SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1997
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ________ to __________
Commission File No. 333-23769
DOBSON COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
OKLAHOMA 73-1110531
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13439 North Broadway Extension
Suite 200
OKLAHOMA CITY, OKLAHOMA 73114
(Address of principal executive offices) (Zip Code)
(405) 391-8500
(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
At August 13, 1997, there were 473,152 shares of the registrant's $1.00
par value Class A Common Stock outstanding.
<PAGE>
DOBSON COMMUNICATIONS CORPORATION
Index to Form 10-Q
PART I. FINANCIAL INFORMATION
PAGE
Item 1. Condensed Consolidated Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets at June 30, 1997 and
December 31, 1996
Condensed Consolidated Statements of Operations for the
Three Months and Six Months Ended June 30, 1997 and 1996
Condensed Consolidated Statement of Stockholders' Equity
for the Six Months Ended June 30, 1997
Condensed Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1997 and 1996
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 3. Quantitative and Qualitative Disclosure about Market Risk
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
<TABLE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
ASSETS June 30, December 31,
1997 1996
-------------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 2,349,600 $ 1,609,221
Accounts receivable, net 11,203,495 6,584,103
Restricted investments 21,220,822 -
Receivables - affiliates 4,411,927 1,704,033
Other current assets 2,725,702 10,059,098
------------- ------------
Total current assets 41,911,546 19,956,455
------------- ------------
PROPERTY, PLANT AND EQUIPMENT, net 69,514,420 61,929,904
------------- ------------
OTHER ASSETS:
Receivables - affiliates 622,730 3,494,806
Restricted investments 17,010,039 -
Cellular license acquisition costs,
net 161,233,936 23,465,128
Other intangibles, net 21,273,023 6,723,598
Investments in unconsolidated sub-
sidiaries and other 2,225,358 1,378,134
------------- ------------
Total other assets 202,365,086 35,061,666
------------- ------------
Total assets $313,791,052 $116,948,025
============= ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
<TABLE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS, continued
(Unaudited)
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY June 30, December 31,
1997 1996
-------------- --------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 4,515,257 $ 4,718,124
Accrued liabilities 11,103,818 3,014,737
Current portion of long-term debt 1,212,680 1,190,924
-------------- --------------
Total current liabilities 16,831,755 8,923,785
-------------- --------------
LONG-TERM DEBT, net of current portion 309,000,203 104,303,802
DEFERRED CREDITS 1,086,996 1,077,864
MINORITY INTERESTS 3,229,614 2,444,176
CLASS B CONVERTIBLE PREFERRED STOCK 10,000,000 10,000,000
CLASS C PREFERRED STOCK 1,623,329 -
STOCKHOLDERS' EQUITY:
Class A Preferred Stock 100,000 -
Class A Common Stock, $1 par value
1,000,000 shares authorized and 473,152
shares issued and outstanding 473,152 473,152
Paid-in capital 5,508,285 5,508,285
Retained deficit (22,049,282) (3,870,039)
------------- -------------
(15,967,845) 2,111,398
Less-
Class A Preferred Stock owned by Dobson Telephone (100,000) -
Class A Common Stock held in treasury, at cost (11,913,000) (11,913,000)
------------- -------------
Total stockholders' equity (27,980,845) (9,801,602)
------------- -------------
Total liabilities and stockholders' equity $313,791,052 $116,948,025
============= =============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
<TABLE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three months ended June 30, Six months ended June 30,
1997 1996 1997 1996
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Cellular service $ 9,988,569 $ 4,338,495 $16,272,245 $ 8,447,606
Cellular roaming 6,481,240 1,947,294 9,854,528 3,159,470
Cellular equipment sales 217,835 150,768 357,433 396,168
Wireline telephone service 3,839,727 3,305,449 7,414,214 6,564,493
Fiber service revenues 902,409 541,376 1,704,362 1,015,329
Other 337,376 335,692 507,704 654,146
------------ ------------ ------------ ------------
Total operating revenues 21,767,156 10,619,074 36,110,486 20,237,213
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Cellular service 3,570,751 1,045,836 5,383,773 1,869,557
Cellular equipment 999,663 564,147 1,790,098 1,038,032
Wireline telephone service 478,222 409,755 980,325 837,770
Fiber service 78,010 49,742 145,217 99,484
Marketing and selling 2,535,969 1,153,025 4,113,225 1,967,558
General and administrative 5,061,871 2,886,241 9,059,651 5,243,897
Depreciation and
amortization 5,996,988 2,436,340 9,593,000 4,169,405
------------ ------------ ------------ ------------
Total operating expenses 18,721,474 8,545,086 31,065,289 15,225,704
------------ ------------ ------------ ------------
OPERATING INCOME 3,045,682 2,073,988 5,045,197 5,011,509
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest income 824,570 - 1,073,321 -
Interest expense (7,746,260) (1,699,675) (11,648,185) (2,784,187)
Other 14,003 (1,389,297) 35,993 (1,701,477)
------------ ------------ ------------ ------------
Total other expense (6,907,687) (3,088,972) (10,538,871) (4,485,664)
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE MINORITY
INTERESTS IN INCOME OF
SUBSIDIARIES, INCOME TAXES
AND EXTRAORDINARY ITEMS (3,862,005) (1,014,985) (5,493,674) 525,845
MINORITY INTERESTS IN INCOME
OF SUBSIDIARIES (558,579) (64,765) (801,317) (224,542)
------------ ------------- ------------ ------------
INCOME (LOSS) BEFORE INCOME
TAXES AND EXTRAORDINARY
ITEMS (4,420,584) (1,079,750) (6,294,991) 301,303
INCOME TAX (PROVISION) BENEFIT 176,691 397,347 251,667 (93,016)
------------ ------------- ------------ ------------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEMS (4,243,893) (682,402) (6,043,324) 208,287
EXTRAORDINARY EXPENSE, net of
income tax benefit of
$93,887 in 1997, and
$287,361 in 1996 - - (2,403,711) (542,055)
------------ ------------ ------------ ------------
NET LOSS (4,243,893) (682,402) (8,447,035) (333,768)
DIVIDENDS ON PREFERRED STOCK (276,203) (315,984) (475,259) (443,457)
------------ ------------ ------------ ------------
NET LOSS APPLICABLE TO
COMMON STOCKHOLDERS $(4,520,096) $ ( 998,386) $(8,922,295) $(777,225)
============ ============ ============ ===========
NET LOSS APPLICABLE TO
COMMON STOCKHOLDERS PER
COMMON SHARE $ (7.89) $ (1.74) $ (15.57) $ (1.55)
============ ============ ============ ===========
WEIGHTED AVERAGE COMMON
SHARES AND COMMON SHARE
EQUIVALENTS OUTSTANDING 573,152 573,152 573,152 501,371
============ ============ ============ ===========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
<TABLE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
<CAPTION>
Class A Class A Treasury
Preferred Stock Common Stock Paid - in Stock, at Retained
Shares Amount Shares Amount Capital Cost Deficit
------ ------ ------ ------ ------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1996 - $ - 473,152 $473,152 $5,508,285 $(11,913,000) $ (3,870,039)
Net Loss - - - - - - (8,447,035)
Cash dividends
declared on
preferred stock - - - - - - (475,259)
Cash dividends
declared on
common stock - - - - - - (7,633,620)
Preferred stock
dividend - - - - - - (1,623,329)
Reorganization 100,000 100,000 - - - (100,000) -
----------- ----------- ----------- ---------- ---------- ------------- -------------
June 30, 1997 100,000 $100,000 473,152 $473,152 $5,508,285 $(12,013,000) $(22,049,282)
=========== =========== =========== ========== ========== ============ ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
<TABLE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Six months ended June 30,
------------------------------
1997 1996
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES: $ 6,782,104 $ 8,601,154
------------- -------------
Net cash provided by operating activities 6,782,104 8,601,154
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (5,005,574) (12,175,280)
Acquisitions of selected cellular systems (155,803,444) (30,000,000)
Deferred costs (493,568) -
Decrease (increase) in receivables - affiliate 164,182 (1,152,780)
Refund of Deposit 6,350,000 5,000,000
Investments in unconsolidated subsidiaries
and other (847,224) (316,870)
Proceeds on sale of assets - 378,000
------------- ------------
Net cash used in investing activities (155,581,628) (38,806,930)
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable - 100,000
Repayments of notes payable - (500,000)
Proceeds from long-term debt 205,250,000 67,000,000
Repayments of long-term debt (531,843) (35,063,524)
Cash dividends (8,108,878) (507,329)
Issuance of preferred stock - 10,000,000
Purchase of treasury stock - (5,913,000)
Restricted investments (37,454,642) -
Deferred financing costs (9,614,733) (3,258,015)
-------------- ------------
Net cash provided by financing activities 149,539,904 31,858,132
-------------- ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 740,379 1,652,356
CASH AND CASH EQUIVALENTS, beginning of
period 1,609,221 1,116,773
-------------- ------------
CASH AND CASH EQUIVALENTS, end of period $ 2,349,600 $ 2,769,129
============== ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The condensed consolidated balance sheets of Dobson Communications Corporation
("DCC") and subsidiaries (collectively with DCC, "the Company") as of June 30,
1997 and December 31, 1996, the condensed consolidated statements of operations
for the three and six months ended June 30, 1997 and 1996, the condensed
consolidated statement of stockholders' equity for the six months ended June
30, 1997 , and the condensed consolidated statements of cash flows for the six
months ended June 30, 1997 and 1996 are unaudited. In the opinion of
management, such financial statements include all adjustments, consisting only
of normal recurring adjustments necessary for a fair presentation of financial
position, results of operations, and cash flows for the periods presented. The
condensed balance sheet data at December 31, 1996 was derived from audited
financial statements, but does not include all disclosures required by
generally accepted accounting principles. The financial statements presented
herein should be read in connection with the Company's December 31, 1996
consolidated financial statements included on the Company's Prospectus dated
May 14, 1997, as filed with the Securities and Exchange Commission under Rule
424 (b) of the Securities Act of 1933.
