FORM 10-Q. - Quarterly Report Under Section 23 or 15(d) of the
Securities Exchange Act of 1934
FORM 10-Q-QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 2000
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: ___________
TRITEL, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
Delaware 64-0896417
(State or other jurisdiction of incorporation or organization (I.R.S. Employer Identification No.)
</TABLE>
111 E. Capitol Street, Suite 500
Jackson, MS 39201
(Address of Principal Executive Offices)
(601) 914-8000
(Registrant's telephone number, including area code)
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[ ]
On April 28, 2000, there were 97,809,885 shares of class A voting common
stock, 2,927,120 shares of class B non-voting common stock, 1,380,448 shares
of class C common stock, 4,962,804 shares of class D common stock and 6 shares
of voting preference common stock outstanding.
Form 10-Q
Tritel, Inc.
Quarter Ended March 31, 2000
Table of Contents
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Tritel, Inc. Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets-
December 31, 1999 and March 31, 2000..............................2
Condensed Consolidated Statements of Operations- Three-Month
Periods Ended March 31, 1999 and March 31, 2000...................3
Condensed Consolidated Statements of Cash Flows- Three-Month
Periods Ended March 31, 1999 and March 31, 2000...................4
Notes to Condensed Consolidated Financial Statements...............5
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition................................10
Item 3. Quantitative and Qualitative Disclosures About Market Risk.........19
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..................................................21
Item 4 Submission Of Matters To A Vote Of Security Holders................21
Item 5. Other Information..................................................21
Item 6. Exhibits And Reports On Form 8-K...................................21
Signature Page .............................................................22
<PAGE>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
TRITEL, INC.
Condensed Consolidated Balance Sheets
December 31, 1999 and March 31, 2000 (unaudited)
(amounts in thousands, except share data)
<TABLE>
<CAPTION>
December 31, March 31,
1999 2000
---------------- ---------------
Assets (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 609,269 482,459
Accounts receivable, net 5,040 8,708
Inventory 8,957 16,410
Prepaid expenses and other current assets 7,298 8,188
---------------- ---------------
Total current assets 630,564 515,765
Restricted cash 6,594 6,125
Property and equipment, net 262,343 292,215
Federal Communications Commission licensing costs, net 201,946 203,107
Intangible assets, net 59,508 58,077
Other assets 35,407 34,585
---------------- ---------------
Total assets $ 1,196,362 1,109,874
================ ===============
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long-term debt $ 923 960
Accounts payable and accrued liabilities 113,324 64,118
---------------- ---------------
Total current liabilities 114,247 65,078
---------------- ---------------
Non-current liabilities:
Long-term debt 557,716 564,483
Deferred income taxes and other liabilities 37,367 38,891
---------------- ---------------
Total non-current liabilities 595,083 603,374
---------------- ---------------
Total liabilities 709,330 668,452
---------------- ---------------
Series A 10% redeemable convertible preferred stock 99,586 101,853
---------------- ---------------
Stockholders' equity:
Preferred stock, authorized 3,100,000 shares:
Series D, outstanding 46,374 shares in 1999 and 2000 46,374 46,374
Common stock issued and outstanding at March 31, 2000
Class A Voting - 97,799,735 shares; Class B Non-voting - 2,927,120
shares; Class C - 1,380,448; Class D - 4,962,804 shares, Voting
Preference -- 6 shares 1,071 1,071
Additional paid in capital 611,277 719,563
Accumulated deficit (271,276) (427,439)
---------------- ---------------
Total stockholders' equity 387,446 339,569
---------------- ---------------
Total liabilities, redeemable preferred stock
and stockholders' equity $ 1,196,362 1,109,874
================ ===============
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
TRITEL, INC.
Condensed Consolidated Statements of Operations
(Unaudited)
For the Three-Month Periods Ended March 31, 1999 and 2000
(amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Three months
ended
March 31,
-----------------------------------
1999 2000
---------------- -----------------
<S> <C> <C>
Revenues $ - 15,499
------- ----------
Operating expenses:
Cost of service and equipment - 13,703
Technical operations 1,956 10,192
General and administrative 2,890 9,328
Sales and marketing 1,016 12,139
Stock-based compensation - 108,297
Depreciation and amortization 1,609 10,551
------- ----------
Total operating expenses 7,471 164,210
------- ----------
Operating loss (7,471) (148,711)
Interest income 1,127 8,669
Financing cost (2,230) -
Interest expense - (14,360)
------- ----------
Loss before income taxes (8,574) (154,402)
Income tax benefit 2,327 506
------- ----------
Net loss (6,247) (153,896)
Series A preferred dividend requirement (2,087) (2,267)
------- ----------
Net loss available to common stockholders $ (8,334) (156,163)
======= ==========
Basic and diluted net loss per share $ (1.32)
==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
TRITEL, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For the Three-Month Periods Ended March 31, 1999 and 2000
(amounts in thousands)
<TABLE>
<CAPTION>
Three-months ended
March 31,
-------------------------------
1999 2000
------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (6,247) (153,896)
Adjustments to reconcile net loss to net cash used in operating
activities:
Financing costs 2,230 -
Depreciation and amortization 1,609 10,551
Stock-based compensation - 108,297
Accretion of discount on debt and amortization - 6,472
of debt issuance costs
Deferred income tax benefit (2,327) (506)
Provision for bad debts - 188
Changes in operating assets and liabilities:
Accounts receivable - (3,856)
Inventory - (7,453)
Accounts payable and accrued expenses (3,870) (10,935)
Change in other current assets and liabilities 404 (700)
--------- -----------
Net cash used in operating activities (8,201) (51,838)
--------- -----------
Cash flows from investing activities:
Capital expenditures (22,358) (73,166)
Advance under notes receivable (7,500) -
Capitalized interest on network construction and
Federal Communications Commission licensing costs (3,715) (1,806)
(Increase) decrease in restricted cash (8,393) 568
Other - (144)
--------- -----------
Net cash used in investing activities (41,966) (74,548)
--------- -----------
Cash flows from financing activities:
Proceeds from (repayments of) long-term debt 200,000 (215)
Repayments of notes payable (22,100) -
Payment of debt issuance costs and other deferred charges (27,201) (199)
Payment of stock issuance costs - (61)
Proceeds from vendor discount 15,000 -
Issuance of preferred stock 113,623 -
Proceeds from exercise of stock options - 51
--------- -----------
Net cash provided by (used in) financing activities 279,322 (424)
--------- -----------
Net increase (decrease) in cash and cash equivalents 229,155 (126,810)
Cash and cash equivalents at beginning of period 846 609,269
--------- -----------
Cash and cash equivalents at end of period $ 230,001 482,459
========= ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
Tritel, Inc.
