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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
Amendment Number 1
[ 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
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number :
0-23008
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AMERICAN TELECASTING, INC.
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(Exact name of registrant as specified in its charter)
Delaware 54-1486988
- -------------------------------------------- ------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
5575 Tech Center Drive, Colorado Springs, CO 80919
- -------------------------------------------- -------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (719) 260 - 5533
-------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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As of May 13, 1998, 25,743,607 shares of the registrant's Common Stock, par
value $.01 per share, were outstanding.
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The registrant hereby amends Part I, Item 1, of its Quarterly Report on
Form 10-Q for the quarter ended March 31, 1998 in order to correct a printer
error in the line titled "Proceeds from disposition of wireless cable systems
and assets" appearing in the American Telecasting, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows. The error occurred when the
printers' conversion software did not accurately convert the financial numbers
in a file supplied to the printers by the registrant.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN TELECASTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
December 31, March 31,
1997 1998
------------- -------------
(Unaudited)
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents .............................................. $ 9,125 $ 5,957
Trade accounts receivable, net ......................................... 1,091 1,021
Notes receivable ...................................................... 351 360
Prepaid expenses and other current assets .............................. 2,722 5,649
------------- -------------
Total current assets ........................................ 13,289 12,987
Property and equipment, net ............................................... 60,166 56,592
Deferred license and leased license acquisition costs, net ................ 131,017 132,383
Cash available for asset purchases and debt repayment ..................... 31,658 26,600
Restricted escrowed funds ................................................. 6,395 6,395
Goodwill, net ............................................................. 14,296 14,080
Deferred financing costs, net ............................................. 4,294 4,193
Other assets, net ......................................................... 483 462
------------- -------------
Total assets ..................................................... $ 261,598 $ 253,692
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses ................................... $ 12,614 $ 12,940
Current portion of long-term obligations ................................ 3,284 2,735
Customer deposits ....................................................... 363 291
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Total current liabilities ................................................. 16,261 15,966
Deferred income taxes ..................................................... 1,275 1,275
2004 Notes ................................................................ 156,897 162,736
2005 Notes ................................................................ 135,137 140,153
Other long-term obligations, net of current portion ....................... 1,252 1,056
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Total liabilities ................................................ 310,822 321,186
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT:
Class A Common Stock, $.01 par value; 45,000,000 shares authorized;
25,743,607 shares issued and outstanding ................................. 257 257
Class B Common Stock, $.01 par value; 10,000,000 shares authorized;
no shares issued and outstanding ....................................... -- --
Additional paid-in capital ................................................ 189,413 189,413
Common Stock warrants outstanding ......................................... 10,129 10,129
Accumulated deficit ....................................................... (249,023) (267,293)
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Total stockholders' deficit ...................................... (49,224) (67,494)
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Total liabilities and stockholders' deficit ...................... $ 261,598 $ 253,692
============= =============
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
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AMERICAN TELECASTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------
1997 1998
------------------------------
<S> <C> <C>
Revenues:
Service and other .................................... $ 15,760 $ 12,500
Installation ......................................... 260 213
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Total Revenues ......................................... 16,020 12,713
Costs and Expenses:
Operating ............................................ 9,826 7,762
Marketing ............................................ 864 701
General and administrative ........................... 5,076 5,672
Depreciation and amortization ........................ 12,833 9,644
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Total costs and expenses ............................... 28,599 23,779
