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 September 30, 2000.
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
SUITE 400
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 November 6, 2000 was as follows:
Common Stock, Class A 42,423,082
Common Stock, Class B 21,260,610
<PAGE>
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
As of September 30, 2000 (unaudited) and December 31, 1999 3
Unaudited Condensed Consolidated Statements of Operations -
for the three and nine months ended September 30, 2000 and 1999 4
Unaudited Condensed Consolidated Statements of Cash Flows -
for the nine months ended September 30, 2000 and 1999 5
Notes to Unaudited Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
Item 3. Quantitative and Qualitative Disclosure About Market Risk 15
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES
EXHIBIT INDEX
<PAGE>
TELIGENT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- -------------
Assets (Unaudited)
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 171,993 $ 440,293
Short-term investments 126,057 116,610
Accounts receivable, net 33,390 12,673
Prepaid expenses and other current assets 28,170 17,914
Restricted cash and investments 23,401 38,224
------------- -------------
Total current assets 383,011 625,714
Property and equipment, net of accumulated
depreciation of $124,994 and $56,404,
respectively 564,083 402,989
Intangible assets, net of accumulated
amortization of $27,539 and $15,979,
respectively 197,473 96,418
Investments in and advances to international
ventures and other assets 33,447 6,722
------------- -------------
Total assets $ 1,178,014 $ 1,131,843
============= =============
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable $ 73,575 $ 239,139
Accrued expenses 62,571 43,869
------------- -------------
Total current liabilities 136,146 283,008
Long-term debt 1,215,203 808,799
Other noncurrent liabilities 9,346 3,165
Series A preferred stock 509,935 478,788
Commitments and contingencies
Stockholders' deficit:
Common stock 637 547
Additional paid-in capital 816,803 519,607
Accumulated deficit (1,510,056) (962,071)
------------- -------------
Total stockholders' deficit (692,616) (441,917)
------------- -------------
Total liabilities and stockholders'
deficit $ 1,178,014 $ 1,131,843
============= =============
</TABLE>
See notes to condensed consolidated financial statements
<PAGE>
TELIGENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
--------------------- --------------------
2000 1999 2000 1999
---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Communications services $ 42,669 $ 10,320 $ 97,997 $ 15,805
Costs and expenses:
Cost of services 62,007 56,874 225,449 134,816
Sales, general and administrative 72,807 56,794 189,264 152,336
Stock-based and other noncash
compensation 6,470 7,830 22,541 23,631
Depreciation and amortization 25,720 12,821 68,869 30,304
---------- --------- --------- ---------
Total costs and expenses 167,004 134,319 506,123 341,087
---------- --------- --------- ---------
Loss from operations (124,335) (123,999) (408,126) (325,282)
Interest income 6,983 5,084 20,211 14,466
Interest expense (48,469) (24,248) (98,686) (63,923)
Other expense (62,290) (477) (61,384) (486)
---------- --------- --------- ---------
Net loss (228,111) (143,640) (547,985) (375,225)
Accrued preferred stock dividends
and amortization of issuance
costs (10,527) - (31,146) -
---------- --------- --------- ---------
Net loss applicable to common
stockholders $(238,638) $(143,640) $(579,131) $(375,225)
========== ========== ========== ==========
Basic and diluted net loss per
common share $ (3.88) $ (2.66) $ (9.88) $ (7.06)
========== ========== ========== ==========
Weighted average common shares
outstanding 61,469 54,013 58,621 53,177
========== ========== ========== ==========
</TABLE>
See notes to condensed consolidated financial statements
<PAGE>
TELIGENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
<TABLE>
<CAPTION> Nine months ended
September 30,
-------------------------
2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(547,985) $(375,225)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 68,869 30,304
Loss on write-down of available-for-sale
securities 60,671 -
Accretion of senior discount notes and other
amortization 30,045 27,196
Stock-based and other noncash compensation 22,541 23,631
Losses in equity of affiliates 1,628 -
Changes in current assets and current liabilities:
Accounts receivable (15,596) (7,104)
Prepaid expenses and other current assets (8,963) (8,409)
Accounts payable (161,357) 18,824
Accrued expenses 5,786 22,934
