þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF | |
THE SECURITIES EXCHANGE ACT OF 1934 | ||
For the quarterly period ended September 30, 2018 | ||
or | ||
o | 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 001-37488 |
Delaware | 91-1671412 | |
(State or other jurisdiction of | (I.R.S. Employer Identification No.) | |
incorporation or organization) | ||
12110 Sunset Hills Road, Suite 600 Reston, Virginia (Address of principal executive offices) | 20190 (Zip Code) |
Large accelerated filer o | Accelerated filer þ | Non-accelerated filer o | Smaller reporting company o | Emerging growth company o |
Number of Shares Outstanding | |
Title of Class | on November 2, 2018 |
Common Stock, $0.001 par value per share | 100,873,423 |
Page | ||
NII HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except par values) Unaudited | |||||||
September 30, 2018 | December 31, 2017 | ||||||
ASSETS | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 152,712 | $ | 193,888 | |||
Short-term investments | 48,407 | 16,711 | |||||
Accounts receivable, net of allowance for doubtful accounts of $22,105 and $42,011 | 97,415 | 106,715 | |||||
Handset and accessory inventory | 2,295 | 3,163 | |||||
Prepaid expenses and other | 234,765 | 264,017 | |||||
Total current assets | 535,594 | 584,494 | |||||
Property, plant and equipment, net | 121,593 | 117,262 | |||||
Intangible assets, net | 158,342 | 191,757 | |||||
Other assets | 224,059 | 220,009 | |||||
Total assets | $ | 1,039,588 | $ | 1,113,522 | |||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | |||||||
Current liabilities | |||||||
Accounts payable | $ | 45,103 | $ | 42,284 | |||
Accrued expenses and other | 265,217 | 308,129 | |||||
Current portion of long-term debt | 21,755 | 7,990 | |||||
Total current liabilities | 332,075 | 358,403 | |||||
Long-term debt | 623,332 | 647,717 | |||||
Other long-term liabilities | 271,192 | 218,590 | |||||
Total liabilities | 1,226,599 | 1,224,710 | |||||
Commitments and contingencies (Note 8) | |||||||
Stockholders’ deficit | |||||||
Undesignated preferred stock, par value $0.001, 10,000 shares authorized, no shares issued or outstanding | — | — | |||||
Common stock, par value $0.001, 140,000 shares authorized, 100,744 shares issued and outstanding — 2018, 100,384 shares issued and outstanding — 2017 | 101 | 100 | |||||
Paid-in capital | 2,141,079 | 2,139,299 | |||||
Accumulated deficit | (2,237,135 | ) | (2,127,876 | ) | |||
Accumulated other comprehensive loss | (1,813 | ) | (47,266 | ) | |||
Total NII Holdings stockholders’ deficit | (97,768 | ) | (35,743 | ) | |||
Noncontrolling interest | (89,243 | ) | (75,445 | ) | |||
Total deficit | (187,011 | ) | (111,188 | ) | |||
Total liabilities and stockholders’ deficit | $ | 1,039,588 | $ | 1,113,522 |
NII HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (in thousands, except per share amounts) Unaudited | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Operating revenues | |||||||||||||||
Service and other revenues | $ | 138,596 | $ | 200,874 | $ | 465,603 | $ | 664,446 | |||||||
Handset and accessory revenues | 3,141 | 4,549 | 13,383 | 17,066 | |||||||||||
141,737 | 205,423 | 478,986 | 681,512 | ||||||||||||
Operating expenses | |||||||||||||||
Cost of service (exclusive of depreciation and amortization included below) | 61,634 | 91,230 | 220,295 | 281,780 | |||||||||||
Cost of handsets and accessories | 3,452 | 8,736 | 19,532 | 30,443 | |||||||||||
Selling, general and administrative | 68,503 | 139,004 | 235,474 | 403,082 | |||||||||||
Impairment, restructuring and other (benefits) charges, net | (2 | ) | 34,794 | 14,070 | 160,968 | ||||||||||
Depreciation | 3,614 | 2,428 | 11,626 | 17,031 | |||||||||||
Amortization | 3,191 | 3,663 | 10,229 | 11,420 | |||||||||||
140,392 | 279,855 | 511,226 | 904,724 | ||||||||||||
Operating income (loss) | 1,345 | (74,432 | ) | (32,240 | ) | (223,212 | ) | ||||||||
Other (expense) income | |||||||||||||||
Interest expense, net | (24,324 | ) | (33,278 | ) | (78,940 | ) | (91,245 | ) | |||||||
Interest income | 1,887 | 19,012 | 8,866 | 35,956 | |||||||||||
Foreign currency transaction (losses) gains, net | (12,238 | ) | 14,174 | (60,092 | ) | 12,197 | |||||||||
Other expense, net | (16,391 | ) | (10,964 | ) | (25,972 | ) | (5,104 | ) | |||||||
(51,066 | ) | (11,056 | ) | (156,138 | ) | (48,196 | ) | ||||||||
Loss from continuing operations before income tax benefit | (49,721 | ) | (85,488 | ) | (188,378 | ) | (271,408 | ) | |||||||
Income tax benefit | — | — | — | 5,778 | |||||||||||
Net loss from continuing operations | (49,721 | ) | (85,488 | ) | (188,378 | ) | (265,630 | ) | |||||||
(Loss) income from discontinued operations, net of income taxes | (163 | ) | (92 | ) | (2,946 | ) | 2,567 | ||||||||
Net loss | (49,884 | ) | (85,580 | ) | (191,324 | ) | (263,063 | ) | |||||||
Net loss attributable to noncontrolling interest | (8,866 | ) | (24,622 | ) | (47,965 | ) | (24,622 | ) | |||||||
Net loss attributable to NII Holdings | $ | (41,018 | ) | $ | (60,958 | ) | $ | (143,359 | ) | $ | (238,441 | ) | |||
Net loss from continuing operations per common share, basic and diluted | $ | (0.50 | ) | $ | (0.85 | ) | $ | (1.88 | ) | $ | (2.65 | ) | |||
Net (loss) income from discontinued operations per common share, basic and diluted | — | — | (0.03 | ) | 0.03 | ||||||||||
Net loss attributable to NII Holdings per common share, basic and diluted | $ | (0.50 | ) | $ | (0.85 | ) | $ | (1.91 | ) | $ | (2.62 | ) | |||
Weighted average number of common shares outstanding, basic and diluted | 100,592 | 100,383 | 100,458 | 100,314 | |||||||||||
Comprehensive loss, net of income taxes | |||||||||||||||
Foreign currency translation adjustment | $ | 7,386 | $ | (9,516 | ) | $ | 45,453 | $ | (4,698 | ) | |||||
Other comprehensive income (loss) | 7,386 | (9,516 | ) | 45,453 | (4,698 | ) | |||||||||
Net loss attributable to NII Holdings | (41,018 | ) | (60,958 | ) | (143,359 | ) | (238,441 | ) | |||||||
Total comprehensive loss | $ | (33,632 | ) | $ | (70,474 | ) | $ | (97,906 | ) | $ | (243,139 | ) |
NII HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT (in thousands) Unaudited | ||||||||||||||||||||||||||||||
Common Stock | Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total NII Holdings Stockholders’ Deficit | Noncontrolling Interest | Total Deficit | ||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||||||
Balance, December 31, 2017 | 100,384 | $ | 100 | $ | 2,139,299 | $ | (2,127,876 | ) | $ | (47,266 | ) | $ | (35,743 | ) | $ | (75,445 | ) | $ | (111,188 | ) | ||||||||||
Net loss | — | — | — | (143,359 | ) | — | (143,359 | ) | (47,965 | ) | (191,324 | ) | ||||||||||||||||||
Other comprehensive income | — | — | — | — | 45,453 | 45,453 | 19,278 | 64,731 | ||||||||||||||||||||||
Share-based compensation activity | 360 | 1 | 1,780 | — | — | 1,781 | 286 | 2,067 | ||||||||||||||||||||||
Implementation of revenue recognition accounting standard | — | — | — | 34,100 | — | 34,100 | 14,603 | 48,703 | ||||||||||||||||||||||
Balance, September 30, 2018 | 100,744 | $ | 101 | $ | 2,141,079 | $ | (2,237,135 | ) | $ | (1,813 | ) | $ | (97,768 | ) | $ | (89,243 | ) | $ | (187,011 | ) |
NII HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Unaudited | |||||||
Nine Months Ended September 30, 2018 | Nine Months Ended September 30, 2017 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (191,324 | ) | $ | (263,063 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
Loss (income) from discontinued operations | 2,946 | (2,567 | ) | ||||
Amortization of debt discounts (premiums) and financing costs | 1,788 | (1,139 | ) | ||||
Depreciation and amortization | 21,855 | 28,451 | |||||
Provision for losses on accounts receivable | 27,256 | 63,527 | |||||
Foreign currency transaction losses (gains), net | 60,092 | (12,197 | ) | ||||
Impairment charges and losses on disposals of fixed assets | 1,610 | 63,274 | |||||
Share-based payment expense | 2,775 | 3,951 | |||||
Loss on derivative instruments | 11,739 | 16 | |||||
Other, net | (2,086 | ) | (2,181 | ) | |||
Change in assets and liabilities: | |||||||
Accounts receivable | (37,350 | ) | (31,859 | ) | |||
Prepaid value-added taxes | 1,092 | 13,985 | |||||
Handset and accessory inventory | 36 | 4,554 | |||||
Prepaid expenses and other | (29,494 | ) | 8,709 | ||||
Other long-term assets | (12,348 | ) | (27,894 | ) | |||
Accrued value-added taxes | 13,745 | 7,642 | |||||
Other long-term liabilities | 23,510 | 92,273 | |||||
Accounts payable, accrued expenses, deferred revenues and other | 7,273 | (8,139 | ) | ||||
Net cash used in operating activities | (96,885 | ) | (62,657 | ) | |||
Cash flows from investing activities: | |||||||
Capital expenditures | (45,357 | ) | (52,068 | ) | |||
Purchases of investments | (641,082 | ) | (494,975 | ) | |||
Proceeds from sales of investments | 604,320 | 548,265 | |||||
Change in deposits, net | 43,341 | 28,127 | |||||
Other, net | (3,689 | ) | (1,089 | ) | |||
Total investing cash (used in) provided by continuing operations | (42,467 | ) | 28,260 | ||||
Total investing cash used in discontinued operations | (3,953 | ) | (117 | ) | |||
Net cash (used in) provided by investing activities | (46,420 | ) | 28,143 | ||||
Cash flows from financing activities: | |||||||
Gross proceeds from issuance of convertible notes | 115,000 | — | |||||
Proceeds from minority interest investment | — | 50,000 | |||||
Repayments under equipment financing facility and local bank loans | (1,421 | ) | (85,915 | ) | |||
Repayments under capital leases and other | (4,413 | ) | (5,334 | ) | |||
Payments of debt financing costs | (9,299 | ) | — | ||||
Net cash provided by (used in) financing activities | 99,867 | (41,249 | ) | ||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (1,536 | ) | 543 | ||||
Net decrease in cash, cash equivalents and restricted cash | (44,974 | ) | (75,220 | ) | |||
Cash, cash equivalents and restricted cash, beginning of period | 305,778 | 422,232 | |||||
Cash, cash equivalents and restricted cash, end of period | $ | 260,804 | $ | 347,012 |
Note 1. | Basis of Presentation |
Note 2. | Revenue Recognition |
Three Months Ended September 30, 2018 | |||||||||||
As Reported With ASC 606 | Without ASC 606 | Impact | |||||||||
Operating revenues | |||||||||||
Service and other revenues | $ | 138,596 | $ | 142,753 | $ | (4,157 | ) | ||||
Handset and accessory revenues | 3,141 | 4,268 | (1,127 | ) | |||||||
141,737 | 147,021 | (5,284 | ) | ||||||||
Operating expenses | |||||||||||
Cost of service (exclusive of depreciation and amortization included below) | 61,634 | 61,634 | — | ||||||||
Cost of handsets and accessories | 3,452 | 3,452 | — | ||||||||
Selling, general and administrative | 68,503 | 72,568 | (4,065 | ) | |||||||
Impairment, restructuring and other benefits, net | (2 | ) | (2 | ) | — | ||||||
Depreciation | 3,614 | 3,614 | — | ||||||||
Amortization | 3,191 | 3,191 | — | ||||||||
140,392 | 144,457 | (4,065 | ) | ||||||||
Operating income | $ | 1,345 | $ | 2,564 | $ | (1,219 | ) | ||||
Net loss | $ | (49,884 | ) | $ | (48,665 | ) | $ | (1,219 | ) |
Nine Months Ended September 30, 2018 | |||||||||||
As Reported With ASC 606 | Without ASC 606 | Impact | |||||||||
Operating revenues | |||||||||||
Service and other revenues | $ | 465,603 | $ | 479,541 | $ | (13,938 | ) | ||||
Handset and accessory revenues | 13,383 | 12,130 | 1,253 | ||||||||
478,986 | 491,671 | (12,685 | ) | ||||||||
Operating expenses | |||||||||||
Cost of service (exclusive of depreciation and amortization included below) | 220,295 | 220,295 | — | ||||||||
Cost of handsets and accessories | 19,532 | 19,532 | — | ||||||||
Selling, general and administrative | 235,474 | 249,942 | (14,468 | ) | |||||||
Impairment, restructuring and other charges, net | 14,070 | 14,070 | — | ||||||||
Depreciation | 11,626 | 11,626 | — | ||||||||
Amortization | 10,229 | 10,229 | — | ||||||||
511,226 | 525,694 | (14,468 | ) | ||||||||
Operating loss | $ | (32,240 | ) | $ | (34,023 | ) | $ | 1,783 | |||
Net loss | $ | (191,324 | ) | $ | (193,107 | ) | $ | 1,783 |
Note 3. | Impairment, Restructuring and Other Charges |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Brazil | $ | (2 | ) | $ | 34,512 | $ | 13,718 | $ | 160,143 | ||||||
Corporate | — | 282 | 352 | 825 | |||||||||||
Total impairment, restructuring and other (benefits) charges, net | $ | (2 | ) | $ | 34,794 | $ | 14,070 | $ | 160,968 |
Balance, December 31, 2017 | $ | 107,306 | |
Restructuring charges, net | 10,021 | ||
Cash payments and other | (29,379 | ) | |
Foreign currency translation adjustment | (16,805 | ) | |
Balance, September 30, 2018 | $ | 71,143 |
Note 4. | Supplemental Financial Statement Information |
September 30, 2018 | December 31, 2017 | ||||||
(in thousands) | |||||||
Cash and cash equivalents | $ | 152,712 | $ | 193,888 | |||
Cash in escrow (included in prepaid expenses and other) | 106,071 | 110,024 | |||||
Other (included in other assets) | 2,021 | 1,866 | |||||
Cash, cash equivalents and restricted cash | $ | 260,804 | $ | 305,778 |
September 30, 2018 | December 31, 2017 | ||||||
(in thousands) | |||||||
Cash in escrow | $ | 106,071 | $ | 110,024 | |||
Brazil judicial deposits | 52,755 | 43,648 | |||||
Value-added taxes | 22,941 | 37,191 | |||||
Cash collateral related to performance bonds | 578 | 50,340 | |||||
Other prepaid expenses | 31,270 | 14,231 | |||||
