<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
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 0-19656
NEXTEL COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 36-3939651
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1505 FARM CREDIT DRIVE, MCLEAN, VA 22102
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (703) 394-3000
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
--- ---
Indicate the number of shares outstanding of each of issuer's classes
of common stock as of the latest practicable date:
<TABLE>
<S> <C>
Number of Shares Outstanding
Title of Class on April 30, 1998
-------------- -----------------
Class A Common Stock, $0.001 par value 255,444,162
Class B Non-Voting Common Stock,
$0.001 par value 17,830,000
</TABLE>
<PAGE> 2
NEXTEL COMMUNICATIONS, INC.
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
PART I FINANCIAL INFORMATION.
Item 1. Financial Statements - Unaudited.
Condensed Consolidated Balance Sheets -
As of March 31, 1998 and December 31, 1997. 3
Condensed Consolidated Statements of Operations -
For the Three Months Ended March 31, 1998 and 1997. 4
Condensed Consolidated Statement of Changes in Stockholders' Equity -
For the Three Months Ended March 31, 1998. 5
Condensed Consolidated Statements of Cash Flows -
For the Three Months Ended March 31, 1998 and 1997. 6
Notes to Condensed Consolidated Interim Financial
Statements. 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk. 22
PART II OTHER INFORMATION.
Item 1. Legal Proceedings. 24
Item 2. Changes in Securities. 24
Item 6. Exhibits and Reports on Form 8-K. 24
</TABLE>
<PAGE> 3
PART I
ITEM 1. FINANCIAL STATEMENTS - UNAUDITED.
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
------------ ------------
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents (of which $463,380 and $159,790 is restricted) $ 1,505,289 $ 301,601
Marketable securities (of which $5,236 and $128,560 is restricted) 8,123 131,404
Accounts and notes receivable, less allowance for doubtful
accounts of $68,194 and $56,590 268,993 240,637
Subscriber equipment inventory 111,542 101,338
Prepaid expenses and other 80,231 64,617
------------ ------------
Total current assets 1,974,178 839,597
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation
of $735,133 and $594,473 3,716,785 3,225,603
INTANGIBLE ASSETS, net of accumulated amortization
of $807,097 and $764,554 4,733,507 4,699,746
OTHER ASSETS 583,090 462,855
------------ ------------
$ 11,007,560 $ 9,227,801
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable, accrued expenses and other $ 801,252 $ 761,314
Current portion of long-term debt 6,933 7,577
------------ ------------
Total current liabilities 808,185 768,891
LONG-TERM DEBT 6,396,799 5,038,250
DEFERRED INCOME TAXES 936,551 951,192
OTHER 36,115 27,929
------------ ------------
Total liabilities 8,177,650 6,786,262
------------ ------------
SERIES D EXCHANGEABLE PREFERRED STOCK MANDATORILY REDEEMABLE 2009,
13% cumulative annual dividend; 531,908 and 515,166
shares issued and outstanding; stated at liquidation value 546,304 529,119
SERIES E EXCHANGEABLE PREFERRED STOCK MANDATORILY REDEEMABLE 2010,
11.125% cumulative annual dividend; 750,000 shares issued and outstanding;
stated at liquidation value 760,893 --
STOCKHOLDERS' EQUITY
Preferred stock, Class A convertible redeemable,
7,905,981 shares issued and outstanding 290,545 290,545
Preferred stock, Class B convertible, 82 shares issued and outstanding -- --
Common stock, Class A, 254,128,533 and 253,246,237 shares issued,
253,054,717 and 252,028,617 shares outstanding 254 253
Common stock, Class B, non-voting convertible, 17,830,000 shares
issued and outstanding 18 18
Paid-in capital 4,366,794 4,379,810
Accumulated deficit (3,135,967) (2,749,105)
Treasury shares, at cost, 1,073,816 and 1,217,620 shares (20,642) (23,435)
Other stockholders' equity 21,711 14,334
------------ ------------
Total stockholders' equity 1,522,713 1,912,420
------------ ------------
$ 11,007,560 $ 9,227,801
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE> 4
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
UNAUDITED
<TABLE>
<CAPTION>
1998 1997
------------- -------------
<S> <C> <C>
OPERATING REVENUES $ 327,134 $ 110,676
------------- -------------
OPERATING EXPENSES
Cost of revenues 102,428 58,161
Selling, general and administrative 329,739 132,376
Depreciation and amortization 184,495 110,203
------------- -------------
616,662 300,740
------------- -------------
OPERATING LOSS (289,528) (190,064)
------------- -------------
OTHER INCOME (EXPENSE)
Interest expense (145,380) (75,267)
Interest income 14,353 3,982
Other, net 53 1,063
------------- -------------
(130,974) (70,222)
------------- -------------
LOSS BEFORE INCOME TAX BENEFIT (420,502) (260,286)
INCOME TAX BENEFIT 33,640 39,436
------------- -------------
NET LOSS (386,862) (220,850)
REDEEMABLE PREFERRED STOCK DIVIDENDS (28,088) --
------------- -------------
LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS $ (414,950) $ (220,850)
============= =============
BASIC AND DILUTED LOSS PER SHARE ATTRIBUTABLE TO COMMON
STOCKHOLDERS $ (1.53) $ (0.93)
============= =============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 270,385,000 237,496,000
============= =============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE> 5
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(DOLLARS IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
Class A Class B Class A
-------------------- ------------------ ---------------------
Preferred Stock Preferred Stock Common Stock
Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1998 7,905,981 $290,545 82 $ -- 253,246,237 $253
Issuance of common stock:
Exercise of options and warrants 882,296 1
Employee stock purchase plan
Acquisitions
Deferred compensation
Unrealized gain on available-for-sale
securities, net of income taxes
Foreign currency translation adjustment
Preferred stock dividends
Net loss
--------- -------- ------ ------ ----------- ----
BALANCE, March 31, 1998 7,905,981 $290,545 82 $ -- 254,128,533 $254
========= ======== ====== ====== =========== ====
</TABLE>
<TABLE>
<CAPTION>
Class B
------------------
Common Stock Paid-in Accumulated Treasury
Shares Amount Capital Deficit Shares
------ ------ ------- ------- ------
<S> <C> <C> <C> <C> <C>
BALANCE, January 1, 1998 17,830,000 $18 $4,379,810 $(2,749,105) $(23,435)
Issuance of common stock:
Exercise of options and warrants 11,578 1,327
Employee stock purchase plan 202 1,466
Acquisitions 1,706
Deferred compensation 1,586
Unrealized gain on available-for-sale
securities, net of income taxes
Foreign currency translation adjustment
Preferred stock dividends (28,088)
Net loss (386,862)
---------- --- ---------- ----------- --------
BALANCE, March 31, 1998 17,830,000 $18 $4,366,794 $(3,135,967) $(20,642)
========== === ========== =========== ========
</TABLE>
<TABLE>
<CAPTION>
Other Stockholders' Equity
------------------------------------------
Accumulated Other
Comprehensive Income
--------------------------
Unrealized Cumulative
Gain on Translation Deferred
Investments Adjustment Compensation
----------- ---------- ------------
<S> <C> <C> <C>
BALANCE, January 1, 1998 $22,798 $ -- $ (8,464)
Issuance of common stock:
Exercise of options and warrants
Employee stock purchase plan
Acquisitions
Deferred compensation 1,073
Unrealized gain on available-for-sale
securities, net of income taxes 9,774
Foreign currency translation adjustment (3,470)
Preferred stock dividends
Net loss
------- --------- -----------
BALANCE, March 31, 1998 $32,572 $ (3,470) $ (7,391)
======= ========= ===========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE> 6
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(DOLLARS IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (386,862) $ (220,850)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of deferred financing costs and accretion of senior
redeemable discount notes, net of capitalized accreted interest
of $8,845 and $0 122,081 66,081
Depreciation and amortization 184,495 110,202
Provision for losses on accounts receivable 22,163 1,403
Deferred income tax benefit (33,640) (39,436)
Other, net 4,568 3,429
Change in current assets and liabilities, net of effects from acquisitions:
Accounts and notes receivable (49,162) (40,176)
Subscriber equipment inventory (8,945) (1,287)
Other assets (17,981) (7,057)
Accounts payable, accrued expenses and other 59,167 23,657
----------- -----------
Net cash used in operating activities (104,116) (104,034)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (602,114) (217,941)
Payments for acquisitions and purchase of licenses, net of cash acquired (86,230) (30,809)
Purchases of marketable securities (4,917) --
Proceeds from maturities and sales of marketable securities 128,198 --
Other investments in and advances to affiliates (37,774) (2,028)
----------- -----------
Net cash used in investing activities (602,837) (250,778)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of debt securities 1,401,013 500,003
Proceeds from redeemable preferred stock issuance 750,000 --
Long-term borrowings 1,000,000 389,000
Long-term repayments (972,021) --
Revolving line of credit repayments, net (192,676) --
Other long-term (repayments) borrowings, net (1,993) 1,586
Deferred financing costs (86,578) (16,830)
Common stock and options issued 12,896 4,100
Option repurchase and other -- (24,513)
----------- -----------
Net cash provided by financing activities 1,910,641 853,346
----------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS 1,203,688 498,534
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 301,601 139,681
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,505,289 $ 638,215
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest, net of amounts capitalized of $3,543 and $12,022 $ 26,409 $ 3,196
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
6
<PAGE> 7
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
UNAUDITED
NOTE 1 -- BASIS OF PRESENTATION.
The condensed consolidated interim financial statements of Nextel
Communications, Inc. and subsidiaries ("Nextel" or the "Company") included
herein have been prepared by the Company without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission (the "Commission") and
reflect all adjustments that are, in the opinion of management, necessary for a
fair statement of the results for the interim periods. All adjustments made were
normal recurring accruals.
The interim financial statements should be read in conjunction with the
financial statements and notes thereto contained in the Company's Annual Report
on Form 10-K for the year ended December 31, 1997 (the "1997 Form 10-K").
Operating results for the interim periods are not necessarily indicative of
results for an entire year.
Certain prior period amounts have been reclassified to conform to the 1998
presentation.
SUPPLEMENTAL CASH FLOW INFORMATION -- Total capital expenditures paid in
cash and financed during the three months ended March 31, 1998 and 1997 were
$591.1 million and $217.9 million, respectively. Total capital expenditures
includes interest capitalized in connection with the construction and
development of the Company's advanced mobile communications systems employing
digital technology with a multi-site configuration permitting frequency reuse
(the "Digital Mobile network") of approximately $12.4 million and $12.0 million
during the three months ended March 31, 1998 and 1997, respectively.
RESTRICTED CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES -- As of March
31, 1998 and December 31, 1997, approximately $468.6 million and $288.4 million,
respectively, of cash, cash equivalents and marketable securities held by Nextel
International, Inc. and its subsidiaries ("Nextel International"), an indirect
wholly-owned subsidiary of Nextel, were not available to fund any of the cash
needs of Nextel's domestic Digital Mobile network and analog specialized mobile
radio ("SMR") businesses due to the restrictions contained in (i) the indenture
related to the 10-year discount notes issued by Nextel International in March
1997 (the "1997 NI Notes") and (ii) the indenture related to the 10-year
discount notes issued by Nextel International in March 1998 (the "1998 NI
Notes")(such indentures, collectively, the "NI Indentures").
COMPREHENSIVE INCOME -- Effective January 1, 1998, the Company adopted
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("SFAS 130"), that establishes new rules for the reporting and display
of comprehensive income and its components. Adoption of SFAS 130 requires
unrealized gains or losses on the Company's available-for-sale securities and
foreign currency translation adjustments be included in other comprehensive
income. The components of comprehensive income, net of related tax, are as
follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------------
1998 1997
--------- ---------
(in thousands)
<S> <C> <C>
Loss attributable to common stockholders $(414,950) $(220,850)
Other comprehensive income:
Unrealized gain (loss) on investments, net of tax 9,774 (8,845)
Foreign currency translation adjustments (3,470) --
--------- ---------
$(408,646) $(229,695)
========= =========
</TABLE>
7
<PAGE> 8
NOTE 2 -- SIGNIFICANT TRANSACTIONS.