Notes to Condensed Consolidated Financial Statements
1. Organization
Tritel, Inc. ("Tritel") was formed on April 23, 1998 by the controlling
shareholders of Airwave Communications LLC and Digital PCS, LLC, our
predecessor companies, to develop PCS markets in the south-central United
States. On January 7, 1999, our predecessor companies transferred
substantially all of their assets and liabilities at historical cost to
Tritel in exchange for 18,262 shares of series C preferred stock in
Tritel. The controlling shareholders of our predecessor companies control
Tritel. Tritel will continue the activities of our predecessor companies
and, for accounting purposes, this transaction was accounted for as a
reorganization of the predecessor company into a C corporation and a name
change to Tritel. Tritel and the predecessor company, together with
Tritel's subsidiaries, are referred to collectively as "the Company."
2. Merger with Telecorp PCS
On February 28, 2000, Tritel and TeleCorp PCS, Inc. announced the signing
of a definitive agreement and plan of reorganization and contribution,
called the Merger Agreement, for an all stock, tax-free merger, called
the Merger. The Merger Agreement provides for the creation of a new
entity to be called TeleCorp PCS, Inc. Tritel and TeleCorp will merge
into subsidiaries of the new entity.
Under the Merger Agreement, each share of Tritel class A voting common
stock will be converted into the right to receive 0.76 shares of the new
entity's class A common stock. This exchange ratio is fixed regardless of
future stock price movement.
The Merger has been unanimously approved by the Tritel and TeleCorp
boards of directors, with three members of the TeleCorp board abstaining.
Shareholders with an excess of 50% of the voting power of each company
have entered into agreements to vote in favor of the Merger. The Merger
is still subject to regulatory approval and other conditions.
3. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of
the Company have been prepared pursuant to the rules and regulations of
the Securities and Exchange Commission (the "SEC"). Certain information
and footnote disclosures normally included in financial statements
presented in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. In
the opinion of management, the condensed consolidated financial
statements include all adjustments, consisting of normal recurring items,
necessary to fairly present the results of operations, financial position
and cash flows for the periods presented. The results of operations for
an interim period are not necessarily indicative of the results of
operations that may be expected for the complete fiscal year.
The condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
for the year ended December 31, 1999 included in the Company's Annual
Report to Shareholders on Form 10-K.
4. Supplemental Cash Flow Information
<TABLE>
<CAPTION>
Three months ended
March 31,
-----------------------------
1999 2000
------------- --------------
<S> <C> <C>
(Amounts in Thousands)
Supplementary Information:
Cash paid for interest, net of amounts capitalized $ - 7,888
=========== ===========
Significant non-cash investing and financing activities:
Capitalized interest and discount on debt $ 221 1,481
=========== ===========
Conversions of debt to equity $ 6,746 -
=========== ===========
Capital expenditures included in accounts payable $ (5,762) 43,642
=========== ===========
</TABLE>
5. Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Financial Accounting Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities, ("FAS133"). FAS133 establishes
accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts, and for
hedging activities. It requires that an entity recognize all derivatives
as either assets or liabilities in the statement of financial position
and measure those instruments at fair value. FAS133 will significantly
change the accounting treatment of derivative instruments and, depending
upon the underlying risk management strategy, these accounting changes
could affect future earnings, assets, liabilities, and shareholders'
equity. The Company is closely monitoring the deliberations of the FASB's
derivative implementation task force. With the issuance of Financial
Accounting Statement No. 137, Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FASB Statement No.
133, which delayed the effective date of FAS133, the Company will be
required to adopt FAS133 on January 1, 2001. Presently, the Company has
not yet quantified the impact that the adoption will have on the
consolidated financial statements of the Company.
6. Condensed Consolidating Financial Statements
The following condensed consolidating financial statements as of December
31, 1999 and March 31, 2000 and for the three months ended March 31, 1999
and 2000 are presented for Tritel, Tritel PCS, those subsidiaries of
Tritel PCS who serve as guarantors and those subsidiaries who do not
serve as guarantors of the senior subordinated discount notes.
<TABLE>
<CAPTION>
Condensed Consolidating Balance Sheet
As of December 31, 1999
Tritel, Tritel PCS, Guarantor NonGuarantor Consolidated
(Amounts in thousands) Inc. Inc. Subsidiaries Subsidiaries Eliminations Tritel, Inc.
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ - 613,999 (4,730) - - 609,269
Other current assets 2,462 1,407 17,426 - - 21,295
Intercompany receivables 1,799 210,673 - - (212,472) -
----------- ----------- ----------- ----------- ------------- ------------
Total current assets 4,261 826,079 12,696 - (212,472) 630,564
Restricted cash - 6,594 - - - 6,594
Property and equipment, net - - 262,343 - - 262,343
Licenses and other intangibles 59,508 - - 201,946 - 261,454
Investment in subsidiaries 445,301 73,286 - - (518,587) -
Other long term assets - 62,633 82 - (27,308) 35,407
----------- ----------- ----------- ----------- ------------- ------------
Total assets $ 509,070 968,592 272,121 201,946 (758,367) 1,196,362
=========== =========== =========== =========== ============= ============
Current liabilities:
Accounts payable, accrued
expenses and other current
liabilities $ 29 1,240 111,257 1,721 - 114,247
Intercompany payables - - 196,950 15,522 (212,472) -
----------- ----------- ----------- ----------- ------------- ------------
Total current liabilities 29 1,240 308,207 17,243 (212,472) 114,247
Non-current liabilities:
Long-term debt - 516,734 27,121 40,982 (27,121) 557,716
Deferred income taxes and
other 22,009 5,318 (20,024) 30,251 (187) 37,367
----------- ----------- ----------- ----------- ------------- ------------
Total liabilities 22,038 523,292 315,304 88,476 (239,780) 709,330
Series A redeemable convertible
preferred stock 99,586 - - - - 99,586
----------- ----------- ----------- ----------- ------------- ------------
Stockholders' equity (deficit) 387,446 445,300 (40,183) 113,470 (518,587) 387,446
----------- ----------- ----------- ----------- ------------- ------------
Total liabilities and equity $ 509,070 968,592 272,121 201,946 (758,367) 1,196,362
=========== =========== =========== =========== ============= ============
</TABLE>
<TABLE>
<CAPTION>
Condensed Consolidating Balance Sheet
As of March 31, 2000
Tritel, Tritel PCS, Guarantor NonGuarantor Consolidated
(Amounts in thousands) Inc. Inc. Subsidiaries Subsidiaries Eliminations Tritel, Inc.
