<PAGE> 1
PRESS RELEASE
Exhibit 99
FOR IMMEDIATE RELEASE Contact: Tricia Drennan
Director of Corporate Communications
& Investor Relations
(703) 873-2390 (phone)
(703) 873-2300 (fax)
[email protected]
LCC INTERNATIONAL REPORTS RECORD REVENUE
AND STRONG OPERATING RESULTS
COMPANY PROVIDES PROJECTIONS FOR THE FOURTH QUARTER AND FULL YEAR 2001
<PAGE> 2
MCLEAN, VIRGINIA, November 1, 2000 -- LCC International, Inc., (NASDAQ: LCCI) a
global leader in wireless voice and data turn-key technical consulting services,
today reported a 124 percent increase in third-quarter revenue to $40.9 million,
compared with $18.2 in the same period in 1999. The Company continued its strong
sequential revenue growth trend by reporting in excess of a 19 percent quarter
over quarter increase.
Net income, excluding results from the Company's sale of its tower assets, was
$1.9 million in the third quarter compared to a ($1.2) million loss in the third
quarter of last year.
Earnings per share in the third quarter, excluding the results from the tower
sales, were $0.09 basic (on 20.4 million shares) and $0.09 fully diluted (on
22.4 million shares) compared to a loss of ($0.06) per basic and diluted share
(on 18.1 million shares) for the same period in the prior year.
"We continue to see strong demand for LCC's design and deployment services in
the global market which has translated into very strong financial results for
the Company. One milestone reached this quarter is the ability to fully fund our
growth and operations through internally generated cash flows," LCC chairman and
chief executive officer C. Thomas Faulders III said.
"We have added 8 new customers this quarter and have expanded our services with
existing customers. We see growing needs in both the wireless broadband and
mobile wireless markets, the former led by the U.S. and the latter throughout
the world. LCC is preparing for this growth and ensuring that its leadership
position in wireless design and deployment is maintained through expansion of
its service offering, increasing contract wins, and enhancement of its talent
pool."
The Company also indicated that it expects to continue the growth and
profitability trends experienced in the first nine months of 2000 into the
fourth quarter and full year 2001.
Commenting on LCC's financial outlook Faulders said, "The Company continues to
make great progress towards its goals. With the numerous contracts we currently
have in the sales pipeline along with current contracted backlog, we believe
that fourth quarter revenues
<PAGE> 3
will be approximately $50 million with associated earnings of $0.11 per share.
For the year 2001, we expect to see a top line growth between 25 percent and 30
percent over this year's results excluding any acquisitions. At this point, we
have visibility into about 86% of 2001 revenues. Additionally, we will continue
to make progress in performing to our profitability model such that we expect to
see gross margins between the 30 - 35 percent range and EBITDA margins of 15 -
20 percent as we exit 2001."
In response to SEC Regulation FD, LCC will be implementing certain modifications
to its disclosure policy. Performance and earnings projections will be provided
at each quarterly earnings conference call and in specific regulatory filings.
These forecasts will be as of the date of the call or filing, and the company
does not and will not undertake to update the projections prior to the next
earnings conference call.
Revenues for the nine months ended September 30, 2000 were $105.4 million, up
102 percent from the $52.1 million posted for the same period in 1999.
Net income for the nine months ended September 30, 2000, excluding the gain from
the Company's sale of its tower assets, was $3.7 million compared to a loss of
($6.2) million for the same period in 1999.
Earnings per share for the nine months ended September 30, 2000, excluding the
gain from the tower sales, were $0.18 basic (on 20.3 million shares) and $0.17
fully diluted (on 22.4 million shares) compared to a loss of ($0.38) per basic
and diluted share (on 16.5 million shares) for the same period in the prior
year. Basic and fully diluted earnings per share, including the gain realized
from the sale of the Company's tower assets, were $0.90 and $0.82 respectively.
