<PAGE>
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 September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 333-26055
-------------------------------------------------------------
CCPR SERVICES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3120943
- --------------------------------------------- --------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
110 E. 59/th/ Street, New York, New York 10022
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(212) 906-8481
- --------------------------------------------------------------------------------
(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 September
30, 1997 was 1,000.
<PAGE>
CCPR Services, Inc.
Index
PART I. FINANCIAL INFORMATION Page
- ------------------------------ ----
Item 1. Financial Statements
Condensed Balance Sheets-
September 30, 1997 and December 31, 1996...................... 2
Condensed Statements of Operations-
Three and nine months ended September 30, 1997 and 1996....... 3
Condensed Statement of Shareholder's Equity -
Nine months ended September 30, 1997.......................... 4
Condensed Statements of Cash Flows-
Nine months ended September 30, 1997 and 1996................. 5
Notes to Condensed Financial Statements....................... 6
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition............................ 9
PART II. OTHER INFORMATION
- --------------------------
Item 6. Exhibits and Reports on Form 8-K.............................. 12
SIGNATURES............................................................. 13
- ----------
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CCPR Services, Inc.
Condensed Balance Sheets
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
-----------------------------------------------
(Unaudited) (see note)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ - $ 1,919,000
Marketable securities - 5,917,000
Accounts receivable - trade, less allowance for doubtful
accounts of $2,487,000 (1997) and $3,472,000 (1996) 19,278,000 18,553,000
Due from affiliates 24,082,000 20,160,000
Equipment inventory 3,913,000 2,292,000
Prepaid expenses 4,059,000 2,130,000
--------------- ---------------
Total current assets 51,332,000 50,971,000
Property, plant and equipment, net 118,833,000 89,912,000
Investment in San Juan Cellular Telephone Company 99,309,000 21,401,000
Deferred financing costs, net of accumulated
amortization of $414,000 (1997) and $1,065,000 (1996) 6,376,000 4,118,000
Other assets, net of accumulated amortization
of $1,181,000 (1997) and $474,000 (1996) 991,000 866,000
--------------- ---------------
Total assets $276,841,000 $167,268,000
=============== ===============
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Cash overdraft $ 1,035,000 $ -
Accounts payable 8,069,000 6,703,000
Accrued expenses 16,224,000 10,238,000
Due to affiliates 35,627,000 26,122,000
Deferred revenue 2,270,000 2,454,000
--------------- ---------------
Total current liabilities 63,225,000 45,517,000
Long-term debt 200,000,000 115,000,000
Obligation under capital lease 9,526,000 -
Commitments and contingent liabilities
Shareholder's equity:
Common stock, $1 par value:
authorized, issued and outstanding -1,000 shares 1,000 1,000
Additional paid-in capital 5,258,000 5,258,000
Retained earnings (deficit) (1,169,000) 1,492,000
--------------- ---------------
Total shareholder's equity 4,090,000 6,751,000
--------------- ---------------
Total liabilities and shareholder's equity $276,841,000 $167,268,000
=============== ===============
</TABLE>
Note: The balance sheet at December 31, 1996 has been derived from the audited
financial statements at that date.
See accompanying notes.
2
<PAGE>
CCPR Services, Inc.
Condensed Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------------------------ -------------------------------------
1997 1996 1997 1996
------------------------------------ -------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Administrative and capital usage fees
charged to affiliates $10,513,000 $ 7,118,000 $ 29,157,000 $19,269,000
Depreciation and amortization 5,339,000 3,332,000 14,215,000 9,451,000
------------------------------------ -------------------------------------
Operating income 5,174,000 3,786,000 14,942,000 9,818,000
OTHER INCOME (EXPENSE):
Intercompany interest income 202,000 181,000 552,000 579,000
Interest and other income (expense) (18,000) 100,000 (54,000) 268,000
Interest expense (5,199,000) (2,150,000) (14,257,000) (5,560,000)
Equity in net income (loss) of San Juan
Cellular Telephone Company (558,000) 134,000 (349,000) 246,000
------------------------------------ -------------------------------------
Income (loss) before income taxes and
extraordinary item (399,000) 2,051,000 834,000 5,351,000
Provision for income taxes (223,000) (178,000) (556,000) (399,000)
------------------------------------ -------------------------------------
Income (loss) before extraordinary item (622,000) 1,873,000 278,000 4,952,000
Loss from early extinguishment of debt,
net of income tax benefit of $1,129,000 387,000 - (2,939,000) -
------------------------------------ -------------------------------------
Net income (loss) $ (235,000) $ 1,873,000 $ (2,661,000) $ 4,952,000
==================================== =====================================
</TABLE>
See accompanying notes.