----------- -----------
Net cash used in operating activities (544,361) (267,849)
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (218,086) (137,730)
Purchase of short-term investments (106,997) (98,988)
Maturity of short-term investments 97,550 10,326
Investment in and advances to international
ventures (30,876) -
Cash paid for acquisitions, net of cash acquired (29,345) (2,498)
Restricted cash and investments 16,135 10,347
Other 1,928 (354)
----------- -----------
Net cash used in investing activities (269,691) (218,897)
----------- -----------
Cash flows from financing activities:
Proceeds from long-term debt 350,000 200,000
Proceeds from common stock offering 189,935 -
Proceeds from exercise of stock options 7,795 9,991
Other (1,978) (689)
----------- -----------
Net cash provided by financing activities 545,752 209,302
----------- -----------
Net decrease in cash and equivalents (268,300) (277,444)
Cash and cash equivalents, beginning of period 440,293 416,247
----------- -----------
Cash and cash equivalents, end of period $ 171,993 $ 138,803
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 82,556 $ 55,431
=========== ===========
Accrued preferred stock dividends and
amortization of issuance costs $ 31,146 $ -
=========== ===========
</TABLE> See notes to condensed consolidated financial statements
<PAGE>
TELIGENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The Company
Teligent, Inc. ("Teligent" or the "Company") is a full-service,
facilities-based communications company offering business customers local and
long-distance, high-speed data and dedicated Internet access services over the
Company's digital SmartWave(TM) local networks and also provides network
integration and teleconferencing services. The Company's SmartWave(TM) local
networks integrate advanced fixed wireless technologies with traditional
broadband wireline technology.
The Company has established several international ventures with local
partners in foreign countries. These ventures have acquired fixed wireless
spectrum licenses in order to build and operate wireless communications
facilities in those countries.
2. Significant Accounting Policies
Basis of Presentation
The Company, in accordance with the rules and regulations of the
Securities and Exchange Commission ("SEC"), has prepared the unaudited condensed
consolidated financial statements included herein. 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 consolidated 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, 1999
filed with the SEC. The results of operations for the three and nine months
ended September 30, 2000 are not necessarily indicative of the results that may
be expected for the full year.
Consolidation
The condensed consolidated financial statements include the accounts of
the Company and its subsidiaries after elimination of all significant
intercompany transactions. International ventures are accounted for by the
equity method where common stock ownership is at least 20% and not more than
50%, or the Company is unable to exercise effective control.
Reclassifications
Certain amounts in prior period financial statements have been
reclassified to conform to the current period presentation.
<PAGE>
TELIGENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
3. Comprehensive Loss
Comprehensive loss includes net loss and foreign currency translation
adjustments. The components of other comprehensive loss are as follows (amounts
in thousands):
Three months ended Nine months ended
September 30, September 30,
--------------------- ---------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
Loss applicable to common
shareholders $(238,638) $(143,640) $(579,131) $(375,225)
Other comprehensive loss:
Foreign currency translation
adjustments (1,520) - (1,520) -
---------- ---------- ---------- ----------
Comprehensive loss applicable to
common shareholders $(240,158) $(143,640) $(580,651) $(375,225)
========== ========== ========== ==========
4. Long-Term Debt
On August 1, 2000, the Company borrowed an additional $350 million on
its existing credit facility. As of September 30, 2000, the Company had a $550
million outstanding loan balance under its existing credit facility.
5. Convertible Redeemable Preferred Stock
The Company has authorized 10,000,000 shares of preferred stock, of
which 529,289 shares and 500,000 shares of its 7 3/4% Series A cumulative
convertible preferred stock, liquidation preference of $1,000 per share, par
value $.01 per share ("Series A Preferred Stock"), were issued and outstanding
at September 30, 2000 and December 31, 1999, respectively.