LCC International, Inc. is a global leader in voice and data design, deployment
and management services to the wireless telecommunications industry. A pioneer
in the industry since 1983, LCC has performed technical services for the largest
wireless operators in North and South America, Europe, The Middle East, Africa
and Asia. The Company has worked with all major access technologies and has
participated in the success of some of the largest and most sophisticated
wireless systems in the world. Through an integrated set of technical business
consulting, training, design, deployment, operations and maintenance services,
LCC is unique in its ability to provide comprehensive turnkey services to
wireless operators around the world.
<PAGE> 4
Statements included in this news release which are not historical in nature are
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995 including, without limitation,
statements regarding increased demand for the Company's services, the Company's
ability to service existing business and secure new business, the company's
ability to recruit and retain professional staff, increased backlog, forecasts
of revenues, earnings estimates, and related information, all of which are based
on current factual information and certain assumptions which management believes
to be reasonable at this time. There are many risks, uncertainties and other
factors that can prevent the company from achieving its goals or cause the
company's results to differ materially from those expressed or implied by these
forward-looking statements including, without limitation, changes in demand for
the Company's services from external factors, the Company's dependence on hiring
and retaining professional staff and key personnel, fluctuations in quarterly
results, lengthy sales cycles, intense competition in the marketplace, and those
factors highlighted in LCC International, Inc.'s Annual Reports on Form 10-K and
Quarterly Reports on Form 10-Q. In providing projections and other
forward-looking statements, the Company does not make, and specifically
disclaims, any undertaking or obligation to update them at any time in the
future or at all.
<PAGE> 5
LCC INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- ----------------------
1999 2000 1999 2000
--------- ---------- --------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Services................................................................... $ 17,437 $ 40,912 $ 50,561 $ 104,359
Tower ownership and management............................................. 805 25 1,485 1,008
--------- ---------- --------- -----------
18,242 40,937 52,046 105,367
--------- ---------- --------- -----------
COST OF REVENUES:
Services................................................................... 13,091 29,886 37,053 76,326
Tower ownership and management............................................. 276 10 801 333
--------- ---------- --------- -----------
13,367 29,896 37,854 76,659
--------- ---------- --------- -----------
GROSS PROFIT.................................................................. 4,875 11,041 14,192 28,708
--------- ---------- --------- -----------
OPERATING EXPENSES:
Sales and marketing........................................................ 1,259 1,934 4,058 6,081
General and administrative................................................. 4,046 5,292 13,544 14,146
Tower portfolio sale and administration, net............................... - (889) - (26,195)
Depreciation and amortization.............................................. 955 621 2,495 2,213
--------- ---------- --------- -----------
6,260 6,958 20,097 (3,755)
--------- ---------- --------- -----------
OPERATING INCOME (LOSS)....................................................... (1,385) 4,083 (5,905) 32,463
--------- ---------- --------- -----------
OTHER INCOME (EXPENSE):
Interest income............................................................ 207 623 427 1,441
Interest expense........................................................... (428) (6) (2,023) (261)
Other expense.............................................................. (54) (287) (1,398) (850)
--------- ---------- --------- -----------
(275) 330 (2,994) 330
--------- ---------- --------- -----------
INCOME (LOSS) FROM OPERATIONS BEFORE INCOME TAXES............................. (1,660) 4,413 (8,899) 32,793
PROVISION (BENEFIT) FOR INCOME TAXES.......................................... (500) 2,509 (2,680) 14,429
--------- ---------- --------- -----------
NET INCOME (LOSS)............................................................. $ (1,160) $ 1,904 $ (6,219) $ 18,364
========= ========== ========= ===========
NET INCOME (LOSS) PER SHARE:
Basic...................................................................... $ (0.06) $ 0.09 $ (0.38) $ 0.90
======== ========== ======== ==========
Diluted.................................................................... $ (0.06) $ 0.09 $ (0.38) $ 0.82