1. REORGANIZATION
DCC was incorporated as an Oklahoma corporation in February 1997. Under an
Agreement and Plan of Reorganization effective February 28, 1997, DCC acquired
all of the outstanding Class A Common Stock, Class C Common Stock and Class B
Convertible Preferred Stock of Dobson Operating Company ("DOC"). In exchange,
the holders of the Class A Common Stock and Class B Convertible Preferred Stock
of DOC received equivalent shares of stock of DCC. The holders of Class C
Common Stock received 100,000 shares of Class A preferred Stock of DCC. In
addition, DCC assumed all DOC outstanding stock options, substituting shares of
DCC Class B Common Stock for the DOC stock subject to options. As a result of
the reorganization, DCC is the parent company of DOC.
As part of the reorganization, the stock of certain subsidiaries of DOC was
distributed to DCC. DOC continues to be the holding company for the Company's
cellular, local exchange and wholly-owned fiber subsidiaries.
2. ACQUISITIONS OF SELECTED CELLULAR SYSTEMS
RECENT ACQUISITIONS
On March 19, 1996, the Company purchased the FCC cellular licenses for, and
certain assets relating to one RSA located in Kansas and three RSAs and a
portion of another RSA located in Missouri for $30 million. The properties (the
"Kansas/Missouri Cluster") are located in northeastern Kansas and northwestern
Missouri near Kansas City.
On February 28, 1997, the Company purchased the FCC cellular licenses for, and
certain assets relating to two MSAs and two RSAs located in Maryland and
Pennsylvania for $77.7 million. The properties are located immediately outside
the Washington/Baltimore metropolitan area.
On March 3, 1997, the Company purchased the FCC cellular license for, and
certain assets relating to Maryland RSA 2 for $75.8 million. The property is
located to the east of the Washington/Baltimore metropolitan area.
The acquisition transactions were accounted for as purchases and, accordingly,
their results of operations have been included in the accompanying consolidated
statements of operations from the respective dates of acquisition. The
unaudited pro forma information set forth below includes the 1997 acquisitions
and 1996 acquisitions accounted for as if the purchases occurred at the
beginning of the respective periods presented. The unaudited pro forma
information is presented for informational purposes only and is not necessarily
indicative of the results of operations that actually would have been achieved
had the acquisitions been consummated at that time:
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
--------------------------- ---------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Operating revenue $21,767,000 $17,304,000 $41,035,000 $31,764,000
Loss before
extraordinary items (4,244,000) (5,460,000) (9,119,000) (9,415,000)
Net loss (4,244,000) (5,460,000) (11,523,000) (9,867,000)
Net loss applicable to
common stockholders (4,520,000) (5,776,215) (11,998,000) (10,400,000)
Net loss applicable to
common stockholders
per common share (7.89) (10.08) (20.93) (20.74)
</TABLE>
PENDING ACQUISITIONS
On February 28, 1997, the Company signed a definitive agreement to purchase for
$53.1 million a 100% interest in the Gila River Cellular General Partnership
(the "Arizona 5 Partnership") which owns the cellular license for Arizona RSA 5
as well as the associated tangible operating assets. Gila River
Telecommunications, Inc. ("GRTI") owns 41.95% of Arizona 5 Partnership and
Associated Telecommunications and Technologies, Inc, an affiliate of the
Company, owns 49% of GRTI. In connection with this acquisition, the Company
will loan $5.2 million to one of the current partners which, concurrent with
other equity contributions, will acquire a 25% interest in the Arizona 5
Partnership. Upon completion of these transactions, the Company will have paid
a net purchase price of $39.8 million, and it will own a 75% interest in the
Arizona 5 Partnership. Management of the Company expects that this acquisition
will close late in the third quarter or early in the fourth quarter of 1997.
PCS LICENSE
In the second quarter of 1997 the Company was granted PCS licenses for nine
markets, adjacent to and overlapping the Company's existing cellular footprint,
in the FCC "F" Block auction. The aggregate bid for these licenses was $5.1
million after a 15% discount. The Company has paid 20% of the winning bid
amount. The balance was financed in July 1997 by a note payable to the U.S.
Government at an interest rate equal to the U.S. Treasury ten-year rate.
The obligations will be due in quarterly installments over an eight year
amortization beginning in 1999.
3. LONG-TERM DEBT
The Company's long-term debt consists of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
--------------- --------------
<S> <C> <C>
Revolving credit facility $ 121,000,000 $ 75,750,000
Senior notes 160,000,000 -
Mortgage notes payable 29,212,883 29,744,726
--------------- --------------
Total debt 310,212,883 105,494,726
Less- Current maturities 1,212,680 1,190,924
--------------- --------------
Total long-term debt $ 309,000,203 $ 104,303,802
=============== ==============
</TABLE>
REVOLVING CREDIT FACILITY
On February 28, 1997, the Company's bank credit agreement was amended and
restated to provide the Company with a $200,000,000 revolving credit agreement
facility maturing in 2005. Interest on borrowings under the new credit
agreement accrue at a variable rate (8.70% at June 30, 1997). Initial proceeds
were used to refinance existing indebtedness, finance the 1997 acquisitions
described above and for general corporate purposes, including $7.6 million to
pay a dividend to holders of its Class A Common Stock. $6.0 million of the
dividend was used to repay a loan which had been guaranteed by the Company and
approximately $.5 million was used to repay indebtedness owed to the Company
with respect to certain legal fees. As a result of the $7.6 million dividend,
the holders of Class B Convertible Preferred Stock were entitled to a make-
whole dividend of approximately $1.6 million. In lieu of such dividend, the
holders of Class B Convertible Preferred Stock were issued 100,000 shares of
Class C Preferred Stock, having a liquidation preference of approximately $1.6
million. In connection with the closing of the revolving credit facility, the
Company extinguished its then existing credit facility, and recognized a pretax
loss of approximately $2.5 million as a result of writing off previously
capitalized financing costs associated with the revolving credit facility.
This loss has been reflected as an extraordinary item, net of tax, in the
Company's statement of operations for the six months ended June 30, 1997.
On March 19, 1996 the Company amended and restated the revolving credit
agreement that was in place at that date. In connection with this amendment,
the Company recorded a pretax loss of approximately $.8 million as a result of
writing off previously capitalized financing costs which is included as
extraordinary expense in the accompanying statement of operations.