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ - 472,193 10,266 - - 482,459
Other current assets 2,926 2,407 27,973 - 33,306
Intercompany receivables 443 345,696 - (346,139) -
---------------------------------------------------------------------------------------
Total current assets 3,369 820,296 38,239 (346,139) 515,765
Restricted cash - 6,125 - - 6,125
Property and equipment, net - - 292,215 - 292,215
Licenses and other intangibles 58,077 - - 203,107 - 261,184
Investment in subsidiaries 401,979 34,126 - (436,105) -
Other long term assets 70,354 424 (36,193) 34,585
---------------------------------------------------------------------------------------
Total assets $ 463,425 930,901 330,878 203,107 (818,437) 1,109,874
=======================================================================================
Current liabilities:
Accounts payable, accrued
expenses and other current
liabilities $ 20 1,117 62,219 1,722 - 65,078
Intercompany payables 0 - 328,793 17,346 (346,139) -
---------------------------------------------------------------------------------------
Total current liabilities 20 1,117 391,012 19,068 (346,139) 65,078
Non-current liabilities:
Long-term debt - 523,510 35,371 40,973 (35,371) 564,483
Deferred income taxes and
other liabilities 21,983 4,295 (16,809) 30,244 (822) 38,891
---------------------------------------------------------------------------------------
Total liabilities 22,003 528,922 409,574 90,285 (382,332) 668,452
---------------------------------------------------------------------------------------
Series A redeemable convertible
preferred stock 101,853 - - - - 101,853
---------------------------------------------------------------------------------------
Stockholders' equity (deficit) 339,569 401,979 (78,696) 112,822 (436,105) 339,569
---------------------------------------------------------------------------------------
Total liabilities and
equity $ 463,425 930,901 330,878 203,107 (818,437) 1,109,874
=======================================================================================
</TABLE>
<TABLE>
<CAPTION>
Condensed Consolidating Statement of Operations
For the Three-Months Ended March 31, 1999
Tritel, Tritel PCS, Guarantor NonGuarantor Consolidated
(Amounts in thousands) Inc. Inc. Subsidiaries Subsidiaries Eliminations Tritel, Inc.
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ - - - - - -
----------------------------------------------------------------------------------------
Operating Expenses
Cost of services and equipment - - - - -
Technical operations - - 1,956 - - 1,956
General and administrative - - 2,890 - - 2,890
Sales and marketing - - 1,016 - - 1,016
Depreciation and amortization 980 384 245 - - 1,609
----------------------------------------------------------------------------------------
Total operating expenses 980 384 6,107 - - 7,471
Operating loss (980) (384) (6,107) - - (7,471)
Interest income 38 1,052 37 - - 1,127
Financing cost - - (2,230) - - (2,230)
Interest expense - - - - - -
----------------------------------------------------------------------------------------
Income (loss) before income taxes (942) 668 (8,300) - - (8,574)
Income tax benefit (expense) 361 (256) 2,222 - - 2,327
----------------------------------------------------------------------------------------
Net loss $ (581) 412 (6,078) - - (6,247)
========================================================================================
</TABLE>
<TABLE>
<CAPTION>
Condensed Consolidating Statement of Operations
For the Three-Months Ended March 31, 2000
Tritel, Tritel PCS, Guarantor NonGuarantor Consolidated
(Amounts in thousands) Inc. Inc. Subsidiaries Subsidiaries Eliminations Tritel, Inc.
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ - - 15,499 1,309 (1,309) 15,499
----------------------------------------------------------------------------------------
Operating Expenses
Cost of services and equipment - - 13,703 - - 13,703
Technical operations - - 10,192 - - 10,192
General and administrative 1,002 - 9,635 - (1,309) 9,328
Sales and marketing - - 12,139 - - 12,139
Stock-based compensation 108,297 - - - - 108,297
Depreciation and amortization 1,431 - 8,304 816 - 10,551
----------------------------------------------------------------------------------------
Total operating expenses 110,730 - 53,973 816 (1,309) 164,210
----------------------------------------------------------------------------------------
Operating income (loss) (110,730) - (38,474) 493 - (148,711)
Interest income 66 9,006 231 - (634) 8,669
Interest expense - (13,206) (640) (1,148) 634 (14,360)
----------------------------------------------------------------------------------------
Income (loss) before income taxes (110,664) (4,200) (38,883) (655) - (154,402)
Income tax benefit 26 39 433 8 - 506
----------------------------------------------------------------------------------------
Net loss $ (110,638) (4,161) (38,450) (647) - (153,896)
========================================================================================
</TABLE>
<TABLE>
<CAPTION>
Condensed Consolidating Statement of Cash Flows
For the Three-Months Ended March 31, 1999
Tritel, Tritel PCS, Guarantor NonGuarantor Consolidated
(Amounts in thousands) Inc. Inc. Subsidiaries Subsidiaries Eliminations Tritel, Inc.
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities $ 37 1,052 (9,290) - - (8,201)
-------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures - - (22,358) - - (22,358)
Advance under notes receivable - (7,500) - - - (7,500)
Increase in restricted cash - (8,393) - - - (8,393)
Capitalized interest on debt - - (483) (3,232) - (3,715)
-------------------------------------------------------------------------------------
Net cash provided by (used in)
investing activities: - (15,893) (22,841) (3,232) - (41,966)
-------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from long term debt - 200,000 - - - 200,000
Repayments of notes payable (22,100) - - - - (22,100)
Payment of debt issuance costs
and other deferred charges - (27,201) - - - (27,201)
Intercompany receivable/payable 57,594 (94,955) 34,129 3,232 - -
Proceeds from vendor discount - 15,000 - - - 15,000
Issuance of preferred stock 113,623 - - - - 113,623
-------------------------------------------------------------------------------------
Net cash provided by financing
activities: 149,117 92,844 - 279,322
-------------------------------------------------------------------------------------
Net increase (decrease) in
restricted cash, cash and
cash equivalents 149,154 78,003 1,998 - - 229,155
Cash and cash equivalents at
beginning of period 846 - - - - 846
-------------------------------------------------------------------------------------
Cash and cash equivalents at
end of period $ 150,000 78,003 1,998 - - 230,001
=====================================================================================
</TABLE>
<TABLE>
<CAPTION>
Condensed Consolidating Statement of Cash Flows
For the Three-Months Ended March 31, 2000
Tritel, Tritel PCS, Guarantor NonGuarantor Consolidated
(Amounts in thousands) Inc. Inc. Subsidiaries Subsidiaries Eliminations Tritel, Inc.
