<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30,2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______________ TO
________________.
Commission file number ...333-92271-01
LOUISIANA UNWIRED, LLC.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Louisiana 72-1407430
---------------------------------------- ---------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
One Lakeshore Drive, Suite 1900
Lake Charles, LA 70629
---------------------------------------- ---------------------------------------------
(Address of principal executive offices) (Zip code)
(337) 436-9000
------------------------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
------------------------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last report)
</TABLE>
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 ....
1
<PAGE>
<TABLE>
<CAPTION>
Part I -- Financial Information
Page
----
<S> <C> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets ................................................... 3
Condensed Consolidated Statements of Operations ......................................... 4
Condensed Consolidated Statements of Cash Flows ......................................... 5
Notes to Condensed Consolidated Financial Statements..................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ............................................................. 9
Part II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ......................................................... 14
SIGNATURES ....................................................................................... 14
</TABLE>
2
<PAGE>
Part I Financial Information
Item 1 Financial Statements
LOUISIANA UNWIRED, LLC AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
------------- --------------
2000 1999
------------ -------------
(Unaudited) (Note 1)
<S> <C> <C>
Assets
------
Current assets:
Cash and cash equivalents $ 3,773 $ 1,844
Subscriber receivables, net 1,956 1,256
Other receivables 1,017 810
Inventory 1,888 2,189
Prepaid expenses 3,753 854
Receivables from related parties 78 ---
Due from affiliates --- 788
-------- --------
Total current assets 12,465 7,741
Marketable securities 32,176 114,854
Property and equipment, net 153,396 85,305
Licenses, net 9,143 10,462
Other assets 9,990 46
-------- --------
Total assets $217,170 $218,408
======== ========
Liabilities and members' equity
-------------------------------
Current liabilities:
Accounts payable $ 16,006 $ 9,012
Accrued expenses 4,833 1,568
Payables to related parties 123
Current maturities of long term obligations 500 140
-------- --------
Total current liabilities $ 21,339 10,843
Long term obligations, net of current maturities 8,670 1,369
Minority interest 537 ---
Members' equity:
Members capital 252,756 251,561
Accumulated other comprehensive income 383 709
Accumulated deficit (66,515) (46,074)
-------- --------
Total members' equity 186,624 206,196
-------- --------
Total liabilities and members' equity $217,170 $218,408
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
LOUISIANA UNWIRED, LLC AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended For the six months ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Subscriber $ 10,350 $ 2,213 $ 17,872 $ 3,759
Roaming 3,530 858 5,880 1,123
Merchandise sales 1,915 851 4,674 1,714
Other revenue 109 7 203 7
-------- -------- -------- --------
Total revenue 15,904 3,929 28,629 6,603
Expense:
Cost of service 7,939 2,197 13,207 3,553
Merchandise cost of sales 4,011 1,548 9,263 3,463
General and administrative 3,913 751 6,751 1,315
Selling and marketing 5,237 1,463 9,813 2,657
Depreciation and amortization 7,213 2,648 13,123 5,001
-------- -------- -------- --------
Total operating expense 28,313 8,607 52,157 15,989
-------- -------- -------- --------
Operating loss (12,409) (4,678) (23,528) (9,386)
Other income (expense):
Interest income (expense), net 1,058 (944) 2,374 (1,550)
-------- -------- -------- --------
Loss before extraordinary
item and minority interest (11,351) (5,622) (21,154) (10,936)
Minority interest in losses of subsidiary 506 --- 951 ---
Extraordinary item-early extinguishment of debt --- (614) (238) (614)
-------- -------- -------- --------
Net loss $(10,845) $ (6,236) $(20,441) $(11,550)
======== ======== ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
LOUISIANA UNWIRED, LLC AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the six
months ended
--------------------------------
June 30, June 30,
2000 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities
------------------------------------
Net cash used in operating activities $ (8,198) $ (6,886)
Cash flows from investing activities
------------------------------------
Sale of marketable securities 85,000 ---
Purchase of marketable securities (2,523) ---
Payments for the purchase of equipment (58,029) (26,990)
Payments for microwave relocation (767) ---
-------- --------
Net cash provided by (used in) investing activities 23,681 (26,990)
Cash flows from financing activities
------------------------------------
Capital contributions from members 115 15,100
Debt issuance costs --- (3,222)
Proceeds from long-term debt 260 21,819
Principal payments of long-term debt (13,929) ---
-------- --------
Net cash provided by (used in) financing activities (13,554) 33,697
-------- --------
Net increase (decrease) in cash and cash equivalents 1,929 (179)
Cash and cash equivalents at beginning of period 1,844 1,350
-------- --------
Cash and cash equivalents at end of period $ 3,773 $ 1,171
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
LOUISIANA UNWIRED, LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(UNAUDITED)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for fair presentation have been included. Operating results for
the three and six month periods ended June 30, 2000 are not necessarily
indicative of the results that may be expected for the year ending
December 31, 2000.
