UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 19869-99
-------------------------------------------------------------
CORECOMM INCORPORATED
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3927257
- --------------------------------- ------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
110 East 59th Street, New York, New York 10022
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(212) 906-8485
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------- -------
The number of shares outstanding of the issuer's common stock as of March 31,
1998 was 13,182,336.
<PAGE>
CoreComm Incorporated and Subsidiaries
Index
PART I. FINANCIAL INFORMATION Page
- ----------------------------- ----
Item 1. Financial Statements
Condensed Consolidated Balance Sheets-
March 31, 1998 and December 31, 1997 ............................. 2
Condensed Consolidated Statements of Operations-
Three months ended March 31, 1998 and 1997 ....................... 3
Condensed Consolidated Statement of Shareholders'
Equity - Three months ended March 31, 1998 ....................... 4
Condensed Consolidated Statements of Cash Flows-
Three months ended March 31, 1998 and 1997 ....................... 5
Notes to Condensed Consolidated Financial Statements ............. 6
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition ............................... 10
PART II. OTHER INFORMATION
- --------------------------
Item 6. Exhibits and Reports on Form 8-K ................................. 14
SIGNATURES ................................................................. 15
- ----------
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CoreComm Incorporated and Subsidiaries
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
--------------------------------
(Unaudited) (See Note)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 10,336,000 $ 11,783,000
Marketable securities 32,128,000 62,666,000
Accounts receivable - trade, less allowance for doubtful
accounts of $1,701,000 (1998) and $2,106,000 (1997) 19,032,000 19,043,000
Equipment inventory 6,501,000 2,882,000
Prepaid expenses and other current assets 5,115,000 7,147,000
--------------------------------
Total current assets 73,112,000 103,521,000
Property, plant and equipment, net 128,856,000 128,451,000
Unamortized license acquisition costs 173,567,000 157,467,000
Deferred financing costs, less accumulated amortization
of $755,000 (1998) and $584,000 (1997) 6,035,000 6,206,000
LMDS auction bid 25,241,000 -
Other assets, less accumulated amortization of
$1,263,000 (1998) and $1,088,000 (1997) 3,853,000 1,631,000
--------------------------------
$ 410,664,000 $ 397,276,000
================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,215,000 $ 6,873,000
Accrued expenses 15,738,000 11,730,000
Due to NTL Incorporated 116,000 71,000
Interest payable 3,510,000 8,333,000
Deferred revenue 5,868,000 3,952,000
--------------------------------
Total current liabilities 34,447,000 30,959,000
Long-term debt 208,900,000 200,000,000
Obligation under capital lease 9,384,000 9,456,000
Commitments and contingent liabilities
Shareholders' equity:
Series preferred stock - $.01 par value; authorized 2,500,000
shares; issued and outstanding none - -
Common stock - $.01 par value; authorized 30,000,000 shares;
issued 13,565,000 shares 136,000 136,000
Additional paid-in capital 226,490,000 226,490,000
(Deficit) (59,631,000) (60,703,000)
--------------------------------
166,995,000 165,923,000
Treasury stock - at cost, 383,000 shares (9,062,000) (9,062,000)
--------------------------------
157,933,000 156,861,000
--------------------------------
$ 410,664,000 $ 397,276,000
================================
</TABLE>
Note: The balance sheet at December 31, 1997 has been derived from the audited
financial statements at that date.
See accompanying notes.
2
<PAGE>
CoreComm Incorporated and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
THREE MONTHS ENDED
MARCH 31
---------------------------
1998 1997
---------------------------
REVENUES:
Service revenue $ 34,459,000 $ 33,352,000
Equipment revenue 4,954,000 3,919,000
---------------------------
39,413,000 37,271,000
COSTS AND EXPENSES:
Cost of equipment sold 4,575,000 4,779,000
Operating expenses 4,115,000 3,890,000
Selling, general and administrative expenses 16,629,000 18,049,000
Depreciation of rental equipment 241,000 177,000
Depreciation expense 5,946,000 3,806,000
Amortization expense 1,690,000 1,557,000
---------------------------
33,196,000 32,258,000
---------------------------
Operating income 6,217,000 5,013,000
OTHER INCOME (EXPENSE):
Interest income and other, net 686,000 703,000
Interest expense (5,365,000) (3,984,000)
---------------------------
Income before income taxes and
extraordinary item 1,538,000 1,732,000
Income tax provision (466,000) (1,328,000)
---------------------------
Income before extraordinary item 1,072,000 404,000
Loss from early extinguishment of debt,
net of income tax benefit of $237,000 - (3,830,000)
---------------------------
Net income (loss) $ 1,072,000 $ (3,426,000)
===========================
Earnings per common share:
Income before extraordinary item $ .08 $ .03
Extraordinary item - (.29)
---------------------------
Net income (loss) $ .08 $ (.26)
===========================
Earnings per common share-Assuming Dilution:
Income before extraordinary item $ .08 $ .03
Extraordinary item - (.29)
---------------------------
Net income (loss) $ .08 $ (.26)
===========================
See accompanying notes.