6. Capital Stock
The Company has authorized two classes of common stock, Class A Common
Stock and Class B common stock, par value $.01 per share ("Class B Common
Stock"), consisting of three series, Class B Series 1 common stock ("Series
B-1"), Class B Series 2 common stock ("Series B-2") and Class B Series 3 common
stock ("Series B-3"). The number of shares authorized, issued and outstanding at
September 30, 2000 and December 31, 1999, for each class of common stock is
summarized below:
September 30, December 31,
2000 1999
---------------------------- ----------------------------
Par Shares Shares Issued Shares Shares Issued
Class Value Authorized and Outstanding Authorized and Outstanding
---------- ----- ---------- --------------- ----------- ----------------
A $.01 500,000,000 42,423,082 200,000,000 10,281,667
Series B-1 .01 - - 30,000,000 21,436,689
Series B-2 .01 50,000,000 15,477,210 25,000,000 17,206,210
Series B-3 .01 20,000,000 5,783,400 10,000,000 5,783,400
<PAGE>
TELIGENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
In January 2000, as a result of Liberty Media Corporation's acquisition
of The Associated Group, Inc., all of the outstanding shares of Series B-1 owned
by The Associated Group, Inc. were converted into 21,436,689 shares of Class A
Common Stock, and the Series B-1 shares were subsequently cancelled.
7. Other Transactions
During the nine months ended September 30, 2000, the Company acquired
several communications companies (the "2000 Transactions"). The combined
purchase price of the 2000 Transactions consisted of 2,822,154 shares of Class A
Common Stock valued at $47.2 million at the time of issuance and cash payments
totaling $30.4 million. If specific earnout provisions, consisting of certain
revenue and other benchmark targets, are met over the next three years, the
Company would be obligated to make additional cash payments and Class A Common
Stock issuances. The 2000 Transactions were accounted for as purchases with
approximately $113.8 million being assigned to acquired intangibles, which is
being amortized on a straight-line basis over a period from 5-15 years.
Significant non-cash investing and financing activities and certain supplemental
disclosures resulting from acquisitions are as follows (amounts in thousands):
Nine months ended
September 30,
------------------------
2000 1999
--------- ---------
Cash paid for acquisitions, net of cash acquired:
Recorded value of assets acquired $ 22,972 $ 1,759
Identified intangibles 113,813 16,787
Net liabilities assumed (60,215) (2,878)
Common stock issued in acquisitions (47,225) (13,170)
--------- ---------
$ 29,345 $ 2,498
========= =========
In July 2000, the Company closed an investment in ICG Communications,
Inc. ("ICG"), whereby a subsidiary of the Company acquired 2,996,076 shares of
ICG common stock in exchange for one million shares of Class A Common Stock (the
"ICG Transaction"). The value of the Company's investment in ICG as of the
closing date was $62.0 million. Subsequent to the closing date of the ICG
Transaction, the market value of ICG common stock decreased significantly, and
the Company has concluded that the decline is other than temporary. Accordingly,
the Company has written its investment in ICG common stock down to its market
value, which management believes approximates fair value. At September 30, 2000,
the market value of the investment in ICG common stock was $1.3 million and
Teligent realized a loss on this investment of $60.7 million.
In September 2000, the Company resolved an outstanding liability with
one of its vendors. This transaction resulted in a reduction of
telecommunications costs (cost of services) of $27.9 million for the three
months ended September 30, 2000, and will result in a reduction of $11.8 million
in the three months ended December 31, 2000. Additionally, the transaction
resulted in the payment of $17.3 million in interest to the vendor.
<PAGE>
TELIGENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
8. Subsequent Event
On November 8, 2000, the Company announced a workforce reduction
associated with its efforts to realign its sales, operations and real estate
organizations. As a result of this work force reduction and organizational
realignment, the Company expects to record a charge of approximately $13 million
in the quarter ended December 31, 2000.