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Loss from operations ................................... (12,579) (11,066)
Interest expense ....................................... (10,331) (10,975)
Interest income ........................................ 184 471
Gain on disposition of wireless cable systems and assets -- 3,219
Other income, net ...................................... 143 81
------------ ------------
Loss before income tax benefit ......................... (22,583) (18,270)
Income tax benefits .................................... -- --
------------ ------------
Net loss ............................................... $ (22,583) $ (18,270)
============ ============
Basic and diluted net loss per share ................... $ (.92) $ (.71)
============ ============
Weighted average number of shares outstanding .......... 24,586,313 25,743,607
============ ============
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
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AMERICAN TELECASTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1997 1998
------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ........................................................ $ (22,583) $ (18,270)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization ................................. 12,833 9,644
Amortization of debt discount and deferred financing costs .... 9,667 10,956
Bond appreciation rights ...................................... 301 (45)
Minority interest income ...................................... (127) (138)
Gain on disposition of wireless cable systems and assets ...... -- (3,219)
Other ......................................................... 142 62
Changes in operating assets and liabilities ................... (1,509) (2,620)
--------- ---------
Net cash used in operating activities ...................... (1,276) (3,630)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment ............................. (2,318) (4,866)
Additions to deferred license and leased license
acquisition costs ............................................. (561) (1,871)
Proceeds from disposition of wireless cable systems and assets .. 55 4,377
Decrease in cash available for asset purchases and debt
repayment ..................................................... -- 5,058
Net cash used in acquisitions ................................... (1,293) (1,672)
--------- ---------
Net cash (used in) provided by investing activities ......... (4,117) 1,026
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under credit facilities .............................. 6,155 --
Principal payments on revolving credit facilities ............... (2,950) --
Increase in deferred financing costs ............................ (1,285) --
Contributions by minority interest holder ....................... 462 --
Principal payments on notes payable ............................. (1,068) (123)
Principal payments on capital lease obligations ................. (272) (441)
--------- ---------
Net cash provided by (used in) financing activities .......... 1,042 (564)
--------- ---------
Net decrease in cash and cash equivalents ....................... (4,351) (3,168)
Cash and cash equivalents, beginning of period .................. 18,476 9,125
--------- ---------
Cash and cash equivalents, end of period ........................ $ 14,125 $ 5,957
========= =========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
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AMERICAN TELECASTING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BUSINESS DESCRIPTION
History and Organization
American Telecasting, Inc. ("ATI") owns and operates a network
of wireless cable television systems providing subscription television
service. ATI and its subsidiaries are collectively referred to herein
as the "Company." As of March 31, 1998, the Company owned and operated
33 wireless cable systems located throughout the United States (the
"Developed Markets"). The Company also has significant wireless cable
(microwave) frequency interests in 19 other U.S. markets (the
"Undeveloped Markets").
Risks and Other Important Factors
As more fully described in Note 2, on May 13, 1998, the
Company paid approximately $17.5 million to purchase approximately
$30.2 million aggregate principal amount at maturity of the Company's
Senior Discount Notes due 2004 (the "2004 Notes") and approximately
$43.5 million aggregate principal amount at maturity of the Company's
Senior Discount Notes due 2005 (the "2005 Notes"). Expenses related to
the debt repayment are estimated by the Company to be approximately
$550,000. In connection with such purchase , the Company will recognize
a gain of approximately $37.0 million which will be reflected as an
extraordinary item in its second quarter 1998 results.
Interest payments on the 2004 Notes and the 2005 Notes will
commence on December 15, 1999 and February 15, 2001, respectively.
Interest payments in 1999, 2000, and 2001 are expected to be
approximately $12.1 million, $24.2 million and $47.1 million,
respectively. The Company's ability to make these payments will depend
upon its ability to attract sufficient additional capital through
relationships or transactions with strategic partners or otherwise, or
to develop product lines that would fund such cash interest payments.
There can be no assurance that the Company will be able to generate the
cash to fund such interest payments. Without new investments in the
Company, it is unlikely the Company's resources will be sufficient to
meet its obligations through 1999.