The following transactions are more fully described in "Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Recent Transactions and Developments."
PREFERRED STOCK ISSUANCE -- On February 11, 1998, Nextel completed a
private placement of 750,000 shares of 11.125% Series E Exchangeable Preferred
Stock Mandatorily Redeemable 2010 with a liquidation preference of $1,000 per
share yielding net proceeds of approximately $727.9 million (the "Series E
Preferred Stock Proceeds"). At March 31, 1998, accrued but unpaid dividends on
the outstanding shares of Series E Preferred Stock Mandatorily Redeemable 2010
were approximately $10.9 million.
LMDS AUCTION -- NextBand Communications, L.L.C. ("NextBand"), a joint
venture in which the Company has a 50% interest, submitted winning bids totaling
$134.7 million during the March 1998 Federal Communications Commission ("FCC")
auction of Local Multipoint Distribution Service ("LMDS") spectrum. Under the
terms of the joint venture, the Company is required to fund 50% of the bid
amount (net of the Company's $25.0 million share of the auction bidding deposit,
which already has been paid to the FCC).
NEXTEL INTERNATIONAL ARGENTINA INVESTMENT AND CREDIT FACILITY -- On January
30, 1998, Nextel International acquired the remaining 50% equity interest in the
holding company for Nextel Argentina S.R.L. ("Nextel Argentina") for a purchase
price of $46.0 million. On February 27, 1998, Nextel Argentina entered into an
$83.0 million senior secured credit facility with The Chase Manhattan Bank.
8
<PAGE> 9
NOTE 3 -- LONG-TERM DEBT.
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
---------- ------------
(in thousands)
<S> <C> <C>
11.5% Senior Redeemable Discount Notes due 2003,
net of unamortized discount of $15,567 and $24,564 $ 327,798 $ 318,801
9.75% Senior Redeemable Discount Notes due 2004,
net of unamortized discount of $89,529 and $113,926 1,036,906 1,012,509
10.125% Senior Redeemable Discount Notes due 2004,
net of unamortized discount of $100,986 and $111,870 308,890 298,006
12.25% Senior Redeemable Discount Notes due 2004,
net of unamortized discount of $92,742 and $104,504 338,728 326,966
10.25% Senior Redeemable Discount Notes due 2005,
net of unamortized discount of $31,342 and $34,320 83,823 80,845
13.0% Senior Redeemable Discount Notes due 2007
(issued by Nextel International), net of unamortized
discount of $394,040 and $411,571 557,423 539,892
10.65% Senior Redeemable Discount Notes due 2007,
net of unamortized discount of $310,885 and $324,329 529,115 515,671
9.75% Senior Serial Redeemable Discount Notes due 2007,
net of unamortized discount of $398,958 and $416,021 730,142 713,079
9.95% Senior Serial Redeemable Discount Notes due 2008,
net of unamortized discount of $613,045 1,013,955 --
12.125% Senior Redeemable Discount Notes due 2008,
(issued by Nextel International), net of unamortized
discount of $326,554 403,446 --
Bank credit facility, interest payable quarterly at an
adjusted rate calculated either on the prime rate or
LIBOR (8.84% - 1998 and 7.94% to 9.75% - 1997) 1,000,000 1,021,000
Vendor credit facility, interest payable quarterly at 2%
over the prime rate (10.5%) -- 152,021
Nextel International vendor credit facilities, interest payable
semiannually at 2.5% over the prime rate (11.0%) 58,574 50,250
Other 14,932 16,787
---------- ----------
6,403,732 5,045,827
Less current portion 6,933 7,577
---------- ----------
$6,396,799 $5,038,250
========== ==========
</TABLE>
During the three months ended March 31, 1998, the Company completed the
following financing transactions, each of which are more fully discussed in
"Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Recent Transactions and Developments."
FEBRUARY NOTES ISSUANCE -- On February 11, 1998, the Company completed a
private placement of $1,627.0 million in principal amount at maturity of 9.95%
Senior Serial Redeemable Discount Notes due 2008 (the "February Notes") yielding
approximately $975.9 million in net cash proceeds (the "February Notes
Proceeds").
NEXTEL INTERNATIONAL NOTES ISSUANCE -- On March 12, 1998, Nextel
International completed a private placement of $730.0 million in principal
amount at maturity of 12.125% Senior Redeemable Discount Notes due 2008 (the
"1998 NI Notes") yielding approximately $387.0 million in net cash proceeds (the
"1998 NI Notes Proceeds").
9
<PAGE> 10
NEW BANK FINANCING -- On March 13, 1998, the Company entered into
definitive agreements which increased the Company's total secured financing
capacity under its bank financing agreement to $3.0 billion and concurrently
terminated its vendor credit facilities.
NOTE 4 -- DIGITAL MOBILE NETWORK EQUIPMENT SALES AND RELATED COSTS.
The loss generated from the sale of subscriber units used in the Digital
Mobile network primarily results from the Company's subsidy of digital
subscriber units and represents marketing costs for the Digital Mobile network.
Equipment sales revenue and related cost of sales of digital subscriber units
and related digital accessories, including current period order fulfillment and
installation related expenses are classified within selling, general and
administrative expenses as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1998 1997
--------- ---------
<S> <C> <C>
Equipment sales $ 83,995 $ 43,283
Cost of equipment sales 143,075 62,134
--------- ---------
$ (59,080) $ (18,851)
========= =========
</TABLE>
NOTE 5 -- SUBSEQUENT EVENTS.
TENDER OFFER -- On March 3, 1998, the Company commenced a cash tender offer
and related consent solicitation with respect to all of the outstanding 11.5%
Senior Redeemable Discount Notes due 2003 (the "2003 Notes") and 12.25% Senior
Redeemable Discount Notes due 2004 (the "12.25% 2004 Notes" and collectively
with the 2003 Notes, the "Targeted Notes"). The tender offer and consent
solicitation concluded on April 3, 1998. Approximately $307.6 million in
principal amount at maturity of the 2003 Notes and $422.8 million in principal
amount at maturity of the 12.25% 2004 Notes, which had carrying values of
approximately $294.2 million and $332.7 million, respectively, were validly
tendered in the tender offer. Pursuant to the terms of the tender offer and
consent solicitation the Company paid approximately $740.8 million for the
tendered Targeted Notes (representing both the purchase price of the tendered
Targeted Notes and related consent fees) utilizing a portion of the February
Notes Proceeds. As a result of the early retirement of the tendered Targeted
Notes, in the second quarter of 1998, the Company will recognize an
extraordinary loss of approximately $133.2 million, representing the sum of (i)
the excess of the purchase price for such tendered Targeted Notes over the sum
of carrying values of such tendered Targeted Notes and (ii) the write-off of the
associated unamortized deferred financing costs of approximately $19.3 million.
NOTE 6 -- CONTINGENCIES.
See Part II, Item 1. "Legal Proceedings" for a discussion of certain
lawsuits and other legal matters.
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW.
The following discussion of the condensed consolidated financial condition
and results of operations of Nextel for the three months ended March 31, 1998
and 1997, and certain factors that could affect Nextel's prospective financial
condition, should be read in conjunction with the Company's 1997 Form 10-K.
Nextel provides a wide array of digital and analog wireless communications
services throughout the United States. The Company offers a differentiated,
integrated package of digital wireless communications services under the Nextel
brand name, primarily to business users, and as of March 31, 1998, provided
service to approximately 1,641,500 digital subscriber units in the United
States. At March 31, 1998, the Company's Digital Mobile network was operational
in areas in or around 78 of the top 100 metropolitan statistical areas ("MSAs")
in the United States. In addition to its Digital Mobile network, Nextel also
operates analog wireless networks providing analog SMR services throughout the
continental United States and in Hawaii to approximately 493,600 analog SMR
subscriber units as of March 31, 1998. Nextel has significant SMR spectrum
holdings in and around every major business and population center in the
country, including all of the top 50 MSAs in the United States.
In early 1997, Nextel finalized and began implementing a business plan for
the period from March 31, 1997 through December 31, 1998 (the "Plan Period")
that contemplated an accelerated build-out of its Digital Mobile network in the
United States incorporating the modified version of the digital technology
developed by Motorola, Inc. (such modified technology is referred to as the
"Reconfigured integrated Digital Enhanced Network" or "Reconfigured iDEN")
technology (the "1997 Plan"). During 1997, Nextel achieved a significant
expansion of its Digital Mobile network and experienced a large increase in the
number of digital subscriber units in service and system minutes of use. This
growth resulted in greater capital expenditures and net cash used in Digital
Mobile network operations in the final three quarters of 1997 than estimated for
purposes of developing the 1997 Plan. The Company has updated and revised its
business plan for its domestic operations, as it relates to 1998, in light of
its results and experience in building out and commercializing its Digital
Mobile network in 1997 (the "1998 Plan"). See "Part I, Item 1 Business -- 1998
Business Plan" in the Company's 1997 Form 10-K.
The increased funding requirements reflected in the 1998 Plan include (i) a
$1,050.0 million increase in total system infrastructure and capital costs over
the $1,450.0 million in such costs that were contemplated by the 1997 Plan for
the Plan Period and (ii) a $500.0 million increase in non-system capital
expenditures and operating losses over the $1,050.0 million of such expenditures
and losses that were contemplated by the 1997 Plan for the Plan Period. The 1998
Plan contemplates that the Company's funding requirements for system and
non-system capital expenditures for 1998 will be approximately $1,496.0 million
as compared to the approximately $1,452.5 million in funding used for such
purposes during 1997. Such actual and contemplated capital expenditures exclude
capital expenditures relating to international operations and capitalized
interest relating to the Company's domestic and international operations for the
respective periods. During the first quarter ending March 31, 1998, capital
expenditures relating to the Company's domestic operations (excluding
capitalized interest) were approximately $490.1 million. The level of domestic
capital expenditures during such quarter was consistent with the 1998 Plan. The
levels of capital expenditures that will be incurred by the Company in the
remainder of 1998 are subject to certain risks and uncertainties identified or
referred to in the Company's 1997 Form 10-K. See "-- Forward Looking
Statements."
The Company also operates or has investments in international wireless
companies through its indirect, wholly-owned subsidiary Nextel International.
Nextel International's subsidiaries or other entities in which Nextel
International holds equity or equivalent interests own and operate wireless
communications systems in Latin America, Asia and Canada and (together with
Nextel's domestic Digital Mobile network operations) provide service in twelve
of the world's 25 largest cities. The Company's condensed consolidated financial
statements include financial information reflecting the assets, liabilities and
results of operations relating to
11
<PAGE> 12
Nextel International and its consolidated subsidiaries as of the relevant dates
or for periods indicated therein. Since March 1997 the funding needs relating to
international operations have been met largely through separate financing
arrangements entered into by Nextel International and its operating subsidiaries
and affiliates. Nextel International currently estimates its funding
requirements for fiscal year 1998 to be approximately $810.0 million. See
Nextel International's Annual Report on Form 10-K for the year ended December
31, 1997 (the "Nextel International 1997 Form 10-K"). More detailed information
relating to Nextel International's financial condition and results of operations
may be found in the periodic and other reports filed by Nextel International
with the Commission pursuant to rules under the Securities and Exchange Act of
1934, as amended (the "Exchange Act").