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities $ (1,409) 1,464 (51,893) - - (51,838)
-------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures - - (73,166) - - (73,166)
Investment in subsidiaries - - - - -
Decrease in other assets - 568 (144) - - 424
Capitalized interest on debt - - (719) (1,087) - (1,806)
-------------------------------------------------------------------------------------
Net cash provided by (used in)
investing activities: - 568 (74,029) (1,087) - (74,548)
-------------------------------------------------------------------------------------
Cash flows from financing activities:
Repayment of long term debt - - - (215) - (215)
Payment of debt issuance
costs and other deferred
charges - (199) - - - (199)
Intercompany receivable/payable 1,419 (143,639) 140,918 1,302 -
Payment of stock issuance costs (61) - - - - (61)
Proceeds from exercise of stock
options 51 - - - - 51
-------------------------------------------------------------------------------------
Net cash provided by (used in)
financing activities: 1,409 (143,838) 140,918 1,087 - (424)
-------------------------------------------------------------------------------------
Net increase (decrease) in
restricted cash, cash and
cash equivalents - (141,806) 14,996 - - (126,810)
Cash and cash equivalents at
beginning of period - 613,999 (4,730) - - 609,269
-------------------------------------------------------------------------------------
Cash and cash equivalents at
end of period $ - 472,193 10,266 - - 482,459
=====================================================================================
</TABLE>
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with our consolidated
financial statements and notes thereto, which are included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1999.
Forward Looking Statements; Cautionary Statements
Statements in this report expressing our expectations and beliefs of
the Company regarding our future results or performance are forward-looking
statements that involve a number of risks and uncertainties. In particular,
certain statements contained in this Management's Discussion and Analysis of
Financial Condition and Results of Operations which are not historical facts
constitute "forward-looking statements." Our actual future results may differ
significantly from those stated in any forward-looking statements. Factors
that may cause or contribute to such differences include, but are not limited
to, risks discussed in our Registration Statement on Form S-1 (Reg. No.
333-91207) and from time to time in our other filings with the Securities and
Exchange Commission, including, without limitation, the following: (1) we
depend on our agreements with AT&T for our success, and under certain
circumstances AT&T could terminate its exclusive relationship with us and our
use of the AT&T brand name and logo, (2) we may not be able to manage the
construction of our network or the growth of our business successfully, (3) we
have substantial existing debt, and may incur substantial additional debt,
that we may be unable to service, (4) we may not be able to obtain the
additional financing we may need to complete our network and fund operating
losses, (5) we have many competitors that have substantial coverage of our
licensed areas, (6) difficulties in obtaining infrastructure equipment or
sites may affect our ability to construct our network and meet our development
requirements, (7) potential acquisitions may require us to incur substantial
additional debt and integrate new technologies, operations and services, which
may be costly and time consuming, (8) we may experience a high rate of
customer turnover, (9) our association with the other SunCom companies may
harm our reputation if consumers react unfavorably to them, (10) we depend
upon consultants and contractors for our network services, (11) we may become
subject to new health and safety regulations, which may result in a decrease
in demand for our services, (12) changes in our licenses or other governmental
action or regulation could affect how we do business, (13) we could lose our
PCS licenses or incur financial penalties if the Federal Communications
Commission determines we are not a very small business or if we do not meet
the Federal Communications Commission's minimum construction requirements,
(14) the technologies that we use may become obsolete, which would limit our
ability to compete effectively, and (15) we may incur operating costs due to
fraud. In addition, new factors emerge from time to time, and it is not
possible for us to predict all of these factors. Further, we cannot assess the
impact of each such factor on our business or the extent to which any factor,
or combination of factors, may cause actual results to be materially different
from those contained in any forward-looking statements. As a result of the
foregoing and other factors, we may experience material fluctuations in future
operating results on a quarterly or annual basis which could materially and
adversely affect our business, financial condition, operating results and
stock price. We specifically decline any obligation to publicly release the
result of any revisions that may be made to forward- looking statements to
reflect anticipated or unanticipated events or circumstances occurring after
the date of such statement.
General
For periods prior to the fourth quarter of 1999, we were a
development stage company. We launched commercial service in Jackson and
Vicksburg, Mississippi in September 1999 and launched commercial service in
Nashville, Knoxville and Chattanooga, Tennessee; Montgomery and Huntsville,
Alabama; and Louisville and Lexington, Kentucky during the fourth quarter of
1999.
We are an AT&T Wireless affiliate with licenses to provide PCS
services to approximately 14.0 million people in contiguous markets in the
south-central United States. In January 1999, we entered into our affiliation
agreement with AT&T Wireless, our largest equity shareholder with 21.6%
ownership of our company. We have also joined with two other AT&T Wireless
affiliates to operate under a common regional brand name, SunCom. We provide
our PCS services as a member of the AT&T Wireless Network, serving as the
preferred roaming provider to AT&T Wireless' digital customers in virtually
all of our markets and co-branding our services with the AT&T and SunCom
brands and logos, giving equal emphasis to each.
AT&T Wireless operates the largest digital wireless network in North
America. Its network consists of AT&T Wireless' existing digital and analog
systems, PCS systems being constructed by four joint venture partners,
including our company, and systems currently operated by third parties with
which AT&T Wireless has roaming agreements. In the aggregate, these systems
covered over 95% of the total population throughout the United States as of
December 31, 1999.
