Prospectus Supplement filed under Rule 424(b)(3)
Registration Number 333-91749
- ------------------------------------------------------------------------------
Prospectus Supplement No. 5, dated May 16, 2000
(To Prospectus, dated January 3, 2000)
[AirGate PCS logo]
644,400 SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF WARRANTS
This prospectus supplement to the prospectus dated January 3, 2000 relates
to our offering of 644,400 shares of common stock issuable by us from time to
time upon exercise of warrants sold by us in our units offering, which was
completed on September 30, 1999.
This prospectus supplement should be read in conjunction with the
prospectus dated January 3, 2000, which is to be delivered with this prospectus
supplement. The information in this prospectus supplement updates and
supercedes certain information contained in the prospectus dated January 3,
2000 and prospectus supplement No. 1 dated February 8, 2000.
THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING
ON PAGE 17 OF THIS PROSPECTUS SUPPLEMENT.
- -------------------------------------------------------------------------------
Neither the SEC nor any state securities commission has determined whether this
prospectus is truthful or complete. Nor have they made, nor will they make, any
determination as to whether anyone should buy these securities. Any
representation to the contrary is a criminal offense.
- -------------------------------------------------------------------------------
<PAGE>
On May 15, 2000, AirGate PCS, Inc. filed with the Securities and Exchange
Commission the attached Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 2000.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED MARCH 31, 2000.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 027455
AIRGATE PCS, INC.
Harris Tower
233 Peachtree St. NE
Suite 1700
Atlanta, Georgia 30303
(404) 525-7272
DELAWARE 58-2422929
- -------------------- ---------------------------
_
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
12,421,802 shares of Common Stock, $0.01 par value per share, were outstanding
as of April 24, 2000.
Indicate by a check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities and 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
<PAGE>
AIRGATE PCS, INC.
SECOND QUARTER REPORT
Table of Contents
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets (unaudited) at March 31, 2000 and
September 30, 1999
Consolidated Statements of Operations (unaudited) for the three
and six months ended March 31, 2000 and March 31, 1999
Consolidated Statements of Cash Flows (unaudited) for the six
months ended March 31, 2000 and March 31, 1999
Notes to the Consolidated Financial Statements (unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
PART II OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
PART I. FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS
AIRGATE PCS, INC. AND SUBSIDIARY AND PREDECESSORS
CONSOLIDATED BALANCE SHEETS
(unaudited)
(dollars in thousands, except share and per share amounts)
<TABLE><CAPTION>
March 31, September 30,
ASSETS 2000 1999
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 147,501 $ 258,900
Due from AirGate Wireless, LLC - 751
Prepaid expenses 3,720 1,596
Other current assets 3,811 1,223
---------- ----------
Total current assets 155,032 262,470
Property and equipment, net 133,822 44,206
Financing costs 9,808 10,399
Other assets 266 245
---------- ----------
$ 298,928 $ 317,320
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 15,536 $ 2,216
Accrued expenses 12,218 20,178
Accrued interest 208 1,413
Current maturities of long-term debt - 7,700
---------- ----------
Total current liabilities 27,962 31,507
Long-term debt, excluding current maturities 169,122 157,967
---------- ----------
Total liabilities 197,084 189,474
---------- ----------
Stockholders' equity:
Preferred stock, par value, $.01 per
share; 5,000,000 shares authorized;
no shares issued and outstanding -- --
Common stock, par value, $.01 per
share; 25,000,000 shares authorized;
12,369,355 and 11,957,201 shares issued
and outstanding at March 31, 2000
and September 30, 1999, respectively 124 120
Additional paid-in capital 160,324 157,880
Accumulated deficit (54,186) (27,254)
Unearned stock option compensation (4,418) (2,900)
---------- ----------
Total stockholders' equity 101,844 127,846
Commitments and contingencies -- --
---------- ----------
$ 298,928 $ 317,320
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARY AND PREDECESSORS
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(dollars in thousands, except share and per share amounts)
<TABLE><CAPTION>
Three Months Six Months
Ended Ended
March 31, March 31,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Service revenue $ 460 $ - $ 460 $ -
Roaming revenue 816 - 946 -
Equipment revenue 304 - 304 -
-------- -------- --------- ---------
Total revenues $1,580 $ - $ 1,710 $ -
Operating expenses:
Cost of service and roaming (5,509) - (8,427) -
Cost of equipment (1,093) - (1,093) -
Selling and marketing (3,419) - (4,552) -
General and administrative (3,189) (598) (4,677) (1,643)
Noncash stock option
Compensation (309) - (713) -
Depreciation and amortization (2,042) (238) (2,560) (414)
-------- -------- --------- -------
Operating loss (13,981) (836) (20,312) (2,057)
Interest income 2,722 - 6,192 -
Interest expense (5,845) (744) (12,812) (1,121)
-------- -------- --------- -------
Net loss $(17,104) $(1,580) $ (26,932) $(3,178)
========= ======== ========== ========
Basic and diluted net loss
Per share of common stock $ (1.40) $ (0.47) $ (2.23) $ (0.94)
========= ======== ========== ========
Weighted-average outstanding
common shares 12,237,483 3,382,518 12,101,507 3,382,518
========== ========= ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARY AND PREDECESSORS
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(dollars in thousands)
<TABLE> Six Months
ended
March 31,
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (26,932) $ (3,178)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,560 414
Amortization of note discounts 11,155 --
Amortization of financing costs 591 --
Noncash stock option compensation 713 --
(Increase) decrease in:
Due from AirGate Wireless, LLC 751 (431)
Prepaid expenses (2,124) 346
Other current assets (2,588) --
Other assets (20) (131)
Increase (decrease) in:
Accounts payable 10,540 325
Accrued expenses 8,387 --
Accrued interest (1,103) 717
-------- ---------
Net cash provided by (used in)
operating activities 1,929 (1,938)
-------- ---------
Cash flows from investing activities:
Capital expenditures (105,631) (4,341)
-------- ---------
Net cash used in investing activities (105,631) (4,341)
-------- ---------
Cash flows from financing activities:
Proceeds from notes payable -- 5,500
Payment on notes payable (7,700) --
Proceeds from exercise of stock purchase warrants 4 --
Payments on notes payable to stockholders -- (700)
-------- ---------
Net cash (used in) provided by
financing activities (7,696) 4,800
-------- ---------
Net decrease in cash and cash equivalents (111,399) (1,479)
Cash and cash equivalents at beginning of period 258,900 1,926
-------- ---------
Cash and cash equivalents at end of period $147,501 $ 447
========= =========
Supplemental disclosure of cash flow information -
cash paid for interest $ 1,929 $ 648
========= =========
Supplemental disclosure of noncash investing and
financing activities:
Notes payable and accrued interest
converted to equity 102 --
Grant of compensatory stock options 2,231 --
Network assets acquired and not yet paid for 2,781 --
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARY AND PREDECESSORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
(unaudited)
(1) Basis of Presentation
The accompanying consolidated financial statements are unaudited and have been
prepared by management. The consolidated financial statements included herein
include the accounts of AirGate PCS, Inc. and its wholly-owned subsidiary, AGW
Leasing Company, Inc., and their predecessor entities (AirGate, LLC, AirGate
Wireless, LLC, and AirLink II, LLC) for all periods presented. In the opinion
of management, these consolidated financial statements contain all of the
adjustments, consisting of normal recurring adjustments, necessary to present
fairly, in summarized form, the financial position and the results of operations
of AirGate PCS, Inc. ("AirGate" or the "Company") and subsidiary and
predecessors. The results of operations for the three and six months ended
March 31, 2000 are not indicative of the results that may be expected for the
full fiscal year of 2000. The financial information presented herein should be
read in conjunction with the Company's Form 10-K for the year ended September
30, 1999 which includes information and disclosures not included herein. All
significant intercompany accounts or balances have been eliminated in
consolidation. Certain amounts have been reclassified to conform to the current
year presentation.
(2) Development Stage Enterprise
AirGate, LLC, the first predecessor of the Company, was established on June 15,
1995 (inception). The Company had devoted most of its efforts through December
31, 1999, to activities such as preparing business plans, raising capital and
planning and executing the build-out of its PCS network. With the launch of
commercial service in several markets during the second fiscal quarter of 2000,
the Company has completed its development stage activities.
(3) Net Loss Per Share
The Company computes net loss per common share in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share" and SEC
Staff Accounting Bulletin No. 98. Basic and diluted net loss per share of
common stock is computed by dividing net loss for each period by the
weighted-average outstanding common shares. No conversion of common stock
equivalents has been assumed in the calculations since the effect would be
antidilutive. As a result, the net loss per share is the same for both the
basic and diluted net loss per share calculations for all periods presented.