In April 1997, the Company entered into an interest rate hedge agreement to
hedge the Company's interest expense on its indebtedness under the Bank
Facility. The agreement provides for a rate cap of 8% plus a factor, based
on the Company's leverage ratio (cap at June 30, 1997 was 10.75%),
terminating on the earlier of April 24, 2000 or the date an option to enter
into an interest rate swap transaction is exercised by the financial partner.
Under the swap agreement, the interest rate would be fixed at 6.13% plus
the factor referred to above or a floating LIBOR rate, terminating on April 24,
2002. The Company accounts for this as a hedge.
SENIOR NOTES
On February 28, 1997, the Company issued $160,000,000 of 11.75% Senior Notes
maturing in 2007 to finance the 1997 acquisitions described above and
approximately $38.3 million placed in an interest bearing escrow account, which
will be used to pay the first four semi-annual interest payments on the notes,
which begin on October 15, 1997. Amounts in the escrow account are reflected
as "restricted investments" in the Company's balance sheet. The senior notes
are redeemable at the option of the Company in whole or in part, on or after
April 15, 2002, initially at 105.875%. Prior to April 15, 2000, the Company may
redeem up to 35% of the principal amount of the senior notes at 111.750% with
proceeds from sales of stock, provided that after any such redemption at least
$104 million remains outstanding. On June 16, 1997, the Company completed an
offer to exchange all of the outstanding senior notes for substantially
identical notes registered under the Securities Act of 1933.
4. TAXES
The income tax benefit for the three and six months ended June 30, 1997 differs
from amounts computed at the statutory rate due primarily to net operating
losses for which no benefit has been recognized.
5. EARNINGS PER COMMON SHARE
For purposes of calculating reported weighted average number of common and
common equivalent shares outstanding, shares of convertible Class B Preferred
Stock issued on March 19, 1996 are considered common equivalent shares
outstanding.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings Per Share ("SFAS No. 128").
SFAS No. 128 specifies the computation, presentation, and disclosure
requirements of earnings per share and supersedes Accounting Principles Board
Opinion No. 15, Earnings Per Share. SFAS No. 128 requires a dual presentation
of basic and diluted earnings per share. Basic earnings per share, which
excludes the impact of common stock equivalents will replace primary earnings
per share. Diluted earnings per share, which utilizes the average market price
per share as opposed to the greater of the average market price per share or
ending market price per share when applying the treasury stock method in
determining common stock equivalents will replace fully-diluted earnings per
share. SFAS No. 128 will be effective for both interim and annual periods
ending after December 15, 1997. The following pro forma earnings per common
share information assumes SFAS No. 128 was adopted in 1996:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- ------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Reported:
Primary net income (loss)
applicable to common
shareholders per common share $ (7.89) $ (1.74) $ (15.57) $ (1.55)
Weighted average number of
common and common equivalent
shares outstanding 573,152 573,152 573,152 501,371
Pro forma:
Basic net income (loss) per
common share $ (9.55) $ (2.11) $ (18.86) $ (1.64)
Basic weighted average shares 473,152 473,152 473,152 473,152
</TABLE>
Diluted net income per common share has been omitted because the impact of com-
mon stock equivalents is anti-dilutive.
6. SUBSEQUENT EVENTS
In August 1997, the Company entered into a letter of intent with Texas 16
Cellular Telephone Company to purchase the assets of the cellular system in
Texas RSA #16, including the licenses granted by the Federal Communications
Commission. Texas RSA #16 is located in south Texas, adjacent to Houston,
Austin and San Antonio, and serves a population base of approximately 325,000.
Management of the Company anticipates entering a definitive agreement in the
third quarter and expects the transaction to close late in the fourth quarter
of 1997 or first quarter of 1998.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company provides diversified telecommunication products and services. The
Company currently provides rural cellular telephone services in Oklahoma and
Texas (the "Oklahoma/Texas Cluster"), in Kansas and Missouri (the
"Kansas/Missouri Cluster") and in Maryland and Pennsylvania (the "Maryland
Cluster"). Upon consummation of the Arizona 5 Partnership acquisition described
below, the Company will also own and operate a cellular system in Arizona. The
Company also owns interests in, and operates, regional fiberoptic transmission
networks in Oklahoma, Texas and Colorado, and owns and operates local telephone
exchanges in Oklahoma, and intends to resell local, long distance and wireless
services in Oklahoma.
RECENT EVENTS
In August 1997, the Company entered into a letter of intent with Texas 16
Cellular Telephone Company to purchase the assets of the cellular system in
Texas RSA #16, including the licenses granted by the Federal Communications
Commission. Texas RSA #16 is located in south Texas, adjacent to Houston,
Austin and San Antonio, and serves a population base of approximately 325,000.
Management of the Company anticipates entering a definitive agreement in the
third quarter and expects the transaction to close late in the fourth quarter
of 1997 or first quarter of 1998.
On February 28, 1997, the Company purchased the FCC cellular licenses for, and
certain assets relating to, two MSAs and two RSAs located in Maryland and
Pennsylvania for $77.7 million. The properties are located immediately outside
the Washington/Baltimore metropolitan area. On March 3, 1997, the Company
purchased the FCC cellular license for, and certain assets relating to, the
Maryland RSA 2 for $75.8 million. The property is located to the east of the
Washington/Baltimore metropolitan area. The acquired properties are hereafter
referred to as the "Maryland Cluster."
On February 28, 1997, the Company signed a definitive agreement to purchase the
Gila River Cellular General Partnership (the "Arizona 5 Partnership"), which
owns the cellular license for Arizona RSA 5 as well as the associated tangible
operating assets. Certain affiliates of the Company indirectly own a 20.6%
interest in the Arizona 5 Partnership and will receive approximately $9.5
million in connection with the acquisition. In addition, the Company will loan
$5.2 million to one of the current partners, which will acquire a 25% interest
in the Arizona 5 Partnership. Upon completion of these transactions, the
Company will have paid a net amount of $39.8 million and will own a 75%
interest in the Arizona 5 Partnership. The Company expects that this
acquisition will close late in the third quarter or early in the fourth quarter
of 1997.
On February 28, 1997, the Company's bank credit agreement was amended and
restated to provide the Company with a $200 million revolving credit facility
maturing in 2005 ("the Bank Facility"). Interest on borrowings under the Bank
Facility accrue at a variable rate (8.70% at June 30, 1997). Initial loan
proceeds were used to refinance existing indebtedness, finance the Maryland
Cluster acquisition described above and for general corporate purposes,
including the payment of a $7.6 million dividend to holders of the Company's
Class A Common Stock. The principal stockholder used $6.0 million of the
dividend to repay a loan which had been guaranteed by the Company and
approximately $.5 million to repay indebtedness owed to the Company with
respect to certain legal fees. As a result of the $7.6 million dividend, the
holders of Class B Convertible Preferred Stock were issued 100,000 shares of
Class C Preferred Stock, having a liquidation preference of approximately $1.6
million. In connection with the closing of the Bank Facility, the Company
extinguished its then existing credit facility. The Company will finance the
Arizona 5 Partnership acquisition with borrowings under the Bank Facility.
On February 28, 1997, the Company issued pursuant to a private offering $160
million of 11.75% Senior Notes maturing in 2007 and used the net proceeds
($155.2 million) to finance the acquisitions described above ($116.9 million)
and to purchase securities ($38.3 million) which have been pledged and escrowed
to secure payment of the first four semi-annual interest payments on the notes,
which begin on October 15, 1997. Except for the first four interest payments,
the senior notes are unsecured obligations of the Company, redeemable at the
option of the Company, in whole or in part, on or after April 15, 2002 at
105.875% of the principal amount outstanding, declining ratably to 100% on or
after April 15, 2004, plus accrued interest. In addition, at any time prior to
April 15, 2000, the Company may redeem up to 35% of the aggregate principal
amount with the net proceeds of sales of capital stock of the Company at
111.750% of principal amount, plus accrued interest; provided that after any
such redemption at least $104 million aggregate principal amount remains
outstanding.
On June 16, 1997, the Company completed an offer to exchange all of the
outstanding Senior Notes for substantially identical notes registered under the
Securities Act of 1933.