Other current assets | 21,150 | 8,583 | |||||
$ | 234,765 | $ | 264,017 |
September 30, 2018 | December 31, 2017 | ||||||
(in thousands) | |||||||
Land | $ | 404 | $ | 489 | |||
Building and leasehold improvements | 629 | 935 | |||||
Network equipment, communication towers and network software | 95,307 | 82,493 | |||||
Software, office equipment, furniture and fixtures and other | 26,806 | 22,498 | |||||
Less: Accumulated depreciation and amortization | (21,497 | ) | (11,461 | ) | |||
101,649 | 94,954 | ||||||
Construction in progress | 19,944 | 22,308 | |||||
$ | 121,593 | $ | 117,262 |
September 30, 2018 | December 31, 2017 | ||||||||||||||||||||||||
Average Useful Life (Years) | Gross Carrying Value | Accumulated Amortization | Net Carrying Value | Gross Carrying Value | Accumulated Amortization | Net Carrying Value | |||||||||||||||||||
(in thousands) | |||||||||||||||||||||||||
Amortizable intangible assets: | |||||||||||||||||||||||||
Licenses | 26 | $ | 163,444 | $ | (9,316 | ) | $ | 154,128 | $ | 186,983 | $ | (5,426 | ) | $ | 181,557 | ||||||||||
Customer relationships | 4 | 12,641 | (8,427 | ) | 4,214 | 15,300 | (5,100 | ) | 10,200 | ||||||||||||||||
$ | 176,085 | $ | (17,743 | ) | $ | 158,342 | $ | 202,283 | $ | (10,526 | ) | $ | 191,757 |
Years | Estimated Amortization Expense | ||
2018 | $ | 13,287 | |
2019 | 9,424 | ||
2020 | 6,615 | ||
2021 | 6,615 | ||
2022 | 6,615 |
September 30, 2018 | December 31, 2017 | ||||||
(in thousands) | |||||||
Brazil judicial deposits | $ | 99,590 | $ | 110,758 | |||
Cash collateral related to contingencies | 49,576 | 55,027 | |||||
Other | 74,893 | 54,224 | |||||
$ | 224,059 | $ | 220,009 |
September 30, 2018 | December 31, 2017 | ||||||
(in thousands) | |||||||
Contingencies | $ | 64,554 | $ | 78,006 | |||
Network system and information technology expenses | 49,077 | 48,702 | |||||
Non-income based taxes | 36,700 | 30,044 | |||||
Payroll related items and commissions | 24,016 | 32,613 | |||||
License fees | 18,013 | 17,501 | |||||
Other | 72,857 | 101,263 | |||||
$ | 265,217 | $ | 308,129 |
September 30, 2018 | December 31, 2017 | ||||||
(in thousands) | |||||||
Non-current withholding taxes | $ | 77,870 | $ | 67,356 | |||
Accrued lease terminations and other restructuring charges | 61,799 | 90,128 | |||||
Conversion option for convertible senior notes | 53,503 | — | |||||
Other | 78,020 | 61,106 | |||||
$ | 271,192 | $ | 218,590 |
Nine Months Ended September 30, | |||||||
2018 | 2017 | ||||||
(in thousands) | |||||||
Capital expenditures | |||||||
Cash paid for capital expenditures, including capitalized interest on property, plant and equipment | $ | 45,357 | $ | 52,068 | |||
Change in capital expenditures accrued and unpaid or financed, including interest capitalized | (4,669 | ) | (21,968 | ) | |||
$ | 40,688 | $ | 30,100 |
Note 5. | Discontinued Operations |
Note 6. | Debt |
September 30, 2018 | December 31, 2017 | ||||||
(in thousands) | |||||||
Brazil equipment financing facility | $ | 238,669 | $ | 242,883 | |||
Brazil bank loans | 164,597 | 200,567 | |||||
Brazil spectrum financing | 100,794 | 122,044 | |||||
Convertible senior notes | 70,702 | — | |||||
Brazil capital lease and tower financing obligations | 70,325 | 90,213 | |||||
Total debt | 645,087 | 655,707 | |||||
Less: current portion | (21,755 | ) | (7,990 | ) | |||
$ | 623,332 | $ | 647,717 |
• | during any calendar quarter commencing after September 30, 2018 if the last reported sale price of our common stock is greater than or equal to 130% of the conversion price of $6.21 per share for at least 20 trading days during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter; |
• | during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day; or |
• | upon the occurrence of specified corporate events. |
Note 7. | Fair Value Measurements |
September 30, 2018 | December 31, 2017 | ||||||||||||||
Carrying Amount | Estimated Fair Value | Carrying Amount | Estimated Fair Value | ||||||||||||
(in thousands) | |||||||||||||||
Brazil equipment financing | $ | 238,669 | $ | 233,533 | $ | 242,883 | $ | 237,958 | |||||||
Brazil bank loans and other | 164,597 | 100,358 | 200,567 | 144,312 | |||||||||||
Brazil spectrum financing | 100,794 | 114,247 | 122,044 | 128,225 | |||||||||||
Convertible senior notes | 70,702 | 73,296 | — | — | |||||||||||
$ | 574,762 | $ | 521,434 | $ | 565,494 | $ | 510,495 |
Note 8. | Commitments and Contingencies |
Note 9. | Income Taxes |
Note 10. | Segment Reporting |
Nextel Brazil | Corporate | Consolidated | |||||||||
(in thousands) | |||||||||||
Three Months Ended September 30, 2018 | |||||||||||
Operating revenues | $ | 141,737 | $ | — | $ | 141,737 | |||||
Segment earnings (losses) | $ | 12,749 | $ | (4,601 | ) | $ | 8,148 | ||||
Less: | |||||||||||
Impairment, restructuring and other benefits, net | 2 | ||||||||||
Depreciation and amortization | (6,805 | ) | |||||||||
Foreign currency transaction losses, net | (12,238 | ) | |||||||||
Interest expense and other, net | (38,828 | ) | |||||||||
Loss from continuing operations before income tax benefit | $ | (49,721 | ) | ||||||||
Capital expenditures | $ | 17,583 | $ | — | $ | 17,583 | |||||
Three Months Ended September 30, 2017 | |||||||||||
Operating revenues | $ | 205,399 | $ | 24 | $ | 205,423 | |||||
Segment losses | $ | (27,266 | ) | $ | (6,281 | ) | $ | (33,547 | ) | ||
Less: | |||||||||||
Impairment, restructuring and other charges, net | (34,794 | ) | |||||||||
Depreciation and amortization | (6,091 | ) | |||||||||
Foreign currency transaction gains, net | 14,174 | ||||||||||
Interest expense and other, net | (25,230 | ) | |||||||||
Loss from continuing operations before income tax benefit | $ | (85,488 | ) | ||||||||
Capital expenditures | $ | 11,661 | $ | — | $ | 11,661 | |||||
Nine Months Ended September 30, 2018 | |||||||||||
Operating revenues | $ | 478,964 | $ | 22 | $ | 478,986 | |||||
Segment earnings (losses) | $ | 16,436 | $ | (12,751 | ) | $ | 3,685 | ||||
Less: | |||||||||||
Impairment, restructuring and other charges, net | (14,070 | ) | |||||||||
Depreciation and amortization | (21,855 | ) | |||||||||
Foreign currency transaction losses, net | (60,092 | ) | |||||||||
Interest expense and other, net | (96,046 | ) | |||||||||
Loss from continuing operations before income tax benefit | $ | (188,378 | ) | ||||||||
Capital expenditures | $ | 40,688 | $ | — | $ | 40,688 | |||||
Nine Months Ended September 30, 2017 | |||||||||||
Operating revenues | $ | 681,429 | $ | 83 | $ | 681,512 | |||||
Segment losses | $ | (11,813 | ) | $ | (21,980 | ) | $ | (33,793 | ) | ||
Less: | |||||||||||
Impairment, restructuring and other charges, net | (160,968 | ) | |||||||||
Depreciation and amortization | (28,451 | ) | |||||||||
Foreign currency transaction gains, net | 12,197 | ||||||||||
Interest expense and other, net | (60,393 | ) | |||||||||
Loss from continuing operations before income tax benefit | $ | (271,408 | ) | ||||||||
Capital expenditures | $ | 30,100 | $ | — | $ | 30,100 | |||||
September 30, 2018 | |||||||||||
Identifiable assets | $ | 799,167 | $ | 240,421 | $ | 1,039,588 | |||||
December 31, 2017 | |||||||||||
Identifiable assets | $ | 965,919 | $ | 147,603 | $ | 1,113,522 |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
INDEX TO MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | |
• | our consolidated financial condition as of September 30, 2018 and December 31, 2017 and our consolidated results of operations for the three- and nine-month periods ended September 30, 2018 and 2017; and |
• | significant factors that we believe could affect our prospective financial condition and results of operations. |
• | mobile telephone voice and wireless data services; |
• | international voice and data roaming services; |
• | application-based radio connection; and |
• | value-added services, including sports, music and entertainment streaming capabilities; online education; and access to national and international WiFi hotspot networks. |
• | offering a unique and superior customer-centric experience, including a reliable and high quality wireless network and rate plan flexibility; |
• | continuing to implement cost reduction strategies and redesigning our network architecture in order to lower cash costs per user, outweigh scale disadvantages, create an agile organization and improve overall profitability; |
• | focusing on higher value customer segments that generate higher ARPU and lower subscriber turnover; and |
• | building on the strength of the unique positioning of the Nextel brand. |
• | revenue recognition; |
• | allowance for doubtful accounts; |
• | depreciation of property, plant and equipment; |
• | amortization of intangible assets; |
• | valuation of long-lived assets; |
• | foreign currency; |
• | loss contingencies; and |
• | income taxes. |
Three Months Ended September 30, | Actual Percent Change From Prior Year | |||||||
2018 | 2017 | |||||||
Brazilian real | 3.96 | 3.16 | (25 | )% |
Nine Months Ended September 30, | Actual Percent Change From Prior Year | |||||||
2018 | 2017 | |||||||
Brazilian real | 3.61 | 3.17 | (14 | )% |
2017 | 2018 | |||||||||||||||||||
March | June | September | December | March | June | September | ||||||||||||||
Brazilian real | 3.13 | 3.31 | 3.17 | 3.31 | 3.32 | 3.86 | 4.00 |
September 30, 2018 | September 30, 2017 | Actual Change from Previous Year | Constant Currency Change from Previous Year | ||||||||||||||
Dollars | B(W) Change | B(W) Change | |||||||||||||||
(dollars in thousands) | |||||||||||||||||
Three Months Ended | |||||||||||||||||
Brazil segment earnings (losses) | 12,749 | (27,266 | ) | 40,015 | 147 | % | 158 | % | |||||||||
Corporate segment losses | (4,601 | ) | (6,281 | ) | 1,680 | 27 | % | 27 | % | ||||||||
Consolidated segment earnings (losses) | 8,148 | (33,547 | ) | 41,695 | 124 | % | 129 | % | |||||||||
Impairment, restructuring and other benefits (charges), net | 2 | (34,794 | ) | 34,796 | 100 | % | 100 | % | |||||||||
Depreciation and amortization | (6,805 | ) | (6,091 | ) | (714 | ) | (12 | )% | (40 | )% | |||||||
Operating income (loss) | 1,345 | (74,432 | ) | 75,777 | 102 | % | 102 | % | |||||||||
Interest expense, net | (24,324 | ) | (33,278 | ) | 8,954 | 27 | % | (6 | )% | ||||||||
Interest income | 1,887 | 19,012 | (17,125 | ) | (90 | )% | (85 | )% | |||||||||
Foreign currency transaction (losses) gains, net | (12,238 | ) | 14,174 | (26,412 | ) | (186 | )% | (208 | )% | ||||||||
Other expense, net | (16,391 | ) | (10,964 | ) | (5,427 | ) | (49 | )% | (87 | )% | |||||||
Loss from continuing operations before income tax benefit | (49,721 | ) | (85,488 | ) | 35,767 | 42 | % | 27 | % | ||||||||
Income taxes | — | — | — | NM | NM | ||||||||||||
Net loss from continuing operations | (49,721 | ) | (85,488 | ) | 35,767 | 42 | % | 27 | % | ||||||||
Loss from discontinued operations, net of income taxes | (163 | ) | (92 | ) | (71 | ) | (77 | )% | (77 | )% | |||||||
Net loss | (49,884 | ) | (85,580 | ) | 35,696 | 42 | % | 27 | % | ||||||||
Net loss attributable to noncontrolling interest | (8,866 | ) | (24,622 | ) | 15,756 | 64 | % | 64 | % | ||||||||
Net loss attributable to NII Holdings | $ | (41,018 | ) | $ | (60,958 | ) | $ | 19,940 | 33 | % | 7 | % | |||||
Nine Months Ended | |||||||||||||||||
Brazil segment earnings (losses) | 16,436 | (11,813 | ) | 28,249 | 239 | % | 258 | % | |||||||||
Corporate segment losses | (12,751 | ) | (21,980 | ) | 9,229 | 42 | % | 42 | % | ||||||||
Consolidated segment earnings (losses) | 3,685 | (33,793 | ) | 37,478 | 111 | % | 111 | % | |||||||||
Impairment, restructuring and other charges, net | (14,070 | ) | (160,968 | ) | 146,898 | 91 | % | 90 | % | ||||||||
Depreciation and amortization | (21,855 | ) | (28,451 | ) | 6,596 | 23 | % | 12 | % | ||||||||
Operating loss | (32,240 | ) | (223,212 | ) | 190,972 | 86 | % | 84 | % | ||||||||
Interest expense, net | (78,940 | ) | (91,245 | ) | 12,305 | 13 | % | (7 | )% | ||||||||
Interest income | 8,866 | 35,956 | (27,090 | ) | (75 | )% | (71 | )% | |||||||||
Foreign currency transaction (losses) gains, net | (60,092 | ) | 12,197 | (72,289 | ) | NM | NM | ||||||||||
Other expense, net | (25,972 | ) | (5,104 | ) | (20,868 | ) | NM | NM | |||||||||
Loss from continuing operations before income tax benefit | (188,378 | ) | (271,408 | ) | 83,030 | 31 | % | 22 | % | ||||||||
Income tax benefit | — | 5,778 | (5,778 | ) | (100 | )% | (100 | )% | |||||||||
Net loss from continuing operations | (188,378 | ) | (265,630 | ) | 77,252 | 29 | % | 20 | % | ||||||||
(Loss) income from discontinued operations, net of income taxes | (2,946 | ) | 2,567 | (5,513 | ) | (215 | )% | (215 | )% | ||||||||
Net loss | (191,324 | ) | (263,063 | ) | 71,739 | 27 | % | 18 | % | ||||||||
Net loss attributable to noncontrolling interest | (47,965 | ) | (24,622 | ) | (23,343 | ) | (95 | )% | (95 | )% | |||||||
Net loss attributable to NII Holdings | $ | (143,359 | ) | $ | (238,441 | ) | $ | 95,082 | 40 | % | 31 | % |
1. | Impairment, restructuring and other charges, net |
2. | Interest income |
3. | Foreign currency transaction (losses) gains, net |
September 30, 2018 | % of Nextel Brazil’s Operating Revenues | September 30, 2017 | % of Nextel Brazil’s Operating Revenues | Actual Change from Previous Year | Constant Currency Change from Previous Year | ||||||||||||||||||
