UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998.
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
Commission File Number 000-23387
TELIGENT, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 54-1866562
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
8065 LEESBURG PIKE
VIENNA, VIRGINIA 22182
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (703) 762-5100
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: Yes [X] No [_].
The number of shares outstanding of each of the registrant's classes of common
stock as of August 10, 1998 was as follows:
Common Stock, Class A 8,167,590
Common Stock, Class B 44,426,299
<PAGE>
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets -
As of June 30, 1998 (unaudited) and December 31, 1997 3
Unaudited Condensed Statements of Operations -
For the three and six months ended June 30, 1998 and 1997
and for the period March 5, 1996 (date of inception) to
June 30, 1998 4
Condensed Statements of Shareholders' Equity (Deficit) For the
period March 5, 1996 (date of inception) to December 31,
1997, and for the six months ended June 30, 1998 (unaudited) 5
Unaudited Condensed Statements of Cash Flows For the six
months ended June 30, 1998 and 1997, and for
the period March 5, 1996 (date of inception) to June 30, 1998 6
Notes to Unaudited Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
PART II. OTHER INFORMATION
Item 2. Change in Securities and Use of Proceeds 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES
EXHIBIT INDEX
2
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
------- ------------------------------
TELIGENT, INC.
(a development stage company)
CONDENSED BALANCE SHEETS
(amounts in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
-------- ------------
1998 1997
---- ----
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 586,976 $ 424,901
Prepaid expenses and other current assets 5,330 7,087
Restricted cash and investments 30,016 30,373
------- -------
Total current assets 622,322 462,361
Property and equipment, net 71,673 8,186
Restricted cash and investments 50,736 64,702
Intangible assets, net 67,682 60,354
Other assets 851 777
------- -------
Total assets $ 813,264 $ 596,380
======= =======
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 48,886 $ 16,577
Accrued interest and other current liabilities 10,285 4,468
------- ------
Total current liabilities 59,171 21,045
11 1/2% Senior Notes, due 2007 300,000 300,000
11 1/2% Senior Discount Notes, due 2008 260,873 -
Other non-current liabilities 1,657 1,189
Commitments and contingencies
Stockholders' equity:
Preferred stock - -
Common stock 526 526
Additional paid-in capital 449,918 436,307
Deficit accumulated during the development stage (249,381) (151,687)
------- -------
201,063 285,146
Notes receivable from Executive (9,500) (11,000)
------- -------
Total stockholders' equity 191,563 274,146
------- -------
Total liabilities and stockholders' equity $ 813,264 $ 596,380
======= =======
</TABLE>
See notes to condensed financial statements.
3
<PAGE>
TELIGENT, INC.
(a development stage company)
CONDENSED STATEMENTS OF OPERATIONS
(amounts in thousands, except share and per share data)
(unaudited)
<TABLE>
<CAPTION>
Period from March 5,
--------------------
Three Months Ended Six Months Ended 1996 (date of inception)
------------------ ---------------- ------------------------
June 30, June 30, to June 30,
-------- -------- -----------
1998 1997 1998 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues:
Communications services $ 143 $ -- $ 241 $ -- $ 274
Management fees and other services -- 1,079 -- 1,714 4,664
Total revenues 143 1,079 241 1,714 4,938
Costs and expenses:
Cost of services 17,942 1,167 25,333 1,713 31,743
Sales, general and administrative
expenses 26,229 7,546 45,457 12,103 98,506
Stock-based compensation 6,923 35,790 13,554 37,873 100,374
Depreciation and amortization 2,080 80 3,653 167 10,271
------- ------- ------- ------- -------
Total costs and expenses 53,174 44,583 87,997 51,856 240,894
------- ------- ------- ------- -------
Loss from operations (53,031) (43,504) (87,756) (50,142) (235,956)
Interest and other income 10,170 46 18,266 49 21,518
Interest expense (16,274) (405) (28,204) (533) (34,943)
------- ------- ------- ------- -------
Net loss $ (59,135) $ (43,863) $ (97,694) $ (50,626) $ (249,381)
======= ======= ======= ======= =======
Net loss per share $ (1.12) $ (0.99) $ (1.86) $ (1.14) $ (5.21)
======= ======= ======= ======= =======
Weighted average common shares
outstanding 52,591,864 44,426,299 52,588,640 44,426,299 47,909,301
========== ========== ========== ========== ==========
</TABLE>
See notes to condensed financial statements.
