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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000 OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______________ TO
_____________.
Commission file number---333-92271-01
LOUISIANA UNWIRED, LLC.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
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<S> <C>
Louisiana 72-1407430
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(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
One Lakeshore Drive, Suite 1900
Lake Charles, LA 70629
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(Address of principal executive offices) (Zip code)
(337) 436-9000
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(Registrant's telephone number, including area code)
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(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 ____
___
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Part I - Financial Information
Page
----
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.............................................................. 8
Part II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................................................. 14
SIGNATURES.............................................................................................. 14
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2
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Part I Financial Information
Item 1 Financial Statements
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<CAPTION>
LOUISIANA UNWIRED, LLC AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30, December 31,
------------- ------------
2000 1999
---- ----
(Unaudited) (Note 1)
<S> <C> <C>
Assets
------
Current assets:
Cash and cash equivalents $ 3,352 $ 1,844
Subscriber receivables, net 2,858 1,256
Other receivables 1,505 810
Inventory 1,905 2,189
Prepaid expenses 3,591 854
Receivables from related parties 886 ---
Due from affiliates --- 788
---------- ----------
Total current assets 14,097 7,741
Marketable securities 25 114,854
Property and equipment, net 182,806 85,305
Licenses, net 10,851 10,462
Other assets 9,304 46
---------- ----------
Total assets $ 217,083 $ 218,408
========== ==========
Liabilities and members' equity
-------------------------------
Current liabilities:
Accounts payable $ 16,885 $ 9,012
Accrued expenses 6,894 1,568
Payables to related parties 2,408 123
Demand note payable to parent 11,750 ---
Current maturities of long term obligations 519 140
---------- ----------
Total current liabilities 38,456 10,843
Long term obligations, net of current maturities 8,787 1,369
Deferred liability 44 ---
Minority interest 13 ---
Members' equity:
Members capital 252,756 251,561
Accumulated other comprehensive income --- 709
Accumulated deficit (82,973) (46,074)
---------- ----------
Total members' equity 169,783 206,196
---------- ----------
Total liabilities and members' equity $ 217,083 $ 218,408
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
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<TABLE>
<CAPTION>
LOUISIANA UNWIRED, LLC AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands)
(Unaudited)
For the three months ended For the nine months ended
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Subscriber $ 12,014 $ 2,761 $ 29,886 $ 6,520
Roaming 5,815 1,256 11,695 2,379
Merchandise sales 2,256 979 6,930 2,693
Other revenue 134 (7) 337 --
-------- -------- -------- --------
Total revenue 20,219 4,989 48,848 11,592
Expense:
Cost of service 11,151 2,670 24,358 6,223
Merchandise cost of sales 4,382 2,117 13,645 5,580
General and administrative 5,105 990 11,856 2,305
Selling and marketing 7,650 1,884 17,463 4,541
Depreciation and amortization 9,356 4,128 22,479 9,129
-------- -------- -------- --------
Total operating expense 37,644 11,789 89,801 27,778
-------- -------- -------- --------
Operating loss (17,425) (6,800) (40,953) (16,186)
Other income (expense):
Interest income (expense), net 442 (1,838) 2,816 (3,387)
-------- -------- -------- --------
Loss before extraordinary
item and minority interest (16,983) (8,638) (38,137) (19,573)
Minority interest in losses of subsidiary 524 --- 1,475 ---
Extraordinary item-early extinguishment ---- --- (238) (614)
-------- -------- -------- --------
of debt
Net loss $(16,459) $(8,638) $(36,900) $(20,187)
======== ======= ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<TABLE>
<CAPTION>
LOUISIANA UNWIRED, LLC AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
(Unaudited)
For the nine months ended
----------------------------------
September 30, September 30,
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities
------------------------------------
Net cash used in operating activities $ (12,452) $ (10,728)
Cash flows from investing activities
------------------------------------
Sale of marketable securities 117,270 ---
Purchase of marketable securities (3,150) ---
Payments for the purchase of equipment (96,755) (32,980)
Payments for microwave relocation (2,628) (1,564)