3
<PAGE>
CoreComm Incorporated and Subsidiaries
Condensed Consolidated Statement of Shareholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TREASURY STOCK
----------------------- PAID-IN -------------------------
SHARES AMOUNT CAPITAL (DEFICIT) SHARES AMOUNT
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 13,565,000 $ 136,000 $ 226,490,000 $ (60,703,000) (383,000) $ (9,062,000)
Net income for the three
months ended March 31, 1998 1,072,000
----------------------------------------------------------------------------------------
Balance, March 31, 1998 13,565,000 $ 136,000 $ 226,490,000 $ (59,631,000) (383,000) $ (9,062,000)
========================================================================================
</TABLE>
See accompanying notes.
4
<PAGE>
CoreComm Incorporated and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
-------------------------------
1998 1997
-------------------------------
<S> <C> <C>
Net cash provided by operating activities $ 6,427,000 $ 8,602,000
-------------------------------
INVESTING ACTIVITIES
Payment of the LMDS auction deposit (20,000,000) -
Cost of cellular license interest (8,686,000) (146,000)
Payment in connection with an acquisition (2,000,000) -
Purchase of property, plant and equipment (7,661,000) (7,210,000)
Purchase of marketable securities (35,391,000) (30,856,000)
Proceeds from maturities of marketable securities 65,929,000 2,257,000
-------------------------------
Net cash (used in) investing activities (7,809,000) (35,955,000)
-------------------------------
FINANCING ACTIVITIES
Repayment of bank loan - (115,000,000)
Proceeds from issuance of Notes, net of financing costs - 193,968,000
Purchase of treasury stock - (688,000)
Principal payments of capital lease obligation (65,000) -
Proceeds from exercise of stock options - 287,000
-------------------------------
Net cash provided by (used in) financing activities (65,000) 78,567,000
-------------------------------
Increase (decrease) in cash and cash equivalents (1,447,000) 51,214,000
Cash and cash equivalents at beginning of period 11,783,000 2,307,000
-------------------------------
Cash and cash equivalents at end of period $ 10,336,000 $ 53,521,000
===============================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest exclusive
of amounts capitalized $ 10,188,000 $ 2,329,000
Income taxes paid 292,000 550,000
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES:
Liabilities incurred to acquire property, plant and equipment $ 1,938,000 $ 1,012,000
Liability incurred in connection with LMDS auction bid 5,241,000 -
Long-term debt issued to acquire cellular license interest 8,900,000 -
</TABLE>
See accompanying notes.
5
<PAGE>
CoreComm Incorporated and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three months ended March 31, 1998 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1998. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended December 31, 1997.
NOTE B - LMDS AUCTION AND ACQUISITIONS
A subsidiary of the Company, Cortelyou Communications Corp. ("Cortelyou"), was
the successful bidder, for an aggregate of $25,241,000, for 15 Block A Local
Multipoint Distribution Service ("LMDS") licenses in Ohio. The FCC has allocated
two blocks of frequencies (Block A and Block B) to be licensed in each of the
493 Basis Trading Areas in the United States and its territories based on an
auction that commenced in February 1998 and ended in March 1998. LMDS
frequencies are expected to be used for the provision of voice, data, video and
Internet services to businesses and homes in competition with incumbent local
exchange telephone companies and/or cable television operators. High bidders
must submit an application demonstrating their qualifications to hold the
licenses they won at auction. The high bids must be paid within ten business
days of the announcement by the FCC that an application was accepted.