4
<PAGE>
TELIGENT, INC.
(a development stage company)
CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
Period from March 5, 1996 (date of inception) to June 30, 1998
(amounts in thousands)
<TABLE>
<CAPTION>
Capital / --------------- Common Stock ----------------- /
Contributions A B-1 B-2 B-3 Total
------------- --- --- --- --- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at March 5, 1996 (date of inception) $ -- $ -- $ -- $ -- $ -- $ --
Member capital contributions 24,058
Notes receivable from Executive
Amortization of notes receivable from Executive
Net loss
------- ------- ------ ------ ------ ------
Balance at December 31, 1996 24,058 -- -- -- -- --
------- ------- ------ ------ ------ ------
Contribution of licenses from members 8,497
Acquisition 31,500
Cash contributions 100,301
Conversion of member interests
to capital stock (164,356) 19 214 172 23 428
Stock based compensation
Equity contribution prior to public offering 35 35
Public stock offering 63 63
Amortization of notes receivable from Executive
Net loss
------- ------- ------ ------ ------ ------
Balance at December 31, 1997 -- 82 214 172 58 526
------- ------- ------ ------ ------ ------
Exercise of stock options
Stock-based compensation
Amortization of notes receivable from Executive
Net loss
------- ------- ------ ------ ------ ------
Balance at June 30, 1998 (unaudited) $ -- $ 82 $ 214 $ 172 $ 58 $ 526
======= ======= ====== ====== ====== ======
<CAPTION>
Notes
Additional Receivable
Paid-in Accumulated From
Capital Deficit Executive Total
<S> <C> <C> <C> <C>
Balance at March 5, 1996 (date of inception) $ -- $ -- $ -- $ --
Member capital contributions 24,058
Notes receivable from Executive (15,000) (15,000)
Amortization of notes receivable from Executive 1,000 1,000
Net loss (13,633) (13,633)
------- ------- ------- --------
Balance at December 31, 1996 -- (13,633) (14,000) (3,575)
------- ------- ------- --------
Contribution of licenses from members 8,497
Acquisition 31,500
Cash contributions 100,301
Conversion of member interests
to capital stock 163,928 --
Stock based compensation 86,821 86,821
Equity contribution prior to public offering 59,965 60,000
Public stock offering 125,593 125,656
Amortization of notes receivable from Executive 3,000 3,000
Net loss (138,054) (138,054)
------- ------- ------- --------
Balance at December 31, 1997 436,307 (151,687) (11,000) 274,146
------- ------- ------- --------
Exercise of stock options 57 57
Stock-based compensation 13,554 13,554
Amortization of notes receivable from Executive 1,500 1,500
Net loss (97,694) (97,694)
------- ------- ------- --------
Balance at June 30, 1998 (unaudited) $ 449,918 $(249,381) $ (9,500) $ 191,563
======= ======= ======= ========
</TABLE>
See notes to condensed financial statements.
5
<PAGE>
TELIGENT, INC.