RECENT TRANSACTIONS AND DEVELOPMENTS
DOMESTIC TRANSACTIONS
NEW BANK FINANCING: Nextel, Nextel Finance Company, a wholly-owned subsidiary of
Nextel ("NFC"), and certain other subsidiaries of Nextel entered into definitive
agreements, which became effective on March 13, 1998, with respect to a secured
credit facility arranged by Barclays Capital, Chase Securities Inc., J.P. Morgan
Securities Inc., NationsBanc Montgomery Securities L.L.C. and Toronto-Dominion
Securities (USA), Inc. (the "Bank Credit Facility"). The Bank Credit Facility
replaces a prior credit facility initially arranged on September 30, 1996, as
amended (the "Old Bank Credit Facility"). The credit agreement relating to the
Bank Credit Facility (the "Bank Credit Agreement") provides for up to $3.0
billion of secured financing, consisting of a $1.5 billion revolving loan and
$1.5 billion in term loans. Concurrently with the effectiveness of the Bank
Credit Facility, the Company made and applied borrowings pursuant to certain of
the term loans thereunder to repay the indebtedness outstanding under its
secured credit facility with Motorola Inc. ("Motorola") and certain other
lenders (the "Vendor Credit Facility") and terminated such secured credit
facility, as well as access to $200.0 million available under an additional
secured term facility from Motorola. In addition, the Company applied its
available financing under the Bank Credit Facility to repay the outstanding
borrowings under the Old Bank Credit Facility. At March 31, 1998, the Company
had drawn an aggregate total of $1.0 billion of its available financing under
the Bank Credit Facility leaving a total of $2.0 billion available for borrowing
under such facility, subject to the satisfaction or waiver of applicable
borrowing conditions. Nextel contemplates accessing the Bank Credit Facility to
finance investments and acquisitions, to fund capital expenditures and for
working capital and general corporate purposes. Borrowings under the Bank Credit
Facility are secured by liens on assets of Nextel's subsidiaries that are
"restricted" subsidiaries under the terms of Nextel's public indentures (the
"Nextel Indentures") relating to the Company's various outstanding issues of
senior discount notes (the "Nextel Notes") and bear interest payable quarterly
at an adjustable rate calculated based either on the prime rate or LIBOR. The
Nextel Indentures contain provisions that operate to limit the amount of
borrowings available under the Bank Credit Facility in certain circumstances.
Based on (i) the amount of equity issuances (including the issuances of Series D
Preferred Stock (defined below) and Series E Preferred Stock (defined below))
completed since June 1, 1997 (the relevant date for purposes of determining the
Company's debt capacity that is based on equity issuances under the Nextel
Indentures), and (ii) the Company's outstanding debt at March 31, 1998 (but
giving effect to the purchase of the tendered Targeted Notes with the February
Notes Proceeds (see "Note 5 -- Subsequent Events")), the Company may access the
entire $3.0 billion available under the Bank Credit Facility in compliance with
the debt incurrence requirements contained in the Nextel Indentures. See the
discussion under the caption "Risk Factors -- Nextel to Require Additional
Financing" in the Company's 1997 Form 10-K and "-- Forward Looking Statements."
The maturity date of the $1.5 billion revolving loan and a $500.0 million
portion of the term loans is March 31, 2006. The maturity date of the remaining
$1.0 billion portion of the term loans is September 30, 2006. Notwithstanding
the foregoing, (i) the maturity of the revolving credit facility and the $500.0
million term loan facility will be accelerated to the date that is six months
prior to the earliest maturity date for the five issues of Senior Redeemable
Discount Notes outstanding prior to 1997 (the "Old Senior Notes"), unless the
aggregate principal amount of all the Old Senior Notes is less than $1.0 billion
and (ii) the maturity of the $1.0 billion term loan facility will be accelerated
to the date that is three months prior to the earliest maturity date for the
then outstanding Old Senior Notes unless the aggregate principal amount of all
outstanding Old Senior Notes is less than $1.0 billion. Access to the Bank
Credit Facility is required for Nextel to implement the 1998 Plan. See the
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discussion under the caption "Risk Factors -- Nextel to Require Additional
Financing" in the Company's 1997 Form 10-K and "-- Forward Looking Statements."
TENDER OFFER AND CONSENT SOLICITATION: On March 3, 1998, the Company commenced a
cash tender offer and related consent solicitation with respect to all of the
outstanding Targeted Notes. The tender offer and consent solicitation concluded
on April 3, 1998. Approximately $307.6 million in principal amount at maturity
of the 2003 Notes and $422.8 million in principal amount at maturity of the
12.25% 2004 Notes, which had carrying values of approximately $294.2 million and
$332.7 million, respectively, were validly tendered in the tender offer.
Pursuant to the terms of the tender offer and consent solicitation the Company
paid approximately $740.8 million for the tendered Targeted Notes (representing
both the purchase price of the tendered Targeted Notes and related consent fees)
utilizing a portion of the February Notes Proceeds. As a result of the early
retirement of the tendered Targeted Notes, in the second quarter of 1998, the
Company will recognize an extraordinary loss of approximately $133.2 million,
representing the sum of (i) the excess of the purchase price for such tendered
Targeted Notes over the sum of carrying values of such tendered Targeted Notes
and (ii) the write-off of the associated unamortized deferred financing costs of
approximately $19.3 million.
LMDS AUCTION: On February 18, 1998, the FCC commenced an auction of LMDS
spectrum in the 28 GHz - 31 GHz frequency range. In connection with its
participation in the LMDS auction and potential pursuit of LMDS-related business
opportunities, the Company has entered into a joint venture with NextLink
Communications, Inc. ("NextLink"), a publicly traded company that is controlled
by Mr. Craig O. McCaw, a significant stockholder of the Company, ("Mr. McCaw").
NextLink provides local facilities based telecommunications services, with an
emphasis on delivering switched services to commercial customers. NextLink files
periodic and other reports with the Commission pursuant to the Exchange Act, and
for additional information concerning NextLink, reference is made to such
reports. The Company's participation with NextLink in the LMDS spectrum auction
and related activities have been conducted through NextBand, a joint venture in
which the Company has a 50% ownership interest. As of the conclusion of the LMDS
spectrum auction on March 25, 1998, NextBand had submitted $134.7 million in
bids that represented the highest bids with respect to the auction of LMDS
spectrum in 42 markets covering approximately 96 million people throughout the
United States. Under the terms of the joint venture, one half of the bid amount
is to be funded by the Company. The Company's funding obligation with respect to
NextBand's acquisition of such LMDS spectrum is approximately $42.4 million
(net of the Company's $25.0 million share of the auction bidding deposit, which
already has been paid to the FCC).
SERIES E PREFERRED STOCK ISSUANCE: On February 11, 1998, Nextel completed the
sale of 750,000 shares of 11.125% Series E Exchangeable Preferred Stock
mandatorily redeemable 2010 (the shares of such stock so issued originally, any
shares of such stock issued in exchange therefor in the Series E Preferred Stock
Exchange Offer (as defined below) and any shares of such stock issued as payment
in kind dividends thereon, collectively the "Series E Preferred Stock"), with a
liquidation preference of $1,000 per share, generating approximately $727.9
million in Series E Preferred Stock Proceeds. Dividends on the Series E
Preferred Stock accrue at an annual rate of 11.125% of the liquidation
preference, are cumulative from the date of issuance and are payable quarterly
in cash or, on or prior to February 15, 2003, at the sole option of Nextel, in
additional shares of Series E Preferred Stock. The Series E Preferred Stock is
mandatorily redeemable on February 15, 2010, at the liquidation preference plus
accrued and unpaid dividends, and is redeemable in whole or part, at the option
of Nextel, at any time after December 15, 2005, at a price equal to the
liquidation preference plus accrued and unpaid dividends, and, in certain
circumstances, after February 15, 2003 at specified redemption prices.
Additionally, in certain circumstances, up to 35% of the outstanding Series E
Preferred Stock may be redeemed on or prior to February 15, 2001, at the option
of Nextel, at 111.125% of the liquidation preference plus accrued and unpaid
dividends from the proceeds of one or more sales of Nextel's Common Stock,
provided that such redemption occurs within 180 days after the consummation of
any such sale. The Series E Preferred Stock is exchangeable, in whole but not in
part, at the option of Nextel at any time after December 15, 2005, and in
certain circumstances sooner, into Nextel subordinated debentures.
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The shares of the Series E Preferred Stock were issued in a private
placement transaction, have not been registered with the Commission under the
Securities Act of 1933, as amended (the "Securities Act"), and may not be sold
absent registration or an applicable exemption from the registration
requirements. In connection with the issuance of the Series E Preferred Stock,
Nextel agreed to use its best efforts to file with the Commission and cause to
become effective a registration statement with respect to a registered offer to
exchange the then outstanding Series E Preferred Stock for an equal number of
shares of 11.125% Series E Exchangeable Preferred Stock that have been
registered pursuant to the Securities Act (the "Series E Preferred Stock
Exchange Offer"). In the event that the Series E Preferred Stock Exchange Offer
is not consummated prior to specified dates, the dividend accrual rate
applicable to the Series E Preferred Stock will increase by specified amounts
until the Series E Preferred Stock Exchange Offer is consummated or certain
other requirements are met.
FEBRUARY SENIOR NOTES ISSUANCE: Concurrent with the sale of the Series E
Preferred Stock on February 11, 1998, Nextel completed the sale of $1,627.0
million principal amount at maturity of the February Notes. The issue price of
the February Notes, which mature on February 15, 2008, was $614.71 per $1,000
principal amount at maturity (generating approximately $975.9 million in
February Notes Proceeds) representing a yield to maturity of 9.95% computed on a
semi-annual bond equivalent basis from the date of issuance. Cash interest will
not accrue on the February Notes prior to February 15, 2003, and will be payable
on February 15 and August 15 of each year commencing August 15, 2003, at a rate
of 9.95% per annum. The February Notes are redeemable at the option of Nextel,
in whole or in part, at any time on or after February 15, 2003, at specified
redemption prices plus accrued and unpaid interest. In addition, in the event of
one or more sales by Nextel prior to February 15, 2001, of at least $125.0
million of its capital stock, Nextel may redeem up to a maximum of 35% of the
aggregate accreted value of the outstanding February Notes at a redemption price
equal to 109.95% of such accreted value on the date of redemption; provided that
such redemption occurs within 180 days after the consummation of any such sale.
The February Notes are senior unsecured indebtedness of Nextel and rank pari
passu in right of payment with all unsubordinated, unsecured indebtedness of
Nextel.
The February Notes were issued in a private placement transaction, have not
been registered with the Commission under the Securities Act and may not be sold
absent registration or an applicable exemption from the registration
requirements. In connection with the issuance of the February Notes, Nextel
agreed to use its best efforts to file with the Commission and cause to become
effective a registration statement with respect to a registered offer to
exchange the then outstanding February Notes for an equal principal amount at
maturity of its 9.95% Senior Serial Redeemable Discount Notes due 2008 that have
been registered pursuant to the Securities Act (the "February Notes Exchange
Offer"). In the event that the February Notes Exchange Offer is not consummated
prior to specified dates, additional incremental interest on the accreted value
of the February Notes will accrue until the February Notes Exchange Offer is
consummated or certain other requirements are met.
NEXTEL INTERNATIONAL TRANSACTIONS
JAPAN INVESTMENT: On March 17, 1998, Nextel International purchased a 21% equity
interest in J-Com Co., Ltd., a digital SMR provider in Japan ("J-Com"), for a
purchase price of approximately $593,000. Nextel International also provided a
shareholder loan of approximately $31.5 million to J-Com. J-Com has a
contractual right to provide service in Japan under a sublicense covering more
than 125 million people. DJSMR Business Partnership, a Japanese partnership in
which an affiliate of Motorola is the majority partner, holds a 49% equity
interest in J-Com.
MARCH 1998 NOTES ISSUANCE: On March 12, 1998, Nextel International completed the
sale of $730.0 million principal amount at maturity of the 1998 NI Notes. The
issue price of the 1998 NI Notes, which mature on April 15, 2008, was $549.15
per $1,000 principal amount at maturity (generating approximately $387.0 million
in 1998 NI Notes Proceeds) representing a yield to maturity of 12.125% computed
on a semi-annual bond equivalent basis from the date of issuance. Cash interest
will not accrue on the 1998 NI Notes prior to April 15, 2003, and will be
payable on April 15 and October 15 of each year commencing October 15, 2003, at
a rate of
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12.125% per annum. The 1998 NI Notes are redeemable at the option of Nextel
International, in whole or in part, at any time on or after April 15, 2003, at
specified redemption prices plus accrued and unpaid interest. In addition, in
the event of one or more sales by Nextel International prior to April 15, 2001
of its capital stock, Nextel International may redeem up to a maximum of 35% of
the aggregate accreted value of the outstanding 1998 NI Notes at a redemption
price equal to 112.125% of such accreted value on the date of redemption;
provided that at least $474.5 million in aggregate principal amount at maturity
of 1998 NI Notes remains outstanding after each such redemption and that notice
of such redemption is mailed to holders of the 1998 NI Notes within 60 days
after the consummation of any such sale. The 1998 NI Notes are senior unsecured
indebtedness of Nextel International and rank pari passu in right of payment
with all unsubordinated, unsecured indebtedness of Nextel International.