Proceeds from sale of assets 326 ---
--------- ---------
Net cash provided by (used in) investing activities 15,063 (34,544)
Cash flows from financing activities
------------------------------------
Capital contributions from members 940 19,100
Debt issuance costs --- (3,245)
Proceeds from short-term debt --- 28,760
Proceeds from note payable to parent 11,750 ---
Proceeds from long term borrowing 260 ---
Principal payments of long-term debt (14,053) ---
--------- ---------
Net cash provided by (used in) financing activities (1,103) 44,615
--------- ---------
Net increase (decrease) in cash and cash equivalents 1,508 (657)
Cash and cash equivalents at beginning of period 1,844 1,350
--------- ---------
Cash and cash equivalents at end of period $ 3,352 $ 693
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
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LOUISIANA UNWIRED,LLC
NOTES TO CONSDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 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 nine month periods ended September 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 September 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,
Tennessee and Alabama. As of September 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"), an affiliate of US Unwired and Cameron, 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 Gulf
Coast Wireless ("Gulf Coast Wireless"), formerly known as Meretel
Communications Limited Partnership, to receive an 80% ownership interest in
each of the Beaumont-Port Arthur and Lufkin-Nacogdoches BTAs in exchange
6
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for a reduction in US Unwired's ownership interest in Gulf Coast Wireless
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 nine month periods ended
September 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.
4. Property and Equipment
Major categories of property and equipment were:
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September 30, December 31,
2000 1999
---- ----
(In thousands)
<S> <C> <C>
Facilities and equipment $188,762 $86,438
Office equipment 3,875 1,785
Leasehold improvements 1,121 350
Construction in progress 24,822 12,537
-------- -------
218,580 101,110
Less accumulated depreciation and amortization 35,774 15,805
-------- -------
$182,806 $85,305
======== =======
</TABLE>
5. Long-term Obligations
Long-term obligations consisted of the following:
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<CAPTION>
September 30, December 31,
2000 1999
---- ----
(In thousands)
<S> <C> <C>
FCC debt $1,115 $1,509
Capital leases 8,191 ---
------ ------
Total long-term obligations 9,306 1,509
Less current maturities 519 140
------ ------
Long-term obligations, excluding current maturities $8,787 $1,369
====== ======
</TABLE>
During the nine month period ended September 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 September 2000, the Company borrowed $11.8 million from US Unwired
through the execution of a series of demand notes. The Notes accrue
interest at a variable rate of the Federal discount rate plus 3.5%.
In 1999, Gulf Coast Wireless entered into agreements to lease towers for a
15-year period. As part of the agreement discussed in Note 2 above, Texas
Unwired assumed Gulf Coast Wireless's obligations under 31 leases in the
Beaumont-Port Arthur and Lufkin-Nacogdoches markets. During the nine month
period ended September 30, 2000, the Company executed two additional tower
capital leases, bringing the total capitalized leases to 33.
7
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Future minimum annual lease payments due under these capital leases
consisted of the following at September 30, 2000 (in thousands):
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<S> <C>
2001 $ 792
2002 792
2003 792
2004 792
2005 792
Thereafter 7,163
------
11,123
Amounts representing interest (2,932)
------
Present value of minimum lease payments (including
current portion of $397) $8,191
======
</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 September 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 $16.5 million for the three months
ended September 30, 2000, $8.6 million for the three months ended September
30, 1999, $36.9 million for the nine months ended September 30, 2000 and
$20.2 million for the nine months ended September 30, 1999. The total other
comprehensive loss includes net loss 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 changes and trends related to the financial
condition and results of operations of Louisiana 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
8
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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 personal communication services ("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. We are constructing a 100% digital, 100% wireless PCS network that we
expect to substantially complete by March 2001. Our service area is contiguous
with Sprint PCS's launched markets of Houston, Dallas, Little Rock, New Orleans,
Birmingham, Tallahassee and Memphis.