(a development stage company)
CONDENSED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
Period from March 5,
--------------------
Six Months Ended 1996 (date of inception) to
---------------- ---------------------------
June 30, June 30,
-------- --------
1998 1997 1998
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (97,694) $ (50,626) $ (249,381)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 3,653 167 10,271
Amortization of notes receivable from Executive 1,500 1,500 5,500
Amortization of discount on long-term debt 10,170 - 10,170
Amortization of debt issue costs 575 - 634
Other noncurrent liabilities 467 439 1,656
Stock-based compensation 13,554 37,873 100,374
Other (75) - (852)
Changes in current assets and current liabilities:
Prepaid expenses and other current assets (247) (3,512) (6,821)
Accounts payable 8,296 132 24,873
Accrued interest and other current liabilities 5,817 618 10,285
------- ------ -------
Net cash used in operating activities (53,984) (13,409) (93,291)
------- ------ -------
Cash flows from investing activities:
Restricted cash and investments 14,324 - (80,751)
Purchase of property and equipment (41,467) (3,468) (55,136)
Acquisitions and other investments - (5,770) (10,720)
------- ------ -------
Net cash used in investing activities (27,143) (9,238) (146,607)
------- ------ -------
Cash flows from financing activities:
Proceeds from bank borrowing - 23,000 42,500
Repayment of bank borrowing - - (42,500)
Members contributions - - 109,359
Equity contribution prior to public offering - - 60,000
Net proceeds from issuance of common stock - - 125,656
Proceeds from long-term debt 250,703 - 550,703
Debt financing costs (7,558) - (18,901)
Proceeds from exercise of stock options 57 - 57
------- ------ -------
Net cash provided by financing activities 243,202 23,000 826,874
------- ------ -------
Net increase in cash and equivalents 162,075 353 586,976
Cash and cash equivalents, beginning of period 424,901 1,303 -
------- ------ -------
Cash and cash equivalents, end of period $ 586,976 $ 1,656 $ 586,976
======= ====== =======
</TABLE>
See notes to condensed financial statements.
6
<PAGE>
TELIGENT, INC.
(a development stage company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
1. The Company
Teligent, Inc. ("Teligent" or the "Company") (a development stage
company) was formed in September 1997, as a wholly owned subsidiary of Teligent,
L.L.C. On November 21, 1997, concurrent with an initial public offering of the
Company's Class A Common Stock, Teligent, L.L.C. merged with and into the
Company (the "Merger") with the Company as the surviving entity. Teligent,
L.L.C. was originally formed in March 1996, by Microwave Services, Inc. ("MSI")
and Digital Services Corporation ("DSC"), both of which, through affiliates,
have extensive experience in pioneering wireless telecommunications businesses.
Prior to the Merger, Nippon Telegraph and Telephone Corporation ("NTT"), through
its wholly owned subsidiary NTTA&T, acquired a 5% interest in Teligent L.L.C.,
and immediately after the Merger acquired an additional 7.5% equity interest in
the Company. All of Teligent, L.L.C.'s member interests were converted into
shares of common stock upon the Merger in a manner proportionate to each
member's percentage interest in Teligent, L.L.C. immediately prior to the
Merger.
Teligent, currently in the development stage, intends to be a premier
provider of high quality, low cost voice, data, and video telecommunications
services primarily to small and medium sized businesses.
2. Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements included
herein have been prepared by the Company in accordance with the rules and
regulations of the Securities and Exchange Commission ("SEC"). In the opinion of
the Company's management, all adjustments and reclassifications of a normal and
recurring nature necessary to present fairly the financial position, results of
operations and cash flows for the periods presented have been made. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles ("GAAP")
have been condensed or omitted pursuant to SEC rules and regulations. These
condensed unaudited financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K for the period ended December 31, 1997 filed with the Securities
and Exchange Commission. The results of operations for the three and six months
ending June 30, 1998 are not necessarily indicative of the results that may be
expected for the full year.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Income Taxes
The Company uses the liability method of accounting for income taxes.
Deferred income taxes result from temporary differences between the tax basis of
assets and liabilities and the basis reported in the financial statements.
During the three and six months period ended June 30,
7
<PAGE>
1998, the Company did not record an income tax provision given the significant
operating losses and based on the fact that any resultant asset would be fully
reserved.
Net Loss Per Share
During 1997, the Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share", which
requires the Company to present basic and fully diluted earnings per share for
all years presented. For the period prior to 1998, the Company's net loss per
share calculation (basic and fully diluted), is based upon the number of common
shares outstanding immediately prior to the initial public offering, as if
outstanding for all periods presented similar to a stock split, plus the
weighted average common shares issued subsequent to the initial public offering.
The Company's 1998 net loss per share calculation (basic and fully diluted) is
based on the weighted average common shares outstanding. There are no
reconciling items in the numerator or denominator of the Company's net loss per
share calculation. Employee stock options have been excluded from the net loss
per share calculation because their effect would be anti-dilutive.
Comprehensive Income
Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting
of Comprehensive Income" ("SFAS No. 130"). SFAS No. 130 establishes standards
for the display of comprehensive income and its components in a full set of
financial statements. Comprehensive income includes all changes in equity during
a period except those resulting from the issuance of shares of stock and
distributions to shareholders. There were no differences between net loss and
comprehensive loss.