<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 Private Securities
Litigation Reform Act of 1995, and should be read in conjunction with our 1999
Annual Report on Form 10-K for the fiscal year ended December 31, 1999. The
words "anticipate," "believe," "estimate," "expect," "plan," "intend" and
similar expressions, as they relate to the Company, are intended to identify
forward-looking statements. Such statements reflect our current views with
respect to future events and involve known and unknown risks, uncertainties and
other factors. The Company cannot be sure that any of its expectations will be
realized. Factors that may cause actual results, performance or achievements of
the Company, or industry results, to differ materially from those contemplated
by such forward-looking statements, include, without limitation: (1) the
Company's ability to meet its existing debt service obligations and the
availability of additional funds to pursue the Company's business plan; (2) the
Company's pace of entry into new domestic and international market areas and the
ability to secure building access; (3) the Company's success in obtaining
spectrum licenses in international markets and the ability of the Company to
negotiate definitive agreements with its international joint venture partners;
(4) the time and expense required to build the Company's planned network; (5)
the Company's ability to integrate and maintain internal management, technical
information and accounting systems; (6) the Company's ability to hire and retain
qualified personnel to operate its business; (7) the impact of changes in
telecommunication laws and regulations; (8) the Company's success in gaining
regulatory approval for its products and services, when required; (9) the
Company's ability to successfully interconnect with the incumbent carriers; (10)
the timely supply of necessary equipment; (11) the Company's ability to adjust
to rapid changes in technology and to prevent misappropriation of its
technology; (12) the intensity of competition in the markets in which we provide
service and the Company's ability to attract and retain a sufficient number of
revenue-generating customers in such markets; and (13) general economic
conditions and the condition of the financial markets, particularly within the
communications and technology sectors which have historically been more volatile
than the markets generally. Given these uncertainties, prospective investors are
cautioned not to place undue reliance on such forward-looking statements.
The forward-looking statements are included in, without limitation,
"Overview", "Results of Operations" and "Liquidity and Capital Resources." In
the preparation of our financial statements, we also make various estimates and
assumptions that are forward-looking statements.
In this Quarterly Report on Form 10-Q, we refer to Teligent, Inc., a
Delaware corporation, as "Teligent," the "Company," "we," "us," and "our." Where
applicable, such references refer to Teligent's limited liability company
predecessor.
The following discussion should be read in connection with the attached
condensed consolidated financial statements and notes thereto, and with our
audited financial statements and notes thereto as of and for the year ended
December 31, 1999, included in our Annual Report on Form 10-K.
<PAGE>
Overview
Teligent offers business customers local, long distance, high-speed
data and dedicated Internet services over our digital SmartWave(TM) local
networks and provides network integration and teleconferencing services. Our
SmartWave(TM) local networks integrate fixed wireless technologies with
traditional broadband wireline technology. By integrating these technologies, we
believe we are able to increase local network efficiency and significantly lower
network costs. We have also established international ventures with local
partners in foreign countries. These ventures have acquired fixed wireless
spectrum licenses and are in the process of building and operating wireless
communications facilities in foreign countries.
Our operating losses, as well as our negative operating cash flow, have
been significant to date, and we expect both to continue for several years
until we develop a customer base that will generate sufficient revenues to fund
operating expenses. We expect to have positive operating margins over time by
increasing the number of customers and selling them additional capacity or
services without significantly increasing related capital expenditures, costs
of building access rights and other operating costs. Our ability to generate
positive cash flow will depend in part on the extent of capital expenditures in
current and new market areas, including international expansion, competition in
our current market areas and any potential adverse regulatory developments.
Various financing sources will be required to fund our growth as well as cover
our expected losses from operations.
Results of Operations
Three and Nine Months Ended September 30, 2000 Compared to Three and Nine Months
Ended September 30, 1999
Teligent's revenues grew by $32.4 million, or 315%, to $42.7 million
for the three months ended September 30, 2000, from $10.3 million for the
corresponding period in 1999. For the nine months ended September 30, 2000,
revenues increased by $82.2 million, or 520%, to $98.0 million from $15.8
million for the corresponding prior year period. These increases are due to
revenue attributable growth in our customer base, acquisitions and continued
expansion into new markets.