We have launched our PCS service in eight new markets since June 30, 2000 and at
September 30, 2000 offered PCS service in 28 markets in Louisiana, Texas,
Alabama, Florida, Arkansas, Mississippi and Tennessee. Since June 30, 2000 we
have increased our network coverage by over 2.1 million residents, and at
September 30, 2000, our network covered approximately 5.1 million residents out
of approximately 8.0 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 September 30, 2000,
we had approximately 91,100 subscribers within the 28 markets. This phase of our
build out represents 584 operational owned and co-located towers. We are
continuing to build out new markets in the Florida panhandle, Mississippi,
Arkansas and Alabama and 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 interest in the Gulf Coast
Wireless Limited Partnership ("Gulf Coast Wireless"), formerly known as Meretel
Communications Limited Partnership, 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.
In October 2000, we amended our management agreements with Sprint PCS whereby
Sprint PCS will begin providing substantially all of our billing and customer
care services. As a part of the amendment, Sprint PCS has also agreed to not
change the existing reciprocal Sprint roaming rates with us for PCS customers
through December 31, 2002.
Results of Operations
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Three and Nine Month Periods Ended September 30, 2000 Compared to Three Month
and Nine Month Periods Ended September 30, 1999
You should keep in mind that our operating results for the three and nine month
periods ended September 30, 2000 include the consolidation of Texas Unwired.
Revenues
<TABLE>
<CAPTION>
Three months ended September 30, Nine months ended September 30,
2000 1999 2000 1999
---- ---- ---- ----
(In thousands (In thousands)
<S> <C> <C> <C> <C>
Subscriber revenues $12,014 $2,761 $29,886 $ 6,520
Roaming revenues 5,815 1,256 11,695 2,379
Merchandise sales 2,256 979 6,930 2,693
Other revenue 134 (7) 337 --
------- ------ ------- -------
Total revenues $20,219 $4,989 $48,848 $11,592
======= ====== ======= =======
</TABLE>
Subscriber revenues
Subscriber revenues were $12.0 million for the three month period ended
September 30, 2000 as compared to $2.8 million for the three month period ended
September 30, 1999, representing an increase of $9.2 million and was primarily
the result of an increase in PCS subscribers to 91,100 at September 30, 2000
from 23,400 at September 30, 1999. We added 14,600 new PCS subscribers during
the three month period ended September 30, 2000 as compared to 5,000 during the
three month period ended September 30, 1999.
Subscriber revenues were $29.9 million for the nine month period ended September
30, 2000 as compared to $6.5 million for the nine month period ended September
30, 1999, representing an increase of $23.4 million and was primarily the result
of an increase in our overall PCS subscribers to 91,100 at September 30, 2000
from 23,400 at September 30, 1999. We added 57,400 new PCS subscribers during
the nine month period ended September 30, 2000 as compared to 17,700 during the
nine month period ended September 30, 1999.
Roaming revenues
Roaming revenues were $5.8 million for the three month period ended September
30, 2000 as compared to $1.3 million for the three month period ended September
30, 1999, representing an increase of $4.5 million and was primarily the result
of a higher volume of Sprint PCS(R) customers traveling through our markets and
an expansion in our PCS network coverage. We added eight new PCS markets to our
coverage area during the three month period ended September 30, 2000 and served
28 PCS markets at September 30, 2000 as compared to eight PCS markets at
September 30, 1999.
Roaming revenues were $11.7 million for the nine month period ended September
30, 2000 as compared to $2.4 million for the nine month period ended September
30, 1999, representing an increase of $9.3 million and was primarily the result
of a higher volume of Sprint PCS(R) customers traveling through our markets and
an expansion in our PCS network coverage. We added 20 new PCS markets to our
coverage area since September 30, 1999 and served 28 PCS markets at September
30, 2000 as compared to eight PCS markets at September 30, 1999.