3. Supplemental Disclosure of Cash Flow Information
Investing Activities
During the six months ended June 30, 1998, the Company incurred capital
expenditures of approximately $65.5 million, of which $24.0 million was accrued,
and is not reflected in the accompanying condensed statement of cash flows.
4. Capital Stock
During the six months ended June 30, 1998, stock options were exercised
to purchase 9,931 shares of the Company's Class A Common Stock. The number of
shares of the Company's Class A Common Stock issued and outstanding as of June
30, 1998 was 8,166,341.
5. Discount Note Offering
On February 20, 1998, the Company completed an offering (the "Discount
Notes Offering") of $440 million 11 1/2% Senior Discount Notes due 2008 (the
"Senior Discount Notes"). The Senior Discount Notes carry zero-coupon interest
until March 1, 2003, after which the Senior Discount Notes pay interest at 11
1/2%, payable March 1 and September 1 through March 1, 2008. The Company
received approximately $243.1 million net proceeds from the Discount Notes
Offering, after deductions for offering expenses of approximately $7.6 million.
On July 10, 1998, the Company commenced an offer to exchange (the
"Exchange Offer") all outstanding Senior Discount Notes for 11 1/2% Series B
Senior Discount Notes due 2008 (the "New Discount Notes") which have been
registered under the Securities Act of 1933, as amended. The New Discount Notes
are identical in all material respects to the Senior Discount Notes except for
certain transfer restrictions, registration rights and certain liquidated
damages
8
<PAGE>
rights which rights will terminate upon consummation of the Exchange Offer. The
Exchange Offer expired on August 13, 1998 and all outstanding Senior Discount
Notes were exchanged for the New Discount Notes.
6. Subsequent Event
On July 2, 1998, the Company entered into a credit agreement providing
for facilities up to an aggregate of $800 million (the "Credit Agreement"). The
Credit Agreement is for working capital and general corporate purposes,
including the purchase of telecommunications equipment, software and services.
Availability of funds under the Credit Agreement is subject to certain
conditions as defined in the Credit Agreement. The Company's obligations under
the Credit Agreement are secured by substantially all of the assets of the
Company.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
------ ---------------------------------------------------------------
Results of Operations
---------------------
Except for any historical information contained herein, the matters
discussed in this quarterly report on Form 10-Q contain certain "forward-looking
statements" within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended, and should be read in conjunction with the Company's 1997
Annual Report on Form 10-K. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors including, but not limited to,
economic, key employee, competitive, governmental, regulatory and technological
factors affecting the Company's growth, operations, markets, products, services,
licenses and other factors discussed in the Company's other filings with the
Securities and Exchange Commission. These factors may cause the actual results,
performance or achievements of the Company, or industry results, to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Given these
uncertainties, prospective investors are cautioned not to place undue reliance
on such forward-looking statements.
Overview and Results of Operations
Teligent intends to capitalize on a convergence of technological,
regulatory and market developments to capture revenues in the estimated $110
billion business telecommunications market. Teligent's goal is to be a
full-service, integrated communications company that will offer small and
medium-sized business customers local, long distance, high-speed data and
Internet services over its own, digital wireless networks in 74 major
metropolitan areas in the United States.
The Company's business commenced on March 5, 1996, and the Company has
generated only nominal revenues from operations to date. Prior to the transfer
by MSI and DSC of their fixed wireless licenses to the Company in October 1997,
revenues and cash flows associated with customers using the fixed wireless
licenses were accounted for by MSI and DSC. Accordingly, Teligent's historic
revenues principally reflect certain management and administrative services to
MSI and DSC in connection with the development, construction and operation of
their 18 GHz and subsequently 24 GHz fixed wireless networks. The Company's
primary activities have focused on the acquisition of licenses and
authorizations, the acquisition of building access rights, the hiring of
management and other key personnel, the raising of capital, the acquisition of
equipment, the development of operating systems and the negotiation of
interconnection agreements.