Since inception, the Company has focused principally on
developing analog wireless cable systems to provide multiple channel
television programming similar to that offered by franchise cable
companies. The Company's strategy is, in part, to maximize operating
cash flow from its analog video operations, while continuing to explore
the development of digital wireless services, such as high-speed
Internet access, two-way multimedia services (i.e. Internet and
telephony) and digital video. In certain markets, the Company has
intentionally curtailed growth in its analog video business by not
investing the capital resources necessary to replace all those
subscribers who chose to stop receiving the Company's service
("Subscriber Churn"). The Company's analog video strategy is based upon
several factors, including the limited capital resources available to
maintain the Company's business at current levels and management's
belief that the most attractive returns on investment are likely to be
based on digital technologies. The Company's high-speed Internet access
strategy is to initially launch commercial operations in a small number
of markets in order to evaluate the long-term viability and financial
returns of the business. During 1997, the Company launched an
asymmetrical high-speed Internet access service in its Colorado
Springs, Colorado market branded as "WantWEB." In the first quarter of
1998, the Company launched asymmetrical high-speed Internet services in
Denver, Colorado, and Portland, Oregon. The Company currently plans to
deploy a similar service in Seattle, Washington later in 1998 if
sufficient capital resources are available.
While the Company has begun planning and testing the digital
wireless services described above, it has introduced high-speed
Internet access service only on a limited basis and has not
commercially introduced
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two-way multi-media or digital video services. The Company's ability to
introduce these services on a broad commercial basis will depend on a
number of factors, including the availability of sufficient capital,
the success of the Company's development efforts, competitive factors
(such as the introduction of new technologies or the entry of
competitors with significantly greater resources than the Company and
increased competition for the renewal of channel lease agreements), the
availability of appropriate transmission and reception equipment on
satisfactory terms, the expertise of the Company's management, and the
Company's ability to obtain the necessary regulatory changes and
approvals in a timely fashion. There is also uncertainty regarding the
degree of subscriber demand for these services, especially at pricing
levels at which the Company can achieve an attractive return on
investment. Moreover, the Company expects that the market for any such
services will be extremely competitive.
During 1998, the Company intends to continue to operate its
Developed Markets principally as an analog wireless cable business, to
commercially launch high-speed Internet access services in three
markets (including Denver and Portland, which were launched in the
first quarter of 1998), and to initiate two multi-media technical
demonstrations. Because of its current financial condition and its
increasing emphasis on the development of digital services, the Company
does not plan to make the capital expenditures necessary to add enough
new subscribers to replace all of its analog video subscriber churn.
Moreover, at this time, the Company does not generally intend to
further develop any of its Undeveloped Markets using analog video
technology. The Company's business strategy regarding analog video
subscribers is expected to result in a decline in subscribers, revenue
and operating cash flow. This negative trend is expected to continue
for the foreseeable future until the Company is able to successfully
introduce and market alternative digital services. Unless and until
sufficient cash flow is generated from operations, the Company will be
required to utilize its current capital resources or external sources
of funding, or to sell assets, to satisfy its working capital and
capital expenditure needs. Under current capital market conditions, the
Company does not expect to be able to raise significant capital by
issuing equity securities. If the Company's capital resources are not
sufficient to finance its operations, either in 1998 or thereafter, the
Company will be required, at a minimum, to curtail its operations and
development plans, which curtailment could involve, among other things,
a complete cessation of new subscriber additions in analog video and
high-speed Internet access.
Multi-Media Services
During 1998, the Company intends to conduct technical
demonstration trials in Eugene, Oregon and Seattle, Washington, using
its wireless spectrum to deliver two-way multi-media (i.e. Internet and
telephony) services. The trials will utilize a transceiver and network
interface unit ("gateway") located at the subscriber's premises. The
transceiver will receive and send information to the transmission
tower. The gateway will separate the information streams into voice and
data channels. The Company's plan in conducting these trials is to
demonstrate the commercial viability of the services by confirming the
reliability of the technologies involved, especially for providing
broadband wireless bundled services, including voice and high-speed
Internet. The equipment being used by the Company is not yet available
in commercial quantities.
While the Company intends to continue its development efforts
with respect to offering a full complement of multi-media services, the
commercial introduction of such services in any of the Company's
markets would involve substantial capital expenditures, which the
Company is not in a position to make at this time. The Company's
ability to commence delivery of multi-media services is also dependent
upon, among other things, commercial availability of appropriate
transmission and reception equipment on satisfactory terms and certain
regulatory approvals and changes, especially with respect to routine
two-way licensing of the radio spectrum used by the Company.
