SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE |
| SECURITIES EXCHANGE ACT OF 1934 |
| FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2003 OR |
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE |
| SECURITIES EXCHANGE ACT OF 1934 |
| FOR THE TRANSITION PERIOD FROM TO |
Commission file number … 333-39746
IWO HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 14-1818487 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| 901 Lakeshore Drive Lake Charles, LA |
70601 | |
| (Address of principal executive offices) | (Zip code) |
(337) 436-9000
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x. No ¨.
| Page | ||||
| Part I—Financial Information |
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| Item 1. |
Financial Statements | |||
| Condensed Consolidated Balance Sheets | 3 | |||
| Condensed Consolidated Statements of Operations | 4 | |||
| Condensed Consolidated Statements of Cash Flows | 5 | |||
| Notes to Condensed Consolidated Financial Statements | 6 | |||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 17 | ||
| Item 4. |
Controls and Procedures | 26 | ||
| Part II—Other Information |
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| Item 5. |
Other Information | 27 | ||
| Item 6. |
Exhibits and Reports on Form 8-K | 27 | ||
| Signatures | 27 | |||
2
Part I Financial Information
| Item 1. | Financial Statements |
IWO HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
| June 30, 2003 |
December 31, 2002 |
|||||||
| (Unaudited) | (Note 1) | |||||||
| Assets | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 21,251 | $ | 35,008 | ||||
| Restricted cash and US Treasury securities at amortized cost—held to maturity |
30,346 | 33,218 | ||||||
| Subscriber receivables, net |
11,696 | 11,843 | ||||||
| Inventory |
1,971 | 2,579 | ||||||
| Prepaid expenses and other assets |
6,448 | 6,276 | ||||||
| Receivables from related parties |
217 | 320 | ||||||
| Total current assets |
71,929 | 89,244 | ||||||
| Property and equipment, net |
174,122 | 189,878 | ||||||
| Restricted cash |
— | 8,000 | ||||||
| Intangible assets, net |
40,579 | 55,517 | ||||||
| Note receivable |
160 | 174 | ||||||
| Other assets |
17,600 | 17,612 | ||||||
| Total assets |
$ | 304,390 | $ | 360,425 | ||||
| Liabilities and Stockholder’s deficit | ||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 8,500 | $ | 14,994 | ||||
| Accrued expenses |
34,024 | 29,320 | ||||||
| Current maturities of long-term obligations in default |
350,921 | — | ||||||
| Total current liabilities |
393,445 | 44,314 | ||||||
| Long term obligations in default |
— | 350,207 | ||||||
| Other |
562 | 951 | ||||||
| Stockholder’s deficit: |
||||||||
| Common stock |
1 | 1 | ||||||
| Additional paid in capital |
446,449 | 446,449 | ||||||
| Retained deficit |
(536,067 | ) | (481,497 | ) | ||||
| Total stockholder’s deficit |
(89,617 | ) | (35,047 | ) | ||||
| Total liabilities and stockholder’s deficit |
$ | 304,390 | $ | 360,425 | ||||
See accompanying notes to condensed consolidated financial statements.
3
IWO HOLDINGS, INC.AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(Unaudited)
| Three month periods |
Six month periods |
|||||||||||||||||||
| Three months ended June 30, 2003 |
Three months ended June 30, 2002 |
Six months ended June 30, 2003 |
January 1, 2002 March 31, 2002 |
April 1, 2002 through June 30, 2002 |
||||||||||||||||
| Revenues: |
||||||||||||||||||||
| Subscriber |
$ | 32,670 | $ | 28,427 | $ | 62,743 | $ | 25,965 | $ | 28,427 | ||||||||||
| Roaming |
8,303 | 9,108 | 15,384 | 7,014 | 9,108 | |||||||||||||||
| Merchandise sales |
1,478 | 2,034 | 3,229 | 2,554 | 2,034 | |||||||||||||||
| Other revenue |
162 | 7 | 277 | 3 | 7 | |||||||||||||||
| Total revenue |
42,613 | 39,576 | 81,633 | 35,536 | 39,576 | |||||||||||||||
| Expense: |
||||||||||||||||||||
| Cost of service |
16,760 | 18,837 | 34,238 | 17,532 | 18,837 | |||||||||||||||
| Merchandise cost of sales |
2,364 | 2,708 | 4,875 | 4,577 | 2,708 | |||||||||||||||
| General and administrative |
11,756 | 11,966 | 24,734 | 19,382 | 11,966 | |||||||||||||||
| Sales and marketing |
6,585 | 8,638 | 15,117 | 8,519 | 8,638 | |||||||||||||||
| Depreciation and amortization |
13,591 | 14,705 | 26,965 | 5,714 | 14,705 | |||||||||||||||
| Asset abandonment charge |
— | — | 12,403 | — | — | |||||||||||||||
| Total operating expense |
51,056 | 56,854 | 118,332 | 55,724 | 56,854 | |||||||||||||||
| Operating loss |