We have incurred significant expenditures in conjunction with our
organization and financing, PCS license acquisitions, hiring key personnel and
the design and construction of our PCS network facilities. We have commenced
commercial PCS services in nine of our ten largest markets as of April 30,
2000. We expect to have commenced commercial PCS service in all of our major
population and business centers by the end of 2000. The timing of launch in
individual markets will be determined by various factors, principally the
success of our site acquisition program, zoning and microwave relocation
activities, equipment delivery schedules and local market and competitive
considerations. We provided service to over 50% of the population in our
license area at the end of 1999 and expect to provide service to over 98% by
the end of 2000. Thereafter, we will evaluate further coverage expansion on a
market-by-market basis.
The extent to which we are able to generate operating revenues and
earnings will be dependent on a number of business factors, including
successfully deploying the PCS network and attaining profitable levels of
market demand for our products and services.
Revenues
We generate substantially all of our revenues from the following
sources:
Service. We sell wireless personal communications services. The
various types of service revenue associated with personal communications
services for our subscribers include monthly recurring charges and monthly
non-recurring airtime charges for local, long distance and roaming airtime
used in excess of pre-subscribed usage. Our customers' charges are dependent
on their rate plans, based on the number of minutes included in their plans.
Service revenue also includes monthly non-recurring airtime usage associated
with our prepaid subscribers and non-recurring activation and deactivation
service charges.
Equipment. We sell wireless PCS handsets and accessories that are
used by our customers in connection with our wireless services.
Roaming. We charge monthly, non-recurring, per minute fees to other
wireless companies whose customers use our network facilities to place and
receive wireless services.
Industry statistics indicate that average revenue per unit, called
ARPU, for the wireless communications business has declined substantially over
the period 1993-1998. Although this decline has stabilized recently,
management believes that some deterioration in industry ARPU will continue.
Management believes that certain direct operating costs, including billing,
interconnect, roaming and long distance charges will decline on a per
subscriber basis. However, our ability to improve our margins will depend
primarily on our ability to manage our variable costs, including selling,
general and administrative expense and costs per new subscriber.
A particular focus of our strategy is to reduce subscriber churn.
Industry data suggest that providers (including PCS providers) that have
offered poor or spotty coverage, poor voice quality, unresponsive customer
care or confusing billing suffer higher-than-average churn rates. Accordingly,
we launch service in a new market only after we believe that comprehensive and
reliable coverage and service can be maintained in that market. In addition,
we have designed our billing system to provide simple and understandable
options to our subscribers and to permit subscribers to select a flexible
billing cycle.
We also focus resources on a proactive subscriber retention program,
strict credit policies and alternative methods of payment for
credit-challenged customers. However, future PCS churn rates may be higher
than historical rates due to the increase in number of competitors and
expanded marketbase.
Cost of Services and Equipment
Our cost of services and equipment has consisted of, and we expect
will continue to consist of, the following:
Equipment. We purchase personal communications handsets and
accessories from third party vendors to resell to our customers for use in
connection with our services. The cost of handsets has been, and is expected
to remain, higher than the resale price to the customer. This cost is recorded
as a cost of services and equipment. We do not manufacture any of this
equipment.
Roaming Fees. We pay fees to other wireless communications companies
based on airtime usage of our customers on other communications networks. It
is expected that reciprocal roaming rates charged between our company and
other carriers will decrease.
Variable Interconnect. We pay monthly charges associated with the
connection of our network with other carriers' networks. These fees are based
on minutes of use by our customers. This is known as interconnection.
Variable Long Distance. We pay monthly usage charges to other
communications companies for long distance service provided to our customers.
These variable charges are based on our subscribers' usage, applied at
pre-negotiated rates with the other carriers.
Clearinghouse Fees. We pay fees to an independent clearinghouse for
processing our call data records and performing monthly intercarrier financial
settlements for all charges that we pay to other wireless companies when our
customers use their network, and that other wireless companies pay to us when
their customers use our network. These fees are based on the number of
transactions processed in a month.
Operating Expenses
Our operating expenses have consisted of, and we expect will continue
to consist of, the following costs:
Technical Operations. Our technical operations expense includes
engineering operations and support, cell site lease expenses, field
technicians, network implementation support, and engineering management. This
expense also includes monthly recurring charges directly associated with the
maintenance of network facilities and equipment.
General and Administrative. Our general and administrative expense
includes customer service, billing, information technology, finance,
accounting, human resources and legal services.
Sales and Marketing. Our sales and marketing expense includes
salaries and benefits, commissions, advertising and promotions, retail
distribution, sales training, and direct and indirect support.
Stock Based Compensation. We have issued a total of 12,362,380 shares
of our class A voting and class C common stock to members of our management,
primarily in connection with the formation of the joint venture with AT&T
Wireless. These shares are subject to vesting and are currently held in
escrow. These shares are also subject to repurchase agreements, which are
considered a "variable stock plan" under generally accepted accounting
principles. Under the repurchase agreements, the management holders will pay
$2.50 per share for these shares, payable by surrendering shares to us valued
at their fair value. Based on the average closing price of our common stock
for the last ten trading days prior to March 31, 2000, we recorded non-cash
compensation expense of approximately $108.3 million in the first quarter of
2000 relating to the earned portion of the stock issued to management. During
the first quarter of 2000, the Board of Directors approved a plan to modify
these awards to remove the provision that requires management to surrender a
portion of their shares. The effective date of this modification, if and when
completed, will become the measurement date upon which the value of the award
will be fixed. Assuming our class A voting common stock continues to have a
fair value of approximately $37.34 per share on the measurement date, we would
record additional non-cash compensation expense related to these shares for
the period from 2000 to 2004 of approximately $131.7 million. Future stock
price movement will result in charges that differ from this amount. Each
dollar increase or decrease in the average closing price of our common stock
for the last ten trading days of any quarter will result in an increase or
decrease in the non-cash compensation expense related to these shares of
approximately $12.4 million.
Depreciation and Amortization. Property and equipment are depreciated
using the straight-line method, generally over three to seven years, based
upon the estimated useful lives of the respective assets. Leasehold
improvements are depreciated over the term of the lease. Network development
costs are capitalized and are depreciated generally over seven years beginning
as PCS service is commenced in each of our markets.
PCS license costs are amortized over 40 years beginning as PCS
service is commenced in each of our markets. The AT&T agreements, including
the Network Membership License Agreement and the Intercarrier Roamer Service
Agreement, are amortized over the lives of the agreements, 10 years and 20
years, respectively, beginning in January 1999.