Merchandise sales
Merchandise sales were $2.3 million for the three month period ended September
30, 2000 as compared to $1.0 million for the three month period ended September
30, 1999, representing an increase of $1.3 million and were due primarily to an
increase in initial sales to new PCS subscribers. We recorded initial sales to
23,900 new PCS subscribers during the three month period ended September 30,
2000 as compared initial sales to 7,500 new PCS subscribers during the three
month period ended September 30, 1999.
10
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Merchandise sales were $6.9 million for the nine month period ended September
30, 2000 as compared to $2.7 million for the nine month period ended September
30, 1999, representing an increase of $4.2 million and were due primarily to an
increase in initial sales to new PCS subscribers. We recorded initial sales to
63,200 new PCS subscribers during the nine month period ended September 30, 2000
compared to initial sales to 22,200 new PCS subscribers during the nine month
period ended September 30, 1999.
Operating Expenses
Cost of service
Cost of service was $11.2 million for the three month period ended September 30,
2000 as compared to $2.7 million for the three month period ended September 30,
1999, representing an increase of $8.5 million and primarily related to
increased circuit costs and cell site leases for the increase in coverage area
and market expansion in Texas, Florida, Alabama, Arkansas, Mississippi and
Tennessee as described above.
Cost of service was $24.4 million for the nine month period ended September 30,
2000 as compared to $6.2 million for the nine month period ended September 30,
1999, representing an increase of $18.2 million and primarily related to
increased circuit costs and cell site leases for the increase in coverage area
and market expansion in Texas, Florida, Alabama, Arkansas, Mississippi and
Tennessee as described above.
Merchandise cost of sales
Merchandise cost of sales was $4.4 million for the three month period ended
September 30, 2000 as compared to $2.1 million for the three month period ended
September 30, 1999, representing an increase of $2.3 million and was primarily
due to an increase in initial sales to new PCS subscribers. We recorded initial
sales to 23,900 new PCS subscribers during the three month period ended
September 30, 2000 as compared to initial sales to 7,500 new PCS subscribers
during the three month period ended September 30, 1999.
Merchandise cost of sales $13.6 million for the nine month period ended
September 30, 2000 as compared to $5.6 million for the nine month period ended
September 30, 1999, representing an increase of $8.0 million and was primarily
due to an increase in initial sales to new PCS subscribers. We recorded initial
sales to 63,200 new PCS subscribers during the nine month period ended September
30, 2000 compared to initial sales to 22,200 new PCS subscribers during the nine
month period ended September 30, 1999.
General and administrative expenses
General and administrative expenses were $5.1 million for the three month period
ended September 30, 2000 as compared to $1.0 million for the three month period
ended September 30, 1999, representing an increase of $4.1 million, and were
primarily due to the hiring of additional employees and increased billing costs
as the average number of PCS subscribers increased to 91,100 at September 30,
2000 from 23,400 at September 30, 1999 and overall market expansion has
increased to 28 PCS markets at September 30, 2000 from eight PCS markets at
September 30, 1999.
General and administrative expenses were $11.9 million for the nine month period
ended September 30, 2000 as compared to $2.3 million for the nine month period
ended September 30, 1999, representing an increase of $9.6 million, and were
primarily due to the hiring of additional employees and increased billing costs
as the average number of PCS subscribers increased to 91,100 at September 30,
2000 from 23,400 at September 30, 1999 and overall market expansion has
increased to 28 PCS markets at September 30, 2000 from eight PCS markets at
September 30, 1999.
Selling and marketing expenses
Selling and marketing expenses were $7.7 million for the three month period
ended September 30, 2000 as compared to $1.9 million for the three month period
ended September 30, 1999, representing an increase of $5.8 million and primarily
relates to advertising, direct selling headcount and commissions paid to local
11
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and national third party retailers contracted to sell our product. PCS
subscribers increased to 91,100 at September 30, 2000 from 23,400 at September
30, 1999; network coverage increased to 28 PCS markets at September 30, 2000
from eight PCS markets at September 30, 1999; nine additional PCS retail outlets
were open as of September 30, 2000 compared to September 30, 1999.