======== ========== ======== ==========
NET INCOME (LOSS) PER SHARE EXCLUDING TOWER SALE: (1)
Basic...................................................................... $ (0.06) $ 0.09 $ (0.38) $ 0.18
======== ========== ======== ==========
Diluted.................................................................... $ (0.06) $ 0.09 $ (0.38) $ 0.17
======== ========== ======== ==========
WEIGHTED AVERAGE SHARES USED IN CALCULATION
OF NET INCOME (LOSS) PER SHARE:
Basic...................................................................... 18,133 20,417 16,487 20,320
========= ========== ========= ===========
Diluted.................................................................... 18,133 22,368 16,487 22,363
========= ========== ========= ===========
</TABLE>
NOTE (1) - Excludes the gain from the tower portfolio sale and a pro-rata
allocation for income taxes of $0.9 million for the quarter and $11.5 million
for the nine months. The provision for income taxes in the current quarter
reflects a $ 0.6 million adjustment (with $0.5 million attributable to the tower
sale), resulting from increasing in the current quarter the effective income tax
rate anticipated for the full year from 42% to 44%. The portion of the tax
adjustment attributable to the tower sale was determined by multiplying the
change in the effective tax rate by the gain realized during the first six
months of the year of $25.3 million.
<PAGE> 6
LCC INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1999 2000
-------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents................................................. $ 1,951 $ 24,495
Short-term investments.................................................... 86 15,556
Receivables, net of allowance for doubtful accounts of $7,860
and $1,751 at December 31, 1999 and September 30, 2000,
respectively:
Trade accounts receivable............................................ 15,052 25,406
Due from related parties and affiliates.............................. 836 1,402
Unbilled receivables................................................. 5,187 15,815
Deferred income taxes, net................................................ 5,083 2,958
Prepaid expenses and other current assets................................. 3,202 2,721
-------------- -------------
Total current assets................................................. 31,397 88,353
Property and equipment, net................................................... 37,762 5,432
Investments................................................................... 1,095 3,627
Deferred income taxes, net.................................................... 11,562 4,753
Other assets.................................................................. 1,052 571
-------------- -------------
$ 82,868 $ 102,736
============== =============
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Line of credit............................................................ $ 4,535 $ -
Accounts payable.......................................................... 4,565 3,821
Accrued expenses.......................................................... 7,567 7,202
Accrued employee compensation and benefits................................ 13,516 13,074
Deferred revenue.......................................................... 780 759
Income taxes payable...................................................... 5,844 4,517
Other current liabilities................................................. 2,629 864
-------------- -------------
Total current liabilities............................................ 39,436 30,237
Other liabilities......................................................... 1,006 6,000
-------------- -------------
Total liabilities.................................................... 40,442 36,237
-------------- -------------
Preferred stock:
10,000 shares authorized; -0- shares issued and outstanding............... - -
Class A common stock, $0.01 par value:
70,000 shares authorized; 11,630 and 12,003 shares issued and
outstanding at December 31, 1999 and September 30, 2000,
respectively........................................................... 116 120
Class B common stock, $0.01 par value:
20,000 shares authorized; 8,461 and 8,450 shares issued and
outstanding at December 31, 1999 and September 30, 2000,
respectively........................................................... 85 85
Paid-in capital............................................................... 85,846 91,377
Accumulated deficit........................................................... (38,999) (20,635)
Notes receivable from shareholders............................................ (3,025) (2,325)
-------------- -------------
Subtotal.................................................................. 44,023 68,622
Accumulated other comprehensive loss - foreign currency translation
adjustments............................................................... (1,597) (2,123)