The 1998 NI Notes were issued in a private placement transaction, have not
been registered with the Commission under the Securities Act and may not be sold
absent registration or an applicable exemption from the registration
requirements. In connection with the issuance of the 1998 NI Notes, Nextel
International agreed to use its best efforts to file with the Commission and
cause to become effective a registration statement with respect to a registered
offer to exchange the then outstanding 1998 NI Notes for an equal principal
amount at maturity of its 12.125% Senior Discount Notes due 2008 that have been
registered pursuant to the Securities Act (the "1998 NI Notes Exchange Offer").
In the event that the 1998 NI Notes Exchange Offer is not consummated prior to
specified dates, additional incremental interest on the accreted value of the
1998 NI Notes will accrue until the 1998 NI Notes Exchange Offer is consummated
or certain other requirements are met.
ARGENTINA INVESTMENT AND CREDIT FACILITY: On January 30, 1998, Nextel
International acquired the remaining 50% equity interest in Nextel Argentina for
$46.0 million. As of February 27, 1998, Nextel Argentina entered into an $83.0
million senior secured credit facility (the "Argentina Credit Facility") with
The Chase Manhattan Bank. Borrowings under the Argentina Credit Facility are
subject to finalizing certain security arrangements as well as the satisfaction
or waiver of certain other conditions. Loans under the Argentina Credit Facility
will bear interest at a rate equal to either (i) the ABR plus 2.75% (ABR is the
highest of the prime rate, the base CD rate plus 1% and the federal funds rate
plus 0.5%) or (ii) the Eurodollar rate plus 3.75% (the Eurodollar rate is LIBOR
multiplied by the statutory reserve rate). The loans under the Argentina Credit
Facility will be repaid in quarterly installments beginning September 30, 2000
and ending March 31, 2003. At March 31, 1998, Nextel International had not
accessed any of the available borrowings under the Argentina Credit Facility.
PERU INVESTMENT: On January 29, 1998, Nextel International purchased a 70.1%
equity interest in Valorcom, S.A., a Peruvian wireless SMR operator ("Nextel
Peru"), for a purchase price of $27.9 million, $23.8 million of which will
represent new capital to be contributed to Nextel Peru to finance the expansion,
upgrade and operation of its wireless services business. As of March 31, 1998,
Nextel International had paid $7.2 million to Nextel Peru, and the remaining
$20.7 million will be paid in the form of capital contributions, which Nextel
International expects will be made prior to July 30, 1998. Nextel Peru, through
its subsidiaries, currently offers analog SMR services in the greater Lima area,
and holds licenses covering 138 SMR channels.
PHILIPPINES RESTRUCTURING: In February 1998, Nextel International reached an
agreement in principle with the three groups of local shareholders of Infocom
Communications Network, Inc. ("Nextel Philippines"), including the Gotesco group
(the "Gotesco Group" and together with the other local shareholders, the
"Philippines Shareholders"), and consummated such agreement in April 1998 (the
"Philippines Partner Agreements"). Pursuant to the Philippines Partner
Agreements (i) the Nextel Philippines corporate governance arrangements were
restructured to give Nextel International increased minority shareholder rights;
(ii) Nextel International purchased existing shareholder loans of the
Philippines Shareholders totaling approximately $19.6 million, which loans bear
interest at 18% per annum and are convertible into equity of Nextel Philippines;
(iii) Nextel International agreed to fund, at Nextel International's option,
Nextel Philippines' future capital needs, currently estimated to be $50.0
million for 1998, pursuant to loans that, at the option of Nextel International,
may be converted into equity of Nextel Philippines;
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(iv) the Gotesco Group has the right to put its 20% interest to Nextel
International for approximately $9.4 million, beginning in January 1999 (the
"Gotesco Put"); and (v) Nextel International has the right to call the Gotesco
20% interest for approximately $11.6 million if the Gotesco Group does not
exercise the Gotesco Put. The ability of Nextel International to convert
shareholders loans into equity, satisfy the Gotesco Put or call the Gotesco 20%
interest, is subject to applicable Philippines foreign ownership rules.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 VS. THREE MONTHS ENDED MARCH 31, 1997
The following discussion compares the consolidated results of operations
for the three month period ended March 31, 1998 to the three month period ended
March 31, 1997. The operating results of these periods are not necessarily
indicative of operating results in future periods. The following comparative
information should be read in conjunction with the Condensed Consolidated
Financial Statements and accompanying Notes for each period discussed, as well
as the information presented elsewhere herein and in the financial statements
and related notes for the year ended December 31, 1997 included in the Company's
1997 Form 10-K.
Operating revenues for the three months ended March 31, 1998 increased
196%, principally as a result of a 288% increase in digital subscriber units in
service from approximately 422,900 at March 31, 1997 to approximately 1,641,500
at March 31, 1998. The increase in operating revenues primarily reflects
increased sales in markets in which Digital Mobile network services are provided
as well as the commencement of Digital Mobile network service in a significant
number of those markets during 1997. Operating revenues include service
revenues, which consist primarily of charges for airtime usage and monthly
network access fees, as well as revenue from sales of analog equipment and
accessories. Key factors contributing to the Company's customer growth include
increased sales force and marketing staff, increased distribution channels,
expanded network capacity, declining equipment prices, increased consumer
awareness and acceptance of wireless communications and pricing plans targeted
at particular market segments. Additionally, average monthly revenue per digital
unit increased from approximately $59 to approximately $66 for the three months
ended March 31, 1997 and 1998, respectively. As the Company expands its retail
subscriber base through increased reliance on indirect distribution channels,
and as price competition in the wireless industry intensifies, the average
revenue per subscriber unit is expected to decrease.
The average churn rate for the Digital Mobile network operation has
increased from approximately 1% per month for the three months ended March 31,
1997 to approximately 1.7% per month for the three months ended March 31, 1998.
Contributing to this increase was an increase in the number of involuntary
disconnects initiated by the Company for older non-paying customer accounts. The
Company believes that the voluntary churn rate (which excludes churn relating to
such involuntary disconnects) for the three months ended March 31, 1998 was
similar to the average churn rate experienced by the Company in the fourth
quarter of 1997.
Cost of revenues for the three months ended March 31, 1998 increased 76%,
primarily as a result of an increase in operational cell sites activated by the
Company during 1997 and 1998 as well as increases in airtime usage and digital
subscriber units in service. Cost of revenues consist primarily of network
operating costs and interconnection fees assessed by local exchange carriers.
Cost of revenues as a percentage of revenues decreased from 53% for the three
months ended March 31, 1997 to 31% for the three months ended March 31, 1998,
primarily resulting from economies of scale achieved by the Company due to the
increase in digital subscriber units placed in service during 1997 and the first
quarter of 1998.
Selling, general and administrative expenses for the three months ended
March 31, 1998 increased $197.3 million or 149% compared to the three months
ended March 31, 1997. This increase consisted of an increase in
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selling and marketing expenses of $129.5 million and an increase in general and
administrative expenses of $67.8 million.
Selling and marketing expenses for the three months ended March 31, 1998
increased by 175% to $203.4 million, as compared to $73.9 million for the three
months ended March 31, 1997. The increase in selling and marketing expenses
consisted primarily of increased costs incurred in connection with higher sales
of digital subscriber units, including an increase in the loss generated from
the sale of digital subscriber units of $40.2 million and an increase in
commissions and residuals to indirect distributors of $35.2 million. Also
contributing to the increase in selling and marketing expenses were higher
advertising and promotion expenses related to the aggressive national and
regional marketing campaigns, which began in March 1997. The remaining increase
in selling and marketing expenses is attributable to increased salaries,
commissions and related personnel costs associated with increased sales and
marketing staffing. Selling and marketing expenses are expected to increase as
the Company continues to expand its presence in existing markets and expands the
geographic coverage of its Digital Mobile network.
The Company offers digital subscriber equipment and accessories at
competitive prices, which are below cost, as an incentive for new customers to
subscribe to its services and for certain existing customers to remain
subscribers. The Company includes the loss generated from the sale of digital
subscriber equipment and accessories in selling and marketing expenses, as the
loss primarily represents marketing costs for the Digital Mobile network. The
loss on digital subscriber equipment sales for the three months ended March 31,
1998 increased 213% to $59.1 million, as compared to $18.9 million for the three
months ended March 31, 1997, primarily reflecting the continued effect of
customer subsidies and discounts on increased sales of digital subscriber units
and related digital accessories. Competitive market pressures are expected to
result in a continued trend of negative gross margins on digital subscriber
equipment sales as the Company anticipates that it will continue to offer
customers subsidies and/or discounts in connection with the sale and
installation of digital subscriber units.
General and administrative expenses for the three months ended March 31,
1998 increased by 116% to $126.3 million, as compared to $58.5 million for the
three months ended March 31, 1997 and decreased as a percentage of revenues from
53% for 1997 to 39% for 1998. The increase in general and administrative
expenses is primarily related to increased bad debt expense of $20.8 million,
increased salaries and related personnel costs associated with increased
staffing for back-office, customer care and collection activities of $17.2
million and increased general and administrative expenses to support the growth
of international operations. To a lesser extent the increase is attributable to
general corporate expenses to support the additional staffing required as a
result of the accelerated growth in the Company's implementation and operation
of the Digital Mobile network.
The Company recognized an aggregate of $22.2 million in bad debt expense
for the quarter ended March 31, 1998. Bad debt expense as a percentage of total
revenues, including digital equipment revenues classified within selling and
marketing expense, increased to 5.4% for the three months ended March 31, 1998
from 0.9% for the three months ended March 31, 1997. The amount of bad debt
expense recognized by the Company during each of the third and fourth quarters
of 1997 and the first quarter of 1998 was significantly higher compared to the
first two quarters of 1997 as a result of a number of factors, including
principally delays in the billing of amounts due on purchases of digital network
subscriber equipment and the inability of the Company's billing and collection
systems, processes and personnel to fully keep pace with the rapid growth of the
Company's customer base and Digital Mobile network utilization. As a result, the
Company instituted a more comprehensive and aggressive program for the
collection of past due receivables in the second half of 1997, including
involuntarily disconnecting certain non-paying customer accounts, which
contributed to the increased bad debt expense during the three months ended
March 31, 1998, as compared to the three months ended March 31, 1997. Nextel
believes that it is pursuing appropriate activities and already has taken a
number of measures that it expects to result in the gradual improvement of its
billing and accounts receivable collection effectiveness in 1998. As a result of
such initiatives, bad debt expense has decreased by approximately $10.4 million
as compared to the fourth quarter of 1997. Nextel does not anticipate that the
percentage of bad debt expense as compared to total revenues will increase
during 1998, although with the anticipated growth of revenues, the absolute
dollar amount of such expenses may increase. Accordingly, the
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amount of bad debt expense recognized by the Company during the second half of
1997 and the first quarter of 1998 should not be viewed as indicative of either
the amount or level of bad debt expense that the Company may recognize in future
periods. See " -- Forward Looking Statements."
Depreciation and amortization for the three months ended March 31, 1998
increased 67% or $74.3 million compared to the three months ended March 31,
1997. This increase was attributable to an $86.9 million increase in
depreciation expense offset by a $12.6 million decrease in amortization expense.
Depreciation expense for the three months ended March 31, 1998 increased
183% to $134.4 million, as compared to $47.5 million for the three months ended
March 31, 1997, reflecting the effect of activating additional operational cell
sites and switches, the expansion of the existing Digital Mobile network and the
effect of certain business acquisitions during the latter part of 1997. System
assets relating to the development and expansion of the Digital Mobile network
represent the largest portion of capital expenditures during the period.