Interest Income (Expense). Interest income is earned primarily on our
cash and cash equivalents and restricted cash. Interest expense consists of
interest due on our senior credit facilities and debt owed to the U.S.
government related to our licenses as well as discount accretion on the senior
subordinated discount notes.
Results of Operations
Revenues. Revenues for the quarter ended March 31, 2000 were $15.5
million. We launched commercial service in Jackson and Vicksburg, Mississippi
in September 1999 and launched commercial service in seven other major markets
during the fourth quarter of 1999. We did not recognize any revenues during
the quarter ended March 31, 1999. Revenues consist primarily of revenues
derived from service to our customers, roaming services provided to customers
of other carriers, and the sale of handsets and accessories.
As of March 31, 2000 we had approximately 63,800 subscribers
throughout our service area. Our ARPU including service and feature revenue as
well as airtime and incollect roaming, but excluding outcollect roaming,
charges was $51 for the first quarter of 2000 as compared to $45 in December
1999. We expect ARPU to continue to increase as we target business customers,
implement a national accounts program, focus on value added features and
provide incentives to our sales force for selling higher priced rate plans.
We anticipate strong growth in 2000 in revenue and subscribers as we
continue to expand our operations in our licensed areas. We expect to launch
substantially all of our remaining markets during 2000, including our Mobile,
Alabama market which is expected to launch service in the second quarter of
2000. We began offering SunCom service in our Birmingham, Alabama market in
April 2000.
We expect roaming revenues to increase during 2000 as we expand our
coverage areas as well as complete our first full year of operations in the
markets that became operational during 1999.
Operating Expenses
Cost of services and equipment was $13.7 million for the quarter
ended March 31, 2000. Cost of equipment includes primarily the cost of
equipment sold to customers, costs paid to other carriers for roaming services
and wireline access and long-distance costs from customer use on our system.
We did not incur any cost of services and equipment for the three months ended
March 31, 1999. These costs are expected to increase in future periods as
subscribers are added to the system and usage of our system increases.
Technical operations expenses were $2.0 million and $10.2 million for
the three-months ended March 31, 1999 and 2000, respectively. These expenses
include primarily the cost of engineering and operating staff devoted to the
oversight of the design, implementation and monitoring of our network, cell
site lease expense, charges incurred to connect our network to other carriers
and construction site office expenses.
We expect that the majority of our future technical operations
expenses will consist of costs relating to operating the network, including
the cost of interconnection to wireline and other wireless networks, cell site
lease costs, network personnel and repair and maintenance. We expect these
costs to increase in future periods as we expand our coverage areas and incur
a full year of operational expenses.
Our general and administrative expense includes customer service,
billing, information technology, finance, accounting, human resources and
legal services. General and administrative expenses increased from $2.9
million for the first quarter of 1999 to $9.3 million for the first quarter of
2000. The increase was due primarily to increased staffing in various
departments, including information technology, billing, customer care,
accounting, human resources and other administrative functions, incurred in
preparation for commercial launch of our network in 1999. We expect general
and administrative expenses to continue to increase during 2000 as we continue
to launch additional markets and provide customer support functions to a
larger customer base. Costs related to the merger with Telecorp will be
expensed as incurred.
Our sales and marketing expense includes salaries and benefits,
commissions, advertising and promotions, retail distribution, sales training,
and direct and indirect support. Sales and marketing expenses increased from
$1.0 million for the first quarter of 1999 to $12.1 million for the first
quarter of 2000. The increase was associated with the salary and benefits for
sales and marketing personnel, market deployment, including planning and
leasing of sales offices and retail store locations and advertising costs
related to 1999 market launches. We expect to incur significant selling and
marketing costs during 2000 primarily related to sales commissions, ongoing
advertising and promotions in our existing markets and promotional events and
advertising incurred in connection with market launches.
Depreciation and amortization expenses were $1.6 million for the
first quarter of 1999 and $10.6 million for the first quarter of 2000. The
increase relates primarily to the depreciation of network system equipment
placed into service in the fourth quarter of 1999 as well as depreciation of
computer hardware, software, furniture, fixtures, and office equipment.
Depreciation and amortization expenses are expected to increase during 2000 as
we complete the construction of our network as well as recognize a full year
of depreciation expense on our network assets placed in service during 1999.
Non-Operating Income and Expense
Interest income was $1.1 million for the first quarter of 1999 as
compared to $8.7 million for the first quarter of 2000. This significant
increase in 2000 as compared to 1999 was a result of our investment of
advances under our bank facility of $300.0 million, proceeds from the sale of
senior subordinated discount notes of approximately $200.2 million and
proceeds from the sale of common stock in our initial public offering of
approximately $242.5 million. Our short-term cash investments consist
primarily of U.S. Government securities and highly rated commercial paper with
a dollar-weighted average maturity of 90 days or less.
Financing costs were $2.2 million for the quarter ended March 31,
1999. These costs were associated with the January 1999 conversion by Digital
PCS of debt due to an investor to equity in Airwave Communications.
Interest expense was $14.4 million in the first quarter of 2000 and
consisted of interest incurred related to borrowing under our bank credit
facility and the Federal Communications Commission debt and discount accretion
on the senior subordinated discount notes issued in May 1999. Interest expense
is net of the amount capitalized for the purpose of completing the network
buildout. There was no interest expense for the first quarter of 1999 because
all interest costs were capitalized in connection with the construction of the
network.
For the quarters ended March 31, 1999 and 2000, we recorded a
deferred income tax benefit of $2.3 million and $500,000, respectively. The
valuation allowance for the gross deferred tax asset at March 31, 2000 was
$17.9 million. No valuation allowance was considered necessary for the
remaining gross deferred tax asset, principally due to the existence of a
deferred tax liability which was recorded upon the closing of the AT&T
transaction on January 7, 1999.
Liquidity and Capital Resources
The buildout of our network and the marketing and distribution of our
products and services will require substantial capital. We currently estimate
that our capital requirements, including capital expenditures, the cost of
acquiring licenses, working capital, debt service requirements and anticipated
operating losses, for the period from inception through the end of 2001,
assuming substantial completion of our network buildout will total
approximately $1.4 billion.