Dollars | B(W) Change | B(W) Change | |||||||||||||||||||||
(dollars in thousands) | |||||||||||||||||||||||
Three Months Ended | |||||||||||||||||||||||
Service and other revenues | $ | 138,596 | 98 | % | $ | 200,850 | 98 | % | $ | (62,254 | ) | (31 | )% | (14 | )% | ||||||||
Handset and accessory revenues | 3,141 | 2 | % | 4,549 | 2 | % | (1,408 | ) | (31 | )% | (14 | )% | |||||||||||
Cost of handsets and accessories | (3,452 | ) | (2 | )% | (8,736 | ) | (4 | )% | 5,284 | 60 | % | 51 | % | ||||||||||
Handset and accessory net subsidy | (311 | ) | — | (4,187 | ) | (2 | )% | 3,876 | 93 | % | 91 | % | |||||||||||
Cost of service (exclusive of depreciation and amortization) | (61,634 | ) | (44 | )% | (91,230 | ) | (44 | )% | 29,596 | 32 | % | 15 | % | ||||||||||
Selling and marketing expenses | (18,902 | ) | (13 | )% | (28,275 | ) | (14 | )% | 9,373 | 33 | % | 16 | % | ||||||||||
General and administrative expenses | (45,000 | ) | (32 | )% | (104,424 | ) | (51 | )% | 59,424 | 57 | % | 46 | % | ||||||||||
Segment earnings (losses) | $ | 12,749 | 9 | % | $ | (27,266 | ) | (13 | )% | $ | 40,015 | 147 | % | 158 | % | ||||||||
Nine Months Ended | |||||||||||||||||||||||
Service and other revenues | $ | 465,581 | 97 | % | $ | 664,363 | 97 | % | $ | (198,782 | ) | (30 | )% | (20 | )% | ||||||||
Handset and accessory revenues | 13,383 | 3 | % | 17,066 | 2 | % | (3,683 | ) | (22 | )% | (11 | )% | |||||||||||
Cost of handsets and accessories | (19,532 | ) | (4 | )% | (30,443 | ) | (4 | )% | 10,911 | 36 | % | 27 | % | ||||||||||
Handset and accessory net subsidy | (6,149 | ) | (1 | )% | (13,377 | ) | (2 | )% | 7,228 | 54 | % | 48 | % | ||||||||||
Cost of service (exclusive of depreciation and amortization) | (220,295 | ) | (46 | )% | (281,780 | ) | (41 | )% | 61,485 | 22 | % | 11 | % | ||||||||||
Selling and marketing expenses | (55,628 | ) | (12 | )% | (78,843 | ) | (12 | )% | 23,215 | 29 | % | 20 | % | ||||||||||
General and administrative expenses | (167,073 | ) | (35 | )% | (302,176 | ) | (44 | )% | 135,103 | 45 | % | 37 | % | ||||||||||
Segment earnings (losses) | $ | 16,436 | 3 | % | $ | (11,813 | ) | (2 | )% | $ | 28,249 | 239 | % | 258 | % |
Three Months Ended | ||||||||||||||||||||
March 31, 2017 | June 30, 2017 | September 30, 2017 | December 31, 2017 | March 31, 2018 | June 30, 2018 | September 30, 2018 | ||||||||||||||
(subscribers in thousands) | ||||||||||||||||||||
WCDMA subscriber units | 2,815.2 | 2,874.6 | 2,864.8 | 2,845.8 | 2,896.1 | 3,023.8 | 3,121.0 | |||||||||||||
iDEN subscriber units | 822.7 | 686.3 | 563.3 | 449.7 | 349.6 | 230.4 | — | |||||||||||||
Total subscriber units in commercial service — beginning of period | 3,637.9 | 3,560.9 | 3,428.1 | 3,295.5 | 3,245.7 | 3,254.2 | 3,121.0 | |||||||||||||
WCDMA net subscriber additions (losses) | 38.4 | (29.3 | ) | (32.3 | ) | 26.8 | 92.9 | 65.7 | 85.7 | |||||||||||
iDEN net subscriber losses | (115.4 | ) | (103.5 | ) | (100.3 | ) | (76.6 | ) | (84.4 | ) | (198.9 | ) | — | |||||||
Total net subscriber (losses) additions | (77.0 | ) | (132.8 | ) | (132.6 | ) | (49.8 | ) | 8.5 | (133.2 | ) | 85.7 | ||||||||
Migrations from iDEN to WCDMA | 21.0 | 19.5 | 13.3 | 23.5 | 34.8 | 31.5 | — | |||||||||||||
WCDMA subscriber units | 2,874.6 | 2,864.8 | 2,845.8 | 2,896.1 | 3,023.8 | 3,121.0 | 3,206.7 | |||||||||||||
iDEN subscriber units | 686.3 | 563.3 | 449.7 | 349.6 | 230.4 | — | — | |||||||||||||
Total subscriber units in commercial service — end of period | 3,560.9 | 3,428.1 | 3,295.5 | 3,245.7 | 3,254.2 | 3,121.0 | 3,206.7 | |||||||||||||
WCDMA subscriber turnover | 3.23 | % | 3.53 | % | 4.04 | % | 3.47 | % | 2.37 | % | 2.75 | % | 2.68 | % | ||||||
iDEN subscriber turnover | 5.52 | % | 5.88 | % | 6.89 | % | 6.36 | % | 9.67 | % | NM | — | ||||||||
Total subscriber turnover | 3.71 | % | 3.95 | % | 4.47 | % | 3.83 | % | 3.02 | % | 4.68 | % | 2.68 | % |
Three Months Ended | ||||||||||||||||||||
March 31, 2017 | June 30, 2017 | September 30, 2017 | December 31, 2017 | March 31, 2018 | June 30, 2018 | September 30, 2018 | ||||||||||||||
Total service ARPU (US$) | 21 | 19 | 19 | 18 | 17 | 15 | 14 | |||||||||||||
WCDMA service ARPU (US$) | 22 | 20 | 19 | 18 | 18 | 15 | 14 | |||||||||||||
iDEN service ARPU (US$) | 17 | 15 | 15 | 14 | 12 | 8 | — | |||||||||||||
Total service ARPU (BR) | 65 | 62 | 59 | 57 | 56 | 54 | 56 | |||||||||||||
WCDMA service ARPU (BR) | 68 | 65 | 61 | 58 | 58 | 55 | 56 | |||||||||||||
iDEN service ARPU (BR) | 54 | 49 | 47 | 47 | 38 | 26 | — |
1. | Service and other revenues |
2. | Handset and accessory net subsidy |
3. | Cost of service |
4. | Selling and marketing expenses |
5. | General and administrative expenses |
September 30, 2018 | September 30, 2017 | Change from Previous Year | ||||||||||||
Dollars | B(W) Change | |||||||||||||
(dollars in thousands) | ||||||||||||||
Three Months Ended | ||||||||||||||
Service and other revenues | $ | — | $ | 24 | $ | (24 | ) | (100 | )% | |||||
General and administrative expenses | (4,601 | ) | (6,305 | ) | 1,704 | 27 | % | |||||||
Segment losses | $ | (4,601 | ) | $ | (6,281 | ) | $ | 1,680 | 27 | % | ||||
Nine Months Ended | ||||||||||||||
Service and other revenues | $ | 22 | $ | 83 | $ | (61 | ) | (73 | )% | |||||
General and administrative expenses | (12,773 | ) | (22,063 | ) | 9,290 | 42 | % | |||||||
Segment losses | $ | (12,751 | ) | $ | (21,980 | ) | $ | 9,229 | 42 | % |
Nine Months Ended | |||||||
September 30, 2018 | September 30, 2017 | ||||||
Cash, cash equivalents and restricted cash, beginning of period | $ | 305,778 | $ | 422,232 | |||
Net cash used in operating activities | (96,885 | ) | (62,657 | ) | |||
Net cash (used in) provided by investing activities | (46,420 | ) | 28,143 | ||||
Net cash provided by (used in) financing activities | 99,867 | (41,249 | ) | ||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (1,536 | ) | 543 | ||||
Cash, cash equivalents and restricted cash, end of period | $ | 260,804 | $ | 347,012 |
• | the amount of revenue we are able to generate and collect from our subscribers, including our ability to increase the size of our subscriber base; |
• | the amount of operating expenses required to provide our services; |
• | the cost of acquiring and retaining subscribers, including the subsidies we incur to provide handsets to both our new and existing subscribers; and |
• | changes in foreign currency exchange rates. |
• | operating expenses and capital expenditures relating to our existing network and the continued deployment of LTE in São Paulo; |
• | payments in connection with previous spectrum purchases and ongoing spectrum license fees; |
• | debt service requirements; |
• | obligations relating to our tower financing arrangements and capital lease obligations; |
• | cash taxes; and |
• | other general corporate expenditures. |
• | the amount we spend to enhance our WCDMA network and deploy LTE in certain areas; |
• | the extent to which we expand the coverage of our network in new or existing market areas; |
• | the number of additional transmitter and receiver sites we build in order to increase system capacity, maintain system quality and meet our regulatory requirements, as well as the costs associated with the installation of network infrastructure and switching equipment; and |
• | the costs we incur in connection with non-network related information technology projects. |
• | cash and cash equivalents on hand and short-term investments available to fund our operations; |
• | restricted cash currently held in escrow to secure our indemnification obligations in connection with the sale of Nextel Mexico; |
• | expected cash flows from our operations in Brazil; |
• | the timing of spectrum payments, including ongoing fees for spectrum use; |
• | our anticipated level of capital expenditures; |
• | our scheduled debt service obligations; |
• | our other contractual obligations; |
• | potential incremental investments by Access Industries; and |
• | cash income and other taxes. |
• | based on the continued development of our business plans and strategy; |
• | if currency values in Brazil depreciate or appreciate relative to the U.S. dollar in a manner that is more significant than we currently expect and assume as part of our plans; |
• | if economic conditions in Brazil do not improve or worsen; |
• | if we are subject to litigation involving tax and other matters requiring material judicial deposits of cash that will not be released until the pending matter is resolved; |
• | if competitive practices in the mobile wireless telecommunications industry in Brazil change materially from those currently prevailing or from those now anticipated; or |
• | if other presently unexpected circumstances arise that have a material effect on the cash flow or profitability of our business, such as contingencies. |
• | our ability to attract and retain subscribers; |
• | our ability to satisfy the requirements of our debt obligations; |
• | our ability to access sufficient debt or equity capital to meet any future operating and financial needs; |
• | our ability to meet established operating goals and generate cash flow; |
• | the availability of other funding sources, including the timely resolution of claims and receipt of proceeds from the sale of Nextel Mexico held in escrow; |
• | risks associated with our partnership with Access Industries; |
• | general economic conditions in Brazil, including political instability, which may affect Brazil's economy and the regulatory environment there; |
• | the impact of foreign currency exchange rate volatility in the local currency in Brazil when compared to the U.S. dollar and the impact of related currency depreciation in Brazil; |
• | our having reasonable access to and the successful performance of the technology being deployed in our service areas, and improvements thereon, including technology deployed in connection with digital two-way mobile data or internet connectivity services in Brazil; |
• | the availability of adequate quantities of system infrastructure and subscriber equipment and components at reasonable pricing to meet our service deployment and marketing plans and customer demand; |
• | risks related to the operation and expansion of our network in Brazil, including the potential need for additional funding to support enhanced coverage and capacity, and the risk that we will not attract enough subscribers to support the related costs of deploying or operating the network; |
• | our ability to successfully scale our billing, collection, customer care and similar back-office operations to keep pace with customer growth as necessary, increased system usage rates and growth or to successfully deploy new systems that support those functions; |
• | future legislation or regulatory actions relating to our services, other wireless communications services or telecommunications generally and the costs and/or potential customer impacts of compliance with regulatory mandates; |
• | the ability to achieve and maintain market penetration and average subscriber revenue levels sufficient to provide financial viability to our business; |
• | the quality and price of similar or comparable wireless communications services offered or to be offered by our competitors, including providers of cellular services and personal communications services; |
• | market acceptance of our new service offerings; |
• | a requirement to provide material judicial deposits of cash that will not be released until the pending matter is resolved in order for litigation involving tax and other matters to be heard by the courts in Brazil; |
• | equipment failure, natural disasters, terrorist acts or other breaches of network or information technology security; and |
• | other risks and uncertainties described in Part I, Item 1A. "Risk Factors," in our annual report on Form 10-K for the year ended December 31, 2017, as well as Part II — Other Information — Item 1A. "Risk Factors" in our quarterly report on Form 10-Q for the three months ended June 30, 2018 and, from time to time, in our other reports filed with the SEC. |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Item 4. | Controls and Procedures |
Item 1. | Legal Proceedings |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
Period | Total Number of Shares Purchased | Average Price Per Share | Total Number of Shares Purchased as Part of Program | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program | ||||||||||
July 1, 2018 — July 31, 2018 | — | (1) | $ | — | — | |||||||||
August 1, 2018 — August 31, 2018 | 114,571 | (1) | 5.47 | 114,571 | ||||||||||
September 1, 2018 — September 30, 2018 | — | (1) | — | — | ||||||||||
Total | 114,571 | (1) | 5.47 | 114,571 | $ | — |
Exhibit Number | Exhibit Description | Form | Exhibit | Incorporated by Reference Filing Date | Filed Herewith | |||||
4.1 | 8-K | 4.1 | 08/14/18 | |||||||
4.2 | 8-K | 4.2 | 08/14/18 | |||||||
31.1 | * | |||||||||
31.2 | * | |||||||||
32.1 | * | |||||||||
32.2 | * | |||||||||
101 | The following materials from the NII Holdings, Inc. Quarterly Report on Form 10-Q for the quarter ended September 30, 2018 formatted in eXtensible Business Reporting Language (XBRL): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Comprehensive Loss, (iii) Condensed Consolidated Statement of Changes in Stockholders’ Deficit, (iv) Condensed Consolidated Statements of Cash Flows and (v) Notes to Condensed Consolidated Financial Statements. | * |