RESULTS OF OPERATIONS
The following table presents the period-to-period change, for the periods
indicated, in dollars and percent for the various Condensed Consolidated
Statements of Operations line items:
<TABLE>
<CAPTION>
Period-to-Period Period-to-Period
Change for the Change for the
Three Months Ended Six Months Ended
June 30, 1997 and 1996 June 30, 1997 and 1996
Increase/(Decrease) Increase/(Decrease)
------------------------------ -------------------------------
<S> <C> <C> <C> <C>
Operating Revenues:
Cellular service $ 5,650,074 130.2% $ 7,824,639 92.6%
Cellular roaming 4,533,946 232.8% 6,695,057 211.9%
Cellular equipment sales 67,067 44.5% (38,735) (9.8%)
Wireline telephone service 534,278 16.2% 849,721 12.9%
Fiber service 361,033 66.7% 689,033 67.9%
Other 1,684 .5% (146,442) (22.4%)
------------ --------- ------------ --------
Total operating revenues 11,148,182 105.0% 5,873,273 78.4%
Operating Expenses:
Cellular service 2,524,915 241.4% 3,514,216 188.0%
Cellular equipment 435,516 77.2% 752,066 72.5%
Wireline telephone service 68,467 16.7% 142,554 17.0%
Fiber service 28,268 56.8% 45,733 46.0%
Marketing and selling 1,382,943 119.9% 2,145,668 109.1%
General and administrative 2,175,630 75.4% 3,815,754 72.8%
Depreciation and amortization 3,560,649 146.1% 5,423,595 130.1%
------------ -------- ------------ --------
Total operating expenses 10,176,388 119.1% 15,839,586 104.0%
------------ -------- ------------ --------
Operating income 971,694 46.9% 33,687 0.7%
------------ -------- ------------ --------
Other expense 3,818,715 123.6% 6,053,207 134.9%
------------ -------- ------------ --------
Loss before minority interests in
income of subsidiaries, income taxes
and extraordinary items (2,847,021) (280.5%) (6,019,520) (1,144.7%)
Minority interests in income of
subsidiaries 493,814 762.5% 576,774 256.9%
------------ -------- ------------ --------
Loss before income taxes and
extraordinary items (3,340,834) (309.4%) (6,596,294) (2,189.3%)
Income tax benefit 220,657 55.5% 344,682 370.6%
------------ -------- ------------ --------
Loss before extraordinary items (3,561,491) (521.9%) (6,251,611) (3,001.4%)
Extraordinary expense, net of income
tax benefit - - 1,861,656 343.4%
------------ -------- ------------ --------
Net loss $ (3,561,491) (521.9%) $ (8,113,267) (2,430.8%)
============ ======== ============ ========
</TABLE>
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THE THREE MONTHS ENDED JUNE 30,
1996
OPERATING REVENUE. For the three months ended June 30, 1997, total operating
revenue increased $11.1 million, or 105%, to $21.8 million from $10.6 million
for the comparable period in 1996.
CELLULAR. The Company's operating revenue from its cellular operations
(service, roaming, and equipment) increased $10.3 million in the second quarter
of 1997 compared to 1996. Cellular service revenue increased $5.7 million, or
130.2%, to $10.0 million in 1997 from $4.3 million in 1996. Of the increase,
$4.8 million was attributable to the acquisition of the Maryland Cluster in
1997. The remaining $.9 million was primarily attributable to increased
penetration and usage in the Oklahoma/Texas Cluster and the Kansas/Missouri
Cluster. The Company's cellular subscriber base increased 215.9% to 96,140 at
June 30, 1997, from 30,437 at June 30, 1996. 42,608 subscribers were added as a
result of the acquisition of the Maryland Cluster. However, the Company's
average monthly cellular service revenue per subscriber decreased 14.1% to
$41.35 for the three months ended June 30, 1997 from $48.11 for the comparable
period in 1996 due to the addition of new lower rate subscribers in the
Maryland Cluster and competitive market pressures. Cellular roaming revenue
increased $4.5 million, or 232.8%, to $6.5 million in 1997 from $1.9 million in
1996. Of the increase, $3.5 million was attributable to the acquisition of the
Maryland Cluster in 1997. The remaining $1.1 million was primarily attributable
to increased roaming minutes in the Oklahoma/Texas Cluster and Kansas/Missouri
Cluster due to expanded coverage area in these markets and the general increase
in cellular minutes of use. Cellular equipment sales of $.2 million in the
second quarter of 1997 represented a slight increase from 1996, as the Company
sold more equipment during the second quarter of 1997.
WIRELINE. Wireline operations revenue increased $.5 million, or 16.2%, to
$3.8 million for the three months ended June 30, 1997 compared to $3.3 million
for the same period in 1996 due primarily to an increase in toll charges and an
increase in the number of access lines.
FIBER. The Company's revenue from its fiber operations increased $.4 million,
or 66.7%, to $.9 million in the second quarter of 1997 from $.5 million in 1996
primarily as a result of an increase in the number of fiber lines, bringing the
total lines leased to an equivalent of 48 DS3s at June 30, 1997 compared to 33
at June 30, 1996.
OTHER. For the three months ended June 30, 1997, other income of $.3 million
included rental revenue for the use of Company owned facilities, interest on
loans to Company employees and affiliates, management fees from affiliates and
other telecommunications services such as internet and voice mail.
COST OF SERVICE AND EQUIPMENT SALES. For the three month period ended June 30,
1997, the total cost of service and equipment sales increased $3.1 million, or
147.7%, to $5.1 million from $2.1 million for the comparable period in 1996.
CELLULAR. Cost of cellular service increased $2.5 million, or 241.4% to $3.6
million during the three months ended June 30, 1997 from the same period in
1996. Of the increase, $2.0 million was attributable to the acquisition of the
Maryland Cluster in 1997. The remaining $.5 million was primarily attributable
to increased subscribers and minutes of use in the Oklahoma/Texas Cluster and
Kansas/Missouri Cluster and expanded use of rerating agreements with cellular
providers adjacent to our markets. Cost of cellular equipment increased $.4
million in 1997 primarily from increases in the volume of equipment sold due to
the growth in subscribers.
WIRELINE. Cost of wireline telephone service increased $.1 million, or 16.7%,
to $.5 million in 1997 from $.4 million in 1996. The increase was a result of
increased costs associated with continued customer growth and usage.
FIBER. Costs of fiber service remained fairly constant for the period.
MARKETING AND SELLING COSTS. Marketing and selling costs increased
$1.4 million, or 119.9%, to $2.5 million in the second quarter of 1997 from
$1.2 million in 1996. The increase was primarily due to the higher level of
cellular subscribers added period to period. Gross cellular subscribers added
in the second quarter of 1997 was 8,440 with the Maryland Cluster making up
4,787 of the gross cellular subscribers added in the second quarter of 1997.
The number of gross cellular subscribers added in the second quarter of 1996
was 2,619.
GENERAL AND ADMINISTRATIVE COSTS. For the three month period ended June 30,
1997, general and administrative costs increased $2.2 million, or 75.4%, to
$5.1 million from $2.9 million for 1996. The increase was primarily due to
increased billing costs as a result of the growth in cellular subscribers, the
acquisition of the Maryland Cluster and increased salary costs resulting from
additional personnel in the Company's cellular and fiber operations.
DEPRECIATION AND AMORTIZATION EXPENSE. For the three month period ended June
30, 1997, depreciation and amortization expense increased $3.6 million to
$6.0 million from $2.4 million in 1996. Approximately $3.3 million of the
increase was the result of the amortization of assets acquired in the Maryland
Cluster, with the remainder due primarily to an increase in equipment in the
Company's cellular, wireline and fiber businesses.
OTHER EXPENSE. For the three months ended June 30, 1997, total other expense
(consisting of interest income, interest expense and other) increased $3.8
million, or 123.6% to $6.9 million from $3.1 million for the comparable period
in 1996. Interest income of $.8 million, was a result of interest earned on
securities purchased which were pledged and escrowed to secure payment of the
first four semi-annual interest payments on the Senior Notes. For the second
quarter of 1997, interest expense increased $6.0 million to $7.7 million from
$1.7 million in the comparable period of 1996. The increase was primarily a
result of increased borrowings in the first quarter 1997 to finance the
Maryland Cluster acquisition. For the second quarter 1997, other expense
decreased $1.4 million for the comparable period in 1996. This is primarily the
result of a $1.6 million loss recognized in the second quarter 1996 relating to
a sale of assets.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1996
OPERATING REVENUE. For the six months ended June 30, 1997, total operating
revenue increased $15.9 million, or 78.4% to $36.1 million from $20.2 million
for the comparable period in 1996.