The balance sheet at December 31, 1999 was derived from audited financial
statements at that date but does not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The consolidated financial statements contained herein
should be read in conjunction with the financial statements and notes
included in the prospectus, that is part of Amendment No. 2 to the US Unwired
Inc. ("US Unwired") registration statement on Form S-1, Registration No. 333-
33964, first filed on April 4, 2000 with the Securities and Exchange
Commission.
2. Description of Organization
Louisiana Unwired, LLC ("the Company") was formed in 1998 and is principally
engaged in providing access to and usage of its personal communications
service ("PCS") networks. PCS is a new generation of wireless communications,
offering customers advanced, secure two-way digital wireless service and
applications. As of June 30, 2000, the Company has been primarily engaged in
building out its PCS network and in providing PCS service in Louisiana,
Texas, Florida, Mississippi, Arkansas and Alabama. As of June 30, 2000, US
Unwired owned 93.86% of the Company and Cameron Communications Corporation
("Cameron") owned 6.14% of the Company.
In April 1998, the Company's members contributed PCS licenses in four
Louisiana Basic Trading Areas ("BTAs" or "markets") to the Company from an
affiliated company with common ownership. Additionally, certain related
assets and liabilities, including debt used to finance the purchase of these
four licenses, were also contributed. These contributed assets and
liabilities were recorded at their historical cost. The Company commenced
operations in one of these markets in April 1998 and in the remaining three
markets in September 1998. In December 1999, Command Connect, LLC ("Command
Connect"), a Louisiana limited liability corporation, contributed an
additional 18 licenses.
Additionally during 1998, the Company entered into an agreement with Sprint
PCS and became a Sprint PCS network partner. The agreement grants the Company
the exclusive right to provide PCS service under the Sprint(R) and Sprint
PCS(R) brand names in markets comprising 9.7 million residents. Under the
agreement, the Company has agreed to construct and manage Sprint PCS's
network in markets for which the Company does not have a license. In
consideration of these services, Sprint PCS pays 92% of collected revenues,
as defined in the agreement, to the Company. The agreement requires the
Company to build out the PCS network in accordance with FCC requirements and
deadlines. The Company and Sprint PCS will share equally the costs for any
necessary future relocation of microwave sources that interfere with Sprint
PCS's spectrum.
Effective January 1, 2000, US Unwired entered into an agreement with Meretel
Communications, a Limited Partnership ("Meretel") to receive an 80%
interest in each of the Beaumont-Port Arthur and Lufkin-Nacogdoches BTAs in
exchange for a reduction in US Unwired's ownership
6
<PAGE>
interest in Meretel from 24.33% to 13.28%. US Unwired contributed these net
assets to a partnership, Texas Unwired, a Louisiana general partnership
("Texas Unwired"), of which the Company is the managing partner. The
contributed net assets were recorded at fair value. On January 1, 2000, US
Unwired contributed its 80% ownership interest in Texas Unwired to the
Company. The Company's financial statements for the three and six month
periods ended June 30, 2000 include the financial position and results of
operations of Texas Unwired on a consolidated basis.
Effective May 1, 2000, subject to FCC approval, the Company transferred its
PCS licenses for service areas not covered by the Sprint PCS management
agreements to Cameron in consideration for a .2% reduction of Cameron's
interest in the Company and Cameron's assumption of $295,000 of the Company's
debt related to the licenses.