3
<PAGE>
CCPR Services, Inc.
Condensed Statement of Shareholder's Equity (Unaudited)
<TABLE>
<CAPTION>
------------------------------------------------------------------------
Additional Retained
Common Paid-In Earnings
Stock Capital (Deficit) Total
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1996 $1,000 $5,258,000 $ 1,492,000 $ 6,751,000
Net loss for the nine months
ended September 30, 1997 (2,661,000) (2,661,000)
------------------------------------------------------------------------
Balance at September 30, 1997 $1,000 $5,258,000 $(1,169,000) $ 4,090,000
========================================================================
</TABLE>
See accompanying notes.
4
<PAGE>
CCPR Services, Inc.
Condensed Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
-----------------------------------------
1997 1996
-----------------------------------------
<S> <C> <C>
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ 9,960,000 $(27,884,000)
INVESTING ACTIVITIES
Purchase of marketable securities - (1,235,000)
Proceeds from maturities of marketable securities 5,917,000 1,028,000
Purchase of San Juan Cellular Telephone Company
interest (80,000,000) (56,000)
Purchase of property, plant and equipment (30,450,000) (18,294,000)
---------------------------------------
Net cash (used in) investing activities (104,533,000) (18,557,000)
FINANCING ACTIVITIES
Due to Cellular Communications of Puerto Rico, Inc. 13,056,000 -
Additional deferred financing costs - (22,000)
Proceeds from borrowings - 47,000,000
Principal payments of capital lease obligation (131,000) -
Proceeds from issuance of Notes, net of financing
costs 193,694,000 -
Repayment of bank loan (115,000,000) -
--------------------------------------
Net cash provided by financing activities 91,619,000 46,978,000
---------------------------------------
Net increase (decrease) in cash and cash equivalents (2,954,000) 537,000
Cash and cash equivalents at beginning of period 1,919,000 6,968,000
---------------------------------------
Cash and cash equivalents at end of period $ (1,035,000) $ 7,505,000
======================================
Supplemental disclosure of cash flow information:
Cash paid during the period for interest
exclusive of amounts capitalized $ 12,602,000 $ 4,100,000
Income taxes paid 226,000 198,000
Supplemental schedule of non cash investing activities:
Liability to parent company incurred in
connection with acquisition of San Juan Cellular
Telephone Company interest $ - $ 21,536,000
Capital lease obligation incurred to acquire office
building 9,922,000 -
Liabilities incurred to acquire property,
plant and equipment 2,363,000 4,885,000
</TABLE>
See accompanying notes
5
<PAGE>
CCPR Services, Inc.
Notes to Condensed Financial Statements (Unaudited)
September 30, 1997
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed 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 and nine months ended September 30,
1997 are not necessarily indicative of the results that may be expected for the
year ending December 31, 1997. For further information, refer to the financial
statements and footnotes thereto included in the Company's Registration
Statement on Form S-4, Registration No. 333-26055.