CELLULAR. The Company's operating revenue from its cellular operations
(service, roaming, and equipment) increased $14.5 million for the first six
months of 1997 compared to 1996. Cellular service revenue increased $7.9
million, or 92.6%, to $16.3 million in 1997 from $8.4 million in 1996. Of the
increase, $6.6 million was attributable to the acquisition of the Maryland
Cluster in 1997 and the inclusion of the operations of the Kansas/Missouri
Cluster, which was acquired March 19, 1996, for all of 1997. The remaining
$1.3 million was primarily attributable to increased penetration, usage in the
Oklahoma/Texas Cluster and Kansas/Missouri Cluster. The Company's cellular
subscriber base increased 215.9% to 96,140 at June 30, 1997, from 30,437 at
June 30, 1996. 42,608 subscribers were added as a result of the acquisition of
the Maryland Cluster. However, the Company's average monthly cellular service
revenue per subscriber decreased 14.5 % to $41.93 for the six months ended June
30, 1997 from $49.06 for the comparable period in 1996 due to the addition of
new lower rate subscribers in the Maryland Cluster and competitive market
pressures. Cellular roaming revenue increased $6.7 million, or 211.9%, to $9.9
million in 1997 from $3.2 million in 1996. Of the increase, $5.1 million was
attributable to the acquisition of the Maryland Cluster in 1997 and the
inclusion of the operations of the Kansas/Missouri Cluster which was acquired
on March 19, 1996, for all of 1997. The remaining $1.6 million was primarily
attributable to increased roaming minutes in the Oklahoma/Texas Cluster and
Kansas Missouri Cluster due to expanded coverage areas in these markets and the
general increase in cellular minutes of use. Cellular equipment sales of $.4
million in 1997 remained fairly consistent for the period.
WIRELINE. Wireline operations revenue increased $.8 million, or 12.9%, to
$7.4 million for the six months ended June 30, 1997 compared to $6.6 million
for the same period in 1996 due primarily to an increase in toll charges and an
increase in the number of access lines.
FIBER. The Company's revenue from its fiber operations increased $.7 million,
or 67.9%, to $1.7 million in the first six months of 1997 from $1.0 million in
1996 primarily as a result of an increase in the number of fiber lines,
bringing the total lines leased to an equivalent of 48 DS3s at June 30, 1997
compared to 33 at June 30, 1996.
OTHER. For the six months ended June 30, 1997 and 1996, other income of
$.5 million and $.7 million, respectively, included rental revenue for the use
of Company owned facilities, interest on loans to Company employees and
affiliates, management fees from affiliates and other telecommunications
services such as internet and voice mail.
COST OF SERVICE AND EQUIPMENT SALES. For the six month period ended June 30,
1997, the total cost of service and equipment sales increased $4.4 million, or
115.9%, to $8.3 million from $3.8 million for the comparable period in 1996.
CELLULAR. Cost of cellular service increased $3.5 million, or 188.0% to $5.4
million during the six months ended June 30, 1997 from the same period in 1996.
Of the increase $2.8 million was attributable to the acquisition of the
Maryland Cluster in 1997 and the inclusion of the operations of the
Kansas/Missouri Cluster, which was acquired March 19, 1996, for all of 1997.
The remaining $.7 million was primarily attributable to increased subscribers
and minutes of use in the Oklahoma/Texas Cluster and Kansas/Missouri Cluster
and expanded use of rerating agreements with cellular providers adjacent to our
markets. Cost of cellular equipment increased $.8 million in 1997 primarily
from increases in the volume of equipment sold due to the growth in
subscribers.
WIRELINE. Cost of wireline telephone service increased $.1 million , or 17.0%,
to $1.0 million in 1997 from $.9 million in 1996. The increase was a result of
increased costs associated with continued customer growth and usage.
FIBER. Costs of fiber service remained fairly constant for the period.
MARKETING AND SELLING COSTS. Marketing and selling costs increased
$2.1 million, or 109.1%, to $4.1 million in the first six months of 1997 from
$2.0 million in 1996. The increase was primarily due to the higher level of
cellular subscribers added period to period. Gross cellular subscribers added
in the first six months of 1997 was 13,242 with the Maryland Cluster making up
6,196 of the gross cellular subscribers added since its acquisition. The number
of gross cellular subscribers added in the first six months of 1996 was 4,805.
GENERAL AND ADMINISTRATIVE COSTS. For the six month period ended June 30,
1997, general and administrative costs increased $3.8 million, or 72.8%, to
$9.1 million from $5.2 million for 1996. The increase was primarily due to
increased billing costs as a result of the growth in cellular subscribers, the
acquisition of the Maryland Cluster, the inclusion of the Kansas/Missouri
Cluster for all of 1997, and increased salary costs resulting from additional
personnel in the Company's cellular and fiber operations.
DEPRECIATION AND AMORTIZATION EXPENSE. For the six month period ended June 30,
1997, depreciation and amortization expense increased $5.4 million to
$9.6 million from $4.2 million in 1996. Approximately $5.0 million of the
increase was the result of the amortization of assets acquired in the Maryland
and Kansas/Missouri Clusters, with the remainder due primarily to an increase
in equipment in the Company's cellular, wireline and fiber businesses.
OTHER EXPENSE. For the six months ended June 30, 1997, total other expense
(consisting of interest income, interest expense, and other) increased $6.1
million or 134.9% to $10.5 million from $4.4 million for the comparable period
in 1996. Interest income of $1.1 million for the first six months of 1997 was
a result of interest earned on securities purchased which were pledged and
escrowed to secure payment of the first four semi-annual interest payments on
the Senior Notes. For the first six months of 1997, interest expense increased
$8.9 million to $11.7 million from $2.8 million in the comparable period of
1996. The increase was primarily a result of increased borrowings in the first
quarter 1997 to finance the Maryland Cluster acquisition. For the first six
months of 1997, other expense decreased $1.7 million for the comparable period
in 1996. This is primarily the result of a $1.6 million loss recognized in the
second quarter 1996 relating to a sale of assets.
EXTRAORDINARY EXPENSE. In the first six months of 1997 and 1996, the Company
incurred a pretax loss of approximately $2.5 million and $.8 million,
respectively, as a result of writing off previously capitalized financing costs
associated with a revolving credit facility that was refinanced in February
1997 and March 1996.
LIQUIDITY AND CAPITAL RESOURCES
The cellular telephone business requires substantial capital to acquire,
construct, and expand cellular telephone systems and to fund operating
requirements. The Company historically has financed its acquisitions and other
capital needs through vendor financing, bank debt and proceeds from the sale of
debt and equity. The Company's wireline businesses have historically been
financed through government loans. During the first quarter of 1997, the
Company established a $200 million revolving bank credit facility maturing in
2005 and issued $160 million of 11.75% Senior Notes due 2007 pursuant to a
private offering. See " - Recent Events."
At June 30, 1997, the Company had working capital of $25.1 million (a ratio of
current assets to current liabilities of 2.5:1) and a cash balance of $2.3
million, which compares to working capital of $11.0 million (a ratio of current
assets to current liabilities of 2.2:1) and a cash balance of $1.6 million of
at December 31, 1996. The Company's net cash provided by operating activities
for the six month periods ended June 30, 1997 and 1996 was $6.8 million and $8.6
million, respectively. The net cash provided by operating activities in 1997
primarily relates to the net changes in current assets and liabilities and
depreciation and amortization, offset by the Company's net loss for the period.
The increase in net cash used in investing activities and net cash provided by
financing activities from 1997 to 1996 is primarily the result of the Company's
acquisition of cellular systems in the Maryland Cluster which was financed
through the issuance of additional long-term debt.