3. Marketable Securities
The following is a summary of the Company's available-for-sale marketable
securities as of June 30, 2000:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Estimated Fair
Cost Gains Losses Value
----------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
Commercial paper $29,558 $383 --- $29,941
Fixed income mutual funds 2,235 --- --- 2,235
------- ---- --- -------
$31,793 $383 --- $32,176
======= ==== === =======
</TABLE>
4. Property and Equipment
Major categories of property and equipment were:
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
-------- --------
(In thousands)
<S> <C> <C>
Facilities and equipment $150,302 $ 86,438
Office equipment 3,422 1,785
Leasehold improvements 959 350
Construction in progress 25,985 12,537
-------- --------
180,668 101,110
Less accumulated depreciation and amortization 27,272 15,805
-------- --------
$153,396 $ 85,305
======== ========
</TABLE>
5. Long-term Obligations
Long-term obligations consisted of the following:
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------ ------
(In thousands)
<S> <C> <C>
FCC debt $1,144 $1,509
Capital leases 8,026 ---
------ ------
Total long-term obligations 9,170 1,509
Less current maturities 500 140
------ ------
Long-term obligations, excluding current maturities $8,670 $1,369
====== ======
</TABLE>
7
<PAGE>
During the six month period ended June 30, 2000, the Company extinguished
$13.9 million of debt related to Texas Unwired. As a result, the unamortized
debt issuance costs related to this debt, totaling $238,000 was written off
as an extraordinary item.
In 1999, Meretel entered into agreements to towers for a 15-year period. As
part of the agreement discussed in Note 2 above, Texas Unwired assumed
Meretel's obligations under 31 leases in the Beaumont-Port Arthur and Lufkin-
Nacogdoches markets. During the six month period ended June 30, 2000, the
Company executed one additional tower capital lease, bringing the total
capitalized leases to 32.
Future minimum annual lease payments due under these capital leases consisted
of the following at June 30, 2000 (in thousands):
<TABLE>
<S> <C>
2001 $ 768
2002 768
2003 768
2004 768
2005 768
Thereafter 7,427
-------
11,267
Amounts representing interest (3,241)
-------
Present value of minimum lease payments (including
current portion of $381) $ 8,026
=======
</TABLE>
7. Commitments and Contingencies
The Company's PCS licenses are subject to a requirement that the Company
construct network facilities that offer coverage to 25% of the population or
have substantial service in each of its BTAs within five years from the grant
of the licenses. Should the Company fail to meet these coverage requirements,
it may be subject to forfeiture of its licenses or imposition of fines by the
FCC. The PCS build out in each BTA is subject to the successful completion of
the network design, site and facility acquisitions, the purchase and
installation of the network equipment, network testing, and the satisfactory
accommodation of microwave users currently using the spectrum. All FCC
requirements have been met where operations have commenced.
On October 29, 1999, US Unwired issued $400 million in aggregate principal
amount of its 13 3/8% Senior Subordinated Notes due November 1, 2009 (the
"Notes"). The Company fully and unconditionally guarantees the Notes. The
Notes are secured by a pledge of the Company's 80% interest in Texas Unwired
and any notes payable by Texas Unwired to the Company. The Company's
guarantee of the Notes rank equally in right of payment with its future
senior subordinated indebtedness and is subordinated in right of payment to
all existing and future senior debt of the Company.
Effective October 1, 1999 US Unwired entered into a $130 million senior
credit facility. At June 30, 2000, no amounts under this facility were
outstanding. This facility is secured by, among other things, a first
priority security interest in all tangible and intangible assets of the
Company, including its PCS licenses to the extent legally permitted; a pledge
by the Company of its ownership interest in Texas Unwired; and an assignment
by the Company of its Sprint PCS agreements and any network contract,
including software rights.
8. Other Comprehensive Loss
The total other comprehensive loss was $10.5 million for the three months
ended June 30, 2000, $6.2 million for the three months ended June 30, 1999,
$20.1 million for the six months ended June 30, 2000 and $11.6 million for
the six months ended June 30, 1999. The total other comprehensive loss
includes net
8
<PAGE>
loss available to shareholders plus any unrealized gains from marketable equity
securities that are classified as available-for-sale.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation
The following discussion is intended to facilitate an understanding and
assessment of significant accounting changes and trends related to the financial
condition and results of operations of LA Unwired, LLC ("the Company" or "we",
"us" or "our"). This discussion should be read in conjunction with our financial
statements included in this report and with the financial statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operations that are included in the prospectus referred to in Note 1.
