000 issue results from a programming convention in which computer programs use two digits rather than four to define the applicable year (the Year 2000 Issue). Software, hardware or firmware may recognize a date using 00 as the year 1900, rather than the year 2000. Such an inability of computer programs to recognize a year that begins with 20 could result in system failures, miscalculations or errors causing disruptions of operations or other business problems, including, among others, a temporary inability to process transactions, send invoices or engage in similar normal business activities.
The Company has undertaken a program to address the Year 2000 Issue with respect to the following (i) the Companys information technology and operating systems; (ii) the Companys non-information technology systems (such as buildings, plant, equipment and other infrastructure systems that may contain embedded microcontroller technology; (iii) certain systems of the Companys major vendors and material service providers (insofar as they relate to the Companys business activities with such parties); and (iv) the Companys material clients (insofar as the Year 2000 Issue relates to the Companys ability to provide services to such clients). The Company believes that it has substantially completed its Year 2000 modifications on mission critical applications.
Internal Systems. The Company has invested in the implementation and maintenance of accounting and reporting systems and equipment that are intended to enable the Company to provide adequately for its information and reporting needs and which are also Year 2000 compliant. Substantially all of the Companys internal systems have already been certified as Year 2000 compliant through testing or other mechanisms, and the Company has not delayed any systems projects due to the Year 2000 Issue. Management believes that the future costs associated with Year 2000 Issues for its internal systems will be insignificant and therefore not impact the Companys business, financial condition and results of operations.
Third Party Systems. The Company has initiated formal communications with all of its significant suppliers and large customers to determine the extent to which the Company is vulnerable to those third parties failure to remediate their own Year 2000 Issues. The third parties that responded have indicated that their hardware and/or software is or is expected to be Year 2000 compliant.
Contingency Plans. To address potential year 2000 failure, the Company has developed a contingency plan and will continue to work with its vendors to incorporate their updates into the Companys general plan.
Costs. The Company utilized both internal and external resources to reprogram, or replace, and test software for the Year 2000 modifications. The Company has not separately tracked the costs incurred in connection with the Year 2000 effort; however, total cost associated with the required modifications and conversions is not material to the Companys consolidated results of operations and financial position. The total costs of the program is being funded through operating cash flows.
Risks. Although the Companys Year 2000 efforts are intended to minimize the adverse effects of the Year 2000 Issue on the Companys business and operations, the actual effects of the issue and the success or failure of the Companys efforts described above cannot be known until the year 2000. Failure by the Company and its major vendors, other material service providers and material clients to address adequately their respective Year 2000 issues in a timely manner could have a material adverse effect on the Companys business, results of operations and financial condition.
16
PART II. OTHER INFORMATION
Item 1: Legal Proceedings
Albert Grimes et al. V LCC International, Inc. et al., Civil Action No. 16957-NC, in the Court of Chancery of the State of Delaware, Castle County. On February 12, 1999, the minority shareholders of the Companys majority-owned Microcell subsidiary filed a suit against the Company, the directors appointed by the Company to the Microcell Board and Microcell itself, seeking rescission of the shareholders agreement between the Company and the minority shareholders (which concerns management of Microcell, funding commitments and other matters), the appointment of a custodian or receiver, and unspecified monetary damages. The suit alleges, inter alia , breach of a fiduciary duty, usurpation of corporate opportunities, waste of Microcells corporate assets, tortious interference with Microcells prospective business relations, and violations of the shareholders agreement. On May 6, 1999, the Court ruled that the plaintiffs had served a demand letter on the Board of Directors and therefore, all the plaintiffs derivative claims were stayed pending the Boards review and consideration of the derivative claims. The Board of Directors retained advisory counsel in March 1999. On May 12, 1999, the Court dismissed plaintiffs motion for the appointment of a custodian or receiver. Plaintiffs filed an amended complaint on June 9, 1999, asserting that their claims for rescission and breach of the shareholders agreement and for the appointment of a custodian or receiver are direct claims. Defendants filed a motion to dismiss these claims which is pending. Plaintiffs also filed on June 9, 1999, a motion for a preliminary injunction on Microcells redemption of certain shares and a motion for leave to file a supplemental complaint. On July 27, 1999, the Court denied both motions. Plaintiffs then filed a motion for reargument or reconsideration which was denied on August 11, 1999. In late September 1999, advisory counsel to the Board of Directors presented its report, finding among other things, that all of the claims raised by the plaintiffs in their demand letter lacked legal merit. The Company continues to believe that the case is without merit, and intends to continue to contest the action vigorously. Since the Boards receipt of advisory counsels report, the parties have been engaged in discussions regarding an amicable resolution of their differences, and no further material action has been taken with respect to the litigation.
Not Applicable
Not Applicable
Not Applicable
Not Applicable
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
4 | Amendment to LCC International, Inc. 1996 Employee Stock Option Plan, dated as of July 27, 1999 |
*10 | Contract for Engineering and Construction of Terrestrial Repeater Network System, by and between XM Statellite Radio Inc. and LCC International, Inc. dated as of August 18, 1999 |
11 Calculation of Net Income Per Share
27.1 Financial Data Schedule
27.2 Financial Data Schedule
(b) Reports on Form 8-K
On July 5, 1999, the Company filed a current report on Form 8-K which reported that on July 13, 1999, the Company received notice of conversion of its subordinated debt. On November 8, 1999, the Company filed a current report on Form 8-K which reported the sale of the Companys products businesses on October 22, 1999.
17
Signature
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.
LCC International, Inc. and Subsidiaries | ||
Date: November 12, 1999 |
Signed: /s/ DAVID N. WALKER David N. Walker Senior Vice President, Treasurer and Chief Financial Officer |
18
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