In April 1997, the Company entered into an interest rate hedge agreement to
hedge the Company's interest expense on its indebtedness under the Bank
Facility. The agreement provides for a rate cap of 8% plus a factor,
based on the Company's leverage ratio (cap at June 30, 1997 was 10.75%),
terminating on the earlier of April 24, 2000 or the date an option to enter
into an interest rate swap transaction is exercised by the financial partner.
Under the swap agreement, the interest rate would be fixed at 6.13% plus the
factor referred to above or a floating LIBOR rate, terminating on April 24,
2002. The Company accounts for this as a hedge.
The Company's capital expenditures (excluding cost of acquisitions) were $2.4
and $5.0 million, respectively, for the three month and six month periods ended
June 30, 1997 and the Company expects its capital expenditures (excluding cost
of acquisitions) to be approximately $19 million for 1997. Capital expenditures
for its cellular operations include buildout of new cell sites and new store
locations. Fiber operations capital expenditures will be for electronics to
increase capacity and the Company expects to invest only maintenance capital
for its wireline operations. The Company also expects to invest approximately
$4.9 million in high capacity switches and other communications equipment in
1997 for use in its business to resell local, long-distance and wireless
services in Oklahoma City and Tulsa, and in its wireline operations.
In April 1997, the Company was granted PCS licenses in nine markets adjacent to
and overlapping the Company's existing cellular footprint. The aggregate bid
for these licenses was $5.1 million after a discount of 15%. The Company has
paid 20% of the net winning bid amount and has financed the balance with the
government at the U.S. Treasury rate for ten-year obligations with a quarterly
amortization over eight years beginning in 1999. The Company is required to
build out systems covering 25% of the licensed population by 2002. The Company
currently anticipates that the cost to build out the minimum PCS system will be
$10 million to $30 million. The actual amount of the expenditures will depend
on the PCS technology selected by the Company, the extent of the Company's
buildout, the costs at the time of buildout and the extent the Company must
relocate incumbent microwave licensees.
The amount and timing of capital expenditures may vary depending on the rate at
which the Company expands and develops its cellular systems, whether the
Company consummates additional acquisitions, the rate at which the Company
builds out a PCS system and whether the Company expands its fiberoptic network
or local exchange operations.
Although there can be no assurance, management believes the proceeds available
from the Bank Facility, together with cash on hand, and cash flow from
operations will be sufficient to fund the pending acquisition of the Arizona 5
Partnership, the Company's capital expenditures and its working capital and
debt service requirements. At June 30, 1997, the Company had approximately
$79.0 million of funds available under the Bank Facility. The Company will
require additional financing to complete the Texas 16 acquisition, to pursue
future acquisitions, and to meet the required PCS buildout. Sources of
additional capital may include cash flows from operations and public or private
debt or equity financings. There can be no assurance that any additional
financing will be available to the Company or, if available, that it can be
obtained on terms acceptable to the Company and within the limitations
contained in the Company's financing arrangements. The successful
implementation of the Company's strategy, including the further development of
its cellular systems and significant and sustained growth in the Company's cash
flows, is necessary for the Company to meet its debt service requirements.
The Company is a holding company with no direct operations and no significant
assets other than the stock of its subsidiaries. The Company is dependent on
the cash flows of its subsidiaries to meet its obligations, including the
payment of interest and principal on the Senior Notes (except with respect to
the first four semi-annual interest payments for which the Company has
restricted investments available). The Bank Facility contains certain
restrictions on the ability of the Company's primary subsidiary to distribute
funds to the Company. The indenture under which the Senior Notes were issued
and the Bank Facility impose certain limits on the ability of the Company to,
among other things, incur additional indebtedness.
FORWARD-LOOKING STATEMENTS
The description of the Company's capital expenditure plans set forth above,
including planned acquisitions, are forward-looking statements made pursuant to
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. These plans involve a number of risks and uncertainties. The important
factors that could cause actual capital expenditures, acquisitions activity, or
the Company's performance to differ materially from the plans include, without
limitation, the Company's ability to satisfy the financial covenants of its
existing debt instruments and to raise additional capital; the Company's
ability to manage its rapid growth successfully and to compete effectively in
its cellular, fiber and resale businesses against competitors with greater
financial, technical, marketing and other resources; changes in end-user
requirements and preferences; the development of other technologies and
products that may gain more commercial acceptance than those of the Company;
and adverse regulatory changes. For further information regarding these and
other risk factors, see "Risk factors" and "Business" in the Company's
Prospectus dated May 14, 1997 filed with the Securities and Exchange Commission
under Rule 424(b) of the Securities Act of 1933.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
- - Not applicable
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- - Not applicable
ITEM 2. CHANGES IN SECURITIES
- - Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
- - Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- - Not applicable
ITEM 5. OTHER INFORMATION
- - Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are filed as a part of this report:
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
10.2.3 - Promissory Note dated June 30, 1997 of Russell L.
Dobson in the amount of $422,786.97 in favor of
Western Financial Services Corp.
10.2.6 - Promissory Note dated June 30, 1997 of Everett R.
Dobson in the amount of $353,479.63 in favor of
Western Financial Services Corp.
27 - Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended June
30, 1997.
<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.
Date: August 14, 1997 Dobson Communications Corporation
(registrant)
EVERETT R. DOBSON
Everett R. Dobson
Chairman of the Board, President
and Chief Executive Officer
Date: August 14, 1997 BRUCE R. KNOOIHUIZEN
Bruce R. Knooihuizen
Vice President and Chief Financial
Officer (principal financial officer)
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Method of Filing
- ----------- ----------- ----------------
<S> <C> <C>
10.2.3 Promissory Note dated June Filed herewith electronically
30, 1997 of Russell L.
Dobson in the amount of
$422,786.97 in favor of
Western Financial Services
Corp.
10.2.6 Promissory Note dated June Filed herewith electronically
30, 1997 of Everett R.
Dobson in the amount of
$353,479.63 in favor of
Western Financial Services
Corp.
27 Financial Data Schedule Filed herewith electronically
</TABLE>
DEBTORS' NAME & ADDRESS:
Russell L. Dobson
CUSTOMER NO.
NOTE/LOAN NO.
RLD1297
HOME PHONE
BUSINESS PHONE
OFFICER
LENDER/SECURED PARTY:
Western Financial Services Corp.
13439 N. Broadway Ext., Ste. 200
Oklahoma City, Oklahoma 73114
DATE OF NOTE
6-30-97
MATURITY DATE
12-31-97
PRINCIPAL AMOUNT
$422,786.97
INTEREST RATE
9.07%
PURPOSE OF LOAN
Personal
ANNUAL PERCENTAGE RATE. The cost of your credit as a yearly rate.
9.07%
FINANCE CHARGE. The dollar amount the credit will cost you.
$19,173.39
AMOUNT FINANCED. The amount of credit provided to you or on your
behalf.
$422,786.97
TOTAL OF PAYMENTS. The amount you will have paid after you have
made all payments.
$441,960.36
( ) This obligation is payable on Demand.
( ) This obligation has a demand feature.
( ) All disclosures are based on an assumed maturity of one year.
PAYMENT SCHEDULE WILL BE: Number of Payments
1
PREPAYMENT: If you pay off early, you may be charged a minimum
Finance Charge. Any Prepaid Finance Charges will not be refunded.
"e" means an estimate
AMOUNT OF PAYMENTS
$441,960.36
WHEN PAYMENTS ARE DUE
Payment in full due on or before 12-31-97
( ) VARIABLE RATE. If checked, you loan is a variable rate loan.
The Annual Percentage Rate may increase or decrease according to
the following changes:
( ) Upon changes in index (describe)
( ) Upon other conditions (describe)
Interest rate increases are subject to the following
limitation(s):
( ) Not applicable
( ) Not more than once every
( ) Not more than ________% at a time
( ) Not more than ________% overall
( ) The maximum interest rate will not exceed _____%
Any increase in the interest rate will result in changes in
the form of:
( ) Higher payment amounts
( ) A larger payment amount at maturity
( ) More payments of the same amount
If your loan ( ) is ( ) were for $___________ at _______%
for ________________, and the rate increased to _____% in
_______________: ( ) Your regular payments would increase by
$____________. ( ) Your final payment would increase by
$____________. ( ) You would make ______________ additional
payments.