(8,443 | ) | (17,278 | ) | (36,699 | ) | (20,188 | ) | (17,278 | ) | ||||||||||
| Other expense: |
||||||||||||||||||||
| Interest expense, net |
(9,000 | ) | (8,461 | ) | (17,871 | ) | (6,648 | ) | (8,461 | ) | ||||||||||
| Loss before income tax benefit |
(17,443 | ) | (25,739 | ) | (54,570 | ) | (26,836 | ) | (25,739 | ) | ||||||||||
| Income tax benefit |
— | 2,622 | — | — | 2,622 | |||||||||||||||
| Net loss |
$ | (17,443 | ) | $ | (23,117 | ) | $ | (54,570 | ) | $ | (26,836 | ) | $ | (23,117 | ) | |||||
See accompanying notes to condensed consolidated financial statements
4
IWO HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
| For the six months ended June 30, 2003 |
January 1, 2002 March 31, 2002 |
April 1, 2002 June 30, 2002 |
||||||||||
| Cash flows from operating activities |
||||||||||||
| Net cash used in operating activities |
$ | (14,866 | ) | $ | (14,868 | ) | $ | (17,011 | ) | |||
| Cash flows from investing activities |
||||||||||||
| Release of restricted cash and US Treasury securities |
10,871 | 10,717 | (284 | ) | ||||||||
| Proceeds on maturities of marketable securities |
— | 6,000 | 13,465 | |||||||||
| Purchases of property and equipment |
(9,762 | ) | (29,144 | ) | (16,492 | ) | ||||||
| Net cash provided (used in) by investing activities |
1,109 | (12,427 | ) | (3,311 | ) | |||||||
| Cash flows from financing activities |
||||||||||||
| Proceeds from long-term debt |
— | 40,000 | 20,000 | |||||||||
| Principal payments of long-term debt |
— | (15,000 | ) | — | ||||||||
| Other financing activities |
— | — | 20 | |||||||||
| Net cash provided by financing activities |
— | 25,000 | 20,020 | |||||||||
| Net change in cash and cash equivalents |
(13,757 | ) | (2,295 | ) | (302 | ) | ||||||
| Cash and cash equivalents at beginning of period |
35,008 | 3,394 | 1,099 | |||||||||
| Cash and cash equivalents at end of period |
$ | 21,251 | $ | 1,099 | $ | 797 | ||||||
See accompanying notes to condensed consolidated financial statements.
5
IWO HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2003
(Unaudited)
| 1. | Basis of Presentation |
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States 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 accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included. Operating results for the three and six-month periods ended June 30, 2003 are not necessarily indicative of the results that may be expected for the year ending December 31, 2003.
The condensed consolidated balance sheet at December 31, 2002 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The condensed consolidated financial statements contained herein should be read in conjunction with the financial statements and notes included in the Form 10-K for IWO Holdings, Inc. for the year ended December 31, 2002, filed on March 31, 2003 with the Securities and Exchange Commission.
Recent Accounting Pronouncements
In January 2003, the FASB issued FASB Interpretation No. 46, “Consolidation of Variable Interest Entities-An Interpretation of Accounting Research Bulletin (ARB) No. 51” (“FIN 46”). This interpretation clarifies how to identify variable interest entities and how a company should assess its interests in a variable interest entity to decide whether to consolidate the entity. FIN 46 applies to variable interest entities created after January 31, 2003, in which a company obtains an interest after that date. Also, FIN 46 applies in the first fiscal quarter or interim period beginning after June 15, 2003, to variable interest entities in which a company holds a variable interest that it acquired before February 1, 2003. The Company is in the process of evaluating the effect of this pronouncement on its operations.
In November 2002, the FASB issued FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” This interpretation expands the disclosures to be made by a guarantor about its obligations under certain guarantees and requires that, at the inception of a guarantee, a guarantor recognize a liability for the fair value of the obligation undertaken in issuing the guarantee. The disclosure requirements are effective immediately. As disclosed in Note 5 to the Consolidated Financial Statements, Independent Wireless One Corporation has fully and unconditionally guaranteed the Company’s obligations under the IWO 14% senior notes. The initial recognition and measurement provisions of this interpretation are effective for guarantees issued