NOTE B - INVESTMENT IN SAN JUAN CELLULAR TELEPHONE COMPANY
The investment in San Juan Cellular Telephone Company consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
----------------------------------------
(Unaudited)
<S> <C> <C>
Purchase of San Juan Cellular Telephone Company
interests $101,592,000 $21,592,000
Equity in accumulated net income (loss) (45,000) 304,000
----------------------------------------
101,547,000 21,896,000
Accumulated amortization (2,238,000) (495,000)
----------------------------------------
$ 99,309,000 $21,401,000
========================================
</TABLE>
In January 1997, CCPR Services, Inc. ("Services") acquired a 21% interest in the
San Juan Cellular Telephone Company from its parent company, Cellular
Communications of Puerto Rico, Inc. ("CCPR"), in exchange for cash of
$80,000,000.
The following summarizes the assets, liabilities and partners' capital of San
Juan Cellular Telephone Company:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets $8,147,000 $10,180,000
Deferred costs, net 179,000 229,000
------------------------------------------
$8,326,000 $10,409,000
==========================================
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities $ - $ 796,000
Partners' capital 8,326,000 9,613,000
------------------------------------------
$8,326,000 $10,409,000
==========================================
</TABLE>
6
<PAGE>
CCPR Services, Inc.
Notes to Condensed Financial Statements (unaudited) (continued)
NOTE B - INVESTMENT IN SAN JUAN CELLULAR TELEPHONE COMPANY (CONTINUED)
The following summarizes the unaudited results of operations of San Juan
Cellular Telephone Company:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
----------------------------------------
1997 1996
----------------------------------------
<S> <C> <C>
Revenues $81,741,000 $70,644,000
Costs and expenses 83,029,000 64,824,000
----------------------------------------
Operating income (loss) (1,288,000) 5,820,000
Interest income 1,000 2,000
----------------------------------------
Income (loss) before income taxes (1,287,000) 5,822,000
Income taxes - (1,820,000)
----------------------------------------
Net income (loss) $(1,287,000) $ 4,002,000
========================================
</TABLE>
NOTE C - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
----------------------------------------
(Unaudited)
<S> <C> <C>
Land $ 1,928,000 $ 1,928,000
Office building 9,922,000 -
Operating equipment 111,234,000 90,337,000
Office furniture and other equipment 23,713,000 15,408,000
Rental equipment 991,000 712,000
Construction in progress 17,922,000 17,644,000
----------------------------------------
165,710,000 126,029,000
Accumulated depreciation (46,877,000) (36,117,000)
----------------------------------------
$118,833,000 $ 89,912,000
========================================
</TABLE>
In 1997, the Company entered into a lease for office space through 2012 which is
classified as a capital lease for financial reporting purposes. Accordingly, an
asset of $9,922,000 has been recorded. As of September 30, 1997, the total
minimum lease payments were $18,510,000, the estimated amount representing
interest was $8,719,000 and the present value of net minimum lease payments was
$9,791,000. This amount includes $265,000 current portion and $9,526,000 long-
term obligation under capital lease.
NOTE D - ACCRUED EXPENSES
Accrued expenses consist of:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
----------------------------------------
(Unaudited)
<S> <C> <C>
Accrued franchise, property and income taxes $ 3,089,000 $ 2,874,000
Interest payable 3,333,000 1,678,000
Other 9,802,000 5,686,000
----------------------------------------
$16,224,000 $10,238,000
========================================
</TABLE>
7
<PAGE>
CCPR Services, Inc.
Notes to Condensed Financial Statements (unaudited) (continued)
NOTE E - DUE TO AFFILIATES
Due to affiliates includes cash of $13,056,000 from CCPR that was loaned to
Services in 1997. This loan is non-interest bearing and is due on demand.
NOTE F - LONG-TERM DEBT
In January 1997, Services issued $200,000,000 principal amount 10% Senior
Subordinated Notes due 2007 (the "Notes") and received proceeds of $193,694,000
after discounts, commissions and other related costs. The Notes are
unconditionally guaranteed by CCPR. Services and CCPR used approximately
$116,000,000 of the proceeds to repay the $115,000,000 principal outstanding
plus accrued interest and fees under the bank loan.
In connection with the repayment of the bank loan, Services recorded an
extraordinary loss of $4,068,000 ($2,939,000 net of income tax benefit) from the
write-off of unamortized deferred financing costs.