In March 1998, the Company entered into an agreement to acquire Digicom, Inc., a
reseller of Centrex services in Cleveland, Ohio for an aggregate purchase price
of $2,000,000. The acquisition was subject to regulatory approval, which was
received in April 1998.
In April 1998, the Company acquired for cash of approximately $400,000 all of
the operating assets of the Wireless Outlet which operates prepaid cellular and
paging businesses on a resale basis in Ohio and other locations in the United
States.
6
<PAGE>
CoreComm Incorporated and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)
NOTE C - UNAMORTIZED LICENSE ACQUISITION COSTS
Unamortized license acquisition costs consist of:
MARCH 31, DECEMBER 31,
1998 1997
-------------------------------
(Unaudited)
Deferred cellular license costs $ 5,935,000 $ 5,935,000
Excess of purchase price paid over the fair
market value of tangible assets acquired 207,052,000 189,466,000
-------------------------------
212,987,000 195,401,000
Accumulated amortization 39,420,000 37,934,000
-------------------------------
$ 173,567,000 $ 157,467,000
===============================
In January 1998, a wholly-owned indirect subsidiary of the Company purchased the
FCC license to own and operate the non-wireline cellular system in Puerto Rico
RSA-4 (Aibonito) and all of the assets of the system in exchange for $8,400,000
in cash and a promissory note in the amount of $8,900,000. Costs of $286,000
were incurred in connection with this acquisition.
NOTE D - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of:
MARCH 31, DECEMBER 31,
1998 1997
--------------------------------
(Unaudited)
Land $ 1,951,000 $ 1,951,000
Office building 9,922,000 9,922,000
Operating equipment 132,933,000 127,534,000
Office furniture and other equipment 26,676,000 24,546,000
Rental equipment 2,070,000 1,745,000
Construction in progress 11,149,000 12,533,000
--------------------------------
184,701,000 178,231,000
Accumulated depreciation 55,845,000 49,780,000
--------------------------------
$ 128,856,000 $ 128,451,000
================================
7
<PAGE>
CoreComm Incorporated and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)
NOTE E - ACCRUED EXPENSES
Accrued expenses consists of:
MARCH 31, DECEMBER 31,
1998 1997
-------------------------------
(Unaudited)
Accrued compensation $ 952,000 $ 765,000
Accrued equipment purchases 325,000 1,427,000
Accrued franchise, property and income taxes 3,710,000 3,489,000
Commissions payable 1,038,000 1,143,000
Subscriber deposits 1,520,000 1,544,000
LMDS auction bid 5,241,000 -
Other 2,952,000 3,362,000
-------------------------------
$ 15,738,000 $ 11,730,000
===============================
NOTE F - LONG-TERM DEBT
MARCH 31, DECEMBER 31,
1998 1997
--------------------------------
(Unaudited)
Senior Subordinated Notes $ 200,000,000 $ 200,000,000
Subsidiary Note Payable 8,900,000 -
--------------------------------
$ 208,900,000 $ 200,000,000
================================
In connection with the acquisition of Puerto Rico RSA-4, a wholly-owned indirect
subsidiary of the Company issued a promissory note in January 1998. The
promissory note bears interest at 7.95% per annum payable semiannually beginning
in July 1998 and the principal is payable in January 2003.
8
<PAGE>
CoreComm Incorporated and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)
NOTE G - NET INCOME (LOSS) PER COMMON SHARE
The following table sets forth the computation of basic and diluted net income
(loss) per common share:
THREE MONTHS ENDED
MARCH 31
-----------------------------
1998 1997
-----------------------------
Numerator:
Income before extraordinary item $ 1,072,000 $ 404,000
Extraordinary item - (3,830,000)
-----------------------------
Net income (loss) $ 1,072,000 $ (3,426,000)
-----------------------------
Denominator for basic net income (loss)
per common share 13,182,000 13,071,000
Effect of dilutive securities:
Stock options 105,000 314,000
-----------------------------
Denominator for diluted net income (loss)
per common share 13,287,000 13,385,000
-----------------------------
Basic net income (loss) per common share:
Income before extraordinary item $ .08 $ .03
Extraordinary item - (.29)
-----------------------------
Net income (loss) $ .08 $ (.26)
=============================
Diluted net income (loss) per common share:
Income before extraordinary item $ .08 $ .03
Extraordinary item - (.29)
-----------------------------
Net income (loss) $ .08 $ (.26)
=============================
NOTE H - COMMITMENTS AND CONTINGENT LIABILITIES
As of March 31, 1998, the Company was committed to purchase approximately
$2,900,000 for cellular network and other equipment and for construction
services. In addition, as of March 31, 1998, the Company had commitments to
purchase telephones, pagers and accessories of approximately $420,000.