Revenues, exclusive of revenues from entities acquired during 2000,
increased by $19.7 million, or 191%, to $30.0 million and by $61.5 million, or
389%, to $77.3 million during the three and nine months ended September 30,
2000, respectively, as compared to the corresponding prior year period. This
revenue growth is due to increases in the number of service lines in existing
market areas and expansion into new markets. As of September 30, 2000, Teligent
served approximately 34,200 customers, compared to approximately 7,500 customers
at September 30, 1999. Revenues from entities acquired during 2000 totaled $12.7
million and $20.7 million for the three and nine months ended September 30,
2000, respectively.
<PAGE>
Our revenues are comprised of the following (amounts in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30,
--------------------- ----------------------
2000 1999 2000 1999
--------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Local $ 9,167 $ 1,648 $ 21,292 $ 2,432
Long distance 21,368 6,221 51,121 9,987
Data and Other 12,134 2,451 25,584 3,386
--------- ----------- --------- ----------
Total revenue $ 42,669 $ 10,320 $ 97,997 $ 15,805
========= =========== ========= ==========
</TABLE>
o Local service revenues increased by $7.6 million, or 475%, and
$18.9 million, or 788%, for the three and nine month periods ended
September 30, 2000, respectively, compared to the corresponding
periods from 1999. These increases are primarily due to the
installation of customer lines and growth in our customer base and
continued expansion into new markets.
o Long distance service revenues increased by $15.1 million, or
243%, and $41.1 million, or 411%, for the three and nine month
periods ended September 30, 2000, respectively, compared to the
corresponding periods from 1999. These increases are a result of
internal growth in our customer base, revenue attributable to
acquisitions and continued expansion into new markets.
o Data and other service revenues increased by $9.7 million, or
388%, and $22.2 million, or 653%, for the three and nine month
periods ended September 30, 2000, respectively, compared to the
corresponding periods from 1999. This growth is attributable to
acquisitions of companies that provide data and other services and
internal growth in our customer base.
Cost of services, consisting primarily of telecommunications expenses,
operating personnel costs and site acquisition and rent expenses, increased by
$5.1 million, or 9%, to $62.0 million from $56.9 million and increased by $90.6
million, or 67%, to $225.4 million from $134.8 million for the three and nine
months ended September 30, 2000, respectively, as compared to the corresponding
prior year periods. These increases are primarily due to the costs of
provisioning higher volumes of telecommunications and data traffic over our
networks and the increased number of market areas that we initiated service in
during these periods, partially offset by the reduction in telecommunications
costs totaling $27.9 million from the aforementioned transaction reached with
one of the Company's major vendors. Increases in personnel related costs, site
rent and utility expenses related to our expansion into new markets and services
also contributed to the increase in cost of services for these periods.
Sales, general and administrative expenses increased by $16.0 million,
or 28%, to $72.8 million from $56.8 million and increased by $37.0 million, or
24%, to $189.3 million from $152.3 million for the three and nine months ended
September 30, 2000, respectively, as compared to the corresponding prior year
periods. These increases are primarily attributable to the hiring of additional
employees incurred to support the expansion of our business through additional
markets and services.
<PAGE>
Stock-based and other noncash compensation expense decreased by $1.3
million, or 17%, to $6.5 million from $7.8 million and by $1.1 million, or 5%,
to $22.5 million from $23.6 million for the three and nine months ended
September 30, 2000, respectively, as compared to the corresponding prior year
periods. These expenses relate to compensation earned by certain employees and
executives at the time of the initial public offering that are being recognized
over specified vesting periods. No additional grants have been made to these
persons since the date of the initial public offering.
Depreciation and amortization expense increased by $12.9 million, or
101%, to $25.7 million from $12.8 million and increased by $38.6 million, or
127%, to $68.9 million from $30.3 million for the three and nine months ended
September 30, 2000, respectively, compared to the corresponding periods in 1999.
These increases are due to significant capital expenditures made during 1999 and
2000 and the amortization of acquired intangibles. We expect depreciation
expense to increase as we continue to build our networks through the
installation of additional telecommunications equipment.