The Company will require significant additional capital to
fully implement its digital strategy. To meet such capital
requirements, the Company is pursuing opportunities to enter into
strategic relationships or transactions with other providers of
telecommunications and multi-media services. These relationships could
provide the Company with access to technologies, products, capital and
infrastructure. Such relationships or
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transactions could involve, among other things, joint ventures, sales
or exchanges of stock or assets, or loans to or investments in the
Company by strategic partners. As of the date of this Report, except
for the BellSouth Agreement (as defined herein), the Company has not
reached any agreements or understandings with respect to such strategic
relationships or transactions.
BellSouth Transaction
On March 18, 1997, the Company entered into a definitive
agreement (the "BellSouth Agreement") with BellSouth Corporation and
BellSouth Wireless which provides for the sale of all of the Company's
Florida and Louisville, Kentucky wireless cable assets (the
"Southeastern Assets") to BellSouth Wireless (the "BellSouth
Transaction"). The Southeastern Assets include operating wireless cable
systems in Orlando, Lakeland, Jacksonville, Daytona Beach and Ft.
Myers, Florida and Louisville, Kentucky and wireless cable channel
rights in Bradenton, Naples, Sebring and Miami, Florida. The purchase
price for all of the Southeastern Assets is expected to range from
$67.9 million to $103.2 million, depending upon the number of wireless
cable channel rights that are ultimately transferred to BellSouth
Wireless.
On August 12, 1997, the Company completed the first closing of
the BellSouth Transaction, which involved transferring to BellSouth
Wireless the Company's operating systems and channel rights in the
Florida markets of Orlando, Jacksonville, Ft. Myers and Daytona Beach,
along with the Louisville, Kentucky market and certain rights in Miami,
Florida. The proceeds received and related gain recorded by the Company
from the first closing totaled approximately $54 million and $35.9
million, respectively. Of such proceeds, $7 million was placed in
escrow for a period of twelve months to satisfy any indemnification
obligations of the Company. As of March 31, 1998, the balance of escrow
funds was approximately $6.4 million. In March 1998, the Company closed
on additional channels in the Ft. Myers and Jacksonville, Florida
markets for cash consideration of approximately $2.9 million which is
reflected as a gain in the accompanying Condensed Consolidated
Statements of Operations. Under the terms of the BellSouth Agreement,
additional closings are possible through August 1999. The BellSouth
Agreement contains customary conditions for each closing, including the
satisfaction of all applicable regulatory requirements. There can be no
assurance that all conditions will be satisfied or that further sales
of assets to BellSouth Wireless will be consummated.
In conjunction with the BellSouth Transaction, the Company
agreed to sell its hardwire cable television system in Lakeland,
Florida. In February 1998, this system was sold to Time Warner
Entertainment - Advance Newhouse Partnership for approximately $1.5
million. A gain on the disposition of approximately $300,000 is
reflected in the accompanying Condensed Consolidated Statements of
Operations. As of the date of closing, the Lakeland hardwire cable
television system served approximately 2,300 subscribers.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a
fair presentation have been included. All significant intercompany
accounts and transactions have been eliminated in consolidation.
Operating results for the three-month period ended March 31, 1998 are
not necessarily indicative of the results that may be expected for the
year ending December 31, 1998. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31,
1997.
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Cash and Cash Equivalents
The Company considers all short-term investments with original
maturities of 90 days or less to be cash equivalents. As of March 31,
1998, cash equivalents principally consisted of money market funds,
commercial paper, federal government/agency debt securities, and other
short-term, investment-grade, interest-bearing securities. The carrying
amounts reported in the balance sheet for cash and cash equivalents
approximate the fair values of those assets.
Cash Available for Asset Purchases and Debt Repayment and Restricted
Escrow Funds
Cash available for asset purchases and debt repayments
represents the net available proceeds as of March 31, 1998, received
from the BellSouth closing that occurred on August 12, 1997. These
funds are restricted pursuant to the Indentures (as defined herein).