Statements herein include forward-looking statements about our current and
future business, operations and other matters. They often include the words
"believes," "expects," "plans," "anticipates," "intends," "projects" or similar
words. These statements speak only as of the date made, are not guarantees of
future performance, and involve known and unknown risks and other factors that
could cause actual results to be materially different from any future results
expressed or implied by them. Some of these factors, many of which are outside
our control, include: our dependence on our affiliation with Sprint PCS,
availability of infrastructure and subscriber equipment, availability at
acceptable terms of sufficient funds to pay for our business plan, competition,
changes in labor, equipment and capital costs, ability to obtain required
regulatory approvals, market and technology changes, ability to comply with our
credit agreements, changes in management, ability to attract and retain
qualified employees, future acquisitions, and general economic and business
conditions. One should not rely too heavily on any forward-looking statement.
For a detailed discussion of these and other cautionary statements and factors,
see US Unwired Inc.'s filings with the SEC, especially in the "risk factors"
section of its Form S-1 and in subsequent filings with the SEC.
Overview
The Company was formed in January 1998. In February 1998, the Company became a
Sprint PCS network partner, which gives the Company the exclusive right to
provide digital PCS services under the Sprint(R) and Sprint PCS(R) brand names
in a service area comprising approximately 9.7 million residents in the Gulf
States region.
Our Sprint PCS service area covers 41 Basic Trading Areas ("BTAs" or "markets")
in eastern Texas, southern Oklahoma, southern Arkansas, significant portions of
Louisiana, Alabama and Mississippi, the Florida panhandle and southern
Tennessee. Our service area is contiguous with Sprint PCS's launched markets of
Houston, Dallas, Little Rock, New Orleans, Birmingham, Tallahassee and Memphis.
We are constructing a 100% digital, 100% wireless PCS network that we expect to
substantially complete by March 2001.
We have launched our PCS service in nine new markets since March 31, 2000 and at
June 30, 2000 offered PCS service in twenty markets in Louisiana, Texas,
Alabama, Florida, Arkansas and Mississippi. Since March 31, 2000 we have
increased our network coverage by over 1.2 million residents, and at June 30,
2000, our network covered approximately 3.4 million residents out of
approximately 5.9 million total residents in those markets. We expect to cover
a total of approximately 6.1 million residents by December 2000 and 6.4 million
residents by March 2001, at which point we expect to have covered approximately
66% of the resident population in our service area. The number of people in our
service area does not represent the number of Sprint PCS subscribers that we
expect to have in our service area. At June 30, 2000, we had approximately
77,000 subscribers within the twenty markets, and we are continuing to build out
markets in the Florida panhandle, Mississippi, Arkansas and Alabama. This phase
of our build out represents 439 operational owned and co-located towers. We
have completed radio frequency design, network design and cell site engineering
in the remaining markets to be built out.
Effective January 1, 2000, US Unwired Inc. ("US Unwired") received an 80%
ownership interest in each of the Beaumont-Port Arthur and Lufkin-Nacogdoches
markets in exchange for a reduction in its ownership
9
<PAGE>
interest in the Meretel Communications Limited Partnership ("Meretel") from
24.33% to 13.28%. US Unwired contributed the net assets of those markets to
Texas Unwired, a Louisiana general partnership ("Texas Unwired") of which the
Company is the managing partner. US Unwired then contributed its 80% ownership
interest in Texas Unwired to the Company.
Results of Operations
Three and Six Month Periods Ended June 30, 2000 Compared to Three Month and Six
Month Periods Ended June 30, 1999
You should keep in mind that our operating results for the three and six month
periods ended June 30, 2000 include the consolidation of Texas Unwired but our
operating results for the three and six month periods ended June 30, 1999
include the operations of Texas Unwired as a part of Meretel, which is included
using the equity method.
Revenues
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
2000 1999 2000 1999
------- ------ ------- ------
(In thousands) (In thousands)
<S> <C> <C> <C> <C>
Subscriber revenues $10,350 $2,213 $17,872 $3,759
Roaming revenues 3,530 858 5,880 1,123
Merchandise sales 1,915 851 4,674 1,714
Other revenue 109 7 203 7
------- ------ ------- ------
Total revenues $15,904 $3,929 $28,629 $6,603
======= ====== ======= ======
</TABLE>
Subscriber revenues
Subscriber revenues were $10.4 million for the three month period ended June 30,
2000 as compared to $2.2 million for the three month period ended June 30, 1999,
representing an increase of $8.2 million and was primarily the result of an
increase in PCS subscribers to 77,000 at June 30, 2000 from 18,000 at June 30,
1999. We added 11,000 new PCS subscribers during the three month period ended
June 30, 2000 as compared to 5,000 during the three month period ended June 30,
1999.