The Company has experienced significant operating and net losses and
negative operating cash flow to date and expects to continue to experience
increasing operating and net losses and negative operating cash flow until such
time as it develops a revenue-generating customer base sufficient to fund
operating expenses. The Company expects that operating and net losses and
negative operating cash flow will increase significantly as the Company
implements its growth strategy. See "--Liquidity and Capital Resources."
Three Months Ended June 30, 1998 Compared to Three Months Ended June 30, 1997
The Company generated revenue from communications services of
approximately $0.1 million for the three months ended June 30, 1998. During the
three months ended June 30, 1997, the Company generated revenue of approximately
$1.1 million for management and other services under arrangements that ended
during 1997.
10
<PAGE>
Cost of services, consisting primarily of headcount-related costs and
site rent and acquisition expenses related to network operations, was
approximately $17.9 million for the three months ended June 30, 1998 as compared
with approximately $1.2 million for the corresponding period in 1997. This
increase reflects the Company's growth and development of its network
operations.
Sales, general and administrative expenses, consisting primarily of
headcount-related costs, were approximately $26.2 million for the three months
ended June 30, 1998, as compared with approximately $7.5 million for the
corresponding period in 1997. This increase relates primarily to additional
costs incurred on the commencement of operations and the development of the
Company's infrastructure.
Stock-based compensation expense, representing non-cash expense
associated with stock-based compensation, was approximately $6.9 million for the
three months ended June 30, 1998 as compared with approximately $35.8 million
for the corresponding period in 1997. The decrease is due to additional
compensation expense incurred in 1997 on Company Appreciation Rights granted
prior to the Company's initial public offering.
Depreciation and amortization for the three months ended June 30, 1998
was approximately $2.1 million as compared with approximately $0.1 million for
the corresponding period in 1997 due to higher capital expenditures and
amortization of intangibles acquired in the fourth quarter of 1997.
Interest and other income for the three months ended June 30, 1998, was
approximately $10.2 million, as compared with approximately $46,000 for the
corresponding period in 1997. This increase was primarily as a result of
interest earned on cash and investments.
Interest expense for the three months ended June 30, 1998 was
approximately $16.3 million, as compared with approximately $0.4 million for the
corresponding period in 1997. This increase was due to interest on the 11 1/2%
Senior Notes due 2007 issued in November 1997 (the "Senior Notes"), and the 11
1/2% Senior Discount Notes due 2008 issued in February 1998 (the "Senior
Discount Notes").
Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997
The Company generated revenue from communications services of
approximately $0.2 million for the six months ended June 30, 1998. During the
six months ended June 30, 1997, the Company generated revenue of approximately
$1.7 million for management and other services under arrangements that ended
during 1997.
Cost of services, consisting primarily of headcount-related costs and
site rent and acquisition expenses related to network operations, was
approximately $25.3 million for the six months ended June 30, 1998 as compared
with approximately $1.7 million for the corresponding period in 1997. This
increase reflects the Company's growth and development of its network
operations.
Sales, general and administrative expenses, consisting primarily of
headcount-related costs, were approximately $45.5 million for the six months
ended June 30, 1998, as compared with approximately $12.1 million for the
corresponding period in 1997. This increase relates primarily to additional
costs incurred on the commencement of operations and the development of the
Company's infrastructure.
11
<PAGE>
Stock-based compensation expense, representing non-cash expense
associated with stock-based compensation, was approximately $13.6 million for
the six months ended June 30, 1998 as compared with approximately $37.9 million
for the corresponding period in 1997. The decrease is due to additional
compensation expense incurred in 1997 on Company Appreciation Rights granted
prior to the Company's initial public offering.
Depreciation and amortization for the six months ended June 30, 1998
was approximately $3.7 million as compared with approximately $0.2 million for
the corresponding period in 1997 due to higher capital expenditures and
amortization of intangibles acquired in the fourth quarter of 1997.
Interest and other income for the six months ended June 30, 1998, was
approximately $18.3 million, as compared with approximately $49,000 for the
corresponding period in 1997. This increase was primarily as a result of
interest earned on cash and investments.
Interest expense for the six months ended June 30, 1998 was
approximately $28.2 million, as compared with approximately $0.5 million for the
corresponding period in 1997. This increase was due to interest on the Senior
Notes and the Senior Discount Notes.