Restricted escrowed funds represents amounts placed in escrow at the
closing, which are approximately $6.4 million. These funds will be
released when the Company and BellSouth Wireless jointly submit an
instruction to the escrow agent for the release of such funds.
On April 9, 1998, the Company tendered an offer (the "Tender
Offer") for a portion of its outstanding 2004 Notes and a portion of
its outstanding 2005 Notes at a cash price of $255 per $1,000 principal
amount at maturity of the 2004 Notes purchased and $225 per $1,000
principal amount at maturity of the 2005 Notes purchased (collectively
the "Notes"). The maximum aggregate amount of cash available for the
purchase of Notes pursuant to the offer was $17.5 million.
The Tender Offer expired on May 7, 1998. Approximately $95.3
million aggregate principal amount at maturity of 2004 Notes and
approximately $137.3 million aggregate principal amount at maturity of
2005 Notes were tendered pursuant to the Tender Offer. Because the
consideration required to purchase all Notes tendered pursuant to the
Tender Offer exceeded $17.5 million, all tenders were prorated to the
extent necessary to limit the aggregate Tender Offer consideration to
$17.5 million. After applying proration procedures, the Company
purchased, on May 13, 1998, approximately $30.2 million aggregate
principal amount at maturity of 2004 Notes and approximately $43.5
million aggregate principal amount at maturity of 2005 Notes. A total
of 31.7% of the Notes tendered pursuant to the Tender Offer were
purchased by the Company. All tendered Notes not purchased because of
proration are being returned to the tendering holder. After giving
effect to the offer, approximately $166.7 million aggregate principal
amount at maturity of 2004 Notes and approximately $158.2 million
aggregate principal amount at maturity of 2005 Notes remain
outstanding.
In conjunction with and as a condition of the Tender Offer,
the Company also sought and received on April 28, 1998, the consent of
the majority of noteholders to (i) waivers (the "Waivers") of certain
asset disposition covenants in the Indentures (the "Indentures")
relating to the Notes with respect to proceeds previously received from
certain asset dispositions, and (ii) amendments (the "Amendments") of
the Indentures regarding treatment of future proceeds from certain
asset dispositions pursuant to the BellSouth Transaction. The Waivers
and Amendments became operative May 7, 1998, the date on which the
Notes were accepted for purchase by the Company.
The Waivers and Amendments relate to provisions of the
Indentures (the "Asset Disposition Covenants") which require that
certain Net Available Proceeds (as defined in the related Indenture)
from asset sales by the Company that were not used by the Company
within 270 days following receipt to acquire certain new assets or to
retire certain indebtedness be used to make a pro rata offer to
purchase outstanding Notes at a purchase price equal to 100% of the
accreted value thereof.
The Waivers approved by the noteholders waived the application
of the Asset Disposition Covenants in the case of any and all net
proceeds previously received by the Company from dispositions completed
prior to the Tender Offer, including pursuant to the BellSouth
Transaction.
The Amendments amend the Asset Disposition Covenants in the
case of any and all net available proceeds (the "Affected Proceeds")
received by the Company from (i) dispositions under the BellSouth
Agreement that close after May 7, 1998, which could be up to $46.2
million in proceeds depending on the total number of channel leases and
licenses ultimately delivered by the Company to BellSouth, and (ii) the
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approximately $6.4 million in proceeds that may be received from an
escrow account that was established under the BellSouth Agreement in
connection with a disposition completed prior to the date of the Tender
Offer.
Pursuant to the Amendments, no later than 30 days after the
aggregate amount of Affected Proceeds first equals or is greater than
$10 million, the Company is obligated to utilize 57% of the amount of
such Net Available Proceeds to make an offer (the "Initial Offer") to
purchase the outstanding Notes, at a purchase price in cash equal to
the greater of (i) $280.50 per $1,000 principal amount at maturity in
the case of the 2004 Notes and $247.50 per $1,000 principal amount at
maturity in the case of the 2005 Notes or (ii) the market value of the
Notes as determined on the date preceding the date of the commencement
of the required offer by Donaldson, Lufkin & Jenrette Securities
Corporation, the financial advisor to the Company. If the aggregate
principal amount of Notes tendered by holders thereof pursuant to a
required offer exceeds the amount of the 57% of the net available
proceeds to be used for the purchase of the Notes, the Notes shall be
selected for purchase on a pro rata basis.