By: | /s/ TIMOTHY M. MULIERI | |
Timothy M. Mulieri | ||
Vice President, Corporate Controller | ||
(on behalf of the registrant and as Principal Accounting Officer) |
1. | I have reviewed this quarterly report on Form 10-Q for the period ended September 30, 2018 of NII Holdings, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ ROBERTO RITTES | ||
Roberto Rittes | ||
Principal Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q for the period ended September 30, 2018 of NII Holdings, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ DANIEL E. FREIMAN | ||
Daniel E. Freiman | ||
Chief Financial Officer |
1. | The Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ ROBERTO RITTES | ||
Roberto Rittes | ||
Principal Executive Officer |
1. | The Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ DANIEL E. FREIMAN | ||
Daniel E. Freiman | ||
Chief Financial Officer |
Document and Entity Information Statement - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Nov. 02, 2018 |
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | NII HOLDINGS INC | |
Central Index Key | 0001037016 | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting status | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Common Stock, Shares Outstanding | 100,873,423 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q3 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2018 |
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Allowance for doubtful Accounts | $ 22,105 | $ 42,011 |
Undesignated preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Undesignated preferred stock, shares authorized (shares) | 10,000,000 | 10,000,000 |
Undesignated preferred stock, shares issued (shares) | 0 | 0 |
Undesignated preferred stock, shares outstanding (shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized (shares) | 140,000,000 | 140,000,000 |
Common stock, shares issued (shares) | 100,744,000 | 100,384,000 |
Common stock, shares outstanding (shares) | 100,744,000 | 100,384,000 |
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT - USD ($) shares in Thousands, $ in Thousands |
Total |
Common Stock |
Paid-in Capital |
Accumulated Deficit |
Accumulated Other Comprehensive Loss |
Total NII Holdings Stockholders’ Deficit |
Noncontrolling Interest |
---|---|---|---|---|---|---|---|
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Implementation of revenue recognition accounting standard | $ 48,703 | $ 34,100 | $ 34,100 | $ 14,603 | |||
Beginning balance (shares) at Dec. 31, 2017 | 100,384 | ||||||
Beginning balance at Dec. 31, 2017 | (111,188) | $ 100 | $ 2,139,299 | (2,127,876) | $ (47,266) | (35,743) | (75,445) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net loss | (191,324) | (143,359) | (143,359) | (47,965) | |||
Other comprehensive income | 64,731 | 45,453 | 45,453 | 19,278 | |||
Share-based compensation activity (shares) | 360 | ||||||
Share-based compensation activity | 2,067 | $ 1 | 1,780 | 1,781 | 286 | ||
Ending balance (shares) at Sep. 30, 2018 | 100,744 | ||||||
Ending balance at Sep. 30, 2018 | $ (187,011) | $ 101 | $ 2,141,079 | $ (2,237,135) | $ (1,813) | $ (97,768) | $ (89,243) |
Basis of Presentation |
9 Months Ended |
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Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation Overview. Unless the context requires otherwise, "NII Holdings, Inc.," "NII Holdings," "we," "our," "us" and "the Company" refer to the combined businesses of NII Holdings, Inc. and its consolidated subsidiaries. Our unaudited condensed consolidated financial statements have been prepared under the rules and regulations of the Securities and Exchange Commission, or the SEC. While these financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements, they reflect all adjustments that, in the opinion of management, are necessary for a fair presentation of the results for interim periods. In addition, the year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States. We refer to our majority-owned Brazilian operating company, Nextel Telecomunicações Ltda., as Nextel Brazil. You should read these condensed consolidated financial statements in conjunction with the consolidated financial statements and notes contained in our annual report on Form 10-K for the year ended December 31, 2017 and the condensed consolidated financial statements and notes contained in our quarterly reports on Form 10-Q for the periods ended March 31, 2018 and June 30, 2018. You should not expect results of operations for interim periods to be an indication of the results for a full year. Our consolidated results from continuing operations in this quarterly report on Form 10-Q include the results of operations of Nextel Brazil and our corporate headquarters. Revision of Prior Period Financial Statements. In connection with the preparation of our condensed consolidated financial statements for the three months ended September 30, 2018, we determined that two errors existed in our previously filed financial statements. Specifically, for both the three and nine months ended September 30, 2017, service and other revenues were understated by $0.6 million, cost of handsets and accessories was overstated by $2.8 million, impairment, restructuring and other charges, net was overstated by $4.3 million and depreciation was overstated by $1.2 million. These errors were the result of improperly recording expenses for certain non-income based tax credits and restructuring charges for certain transmitter and receiver sites. We evaluated these errors in accordance with the Securities and Exchange Commission's, or the SEC's, authoritative guidance on materiality and the quantification of the effect of prior period misstatements on financial statements, and we determined that the impact of these errors on our prior period consolidated financial statements is immaterial. However, since the correction of these errors in the third quarter of 2018 could have been considered material to our results of operations for the three months ended September 30, 2018 and may be material to our results of operations for the year ending December 31, 2018, we revised our prior period financial statements to correct these errors herein. As a result of the correction of these errors, as of December 31, 2017, prepaid expenses and other increased $9.6 million, intangible assets, net decreased $2.9 million, other assets increased $1.8 million, other long-term liabilities decreased $2.3 million, accumulated deficit decreased $7.9 million, accumulated other comprehensive loss increased $0.3 million and noncontrolling interest increased $3.2 million. For both the three and nine months ended September 30, 2017, the correction of these errors resulted in an $8.9 million decrease in operating loss, loss from continuing operations and net loss, a $2.7 million decrease in net loss attributable to noncontrolling interest and a $6.2 million decrease in net loss attributable to NII Holdings. In addition, for both the three and nine months ended September 30, 2017, the correction of these errors resulted in a $0.09 decrease in both net loss from continuing operations per basic and diluted common share and net loss attributable to NII Holdings per basic and diluted common share. The impact of the correction of these errors on each of these line items in our condensed consolidated financial statements for the three months ended March 31, 2018 and for the three and six months ended June 30, 2018 was immaterial. Minority Investment. On June 5, 2017, we and AINMT Holdings AB, or ice group, an international telecommunications company operating primarily in Norway under the "ice.net" brand, along with certain affiliates of ours and ice group, entered into an investment agreement to partner in the ownership of Nextel Brazil. On July 20, 2017, ice group completed its initial investment of $50.0 million in Nextel Holdings S. à r.l., or Nextel Holdings, a newly formed subsidiary of NII that indirectly owns Nextel Brazil, in exchange for 30% ownership in Nextel Holdings. In connection with the initial investment, ice group received 50.0 million shares of cumulative preferred voting stock in Nextel Holdings, and we received 116.6 million shares of common stock in this entity. The investment agreement also provided ice group with an option, exercisable on or before November 15, 2017, to invest an additional $150.0 million in Nextel Holdings for an additional 30% ownership. ice group did not exercise its option, and on February 27, 2018, we terminated the investment agreement. In September 2018, ice group completed the sale of its 30% ownership interest in Nextel Holdings by selling the shares of its intermediary holding company, AI Brazil Holdings B.V., to AI Media Holdings (NMT) LLC (90%), or Access Industries, and Bridford Music Holdings B.V. (10%). Since we continue to have a controlling interest in Nextel Brazil, we have consolidated this entity and its subsidiaries. New Accounting Pronouncements. In February 2016, the Financial Accounting Standards Board, or the FASB, issued Accounting Standards Update, or ASU, No. 2016-02, "Leases," or Accounting Standards Codification 842, which we refer to as ASC 842. ASC 842 replaces existing leasing rules with a comprehensive lease measurement and recognition standard and expanded disclosure requirements. ASC 842 will require lessees to recognize most leases on their balance sheet as liabilities, with corresponding "right-of-use" assets, and is effective for interim and annual reporting periods beginning after December 15, 2018, subject to early adoption. The new standard allows us to make an accounting policy election not to recognize lease assets and liabilities on the balance sheet for leases with a term of 12 months or less. In transition, lessees have the option to recognize and measure leases either at the beginning of the earliest period presented or at the beginning of the period of adoption using a modified retrospective approach. We expect to adopt ASC 842 on January 1, 2019 utilizing the modified retrospective approach. The modified retrospective approach includes a package of optional practical expedients that we plan to elect to apply. Upon adoption, we currently expect to record a material amount of lease liabilities and provide significant new disclosures regarding our leasing activities as required. We are continuing to evaluate the additional effects this standard will have on our consolidated financial statements. Recently Adopted Accounting Pronouncements. In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers,” which we refer to as ASC 606. This new pronouncement provides us with a single revenue recognition model for recognizing revenue from contracts with customers and significantly expands the disclosure requirements for revenue arrangements. We implemented ASC 606 on January 1, 2018 using the modified retrospective method. We did not retroactively adjust prior periods. In utilizing the modified retrospective method, we are recognizing the cumulative effect of applying the standard at the date of initial application, and we will continue to disclose the results under both the new and old standards for the remainder of the first year after adoption. See Note 2 for more information regarding the adoption of ASC 606. In November 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash,” or ASU 2016-18, which provides guidance regarding cash flow statement classification and presentation of changes in restricted cash. We implemented this new standard on January 1, 2018. As required, we provided a reconciliation of cash and cash equivalents as presented in our condensed consolidated balance sheets to cash, cash equivalents and restricted cash as presented in our condensed consolidated statements of cash flows for all periods presented in Note 4. Reclassifications. We have reclassified some prior period amounts in our condensed consolidated financial statements to conform to our current presentation. |
Revenue Recognition |