Subscriber revenues were $17.9 million for the six month period ended June 30,
2000 as compared to $3.8 million for the six month period ended June 30, 1999,
representing an increase of $14.1 million and was primarily the result of an
increase in our overall PCS subscribers to 77,000 at June 30, 2000 from 18,000
at June 30, 1999. We added 43,000 new PCS subscribers during the six month
period ended June 30, 2000 as compared to 13,000 during the six month period
ended June 30, 1999.
Roaming revenues
Roaming revenues were $3.5 million for the three month period ended June 30,
2000 as compared to $.9 million for the three month period ended June 30, 1999,
representing an increase of $2.6 million and was primarily the result of a
higher volume of Sprint(R) customers traveling through our markets and an
expansion in our PCS network coverage. We added nine new PCS markets to our
coverage area during the three month period ended June 30, 2000 and served 20
PCS markets at June 30, 2000 as compared to six PCS markets at June 30, 1999.
Roaming revenues were $5.9 million for the six month period ended June 30, 2000
as compared to $1.1 million for the six month period ended June 30, 1999,
representing an increase of $4.8 million and was primarily the result of a
higher volume of Sprint(R) customers traveling through our markets and an
expansion in our PCS network coverage. We added 14 new PCS markets to our
coverage area during the six month period ended June 30, 2000 and served 20 PCS
markets at June 30, 2000 as compared to six PCS markets at June 30, 1999.
10
<PAGE>
Merchandise sales
Merchandise sales were $1.9 million for the three month period ended June 30,
2000 as compared to $.9 million for the three month period ended June 30, 1999,
representing an increase of $1.0 million and were due primarily to an increase
in initial sales to new PCS subscribers. We recorded initial sales to 17,000
new PCS subscribers during the three month period ended June 30, 2000 as
compared initial sales to 7,000 new PCS subscribers during the three month
period ended June 30, 1999.
Merchandise sales were $4.7 million for the six month period ended June 30, 2000
as compared to $1.7 million for the six month period ended June 30, 1999,
representing an increase of $3.0 million and were due primarily to an increase
in initial sales to new PCS subscribers. We recorded initial sales to 39,000
new PCS subscribers during the six month period ended June 30, 2000 compared to
initial sales to 15,000 new PCS subscribers during the six month period ended
June 30, 1999.
Operating Expenses
Cost of service
Cost of service was $7.9 million for the three month period ended June 30, 2000
as compared to $2.2 million for the three month period ended June 30, 1999,
representing an increase of $5.7 million and primarily related to increased
circuit costs and cell site leases for the increased number of new PCS
subscribers, coverage area and market expansion in Texas, Florida, Alabama,
Arkansas and Mississippi as described above.
Cost of service was $13.2 million for the six month period ended June 30, 2000
as compared to $3.6 million for the six month period ended June 30, 1999,
representing an increase of $9.6 million and primarily related to increased
circuit costs and cell site leases for the increased number of new PCS
subscribers, coverage area and market expansion in Texas, Florida, Alabama,
Arkansas and Mississippi as described above.
Merchandise cost of sales
Merchandise cost of sales was $4.0 million for the three month period ended June
30, 2000 as compared to $1.5 million for the three month period ended June 30,
1999, representing an increase of $2.5 million and was primarily due to initial
sales to new PCS subscribers. We recorded initial sales to 17,000 new
subscribers during the three month period ended June 30, 2000 as compared to
initial sales to 7,000 new subscribers during the three month period ended June
30, 1999.
Merchandise cost of sales $9.3 million for the six month period ended June 30,
2000 as compared to $3.5 million for the six month period ended June 30, 1999,
representing an increase of $5.8 million and was primarily due to the number of
new subscribers added. We recorded initial sales to 39,000 new PCS subscribers
during the six month period ended June 30, 2000 compared to initial sales to
15,000 new PCS subscribers during the six month period ended June 30, 1999.
General and administrative expenses
General and administrative expenses were $3.9 million for the three month period
ended June 30, 2000 as compared to $.8 million for the three month period ended
June 30, 1999, representing an increase of $3.1 million, and were primarily due
to the hiring of additional employees, increased billing costs and franchise
fees as the average number of PCS subscribers increased to 71,000 for the three
month period ended June 30, 2000 from an average number of 16,000 PCS
subscribers for the three month period ended June 30, 1999 and overall market
expansion has increased to 20 PCS markets at June 30, 2000 from six PCS markets
at June 30, 1999.