The Notes are due on February 1, 2007. Interest on the Notes is payable
semiannually commencing on 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 covenants with respect to Services, CCPR and certain
subsidiaries of CCPR that limit their ability to, among other things, (i) incur
additional indebteness, (ii) pay dividends or make other distributions or
restricted payments, (iii) create liens, (iv) sell assets, (v) enter into
mergers or consolidations or (vi) sell or issue stock of subsidiaries.
NOTE G - COMMITMENTS AND CONTINGENT LIABILITIES
As of September 30, 1997, Services was committed to purchase cellular network
and other equipment and construction services of approximately $4,100,000. In
addition, as of September 30, 1997, Services had commitments to purchase
cellular telephones, pagers and accessories of approximately $930,000.
Services is involved in various disputes, arising in the ordinary course of
business, which may result in pending or threatened litigation. Services
management expects no material adverse effect on Services' financial condition
to result from these matters.
8
<PAGE>
CCPR Services, Inc.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
CCPR Services, Inc. ("Services") operates and manages Cellular Communications of
Puerto Rico, Inc.'s ("CCPR") (a wholly owned subsidiary of CoreComm
Incorporated) Puerto Rico cellular system on behalf of each of CCPR's operating
subsidiaries. Services charges an administrative fee based on revenues
generated in the Puerto Rico cellular system and a capital usage fee which is
the recovery of Sevices' capital costs. The following information does not
purport to be indicative of results that may occur in the future.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
Administrative and capital usage fees charged to affiliates increased to
$10,513,000 from $7,118,000 primarily because of increases in capital costs in
CCPR's Puerto Rico cellular system.
Depreciation and amortization increased to $5,339,000 from $3,332,000 primarily
because of an increase in property, plant and equipment.
Interest expense increased to $5,199,000 from $2,150,000 as a result of the
increase in long-term debt at a higher effective interest rate.
Equity in net income (loss) of San Juan Cellular Telephone Company decreased to
$(558,000) from $134,000. The change is due to the decrease in San Juan
Cellular Telephone Company's results of operations to a net loss of $(2,055,000)
from net income of $2,185,000 primarily as a result of the increase in capital
usage fees.
The provision for income taxes, net of income tax benefit of $387,000 from the
loss from the early extinguishment of debt, changed to a benefit of $164,000
from a provision of $178,000 as a result of the federal income tax benefit of
the tax sharing agreement with CCPR beginning in 1997.
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
Administrative and capital usage fees charged to affiliates increased to
$29,157,000 from $19,269,000 primarily because of increases in capital costs in
CCPR's Puerto Rico cellular system.
Depreciation and amortization increased to $14,215,000 from $9,451,000 primarily
because of an increase in property, plant and equipment.
9
<PAGE>
CCPR Services, Inc.
Interest expense increased to $14,257,000 from $5,560,000 as a result of the
increase in long-term debt at a higher effective interest rate during the first
quarter of 1997.
Equity in net income (loss) of San Juan Cellular Telephone Company decreased to
$(349,000) from $246,000. The change is due to the decrease in San Juan
Cellular Telephone Company's results of operations to a net loss of $(1,287,000)
from net income of $4,002,000 primarily as a result of the increase in capital
usage fees.
The provision for income taxes, net of income tax benefit of $1,129,000 from the
loss from the early extinguishment of debt, changed to a benefit of $573,000
from a provision of $399,000 as a result of the federal income tax benefit of
the tax sharing agreement with CCPR beginning in 1997.
In connection with the repayment of the bank loan, Services recorded an
extraordinary loss of $4,068,000 ($2,939,000 net of income tax benefit) from the
write-off of unamortized deferred financing costs.