In 1992, the Company entered into an agreement which in effect provides for a
twenty year license to use its service mark which is also licensed to many of
the non-wireline cellular systems in the United States. The Company is required
to pay licensing and advertising fees, and to maintain certain service quality
standards. The total fees paid for 1998 were $289,000, which were determined by
the size of the Company's markets.
9
<PAGE>
CoreComm Incorporated and Subsidiaries
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
CoreComm Incorporated (the "Company") was formed in January 1997 to own and
operate Cellular Communications of Puerto Rico, Inc. ("CCPR") and to pursue
communications related opportunities outside of Puerto Rico and the U.S. Virgin
Islands. CCPR, through its wholly-owned subsidiaries, owns and operates cellular
and paging systems in Puerto Rico and the U.S. Virgin Islands. The Company,
through wholly-owned subsidiaries, has recently acquired two communications
related businesses in the United States and was the high bidder for 15 LMDS
licenses in Ohio.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1998 and 1997
- ------------------------------------------
Service revenue increased to $34,459,000 from $33,352,000. Lower average revenue
of new prepaid subscribers, a migration of subscribers to less expensive rate
plans, and a decrease in minutes of use of existing subscribers resulted in
average monthly revenue per cellular subscriber for the first quarter decreasing
to $56 in 1998 from $68 in 1997. Ending subscribers were 211,900 and 166,600 as
of March 31, 1998 and 1997, respectively. Prepaid subscribers included in ending
subscribers were 59,000 and 300 as of March 31, 1998 and 1997, respectively.
Ending pagers in use were 51,600 and 35,100 as of March 31, 1998 and 1997,
respectively.
The income (loss) from equipment, before depreciation of rental equipment,
increased to income of $379,000 from a loss of $860,000 primarily because the
Company is not selling telephones below their cost to prepaid subscribers.
Reductions in the cost of cellular telephones also contributed to this change.
Operating expenses increased to $4,115,000 from $3,890,000 primarily due to
increased usage of the network and additional costs associated with the expanded
network (including paging operations).
Selling, general and administrative expenses decreased to $16,629,000 from
$18,049,000 as a result of a decrease in selling and marketing costs, bad debt
expense and subscriber billing expense. The decreases in selling and marketing
costs, bad debt expense and subscriber billing expense were 18%, 61% and 16%,
respectively, of the total $1,420,000 decrease.
Depreciation of rental equipment increased to $241,000 from $177,000 due to an
increase in rental telephone depreciation and an increase in the number of
rental pagers.
Depreciation expense increased to $5,946,000 from $3,806,000 primarily because
of an increase in property, plant and equipment.
10
<PAGE>
CoreComm Incorporated and Subsidiaries
Amortization expense increased to $1,690,000 from $1,557,000 primarily due to an
increase in license acquisition costs.
Interest income and other, net, decreased to $686,000 from $703,000 primarily
due to a decrease in interest income on short term investments.
Interest expense increased to $5,365,000 from $3,984,000 as a result of the
issuance of the Senior Subordinated Notes on January 28, 1997, the office
building capital lease obligation beginning in April 1997 and the issuance of
the subsidiary note payable in January 1998.
The provision for income taxes decreased to $466,000 from $1,328,000 primarily
as a result of a decrease in Puerto Rico or U.S. Virgin Islands taxable income
of certain of the Company's consolidated subsidiaries.
In connection with the termination of the bank loan, the Company recorded an
extraordinary loss of $4,067,000 in the first quarter of 1997 ($3,830,000 net of
income tax benefit) from the write-off of unamortized deferred financing costs.