Security: You are giving a security interest in: The
property being purchased (describe)
Other Property (describe)
Signature
( ) Late Charge: If a payment or part of a payment is late more
than _____________ days, you may be charged _________% of the
amount that is late, but not more than $___________________.
See your contract documents for any additional information
about nonpayment, default, and required repayment in full
before the scheduled date, and prepayment refunds and
penalties.
FILING FEES
NON-FILING INSURANCE
( ) Assumption: Someone buying your home may, subject to
conditions, be allowed to assume the remainder of the mortgage
on the original terms.
( ) Assumption: Someone buying your home cannot assume the
remainder of the mortgage on the original terms.
Collateral securing other loans with the Lender may also
secure this loan.
INSURANCE: Credit Life and Disability Insurance are not required
to obtain credit, and will not be provided unless you sign and
agree to pay the additional cost.
TYPE OF INSURANCE
( ) Credit Life - Joint
( ) Credit Life - Single
TERM
PREMIUM
NAME OF INSURED
I want the insurance checked below left, at the cost shown.
( ) Disability - Joint
( ) Disability - Single
TERM
PREMIUM
NAME OF INSURED
I want the insurance checked below left, at the cost shown.
( ) Property Insurance
( ) Vendor's Single Interest Insurance
TERM
PREMIUM
Property & Vendor's Single Interest Insurance may be obtained
from anyone you want that is acceptable to the Lender, or
provided through an existing policy you carry which is
acceptable to the Lender. If you get this Insurance from the
Lender you will pay the cost shown to the left. Any Insurer
issuing Vendor's Single Interest Insurance waives its right to
subrogation against the Debtors.
ITEMIZATION OF AMOUNT FINANCED
$____________ 1. Amount Given to You Directly
$442,786.97 2. Amount Paid on Loans with Us
loans 111396A & 9901A
3. Amounts Paid to Others on Your Behalf
_____ a. Insurance
_____ b. Filing & Releasing Fees to
Public Officials
_____ c. License, Title & Registration
Fees to Pub. Off.
_____ d. ____________________
_____ e. ____________________
_____ f. ____________________
_____ g. ____________________
$____________ 3. Total Amounts Paid to Others (Add a thru g)
$442,786.97 4. Amount of Loan (Principal) (Add 1, 2, & 3)
$____________ 5. Less: Prepaid Finance Charge
$442,786.97 6. AMOUNT FINANCED (4 minus 5)
NOTICE TO CONSUMERS: 1. Do not sign this agreement before you
read it. 2. You are entitled to a copy of this agreement. 3.
You may prepay the unpaid balance at any time without penalty. 4.
This document, together with other written agreements of the
parties, is the final expression of the agreement between the
parties and may not be contradicted by evidence of any prior or
contemporaneous oral agreements of the parties. Any credit
agreement not contained in the printed form must be inserted below
to be enforceable.
Debtor and Lender affirm they have no unwritten oral agreements.
DEBTORS' INITIALS: __________
LENDER'S INITIALS: __________
REPRESENTING THIS LENDER/SECURED PARTY (Officer Signature)
PROMISE TO PAY: In return for my loan, the undersigned (called I,
me, or thy) promise to pay to the order of the Lender the Principal
Amount, plus Interest at the rate stated above (subject to any
applicable variable rate), together with any other sums owed by me
under this agreement including any Prepaid Finance Charge not
included in the Principal Amount, in accordance with the payment
schedule disclosed above or any modification due to a variable
rate.
VARIABLE INTEREST RATE CHANGES: If this contract is subject to a
variable rate, changes in the rate will result in a change in terms
according to the method agreed for effecting them. These changes
will be provided to me by the Lender as applicable from time to
time. The maximum interest will never exceed the lesser of the
maximum legal rate, or as set forth above, if any.
APPLICATION OF PAYMENTS: Each payment shall be applied first to
interest as of the date the payment is received, with the remainder
of the payment applied to reduce the principal. If any payment is
not received when due, the unpaid principal shall bear interest on
a daily basis at the applicable rate. The terms set forth above
are based on an assumed repayment schedule, and variance from this
schedule or changes in the rate due to a variable rate may cause
certain amounts to be greater or less than stated.
PREPAYMENT: I may prepay any amount of this loan at any time
without penalty; however, the Lender may collect or retain a
minimum Finance Charge of $5 when the Amount Financed is $75 or
less, or $7.50 when the Amount Financed exceeds $75.
LATE CHARGE: If any payment is not paid in full when due, the
Lender may assess a delinquency charge if set forth above.
INSUFFICIENT CHECKS: The Lender may charge and collect from me a
ten dollar fee for each return by a bank or other depository
institution of a dishonored check, negotiable order of withdrawal,
or share draft issued by me in connection with this loan.
PREPAID FINANCE CHARGE: I agree to pay Lender those loan fees, if
any, shown on line 5 of the Itemization of Amount Financed. I
agree that any such fee shall be considered as earned when this
loan is made, and will not be subject to refund or rebate.
ATTORNEY FEES: If this Note referred to an attorney for
collection, I agree to pay reasonable attorney fees not to exceed
15% of the unpaid balance after default; provided however, if the
Amount Financed is such that this promise to pay attorney fees is
not enforceable, no attorney fees will be assessed against me by
the terms of this Note.
SECURITY AGREEMENT: To secure this obligation, I grant to the
Lender a security interest in the property described above and
other property covered by this agreement (collateral). If any of
the collateral is real estate, the terms of this agreement will
apply and control over any mortgage in case of any conflict.
Collateral will be located in _________________ County at:
( ) My Address above
( ) Other Address (Specify): __________________________________
_________________________________________________________________
Collateral will be used primarily for: ( ) Personal, family,
household ( ) Business or Agricultural purpose.
The terms above and on the reserve sid of this form are all
incorporated by reference as if they were fully set out at this
point. I (jointly and severally, if more than one) agree to the
forms of this Promissory Note, Disclosure Statement & Security
Agreement, including the authorization of all charges, and
acknowledge receiving a completed copy of this form.
DEBTOR SIGNATURE ( ) (Check Box if Signing Only to Grant a
Security Interest in the Collateral) Date: ___________________
R.L. DOBSON
R.L. Dobson
DEBTOR SIGNATURE ( ) (Check Box if Signing Only to Grant a
Security Interest in the Collateral) Date: _____________________
( ) Check here if the Federal Trade Commission Notice on the
reverse side is to apply to this loan.
PROMISSORY NOTE, DISCLOSURE STATEMENT, & SECURITY AGREEMENT -
SIMPLE INTEREST OKLAHOMA
DEBTORS' NAME & ADDRESS:
Everett R. Dobson
CUSTOMER NO.
NOTE/LOAN NO.
ERD1297
HOME PHONE
BUSINESS PHONE
OFFICER
LENDER/SECURED PARTY:
Western Financial Services Corp.
13439 N. Broadway Ext., Ste. 200
Oklahoma City, Oklahoma 73114
DATE OF NOTE
6-30-97
MATURITY DATE
12-31-97
PRINCIPAL AMOUNT
$353,479.63
INTEREST RATE
8.0%
PURPOSE OF LOAN
Personal
ANNUAL PERCENTAGE RATE. The cost of your credit as a yearly rate.
8.0%
FINANCE CHARGE. The dollar amount the credit will cost you.
$14,139.19
AMOUNT FINANCED. The amount of credit provided to you or on your
behalf.
$353,479.63
TOTAL OF PAYMENTS. The amount you will have paid after you have
made all payments.
$367,618.82
( ) This obligation is payable on Demand.
( ) This obligation has a demand feature.
( ) All disclosures are based on an assumed maturity of one year.
PAYMENT SCHEDULE WILL BE: Number of Payments
1
PREPAYMENT: If you pay off early, you may be charged a minimum
Finance Charge. Any Prepaid Finance Charges will not be refunded.
"e" means an estimate
AMOUNT OF PAYMENTS
$367,618.82
WHEN PAYMENTS ARE DUE
Payment in full due on or before 12/31/97
( ) VARIABLE RATE. If checked, you loan is a variable rate loan.