The Company expects to generate significant operating and net losses
for the next several years.
Liquidity and Capital Resources
Discount Notes Offering
On February 20, 1998, the Company completed an offering (the "Discount
Notes Offering") of $440 million Senior Discount Notes. The Senior Discount
Notes carry zero-coupon interest until March 1, 2003, after which the Senior
Discount Notes pay interest at 11 1/2% per annum payable March 1 and September
1, through March 1, 2008. The Company received approximately $243.1 million in
net proceeds from the Discount Notes Offering, after deductions for offering
expenses of approximately $7.6 million.
On July 10, 1998, the Company commenced an offer to exchange (the "Exchange
Offer") all outstanding Senior Discount Notes for 11 1/2% Series B Senior
Discount Notes due 2008 (the "New Discount Notes") which have been registered
under the Securities Act of 1933, as amended. The New Discount Notes are
identical in all material respects to the Senior Discount Notes except for
certain transfer restrictions, registration rights and certain liquidated
damages rights which rights will terminate upon consummation of the Exchange
Offer. The Exchange Offer expired on August 13, 1998 and all outstanding Senior
Discount Notes were exchanged for the New Discount Notes.
Credit Facilities
On July 2, 1998, the Company entered into a credit agreement providing
for facilities up to an aggregate of $800 million (the "Credit Agreement"). The
Credit Agreement will be used primarily for the purchase of telecommunications
equipment, software and services and is also available for working capital and
general corporate purposes. Availability of funds under the Credit Agreement is
subject to certain conditions as defined in the Credit Agreement. The Company's
obligations under the Credit Agreement are secured by substantially all of the
assets of the Company.
12
<PAGE>
Historical Cash Flows
At June 30, 1998, the Company had working capital of $563.2 million and
cash and cash equivalents of $587.0 million, as compared to working capital of
$441.3 million and cash and cash equivalents of $424.9 million at December 31,
1997. The increase in working capital from December 31, 1997 to June 30, 1998 is
primarily the result of proceeds from the Discount Notes Offering. The buildout
of the Company's networks and the marketing of its services will require
significant capital and operating expenditures in the future.
The Company's total assets increased from $596.4 million as of December
31, 1997 to $813.3 million at June 30, 1998, due primarily to cash proceeds from
the Discount Notes Offering and capital expenditures. Property and equipment,
net of accumulated depreciation, comprised $71.7 million at June 30, 1998
compared to $8.2 million at December 31, 1997.
The Company intends to accelerate the launch of commercial service on
its digital wireless communications network earlier than previously planned. If
the Company is successful in accelerating these commercial launches, it may
result in increased operating and capital expenditures in 1998.
Cash used in operating activities totaled $54.0 million for the six
months ended June 30, 1998, due primarily to the operating loss for the period
reduced by non-cash compensation, amortization and depreciation, and other
charges. For the same period in 1997, the Company used cash in operations of
$13.4 million, due primarily to the operating loss for the period offset
primarily by non-cash stock-based compensation.
The Company used cash in investing activities of $27.1 million for the
six months ended June 30, 1998 relating primarily to the purchase of property
and equipment. For the same period in 1997, the Company used $9.2 million in
investing activities, consisting of $3.5 million relating to the purchase of
property and equipment and the remainder relating primarily to the acquisition
of FirstMark Communications, Inc.
The Company's cash flows provided by financing activities for the six
months ended June 30, 1998 were $243.2 million, consisting primarily of net
proceeds from the Discount Notes Offering, after costs of $7.6 million. For the
same period in 1997, cash flows from financing activities were $23.0 million
consisting of borrowings under a credit agreement that was terminated in
November 1997.
13
<PAGE>
PART II OTHER INFORMATION
Item 2. Change in Securities and Use of Proceeds
Change in Securities
On July 10, 1998, the Company commenced an offer to exchange (the "Exchange
Offer") all outstanding Senior Discount Notes for 11 1/2% Series B Senior
Discount Notes due 2008 (the "New Discount Notes") which have been registered
under the Securities Act of 1933, as amended. The New Discount Notes are
identical in all material respects to the Senior Discount Notes except for
certain transfer restrictions, registration rights and certain liquidated
damages rights which rights will terminate upon consummation of the Exchange
Offer. The Exchange Offer expired on August 13, 1998 and all outstanding Senior
Discount Notes were exchanged for the New Discount Notes.