Depreciation of such assets begins upon commencement of commercial service.
Effective October 1, 1997, the Company changed the estimated useful lives
of certain intangible assets including FCC licenses and the excess of purchase
price over fair value of net assets acquired related to domestic acquisitions
from 20 to 40 years to better reflect the period over which the economic
benefits of such assets will be realized. Accordingly, amortization expense for
the three months ended March 31, 1998 decreased 20% to $50.1 million, as
compared to $62.7 million for the three months ended March 31, 1997.
Interest expense for the three months ended March 31, 1998 increased 93% or
$70.1 million, as compared to the three months ended March 31, 1997. Of this
increase, $56.7 million relates to higher debt balances attributable to
additional borrowings under the Company's secured credit facilities, the Nextel
Notes issued during 1997, and the February Notes offset by a decrease in the
weighted-average interest rate on the total outstanding debt due to refinancing
of the Vendor Credit Facility and the retirement of a portion of Targeted Notes
during the fourth quarter of 1997. The remaining $13.4 million increase in
interest expense is primarily attributable to interest expense associated with
the 1997 NI Notes, which were issued in March 1997. In the beginning of the
second quarter of 1998, a portion of the net proceeds from the February Notes
were applied to retire approximately 94% of the Targeted Notes then outstanding.
See "-- Recent Transactions and Developments."
Interest income for the three months ended March 31, 1998 increased 260% as
compared to the three months ended March 31, 1997. This increase is primarily
attributable to income recognized on the investment of the net proceeds received
from the Company's sale of the Series E Preferred Stock, the February Notes and
the 1997 NI Notes.
The effective tax rate for the three months ended March 31, 1998 of 8.0%
decreased from 15.2% for the three months ended March 31, 1997. These income tax
benefits were derived from the recognition of net operating losses that can be
utilized against existing deferred tax liabilities. In certain circumstances,
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," limits the recognition of income tax benefits for net operating losses
to the amount of deferred tax liabilities that are expected to reverse within
the statutory carry forward period. This limitation resulted in a substantial
reduction in the Company's effective tax rate for 1998 as compared to its
effective tax rate for 1997. The decrease is not expected to have an impact on
the Company's ability to utilize its net operating losses for income tax
purposes.
Redeemable preferred stock dividends recorded during the three months ended
March 31, 1998 totaled $28.1 million and represent dividends payable from the
Company's issuance of 500,000 shares of 13% Series D Exchangeable Preferred
Stock mandatorily redeemable 2009 (the "Series D Preferred Stock") in July 1997
and the issuance of the Series E Preferred Stock in February 1998. Dividends on
the Series D Preferred Stock and the Series E Preferred Stock are payable
quarterly in cash or, during the first five years following issuance, in
additional shares of Series D Preferred Stock and Series E Preferred Stock,
respectively.
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LIQUIDITY AND CAPITAL RESOURCES
Nextel had net losses attributable to common stockholders of $415.0 million
and $220.9 million for the three months ended March 31, 1998 and 1997,
respectively. The operating expenses associated with developing, enhancing and
operating the Digital Mobile network have more than offset operating revenues,
and are expected to continue to offset such operating revenues for the next
several years. Nextel has consistently used external sources of funds, primarily
from equity issuances and debt incurrences, to fund operations, capital
expenditures, acquisitions and other non-operating needs. For the next several
years, Nextel intends to use its existing cash and investments and externally
generated funds from debt and equity sources (as discussed below) to cover
future needs, including the design, implementation and operation of its Digital
Mobile network.
Since December 31, 1997, working capital has increased by $1,095.3 million
to $1,166.0 million at March 31, 1998. The increase in working capital is
primarily related to the increase in cash and cash equivalents resulting from
the net cash proceeds of $2,090.8 million generated by the private placement of
the Series E Preferred Stock, the February Notes and the 1998 NI Notes remaining
after the utilization of such proceeds to fund operating and investing
activities. The Company's construction and operation of its domestic Digital
Mobile network have been and will continue to be principally financed by
incurring long-term debt. Proceeds of the 1998 NI Notes are primarily used to
finance international operations, capital expenditures and acquisitions and are
not available to fund any of the cash needs of the Company's domestic Digital
Mobile and analog SMR businesses, due to restrictions contained in the NI
Indentures.
CASH FLOWS
Capital expenditures to fund the continued expansion of the Digital Mobile
network continue to represent the largest use of Company funds for investing
activities. Net cash used in investing activities for the three months ended
March 31, 1998 increased $352.1 million as compared to the three months ended
March 31, 1997, primarily attributable to the $384.2 million increase in capital
expenditures. Cash payments for capital expenditures totaled $602.1 million and
$217.9 million for the three months ended March 31, 1998 and 1997, respectively.
Of these amounts, $88.6 million and $6.2 million represent capital expenditures
for international operations. Capital spending has increased as a result of the
continued build-out of the Digital Mobile network to enhance or expand coverage
and increase network capacity. See "-- Future Capital Needs and Resources." Also
contributing to the increase in cash used in investing activities was a $55.4
million increase in payments for acquisitions and purchases of licenses
consisting primarily of $38.4 million of additional cash investments in
international subsidiaries and a $25.0 million deposit required for the recently
concluded FCC auction for LMDS licenses. The increases in cash used in investing
activities were offset by $123.3 million in net proceeds from purchases and
maturities of marketable securities.
Cash flows provided by financing activities increased by $1,057.3 million
as compared to the three months ended March 31, 1997, primarily reflecting
higher net proceeds in the first quarter of 1998 from the issuance of long-term
debt and mandatorily redeemable preferred stock. Net cash provided by financing
activities for the three months ended March 31, 1998 consisted primarily of
gross proceeds from the Series E Preferred Stock of $750.0 million, the February
Notes of $1,000.1 million and the 1998 NI Notes of $400.9 million, along with
$1,000.0 million in borrowings under the Bank Credit Facility offset in part by
deferred financing cost payments of $86.6 million and $972.0 million used to
repay the outstanding borrowings under the Old Bank Credit Facility and the
Vendor Credit Facility.
FUTURE CAPITAL NEEDS AND RESOURCES
Nextel anticipates that, for the foreseeable future, it will be utilizing
significant amounts of its available cash for capital expenditures for the
construction and enhancement of the Digital Mobile network, operating expenses
relating both to the Digital Mobile network and to its analog SMR business,
potential acquisitions (including the
19
<PAGE> 20
acquisition of rights to spectrum through the recently concluded 800 MHz
auction, acquisition of LMDS spectrum through the joint venture conducted
through NextBand in the recently concluded LMDS spectrum auction and any future
auctions of spectrum by the FCC), debt service requirements and other general
corporate expenditures. Nextel anticipates that its cash utilization for capital
expenditures and other investing activities and operating losses will continue
to exceed its cash flows from operating activities over the next several years.
In connection with the Company's implementation of its 1998 Plan, Nextel
has estimated that the external funding required to meet the cash needs of its
domestic business activities during 1998, including principally the funding
required for the purchase or redemption of the Targeted Notes, the funding of
anticipated capital expenditures and acquisitions (including the remaining
balance due for acquisitions of licenses in the FCC's 800 MHz spectrum auction
concluded in December 1997, but excluding amounts to acquire LMDS licenses) and
operating losses, will be approximately $2,970.0 million, which includes
approximately $1,335.0 million of system infrastructure and other system capital
costs relating to Nextel's Digital Mobile network expected to be incurred during
1998. Such estimates are based in part on the Company's experience in 1997 and
on a number of significant assumptions, including assumptions regarding
continued subscriber growth and increased demand for the Company's wireless
services and enhancements to existing Digital Mobile system infrastructure to
expand and improve systems coverage and performance to address competitive
pressures faced or anticipated by the Company in its domestic markets.
Additionally, the 1998 Plan does not include amounts required to acquire LMDS
licenses or to pursue LMDS or other business opportunities or other potential
transactions or investments that are not part of Nextel's domestic digital and
analog SMR wireless communications businesses and assets and related corporate
support services, personnel and overhead. Under the terms of the NextBand joint
venture in connection with NextBand's recent acquisition of LMDS spectrum, one
half of the bid amount is to be funded by the Company. The Company's funding
obligation with respect to NextBand's acquisition of such LMDS spectrum is
approximately $42.4 million (net of the Company's $25.0 million share of the
auction bidding deposit, which already has been paid to the FCC). See "Recent
Transactions and Developments -- LMDS Auction." The telecommunications industry
is rapidly evolving and there can be no assurance that the Company will not
experience levels of demand for its services or competitive pressures that
differ from those experienced in 1997 and the first quarter of 1998 and those
assumed in developing the Company's 1998 Plan, which could cause an increase in
the Company's need for additional financing. See "--Forward Looking Statements."
The Bank Credit Agreement currently provides for up to $3.0 billion in
secured financing, subject to the satisfaction or waiver of applicable borrowing
conditions. Of such financing, $1.0 billion of term loan financing was drawn as
of March 31, 1998. The availability of such financing is subject to Nextel's
satisfying certain requirements under the Nextel Indentures which require Nextel
to issue new equity for cash as a condition to obtaining access to all amounts
not constituting "permitted debt" (as such term is defined in the Old
Indentures). Based on (i) the amount of equity issuances including the issuances
of Series D Preferred Stock and Series E Preferred Stock completed since June 1,
1997, and (ii) the Company's outstanding debt at March 31, 1998 (but giving
effect to the purchase of the Targeted Notes with the February Notes Proceeds
(see, "Note 5--Subsequent Events")), the Company may access the entire $3.0
billion available under the Bank Credit Facility in compliance with the debt
incurrence requirements contained in the Nextel Indentures. See the discussion
under the caption "Risk Factors--Nextel to Require Additional Financing" in the
Company's 1997 Form 10-K and "--Forward Looking Statements."
Assuming that it has access to all of the available funds under the Bank
Credit Facility, the Company believes that such amounts, coupled with the
Company's available cash and cash equivalents, including the proceeds from the
financing transactions completed in 1998 remaining after the completion of the
tender offers for the Targeted Notes, will provide funds that in the aggregate
are expected to be more than sufficient to implement the Company's 1998 Plan and
meet the other currently anticipated cash needs of the domestic business
activities contemplated by the 1998 Plan through the end of 1998, as well as the
payment of the Company's current funding obligation in connection with the
recent acquisition of LMDS spectrum by NextBand. Thereafter, Nextel may require
substantial additional financing to fund further deployment, expansion and
enhancement of its Digital
20
<PAGE> 21
Mobile network, to fund operating losses, for other general corporate purposes,
including the pursuit of LMDS or other new business opportunities or other
potential transactions or investments that are not a part of the 1998 Plan. To
the extent the Company's existing financing sources are insufficient to meet
such needs, the Company may seek to raise additional capital from public or
private equity or debt sources. See "-- Forward Looking Statements."
The availability of borrowings pursuant to the Bank Credit Facility is
subject to certain conditions, and there can be no assurance that such
conditions will be met. The Bank Credit Facility, the Nextel Indentures, and the
terms of the certificate of designations for each of the Series D Preferred
Stock and the Series E Preferred Stock contain and will continue to contain
provisions that operate to limit the amount of borrowings that may be incurred
by Nextel. The Bank Credit Agreement also requires Nextel and its relevant
subsidiaries at specified times to maintain compliance with certain operating
and financial covenants or ratios including certain covenants and ratios
specifically related to leverage which may become more stringent over time. In
addition, Nextel's capital needs, and its ability to adequately address those
needs through debt or equity funding sources, are subject to a variety of
factors that cannot presently be predicted with certainty, such as the
commercial success of Nextel's Digital Mobile network, the amount and timing of
Nextel's capital expenditures and operating losses and the market price of the
Common Stock. See "-- Forward Looking Statements."