Upon completion of the Initial Offer, the amount of Net
Available Proceeds shall be reset at zero. Thereafter, when the amount
of Affected Proceeds from subsequent asset dispositions to BellSouth
Wireless is greater than $5 million, the Company shall be obligated to
utilize 57% of the amount of such Affected Proceeds to make a
subsequent required offer, subject to the same terms and conditions set
forth above applicable to the Initial Offer.
The 43% of the Affected Proceeds not to be utilized for a
required offer to purchase, as well as the amount of the 57% of
Affected Proceeds to be used to purchase Notes pursuant to a required
offer that is in excess of the amount required to purchase the Notes
tendered by holders thereof, (the "Unencumbered Net Available
Proceeds") shall not be subject to any such tender obligation and shall
be freely available for use by the Company as it deems appropriate. The
Amendments do not restrict the Company from using Unencumbered Net
Available Proceeds for the purchase or other retirement of Notes on
such terms as it determines to be appropriate.
In addition, any and all financial advisor, legal and other
costs and fees incurred by the Company in connection with completing or
facilitating any future BellSouth dispositions, escrow proceeds or any
required offer shall be deemed to be reduce the amount of Affected
Proceeds.
The Amendments do not apply to net proceeds that may be
received from dispositions of assets that the Company may undertake
other than pursuant to the BellSouth Agreement, and with respect to
such proceeds the Asset Disposition Covenants remain in effect.
On a pro forma basis, had the Tender Offer been completed on
March 31, 1998, the effects of the Tender Offer would have changed the
amounts in the balance sheet categories of "Cash available for asset
purchases and debt repayments", "Cash and cash equivalents", and "2004
Notes" and "2005 Notes" from approximately $26.6 million, $5.9 million,
$162.7 million, and $140.1 million to approximately $0, $14.5 million,
$132.5 million and $96.6 million, respectively. "Cash available for
asset purchases and debt repayments" would no longer be present because
of the Waivers.
Net Loss Per Share
Basic and diluted net loss per share is computed by dividing
income available to common stockholders by the weighted-average number
of common shares outstanding for the period. Options and warrants to
purchase shares of common stock were not included in the computation of
loss per share as the effect would be antidilutive. As a result, the
basic and diluted loss per share amounts are identical.
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Recently Adopted Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued
SFAS No. 130, "Reporting Comprehensive Income," and SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related Information."
The Company adopted SFAS No. 130 during the three month period ended
March 31, 1998.
SFAS No. 130 requires "comprehensive income," to be reported
in the financial statements and/or notes thereto. Since the Company
does not have any components of "other comprehensive income," reported
net income is the same as "total comprehensive income" for the three
months ended March 31, 1997 and 1998.
SFAS No. 131 requires an entity to disclose financial and
descriptive information about its reportable operating segments. It
also establishes standards for related disclosures about products and
services, geographic areas and major customers. SFAS No. 131 is not
required for interim financial reporting purposes during 1998. The
Company is in the process of assessing the additional disclosures, if
any, required by SFAS No. 131. However, such adoption will not impact
the Company's results of operations or financial position, since it
relates only to disclosures.
3. DEBT
Long-term debt at March 31, 1998 consisted of the following
(in thousands):
<TABLE>
<CAPTION>
<S> <C>
2004 Notes ........................................................... $162,736
2005 Notes ........................................................... 140,153
Notes payable ........................................................ 2,135
Capital leases ....................................................... 846
--------
Total ............................................................ 305,870
Less current portion ............................................. 2,735
--------
Long-term debt ................................................... $303,135
========
</TABLE>
On February 26, 1997, the Company entered into a twelve-month
$17.0 million credit facility (the "Credit Facility") with a bank. At
closing of the Credit Facility, the Company also delivered 4,500 bond
appreciation rights ("BARs") and an option to exercise 141,667
exchangeable debt warrants or 141,667 equity warrants. Concurrent with
the closing of the BellSouth Transaction, the Credit Facility was
repaid and the exchangeable debt warrants were redeemed. The Credit
Facility has been terminated.