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Revenue Recognition [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue Recognition | Revenue Recognition On January 1, 2018, we implemented ASC 606 using the modified retrospective method. The primary change to our revenue recognition policies relates to contracts with customers where the customer purchases a discounted handset in connection with entering into a contract for telecommunications services. In accordance with ASC 606, we allocate revenue between the handset and the service based on relative standalone selling price, or SSP. We recognize revenue when we satisfy a performance obligation by providing services or transferring control of promised handsets and accessories, which are distinct to a customer. We recognize revenue in an amount that reflects the consideration to which we expect to be entitled for those performance obligations. A description of the principal activities from which Nextel Brazil generates its revenue, as well as the associated policies that govern the way in which we recognize these revenues, is as follows: Service and Other Revenues. Nextel Brazil's wireless service revenues primarily consist of access charges for providing customers with voice, data or messaging services over the contract period. We recognize revenue related to access charges ratably over the contract period. The typical length of our service contracts is 12 months for individual customers and 24 months for corporate customers. We elected the practical expedient to record all revenue net of taxes collected from customers, which are subsequently remitted to governmental authorities. Handset and Accessory Revenues. We recognize handset and accessory revenue when a subscriber takes possession of a device. The transaction price of the handset sold, if any, is billed at the time of sale. Although more than 90% of our subscribers typically purchase services only and acquire a handset separately, the remainder of our subscriber base purchases a handset offered at a discounted price bundled with services. In these types of bundled sales, we allocate a portion of our future service billings to the handset and recognize revenue upon handset delivery at the inception of the contract, which results in a contract asset. We determined that contracts with terms longer than one year that involve the sale of both a handset and related services generally do not include a significant financing component. Significant Judgments and Estimates. Nextel Brazil's subscribers generally enter into service contracts with a commitment period in exchange for discounts on handsets and/or service fees. The penalty applied upon early termination of a contract declines over time in proportion to the remaining commitment period. We concluded that the commitment period should be identical to the contract period since, at any point, the early termination penalty is significant relative to the remaining monthly service fees under the contract. In cases where a contract includes both a handset and accessories, for which we recognize handset and accessory revenue at a point in time, and services, for which we recognize revenue ratably over time, judgment is required to determine the SSP for each distinct performance obligation in order to allocate consideration properly. We use a range of amounts to estimate SSP when we sell each of the products and services separately. Remaining Performance Obligations. As of September 30, 2018, we have $270.6 million of remaining performance obligations under open service contracts. For these service contracts, we expect to recognize $259.8 million in operating revenues in the period from October 1, 2018 through September 30, 2019 and $10.8 million thereafter. Contract Assets and Liabilities. Contract assets primarily relate to the remaining portion of Nextel Brazil's future service billings allocated to handsets and recognized into revenue upon handset delivery at the inception of the contract. As of September 30, 2018 and January 1, 2018, Nextel Brazil had $4.4 million and $5.5 million in total contract assets, respectively, $3.8 million and $4.5 million of which we classified as a component of prepaid expenses and other in our condensed consolidated balance sheets for these periods. We transfer contract assets to receivables when Nextel Brazil's right to bill becomes unconditional. Contract liabilities primarily relate to upfront fees for wireless services for which the services have not yet been provided. As of September 30, 2018 and January 1, 2018, Nextel Brazil had $2.3 million and $1.7 million in total contract liabilities, respectively, substantially all of which we classified as a component of accrued expenses and other in our condensed consolidated balance sheet. The changes to both the contract asset and contract liability balances during the period, which include opening balances amortized into revenue, were not significant. Cost to Obtain Contracts with Customers. We recognize an asset for the incremental costs of obtaining a contract with a customer. These costs include commissions and related costs for sales employees of Nextel Brazil, and commissions payable to our third party distribution channel partners. We amortize these types of costs ratably using the portfolio approach over the estimated customer relationship period, which includes expected future contract renewals. Under the previous accounting standard, we expensed commissions as incurred. As of September 30, 2018 and January 1, 2018, Nextel Brazil had $36.6 million and $42.8 million of deferred costs, respectively, related to expenses required to obtain a contract. Of these total deferred costs, as of September 30, 2018 and January 1, 2018, we recorded $20.7 million and $16.3 million, respectively, as a component of prepaid expenses and other and the remaining $15.9 million and $26.5 million, respectively, as a component of other assets in our condensed consolidated balance sheet. In addition, Nextel Brazil recorded $3.3 million and $11.7 million, respectively, in total commissions expense during the three and nine months ended September 30, 2018 as a component of selling, general and administrative expenses in our condensed consolidated statement of comprehensive loss. Adoption Impact. Following is a comparison of our reported results of operations for the three and nine months ended September 30, 2018 compared to amounts that we would have reported had we not adopted ASC 606 (in thousands):
Without the adoption of ASC 606 on January 1, 2018, our basic and diluted net loss from continuing operations per common share would have improved by $0.01 for the three months ended September 30, 2018 and would have been $0.02 lower for the nine months ended September 30, 2018. Components of Transition Adjustment. As of January 1, 2018, the cumulative impact of the implementation of ASC 606 included the recognition of contract assets and liabilities, as well as the capitalization of costs to obtain contracts with customers. In total, these effects resulted in a cumulative adjustment on January 1, 2018 that was comprised of a $21.2 million increase to prepaid expenses and other, a $26.8 million increase to other assets, a $1.1 million increase to accrued expenses and other and a $1.8 million decrease to other long-term liabilities. |
Impairment, Restructuring and Other Charges |
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Impairment, Restructuring and Other Charges | Impairment, Restructuring and Other Charges Long-Lived Asset Impairment. During the first quarter of 2017, we reviewed our Nextel Brazil segment for potential impairment and determined that the carrying value of this segment was not fully recoverable. As a result, during the nine months ended September 30, 2017, we recorded non-cash asset impairment charges of $56.5 million to reduce the carrying values of Nextel Brazil's long-lived assets to their respective fair values and allocated these impairment charges on a pro rata basis between property, plant and equipment and spectrum licenses. Other Asset Impairments. During the three and nine months ended September 30, 2017, Nextel Brazil recognized $3.1 million and $7.0 million in other non-cash asset impairment charges, respectively. The charges recognized in all periods primarily related to the abandonment of certain transmitter and receiver sites that were no longer required in Nextel Brazil's business. Restructuring Charges. During the three and nine months ended September 30, 2018, Nextel Brazil recognized $11.9 million and $37.1 million in restructuring costs, respectively, the majority of which related to future lease costs for approximately 500 iDEN-related transmitter and receiver sites. In addition, during the three months ended September 30, 2018, Nextel Brazil reversed $9.4 million in previously accrued restructuring charges in connection with the determination that approximately 400 transmitter and receiver sites related to Nextel Brazil's radio access network, or RAN, sharing project will continue to be utilized. In an effort to further reduce costs, in the first quarter of 2018, Nextel Brazil entered into arrangements with certain of its tower lessors for the right to exchange approximately 600 unused transmitter and receiver sites for other sites. During the first quarter of 2018, we identified approximately 250 transmitter and receiver sites that we plan to exchange pursuant to these arrangements, 200 of which were completed during the second quarter of 2018. As a result, Nextel Brazil reversed $13.7 million in previously accrued restructuring charges in the first quarter of 2018. During the third quarter of 2018, we identified approximately 110 additional transmitter and receiver sites that we plan to exchange pursuant to these arrangements and reversed $3.6 million in previously accrued restructuring charges in the third quarter of 2018. During the three and nine months ended September 30, 2017, Nextel Brazil recognized $9.2 million and $61.8 million in restructuring costs, respectively, the majority of which related to future lease costs for approximately 1,350 transmitter and receiver sites in low-usage areas in connection with Nextel Brazil's RAN sharing agreement. In addition, during the nine months ended September 30, 2017, Nextel Brazil recognized $4.9 million in severance and other related costs resulting from the separation of certain executive level employees. During the third quarter of 2017, as a result of a change in the scope of Nextel Brazil's RAN sharing implementation, Nextel Brazil determined that RAN sharing would no longer be utilized for approximately 700 transmitter and receiver sites. As a result, Nextel Brazil recognized $29.9 million in restructuring costs, of which $15.0 million relates to the present value of future payments to which Nextel Brazil was committed and the remainder relates to the impairment of certain prepayments and other deferred costs attributable to these transmitter and receiver sites. Total impairment, restructuring and other (benefits) charges, net for the three and nine months ended September 30, 2018 and 2017 were as follows (in thousands):
As of September 30, 2018, total accrued restructuring charges were as follows (in thousands):
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Supplemental Financial Statement Information |
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Supplemental Financial Statement Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Financial Statement Information | Supplemental Financial Statement Information Restricted Cash. In November 2016, the FASB issued ASU 2016-18, which requires condensed consolidated statements of cash flows to explain the change in restricted cash and restricted cash equivalents, in addition to the change in cash and cash equivalents as previously required. We adopted this ASU on January 1, 2018. As a result of this adoption, the cash and cash equivalents balances in our condensed consolidated statements of cash flows now include restricted cash of $108.1 million as of September 30, 2018, $111.9 million as of December 31, 2017, $112.3 million as of September 30, 2017 and $164.9 million as of December 31, 2016. Our restricted cash relates to cash held in escrow in connection with the sale of Nextel Mexico and certain judicial deposits of cash in Brazil related to litigation involving tax and other matters. A reconciliation from cash and cash equivalents as presented in our condensed consolidated balance sheets to cash, cash equivalents and restricted cash as reported in our condensed consolidated statements of cash flows is as follows:
Prepaid Expenses and Other. The components of our prepaid expenses and other current assets are as follows:
Property, Plant and Equipment, Net. During the three and nine months ended September 30, 2018 and 2017, we capitalized immaterial amounts of interest. The components of our property, plant and equipment, net are as follows:
Intangible Assets, Net. Our intangible assets include the following:
Based on the carrying amount of our intangible assets as of September 30, 2018 and current exchange rates, we estimate amortization expense for each of the next five years ending December 31 to be as follows (in thousands):
Actual amortization expense to be reported in future periods could differ from these estimates as a result of additional acquisitions of intangibles, as well as changes in foreign currency exchange rates and other relevant factors. Other Assets. The components of our other long-term assets are as follows:
Accrued Expenses and Other. The components of our accrued expenses and other are as follows:
Other Long-Term Liabilities. The components of our other long-term liabilities are as follows:
In connection with the issuance of our convertible senior notes in August 2018, we have accounted for the embedded conversion feature separately from the notes and recorded a non-current derivative liability at its fair value on our condensed consolidated balance sheet. See Note 6 for more information regarding our convertible senior notes. Accumulated Other Comprehensive Income (Loss). As of September 30, 2018 and December 31, 2017, the tax impact on our accumulated other comprehensive loss was not material. In addition, as of September 30, 2018 and December 31, 2017, all of our accumulated other comprehensive loss represented cumulative foreign currency translation adjustment. Supplemental Cash Flow Information.