<PAGE>
The reconciliation of weighted-average outstanding common shares is set forth
below:
<TABLE><CAPTION>
Three Months Six Months
Ended Ended
March 31, March 31,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted-average outstanding common shares 12,237,483 3,382,518 12,101,507 3,382,518
Weighted-average potentially dilutive
common stock equivalents:
Common stock options 992,268 -- 875,995 --
Stock purchase warrants 517,891 -- 496,668 --
---------- --------- ---------- ---------
Weighted-average outstanding shares
including potentially dilutive common
stock equivalents 13,747,642 3,382,518 13,474,171 3,382,518
========== ========= ========== =========
</TABLE>
(2) Due from AirGate Wireless, LLC
On January 27, 2000, the Company collected all principal and accrued interest
relating to the receivable from AirGate Wireless, LLC.
(3) Other Current Assets
Other current assets consists of the following at March 31, 2000 and September
30, 1999 (dollars in thousands):
<TABLE><CAPTION>
March 31, September 30,
2000 1999
---- ----
<S> <C> <C>
Current portion of financing costs $ 1,223 $ 1,223
Interest receivable 1,196 -
Inventories 736 -
Trade receivables, net 656 -
---------- ----------
Other current assets $ 3,811 $ 1,223
========= ==========
</TABLE>
(2) Property and Equipment
Property and equipment consists of the following at March 31, 2000 and September
30, 1999 (dollars in thousands):
<TABLE><CAPTION>
December 31, September 30,
1999 1999
---- ----
<S> <C> <C>
Network assets $ 64,629 $ 7,700
Computer equipment 1,096 89
Furniture, fixtures, and office equipment 2,287 87
--------- --------------
68,012 7,876
Less accumulated depreciation and amortization (3,531) (971)
-------- --------------
64,481 6,905
Construction in progress (network build-out) 69,341 37,301
---------- -------------
Property and equipment, net $ 133,822 $ 44,206
========= ==============
</TABLE>
(7) Stock Option Grants
On January 21, 2000, the Company's Board of Directors granted options to
purchase 90,000 shares of common stock to a director and certain employees
pursuant to the 1999 Stock Option Plan. Of these options, 80,000 options
granted to employees have an exercise price equal to the market value on the
date of grant ($65.13) and 10,000 options (compensatory options) granted to a
director have an exercise price of $2.00 per share which vest over two years.
These options vest at various terms from two to five years beginning at the
grant date and expire ten years from the date of grant. An increase in
additional paid-in capital and unearned stock option compensation of $631,000
has been recorded by the Company for the compensatory options, which represents
the difference between the exercise price and the fair market value of the
Company's common stock at the date of grant and will be recognized as noncash
stock option compensation expense over the vesting period.
On March 9, 2000, the Company's Board of Directors granted options to purchase
25,000 shares of common stock to certain employees pursuant to the 1999 Stock
Option Plan. All of these options have an exercise price equal to the market
value on the date of grant ($98.50). These options vest over five years
beginning on the grant date and expire 10 years from the date of grant.
(8) Common Stock Purchase Warrants
On January 3, 2000, the Company's registration statement on Form S-1, relating
to warrants to purchase 644,400 shares of common stock issued together, as
units, with the Company's $300 million of 13.5% senior subordinated discount
notes due 2009, was declared effective by the Securities and Exchange
Commission. On September 30, 1999, AirGate PCS, Inc. received gross proceeds of
$156.1 million from the issuance of 300,000 units, each unit consisting of a
$1,000 principal amount at maturity 13.5% senior subordinated discount note due
2009 and one warrant to purchase 2.148 shares of common stock at a price of
$0.01 per share. The warrants are exercisable beginning upon the effective date
of the registration statement registering such warrants, for an aggregate of
644,400 shares of common stock and expire October 1, 2009.
As of March 31, 2000, warrants representing 399,617 shares of common stock had
been exercised and warrants representing 244,783 shares of common stock remain
outstanding.
(9) Subsequent Events
(a) As of April 24, 2000, common stock purchase warrants issued with the
Company's senior subordinated discount notes due 2009 were exercised resulting
in the issuance of an additional 52,447 shares of common stock.
(b) On April 27, the Company filed a definitive proxy statement with the
Securities and Exchange Commission relating to a Special Meeting of the
stockholders of AirGate PCS, Inc. to be held on May 26, 2000. The purpose of
the meeting is to vote on an amendment to our Amended and Restated Certificate
of Incorporation to increase the number of authorized shares of our common
stock, par value $0.01 per share, from 25,000,000 shares to 150,000,000 shares.
The record date for the determination of stockholders entitled to vote at the
special meeting was fixed by the Company's Board of Directors as April 24, 2000.
(c) On April 28, the Company launched PCS service in the Charleston, South
Carolina market.
(d) On May 4, 2000, the Company entered into a retention bonus agreement
with Thomas M. Dougherty, its Chief Executive Officer. Provided Mr. Dougherty
is employed by the Company on specified payment dates, generally quarterly,
extending to January 15, 2004, periodic retention bonuses totaling $3.6 million
will be made. An initial payment of $900,000 was made on May 4, 2000. Partial
acceleration would occur upon a change in control of the Company.
(e) On May 12, 2000, the Company signed an amendment to it's management
agreement with SprintCom, Inc. The amendment incorporates several
clarifications to our management agreement: (1) The amendment specifies that we
will purchase long distance services for our customers and connect our
network Sprint PCS services from Sprint through Sprint PCS rather than
purchasing those services directly from Sprint as was previously the case in
the management agreement. Sprint PCS will bill us for long
distance at the rate paid by Sprint PCS plus an administrative
fee to cover Sprint PCS's processing costs. The amendment
also specifies that we can not resell the long distance services we
purchase from Sprint under the management agreement. (2) The amendment modifies
Sprint PCS' right of last offer to provide backhaul and transport services
to exclude from this right backhaul services relating to
national platform and IT application connections. Prior to the amendment, these
services were not excluded. (3) The amendment also eliminates, as no longer
applicable, the reference in the management agreement to the restructuring of
ownership in Sprint Spectrum L.P., SprintCom, Inc., PhillieCo Partners I, L.P.
and Cox Communications PCS, L.P. (4) The amendment modifies our representation
of delivery of existing contracts that affect the right of Sprint PCS under our
agreement to include contracts disclosed by us verbally or in writing copies of
which are delivered to Sprint PCS at its request. (5) The amendment amends
our services agreement with Sprint PCS to provide that our monthly charge for
fees for services (other than billing-related services) provided by Sprint PCS
will be determined based on the number of subscribers as of the 15th of each
month. Sprint PCS will bill us for billing related services based on our
subscribers at the end of the prior month and gross activations on the last
day of the current calendar month. Previously, all charges were determined
as of the 15th of each month including charges for billing related services.
In addition, the amendment removes prohibitions on the transfer or assignment of
ownership interests by certain individuals identified in the management
agreement for a period of five years from the date of the management agreement:
(1) As of May 12, 2000, the amendment allows the pledge of stock by certain
individuals identified in the management agreement that was previously
prohibited for a period of five years from the date of the management agreement.
(2) The amendment removes prohibitions on any transfer or assignment of
ownership interests by certain individuals identified in the management
agreement for a period of five years from the date of the management agreement.
The restrictions will be eliminated on June 30, 2000 if our network is declared
network ready by Sprint PCS and meets our network coverage requirements under
our agreement with Sprint PCS for all of our markets except the Greenwood, S.C.
BTA, New Bern, N.C. BTA, Camden County, N.C., Currituck County, N.C., Dare
County, N.C. and Pasquotank, N.C. If our network is not declared network ready
in these markets by June 30, 2000 or the coverage requirements for these markets
are not met, the restrictions will remain in place until we have achieved
network ready status and provided the coverage. Currently, the violation of
these restrictions and our decision not to enforce compliance with the
restrictions are events that Sprint PCS could use to
terminate our management agreement. Once the restriction lapses, as described
above, this possible event of termination will no longer exist. In addition,
when the restrictions lapse, 1,041,227 shares of our common stock will become
eligible for sale, subject to compliance with Rule 144 of the Securities Act
(including Rule 144(k) for persons who are not affiliates or whose affiliate
status is terminated).
(f) The Company intends to form AirGate Network Services, LLC ("ANS") as a
wholly owned subsidiary of AirGate during the third fiscal quarter. ANS will be
a single member LLC and will fully and unconditionally guaranteed the Company's
senior subordinated notes and Lucent Financing. ANS will hold certain
intangible assets attributable to AirGate PCS's network and provide certain
network construction management.
<PAGE>
(10) AGW Leasing Company, Inc. - Wholly-Owned Subsidiary
AGW Leasing Company, Inc. ("AGW") is a wholly-owned subsidiary of AirGate. AGW
has fully and unconditionally guaranteed the Company's senior subordinated
discount notes and Lucent Financing. AGW was formed to hold the real estate
interests for the Company's PCS network. AGW also was a registrant under the
Company's registration statement (Registration File Number 333-78189-01)
declared effective by the Securities and Exchange Commission on September 27,
1999.