Interest income increased by $1.9 million, or 37%, to $7.0 million from
$5.1 million and increased by $5.7 million, or 39%, to $20.2 million from $14.5
million for the three and nine months ended September 30, 2000, respectively, as
compared to the corresponding periods in 1999. These increases are due to higher
average cash and cash equivalent balances in 2000 resulting from the proceeds
received from the November 1999 offering of Series A Preferred Stock and the
April 2000 offering of Class A Common Stock and higher average interest rates
during the current year periods.
Interest expense increased by $24.3 million, or 100%, to $48.5 million
from $24.2 million and increased by $34.8 million, or 54%, to $98.7 million from
$63.9 million for the three and nine months ended September 30, 2000,
respectively, compared to the corresponding periods in 1999. These increases are
due to interest associated with the aforementioned transaction with a vendor,
higher long-term debt balances resulting from borrowings made against Teligent's
existing credit facilities, the amortization of credit facility fees and
interest incurred on the 11 1/2% Series B Discount Notes due 2008.
Other expense increased by $61.8 million to $62.3 million and increased
by $60.9 million to $61.4 million from $.5 million for each of the three and
nine months ended September 30, 2000, respectively, compared to the
corresponding periods in 1999. These increases are primarily due to a $60.7
million loss on the write down of available-for-sale securities to their fair
value during the third quarter of 2000. Additionally, we received $1.3 million
from a copyright infringement settlement that was completed during the second
quarter of 2000.
<PAGE>
Liquidity and Capital Resources
Historical Cash Flows
At September 30, 2000, we had working capital of $246.9 million that
includes unrestricted cash, cash equivalents and short-term investments of
$298.1 million, compared to working capital of $342.7 million that includes
unrestricted cash, cash equivalents and short-term investments of $556.9 million
at December 31, 1999. The decrease in working capital is a result of lower cash
and cash equivalent levels due to increased operating costs and capital
expenditures as we continue to expand our service to new markets and to provide
service to new customers within existing markets. We will need a significant
amount of cash to continue to build our networks, both domestically and
internationally, market our services and cover operating expenditures. Although
we anticipate our existing cash and cash equivalents on hand and short-term
investments together with existing credit facilities will provide sufficient
funds to carry out our current business plan into the second quarter of 2001,
our management continually evaluates potential financing options. We also expect
that current and future expansion and acquisitions will be financed from funds
generated from operations, borrowings under the credit facilities, financing
under our existing shelf registration statement and potential additional
financings. However, there can be no assurance that we will be able to obtain
additional financing, or financing on terms acceptable to us.
Our total assets increased from $1,131.8 million at December 31, 1999
to $1,178.0 million at September 30, 2000, as higher property and equipment
balances, acquired intangibles and investments in international ventures, were
partially offset by lower cash and cash equivalent balances. Property and
equipment, net of accumulated depreciation, was $564.1 million at September 30,
2000, compared to $403.0 million at December 31, 1999. This increase was due to
capital expenditures related to the growth and development of our network
operations, partially offset by increased accumulated depreciation.
We used cash in operations of $544.4 million for the nine months ended
September 30, 2000. Operating losses for the period and changes in working
capital items were partially offset by depreciation, amortization, loss on the
write-down of available-for-sale securities, non-cash interest expense and
stock-based and other noncash compensation. For the same period in 1999, we used
cash in operations of $267.8 million, due primarily to the operating loss for
the period partially offset by depreciation, amortization, stock-based and other
non-cash compensation and other non-cash charges.
We used $269.7 million of cash in investing activities for the nine
months ended September 30, 2000, primarily relating to the purchase of property
and equipment, cash paid for acquisitions and advances to international
ventures. For the same period in 1999, we used $218.9 million primarily for the
purchase of property and equipment and short-term investments.