We believe that the proceeds from the initial public offering
completed in December 1999, together with the proceeds from our sale of senior
subordinated discount notes, the financing made available to us by the Federal
Communications Commission, borrowings under our bank credit facility and the
equity investments we have received, will provide us with sufficient funds to
build out our existing network as planned and fund operating losses until we
complete our planned network buildout and generate positive cash flow.
Our January 7, 1999 loan agreement provides a senior bank facility
with a group of lenders for an aggregate amount of $550 million of senior
secured credit. Up to $10 million of the facility may be used for letters of
credit. We estimate that the $550 million bank facility will be drawn through
the end of 2001 for capital requirements. The terms of the bank facility will
permit us, subject to certain terms and conditions, including compliance with
certain leverage ratios and satisfaction of buildout and subscriber
milestones, to draw up to $550 million to finance working capital
requirements, capital expenditures or other corporate purposes. As of March
31, 2000, we had $300 million outstanding under the bank facility and could
have borrowed up to a total of approximately $550 million pursuant to the
terms of the bank facility.
Management estimates that capital expenditures associated with the
buildout will total approximately $706.6 million from inception through the
end of 2001, including a commitment to purchase a minimum of $300 million in
equipment and services from Ericsson. Costs associated with the network
buildout include switches, base stations, towers and antennae, radiofrequency
engineering, cell site acquisition and construction, and microwave relocation.
The actual funds required to build out our network may vary materially from
these estimates, and additional funds could be required in the event of
significant departures from the current business plan, unforeseen delays, cost
overruns, unanticipated expenses, regulatory expenses, engineering design
changes and other technological risks. We have incurred approximately $295.2
million in capital expenditures through March 31, 2000, including $34.9
million in the first quarter of 2000.
We estimate that cash interest and fees through 2001 will total
approximately $147.6 million, including debt issuance costs related to the
bank credit facility and the senior subordinated discount notes. This amount
represents interest and fees on the senior bank facility and interest on the
preferential financing from the U.S. Government for the C and F-Block
licenses. Cash interest will not be paid on the senior subordinated discount
notes until 2004. We incurred approximately $9.7 million in cash interest and
fees during the first quarter of 2000 of which $1.8 million was capitalized.
We estimate that working capital requirements during the period from
inception through 2001 will total $314.4 million. This amount represents the
costs related to initiating, marketing, operating and managing our PCS
network.
Our ability to meet our capital requirements without additional
financing is subject to our ability to construct our network and obtain
customers in accordance with our plans and assumptions and a number of other
risks and uncertainties. The development of our network may not be completed
as projected and we may not be able to generate positive cash flow. If any of
our projections are incorrect, we may not be able to meet our projected
capital requirements.
On February 28, 2000, the Company announced an agreement to merge
with Telecorp PCS, Inc. This merger is expected to take place during the last
quarter of 2000 and is a tax-free exchange of stock. The Company does not
expect the merger to have any material effect on its current plans related to
network buildout.
Our bank credit facility agreement prohibits the merger of Tritel
with any other parties, except with or among its subsidiaries. Unless a
consent or amendment is obtained, the proposed merger with TeleCorp would
violate the merger provision and the change of control provision. We are
actively seeking an amendment to the bank credit facility or consent from our
lenders concerning the change of control and merger provisions.
Digital PCS holds licenses covering 2.0 million people in Florida and
southern Georgia. These markets include the cities of Pensacola, Tallahassee
and Panama City, Florida. As part of our formation, we received from Digital
PCS an option to purchase these licenses for approximately 1.2 million shares
of our class A voting common stock (reflecting the conversion of series C
preferred stock and the stock split of our class A voting common stock in
December 1999) and our assumption of approximately $12.0 million of Federal
Communications Commission debt. In May 1999, we exercised this option, and on
March 29, 2000, the Federal Communications Commission approved the transfer of
licenses to us. The transfer of these licenses is pending awaiting clearance
under Hart-Scott-Rodino Antitrust Improvement Act of 1976 filings.
We have committed to sell these licenses to Panther Wireless LLC for
the assumption of all outstanding Federal Communications Commission debt on
the licenses and cash in the amount equal to 110% of the sum of (i) the amount
payable to the Federal Communications Commission in respect of the licenses
minus the amount of Federal Communications Commission debt assumed, plus (ii)
the aggregate amount of interest paid on the Federal Communications Commission
debt by us and Digital PCS.
Merger with TeleCorp PCS, Inc.
On February 28, 2000, Tritel and TeleCorp PCS, Inc. announced the
signing of a definitive agreement and plan of reorganization and contribution,
called the Merger Agreement, for an all stock, tax-free merger, called the
Merger. The Merger Agreement provides for the creation of a new entity to be
called TeleCorp PCS, Inc. Tritel and TeleCorp will merge with subsidiaries of
the new entity.
Under the Merger Agreement, Tritel's class A voting common stock will
be converted into the right to receive 0.76 shares of the new entity's class A
voting common stock per share of Tritel Inc.'s common stock. This exchange
ratio is fixed regardless of future stock price movement.
The Merger has been unanimously approved by the Tritel and TeleCorp
boards of directors, with three members of the TeleCorp board abstaining.
Shareholders with an excess of 50% of the voting power of each company have
entered into agreements to vote in favor of the Merger. The Merger is still
subject to regulatory approval and other conditions. It is expected that the
Merger will be completed in the last quarter of 2000.
Pending License Acquisition
On March 23, 1999, the Federal Communications Commission commenced a
re-auction of the C-, D-, E-and F-Block licenses that had been returned to the
Federal Communications Commission under a Federal Communications Commission
restructuring order or that had been forfeited for noncompliance with Federal
Communications Commission rules or for default under the related Federal
Communications Commission financing. Before the re-auction, we loaned $7.5
million to ABC Wireless, an entity formed to participate in the C-Block
re-auction as a "very small business" under applicable Federal Communications
Commission rules, to partially fund its participation in the re-auction.
In the re-auction, ABC Wireless was successful in bidding for an
additional 15 to 30 MHz of spectrum covering a total of 5.7 million people,
all of which are already covered by Tritel's existing licenses. Nashville and
Chattanooga are the largest cities covered by the additional licenses. The
total bid price for these additional licenses was $7.8 million. Tritel's
purchase of licenses from ABC Wireless would be subject to, among other
things, the consent of AT&T Wireless.