The unaudited condensed consolidating financial statements as of and for the six
months ended March 31, 2000 are as follows (dollars in thousands):
<TABLE><CAPTION>
AirGate PCS, Inc. AGW Leasing
and Predecessors Company, Inc. Eliminations Consolidated
--------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 147,501 $ - $ - $ 147,501
Prepaid expenses and other current assets 12,705 - (5,174) 7,531
Property and equipment, net 133,822 - - 133,822
Other assets 10,074 - - 10,074
--------------- ------------ ------------ ------------
Total assets $ 304,102 $ - $ (5,174) $ 298,928
=============== ============= ============ ============
Accounts payable $ 15,536 $ - $ - $ 15,536
Accrued expenses and other
current liabilities 12,426 5,174 (5,174) 12,426
Long-term debt 169,122 - - 169,122
--------------- ------------ ------------ ------------
Total liabilities 197,084 5,174 (5,174) 197,084
Common stock 124 - - 124
Additional paid-in capital 160,324 - - 160,324
Accumulated deficit (49,012) (5,174) - (54,186)
Unearned stock option compensation (4,418) - - (4,418)
--------------- ------------ ------------ ------------
Total liabilities and
stockholders' equity(deficit) $ 304,102 $ - $ (5,174) $ 298,928
=============== ============= ============ ============
Total revenues $ 1,710 $ - $ - $ 1,710
Total expenses (24,847) (3,795) - (28,642)
--------------- ------------ ------------ ------------
Net loss $ (23,137) $ (3,795) - $ (26,932)
=============== ============= ============ ============
</TABLE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
Statements contained herein regarding expected financial results and other
planned events are forward-looking statements that involve risk and
uncertainties. Actual future events or results may differ materially from these
statements. Readers are referred to the documents filed by AirGate with the
Securities and Exchange Commission, specifically the most recent filings which
identify important risk factors that could cause actual results to differ from
those contained in the forward-looking statements, including potential
fluctuations in quarterly results, our dependence on our affiliation with Sprint
PCS, an adequate supply of infrastructure and subscriber equipment, dependence
on new product development, rapid technological and market change, risks related
to future growth and expansion, our significant level of indebtedness and
volatility of stock prices. These and other applicable risks are summarized
under the caption "Risk Factors" included under Item 5 - Other Information of
this quarterly report.
OVERVIEW
On July 22, 1998, we entered into a management agreement with Sprint PCS
whereby we became the Sprint PCS affiliate with the exclusive right to provide
100% digital, 100% PCS services under the Sprint and Sprint PCS brand names in
our territory in the southeastern United States. We completed our radio
frequency design, network design and substantial site acquisition and cell site
engineering, and commenced construction of our PCS network in November 1998. In
January 2000 we began commercial operations with the launch of two markets
covering 1.5 million residents in our territory.
Sprint PCS has invested $44.6 million to purchase the PCS licenses in our
territory and incurred additional expenses for microwave clearing. Under our
long-term agreements with Sprint PCS, we manage the network on Sprint PCS'
licensed spectrum as well as the Sprint and Sprint PCS brand names royalty-free
during our affiliation with Sprint PCS. We also have access to Sprint PCS'
national marketing support and distribution programs and are entitled to buy
network and subscriber equipment and handsets at the same discounted rates
offered by vendors to Sprint PCS based on its large volume purchases. In
exchange for these benefits, we are entitled to receive 92%, and Sprint PCS is
entitled to retain 8% of collected service revenues from customers in our
territory. We are entitled to 100% of revenues collected from the sale of
handsets and accessories, on roaming revenues received when Sprint PCS customers
from a different territory make a wireless call on our PCS network, and on
roaming revenues from non-Sprint PCS customers.
Through March 31, 2000, we have incurred $134.0 million of capital
expenditures related to the build-out of our PCS network. As a result of the
progress made on our PCS network build-out, we were able to open the network for
a portion of our territory for roaming coverage along Interstate 85 between
Atlanta, Georgia and Charlotte, North Carolina in November 1999. In January
2000 we launched commercial PCS operations in the Greenville-Spartanburg and
Anderson, South Carolina markets and the Hickory and Asheville, North Carolina
markets. In March 2000 we launched our Myrtle Beach, South Carolina markets and
the Wilmington and Rocky Mount, North Carolina markets. At March 31, 2000, we
offered personal communication services to 2.3 million residents in our
territory of 6.8 million residents. We expect to extend our commercial
operations during the balance of 2000 and anticipate substantially completing
the build-out of our PCS network by the end of our fiscal year 2000 covering
approximately 74% of the resident population in our territory of 6.8 million.
<PAGE>
RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THE THREE MONTHS
ENDED MARCH 31, 1999:
Customer Additions
As of March 31, 2000, the Company provided personal communication services
to 6,378 customers resulting from the commercial launch of seven markets in the
second fiscal quarter.
Revenues
Service revenue and equipment revenue were $460,000 and $304,000,
respectively, for the three months ended March 31, 2000. These initial
revenues were the result of launching commercial operations in seven
markets during the quarter. Service revenue consists of monthly recurring
access and feature charges and monthly non-recurring charges for local, long
distance, travel and roaming airtime usage in excess of the pre-subscribed
usage plan. Equipment revenue is derived from the sale of handsets and
accessories, net of an allowance for returns. Our handset return policy
allows customers to return their handsets for a full refund within 14 days of
purchase. When handsets are returned to us, we may be able to reissue the
handsets to customers at little additional cost to us. However, when
handsets are returned to Sprint PCS for refurbishing, we receive
a credit from Sprint PCS, which is less than the amount
we originally paid for the handset. Roaming revenue of $816,000 was recorded
during the three months ended March 31, 2000. We receive Sprint PCS roaming
revenue at a per-minute rate from Sprint PCS or another Sprint PCS affiliate
when Sprint PCS subscribers outside of our territory use our network. We also
receive non-Sprint PCS roaming revenue when subscribers of other wireless
service providers roam on our network. No revenue was recorded for the three
months ended March 31, 1999.
Cost of Service and Roaming and Cost of Equipment
The cost of service and roaming and the cost of equipment was $5.5 million
and $1.1 million, respectively, for the three months ended March 31, 2000. Cost
of service represents network operating costs (including salaries, cell site
lease payments, fees related to data transfer via T-1 and other transport lines,
inter-connect fees and other expenses related to network operations), roaming
expense when AirGate customers place calls on Sprint PCS's network, back office
services provided by Sprint PCS such as customer care, billing and activation,
long distance expense relating to inbound roaming revenue and the 8% of
collected service revenue representing the sprint affiliation fee. The sprint
affiliation fee totaled $39,000 in the three month period ended March 31, 2000.
There were approximately 38 employees performing network operations functions at
March 31, 2000. Cost of equipment includes the cost of handsets and
accessories. The cost of handsets exceeds the retail price because we subsidize
the price of handsets to remain competitive in the marketplace. Certain of our
distribution channels effect direct shipment whereby only the handset subsidy is
recorded. There were no cost of service and equipment recognized for the
three months ended March 31, 1999.
Selling and Marketing
We incurred expenses of $3.4 million during the three month period ended
March 31, 2000 for marketing costs associated with our market launches in 2000.
These amounts include retail store costs such as salaries and rent in addition
to promotion, advertising and commission costs. At March 31, 2000, there were
approximately 90 employees performing sales and marketing functions compared to
one employee as of March 31, 1999. The Company did not incur any significant
selling and marketing expenses in the three months ended March 31, 1999.
General and Administrative
For the three months ended March 31, 2000, we incurred expenses of $3.2
million compared to $598,000 for the three months ended March 31, 1999, an
increase of $2.6 million. The increase is primarily comprised of additional
rent, professional and consulting fees, recruiting and relocation costs relating
to growth in the number of employees. Increased professional fees accounted for
approximately $1.1 million of the increase. Of the approximately 162 employees
at March 31, 2000, approximately 34 employees were performing corporate support
functions compared to 10 employees as of March 31, 1999.
Noncash Stock Option Compensation
Noncash stock option compensation expense was $309,000 for the three months
ended March 31, 2000. The Company applies the provisions of APB Opinion No. 25
and related interpretations in accounting for its stock option plan. Unearned
stock option compensation is recorded for the difference between the exercise
price and the fair market value of the Company's common stock at the date of
grant and is recognized as noncash stock option compensation expense in the
period in which the related services are rendered.
Depreciation and Amortization
For the three months ended March 31, 2000, depreciation and amortization
expense increased $1.8 million to $2.0 million compared to $238,000 for the same
period in 1999. The increase in depreciation and amortization expense relates
primarily to network assets placed in service to support our commercial launch.
Depreciation and amortization will continue to increase as additional portions
of our network are placed into service. We incurred capital expenditures of
$58.3 million in the three months ended March 31, 2000 related to the continued
build-out of our PCS network which included approximately $2.0 million of
capitalized interest.
Interest Income
For the three months ended March 31, 2000, interest income was $2.7
million. Interest income is generated from cash proceeds originating from our
initial public equity and units offering completed on September 30, 1999. As
capital expenditures are made to complete the build-out of our PCS network,
decreasing cash balances will result in lower interest income for the remainder
of fiscal 2000.