Cash flows provided by financing activities for the nine months ended
September 30, 2000 were $545.8 million, consisting primarily of a $350 million
drawdown of our credit facility, proceeds of $189.9 million from the April 2000
offering of Class A Common Stock and the exercise of employee stock options. For
the same period in 1999, cash flows from financing activities were $209.3
million consisting primarily of net proceeds from a $200 million drawdown of our
credit facility and the exercise of employee stock options.
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company has exposure to financial market risks, including changes
in interest rates, foreign exchange rates and other relevant market prices.
Specifically, an increase or decrease in interest rates would affect interest
costs relating to our credit facilities. The Company has an outstanding loan
balance of $550 million under our credit facilities, which incurs interest at a
floating rate tied to a LIBOR or an alternate base rate. The outstanding balance
under our credit facilities represents approximately 45% of our outstanding
long-term debt.
The Company's cash flow and earnings are subject to fluctuations due
to exchange rate sensitivity. Foreign currency risk exists due to the Company's
international ventures. The Company may attempt to limit its exposure to
changing foreign exchange rates through both operational and financial market
actions. We currently do not use any such actions to manage our exposure to
foreign currency risk, but we may do so in the future.
The Company also maintains securities with an original maturity of
greater than 90 days, but less than one year. These securities are classified as
"available for sale". An immediate increase or decrease in interest rates could
have a material impact on the fair value of these financial instruments or on
our short-term investment portfolio.
Changes in interest rates do not have a direct impact on interest
expense relating to our remaining fixed rate long-term debt, although the fair
market value of our fixed rate debt is sensitive to changes in interest rates.
If market rates declined, our interest payments could exceed those based on the
current market rate. We currently do not use interest rate derivative
instruments to manage our exposure to interest rate changes, but we may do so in
the future.
<PAGE>
PART II OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
During the third quarter, the Company issued an aggregate of 2,158,811
shares of Class A Common Stock in connection with an acquisition of a
teleconferencing business. Such shares were issued to various individuals in
exchange for the outstanding capital shares of the target company. All shares of
Class A Common Stock issued in this transaction were issued pursuant to an
exemption from the registration requirements of the Securities Act of 1933, as
amended, under Section 4(2) of the act. This sale was made without general
solicitation or advertising. The Company has not received and will not receive
any proceeds from the sale of these shares of Class A Common Stock other than
the assets and liabilities of the acquired company.
On July 6, 2000, the Company closed an investment in ICG
Communications, Inc. ("ICG"), whereby a subsidiary of the Company acquired
2,996,076 shares of ICG common stock in exchange for one million shares of Class
A Common Stock (the "ICG Transaction"). All shares of Class A Common Stock
issued in the ICG Transaction were issued pursuant to an exemption from the
registration requirements of the Securities Act of 1933, under Section 4(2) of
the act. This sale was made without general solicitation or advertising. The
Company has not received and will not receive any proceeds from the sale of
these shares of Class A Common Stock other than the marketable security
investment received in the ICG Transaction.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(10.1) Agreement, dated as of May 9, 2000, by and between Level 3
Communications, LLC and Teligent Services Inc., as amended.
[Portions of the document have been omitted pursuant to a
request for confidential treatment requested through
November 1, 2005.]
(27) Teligent, Inc. Financial Data Schedule
(99.1) Teligent, Inc. Press Release dated November 8, 2000
(b) Reports on Form 8-K
Item Financial
Date of Report Reported Statements Filed
September 8, 2000 Items 5 & 7 - None
Other Events;
Financial Statements,
Pro Forma Financial
Information and Exhibits
<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: November 14, 2000 By: /s/ John C. Wright
-------------------------------------
John C. Wright
Chief Financial Officer and
Senior Vice President
(Principal Accounting Officer)
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit
10.1 Agreement, dated as of May 9, 2000, by and between Level 3
Communications, LLC and Teligent Services Inc., as amended.
[Portions of the document have been omitted pursuant to a
request for confidential treatment requested through
November 1, 2005.]
27 Financial Data Schedule for the nine months ended September 30, 2000.
99.1 Press release of Teligent, Inc. dated November 8, 2000.