Use of Proceeds
In November 1997, the Company completed an offering of 6,325,000 shares
of the Company's Class A Common Stock (the "Equity Offering"). The net proceeds
to the Company from the Equity Offering were approximately $125.7 million, after
deductions for offering expenses. As of June 30, 1998, the Company had used such
net proceeds, together with proceeds from capital contributions received prior
to the Equity Offering and with the proceeds from the Company's offering of $300
million 11 1/2% Senior Notes due 2007, and from the Company's Discount Notes
Offering, as follows: (i) $42.5 million to repay in full indebtedness
outstanding under the Company's credit facility, (ii) $93.9 million to purchase
Pledged Securities to provide for payment in full of the first six interest
payments due on the Senior Notes, (iii) $41.5 million for the purchase of
property and equipment, (iv) $17.7 million to pay interest on the Senior Notes
and (v) to fund general corporate purposes.
Item 5. Other Information
On July 17, 1998, the Federal Communications Commission released an
order unanimously affirming its March 1997 decision relocating Teligent's 18 GHz
DEMS licenses to the 24 GHz band.
On July 7, 1998, the U.S. District Court for the Northern District of
Texas granted the preliminary injunction sought by Teligent barring the city of
Dallas from requiring Teligent to obtain a franchise and pay "rights of way"
fees to offer communications services over its fixed wireless networks in the
city of Dallas.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Index
(b) Reports on Form 8-K
On August 13, 1998, the Company filed a report on Form 8-K
comprising items 5 and 7. The Report, dated July 6, 1998,
announced the closure of senior secured credit facilities for
$800 million underwritten by Chase Securities Inc., Goldman
Sachs Credit Partners L.P. and TD Securities (USA) Inc. These
facilities effectively replaced a $780 million vendor
financing commitment previously provided by Nortel (Northern
Telecom).
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TELIGENT, INC.
(Registrant)
Date: August 14, 1998 By: /s/ Abraham L. Morris
---------------------
Abraham L. Morris
Senior Vice President, Chief Financial
Officer and Treasurer
(Principal Financial Officer)
Date: August 14, 1998 By: /s/ Cindy L. Tallent
--------------------
Cindy L. Tallent
Vice President and Controller
(Principal Accounting Officer)
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit
3.1 Form of Certificate of Incorporation of Registrant,
filed as Exhibit 3.1 to the Company's Registration
Statement on Form S-1 (Registration No. 333-37381),
dated November 26, 1997, and incorporated herein by
reference.
3.2 Form of By-laws of Registrant, filed as Exhibit 3.2
to the Company's Registration Statement on Form S-1
(Registration No. 333-37381), dated November 26,
1997, and incorporated herein by reference.
4.1 Form of Indenture between the Registrant, as issuer,
and First Union National Bank, as Trustee, relating
to Registrant's Senior Discount Notes due 2008,
including form of Note, filed as Exhibit 4.4 to the
Company's Form of Annual Report on Form 10-K, filed
on March 31, 1998, and incorporated by reference
herein.
10.1 Registration Rights Agreement dated as of March 6,
1998, by and between Teligent, Inc., and Microwave
Services, Inc. filed as Exhibit 10.16 to the Company's
Form of Annual Report on Form 10-K, filed on March 31,
1998, and incorporated herein by reference.
10.2 Credit Agreement, dated July 2, 1998 among Teligent,
Inc., several banks and other financial institutions or
entities, Chase Securities Inc., Goldman Sachs Credit
Partners L.P. and TD Securities (USA) Inc., as advisers
and arrangers, Goldman Sachs Credit Partners L.P., as
syndication agent, The Chase Manhattan Bank, as
administrative agent and Toronto Dominion (Texas), Inc.
as documentation agent. filed as Exhibit 10 to the
Company's Form 8-K, filed on August 13, 1998, and
incorporated herein by reference.
27.1 Financial Data Schedule for the six months ended June
30, 1998 (filed only electronically with the Securities
and Exchange Commission).
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