As a result of the re-auction and our contractual rights to purchase
from ABC Wireless PCS licenses, we could, depending upon Federal
Communications Commission interpretations of the spectrum cap rules, hold an
attributable interest in Commercial Mobile Radio Service, or CMRS, spectrum in
excess of applicable limit in several cities in our markets. Current Federal
Communications Commission rules limit PCS licensees and certain PCS investors
in PCS licensees from having an attributable interest in more than 45 MHz of
CMRS spectrum (or 55 MHz where there is an overlap between a PCS service area
and rural cellular service area) in any given geographic area. In order to
exceed the applicable spectrum limit, we and certain investors, including
AT&T, must obtain the consent of the Federal Communications Commission. The
parties have sought the necessary interpretations and consents in the context
of the Telecorp/Tritel merger application. There is no assurance that the
Federal Communications Commission will give its consent and seeking such
consent could delay the processing of the required applications to assign the
licenses from ABC Wireless to us. We believe the Federal Communications
Commission will approve the disaggregation of spectrum from the ABC Wireless
licenses and transfer to us portions of the licenses so we will be in
compliance with the CMRS spectrum cap rules.
Quantitative and Qualitative Disclosure about Market Risk
We are exposed to market risk from changes in interest rates that
could impact results of operations. We manage interest rates through a
combination of fixed and variable rate debt. We have entered into interest
rate swap agreements as a risk management tool, not for speculative purposes.
At March 31, 2000 we had $300 million of Term A and Term B Notes
under our bank facility, which carried an average interest rate of 10.29%;
$372 million of the original 12.75% senior subordinated discount notes, due
2009; $38.0 million of 7%, discounted to yield 10%, debt to the Federal
Communications Commission, due in quarterly installments from 2003 to 2006;
and $9.3 million of 6 1/8%, discounted to yield 10%, debt to the Federal
Communications Commission, due in quarterly installments from 2000 to 2008.
Our senior subordinated discount notes and Federal Communications
Commission debt are fixed interest rate and as a result we are less sensitive
to market rate fluctuations. However, our Term A and Term B Notes outstanding
and other amounts available to us under our bank facility agreement are
variable interest rate. Beginning in May 1999, we entered into interest rate
swap agreements with notional amounts totaling $200 million to manage our
interest rate risk under the bank facility. The swap agreements establish a
fixed effective rate of 9.05% on $200.0 million of the current balance
outstanding under the bank facility through the earlier of March 31, 2002 or
the date on which we achieve operating cash flow breakeven. Market risk, due
to potential fluctuations in interest rates, is inherent in swap agreements.
The following table provides information about our market risk
exposure associated with changing interest rates on our fixed rate debt at
maturity value of the debt (dollars in millions):
<TABLE>
<CAPTION>
Expected Maturity
----------------------------------------------------------------------
2000 2001 2002 2003 2004 Thereafter Total
---- ---- ---- ---- ---- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Face value of long-term fixed
rate debt $0.7 $1.0 $1.1 $9.7 $10.4 $396.4 $419.3
Average interest rate 6.1% 6.1% 6.1% 6.9% 6.9% 12.4% --
</TABLE>
Collectively, our fixed rate debt has a carrying value and a fair
value of $265.4 million and $285.6 million at March 31, 2000, respectively.
The fair value of our fixed rate debt has been estimated using an incremental
borrowing rate of 10.5% based on the market value of our senior subordinated
discount notes.
We are also exposed to the impact of interest rate changes on our
short-term cash investments, consisting primarily of U.S. government
securities and highly rated commercial paper with a dollar weighted average
maturity of 90 days or less. As with all investments, these short-term
investments carry a degree of interest rate risk.
We are not exposed to fluctuations in currency exchange rates since
our operations are entirely within the United States.
<PAGE>
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
The Company is subject to various claims arising in the ordinary
course of business and is a party to various legal proceedings that constitute
ordinary routine litigation incidental to the Company's business. In the
opinion of management, all such matters in the aggregate are not expected to
have a material adverse effect on the Company.
Tritel is a party to routine filings and customary regulatory
proceedings with the Federal Communications Commission relating to its
operations.
Item 4. Submission Of Matters To A Vote Of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits And Reports On Form 8-K
(a) Exhibits
Exhibit
Number Description
2.1 Amendment No. 1 to the Agreement and Plan of
Reorganization and Contribution, dated April 28, 2000
(incorporated by reference to the Registration
Statement on Form S-4 of Telecorp-Tritel Holding
Company filed with the Commission on May 12, 2000).
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K dated February 29,
2000 reporting that the Company entered into a Merger Agreement with TeleCorp
PCS, Inc.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRITEL, INC.
Date: May 12, 2000
/s/ E. B. Martin, Jr.
--------------------------------
E. B. Martin, Jr.
Executive Vice President and
Chief Financial Officer
/s/ Karlen Turbeveille
---------------------------------
Karlen Turbeville
Senior Vice President - Finance
(Chief Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TRITEL, INC. AND PREDECESSOR COMPANIES FINANCIAL STATEMENTS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001088383
<NAME> TRITEL, INC.
<MULTIPLIER> 1
<CURRENCY> U.S.DOLLARS
<S> <C>
<PERIOD-TYPE> 3-Mos
<FISCAL-YEAR-END> Dec-31-2000
<PERIOD-START> Jan-01-2000
<PERIOD-END> Mar-31-2000
<EXCHANGE-RATE> 1
<CASH> 482,459
<SECURITIES> 0
<RECEIVABLES> 8,938
<ALLOWANCES> (230)
<INVENTORY> 16,410
<CURRENT-ASSETS> 515,765
<PP&E> 307,411
<DEPRECIATION> (15,196)
<TOTAL-ASSETS> 1,109,874
<CURRENT-LIABILITIES> 65,078
<BONDS> 564,483
101,853
46,374
<COMMON> 1,071
<OTHER-SE> 292,124
<TOTAL-LIABILITY-AND-EQUITY> 1,109,874
<SALES> 15,499
<TOTAL-REVENUES> 15,499
<CGS> 9,076
<TOTAL-COSTS> 9,076
<OTHER-EXPENSES> 154,946
<LOSS-PROVISION> 188
<INTEREST-EXPENSE> (5,691)
<INCOME-PRETAX> (154,402)
<INCOME-TAX> (506)
<INCOME-CONTINUING> (153,896)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (153,896)
<EPS-BASIC> (1.32)
<EPS-DILUTED> (1.32)
</TABLE>