General and administrative expenses were $6.8 million for the six month period
ended June 30, 2000 as compared to $1.3 million for the six month period ended
June 30, 1999, representing an increase of $5.5
11
<PAGE>
million, and were primarily due to the hiring of additional employees, increased
billing costs and franchise taxes as the average number of PCS subscribers
increased to 55,000 for the six month period ended June 30, 2000 from an average
number of 12,000 PCS subscribers for the six month period ended June 30, 1999
and overall market expansion has increased to 20 PCS markets at June 30, 2000
from six PCS markets at June 30, 1999.
Selling and marketing expenses
Selling and marketing expenses were $5.2 million for the three month period
ended June 30, 2000 as compared to $1.5 million for the three month period ended
June 30, 1999, representing an increase of $3.7 million and primarily relates to
advertising, direct selling headcount and commissions paid to local and national
third party retailers contracted to sell our product. Average PCS subscribers
increased to 71,000 for the three month period ended June 30, 2000 from an
average 16,000 PCS subscribers for the three month period ended June 30, 1999;
network coverage increased to 20 PCS markets at June 30, 2000 from six PCS
markets at June 30, 1999; nine additional PCS retail outlets were open at June
30, 2000 compared to June 30, 1999.
Selling and marketing expenses were $9.8 million for the six month period ended
June 30, 2000 as compared to $2.7 million for the six month period ended June
30, 1999, representing an increase of $7.1 million and primarily relates to
advertising, direct selling headcount and commissions paid to national third
party retailers contracted to sell our product. Average subscribers increased
to 55,000 for the six month period ended June 30, 2000 from 12,000 for the six
month period ended June 30, 1999; network coverage increased to 20 PCS markets
at June 30, 2000 from six PCS markets at June 30, 1999; nine additional PCS
retail outlets were open at June 30, 2000 compared to June 30, 1999.
Depreciation and amortization expense
Depreciation and amortization expense was $7.2 million for the three month
period ended June 30, 2000 as compared to $2.6 million for the three month
period ended June 30, 1999, representing an increase of $4.6 million and $13.1
million for the six month period ended June 30, 2000 as compared to $5.0 million
for the six month period ended June 30, 1999, representing an increase of $8.1
million and is primarily due capital spending to build out our PCS markets. Net
property and equipment for our PCS markets increased to $153.4 million at June
30, 2000 from $70.1 million at June 30, 1999.
Operating Loss
The operating loss was $12.4 million for the three month period ended June 30,
2000 as compared to $4.7 million for the three month period ended June 30, 1999,
representing an increase of $7.7 million and was primarily due to the increased
operational costs associated with the building out of our PCS markets.
The operating loss was $23.5 million for the six month period ended June 30,
2000 as compared to $9.4 million for the six month period ended June 30, 1999,
representing an increase of $14.1 million and was primarily due to the increased
operational costs associated with the building out of our PCS markets.
Other Income/(Expense)
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
2000 1999 2000 1999
------ ----- ------ -------
(In thousands) (In thousands)
<S> <C> <C> <C> <C>
Interest expense $ (122) $(964) $ (402) $(1,589)
Interest income 1,180 20 2,776 39
------ ----- ------ -------
Total other income/(expense) $1,058 $(944) $2,374 $(1,550)
====== ===== ====== =======
</TABLE>
12
<PAGE>
Interest expense was $122,000 for the three month period ended June 30, 2000 as
compared to $964,000 for the three month period ended June 30, 1999,
representing a decrease of $842,000. This decrease was the result of the early
extinguishment of long-term debt in the fourth quarter of 1999.
Interest expense was $402,000 for the six month period ended June 30, 2000
compared to $1.6 million for the six month period ended June 30, 1999,
representing a decrease of $1.2 million. This decrease was the result of the
early extinguishment of long-term debt in the fourth quarter of 1999.
Interest income was $1.2 million for the three month period ended June 30, 2000
as compared to $20,000 for the three month period ended June 30, 1999 and the
increase was the result of investing available funds in marketable securities
until the funds are required to fund our market build out.
Interest income was $2.8 million for the six month period ended June 30, 2000 as
compared to $39,000 for the six month period ended June 30, 1999 and the
increase was the result of investing available funds in marketable securities
until the funds are required to fund our market build out.
Minority Interest in Subsidiary
Minority interest in losses of affiliate was $.5 million for the three month
period ended June 30, 2000 and $1.0 million for the six month period ended
June 30, 2000 and is attributable to the consolidation of Texas Unwired and
represents the portion of losses from Texas Unwired allocable to the minority
partners.