We did not have any significant non-cash investing or financing activities during the nine months ended September 30, 2018 and 2017. Revenue-Based Taxes. Prior to the implementation of ASC 606, we recorded certain revenue-based taxes on a gross basis. For the three and nine months ended September 30, 2017, we recognized $6.0 million and $23.1 million, respectively, in revenue-based taxes as a component of both service and other revenues and selling, general and administrative expenses in our condensed consolidated statement of comprehensive loss. As a result of the adoption of ASC 606, we now record all revenue net of taxes collected from customers. If we had not implemented ASC 606 on January 1, 2018, we would have recognized an additional $3.4 million and $12.1 million, respectively, in revenue-based taxes as a component of both service and other revenues and selling, general and administrative expenses in our condensed consolidated statement of comprehensive loss during the three and nine months ended September 30, 2018. Diluted Net Loss Per Common Share. As presented for the three and nine months ended September 30, 2018 and 2017, our calculation of diluted net loss from continuing operations per common share is based on the weighted average number of common shares outstanding during those periods and does not include other potential common shares, including common shares resulting from the potential conversion of our convertible senior notes, common shares issuable upon the potential exercise of stock options under our stock-based employee compensation plans or restricted common shares issued under those plans since their effect would have been antidilutive. For the three and nine months ended September 30, 2018, we did not include 18.5 million common shares related to the potential conversion of our convertible senior notes because their effect would have been antidilutive. For the same periods, we did not include 3.5 million and 3.4 million stock options, respectively, in our calculation of diluted net loss from continuing operations per common share because their effect would have been antidilutive. In addition, for the three and nine months ended September 30, 2018, we did not include 1.4 million and 0.7 million restricted common shares, respectively, in our calculation of diluted net loss from continuing operations per common share because their effect would have been antidilutive. For the three and nine months ended September 30, 2017, we did not include 3.7 million and 3.5 million stock options, respectively, in our calculation of diluted net loss from continuing operations per common share because their effect would have been antidilutive. In addition, for the three and nine months ended September 30, 2017, we did not include 0.1 million and 0.3 million restricted common shares, respectively, in our calculation of diluted net loss from continuing operations per common share because their effect would have been antidilutive. |
Discontinued Operations |
9 Months Ended |
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Sep. 30, 2018 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Discontinued Operations | Discontinued Operations Sale of Nextel Mexico. On April 30, 2015, we, together with our wholly-owned subsidiary NIU Holdings LLC, completed the sale of our Mexican operations to New Cingular Wireless, an indirect subsidiary of AT&T. The transaction was structured as a sale of all of the outstanding stock of the parent company of Comunicaciones Nextel de Mexico, S.A. de C.V., or Nextel Mexico, for a purchase price of $1.875 billion, including $187.5 million deposited in escrow to satisfy potential indemnification claims. In 2016, we paid $4.0 million, plus interest, out of escrow to settle an indemnification claim, and in July 2018, we utilized $4.0 million of cash held in escrow to settle tax audits for the years 2010 and 2011 discussed below. As of September 30, 2018, $73.5 million of the cash held in escrow has been released to us and $106.1 million, which includes interest, remains deposited in escrow related to certain potential tax indemnity claims made by New Cingular Wireless. While we are required to continue to indemnify New Cingular Wireless for any valid claims that arise in the future, New Cingular Wireless is not permitted to make any additional claims against the escrow account. The potential tax indemnity claims submitted by New Cingular Wireless purport to relate to various ongoing tax audits by the Mexican tax authorities for the years 2010 through 2014. Of the total potential tax claims, $12.2 million relates to actual assessments that Nextel Mexico has received. The remaining amounts relate to unassessed matters. New Cingular Wireless' claims include $35.5 million related to the tax audit of Nextel Mexico’s income tax return for 2010 and $36.9 million related to the tax audit of Nextel Mexico's income tax return for 2011. The remaining $37.6 million of potential tax claims relates primarily to non-income tax-based audits for the years 2011 through 2014. During July 2018, the tax audits related to Nextel Mexico's income tax returns for the years 2010 and 2011 were finalized, and we filed amended tax returns. We settled the tax liabilities associated with these tax audits utilizing existing tax credits, with the exception of $4.0 million that we paid utilizing cash held in escrow. As a result, of the $72.4 million in combined claims relating to the tax audits of the years 2010 and 2011, we have requested that New Cingular Wireless agree to the release of $68.3 million from escrow. New Cingular Wireless has disagreed with our interpretation of the escrow and purchase agreements related to the timing of release requirements for escrowed funds. This difference of interpretation could result in a delay of the release of the remaining amount of cash in escrow. We are continuing to work with the Mexican tax authorities to settle the open non-income tax-based audits and accelerate the release of the remaining escrow. In addition, New Cingular Wireless has indicated that it may continue to make additional claims for indemnification related to these open audits in the future. There can be no assurance as to the outcome of the foregoing tax audits or indemnity claims. |
Debt |
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Debt [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | Debt The components of our debt are as follows:
Convertible Senior Notes. In August 2018, we privately placed $100.0 million aggregate principal amount of 4.25% convertible senior notes due 2023, which we refer to as the convertible senior notes. We also granted the initial purchaser an option to purchase up to an additional $15.0 million principal amount of convertible senior notes, which was exercised in full. As a result, we issued a total of $115.0 million principal amount of convertible senior notes at par for total gross proceeds of $115.0 million. In connection with this issuance, we incurred total issuance costs of $5.2 million, $1.9 million of which we allocated to the conversion option and expensed immediately and the remainder of which we recorded as deferred financing costs. We are amortizing the $3.3 million in deferred financing costs into interest expense over the term of the convertible senior notes. Our convertible senior notes are senior unsecured obligations, will rank equal in right of payment with all of our existing and future unsecured and unsubordinated debt and will be effectively junior in right of payment to all of our existing and future secured debt to the extent of the assets securing that debt. With certain exceptions, none of our subsidiaries will guarantee the convertible senior notes. As a result, the convertible senior notes will be structurally subordinated to all existing and future liabilities and obligations of our subsidiaries, except to the extent of any such guarantee. The convertible senior notes bear interest at a rate of 4.25% per year on the principal amount of the notes, payable semi-annually in arrears on February 15 and August 15 of each year, beginning on February 15, 2019. The convertible senior notes mature on August 15, 2023, unless earlier converted or repurchased, when the entire principal balance of $115.0 million will be due. In addition, and subject to specified exceptions, upon the occurrence of a fundamental change, the noteholders have the right to require us to repurchase the notes for cash at a repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest to, but excluding, the repurchase date. The convertible senior notes are convertible into shares of our common stock at an initial conversion rate of 160.9658 shares per $1,000 principal amount of notes, or 18,511,067 aggregate common shares, representing an initial conversion price of $6.21 per share, subject to adjustment in certain situations. The convertible senior notes are convertible, subject to adjustment, prior to the close of business on the business day immediately preceding February 15, 2023 only under the following circumstances:
On or after February 15, 2023 until the close of business on the second scheduled trading day immediately preceding the maturity date, noteholders may convert their notes at any time, regardless of the aforementioned circumstances. We have the option to satisfy the conversion of the convertible senior notes in shares of our common stock, in cash or a combination of both. If certain corporate events occur prior to August 15, 2023, or if we deliver a notice of redemption, we will increase the conversion rate for a noteholder who elects to convert its notes in connection with such a corporate event. The conversion feature embedded in the convertible senior notes meets the criteria of an embedded derivative in accordance with the FASB's authoritative guidance for derivatives. As a result, as of September 30, 2018, we have separated the value of the conversion feature from the notes and recorded the derivative liability at its fair value on our condensed consolidated balance sheet. As of September 30, 2018, we recorded the $53.5 million fair value of the derivative liability as a component of other long-term liabilities in our condensed consolidated balance sheet. |
Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | Fair Value Measurements Financial Instruments. Available-for-Sale Securities. As of September 30, 2018 and December 31, 2017, available-for-sale securities held by Nextel Brazil included $48.4 million and $16.7 million, respectively, in investment funds. These funds invest primarily in Brazilian government bonds and long-term bank certificates of deposit. During the three and nine months ended September 30, 2018 and 2017, we did not have any material unrealized gains or losses associated with these investments. We account for our available-for-sale securities at fair value. The fair value of Nextel Brazil's investment funds is measured based on the funds' net asset value as a practical expedient, which is excluded from the fair value hierarchy. Debt Instruments. The carrying amounts and estimated fair values of our debt instruments are as follows:
We estimated the fair value of our convertible senior notes, as well as Nextel Brazil's bank loans, equipment financing and spectrum financing utilizing inputs such as U.S. Treasury security yield curves, prices of comparable bonds, LIBOR, U.S. Treasury bond rates and credit spreads on comparable publicly traded bonds. We consider these fair value measurements to be Level 3 in the fair value hierarchy. Conversion Option for Convertible Senior Notes. We estimated the fair value of the conversion option embedded in the convertible senior notes using a binomial lattice model with daily nodes from the valuation date to the maturity date of the convertible senior notes. This model considered stock price, risk-free rates, credit spreads, dividend yields and expected volatility. We record gains or losses related to changes in the fair value of the conversion option derivative liability during the period. During the three months ended September 30, 2018, we recorded $11.7 million as a component of other expense, net, in our condensed consolidated statement of comprehensive loss related to the change in the fair value of the conversion option. We consider this fair value measurement to be Level 3 in the fair value hierarchy. Other Financial Instruments. The carrying values of cash and cash equivalents, accounts receivable and accounts payable contained in our condensed consolidated balance sheets approximate their fair values due to the short-term nature of these instruments. |
Commitments and Contingencies |
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Sep. 30, 2018 | |