The BARs remain outstanding as of March 31, 1998. Amounts
payable in connection with the BARs are based upon the appreciation in
price of $4.5 million face value of the Company's 2004 Notes. The
change in the value of the BARs is reflected as interest expense in the
accompanying financial statements. The BARs are exercisable after the
earlier of June 15, 1999 or the occurrence of an Event of Default under
the 2004 Notes. The payment due upon exercise of each BAR is equal to
the market price of each 2004 Note on the closing date less $290. The
net value of the BARs is payable to holders of the BARs in cash. As of
March 31, 1998, the Company had no accrued liability associated with
the BARs as the market price of the 2004 Notes was below $290.
4. COMMITMENTS AND CONTINGENCIES
Litigation
In February 1994, a complaint was filed by Fresno Telsat,
Inc. ("FTI") in the Superior Court of the State of California for the
County of Monterey against a director and officer of the Company, the
Company, and other named and unnamed defendants. The Complaint alleges
damages against the Company of approximately $220 million and that all
defendants, including the Company, participated in a conspiracy to
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misappropriate corporate opportunities belonging to FTI. A trial began
on February 2, 1998. On March 12, 1998, the jury returned a verdict.
The verdict essentially concluded that the defendants Hostetler and
Holmes engaged in no wrongful conduct as alleged by the plaintiff.
Because the plaintiff's claims against the Company must be resolved by
the Court, rather than the jury, that verdict does not yet constitute a
conclusive determination in favor of the Company. The Court intends
imminently to convene a conference to address all remaining issues and
enter judgment. Although the plaintiff has a right to appeal after
judgment is entered, management believes, on the advice of legal
counsel, that the jury verdict and the anticipated determination and
judgment by the Court in favor of all three defendants will survive
appeal. Although the ultimate outcome of this matter cannot be
predicted, management believes, based on its review of this claim and
discussion with legal counsel, that the resolution of this matter will
not have a material impact on the Company's business, financial
position or future results of operations.
On or about December 24, 1997, Peter Mehas, Fresno County
Superintendent of Schools, filed an action against the Fresno
Partnership, the Company and others entitled Peter Mehas, Fresno County
Superintendent of Schools v. Fresno Telsat Inc., an Indiana
corporation, et al., in the Superior Court of the State of California,
Fresno County. The complaint alleges that a channel lease agreement
between the Fresno Partnership and the Fresno County school system has
expired. The Plaintiff seeks a judicial declaration that the lease has
expired and that the defendants, including the Company, hold no right,
title or interest in the channel capacity which is the subject of the
lease. The Company believes that both it and the Fresno Partnership
possess valid defenses to the action. Management does not believe the
lawsuit will have a material impact on the business, financial
condition, or results of operations of the Company.
The Company is occasionally a party to other legal actions
arising in the ordinary course of its business, the ultimate resolution
of which cannot be ascertained at this time. However, in the opinion of
management, resolution of such matters will not have a material adverse
effect on the Company.
LMDS Auction
The Company participated in the FCC's bidding process for
Local Multi-Point Distribution Service ("LMDS") wireless spectrum
rights which was completed in February 1998. The Company was the
highest bidder in one market, Bremerton, Washington, and will pay
approximately $314,000 for certain LMDS rights in this market.
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SIGNATURES
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.
AMERICAN TELECASTING, INC.
Date: May 22, 1998 By:/s/ David K. Sentman
----------------------------- -----------------------------------
David K. Sentman
Senior Vice President, Chief Financial
Officer and Treasurer
(Principal Financial Officer)
Date: May 22, 1998 By:/s/ Fred C. Pattin Jr.
----------------------------- -----------------------------------
Fred C. Pattin Jr.
Controller
(Principal Accounting Officer)
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