Interest Expense
For the three months ended March 31, 2000, interest expense was $5.8
million, an increase of $5.1 million over the same period in 1999. The increase
is primarily attributable to the $5.3 million accretion of original issue
discount on the senior subordinated discount notes and $1.7 million associated
with the Lucent Financing partially offset by $2.0 million of capitalized
interest. The Company had borrowings of $169.1 million as of March 31, 2000
compared to $158.0 million at September 30, 1999 and $19.2 million at March 31,
1999.
Net Loss
For the three months ended March 31, 2000, the net loss was $17.1 million,
an increase of $15.5 million compared to the net loss of $1.6 million for the
same period in 1999. The Company expects that its net losses will continue to
increase throughout fiscal 2000.
FOR THE SIX MONTHS ENDED MARCH 31, 2000 COMPARED TO THE SIX MONTHS ENDED
MARCH 31, 1999:
Revenues
Service revenue and equipment revenue were $460,000 and $304,000 for the
six months ended March 31, 2000, respectively, as a result of launching
commercial operations in seven markets during the January and March 2000.
Roaming revenue of $946,000 was recorded during the six months ended March 31,
2000. No revenue was recorded for the six months ended March 31, 1999.
Cost of Service and Roaming and Cost of Equipment
The cost of service and the cost of equipment was $8.4 million and $1.1
million, respectively, for the six months ended March 31, 2000, related directly
to the launch of commercial operations in January 2000. The Sprint Affiliation
fee totaled $39,000 in the six month period ended March 31, 2000. There were
approximately 38 employees performing network operations functions at March 31,
2000. There were no cost of service or cost of equipment recognized for the six
months ended March 31, 1999, as principal operations had not yet commenced.
Selling and Marketing
We incurred expenses of $4.6 million during the six month period ended
March 31, 2000 for marketing costs associated with our market launches in
January and March 2000. At March 31, 2000, there were approximately 90
employees performing sales and marketing functions compared to one employee as
of March 31, 1999. The Company did not incur any significant selling and
marketing expenses in the six months ended March 31, 1999.
General and Administrative
For the six months ended March 31, 2000, we incurred expenses of $4.7
million compared to $1.6 million for the six months ended March 31, 1999, an
increase of $3.1 million. The increase is primarily comprised of additional
rent, professional fees, consulting fees for outsourced labor and salaries,
recruiting and relocation costs relating to growth in the number of employees.
There were approximately 37 employees performing corporate support functions at
March 31, 2000 compared to 10 employees as of March 31, 1999.
Noncash Stock Option Compensation
Noncash stock option compensation expense was $713,000 for the six months
ended March 31, 2000. No noncash stock option compensation expense was recorded
in the six month period ended March 31, 1999.
Depreciation and Amortization
For the six months ended March 31, 2000, depreciation and amortization
expense was $2.6 million compared to $414,000 for the same period in 1999. The
increase in depreciation and amortization expense relates primarily to network
equipment placed in service to support our commercial launch. Depreciation and
amortization will continue to increase as additional portions of our network are
placed into service. We incurred capital expenditures of $92.2 million in the
six months ended March 31, 2000 related to the continued build-out of our PCS
network which included approximately $3.6 million of capitalized interest.
Interest Income
For the six months ended March 31, 2000, interest income was $6.2 million.
Interest income is generated from cash proceeds originating from our initial
public equity and units offering completed on September 30, 1999. As capital
expenditures are made to complete the build-out of our PCS network, decreasing
cash balances will result in lower interest income for the remainder of fiscal
2000.
Interest Expense
For the six months ended March 31, 2000, interest expense was $12.8
million, an increase of $11.7 million over the same period in 1999. The increase
is primarily attributable to the $10.5 million accretion of original issue
discount on the senior subordinated discount notes and $3.9 million associated
with the Lucent Financing partially offset by $3.6 million of capitalized
interest. The Company had borrowings of $169.1 million as of March 31, 2000
compared to $158.0 million at September 30, 1999 and $19.2 million at March 31,
1999.
Net Loss
For the six months ended March 31, 2000, the net loss was $26.9 million, an
increase of $23.7 million compared to a net loss of $3.2 million for the six
months ended March 31, 1998. The Company expects that its net losses will
continue to increase throughout fiscal 2000.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2000, the Company had $147.5 million in cash and cash
equivalents, as compared to $258.9 million in cash and cash equivalents at
September 30, 1999. Working capital was $127.1 million at March 31, 2000 as
compared to working capital of $231.0 million at September 30, 1999.
Net Cash Provided By (Used In) Operating Activities
The $1.9 million of cash provided by operating activities in the six months
ended March 31, 2000 was the result of the Company's $26.9 million net loss
being fully offset by a net $13.8 million in cash provided by changes in working
capital and depreciation and amortization of note discounts of $15.0 million.
Net Cash Used in Investing Activities
The $105.6 million of cash used in investing activities represents cash
outlays for capital expenditures during the six months ended March 31, 2000. We
made a total of $92.2 million of capital expenditures in the six months ended
March 31, 2000. Further, cash payments of $16.2 million were made for equipment
purchases made through accrued expenses at September 30, 1999 partially offset
by equipment purchases of $2.8 million made through accounts payable at March
31, 2000.
Net Cash Used In Financing Activities
The $7.7 million in cash used in financing activities consisted of the
repayment of the $7.7 million unsecured promissory note.
We closed our offerings of equity and debt funding on September 30, 1999.
The total equity amount raised was $131.0 million, or $120.5 million in net
proceeds. Concurrently, we closed our units offering consisting of $300 million
principal amount at maturity 13.5% senior subordinated discount notes due 2009
and warrants to purchase 644,400 shares of our common stock at $0.01 per share.
The gross proceeds from the units offering were $156.1 million, or $149.4
million in net proceeds. The senior subordinated discount notes will require
cash payments of interest beginning on April 1, 2005.
The Company's $153.5 million Credit Agreement with Lucent (the "Lucent
Financing") provides for a $13.5 million senior secured term loan which matures
on June 6, 2007, which is the first installment of the loan, or Tranche 1. The
second installment, or Tranche 2, under the Lucent Financing is for a $140.0
million senior secured term loan which matures on September 30, 2008. Mandatory
quarterly payments of principal are required beginning December 31, 2002 for
Tranche 1 and March 31, 2004 for Tranche 2 initially in the amount of 3.75% of
the loan balance then outstanding and increasing thereafter. We expect that
cash and cash equivalents together with future advances under the Lucent
Financing will fund the Company's capital expenditures including the completion
of our network build-out and the Company's working capital requirements through
2002.
SEASONALITY
Our business is subject to seasonality because the wireless industry is
heavily dependent on fourth calendar quarter results. Among other things, the
industry relies on significantly higher customer additions and handset sales in
the fourth calendar quarter as compared to the other three calendar quarters. A
number of factors contribute to this trend, including: the increasing use of
retail distribution, which is heavily dependent upon the year-end holiday
shopping season; the timing of new product and service announcements and
introductions; competitive pricing pressures; and aggressive marketing and
promotions. The increased level of activity requires a greater use of the
Company's available financial resources during this period.
INFLATION
Management believes that inflation has not had, and does not expect to
have, a material adverse effect on our results of operations.
<PAGE>
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the normal course of business, our operations are exposed to interest
rate risk on our financing from Lucent and any future financing requirements.
Our fixed rate debt consists primarily of the accreted carrying value of the
senior subordinated discount notes ($166.6 million at March 31, 2000). Our
variable rate debt consists of borrowings made under the Lucent Financing ($13.5
million at March 31, 2000). The Company's primary interest rate risk exposures
relate to (i) the interest rate on the Company's long-term borrowings; (ii) the
Company's ability to refinance its senior subordinated discount notes at
maturity at market rates; and (iii) the impact of interest rate movements on the
Company's ability to meet interest expense requirements and financial covenants
under the Company's debt instruments.
We expect to manage the interest rate risk on our outstanding long-term
debt through the use of fixed and variable rate debt and interest rate swaps.
While we cannot predict our ability to refinance existing debt or the impact
interest rate movements will have on our existing debt, we continue to evaluate
our interest rate risk on an ongoing basis.
The following table presents the estimated future balances of outstanding
long-term debt at the end of each period and future required annual principal
payments for each period then ended associated with the senior subordinated
discount notes and the Lucent Financing based on our projected level of
long-term indebtedness:
<TABLE><CAPTION>
TWELVE MONTHS ENDED MARCH 31,
--------------------------------------------------------------------------
2001 2002 2003 2004 2005 THEREAFTER
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Senior subordinated discount notes $ 189,865 $ 216,379 $ 246,593 $ 281,023 $ 300,000 -
Fixed interest rate 13.5% 13.5% 13.5% 13.5% 13.5% 13.5%
Principal payments - - - - - $ 300,000
Lucent financing $ 55,500 $ 133,325 $ 151,002 $ 142,325 $ 120,005 -
Variable interest rate (1) 10.05% 10.05% 10.05% 10.05% 10.05% 10.05%
Principal payments - - $ 1,013 $ 2,025 $ 2,025 $ 120,005
<FN>
(1) Interest rate on the Lucent financing equals the London Interbank
Offered Rate (''LIBOR'') +3.75%. LIBOR is assumed to equal 6.3% for all periods
presented.