LIQUIDITY AND CAPITAL RESOURCES
CCPR requires capital to expand its cellular and paging network and for debt
service. Subsidiaries of CCPR are currently adding cell sites and increasing
capacity throughout their Puerto Rico and U.S. Virgin Islands markets. CCPR
expects to use approximately $18,800,000 in 1998 for contemplated additions to
the cellular network, the paging network and for other non-cell site related
capital expenditures. CCPR's commitments at March 31, 1998 of $2,900,000 for
cellular network and other equipment and for construction services are included
in the total anticipated expenditures. CCPR expects to be able to meet these
requirements with cash and cash equivalents on hand and cash from operations.
A subsidiary of the Company, Cortelyou Communications Corp., was the successful
bidder, for an aggregate of $25,241,000, for 15 Block A LMDS licenses in Ohio.
Auction participants were required to submit upfront payments that determined
their bidding eligibility. In February 1998, Cortelyou submitted an upfront
payment of $20,000,000. FCC rules require the high bidders to submit a down
payment of 20% of their total bids, adjusted for bidding credits, shortly after
the completion of the auction. Upfront payments may be credited toward the down
payment. High bidders must also submit an application demonstrating their
qualifications to hold the licenses they won at auction. The remaining amount of
the high bids must be paid within ten business days of the announcement by the
FCC that an application was accepted.
In March 1998, the Company entered into an agreement to acquire Digicom, Inc., a
reseller of Centrex services in Cleveland, Ohio for an aggregate purchase price
of $2,000,000. The acquisition was subject to regulatory approval, which was
received in April 1998.
11
<PAGE>
CoreComm Incorporated and Subsidiaries
In April 1998, the Company acquired for cash of approximately $400,000 all of
the operating assets of the Wireless Outlet which operates prepaid cellular and
paging businesses on a resale basis in Ohio and other locations in the United
States.
The Company requires capital for the development of its new businesses and
potentially for additional acquisitions. In order to facilitate the funding of
these opportunities, the Company is presently planning to contribute its
non-Puerto Rico/U.S. Virgin Islands assets to a new company and partially
spinning out that entity to the Company's shareholders. There can be no
assurance, however, that funding will be available on acceptable commercial
terms or at all, or that such a spin-off will occur.
In January 1998, a wholly-owned subsidiary of CCPR purchased the FCC license to
own and operate the non-wireline cellular system in Puerto Rico RSA-4 (Aibonito)
and all of the assets of the system in exchange for $8,400,000 in cash and a
promissory note in the amount of $8,900,000. The promissory note bears interest
at 7.95% per annum payable semiannually beginning in July 1998 and the principal
is payable in January 2003. Costs of $286,000 were incurred in connection with
this acquisition.
In January 1997, a wholly-owned subsidiary of CCPR, CCPR Services, Inc.
("Services") issued $200,000,000 principal amount 10% Senior Subordinated Notes
due 2007 (the "Notes") and received proceeds of $193,233,000 after discounts,
commissions and other related costs. Approximately $116,000,000 of the proceeds
were used to repay the $115,000,000 principal outstanding plus accrued interest
and fees under the bank loan. The Notes are due on February 1, 2007. Interest on
the Notes is payable semiannually as of August 1, 1997. The Notes are
redeemable, in whole or in part, at the option of Services at any time on or
after February 1, 2002, at a redemption price of 105% that declines annually to
100% in 2005, in each case together with accrued and unpaid interest to the
redemption date. The Indenture contains certain convenants with respect to
Services, CCPR and certain subsidiaries that limit their ability to, among other
things: (i) incur additional indebtedness, (ii) pay dividends or make other
distributions or restricted payments (except for dividend payments to CCPR and
an aggregate of up to $100,000,000 to be used for dividends or restricted
payments to the Company), (iii) create liens, (iv) sell assets, (v) enter into
mergers or consolidations or (vi) sell or issue stock of subsidiaries.
In April 1996, the Board of Directors authorized the repurchase of up to an
additional 750,000 shares of the Company's common stock through open market
purchases as market conditions warrant. This repurchase plan is in addition to a
previously announced repurchase plan for up to 250,000 shares. As of March 31,
1998, the Company has repurchased 590,000 shares for an aggregate of
$15,207,000, of which 207,000 shares that cost an aggregate of $6,145,000 were
retired.