As described in the Nextel International 1997 Form 10-K, Nextel
International currently estimates its funding requirements for fiscal year 1998
to be approximately $810.0 million. These amounts consist primarily of the
purchase of switches and other equipment, the acquisition of cell sites, the
cost of constructing the network, loading subscribers, the acquisition of
licenses and investments and funding of operating losses. See Nextel
International 1997 Form 10-K, Part I, Item 1, "Business -- 1998 Plan." Nextel
International's funding requirements and access to funding sources, as well as
its business, financial condition and future prospects, are subject to a number
of risks and contingencies. For a detailed description of the risks and
contingencies that Nextel International regards as significant, See the Nextel
International 1997 Form 10-K and Nextel International's Quarterly Report on Form
10-Q for the three months ended March 31, 1998.
FORWARD LOOKING STATEMENTS
"SAFE HARBOR" STATEMENTS UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995. A number of the matters and subject areas discussed in the foregoing
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" (including the related discussions referred to above that are
included in Nextel's 1997 Form 10-K) that are not historical or current facts
deal with potential future circumstances and developments. The discussion of
such matters and subject areas is qualified by the inherent risks and
uncertainties surrounding future expectations generally, and also may materially
differ from Nextel's actual future experience involving any one or more of such
matters and subject areas. Nextel has attempted to identify, in context, certain
of the factors that it currently believes may cause actual future experiences
and results to differ from Nextel's current
21
<PAGE> 22
expectations regarding the relevant matter or subject area. The operation and
results of Nextel's wireless communications business also may be subject to the
effect of other risks and uncertainties in addition to the relevant qualifying
factors identified or referred to elsewhere in the foregoing "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
section, including, but not limited to, general economic conditions in the
geographic areas and occupational market segments that Nextel is targeting for
its Digital Mobile system service, the availability of adequate quantities of
system infrastructure and subscriber equipment and components to meet Nextel's
service deployment and marketing plans and customer demand, the success of
efforts to improve and satisfactorily address issues relating to Digital Mobile
network performance, the continued successful performance of the Reconfigured
iDEN technology being deployed in Nextel's various market areas, the ability to
achieve market penetration and average subscriber revenue levels sufficient to
provide financial viability to the Digital Mobile network business, Nextel's
ability to timely and successfully accomplish required scale-up of its billing,
collection, customer care and similar back-room operations to keep pace with
customer growth and increased system usage rates, access to sufficient debt or
equity capital to meet Nextel's operating and financial needs, the quality and
price of similar or comparable wireless communications services offered or to be
offered by Nextel's competitors, including providers of cellular and PCS
service, future legislative or regulatory actions relating to SMR services,
other wireless communications services or telecommunications generally and other
risks and uncertainties described from time to time in Nextel's reports filed
with the Commission including the Company's 1997 Form 10-K and, with specific
reference to risk factors relating to international operations, in Nextel
International's reports filed with the Commission including the Nextel
International 1997 Form 10-K.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Nextel uses mandatorily redeemable preferred stock, senior discount notes,
and bank and vendor credit facilities to finance its operations. These
on-balance sheet financial instruments, to the extent they provide for variable
rates of interest, expose the Company to interest rate risk, with the primary
interest rate risk exposure resulting from changes in LIBOR or the prime rate
which are used to determine the interest rates that are applicable to borrowings
under the Company's bank and vendor credit facilities. Nextel uses off-balance
sheet derivative financial instruments, including interest rate swap and
interest rate protection agreements to partially hedge interest rate exposure
associated with both on-balance sheet financial instruments and anticipated debt
transactions. All of the Company's financial instrument transactions are entered
into for non-trading purposes. The terms and characteristics of the derivative
financial instruments are matched with the related underlying on-balance sheet
financial instrument or anticipated transaction and do not constitute
speculative or leveraged positions independent of these exposures.
Nextel International's revenues are denominated in foreign currencies while
a significant portion of its operations are financed through senior discount
notes and bank and vendor credit facilities which are denominated in U.S.
dollars. Accordingly, fluctuations in exchange rates relative to the U.S.
dollar, primarily those related to the Brazilian Real, expose the Company to
foreign currency exchange rate risk. In the near term, the Company's foreign
currency exchange rate exposure associated with the repayment of Nextel
International's debt obligations is limited as the terms of the senior discount
notes and bank and vendor credit facilities do not require principal payments
until after 1999. Accordingly, as of March 31, 1998, the Company has not
established any hedge or risk reduction strategies related to its foreign
currency exchange rate exposure.
The information below summarizes Nextel's sensitivity to market risks
associated with fluctuations in interest rates and foreign currency exchange
rates as of March 31, 1998 in U.S. dollars. To the extent that the Company's
financial instruments expose the Company to interest rate and foreign currency
exchange risk, they are presented within each market risk category in the table
below. The table presents principal cash flows and related interest rates by
year of maturity for the Company's mandatorily redeemable preferred stock,
senior discount notes, and bank and vendor credit facilities in effect as of
March 31, 1998 and, in the case of the mandatorily redeemable preferred stock
and senior discount notes, exclude the potential exercise of the relevant
redemption features. The
22
<PAGE> 23
cash flows related to the variable portion of interest rate swaps are determined
by dealers using valuation models that estimate the future level of interest
rates, with consideration of the applicable yield curve as of March 31, 1998.
For interest rate swaps and the interest rate protection agreement, the table
presents notional amounts and the related reference interest rates by year of
maturity. Fair values included herein have been determined based on: (i) quoted
market prices for mandatorily redeemable preferred stock and senior discount
notes; (ii) the carrying value for the bank and vendor credit facilities at
March 31, 1998 as interest rates are reset periodically; and (iii) estimates
obtained from dealers to settle interest rate swap and interest rate protection
agreements. Descriptions of the Company's mandatorily redeemable preferred
stock, senior discount notes, bank and vendor credit facilities, and interest
rate risk management agreements are contained in Notes 6, 7 and 10 to the
consolidated financial statements contained in the Company's 1997 Form 10-K and
should be read in conjunction with the table below.
<TABLE>
<CAPTION>
Year of Maturity (US $ in thousands)
1998 1999 2000 2001 2002
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
I. Interest Rate Sensitivity
Redeemable Preferred Stock and Long-Term Debt:
- ----------------------------------------------
Fixed Rate -- -- -- -- --
Average Interest Rate -- -- -- -- --
Variable Rate -- -- $11,715 $ 16,715 $27,572
Average Interest Rate -- -- 11.0% 10.2% 10.1%
Interest Rate Swaps:
- --------------------
Variable to Fixed -- $100,000 -- $200,000 --
Average Pay Rate -- 5.4% -- 5.5% --
Average Receive Rate -- 5.7% -- 5.6% --
Variable to Variable -- -- $50,000 $100,000 --
Average Pay Rate -- -- 5.7% 5.7% --
Average Receive Rate -- -- 5.9% 5.7% --
Anticipated Transaction Interest Rate Protection Agreement:
- -----------------------------------------------------------
Protection Agreement $570,000 -- -- -- --
Average Pay Rate 6.0% -- -- -- --
II. Foreign Exchange Rate Sensitivity
Long-Term Debt:
- ---------------
Fixed Rate -- -- -- -- --
Average Interest Rate -- -- -- -- --
Variable Rate -- -- $11,715 $ 11,715 $ 17,572
Average Interest Rate -- -- 11.0% 11.0% 11.0%
</TABLE>
<TABLE>
<CAPTION>
Year of Maturity (US $ in thousands)
Total
There- Due at Fair
After Maturity Value
-------------- --------------- -----
<S> <C> <C> <C>
I. Interest Rate Sensitivity
Redeemable Preferred Stock and Long-Term Debt:
- ----------------------------------------------
Fixed Rate $8,985,782 $8,985,782 $7,260,492
Average Interest Rate 10.9% 10.9%
Variable Rate $1,002,572 $1,058,574 $1,058,574
Average Interest Rate 8.5% 8.6%
Interest Rate Swaps:
- --------------------
Variable to Fixed -- $ 300,000 $ 180
Average Pay Rate -- 5.4%
Average Receive Rate -- 5.6%
Variable to Variable $ 400,000 $ 550,000 $ (3,667)
Average Pay Rate 5.1% 5.3%
Average Receive Rate 5.6% 5.7%
Anticipated Transaction Interest Rate Protection Agreement:
- -----------------------------------------------------------
Protection Agreement -- $ 570,000 $ (9,428)
Average Pay Rate -- 6.0%
II. Foreign Exchange Rate Sensitivity
Long-Term Debt:
- ---------------
Fixed Rate $1,681,463 $1,681,463 $1,116,471
Average Interest Rate 12.6% 12.6%
Variable Rate $ 17,572 $ 58,574 $ 58,574
Average Interest Rate 11.0% 11.0%
</TABLE>
23
<PAGE> 24
PART II
ITEM 1. LEGAL PROCEEDINGS.
The Company is involved in certain legal proceedings that are described in
the Company's 1997 Form 10-K. During the three months ended March 31, 1998,
there were no material changes in the status of or developments regarding those
legal proceedings.
ITEM 2. CHANGES IN SECURITIES.
(a) Inapplicable
(b) Inapplicable
(c) Recent Issues of Unregistered Securities. Nextel sold securities that
were not registered under the Securities Act in the following transactions
during the first quarter of 1998.
(i) On January 2, 1998, an affiliate of Mr. McCaw sold an aircraft to
Nextel Aviation, Inc. for $8,150,000 in cash and received 50,000
shares of the Company's Class A Common Stock at an agreed value
of $32.00 per share.
(ii) On January 6, 1998, Canadian Imperial Holdings, Inc. ("CIHI"), a
successor to Weinstein Kitchenoff Scarlato & Goldman Ltd.
("Weinstein Kitchenoff"), as escrow agent and attorney-in-fact
for plaintiffs in Seidman v. American Mobile Systems, Inc.,
pursuant to the terms of a warrant issued to Weinstein Kitchenoff
on May 5, 1997 as consideration for settlement of the above-named
litigation (the "Settlement Warrant"), exercised such Settlement
Warrant and received 68,276 shares of the Company's Class A
Common Stock (the "Settlement Warrant Shares"). The Settlement
Warrant and the Settlement Warrant Shares were issued pursuant to
an exemption under Section 3(a)(10) of the Securities Act.
(iii) On February 11, 1998, Nextel completed the sale of 750,000 shares
of its 11.125% Series E Preferred Stock with a liquidation
preference of $1,000 per share to qualified institutional buyers
and a limited number of institutional accredited investors
generating approximately $727.9 million in Series E Preferred
Stock Proceeds. Morgan Stanley Dean Witter, Donaldson, Lufkin &
Jenrette Securities Corporation and Credit Suisse First Boston
acted as placement agents and received approximately $22.1
million in fees.
Each of the transactions described in (i) and (iii) were effected
pursuant to the exemption of Section 4(2) of the Securities Act, and with
respect to the transaction described in (iii), Rule 144A thereunder, in reliance
upon representations of the relevant purchasers and their agreement to resell
such securities only pursuant to a registration statement or in a transaction
exempt from the registration requirements of such act.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) List of Exhibits.
EXHIBIT NUMBER EXHIBIT DESCRIPTION
- -------------- -------------------
3.1 Certificate of Designation of the Powers, Preferences and
Relative, Participating, Optional and Other Special Rights of
11.125% Series E Exchangeable Preferred Stock
24
<PAGE> 25
and Qualifications, Limitations and Restrictions Thereof
(filed on February 12, 1998 as Exhibit 4.1 to the Current
Report on Form 8-K dated on February 11, 1998 (the "February
11 Form 8-K") and incorporated herein by reference).
4.1 Indenture dated as of February 11, 1998 between Nextel
Communications, Inc. and Harris Trust and Savings Bank, as
Trustee (the "February 1998 Indenture"), relating to Nextel's
Senior Serial Redeemable Discount Notes due 2008 (filed on
February 12, 1998 as Exhibit 4.2 to the February 11 Form 8-K
and incorporated herein by reference).
4.2 Form of Note issued pursuant to the February 1998 Indenture
(included in Exhibit 4.1).
4.3 Fourth Supplemental Indenture, dated March 24, 1998, to the
Indenture dated August 15, 1993 between Nextel
Communications, Inc. ("Nextel") and the Bank of New York, as
Trustee relating to Nextel's Senior Redeemable Discount Notes
due 2003.