</TABLE>
<PAGE> 17
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On September 30, 1999, we completed the concurrent offerings of equity and
debt funding with total net proceeds of approximately $269.9 million. In the
six months ended March 31, 2000, we have utilized $105.6 million to fund capital
expenditures relating to the build-out of our PCS network and $7.7 million to
repay indebtedness.
ITEM 5. OTHER INFORMATION
ADDITIONAL DIRECTOR NAMED
On February 1, 2000, we announced that John R. Dillon, retired senior vice
president and chief financial officer of Cox Enterprises, was appointed to fill
the remaining vacancy on the Board of Directors with a term to expire at the
annual meeting in 2001.
RISK FACTORS
The following risk factors update and supercede the risk factors contained in
our Quarterly Report on Form 10-Q for the quarter ended December 31, 1999.
RISKS PARTICULAR TO AIRGATE
The termination of our affiliation with Sprint PCS or Sprint PCS' failure to
perform its obligations under our agreements would severely restrict our ability
to conduct our business
Our ability to offer Sprint PCS products and services and our PCS network's
operation are dependent on our agreements with Sprint PCS being renewed and not
terminated. Each of these agreements can be terminated for breach of any
material terms. We are dependent on Sprint PCS' ability to perform its
obligations under the Sprint PCS agreements. The non-renewal or termination of
any Sprint PCS agreement or the failure of Sprint PCS to perform its obligations
under the Sprint PCS agreements would severely restrict our ability to conduct
our business.
If Sprint PCS does not complete the construction of its nationwide PCS network,
we may not be able to attract and retain customers
Sprint PCS' network may not provide nationwide coverage to the same extent
as its competitors which could adversely affect our ability to attract and
retain customers. Sprint PCS is creating a nationwide PCS network through its
own construction efforts and those of its affiliates. Today, Sprint PCS is
still constructing its nationwide network and does not offer PCS services,
either on its own network or through its roaming agreements, in every city in
the United States. Sprint PCS has entered into, and anticipates entering into,
affiliation agreements similar to ours with companies in other territories
pursuant to its nationwide PCS build-out strategy. Our results of operations are
dependent on Sprint PCS' national network and, to a lesser extent, on the
networks of its other affiliates. Sprint PCS and its affiliate program are
subject, to varying degrees, to the economic, administrative, logistical,
regulatory and other risks described in other risk factors contained below.
Sprint PCS' and its other affiliates' PCS operations may not be successful.
We do not have an operating history and if we do not successfully manage our
anticipated rapid growth, we may not be able to complete our PCS network by our
target date, if at all
Our performance as a PCS provider will depend on our ability to manage
successfully the network build-out process, implement operational and
administrative systems, expand our base of 162 employees as of March 31, 2000
and train and manage our employees, including engineering, marketing and sales
personnel. We have completed our radio frequency design, network design and
substantial site acquisition and cell site engineering, and commenced
construction of our PCS network in November 1998. We launched commercial PCS
operations in the first calendar quarter of 2000 in certain markets in our
territory. We will require expenditures of significant funds for the
development, construction, testing and deployment of our PCS network. These
activities are expected to place significant demands on our managerial,
operational and financial resources.
The inability to use Sprint PCS' back office services and third party vendors'
back office systems could disrupt our business
Our operations could be disrupted if Sprint PCS is unable to maintain and
expand its back office services such as customer activation, billing and
customer care, or to efficiently outsource those services and systems through
third party vendors. The rapid expansion of Sprint PCS' business is expected to
continue to pose a significant challenge to its internal support systems.
Additionally, Sprint PCS has relied on third-party vendors for a significant
number of important functions and components of its internal support systems and
may continue to rely on these vendors in the future. We depend on Sprint PCS'
willingness to continue to offer such services to us and to provide these
services at competitive costs. Our services agreement with Sprint PCS provides
that, upon nine months' prior written notice, Sprint PCS may elect to terminate
any such service beginning January 1, 2002. If Sprint PCS terminates a service
for which we have not developed a cost-effective alternative, our operating
costs may increase beyond our expectations and restrict our ability to operate
successfully.
If we fail to complete the build-out of our PCS network, Sprint PCS may
terminate our management agreement, and we would no longer be able to offer
Sprint PCS services
A failure to meet our build-out requirements for any one of the individual
markets in our territory, or to meet Sprint PCS' technical requirements, would
constitute a breach of our management agreement with Sprint PCS that could lead
to its termination. If the management agreement is terminated, we will no
longer be able to offer Sprint PCS products and services. Our agreements with
Sprint PCS require us to build our PCS network in accordance with Sprint PCS'
technical and coverage requirements. These agreements also require that we
provide network coverage to a specified percentage, ranging from 39% to 86%, of
the population within each of the 21 markets which make up our territory by
specified dates.
We have substantial debt which we may not be able to service and which may
result in our lenders controlling our assets in an event of default
Our substantial debt will have a number of important consequences for our
operations and our investors, including the following:
- - we will have to dedicate a substantial portion of any cash flow from
operations to the payment of interest on, and principal of, our debt, which will
reduce funds available for other purposes;
- - we may not have sufficient funds to pay interest on, and principal of, our
debt;
- - we may not be able to obtain additional financing for currently
unanticipated capital requirements, capital expenditures, working capital
requirements and other corporate purposes;
- - some of our debt, including borrowings under the Lucent Financing, will be
at variable rates of interest, which could result in higher interest expense in
the event of increases in market interest rates; and
- - due to the liens on substantially all of our assets and the pledges of
stock of our subsidiary and future subsidiaries that secure our senior debt and
our senior subordinated discount notes, lenders or holders of our senior
subordinated discount notes may control our assets or our subsidiaries' assets
upon a default.
As of March 31, 2000, our outstanding long-term debt totaled $169.1
million. Under our current business plan, we expect to incur substantial
additional debt before achieving break-even operating cash flow. Accordingly,
we may utilize some portion, if not all, of the $140.0 million of additional
available borrowings under our financing from Lucent.
If we do not meet all of the conditions required under our Lucent financing
documents, we may not be able to draw down all of the funds we anticipate
receiving from Lucent and may not be able to complete the build-out of our
network
We have borrowed $13.5 million to date from Lucent. The remaining $140.0
million which we expect to borrow in the future is subject to our meeting all of
the conditions specified in the financing documents and, in addition, is subject
at each funding date to the following conditions:
- - that the representations and warranties in the loan documents are true and
correct; and
- - the absence of a default under our loan documents.
If we do not meet these conditions at each funding date, the lenders may
not lend any or all of the remaining amounts, and if other sources of funds are
not available, we may not be in a position to complete the build-out of our PCS
network. If we do not have sufficient funds to complete our network build-out,
we may be in breach of our management agreement with Sprint PCS and in default
under our financing from Lucent and under our senior subordinated discount
notes.
If we lose the right to install our equipment on wireless towers owned by other
carriers or fail to obtain zoning approval for our cell sites, we may have to
rebuild our network
We expect more than 95% of our cell sites to be collocated on facilities
shared with one or more wireless providers. We will collocate over 150 of these
sites on facilities owned by one tower company. If our master collocation
agreement with that tower company were to terminate, we would have to find new
sites, and if the equipment had already been installed we might have to rebuild
that portion of our network. Some of the cell sites are likely to require us to
obtain zoning variances or other local governmental or third party approvals or
permits. We may also have to make changes to our radio frequency design as a
result of difficulties in the site acquisition process.
We may have difficulty in obtaining infrastructure and subscriber equipment
required in order to meet our network construction deadlines required under our
management agreement and attract customers
If we are not able to acquire the equipment required to build our PCS
network in a timely manner, we may be unable to provide wireless communications
services comparable to those of our competitors or to meet the requirements of
our agreements with Sprint PCS. The demand for the equipment that we require to
construct our PCS network is considerable, and manufacturers of this equipment
could have substantial order backlogs. Accordingly, the lead-time for the
delivery of this equipment may be long. Some of our competitors purchase large
quantities of communications equipment and may have established relationships
with the manufacturers of this equipment. Consequently, they may receive
priority in the delivery of this equipment. We also depend on equipment vendors
for an adequate supply of subscriber equipment, including handsets. If the
supply or subscriber equipment is inadequate or delayed, we may have difficulty
in attracting customers.
Sprint PCS' vendor discounts may be discontinued, which could increase our
equipment costs
We intend to purchase our infrastructure equipment under Sprint PCS' vendor
agreements that include volume discounts. If Sprint PCS were unable to continue
to obtain vendor discounts for its affiliates, the loss of vendor discounts
could increase our equipment costs.