The Annual Percentage Rate may increase or decrease according to
the following changes:
( ) Upon changes in index (describe)
( ) Upon other conditions (describe)
Interest rate increases are subject to the following
limitation(s):
( ) Not applicable
( ) Not more than once every
( ) Not more than ________% at a time
( ) Not more than ________% overall
( ) The maximum interest rate will not exceed _____%
Any increase in the interest rate will result in changes in
the form of:
( ) Higher payment amounts
( ) A larger payment amount at maturity
( ) More payments of the same amount
If your loan ( ) is ( ) were for $___________ at _______%
for ________________, and the rate increased to _____% in
_______________: ( ) Your regular payments would increase by
$____________. ( ) Your final payment would increase by
$____________. ( ) You would make ______________ additional
payments.
Security: You are giving a security interest in: The
property being purchased (describe)
Other Property (describe)
( ) Late Charge: If a payment or part of a payment is late more
than _____________ days, you may be charged _________% of the
amount that is late, but not more than $___________________.
See your contract documents for any additional information
about nonpayment, default, and required repayment in full
before the scheduled date, and prepayment refunds and
penalties.
FILING FEES
NON-FILING INSURANCE
( ) Assumption: Someone buying your home may, subject to
conditions, be allowed to assume the remainder of the mortgage
on the original terms.
( ) Assumption: Someone buying your home cannot assume the
remainder of the mortgage on the original terms.
Collateral securing other loans with the Lender may also
secure this loan.
INSURANCE: Credit Life and Disability Insurance are not required
to obtain credit, and will not be provided unless you sign and
agree to pay the additional cost.
TYPE OF INSURANCE
( ) Credit Life - Joint
( ) Credit Life - Single
TERM
PREMIUM
NAME OF INSURED
I want the insurance checked below left, at the cost shown.
( ) Disability - Joint
( ) Disability - Single
TERM
PREMIUM
NAME OF INSURED
I want the insurance checked below left, at the cost shown.
( ) Property Insurance
( ) Vendor's Single Interest Insurance
TERM
PREMIUM
Property & Vendor's Single Interest Insurance may be obtained
from anyone you want that is acceptable to the Lender, or
provided through an existing policy you carry which is
acceptable to the Lender. If you get this Insurance from the
Lender you will pay the cost shown to the left. Any Insurer
issuing Vendor's Single Interest Insurance waives its right to
subrogation against the Debtors.
ITEMIZATION OF AMOUNT FINANCED
$____________ 1. Amount Given to You Directly
$353,479.63 2. Amount Paid on Loans with Us
Loan #9612
3. Amounts Paid to Others on Your Behalf
_____ a. Insurance
_____ b. Filing & Releasing Fees to
Public Officials
_____ c. License, Title & Registration
Fees to Pub. Off.
_____ d. ____________________
_____ e. ____________________
_____ f. ____________________
_____ g. ____________________
$____________ 3. Total Amounts Paid to Others (Add a thru g)
$353,479.63 4. Amount of Loan (Principal) (Add 1, 2, & 3)
$____________ 5. Less: Prepaid Finance Charge
$353,479.63 6. AMOUNT FINANCED (4 minus 5)
NOTICE TO CONSUMERS: 1. Do not sign this agreement before you
read it. 2. You are entitled to a copy of this agreement. 3.
You may prepay the unpaid balance at any time without penalty. 4.
This document, together with other written agreements of the
parties, is the final expression of the agreement between the
parties and may not be contradicted by evidence of any prior or
contemporaneous oral agreements of the parties. Any credit
agreement not contained in the printed form must be inserted below
to be enforceable.
Debtor and Lender affirm they have no unwritten oral agreements.
DEBTORS' INITIALS: __________
LENDER'S INITIALS: __________
REPRESENTING THIS LENDER/SECURED PARTY (Officer Signature)
PROMISE TO PAY: In return for my loan, the undersigned (called I,
me, or thy) promise to pay to the order of the Lender the Principal
Amount, plus Interest at the rate stated above (subject to any
applicable variable rate), together with any other sums owed by me
under this agreement including any Prepaid Finance Charge not
included in the Principal Amount, in accordance with the payment
schedule disclosed above or any modification due to a variable
rate.
VARIABLE INTEREST RATE CHANGES: If this contract is subject to a
variable rate, changes in the rate will result in a change in terms
according to the method agreed for effecting them. These changes
will be provided to me by the Lender as applicable from time to
time. The maximum interest will never exceed the lesser of the
maximum legal rate, or as set forth above, if any.
APPLICATION OF PAYMENTS: Each payment shall be applied first to
interest as of the date the payment is received, with the remainder
of the payment applied to reduce the principal. If any payment is
not received when due, the unpaid principal shall bear interest on
a daily basis at the applicable rate. The terms set forth above
are based on an assumed repayment schedule, and variance from this
schedule or changes in the rate due to a variable rate may cause
certain amounts to be greater or less than stated.
PREPAYMENT: I may prepay any amount of this loan at any time
without penalty; however, the Lender may collect or retain a
minimum Finance Charge of $5 when the Amount Financed is $75 or
less, or $7.50 when the Amount Financed exceeds $75.
LATE CHARGE: If any payment is not paid in full when due, the
Lender may assess a delinquency charge if set forth above.
INSUFFICIENT CHECKS: The Lender may charge and collect from me a
ten dollar fee for each return by a bank or other depository
institution of a dishonored check, negotiable order of withdrawal,
or share draft issued by me in connection with this loan.
PREPAID FINANCE CHARGE: I agree to pay Lender those loan fees, if
any, shown on line 5 of the Itemization of Amount Financed. I
agree that any such fee shall be considered as earned when this
loan is made, and will not be subject to refund or rebate.
ATTORNEY FEES: If this Note referred to an attorney for
collection, I agree to pay reasonable attorney fees not to exceed
15% of the unpaid balance after default; provided however, if the
Amount Financed is such that this promise to pay attorney fees is
not enforceable, no attorney fees will be assessed against me by
the terms of this Note.
SECURITY AGREEMENT: To secure this obligation, I grant to the
Lender a security interest in the property described above and
other property covered by this agreement (collateral). If any of
the collateral is real estate, the terms of this agreement will
apply and control over any mortgage in case of any conflict.
Collateral will be located in _________________ County at:
( ) My Address above
( ) Other Address (Specify): __________________________________
_________________________________________________________________
Collateral will be used primarily for: ( ) Personal, family,
household ( ) Business or Agricultural purpose.
The terms above and on the reserve sid of this form are all
incorporated by reference as if they were fully set out at this
point. I (jointly and severally, if more than one) agree to the
forms of this Promissory Note, Disclosure Statement & Security
Agreement, including the authorization of all charges, and
acknowledge receiving a completed copy of this form.
DEBTOR SIGNATURE ( ) (Check Box if Signing Only to Grant a
Security Interest in the Collateral) Date: ___________________
EVERETT DOBSON
Everett Dobson
DEBTOR SIGNATURE ( ) (Check Box if Signing Only to Grant a
Security Interest in the Collateral) Date: _____________________
( ) Check here if the Federal Trade Commission Notice on the
reverse side is to apply to this loan.
PROMISSORY NOTE, DISCLOSURE STATEMENT, & SECURITY AGREEMENT -
SIMPLE INTEREST OKLAHOMA
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0001035985
<NAME> DOBSON COMMUNICATIONS CORPORATION
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,349,600
<SECURITIES> 0
<RECEIVABLES> 11,751,870
<ALLOWANCES> 548,375
<INVENTORY> 452,334
<CURRENT-ASSETS> 41,911,546
<PP&E> 109,644,454
<DEPRECIATION> 40,130,034
<TOTAL-ASSETS> 313,791,052
<CURRENT-LIABILITIES> 16,831,755
<BONDS> 309,000,203
0
11,623,000
<COMMON> 473,152
<OTHER-SE> 5,508,285
<TOTAL-LIABILITY-AND-EQUITY> 313,791,052
<SALES> 357,433
<TOTAL-REVENUES> 36,110,486
<CGS> 1,790,098
<TOTAL-COSTS> 31,065,289
<OTHER-EXPENSES> 10,538,871
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,648,185
<INCOME-PRETAX> (6,294,991)
<INCOME-TAX> (251,667)
<INCOME-CONTINUING> (6,043,324)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,447,035)
<EPS-PRIMARY> (15.57)
<EPS-DILUTED> (15.57)
</TABLE>