4.4 Fifth Supplemental Indenture, dated March 24, 1998, to the
Indenture dated April 25, 1993 between Dial Call
Communications, Inc. ("Dial Call") and the Bank of New York,
as Trustee, relating to Dial Call's Senior Redeemable
Discount Notes due 2004.
10.1 Letter Amendment to Employment Agreement dated as of March
24, 1998 between Daniel Akerson and Nextel (filed on March
30, 1998 as Exhibit 10.20.2 to the 1997 Form 10-K and
incorporated herein by reference).
27** Financial Data Schedule.
----------------
** Submitted only with the electronic filing of this document
with the Commission pursuant to Regulation S-T under the
Securities Act.
(b) Reports on Form 8-K.
(i) Current Report on Form 8-K dated and filed February 2, 1998 with
the Commission reporting under Item 5 the proposed issuance of
the February Notes and Series E Preferred Stock; commitment from
certain lenders to increase available borrowings under the
Company's Bank Credit Facility; results of 800 MHz SMR Auction;
completion of certain exchange offers; the Company's proposed
1998 Business Plan and financing risks associated with the 1998
Plan.
(ii) Current Report on Form 8-K dated and filed February 9, 1998 with
the Commission reporting under Item 5 the filing of a Prospectus
Supplement relating to the merger of CellCall, Inc. with a
subsidiary of the Company and filed for the purpose of filing
exhibits related thereto.
(iii) Current Report on Form 8-K dated and filed February 12, 1998
with the Commission reporting under Item 5 the issuance of the
February Notes and Series E Preferred Stock; and updating the
February 2, 1998 Current Report on Form 8-K.
25
<PAGE> 26
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.
NEXTEL COMMUNICATIONS, INC.
By: /s/WILLIAM G. ARENDT
----------------------------------------
Date: May 13, 1998 William G. Arendt
Vice President and Controller
(Principal Accounting Officer)
<PAGE> 27
EXHIBIT INDEX
EXHIBIT NUMBER EXHIBIT DESCRIPTION
- -------------- -------------------
3.1 Certificate of Designation of the Powers, Preferences and
Relative, Participating, Optional and Other Special Rights
of 11.125% Series E Exchangeable Preferred Stock and
Qualifications, Limitations and Restrictions Thereof (filed
on February 12, 1998 as Exhibit 4.1 to the Current Report on
Form 8-K dated on February 11, 1998 (the "February 11 Form
8-K") and incorporated herein by reference).
4.1 Indenture dated as of February 11, 1998 between Nextel
Communications, Inc. and Harris Trust and Savings Bank, as
Trustee (the "February 1998 Indenture"), relating to
Nextel's Senior Serial Redeemable Discount Notes due 2008
(filed on February 12, 1998 as Exhibit 4.2 to the February
11 Form 8-K and incorporated herein by reference).
4.2 Form of Note issued pursuant to the February 1998 Indenture
(included in Exhibit 4.1).
4.3 Fourth Supplemental Indenture, dated March 24, 1998, to the
Indenture dated August 15, 1993 between Nextel
Communications, Inc. ("Nextel") and the Bank of New York, as
Trustee relating to Nextel's Senior Redeemable Discount
Notes due 2003.
4.4 Fifth Supplemental Indenture, dated March 24, 1998, to the
Indenture dated April 25, 1993 between Dial Call
Communications, Inc. ("Dial Call") and the Bank of New York,
as Trustee, relating to Dial Call's Senior Redeemable
Discount Notes due 2004.
10.1 Letter Amendment to Employment Agreement dated as of March
24, 1998 between Daniel Akerson and Nextel (filed on March
30, 1998 as Exhibit 10.20.2 to the 1997 Form 10-K and
incorporated herein by reference).
27** Financial Data Schedule.
----------------
** Submitted only with the electronic filing of this document
with the Commission pursuant to Regulation S-T under the
Securities Act.
<PAGE> 1
================================================================================
EXHIBIT 4.3
NEXTEL COMMUNICATIONS, INC.
and
THE BANK OF NEW YORK,
AS TRUSTEE
---------------
FOURTH SUPPLEMENTAL INDENTURE
Dated as of March 24, 1998
---------------
To
The Indenture Dated as of August 15, 1993
Between NEXTEL Communications, Inc. and
The Bank of New York, as Trustee, Relating to
$525,855,000 Aggregate Principal Amount at Maturity (originally issued)
of Senior Redeemable Discount Notes due 2003
================================================================================
<PAGE> 2
SUPPLEMENTAL INDENTURE
THIS FOURTH SUPPLEMENTAL INDENTURE (the "SUPPLEMENTAL INDENTURE") is made
as of the 24th day of March, 1998, between NEXTEL COMMUNICATIONS, INC., a
corporation duly organized and existing under the laws of the State of Delaware
(the "COMPANY"), and THE BANK OF NEW YORK, a New York banking corporation, as
Trustee (the "TRUSTEE").
RECITALS OF THE COMPANY
WHEREAS, the Company and the Trustee heretofore executed and delivered an
Indenture, dated as of August 15, 1993, as heretofore amended (the "INDENTURE");
and
WHEREAS, pursuant to the Indenture, the Company issued and the Trustee
authenticated and delivered $525,855,000 aggregate principal amount at maturity
of the Company's Senior Redeemable Discount Notes due 2003 (the "SECURITIES");
and
WHEREAS, the Company desires to make certain modifications to the
provisions of the Indenture; and
WHEREAS, Section 902 of the Indenture provides that with the consent of not
less than a majority in principal amount at Stated Maturity of the Securities at
the time Outstanding (the "REQUISITE AMENDMENT CONSENTS"), the Company, when
authorized by a resolution of its Board of Directors, and the Trustee may enter
into an indenture or indentures supplemental to the Indenture for the purpose of
adding provisions to, or changing or eliminating certain provisions of, the
Indenture, subject to certain exceptions specified in Section 902 of the
Indenture; and
WHEREAS, the Company has obtained the Requisite Amendment Consents to amend
the Indenture in certain respects (the "PROPOSED AMENDMENTS"); and
WHEREAS, this Supplemental Indenture has been duly authorized by all
necessary corporate action on the part of the Company; and
WHEREAS, the Company has delivered, or caused to be delivered, to the
Trustee, an Opinion of Counsel stating that this Supplemental Indenture complies
with the requirements of the Indenture;
NOW, THEREFORE, the Company hereby covenants and agrees with the Trustee
for the equal and proportionate benefit of all Holders of the Securities, as
follows:
ARTICLE 1
AMENDMENTS TO CERTAIN PROVISIONS OF INDENTURE
SECTION 1.01. AMENDMENT OF CERTAIN SECTIONS OF THE INDENTURE. Subject to
Section 2.01 hereof, the Indenture is hereby amended in the following respects:
(a) Sections 1008, 1010, 1012, 1013, 1015, and 1017 of the Indenture
and any references to any of such Sections in any of the provisions of the
Indenture are hereby deleted from the Indenture.
(b) The following text appearing in Section 801 of the Indenture is
hereby deleted therefrom:
", and (iii) the Company or the Surviving Entity, as the case may be, after
giving effect to such transaction or series of transactions on a pro forma
basis (including any Debt Incurred or anticipated to be Incurred in
connection with or in respect of such transaction or series of
transactions), could Incur $1.00 of additional Debt (other than Permitted
Debt) pursuant to Section 1008 and the Consolidated Net Worth of the
Company or the Surviving Entity, as the case may be, shall be equal to or
greater than that of the Company immediately prior to such transaction or
series of transactions"
(c) The following text appearing in Section 801 of the Indenture is
hereby deleted therefrom:
1
<PAGE> 3
"Each such Officers' Certificate shall set forth the manner of
determination of the Consolidated Net Worth and the ability to Incur Debt
in accordance with Clause (iii) of Section 801."
(d) Any references to clause (iii) of Section 801 of the Indenture in
any of the provisions of the Indenture are hereby deleted from the
Indenture.
(e) Section 1011 of the Indenture is hereby amended to read in its
entirety as follows:
"Section 1011. Restricted Subsidiaries.
The Board of Directors may, at any time, designate any existing
Unrestricted Subsidiary or any Person that is about to become a Subsidiary
of the Company as a Restricted Subsidiary. The Board of Directors may, at
any time, designate any existing Restricted Subsidiary or any Person that
is about to become a Subsidiary of the Company as an Unrestricted
Subsidiary. Subsidiaries of the Company that are not designated by the
Board of Directors as Restricted or Unrestricted Subsidiaries will be
deemed to be Restricted Subsidiaries. Unless otherwise designated by the
Board of Directors pursuant to this Section 1011, all Subsidiaries of a
Restricted Subsidiary shall be deemed to be Restricted Subsidiaries and all
Subsidiaries of an Unrestricted Subsidiary shall be deemed to be
Unrestricted Subsidiaries."
ARTICLE 2
SUNDRY PROVISIONS
SECTION 2.01. EFFECT OF SUPPLEMENTAL INDENTURE. Upon the execution and
delivery of this Supplemental Indenture by the Company and the Trustee, the
Indenture shall be supplemented in accordance herewith, and this Supplemental
Indenture shall form a part of the Indenture for all purposes, and every Holder
of Securities heretofore or hereafter authenticated and delivered under the
Indenture shall be bound thereby; provided, however, that Section 1.01 hereof
will become effective upon the Company's acceptance for payment of validly
tendered Securities on the applicable Acceptance Date, as such term is defined
in the Offer to Purchase and Consent Solicitation Statement, dated March 3,
1998, as amended, modified or supplemented, that was provided to Holders of
Securities in connection with the Company's solicitation of consents by such
Holders to the Proposed Amendments.
SECTION 2.02. INDENTURE REMAINS IN FULL FORCE AND EFFECT. Except as
supplemented hereby, all provisions in the Indenture shall remain in full force
and effect.
SECTION 2.03. INDENTURE AND SUPPLEMENTAL INDENTURE CONSTRUED TOGETHER. This
Supplemental Indenture is an indenture supplemental to and in implementation of
the Indenture, and the Indenture and this Supplemental Indenture shall
henceforth be read and construed together.
SECTION 2.04. CONFIRMATION AND PRESERVATION OF INDENTURE. The Indenture as
supplemented by this Supplemental Indenture is in all respects confirmed and
preserved.
SECTION 2.05. CONFLICT WITH TRUST INDENTURE ACT. If any provision of this
Supplemental Indenture limits, qualifies or conflicts with any provision of the
Trust Indenture Act that is required under such Act to be part of and govern any
provision of this Supplemental Indenture, the provision of such Act shall
control. If any provision of this Supplemental Indenture modifies or excludes
any provision of the Trust Indenture Act that may be so modified or excluded,
the provision of such Act shall be deemed to apply to the Indenture as so
modified or to be excluded by this Supplemental Indenture, as the case may be.
SECTION 2.06. SEPARABILITY CLAUSE. In case any provision in this
Supplemental Indenture shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
SECTION 2.07. TERMS DEFINED IN THE INDENTURE. All capitalized terms not
otherwise defined herein shall have the meanings ascribed to them in the
Indenture.
2
<PAGE> 4
SECTION 2.08. EFFECT OF HEADINGS. The Article and Section headings herein
are for convenience only and shall not affect the construction hereof.
SECTION 2.09. BENEFITS OF SUPPLEMENTAL INDENTURE, ETC. Nothing in this
Supplemental Indenture, the Indenture or the Securities, express or implied,
shall give to any Person, other than the parties hereto and thereto and their
successors hereunder and thereunder and the Holders of Securities, any benefit
of any legal or equitable right, remedy or claim under the Indenture, this
Supplemental Indenture or the Securities.
SECTION 2.10. SUCCESSORS AND ASSIGNS. All covenants and agreements in this
Supplemental Indenture by the Company shall bind its successors and assigns,
whether so expressed or not.
SECTION 2.11. TRUSTEE NOT RESPONSIBLE FOR RECITALS. The recitals contained
herein shall be taken as the statements of the Company, and the Trustee assumes
no responsibility for their correctness.