The failure of our consultants and contractors to perform their obligations may
delay construction of our network which may lead to a breach of our management
agreement
The failure by any of our vendors, consultants or contractors to fulfill
their contractual obligations to us could materially delay construction of our
PCS network. We have retained Lucent and other consultants and contractors to
assist in the design and engineering of our systems, construct cell sites,
switch facilities and towers, lease cell sites and deploy our PCS network
systems and we will be significantly dependent upon them in order to fulfill our
build-out obligations.
Conflicts with Sprint PCS may not be resolved in our favor which could restrict
our ability to manage our business and provide Sprint PCS products and services
Conflicts between us and Sprint PCS may arise and as Sprint PCS owes us no
duties except as set forth in the management agreement, these conflicts may not
be resolved in our favor. The conflicts and their resolution may harm our
business. For example, Sprint PCS prices its national plans based on its own
objectives and could set price levels that may not be economically sufficient
for our business. In addition, upon expiration, Sprint PCS could decide to not
renew the management agreement which would not be in our best interest or the
interest of our stockholders. There may be other conflicts such as the setting
of the price we pay for back office services and the focus of Sprint PCS'
management and resources.
If we fail to pay our debt, our lenders may sell our loans to Sprint PCS giving
Sprint PCS certain rights of a creditor to foreclose on our assets
Sprint PCS has contractual rights, triggered by an acceleration of the
maturity of the Lucent Financing, pursuant to which Sprint PCS may purchase our
obligations under the Lucent Financing and obtain the rights of a senior lender.
To the extent Sprint PCS purchases these obligations, Sprint PCS' interests as a
creditor could conflict with ours. Sprint PCS' rights as a senior lender would
enable it to exercise rights with respect to our assets and continuing
relationship with Sprint PCS in a manner not otherwise permitted under our
agreements with Sprint PCS.
Certain provisions of our agreements with Sprint PCS may diminish the valuation
of our company
Provisions of our agreements with Sprint PCS could effect the valuation of
our company, thereby, among other things reducing the market prices of our
securities and decreasing our ability to raise additional capital necessary to
complete our network build-out. Under our agreements with Sprint PCS, subject to
the requirements of applicable law, there are circumstances under which Sprint
PCS may purchase our operating assets or capital stock for 72% or 80% of the
"entire business value" of our company, as defined in our management agreement
with Sprint PCS. In addition, Sprint PCS must approve any change of control of
our ownership and consent to any assignment of our agreements with Sprint PCS.
Sprint PCS also has been granted a right of first refusal if we decide to sell
our operating assets. We are also subject to a number of restrictions on the
transfer of our business including the prohibition on selling our company or our
operating assets to a number of identified and as yet to be identified
competitors of Sprint PCS or Sprint. These and other restrictions in our
agreements with Sprint PCS may limit the saleability and/or reduce the value a
buyer may be willing to pay for our business and may operate to reduce the
"entire business value" of our company.
We may not be able to compete with larger, more established businesses offering
similar products and services
Our ability to compete will depend, in part, on our ability to anticipate
and respond to various competitive factors affecting the telecommunications
industry, including new services that may be introduced, changes in consumer
preferences, demographic trends, economic conditions and discount pricing
strategies by competitors. We will compete in our territory with two cellular
providers, both of which have an infrastructure in place and have been
operational for a number of years. They have significantly greater financial and
technical resources than we do, could offer attractive pricing options and may
have a wider variety of handset options. We expect that existing cellular
providers will upgrade their systems and provide expanded, digital services to
compete with the Sprint PCS products and services that we intend to offer. These
wireless providers require their customers to enter into long-term contracts,
which may make it more difficult for us to attract customers away from them.
Sprint PCS generally does not require its customers to enter into long-term
contracts, which may make it easier for other wireless providers to attract
Sprint PCS customers away from Sprint PCS. We will also compete with several PCS
providers and other existing communications companies in our territory. A number
of our cellular and PCS competitors will have access to more licensed spectrum
than the 10 MHz licensed to Sprint PCS in our territory. In addition, any
competitive difficulties that Sprint PCS may experience could also harm our
competitive position and success.
Our services may not be broadly used and accepted by consumers
PCS systems have a limited operating history in the United States. The
extent of potential demand for PCS in our markets cannot be estimated with any
degree of certainty. If we are unable to establish and successfully market PCS
services we may not be able to attract customers in sufficient numbers to
operate our business successfully.
The technology we use has limitations and could become obsolete
We intend to employ digital wireless communications technology selected by
Sprint PCS for its network. Code division multiple access, known as CDMA,
technology is a relatively new technology. CDMA may not provide the advantages
expected by Sprint PCS. If another technology becomes the preferred industry
standard, we may be at a competitive disadvantage and competitive pressures may
require Sprint PCS to change its digital technology which, in turn, may require
us to make changes at substantially increased costs. We may not be able to
respond to such pressures and implement new technology on a timely basis, or at
an acceptable cost.
If Sprint PCS customers are not able to roam instantaneously or efficiently onto
other wireless networks, prospective customers could be deterred from
subscribing for our Sprint PCS services
The Sprint PCS network operates at a different frequency and uses or may
use a different technology than many analog cellular and other digital systems.
To access another provider's analog cellular or digital system outside of the
Sprint PCS network, a Sprint PCS customer is required to utilize a dual-
band/dual-mode handset compatible with that provider's system. Generally,
because dual-band/dual-mode handsets incorporate two radios rather than one,
they are more expensive and are larger and heavier than single-band/single-mode
handsets. The Sprint PCS network does not allow for call hand-off between the
Sprint PCS network and another wireless network, thus requiring a customer to
end a call in progress and initiate a new call when leaving the Sprint PCS
network and entering another wireless network. In addition, the quality of the
service provided by a network provider during a roaming call may not approximate
the quality of the service provided by Sprint PCS. The price of a roaming call
may not be competitive with prices of other wireless companies for roaming
calls, and Sprint PCS customers may not be able to use Sprint PCS advanced
features, such as voicemail notification, while roaming.
Non-renewal or revocation by the Federal Communications Commission of the Sprint
PCS licenses would significantly harm our business
PCS licenses are subject to renewal and revocation. Sprint PCS' licenses in
our territory will expire in 2007 but may be renewed for additional ten year
terms. There may be opposition to renewal of Sprint PCS' licenses upon their
expiration and the Sprint PCS licenses may not be renewed. The Federal
Communications Commission, generally referred to as the FCC, has adopted
specific standards to apply to PCS license renewals. Failure by Sprint PCS to
comply with these standards in our territory could cause revocation or
forfeiture of the Sprint PCS licenses for our territory or the imposition of
fines on Sprint PCS by the FCC.
The loss of our officers and skilled employees that we depend upon to operate
our business could reduce our ability to offer Sprint PCS products and services
The loss of one or more key officers could impair our ability to offer
Sprint PCS products and services. Our business is managed by a small number of
executive officers. We believe that our future success will also depend in large
part on our continued ability to attract and retain highly qualified technical
and management personnel. We believe that there is and will continue to be
intense competition for qualified personnel in the PCS equipment and services
industry as the PCS market continues to develop. We may not be successful in
retaining our key personnel or in attracting and retaining other highly
qualified technical and management personnel. We currently have "key man" life
insurance for our chief executive officer.
We may not achieve or sustain operating profitability or positive cash flow from
operating activities
We expect to incur significant operating losses and to generate significant
negative cash flow from operating activities until 2002 while we develop and
construct our PCS network and build our customer base. Our operating
profitability will depend upon many factors, including, among
others, our ability to market our services, achieve our projected market
penetration and manage customer turnover rates. If we do
not achieve and maintain operating profitability and positive cash flow from
operating activities on a timely basis, we may not be able to meet our debt
service requirements.
We may need more capital than we currently project to build out our PCS network
The build-out of our PCS network will require substantial capital.
Additional funds would be required in the event of significant departures from
the current business plan, unforeseen delays, cost overruns, unanticipated
expenses, regulatory changes, engineering design changes and other technological
risks. Due to our highly leveraged capital structure, additional financing may
not be available or, if available, may not be obtained on a timely basis and on
terms acceptable to us or within limitations permitted under our existing debt
covenants. Failure to obtain additional financing, should the need for it
develop, could result in the delay or abandonment of our development and
expansion plans.
Unauthorized use of our PCS network could disrupt our business
We will likely incur costs associated with the unauthorized use of our PCS
network, including administrative and capital costs associated with detecting,
monitoring and reducing the incidence of fraud. Fraud impacts interconnection
costs, capacity costs, administrative costs, fraud prevention costs and payments
to other carriers for unbillable fraudulent roaming.