Liquidity and Capital Resources
On October 1, 1999, US Unwired entered into a credit facility with Co Bank, ACB,
The Bank of New York, BNY Capital Markets, Inc., First Union Securities, Inc.,
First Union National Bank and other lenders for $130 million. At June 30, 2000,
US Unwired had full availability of $130 million under this new credit facility
for the build out of our PCS network and anticipated operating losses. This
facility is secured by, among other things, a first priority security interest
in all tangible and intangible assets of the Company, including its PCS licenses
to the extent legally permitted; a pledge by the Company of its ownership
interest in Texas Unwired; and an assignment by the Company of its Sprint PCS
agreements and any network contract, including software rights.
On October 29, 1999, US Unwired issued approximately $400 million in aggregate
principal amount of 13 3/8% senior subordinated discount notes and received
gross proceeds of approximately $209 million. These notes are unsecured
obligations of US Unwired. They bear interest at a rate of 13 3/8% per year,
payable twice per year on May 1 and November 1, beginning May 1, 2005. LA
Unwired fully and unconditionally and jointly and severally guarantees US
Unwired's obligations under these notes.
Cash used in operating activities was $8.2 million for the six month period
ended June 30, 2000. Cash provided by investing activities was $23.7 million
for the six month period ended June 30, 2000 and includes $85 million generated
by the sale of marketable securities offset by $58.0 million used to purchase
property and equipment, $.8 million paid for microwave relocation and $2.5
million used to purchase marketable securities. Cash used in financing
activities was $13.6 million for the six month period ended June 30, 2000 and
consists primarily of $13.9 million used in the payment of long-term debt.
In the past, we have funded our working capital requirements, acquisitions,
capital expenditures and debt service through bank financing and cash flows from
operations. We believe that the proceeds from our financings and internally
generated cash flow will be enough to build out our network as planned, cover
anticipated operating losses and meet our debt service requirements through
December 2001.
Seasonality
Like the wireless communications industry in general, our subscribers increase
in the fourth quarter due to the holiday season. A greater number of phones sold
at holiday promotional prices causes our losses on merchandise sales to
increase. Our sales and marketing expenses increase also with holiday
promotional
13
<PAGE>
activities. We generally have the most use and revenue per subscriber in the
summer because of an increase in revenues from fees charged to non-US Unwired,
Sprint PCS customers who use our network while traveling in our service area. We
believe that the increased traffic in our service area comes from people
traveling during summer vacation. We expect these trends to continue based on
historical operating results.
Impact of Year 2000 Issue on Our Operations and Financial Conditions
We use a significant number of computer systems and software programs in our
operations, including in support of our PCS network equipment and for various
administrative functions. Before the Year 2000, we discussed the nature and
progress of our plans to prepare for that year. In late 1999, we finished
testing and preparing our systems for the Year 2000 date change. As of the date
of this report, we had experienced no significant disruptions in our critical
information technology systems and non-information technology systems that
resulted from the Year 2000 date change. We believe that our systems
successfully responded to the Year 2000 date change. We are not aware of any
material problems that resulted from the Year 2000 date change with our
products, our internal systems or the products and services of third parties. We
will continue to monitor our critical computer applications and those of our
suppliers and vendors throughout 2000 so we can promptly address any Year 2000
matters that may arise.
Quantitative and Qualitative Disclosure about Market Risk
We are not exposed to fluctuations in currency exchange rates, as all our
services are invoiced in U.S. dollars. We are exposed to the impact of interest
rate changes on our short-term cash investments, consisting of investments in
respect of institutions with the highest credit ratings, all of which
investments mature on or before November 28, 2000. These short-term investments
carry a degree of interest rate risk. We believe that the impact of a 1%
increase or decline in current average investment rates would not have a
material impact on our investment income.
PART II
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
Financial Data Schedule
b. Reports on Form 8-K during the quarter ended June 30, 2000
No reports on Form 8-K were filed during the quarter ended
June 30, 2000.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on behalf by the undersigned
thereunto duly authorized.
August 11, 2000 LOUISIANA UNWIRED, LLC
By: /s/ Thomas G. Henning
_____________________________
Thomas G. Henning
Duly Authorized Officer
By: /s/ Jerry E. Vaughn
_____________________________
Jerry E. Vaughn
Principal Financial Officer
14