LIQUIDITY AND CAPITAL RESOURCES
Services requires capital to expand CCPR's Puerto Rico cellular system and for
debt service. Services is currently adding cell sites and increasing capacity
throughout Puerto Rico on behalf of CCPR's operating subsidiaries. Services
expects to use approximately $5,200,000 in the fourth quarter of 1997 and
$26,500,000 in 1998 for contemplated additions to the Puerto Rico cellular
system and for other non-cell site related capital expenditures. Services'
commitments at September 30, 1997 of $4,100,000 for cellular network and other
equipment and for construction services are included in the total anticipated
expenditures. Services expects to be able to meet these requirements with cash
from operations and cash from CCPR. CCPR's sources of capital are cash from
operations of its subsidiaries and borrowings from CoreComm (subject to the
limitation contained in the Indenture to the Notes).
In January 1997, Services issued $200,000,000 principal amount 10% Senior
Subordinated Notes due 2007 (the "Notes") and received proceeds of $193,694,000
after discounts, commissions and other related costs. The Notes are
unconditionally guaranteed by CCPR. Services used approximately $116,000,000 of
the proceeds to repay the $115,000,000 principal outstanding plus accrued
interest and fees under the bank loan. In addition, Services made a cash
payment to CCPR of $80,000,000 in exchange for a 21% interest in the San Juan
Cellular Telephone Company.
The Notes are due on February 1, 2007. Interest on the Notes is payable
semiannually commencing 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 covenants with respect to Services, CCPR and
10
<PAGE>
CCPR Services, Inc.
certain subsidiaries of CCPR that limit their ability to, among other things,
(i) incur additional indebtedness, (ii) pay dividends or make other
distributions or restricted payments, (iii) create liens, (iv) sell assets, (v)
enter into mergers or consolidations or (vi) sell or issue stock of
subsidiaries.
Cash provided by (used in) operating activities was $9,960,000 and $(27,884,000)
for the nine months ended September 30, 1997 and 1996, respectively. In August
1996, Services borrowed $37,000,000 under its bank loan which it advanced to an
affiliate for the affiliate's deposit with the FCC in order to participate in a
PCS license auction. The affiliate withdrew from the auction prior to its
conclusion and the FCC returned the deposit in November 1996. The affiliate
then returned the advance to Services. Purchases of property, plant and
equipment of $30,450,000 in 1997 were primarily for additional cell sites and
increased capacity in the Puerto Rico cellular and paging systems.
The allowance for doubtful accounts was $2,487,000 as of September 30, 1997 and
$3,472,000 as of December 31, 1996. Write-offs net of recoveries as a
percentage of service revenues of affiliates was 6.8% for the nine months ended
September 30, 1997 compared to 6.0% for the year ended December 31, 1996. This
percentage increased because Services has attracted and continues to attract new
segments of the market. Services continued to attempt to reduce this percentage
by improving credit procedures and instituting innovative forms of payment such
as prepaid billing.
11
<PAGE>
CCPR Services, Inc.
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
No reports on Form 8-K were filed by the Company during the
quarter ended September 30, 1997.
12
<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.
CCPR SERVICES, INC.
Date: November 11, 1997 By: /s/ J. Barclay Knapp
-------------------------
J. Barclay Knapp
President
Date: November 11, 1997 By: /s/ Gregg Gorelick
--------------------------
Gregg Gorelick
Vice President-Controller
(Principal Accounting Officer)
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<PERIOD-START> JAN-01-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 21,765,000
<ALLOWANCES> (2,487,000)
<INVENTORY> 3,913,000
<CURRENT-ASSETS> 51,332,000
<PP&E> 165,710,000
<DEPRECIATION> (46,877,000)
<TOTAL-ASSETS> 276,841,000
<CURRENT-LIABILITIES> 63,225,000
<BONDS> 200,000,000
0
0
<COMMON> 1,000
<OTHER-SE> 4,089,000
<TOTAL-LIABILITY-AND-EQUITY> 276,841,000
<SALES> 0
<TOTAL-REVENUES> 29,157,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,257,000
<INCOME-PRETAX> 834,000
<INCOME-TAX> 556,000
<INCOME-CONTINUING> 278,000
<DISCONTINUED> 0
<EXTRAORDINARY> (2,939,000)
<CHANGES> 0
<NET-INCOME> (2,661,000)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