Our agreements with Sprint PCS, our certificate of incorporation and our bylaws
include provisions that may discourage, delay and/or restrict any sale of our
operating assets or common stock to the possible detriment of our stockholders
Our agreements with Sprint PCS restrict our ability to sell our operating
assets and common stock. Generally, Sprint PCS must approve a change of control
of our ownership and consent to any assignment of our agreements with Sprint
PCS. The agreements also give Sprint PCS a right of first refusal if we decide
to sell our operating assets to a third party. These restrictions, among other
things, could discourage, delay or make more difficult any sale of our operating
assets or common stock. This could have a material adverse effect on the value
of our common stock and could reduce the price of our company in the event of a
sale. Provisions of our certificate of incorporation and bylaws could also
operate to discourage, delay or make more difficult a change in control of our
company. Our certificate of incorporation, which contains a provision
acknowledging the terms under the management agreement and a consent and
agreement pursuant to which Sprint PCS may buy our operating assets, has been
duly authorized and approved by our board of directors and our stockholders.
This provision is intended to permit the sale of our operating assets pursuant
to the terms of the management agreement or a consent and agreement with our
lenders without further stockholder approval.
Our relationship with Sprint PCS or its successor may be adversely affected by
the proposed merger of Sprint and MCI WorldCom, which could result in a name
change or restrict our ability to operate successfully
Sprint or Sprint PCS may experience a change of control, sale or merger
that could adversely affect our relationships with them or result in a name
change. Sprint and MCI WorldCom have announced that the boards of directors of
both companies have approved a definitive merger agreement whereby the two
companies would merge to form a new company called WorldCom. The companies'
shareholders approved the merger on April 28, 2000. The completion of the
merger is still subject to various conditions, including the approvals of the
Federal Communications Commission, the Justice Department, various state
governmental bodies and foreign antitrust authorities. If the merger is
completed, we expect that our affiliation agreements with the merged company
would be on the same terms as our current affiliation agreements with Sprint
PCS. However, the consummation of the merger may increase the likelihood that
our affiliation agreements will not be renewed if, among other reasons, the
combined company has a different strategy related to affiliate relationships.
Additionally, we may need to enter into new trademark agreements with the merged
entity if the merger results in a name change. The results of the merger may
alter the nature of our relationship with Sprint PCS, which could restrict our
ability to operate successfully. Any negative impact on Sprint as a result of
the merger could have a negative impact on us as a Sprint PCS affiliate.
INDUSTRY RISKS
We may experience a high rate of customer turnover which would increase our
costs of operations and reduce our revenue
Our strategy to reduce customer turnover may not be successful. The PCS
industry has experienced a higher rate of customer turnover as compared to
cellular industry averages. The rate of customer turnover may be the result of
several factors, including network coverage; reliability issues such as blocked
calls, dropped calls and handset problems; non-use of phones; change of
employment; non-use of customer contracts, affordability; customer care concerns
and other competitive factors. Price competition and other competitive factors
could also cause increased customer turnover.
Wireless providers offering services based on alternative technologies may
reduce demand for PCS
The wireless telecommunications industry is experiencing significant
technological change, as evidenced by the increasing pace of digital upgrades in
existing analog wireless systems, evolving industry standards, ongoing
improvements in the capacity and quality of digital technology, shorter
development cycles for new products and enhancements and changes in end-user
requirements and preferences. There is also uncertainty as to the extent of
customer demand as well as the extent to which airtime and monthly recurring
charges may continue to decline. As a result, our future prospects and those of
the industry, and the success of PCS and other competitive services, remain
uncertain.
Regulation by government agencies may increase our costs of providing service or
require us to change our services
The licensing, construction, use, operation, sale and interconnection
arrangements of wireless telecommunications systems are regulated to varying
degrees by the FCC, the Federal Aviation Administration and, depending
on the jurisdiction, state and local regulatory agencies and
legislative bodies. Adverse decisions regarding these regulatory
requirements could negatively impact our operations and our cost of doing
business. The Sprint PCS agreements reflect an affiliation that the parties
believe meets the FCC requirements for licensee control of licensed spectrum.
If the FCC were to determine that our agreements with Sprint PCS need to be
modified to increase the level of licensee control, we have agreed with Sprint
PCS to use our best efforts to modify the agreements as necessary to cause the
agreements to comply with applicable law and to preserve to the extent possible
the economic arrangements set forth in the agreements. If the agreements cannot
be modified, the agreements may be terminated pursuant to their terms.
Use of hand-held phones may pose health risks
Media reports have suggested that certain radio frequency emissions from
wireless handsets may be linked to various health problems, including cancer,
and may interfere with various electronic medical devices, including hearing
aids and pacemakers. Concerns over radio frequency emissions may discourage use
of wireless handsets or expose us to potential litigation.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3 * (i) Amended and Restated Certificate of Incorporation of AirGate PCS,
Inc. (ii) Amended and Restated Bylaws of AirGate PCS, Inc.
4 * Specimen of Common Stock Certificate of AirGate PCS, Inc.
4.2* Form of warrant issued in units offering
4.3* Form of Weiss, Peck & Greer warrants
4.4* Form of Lucent warrants
4.5* Form of Indenture for senior subordinated discount notes (including
form of pledge agreement)
4.6* Form of unit (included in exhibit 10.5)
10.1* Sprint PCS Management Agreement between SprintCom, Inc. and AirGate
Wireless, L.L.C.
10.2* Sprint PCS Services Agreement between Sprint Spectrum L.P. and AirGate
Wireless, L.L.C.
10.3* Sprint Spectrum Trademark and Service Mark License Agreement
10.4* Sprint Trademark and Service Mark License Agreement
10.5* Master Site Agreement dated August 6, 1998 between AirGate and
BellSouth Carolinas PCS, L.P., BellSouth Personal Communications,
Inc. and BellSouth Mobility DCS
10.6* Compass Telecom, L.L.C. Construction Management Agreement
10.7* Commercial Real Estate Lease dated August 7, 1999 between AirGate and
Perry Company of Columbia, Inc. to lease a warehouse facility
10.8* Form of Indemnification Agreement
10.9 Employment Agreement date April 9, 1999 between AirGate and Thomas M.
Dougherty
10.10* Form of Executive Employment Agreement
10.11** 1999 Stock Option Plan
10.12* Credit Agreement with Lucent (including form of pledge agreement and
form of intercreditor agreement)
10.13* Consent and Agreement
10.14* Assignment of Sprint PCS Management Agreement, Sprint Spectrum
Services Agreement and Trademark and Service Mark Agreements from
AirGate Wireless, L.L.C. to AirGate Wireless, Inc. dated
November 20, 1998
10.15* Form of Warrant for units offering (including form of warrant in
units offering and form of unit)
10.16 First Amendment To Employment Agreement dated December 20, 1999
between AirGate and Thomas M. Dougherty
10.17 Retention Bonus Agreement dated May 4, 2000, between AirGate and
Thomas M. Dougherty
27 Financial Data Schedule
* Incorporated herein by reference from exhibits contained in the registration
statement on Form S-1 (Registration File Nos. 333-79189-02 and 333-79189-01)
declared effective by the Securities and Exchange Commission on September 27,
1999
** Incorporated herein by reference from exhibits contained in registration
statement on Form S-8 dated April 10, 2000
(b) Reports on Form 8-K
None.
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 officer duly authorized.
AirGate PCS, Inc.
By: /s/ Alan B. Catherall
---------------------------------
Name: Alan B. Catherall
Title: Chief Financial Officer
Date: May 15, 2000 /s/ Alan B. Catherall _
--------------------------------
Alan B. Catherall
Chief Financial Officer
(Principal Financial and
Accounting Officer)
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
---------------------------------------
This First Amendment to Employment Agreement is entered into on December
20, 1999 by and between AirGate PCS, Inc., a Delaware corporation (the
"Company") and Thomas M. Dougherty ("Executive" or "Employee").
WHEREAS, Executive and the Company entered into an Employment Agreement
dated April 9, 1999 and effective April 15, 1999 regarding the Executive's
employment as the Company's Chief Executive Officer; and
WHEREAS, the Board of Directors of the Company has approved an amendment to
the Executive's Employment Agreement to include a provision for continued
compensation to the Executive's family in the event of his death and to
establish the exercise price at $14.00 for the Executive's stock options in
accordance with the terms of the Company's 1999 Incentive Stock Option Plan and
as approved by the Board of Directors on July 28, 1999;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and for good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto, each intending to be legally bound
do hereby agree as follows:
1. SECTION (4)(C) - STOCK OPTION. Section 4(c) is hereby modified to add
the following provision: "The exercise price for the Stock Option is
fourteen dollars ($14.00) a share."
2. SECTION 4(G) - TERMINATION BY REASON OF DEATH. Section 4 is amended to
add the following subsection (g): "(g) Termination by Reason of Death.
If Executive's employment terminates by reason of death, the Company shall pay
to Executive's legal representative Executive's Base Salary with an annual
adjustment equal to the greater of (a) the Consumer Price Index for all urban
consumers, U.S. City Average, All Items; or (b) 5%; plus an annual bonus at a
rate of 20% of Executive's Base Salary for a period of twelve months following
his death (but in no event exceeding April 15, 2004). Except as provided in
this Section 4(g) or as required by law, compensation and benefits provided
hereunder shall cease at death.
Except as expressly amended herein, the parties hereby ratify and confirm the
Employment Agreement.
IN WITNESS WHEREOF, the parties have executed this First Amendment to
Employment Agreement as of the date first above written.