Cash provided by operating activities was $6,427,000 and $8,602,000 for the
three months ended March 31, 1998 and 1997, respectively. The decrease is
primarily due to the $7,859,000 increase in cash paid for interest, exclusive of
amounts capitalized. Purchases of property, plant and equipment of $7,661,000 in
1998 were primarily for additional cell sites and increased capacity in CCPR's
cellular and paging networks.
12
<PAGE>
CoreComm Incorporated and Subsidiaries
Write-offs of accounts receivable, net of recoveries as a percentage of service
revenue was 4.7% for the three months ended March 31, 1998 compared to 6.7% for
the year ended December 31, 1997. This percentage decreased because CCPR and its
subsidiaries have increased prepaid subscribers and improved credit procedures.
CCPR may also require additional capital for acquisitions of minority interests
in its Aguadilla market, or for the acquisition of certain other RSAs or in
other telecommunications related industries, if opportunities for such
acquisitions arise. CCPR has from time to time engaged in discussions with third
parties regarding such acquisitions.
Year 2000
Many computer systems experience problems handling dates beyond the year 1999.
Therefore, some computer hardware and software will need to be modified prior to
the year 2000 in order to remain functional. The Company is assessing both the
internal readiness of its computer systems and the compliance of the computer
systems of certain significant customers and vendors for handling the year 2000.
The Company expects to implement successfully the systems and programming
changes necessary to address year 2000 issues, and does not believe that the
cost of such actions will have a material adverse effect on the Company. There
can be no assurance, however, that there will not be a delay in, or increased
costs associated with, the implementation of such changes, and the Company's
inability to implement such changes could have an adverse effect on the Company.
In addition, the failure of certain of the Company's significant customers and
vendors to address the year 2000 issue could have a material adverse effect on
the Company.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995:
Certain statements contained herein constitute "forward-looking statements" as
that term is defined under the Private Securities Litigation Reform Act of 1995.
When used herein, the words, "believe," "anticipate," "should," "intend,"
"plan," "will," "expects," "estimates," "projects," "positioned," "strategy,"
and similar expressions identify such forward-looking statements. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the Company, or industry results, to be materially different from those
contemplated, projected, forecasted, estimated or budgeted, whether expressed or
implied, by such forward-looking statements. Such factors include the following:
general economic and business conditions in Puerto Rico and the U.S. Virgin
Islands, industry trends, the Company's ability to continue to design and build
its network, install facilities, obtain and maintain any required government
licenses or approvals and finance construction and development, all in a timely
manner, at reasonable costs and on satisfactory terms and conditions, as well as
assumptions about customer acceptance, churn rates, overall market penetration
and competition from providers of alternative services, the impact of new
business opportunities requiring significant up-front investment, and
availability, terms and deployment of capital.
13
<PAGE>
CoreComm Incorporated and Subsidiaries
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
27. Financial Data Schedule
(b) Reports on Form 8-K.
During the quarter ended March 31, 1998, the Company filed a
current report on Form 8-K dated March 23, 1998, reporting under
Item 5, Other Events, that the Company had entered into an
agreement to acquire Digicom, Inc. No financial statements were
filed with this report.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CORECOMM INCORPORATED
Date: May 11, 1998 By: /s/ J. Barclay Knapp
-------------------------
J. Barclay Knapp
President
Date: May 11, 1998 By: /s/ Gregg Gorelick
--------------------------
Gregg Gorelick
Vice President-Controller
(Principal Accounting Officer)
15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 10,336,000
<SECURITIES> 32,128,000
<RECEIVABLES> 20,733,000
<ALLOWANCES> (1,701,000)
<INVENTORY> 6,501,000
<CURRENT-ASSETS> 5,115,000
<PP&E> 184,701,000
<DEPRECIATION> (55,845,000)
<TOTAL-ASSETS> 410,664,000
<CURRENT-LIABILITIES> 34,447,000
<BONDS> 200,000,000
0
0
<COMMON> 136,000
<OTHER-SE> 157,797,000
<TOTAL-LIABILITY-AND-EQUITY> 410,664,000
<SALES> 4,954,000
<TOTAL-REVENUES> 39,413,000
<CGS> 4,575,000
<TOTAL-COSTS> 8,690,000
<OTHER-EXPENSES> 16,629,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,365,000
<INCOME-PRETAX> 1,538,000
<INCOME-TAX> (466,000)
<INCOME-CONTINUING> 1,072,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,072,000
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