Selling and marketing expenses were $17.5 million for the nine month period
ended September 30, 2000 as compared to $4.5 million for the nine month period
ended September 30, 1999, representing an increase of $13.0 million and
primarily relates to advertising, direct selling headcount and commissions paid
to national third party retailers contracted to sell our product. PCS
subscribers increased to 91,100 at September 30, 2000 from 23,400 at September
30, 1999; network coverage increased to 28 PCS markets at September 30, 2000
from eight PCS markets at September 30, 1999; nine additional PCS retail outlets
were open at September 30, 2000 compared to September 30, 1999.
Depreciation and amortization expense
Depreciation and amortization expense was $9.4 million for the three month
period ended September 30, 2000 as compared to $4.1 million for the three month
period ended September 30, 1999, representing an increase of $5.3 million and
$22.5 million for the nine month period ended September 30, 2000 as compared to
$9.1 million for the nine month period ended September 30, 1999, representing an
increase of $13.4 million and is primarily due capital spending to build out our
PCS markets. Net property and equipment for our PCS markets increased to $182.8
million at September 30, 2000 from $73.3 million at September 30, 1999.
Operating Loss
The operating loss was $17.4 million for the three month period ended September
30, 2000 as compared to $6.8 million for the three month period ended September
30, 1999, representing an increase of $10.6 million and was primarily due to the
increased operational costs associated with the building out of our PCS markets.
The operating loss was $41.0 million for the nine month period ended September
30, 2000 as compared to $16.2 million for the nine month period ended September
30, 1999, representing an increase of $24.8 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 September 30, Nine months ended September 30,
2000 1999 2000 1999
---- ---- ---- ----
(In thousands) (In thousands)
--------------
<S> <C> <C> <C> <C>
Interest expense $(174) $(1,853) $ (576) $ (3,442)
Interest income 616 15 3,392 55
----- ------- ------ --------
Total other income/(expense) $ 442 $(1,838) $2,816 $ (3,387)
===== ======= ====== ========
</TABLE>
Interest expense was $174,000 for the three month period ended September 30,
2000 as compared to $1.9 million for the three month period ended September 30,
1999, representing a decrease of $1.7 million. This decrease was the result of
the early extinguishment of long-term debt in the fourth quarter of 1999.
Interest expense was $576,000 for the nine month period ended September 30, 2000
compared to $3.4 million for the nine month period ended September 30, 1999,
representing a decrease of $2.8 million. This decrease was the result of the
early extinguishment of long-term debt in the fourth quarter of 1999.
Interest income was $616,000 for the three month period ended September 30, 2000
as compared to $15,000 for the three month period ended September 30, 1999,
representing an increase of $601,000 and
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the was the result of investing available funds in marketable securities until
the funds were required to fund our market build out.
Interest income was $3.4 million for the nine month period ended September 30,
2000 as compared to $54,000 for the nine month period ended September 30, 1999
and the increase was the result of investing available funds in marketable
securities until the funds were 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 September 30, 2000 and $1.5 million for the nine month period ended
September 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 September 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.
In September 2000, the Company borrowed $11.8 million from US Unwired through
the execution of a series of demand notes. The Notes accrue interest at a
variable rate of the Federal discount rate plus 3.5%.
Cash used in operating activities was $12.5 million for the nine month period
ended September 30, 2000. Cash provided by investing activities was $15.1
million for the nine month period ended September 30, 2000 and includes $117.3
million generated by the sale of marketable securities offset by $96.8 million
used to purchase property and equipment, $2.6 million paid for microwave
relocation and $3.2 million used to purchase marketable securities. Cash used in
financing activities was $1.1 million for the nine month period ended September
30, 2000 and consists primarily of $14.1 million used in the payment of long-
term debt offset by $11.8 million in proceeds from short 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 and other financing available from US Unwired will be enough
to build out our network as planned, cover anticipated operating losses and meet
our debt service requirements.
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 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
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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.
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. As of September 30, 2000, our short term
investments consisted of funds invested in money market accounts. 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
No reports on Form 8-K were filed during the quarter ended
September 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.
November 9, 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
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