Commitments and Contingencies [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Brazil Roaming and RAN Sharing Commitments. In May 2016, Nextel Brazil entered into an amendment to a nationwide roaming voice and data services agreement with Telefonica Brazil, S.A., or Telefonica, to reduce the usage rates for its roaming traffic. Concurrently, Nextel Brazil entered into a 10-year radio access network, or RAN, sharing agreement with Telefonica, under which Telefonica will permit Nextel Brazil to use some of its tower and equipment infrastructure to transmit telecommunications signals on Nextel Brazil's spectrum. These agreements require Nextel Brazil to meet certain commitments over a five-year period totaling 800 million Brazilian reais, or approximately $246.2 million based on foreign currency exchange rates at the time, which replaced the remaining commitments under the original roaming agreement. As of September 30, 2018, Nextel Brazil had 218 million Brazilian reais, or $54.5 million based on current foreign currency exchange rates, in remaining commitments related to its roaming agreement and 271 million Brazilian reais, or $67.6 million based on current foreign currency exchange rates, in remaining commitments related to its RAN sharing agreement. Contingencies. Nextel Brazil has received various assessment notices from municipal, state and federal Brazilian authorities asserting deficiencies in payments related primarily to value-added taxes and other non-income based taxes. Nextel Brazil has filed various administrative and legal petitions disputing these assessments. In some cases, Nextel Brazil has received favorable decisions, which are currently being appealed by the respective governmental authority. In other cases, Nextel Brazil's petitions have been denied, and Nextel Brazil is currently appealing those decisions. In connection with these petitions, Nextel Brazil is regularly required to make a judicial guarantee through a deposit of cash to cover the amount in dispute in order to file and/or appeal claims. As of September 30, 2018 and December 31, 2017, Nextel Brazil also had contingencies related to certain consumer, contract and labor-related matters, some of which are secured by judicial guarantees. Even in cases where there is no probable loss, Nextel Brazil may in the future be subject to litigation involving tax and other matters requiring material judicial deposits of cash that will not be released until the pending matter is resolved. As of September 30, 2018 and December 31, 2017, Nextel Brazil had accrued liabilities of $78.3 million and $81.2 million, respectively, related to contingencies, of which $7.5 million and $7.4 million related to unasserted claims, respectively. We currently estimate the reasonably possible losses related to matters for which Nextel Brazil has not accrued liabilities, as they are not deemed probable, to be approximately $730.0 million as of September 30, 2018. We continue to evaluate the likelihood of probable and reasonably possible losses, if any, related to all known contingencies. As a result, future increases or decreases to our accrued liabilities may be necessary and will be recorded in the period when such amounts are determined to be probable and reasonably estimable. Legal Proceedings. We are subject to claims and legal actions that may arise in the ordinary course of business. We do not believe that any of these pending claims or legal actions will have a material effect on our business, financial condition, results of operations or cash flows. |
Income Taxes |
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Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The realization of deferred tax assets is dependent on the generation of future taxable income sufficient to realize our tax loss carryforwards and other tax deductions. Valuation allowances are required to be recognized on deferred tax assets unless it is determined that it is “more-likely-than-not” that the asset will be realized. In 2017, we maintained full valuation allowances on the deferred tax assets of our foreign operating companies, our U.S. parent company and subsidiaries and our foreign holding companies due to substantial negative evidence such as the recent history of cumulative losses and the projected losses for the remainder of 2018 and subsequent years. We maintained this same valuation allowance position through the third quarter of 2018. |
Segment Reporting |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting | Segment Reporting We have determined our reportable segment based on our method of internal reporting, which disaggregates our business by geographic location. We evaluate performance and provide resources to it based on operating income before depreciation, amortization and impairment, restructuring and other charges, which we refer to as segment earnings. Nextel Brazil is our only reportable operating segment.
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Basis of Presentation Basis of Presentation (Policies) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
New and Recently Adopted Accounting Pronouncements | New Accounting Pronouncements. In February 2016, the Financial Accounting Standards Board, or the FASB, issued Accounting Standards Update, or ASU, No. 2016-02, "Leases," or Accounting Standards Codification 842, which we refer to as ASC 842. ASC 842 replaces existing leasing rules with a comprehensive lease measurement and recognition standard and expanded disclosure requirements. ASC 842 will require lessees to recognize most leases on their balance sheet as liabilities, with corresponding "right-of-use" assets, and is effective for interim and annual reporting periods beginning after December 15, 2018, subject to early adoption. The new standard allows us to make an accounting policy election not to recognize lease assets and liabilities on the balance sheet for leases with a term of 12 months or less. In transition, lessees have the option to recognize and measure leases either at the beginning of the earliest period presented or at the beginning of the period of adoption using a modified retrospective approach. We expect to adopt ASC 842 on January 1, 2019 utilizing the modified retrospective approach. The modified retrospective approach includes a package of optional practical expedients that we plan to elect to apply. Upon adoption, we currently expect to record a material amount of lease liabilities and provide significant new disclosures regarding our leasing activities as required. We are continuing to evaluate the additional effects this standard will have on our consolidated financial statements. Recently Adopted Accounting Pronouncements. In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers,” which we refer to as ASC 606. This new pronouncement provides us with a single revenue recognition model for recognizing revenue from contracts with customers and significantly expands the disclosure requirements for revenue arrangements. We implemented ASC 606 on January 1, 2018 using the modified retrospective method. We did not retroactively adjust prior periods. In utilizing the modified retrospective method, we are recognizing the cumulative effect of applying the standard at the date of initial application, and we will continue to disclose the results under both the new and old standards for the remainder of the first year after adoption. See Note 2 for more information regarding the adoption of ASC 606. In November 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash,” or ASU 2016-18, which provides guidance regarding cash flow statement classification and presentation of changes in restricted cash. We implemented this new standard on January 1, 2018. As required, we provided a reconciliation of cash and cash equivalents as presented in our condensed consolidated balance sheets to cash, cash equivalents and restricted cash as presented in our condensed consolidated statements of cash flows for all periods presented in Note 4. Reclassifications. We have reclassified some prior period amounts in our condensed consolidated financial statements to conform to our current presentation. |
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Reclassifications | Reclassifications. We have reclassified some prior period amounts in our condensed consolidated financial statements to conform to our current presentation. |
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Revenue Recognition | Revenue Recognition On January 1, 2018, we implemented ASC 606 using the modified retrospective method. The primary change to our revenue recognition policies relates to contracts with customers where the customer purchases a discounted handset in connection with entering into a contract for telecommunications services. In accordance with ASC 606, we allocate revenue between the handset and the service based on relative standalone selling price, or SSP. We recognize revenue when we satisfy a performance obligation by providing services or transferring control of promised handsets and accessories, which are distinct to a customer. We recognize revenue in an amount that reflects the consideration to which we expect to be entitled for those performance obligations. A description of the principal activities from which Nextel Brazil generates its revenue, as well as the associated policies that govern the way in which we recognize these revenues, is as follows: Service and Other Revenues. Nextel Brazil's wireless service revenues primarily consist of access charges for providing customers with voice, data or messaging services over the contract period. We recognize revenue related to access charges ratably over the contract period. The typical length of our service contracts is 12 months for individual customers and 24 months for corporate customers. We elected the practical expedient to record all revenue net of taxes collected from customers, which are subsequently remitted to governmental authorities. Handset and Accessory Revenues. We recognize handset and accessory revenue when a subscriber takes possession of a device. The transaction price of the handset sold, if any, is billed at the time of sale. Although more than 90% of our subscribers typically purchase services only and acquire a handset separately, the remainder of our subscriber base purchases a handset offered at a discounted price bundled with services. In these types of bundled sales, we allocate a portion of our future service billings to the handset and recognize revenue upon handset delivery at the inception of the contract, which results in a contract asset. We determined that contracts with terms longer than one year that involve the sale of both a handset and related services generally do not include a significant financing component. Significant Judgments and Estimates. Nextel Brazil's subscribers generally enter into service contracts with a commitment period in exchange for discounts on handsets and/or service fees. The penalty applied upon early termination of a contract declines over time in proportion to the remaining commitment period. We concluded that the commitment period should be identical to the contract period since, at any point, the early termination penalty is significant relative to the remaining monthly service fees under the contract. In cases where a contract includes both a handset and accessories, for which we recognize handset and accessory revenue at a point in time, and services, for which we recognize revenue ratably over time, judgment is required to determine the SSP for each distinct performance obligation in order to allocate consideration properly. We use a range of amounts to estimate SSP when we sell each of the products and services separately. Remaining Performance Obligations. As of September 30, 2018, we have $270.6 million of remaining performance obligations under open service contracts. For these service contracts, we expect to recognize $259.8 million in operating revenues in the period from October 1, 2018 through September 30, 2019 and $10.8 million thereafter. Contract Assets and Liabilities. Contract assets primarily relate to the remaining portion of Nextel Brazil's future service billings allocated to handsets and recognized into revenue upon handset delivery at the inception of the contract. As of September 30, 2018 and January 1, 2018, Nextel Brazil had $4.4 million and $5.5 million in total contract assets, respectively, $3.8 million and $4.5 million of which we classified as a component of prepaid expenses and other in our condensed consolidated balance sheets for these periods. We transfer contract assets to receivables when Nextel Brazil's right to bill becomes unconditional. Contract liabilities primarily relate to upfront fees for wireless services for which the services have not yet been provided. As of September 30, 2018 and January 1, 2018, Nextel Brazil had $2.3 million and $1.7 million in total contract liabilities, respectively, substantially all of which we classified as a component of accrued expenses and other in our condensed consolidated balance sheet. The changes to both the contract asset and contract liability balances during the period, which include opening balances amortized into revenue, were not significant. Cost to Obtain Contracts with Customers. We recognize an asset for the incremental costs of obtaining a contract with a customer. These costs include commissions and related costs for sales employees of Nextel Brazil, and commissions payable to our third party distribution channel partners. We amortize these types of costs ratably using the portfolio approach over the estimated customer relationship period, which includes expected future contract renewals. Under the previous accounting standard, we expensed commissions as incurred. As of September 30, 2018 and January 1, 2018, Nextel Brazil had $36.6 million and $42.8 million of deferred costs, respectively, related to expenses required to obtain a contract. Of these total deferred costs, as of September 30, 2018 and January 1, 2018, we recorded $20.7 million and $16.3 million, respectively, as a component of prepaid expenses and other and the remaining $15.9 million and $26.5 million, respectively, as a component of other assets in our condensed consolidated balance sheet. In addition, Nextel Brazil recorded $3.3 million and $11.7 million, respectively, in total commissions expense during the three and nine months ended September 30, 2018 as a component of selling, general and administrative expenses in our condensed consolidated statement of comprehensive loss. Adoption Impact. Following is a comparison of our reported results of operations for the three and nine months ended September 30, 2018 compared to amounts that we would have reported had we not adopted ASC 606 (in thousands):
Without the adoption of ASC 606 on January 1, 2018, our basic and diluted net loss from continuing operations per common share would have improved by $0.01 for the three months ended September 30, 2018 and would have been $0.02 lower for the nine months ended September 30, 2018. Components of Transition Adjustment. As of January 1, 2018, the cumulative impact of the implementation of ASC 606 included the recognition of contract assets and liabilities, as well as the capitalization of costs to obtain contracts with customers. In total, these effects resulted in a cumulative adjustment on January 1, 2018 that was comprised of a $21.2 million increase to prepaid expenses and other, a $26.8 million increase to other assets, a $1.1 million increase to accrued expenses and other and a $1.8 million decrease to other long-term liabilities. |
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Revenue-Based Taxes | Revenue-Based Taxes. Prior to the implementation of ASC 606, we recorded certain revenue-based taxes on a gross basis. |