AIRGATE PCS, INC.
By: /s/ Barry Schiffman
Title: Chairman of the Board
Date: December 9, 1999
THOMAS M. DOUGHERTY
/s/ Thomas M. Dougherty
Thomas M. Dougherty
Date: December 9, 1999
THOMAS M. DOUGHERTY
RETENTION BONUS AGREEMENT
THIS RETENTION BONUS AGREEMENT (this "Agreement") is made as of this 4th
day of May, 2000, between AirGate PCS, Inc. (the "Company") and Thomas M.
Dougherty ("Executive").
BACKGROUND
----------
The Compensation Committee has determined that it is in the best interests
of the Company to provide the bonus described herein to Executive in recognition
of his leadership in achieving the successful public offering of the Company's
common stock and its strong performance since that time, and also to assure that
the Company will have the continued dedication of Executive over the ensuing
several months, notwithstanding the possibility or occurrence of a significant
restructuring or change of control of the Company. Therefore, in order to
accomplish these objectives, the Board has caused the Company to enter into this
Agreement.
In consideration of the mutual promises set forth below, and for other good
and valuable consideration, the sufficiency of which is acknowledged, the
Company and Executive hereby agree as follows:
AGREEMENT
---------
1. Effective Date. This Agreement shall be effective as of the date first
noted above (the "Effective Date").
2. Definitions. The following capitalized terms used in this Agreement
-----------
shall have the meanings assigned to them below:
"Board" means the Board of Directors of the Company.
-----
"Cause" means (i) the willful and continued failure of Executive to
-----
substantially perform his duties with the Company (other than any such failure
-
resulting from incapacity due to physical or mental illness, and specifically
excluding any failure by Executive, after reasonable efforts, to meet
performance expectations), or (ii) the willful engaging by Executive in illegal
conduct or gross misconduct that is materially and demonstrably injurious to the
Company. For purposes of this definition of "Cause", no act or failure to act,
on the part of Executive, shall be considered "willful" unless it is done, or
omitted to be done, by Executive in bad faith or without reasonable belief that
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or based upon the advice of counsel for the Company shall
be conclusively presumed to be done, or omitted to be done, by Executive in good
faith and in the best interests of the Company. The cessation of employment of
Executive shall not be deemed to be for Cause unless and until there shall have
been delivered to Executive a copy of a resolution duly adopted by the
affirmative vote of not less than two-thirds of the entire membership of the
Board of the Company at a meeting of such Board called and held for such purpose
(after reasonable notice is provided to Executive and Executive is given an
opportunity, together with counsel, to be heard before such Board), finding
that, in the good faith opinion of such Board, Executive is guilty of the
conduct described in subparagraph (i) or (ii) above, and specifying the
particulars thereof in detail.
"Change of Control" has the meaning assigned such term in that certain
-------------------
Option Agreement, dated as of July 28, 1999, by and between Executive and the
Company, as the same shall be amended from time to time (the "Option
Agreement").
"Compensation Committee" means the Compensation Committee of the Board.
-----------------------
"Disability" means the inability of Executive, as determined by the Board,
----------
to perform the essential functions of his regular duties and responsibilities,
with or without reasonable accommodation, due to a medically determinable
physical or mental illness which has lasted (or can reasonably be expected to
last) for a period of six consecutive months. At the request of Executive or
his personal representative, the Board's determination that the Disability of
Executive has occurred shall be certified by two physicians mutually agreed upon
by Executive, or his personal representative, and the Company. Failing such
independent certification (if so requested by Executive), Executive's
termination shall be deemed a termination by the Company without Cause and not a
termination by reason of his Disability.
3. Retention Bonus. Provided that Executive is employed by the Company on
---------------
the following payment dates (or if Executive's employment shall have been
terminated prior to such date by reason of his death, Disability, or termination
by the Company without Cause), the Company will pay to Executive a retention
bonus in the following amounts in accordance with the following schedule:
<TABLE><CAPTION>
AMOUNT OF
PAYMENT RETENTION
DATE BONUS PAYABLE
- ------- -------------------------
<S> <C>
April 15, 2000 $900,000
January 15, 2001 $540,000
April 15, 2001 $180,000
July 15, 2001 $180,000
October 15, 2001 $180,000
January 15, 2002 $180,000
April 15, 2002 $180,000
July 15, 2002 $180,000
October 15, 2002 $180,000
January 15, 2003 $180,000
April 15, 2003 $180,000
July 15, 2003 $180,000
October 15, 2003 $180,000
January 15, 2004 $180,000
</TABLE>
<PAGE>
Notwithstanding the above schedule, in the event a Change of Control of the
Company shall have occurred, one-half of the then-remaining unpaid amount of the
Retention Bonus shall be paid to Executive in a lump cash payment within 30 days
following the date of such Change of Control and the other half of the
then-remaining unpaid amount of the Retention Bonus shall be payable in
accordance with the above schedule; provided, however, that if the Option
Agreement is hereafter amended to provide for 100% vesting of Executive's stock
options upon a Change of Control, then this Agreement shall be deemed to be
simultaneously amended, without further action, to provide that upon a Change of
Control all of the then-remaining unpaid amount of the Retention Bonus shall be
paid to Executive in a lump cash payment within 30 days following the date of
such Change of Control. In either case, if Executive's employment is terminated
without Cause prior to the occurrence of a Change of Control and if it can
reasonably be shown that such termination (i) was at the direction or request or
a third party that had taken steps reasonably calculated to effect the Change of
Control after such termination, or (ii) otherwise occurred in connection with,
or in anticipation of, the Change of Control, then Executive shall have the
rights described herein as if a Change of Control had occurred on the date
immediately preceding his termination of employment.
4. Successors, Binding Agreement.
(a) The Company will cause any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place.
(b) This Agreement shall inure to the benefit of and be enforceable by the
Company's successors and assigns and by Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devises and legatees.
5. Notice. Any notice required or permitted to be given by this Agreement
shall be effective only if in writing, delivered personally against receipt
therefor, or mailed by certified or registered mail, return receipt requested,
to the parties at the addresses hereinafter set forth, or at such other places
that either party may designate by notice to the other.
Notice to the Company shall be addressed to:
AirGate PCS, Inc.
Harris Tower
233 Peachtree Street, NE
Atlanta, Georgia 30303
Attention: Alan Catherall, Chief Financial Officer
Notice to Executive shall be addressed to him at his home address as then
indicated in the records of the Company.
All such notices shall be deemed effectively given five (5) days after the
same has been deposited in a post box under the exclusive control of the United
States Postal Service.
6. Miscellaneous.
(a) Amendments. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by Executive and such officer of the Company as may be
specifically designated by the Board or the Compensation Committee of the Board.
(b) Waivers. No waiver by either party hereto at any time of any breach by
the other party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
(c) Entire Agreement. No agreement or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement.
(d) Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Delaware.
(e) Severability. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
(f) Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
(g) Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Atlanta, Georgia accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award
in any court having jurisdiction.
(h) Costs of Enforcement. Each party shall pay its own legal fees
and expenses incurred in connection with any arbitration (or other proceeding
whether or not instituted by the Company or Executive), relating to the
interpretation or enforcement of any provision of this Agreement (including any
action seeking to obtain or enforce any right or benefit by this Agreement).
(i) No Restriction on Employment Rights. This contract is in
relation to certain benefits and compensation only and is not to be construed as
an employment contract for a definite term. Nothing in this Agreement shall
confer on Executive any right to continue in the employ of the Company or shall
interfere with or restrict the rights of the Company, which are expressly
reserved, to discharge Executive at any time for any reason whatsoever, with or
without Cause. Nothing in this Agreement shall restrict the right of
Executive to terminate his employment with the Company at any time for any
reason whatsoever.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this
Agreement as of the date first above written.
AIRGATE PCS, INC.
By: /s/ John Dillon
-----------------------
John Dillon
Chariman of the
Compensation Committee
EXECUTIVE
/s/ Thomas M. Dougherty
-------------------------
Thomas M. Dougherty
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<NAME> AIRGATE PCS, INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 147,501
<SECURITIES> 0
<RECEIVABLES> 1,680
<ALLOWANCES> 0
<INVENTORY> 656
<CURRENT-ASSETS> 155,032
<PP&E> 137,353
<DEPRECIATION> (3,531)
<TOTAL-ASSETS> 298,928
<CURRENT-LIABILITIES> 27,962
<BONDS> 169,122
0
0
<COMMON> 124
<OTHER-SE> 101,720
<TOTAL-LIABILITY-AND-EQUITY> 298,928
<SALES> 304
<TOTAL-REVENUES> 1,710
<CGS> 1,093
<TOTAL-COSTS> 9,520
<OTHER-EXPENSES> 12,502
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (12,812)
<INCOME-PRETAX> (26,932)
<INCOME-TAX> 0
<INCOME-CONTINUING> (26,932)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (26,932)
<EPS-BASIC> (2.23)
<EPS-DILUTED> (2.23)
</TABLE>