-------------- -------------
Total shareholders' equity........................................... 42,426 66,499
-------------- -------------
$ 82,868 $ 102,736
============== =============
</TABLE>
<PAGE> 7
LCC INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1999 2000
---------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss).................................................................... $ (6,219) $ 18,364
Adjustments to reconcile income (loss) from continuing operations to
net cash provided by (used in) operating activities:
Depreciation and amortization................................................... 2,495 2,213
Deferred income taxes........................................................... - 13,789
Gain on sale of tower portfolio................................................. - (26,195)
Changes in operating assets and liabilities:
Trade, unbilled, and other receivables....................................... (231) (22,124)
Accounts payable and accrued expenses........................................ 2,280 (2,275)
Other current assets and liabilities......................................... 8,008 (2,528)
Other non-current assets and liabilities..................................... (7,668) (686)
--------- ---------
Net cash used in operating activities.................................................... (1,335) (19,442)
--------- ---------
Cash flows from investing activities:
Increase in short-term investments, net.............................................. - (15,470)
Purchases of property and equipment.................................................. (14,659) (3,425)
Proceeds from tower portfolio sale, net of expenses.................................. - 72,176
Purchase of minority interest........................................................ - (7,174)
Proceeds from sale of property and equipment......................................... - 209
Investments.......................................................................... (1,100) (2,532)
--------- ---------
Net cash provided by (used in) investing activities...................................... (15,759) 43,784
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of common stock, net.......................................... 361 435
Proceeds from exercise of options.................................................... 108 1,502
Payments on line of credit........................................................... (5,484) (14,235)
Proceeds from line of credit......................................................... 25,161 9,700
Repayment of loan from shareholder................................................... - 800
--------- ---------
Net cash provided by (used in) financing activities...................................... 20,146 (1,798)
--------- ---------
Net increase in cash and cash equivalents - continuing operations........................ 3,052 22,544
Net decrease in cash and cash equivalents - discontinued operations...................... (4,245) -
--------- ---------
Net increase in cash and cash equivalents................................................ (1,193) 22,544
Cash and cash equivalents at beginning of period......................................... 4,240 1,951
--------- ---------
Cash and cash equivalents at end of period............................................... $ 3,047 $ 24,495
========= =========
Supplemental disclosures of cash flow information:
Cash paid during the nine months for:
Interest........................................................................ $ 1,573 $ 148
Income taxes.................................................................... 2,760 1,980
</TABLE>
<PAGE> 8
RESULTS OF OPERATIONS
The following table and discussion provide information which management believes
is relevant to an assessment and understanding of the Company's 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.
<TABLE>
<CAPTION>
PERCENTAGE OF REVENUES
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------- ---------------------
1999 2000 1999 2000
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Revenues:
Services......................................... 95.6% 99.9% 97.1% 99.0%
Tower ownership and management................... 4.4 0.1 2.9 1.0
--------- -------- -------- ---------
Total revenues............................... 100.0 100.0 100.0 100.0
--------- -------- -------- ---------
Cost of revenues:
Services......................................... 71.8 73.0 71.2 72.4
Tower ownership and management................... 1.5 0.0 1.5 0.3
--------- -------- -------- ---------
Total cost of revenues....................... 73.3 73.0 72.7 72.7
--------- -------- -------- ---------
Gross profit:
Services......................................... 23.8 26.9 25.9 26.6
Tower ownership and management................... 2.9 0.1 1.4 0.7
--------- -------- -------- ---------
Total gross profit........................... 26.7 27.0 27.3 27.3
--------- -------- -------- ---------