SECTION 2.12. CERTAIN DUTIES AND RESPONSIBILITIES OF THE TRUSTEE. In
entering into this Supplemental Indenture, the Trustee shall be entitled to the
benefit of every provision of the Indenture relating to the conduct or affecting
the liability of or affording protection to the Trustee, whether or not
elsewhere herein so provided.
SECTION 2.13. GOVERNING LAW. This Supplemental Indenture shall be governed
by and construed in accordance with the laws of the State of New York, without
regard to the conflicts of law principles thereof.
SECTION 2.14. COUNTERPARTS. This Supplemental Indenture may be executed in
counterparts, each of which, when so executed, shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date and year first
above written.
NEXTEL COMMUNICATIONS, INC.
BY: /s/ STEVEN SHINDLER
----------------------------
TITLE: VICE PRESIDENT
----------------------------
ATTEST:
/s/ THOMAS J. SIDMAN
- -------------------------------
TITLE: VICE PRESIDENT
- -------------------------------
THE BANK OF NEW YORK,
AS TRUSTEE
BY: /s/ MARY BETH A. LEWICKI
----------------------------
TITLE: ASSISTANT VICE PRESIDENT
----------------------------
ATTEST:
/s/ M.L. RINKIN
- -------------------------------
TITLE: VICE PRESIDENT
- -------------------------------
3
<PAGE> 1
================================================================================
EXHIBIT 4.4
NEXTEL COMMUNICATIONS, INC.
and
THE BANK OF NEW YORK,
AS TRUSTEE
---------------
FIFTH SUPPLEMENTAL INDENTURE
Dated as of March 24, 1998
---------------
To
The Indenture Dated as of April 25, 1994
Between Dial Call Communications, Inc. and
The Bank of New York, as Trustee, Relating to
$541,830,000 Aggregate Principal Amount at Maturity (originally issued)
of Senior Redeemable Discount Notes due 2004
================================================================================
<PAGE> 2
SUPPLEMENTAL INDENTURE
THIS FIFTH SUPPLEMENTAL INDENTURE (the "SUPPLEMENTAL INDENTURE") is made as
of the 24th day of March, 1998, between NEXTEL COMMUNICATIONS, INC., a
corporation duly organized and existing under the laws of the State of Delaware
(the "COMPANY"), and THE BANK OF NEW YORK, a New York banking corporation, as
Trustee (the "TRUSTEE").
RECITALS OF THE COMPANY
WHEREAS, Dial Call Communications, Inc. and the Trustee heretofore executed
and delivered an Indenture, dated as of April 25, 1994, as heretofore amended
(the "INDENTURE"); and
WHEREAS, pursuant to the Indenture, Dial Call Communications, Inc. issued
and the Trustee authenticated and delivered $541,830,000 aggregate principal
amount at maturity of Senior Redeemable Discount Notes due 2004 (the
"SECURITIES"); and
WHEREAS, The Company has assumed all obligations of Dial Call
Communications, Inc. under the Indenture Pursuant to the Third Supplemental
Indenture, dated as of January 30, 1996, between the Company and the Trustee;
and
WHEREAS, the Company desires to make certain modifications to the
provisions of the Indenture; and
WHEREAS, Section 902 of the Indenture provides that with the consent of not
less than a 66 2/3% in principal amount at Stated Maturity of the Securities at
the time Outstanding (the "REQUISITE AMENDMENT CONSENTS"), the Company, when
authorized by a resolution of its Board of Directors, and the Trustee may enter
into an indenture or indentures supplemental to the Indenture for the purpose of
adding provisions to, changing or eliminating certain provisions of, the
Indenture, subject to certain exceptions specified in Section 902 of the
Indenture; and
WHEREAS, the Company has obtained the Requisite Amendment Consents to amend
the Indenture in certain respects (the "PROPOSED AMENDMENTS"); and
WHEREAS, this Supplemental Indenture has been duly authorized by all
necessary corporate action on the part of the Company; and
WHEREAS, the Company has delivered, or caused to be delivered, to the
Trustee, an Opinion of Counsel stating that this Supplemental Indenture complies
with the requirements of the Indenture;
NOW, THEREFORE, the Company hereby covenants and agrees with the Trustee
for the equal and proportionate benefit of all Holders of the Securities, as
follows:
ARTICLE 1
AMENDMENTS TO CERTAIN PROVISIONS OF INDENTURE
SECTION 1.01. AMENDMENT OF CERTAIN SECTIONS OF THE INDENTURE. Subject to
Section 2.01 hereof, the Indenture is hereby amended in the following respects:
(a) Sections 1008, 1009, 1011, 1012, 1014, and 1016 of the Indenture
and any references to any of such Sections in any of the provisions of the
Indenture are hereby deleted from the Indenture.
(b) The following text appearing in Section 801 of the Indenture is
hereby deleted therefrom:
", and (iii) the Company or the Surviving Entity, as the case may be, after
giving effect to such transaction or series of transactions on a pro forma
basis (including any Debt Incurred or anticipated to be Incurred in
connection with or in respect of such transaction or series of
transactions), could Incur $1.00 of additional Debt (other than Permitted
Debt) pursuant to Section 1008."
(c) The following text appearing in Section 801 of the Indenture is
hereby deleted therefrom:
1
<PAGE> 3
"Each such Officers' Certificate shall set forth the manner of
determination of the ability to Incur Debt in accordance with Clause (iii)
of Section 801, upon which the Trustee shall conclusively rely without any
investigation whatsoever."
(d) Any references to clause (iii) of Section 801 of the Indenture in
any of the provisions of the Indenture are hereby deleted from the
Indenture.
(e) Section 1010 of the Indenture is hereby amended to read in its
entirety as follows:
"Section 1010. Restricted Subsidiaries.
The Board of Directors may, at any time, designate any existing
Unrestricted Subsidiary or any Person that is about to become a Subsidiary
of the Company as a Restricted Subsidiary. The Board of Directors may, at
any time, designate any existing Restricted Subsidiary or any Person that
is about to become a Subsidiary of the Company as an Unrestricted
Subsidiary. Subsidiaries of the Company that are not designated by the
Board of Directors as Restricted or Unrestricted Subsidiaries will be
deemed to be Restricted Subsidiaries. Unless otherwise designated by the
Board of Directors pursuant to this Section 1010, all Subsidiaries of a
Restricted Subsidiary shall be deemed to be Restricted Subsidiaries and all
Subsidiaries of an Unrestricted Subsidiary shall be deemed to be
Unrestricted Subsidiaries."
ARTICLE 2
SUNDRY PROVISIONS
SECTION 2.01. EFFECT OF SUPPLEMENTAL INDENTURE. Upon the execution and
delivery of this Supplemental Indenture by the Company and the Trustee, the
Indenture shall be supplemented in accordance herewith, and this Supplemental
Indenture shall form a part of the Indenture for all purposes, and every Holder
of Securities heretofore or hereafter authenticated and delivered under the
Indenture shall be bound thereby; provided, however, that Section 1.01 hereof
will become effective upon the Company's acceptance for payment of validly
tendered Securities on the applicable Acceptance Date, as such term is defined
in the Offer to Purchase and Consent Solicitation Statement, dated March 3,
1998, as amended, modified or supplemented, that was provided to Holders of
Securities in connection with the Company's solicitation of consents by such
Holders to the Proposed Amendments.
SECTION 2.02. INDENTURE REMAINS IN FULL FORCE AND EFFECT. Except as
supplemented hereby, all provisions in the Indenture shall remain in full force
and effect.
SECTION 2.03. INDENTURE AND SUPPLEMENTAL INDENTURE CONSTRUED TOGETHER. This
Supplemental Indenture is an indenture supplemental to and in implementation of
the Indenture, and the Indenture and this Supplemental Indenture shall
henceforth be read and construed together.
SECTION 2.04. CONFIRMATION AND PRESERVATION OF INDENTURE. The Indenture as
supplemented by this Supplemental Indenture is in all respects confirmed and
preserved.
SECTION 2.05. CONFLICT WITH TRUST INDENTURE ACT. If any provision of this
Supplemental Indenture limits, qualifies or conflicts with any provision of the
Trust Indenture Act that is required under such Act to be part of and govern any
provision of this Supplemental Indenture, the provision of such Act shall
control. If any provision of this Supplemental Indenture modifies or excludes
any provision of the Trust Indenture Act that may be so modified or excluded,
the provision of such Act shall be deemed to apply to the Indenture as so
modified or to be excluded by this Supplemental Indenture, as the case may be.
SECTION 2.06. SEPARABILITY CLAUSE. In case any provision in this
Supplemental Indenture shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
SECTION 2.07. TERMS DEFINED IN THE INDENTURE. All capitalized terms not
otherwise defined herein shall have the meanings ascribed to them in the
Indenture.
2
<PAGE> 4
SECTION 2.08. EFFECT OF HEADINGS. The Article and Section headings herein
are for convenience only and shall not affect the construction hereof.
SECTION 2.09. BENEFITS OF SUPPLEMENTAL INDENTURE, ETC. Nothing in this
Supplemental Indenture, the Indenture or the Securities, express or implied,
shall give to any Person, other than the parties hereto and thereto and their
successors hereunder and thereunder and the Holders of Securities, any benefit
of any legal or equitable right, remedy or claim under the Indenture, this
Supplemental Indenture or the Securities.
SECTION 2.10. SUCCESSORS AND ASSIGNS. All covenants and agreements in this
Supplemental Indenture by the Company shall bind its successors and assigns,
whether so expressed or not.
SECTION 2.11. TRUSTEE NOT RESPONSIBLE FOR RECITALS. The recitals contained
herein shall be taken as the statements of the Company, and the Trustee assumes
no responsibility for their correctness.
SECTION 2.12. CERTAIN DUTIES AND RESPONSIBILITIES OF THE TRUSTEE. In
entering into this Supplemental Indenture, the Trustee shall be entitled to the
benefit of every provision of the Indenture relating to the conduct or affecting
the liability of or affording protection to the Trustee, whether or not
elsewhere herein so provided.
SECTION 2.13. GOVERNING LAW. This Supplemental Indenture shall be governed
by and construed in accordance with the laws of the State of New York, without
regard to the conflicts of law principles thereof.
SECTION 2.14. COUNTERPARTS. This Supplemental Indenture may be executed in
counterparts, each of which, when so executed, shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date and year first
above written.
NEXTEL COMMUNICATIONS, INC.
BY: /s/ STEVEN SHINDLER
---------------------------
TITLE: VICE PRESIDENT
---------------------------
ATTEST:
/s/ THOMAS J. SIDMAN
- ---------------------------------
TITLE: VICE PRESIDENT
- ---------------------------------
THE BANK OF NEW YORK,
AS TRUSTEE
BY: /s/ MARY BETH A. LEWICKI
---------------------------
TITLE: ASSISTANT VICE PRESIDENT
---------------------------
ATTEST:
/s/ M.L. RINKIN
- --------------------------------
TITLE: VICE PRESIDENT
- --------------------------------
3
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AT MARCH 31, 1998 (UNAUDITED) AND THE
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH
31, 1998 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,505,289
<SECURITIES> 8,123
<RECEIVABLES> 337,187
<ALLOWANCES> 68,194
<INVENTORY> 111,542
<CURRENT-ASSETS> 1,974,178
<PP&E> 4,451,918
<DEPRECIATION> 735,133
<TOTAL-ASSETS> 11,007,560
<CURRENT-LIABILITIES> 808,185
<BONDS> 6,396,799
1,307,197
290,545
<COMMON> 272
<OTHER-SE> 1,231,896
<TOTAL-LIABILITY-AND-EQUITY> 11,007,560
<SALES> 0
<TOTAL-REVENUES> 327,134
<CGS> 0
<TOTAL-COSTS> 102,428
<OTHER-EXPENSES> 184,495
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 145,380
<INCOME-PRETAX> (420,502)
<INCOME-TAX> (33,640)
<INCOME-CONTINUING> (386,862)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (386,862)
<EPS-PRIMARY> (1.53)
<EPS-DILUTED> (1.53)
</TABLE>