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Diluted Net Loss Per Common Share | Diluted Net Loss Per Common Share. As presented for the three and nine months ended September 30, 2018 and 2017, our calculation of diluted net loss from continuing operations per common share is based on the weighted average number of common shares outstanding during those periods and does not include other potential common shares, including common shares resulting from the potential conversion of our convertible senior notes, common shares issuable upon the potential exercise of stock options under our stock-based employee compensation plans or restricted common shares issued under those plans since their effect would have been antidilutive. |
Revenue Recognition (Tables) |
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Revenue Recognition [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Adoption Impact | Following is a comparison of our reported results of operations for the three and nine months ended September 30, 2018 compared to amounts that we would have reported had we not adopted ASC 606 (in thousands):
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Impairment, Restructuring and Other Charges (Tables) |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Total Impairment and Restructuring Charges | Total impairment, restructuring and other (benefits) charges, net for the three and nine months ended September 30, 2018 and 2017 were as follows (in thousands):
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Schedule of Total Accrued Restructuring Charges | As of September 30, 2018, total accrued restructuring charges were as follows (in thousands):
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Supplemental Financial Statement Information (Tables) |
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Supplemental Financial Statement Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash and Cash Equivalents | A reconciliation from cash and cash equivalents as presented in our condensed consolidated balance sheets to cash, cash equivalents and restricted cash as reported in our condensed consolidated statements of cash flows is as follows:
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Restricted Cash | A reconciliation from cash and cash equivalents as presented in our condensed consolidated balance sheets to cash, cash equivalents and restricted cash as reported in our condensed consolidated statements of cash flows is as follows:
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Schedule of Prepaid Expenses and Other | The components of our prepaid expenses and other current assets are as follows:
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Schedule of Property, Plant and Equipment, Net | The components of our property, plant and equipment, net are as follows:
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Schedule of Intangible Assets, Net | Our intangible assets include the following:
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Schedule of Finite-Lived Intangible Assets, Future Amortization Expense | Based on the carrying amount of our intangible assets as of September 30, 2018 and current exchange rates, we estimate amortization expense for each of the next five years ending December 31 to be as follows (in thousands):
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Schedule of Other Assets | The components of our other long-term assets are as follows:
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Schedule of Accrued Expenses and Other | The components of our accrued expenses and other are as follows:
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Schedule of Other Long-term Liabilities | The components of our other long-term liabilities are as follows:
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Schedule of Supplemental Cash Flow Information |
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Debt (Tables) |
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Summary of Debt | The components of our debt are as follows:
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Fair Value Measurements (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of carrying amounts and estimated fair values of debt | The carrying amounts and estimated fair values of our debt instruments are as follows:
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Segment Reporting (Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Segment Reporting Information |
|
Impairment, Restructuring and Other Charges - Restructuring Charges (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Restructuring Cost and Reserve [Line Items] | ||||
Total impairment, restructuring and other (benefits) charges, net | $ (2) | $ 34,794 | $ 14,070 | $ 160,968 |
Restructuring Reserve [Roll Forward] | ||||
Beginning balance | 107,306 | |||
Restructuring charges, net | 10,021 | |||
Cash payments and other | (29,379) | |||
Foreign currency translation adjustment | (16,805) | |||
Ending balance | 71,143 | 71,143 | ||
Corporate | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Total impairment, restructuring and other (benefits) charges, net | 0 | 282 | 352 | 825 |
Brazil | Operating segment | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Total impairment, restructuring and other (benefits) charges, net | $ (2) | $ 34,512 | $ 13,718 | $ 160,143 |
Supplemental Financial Statement Information - Restricted Cash (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|---|---|
Supplemental Financial Statement Information [Abstract] | ||||
Restricted cash | $ 108,100 | $ 111,900 | $ 112,300 | $ 164,900 |
Cash and cash equivalents | 152,712 | 193,888 | ||
Cash in escrow (included in prepaid expenses and other) | 106,071 | 110,024 | ||
Other (included in other assets) | 2,021 | 1,866 | ||
Cash, cash equivalents and restricted cash | $ 260,804 | $ 305,778 | $ 347,012 | $ 422,232 |
Supplemental Financial Statement Information - Prepaid and Other Assets (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Supplemental Financial Statement Information [Abstract] | ||
Cash in escrow | $ 106,071 | $ 110,024 |
Brazil judicial deposits | 52,755 | 43,648 |
Value-added taxes | 22,941 | 37,191 |
Cash collateral related to performance bonds | 578 | 50,340 |
Other prepaid expenses | 31,270 | 14,231 |
Other current assets | 21,150 | 8,583 |
Other Assets, Current | $ 234,765 | $ 264,017 |
Supplemental Financial Statement Information - Property, Plant and Equipment (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Supplemental Financial Statement Information [Abstract] | ||
Land | $ 404 | $ 489 |
Building and leasehold improvements | 629 | 935 |
Network equipment, communication towers and network software | 95,307 | 82,493 |
Software, office equipment, furniture and fixtures and other | 26,806 | 22,498 |
Less: Accumulated depreciation and amortization | (21,497) | (11,461) |
Property, plant and equipment, gross | 101,649 | 94,954 |
Construction in progress | 19,944 | 22,308 |
Property, plant and equipment, net | $ 121,593 | $ 117,262 |
Supplemental Financial Statement Information - Intangible Assets, Net (Details) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Dec. 31, 2017 |
|
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Value | $ 176,085 | $ 202,283 |
Accumulated Amortization | (17,743) | (10,526) |
Net Carrying Value | $ 158,342 | 191,757 |
Licenses | ||
Finite-Lived Intangible Assets [Line Items] | ||
Average Useful Life (Years) | 26 years | |
Gross Carrying Value | $ 163,444 | 186,983 |
Accumulated Amortization | (9,316) | (5,426) |
Net Carrying Value | $ 154,128 | 181,557 |
Customer relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Average Useful Life (Years) | 4 years | |
Gross Carrying Value | $ 12,641 | 15,300 |
Accumulated Amortization | (8,427) | (5,100) |
Net Carrying Value | $ 4,214 | $ 10,200 |
Supplemental Financial Statement Information - Future Estimated Amortization Expense (Details) $ in Thousands |
Sep. 30, 2018
USD ($)
|
---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | |
2018 | $ 13,287 |
2019 | 9,424 |
2020 | 6,615 |
2021 | 6,615 |
2022 | $ 6,615 |
Supplemental Financial Statement Information - Other Assets (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Brazil judicial deposits | $ 99,590 | $ 110,758 |
Cash collateral related to contingencies | 49,576 | 55,027 |
Other | 74,893 | 54,224 |
Other assets | $ 224,059 | $ 220,009 |
Supplemental Financial Statement Information - Accrued Expenses and Other (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Supplemental Financial Statement Information [Abstract] | ||
Contingencies | $ 64,554 | $ 78,006 |
Network system and information technology expenses | 49,077 | 48,702 |
Non-income based taxes | 36,700 | 30,044 |
Payroll related items and commissions | 24,016 | 32,613 |
License fees | 18,013 | 17,501 |
Other | 72,857 | 101,263 |
Accrued expenses and other | $ 265,217 | $ 308,129 |
Supplemental Financial Statement Information - Other Long-term Liabilities (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Supplemental Financial Statement Information [Abstract] | ||
Non-current withholding taxes | $ 77,870 | $ 67,356 |
Accrued lease terminations and other restructuring charges | 61,799 | 90,128 |
Conversion option for convertible senior notes | 53,503 | 0 |
Other | 78,020 | 61,106 |
Other long-term liabilities | $ 271,192 | $ 218,590 |
Supplemental Financial Statement Information - Supplemental Cash Flow Disclosures (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Supplemental Financial Statement Information [Abstract] | ||||
Cash paid for capital expenditures, including capitalized interest on property, plant and equipment | $ 45,357 | $ 52,068 | ||
Change in capital expenditures accrued and unpaid or financed, including interest capitalized | (4,669) | (21,968) | ||
Capital expenditures | $ 17,583 | $ 11,661 | $ 40,688 | $ 30,100 |
Supplemental Financial Statement Information - Revenue Based Taxes (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended |
---|---|---|
Sep. 30, 2017 |
Sep. 30, 2017 |
|
Revenue Recognition [Abstract] | ||
Revenue-based taxes and other excise taxes | $ 6.0 | $ 23.1 |
Debt (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Debt [Abstract] | ||
Brazil equipment financing facility | $ 238,669 | $ 242,883 |
Brazil bank loans | 164,597 | 200,567 |
Brazil spectrum financing | 100,794 | 122,044 |
Convertible senior notes | 70,702 | 0 |
Brazil capital lease and tower financing obligations | 70,325 | 90,213 |
Total debt | 645,087 | 655,707 |
Less: current portion | (21,755) | (7,990) |
Total debt, excluding current portion | $ 623,332 | $ 647,717 |
Fair Value Measurements - Financial Instruments (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Dec. 31, 2017 |
|
Short-term investments | $ 48,407 | $ 16,711 |
Loss related conversion option embedded in convertible senior note | 11,700 | |
Brazil | ||
Short-term investments | $ 48,400 | $ 16,700 |
Fair Value Measurements - Carrying Amounts and Estimated Fair Values of Long-Term Debt Instrument (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Aug. 31, 2018 |
Dec. 31, 2017 |
---|---|---|---|
Carrying Amount | $ 574,762 | $ 565,494 | |
Estimated Fair Value | 521,434 | 510,495 | |
Brazil equipment financing | |||
Carrying Amount | 238,669 | 242,883 | |
Estimated Fair Value | 233,533 | 237,958 | |
Brazil bank loans and other | |||
Carrying Amount | 164,597 | 200,567 | |
Estimated Fair Value | 100,358 | 144,312 | |
Brazil spectrum financing | |||
Carrying Amount | 100,794 | 122,044 | |
Estimated Fair Value | 114,247 | 128,225 | |
Convertible senior notes | |||
Carrying Amount | 70,702 | 0 | |
Estimated Fair Value | $ 73,296 | $ 0 | |
Interest rate (as percent) | 4.25% |
Commitments and Contingencies - Narrative (Details) R$ in Millions, $ in Millions |
1 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
May 31, 2016
USD ($)
|
May 31, 2016
BRL (R$)
|
Sep. 30, 2018
USD ($)
|
Sep. 30, 2018
BRL (R$)
|
Dec. 31, 2017
USD ($)
|
|
Estimate of reasonably possible losses, not deemed probable | $ 730.0 | ||||
Nextel Brazil | |||||
Accrued liabilities | 78.3 | $ 81.2 | |||
Accrued liabilities related to unasserted claims | 7.5 | $ 7.4 | |||
Roaming and RAN Sharing Commitment | Nextel Brazil | |||||
Contract period | 10 years | 10 years | |||
Milestone period | 5 years | 5 years | |||
Minimum amount required under agreement | $ 246.2 | R$ 800 | |||
Roaming Sharing Commitment | Nextel Brazil | |||||
Minimum amount required under agreement | 54.5 | R$ 218 | |||
RAN Sharing Commitment | Nextel Brazil | |||||
Minimum amount required under agreement | $ 67.6 | R$ 271 |
Segment Reporting (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Dec. 31, 2017 |
|
Operating revenues | $ 141,737 | $ 205,423 | $ 478,986 | $ 681,512 | |
Segment earnings (losses) | 8,148 | (33,547) | 3,685 | (33,793) | |
Less: | |||||
Impairment, restructuring and other benefits, net | 2 | (34,794) | (14,070) | (160,968) | |
Depreciation and amortization | (6,805) | (6,091) | (21,855) | (28,451) | |
Foreign currency transaction (losses) gains, net | (12,238) | 14,174 | (60,092) | 12,197 | |
Interest expense and other, net | (38,828) | (25,230) | (96,046) | (60,393) | |
Loss from continuing operations before income tax benefit | (49,721) | (85,488) | (188,378) | (271,408) | |
Capital expenditures | 17,583 | 11,661 | 40,688 | 30,100 | |
Identifiable assets | 1,039,588 | 1,039,588 | $ 1,113,522 | ||
Corporate | |||||
Operating revenues | 0 | 24 | 22 | 83 | |
Segment earnings (losses) | (4,601) | (6,281) | (12,751) | (21,980) | |
Less: | |||||
Impairment, restructuring and other benefits, net | 0 | (282) | (352) | (825) | |
Capital expenditures | 0 | 0 | 0 | 0 | |
Identifiable assets | 240,421 | 240,421 | 147,603 | ||
Nextel Brazil | Operating segment | |||||
Operating revenues | 141,737 | 205,399 | 478,964 | 681,429 | |
Segment earnings (losses) | 12,749 | (27,266) | 16,436 | (11,813) | |
Less: | |||||
Impairment, restructuring and other benefits, net | 2 | (34,512) | (13,718) | (160,143) | |
Capital expenditures | 17,583 | $ 11,661 | 40,688 | $ 30,100 | |
Identifiable assets | $ 799,167 | $ 799,167 | $ 965,919 |
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