Operating expenses:
Sales and marketing.............................. 6.9 4.7 7.8 5.8
General and administrative....................... 22.2 12.9 26.0 13.4
Tower portfolio sale and operations, net ........ - (2.2) - (24.9)
Depreciation and amortization.................... 5.2 1.5 4.8 2.1
--------- -------- -------- ---------
Total operating expenses..................... 34.3 16.9 38.6 (3.6)
--------- -------- -------- ---------
Operating income (loss)............................... (7.6) 10.1 (11.3) 30.9
--------- -------- -------- ---------
Other income (expense):
Interest income.................................. 1.1 1.5 0.8 1.4
Interest expense................................. (2.3) (0.0) (3.9) (0.2)
Other............................................ (0.3) (0.7) (2.7) (0.8)
---------- --------- -------- ---------
Total other income (expense)................. (1.5) 0.8 (5.8) 0.4
--------- -------- -------- ---------
Income (loss) from operations before
income taxes....................................... (9.1) 10.9 (17.1) 31.3
--------- -------- -------- ---------
Provision (benefit) for income taxes.................. (2.7) 6.1 (5.2) 13.7
--------- -------- -------- ---------
Net income (loss)..................................... (6.4)% 4.8% (11.9)% 17.6%
========= ======== ======== =========
</TABLE>
<PAGE> 9
THREE MONTHS ENDED SEPTEMBER 30, 1999
COMPARED TO
THREE MONTHS ENDED SEPTEMBER 30, 2000
REVENUES. Revenues for the three months ended September 30, 2000 were
$40.9 million compared to $18.2 million for the prior year, an increase of $22.7
million or 124%. Increased revenue in North America of $19.8 million was the
largest contributor to the growth, with the XM Satellite contract providing 67%
of the North American increase. Other North American growth of $6.6 million was
derived from radio frequency design ($1.6 million) and deployment ($5.0 million)
services. Also contributing to the increased revenue, was $4.1 million of
deployment services revenue generated in the Middle East.
COST OF REVENUES. Cost of revenues for the three months ended September
30, 2000 was $29.9 million compared to $13.4 million for the prior year, an
increase of $16.5 million or 124%. As a percentage of total revenues, cost of
revenues was 73.0% and 73.3% for 2000 and 1999, respectively.
GROSS PROFIT. Gross profit for the three months ended September 30, 2000
was $11.0 million compared to $4.9 million for the prior year, an increase of
$6.1 million or 126%. The gross profit increase is largely attributable to the
increase in revenues. As a percentage of total revenues, gross profit was 27.0%
and 26.7% for 2000 and 1999, respectively.
SALES AND MARKETING. Sales and marketing expenses were $1.9 million for
the three months ended September 30, 2000 compared to $1.3 million for the prior
year, an increase of $0.6 million. As a percentage of total revenues, sales and
marketing was 4.7% and 6.9% for 2000 and 1999, respectively. The increased
revenue from large, end-to-end service contracts enabled sales and marketing
costs to increase at a lower rate than revenue growth.
GENERAL AND ADMINISTRATIVE. General and administrative expenses were $5.3
million for the three months ended September 30, 2000 compared to $4.0 million
for the prior year, an increase of $1.3 million. The increase is attributed to
increased recruiting costs and human resources costs in Europe and North
America. As a percentage of total revenues general and administrative cost was
12.9% and 22.2% for 2000 and 1999, respectively. The increased revenue from
large, end-to-end service contracts enabled general and administrative costs to
increase at a lower rate than revenue growth.
TOWER PORTFOLIO SALE AND ADMINISTRATION. During February 2000, the
Company entered into an agreement for the sale of up to 197 tower sites owned or
to be constructed for a total purchase price of up to $80.0 million when the
sites are conveyed. During the current quarter, 7 tower sites were successfully
conveyed resulting in a net gain of $0.9 million.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense was
$0.6 million for the three months ended September 30, 2000 compared to $1.0
million for the prior year. The decrease is a result of a reduction in assets
due to the Company's tower portfolio sale.
INTEREST INCOME/EXPENSE. Interest income, net of interest expense, was
$0.6 million for the three months ended September 30, 2000 compared to an
expense of $0.2 million for the prior year. The interest expense in 1999 was
largely attributed to borrowings under the Company's credit facility to finance
the construction of towers. The proceeds from the sale of the towers in 2000
provided sufficient proceeds to repay the Company's credit facility and provide
cash reserves that generated interest income.
OTHER EXPENSE. Other expense was $0.3 million for the three months ended
September 30, 2000 compared to an expense of $0.06 million for the prior year.
The other expense in the current quarter is attributable to losses using the
equity method of accounting for the Company's 19.9% investment in Tecnosistemi
of $0.1 million and to foreign currency losses of $0.2 million.
PROVISION (BENEFIT) FOR INCOME TAXES. The provision for income taxes was
$2.5 million for the three months ended September 30, 2000 compared to a benefit
of $0.5 million for the prior year. The provision for income taxes was recorded
for the three months ended September 30, 2000 using an effective income tax rate
of 56.9%. The effective income tax rate for the quarter reflects an increase in
the effective income tax rate for the year from 42% to 44%, reflecting a change
in estimated non-deductible expenses resulting from the tower portfolio sale.
The benefit for income taxes was recorded in 1999 based on an effective income
tax rate of 30.1%. The change in effective income tax rates is due both to the
impact of the sale of the telecommunication tower portfolio and to the
conversion of the MCI note during the third quarter of 1999.
NET INCOME (LOSS). Net income was $1.9 million for the three months ended
September 30, 2000 compared to a loss of $1.2 million for the prior year. The
increase in net income was due to the increase in gross profit generated by
revenue growth.
<PAGE> 10
NINE MONTHS ENDED SEPTEMBER 30, 1999
COMPARED TO
NINE MONTHS ENDED SEPTEMBER 30, 2000
REVENUES. Revenues for the nine months ended September 30, 2000 were
$105.4 million compared to $52.1 million for the prior year, an increase of
$53.3 million or 102%. Increased revenue in North America of $46.0 million was
the largest contributor to the growth, with the XM Satellite contract providing
77% of the North American increase. Other North American growth of $10.7 million
was derived from radio frequency design ($4.0 million) and deployment ($6.7
million) services. Also contributing to the increased revenue, was $11.7 million
of deployment services revenue generated in the Middle East, offset by declines
in Central and Latin America ($4.1 million).
COST OF REVENUES. Cost of revenues for the nine months ended September
30, 2000 was $76.7 million compared to $37.9 million for the prior year, an
increase of $38.8 million or 103%. As a percentage of total revenues, cost of
revenues was 72.7% for both September 30, 2000 and 1999.
GROSS PROFIT. Gross profit for the nine months ended September 30, 2000
was $28.7 million compared to $14.2 million for the prior year, an increase of
$14.5 million or 102%. The gross profit increase is largely attributable to the
increase in revenues. As a percentage of total revenues, gross profit was 27.3%
for both September 30, 2000 and 1999.
SALES AND MARKETING. Sales and marketing expenses were $6.1 million for
the nine months ended September 30, 2000 compared to $4.1 million for the prior
year, an increase of $2.0 million. As a percentage of total revenues, sales and
marketing was 5.8% and 7.8% for 2000 and 1999, respectively. The increased
revenue from large, end-to-end service contracts enabled sales and marketing
costs to increase at a lower rate than revenue growth.
GENERAL AND ADMINISTRATIVE. General and administrative expenses were
$14.1 million for the nine months ended September 30, 2000 compared to $13.5
million for the prior year, an increase of $0.6 million. As a percentage of
total revenues general and administrative cost was 13.4% and 26.0% for 2000 and
1999, respectively. General and administrative expenditures as a percent of
revenue were unusually high due to large legal expenditures in 1999 relative to
litigation with minority shareholders of Microcell and support relative to the
sale of discontinued operations. Additionally, the increased revenue from large,
end-to-end service contracts enabled general and administrative costs to
increase at a lower rate than revenue growth.
TOWER PORTFOLIO SALE AND ADMINISTRATION. During February 2000, the
Company entered into an agreement for the sale of up to 197 tower sites owned or
to be constructed for a total purchase price of up to $80.0 million when the
sites are conveyed. Through the end of September 2000, 177 tower sites were
successfully conveyed resulting in a net gain of $26.2 million.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense was
$2.2 million for the nine months ended September 30, 2000 compared to $2.5
million for the prior year. The decrease is a result of a reduction in assets
due to the Company's tower portfolio sale.
INTEREST INCOME/EXPENSE. Interest income, net of interest expense, was
$1.2 million for the nine months ended September 30, 2000 compared to an expense
of $1.6 million for the prior year. The interest expense in 1999 was largely
attributed to borrowings under the Company's credit facility to finance the
construction of towers. The proceeds from the sale of the towers in 2000
provided sufficient proceeds to repay the Company's credit facility and provide
cash reserves that generated interest income.
OTHER EXPENSE. Other expense was $0.9 million for the nine months ended
September 30, 2000 compared to an expense of $1.4 million for the prior year.
The other expense in the current year is attributable to losses using the equity
method of accounting for the Company's 19.9% investment in Tecnosistemi of $0.8
million and to foreign currency losses of $0.4 million, offset by a one-time
gain of $0.3 million. The loss in 1999 was largely driven by foreign currency
transaction losses of approximately $1.4 million relative to the Company's Latin
America operations.
PROVISION (BENEFIT) FOR INCOME TAXES. The provision for income taxes was
$14.4 million for the nine months ended September 30, 2000 compared to a benefit
of $2.7 million for the prior year. The provision for income taxes was recorded
for the nine months ended September 30, 2000 using an effective income tax rate
of 44.0%. The effective income tax rate in excess of the statutory rate reflects
the effect of non-deductible expenses resulting from the tower portfolio sale.
The benefit for income taxes was recorded in 1999 based on an effective income
tax rate of 30.1%. The change in effective income tax rates is due both to the
impact of the sale of the telecommunication tower portfolio and to the
conversion of the MCI note during the third quarter of 1999.
NET INCOME (LOSS). Net income was $18.4 million for the nine months ended
September 30, 2000 compared to a loss of $6.2 million for the prior year. The
increase in net income was due to income generated from the sale of the
telecommunications towers conveyed during the year and additional gross profit
generated by increased revenue.
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $24.5 million at September 30, 2000
compared to $2.0 million at December 31, 1999, an increase of $22.5 million.
Cash combined with short-term investments at September 30, 2000 provides total
liquid assets of $40.0 million. This increase in liquidity stems from cash
received from the tower portfolio sale of 72.2 million. The tower proceeds were
largely used to acquire minority shareholder interests in the tower subsidiary
($7.2 million), eliminate debt ($4.5 million), make strategic investments ($2.5
million) and fund operating activities (19.4 million). Cash used in operating
activities was primarily related to receivable growth as a result of increased
revenue.
Working capital was 58.1 million at September 30, 2000 compared to $(8.0)
million at December 31, 1999, and increase of $66.1 million. The increase in
working capital was primarily due to the proceeds received-to-date from the sale
of the Company's telecommunication tower portfolio. The Company believes it has
sufficient working capital for the next year.
OTHER FINANCIAL INFORMATION
Backlog was $146.8 million as of September 30, 2000. In addition to backlog the
Company derives significant revenue from Master Service Agreements and similar
arrangements. Work derived under such arrangements do not provide a long-term
contractual commitment and therefore are excluded from backlog calculations.
Revenue derived from major accounts under such agreements for the nine and three
months ended September 30, 2000 was 12% and 9% of total revenue, respectively.
The principal portion of the Company's present backlog arises from XM satellite,
which represents approximately $75 million or 51% of the overall backlog. Our
contracts typically have provisions that permit customers to terminate their
contracts under various circumstances, which includes our nonperformance or for
customer convenience. With respect to the Company's Tower Services Agreement
with Pinnacle Tower Inc., the contract provides that on an annual basis, either
party may request a renegotiation of the pricing and scope of services.
Therefore, there are no guarantees the current contract will generate specified
revenues or the minimum payments of $10.0 million per year over the next five
years.
Employee headcount at September 30, 2000 was 880, an increase of 46.7% relative
to December 31, 1999.
