<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 June 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 (I.R.S. Employer Identification No.)
incorporation or organization)
110 E. 59th 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 June 30,
1997 was 1,000.
<PAGE>
CCPR Services, Inc.
Index
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page
- ------------------------------ ----
<S> <C> <C>
Item 1. Financial Statements
Condensed Balance Sheets-
June 30, 1997 and December 31, 1996.................................2
Condensed Statements of Operations-
Three and six months ended June 30, 1997 and 1996...................3
Condensed Statement of Shareholder's Equity -
Six months ended June 30, 1997......................................4
Condensed Statements of Cash Flows-
Six months ended June 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..................................8
PART II. OTHER INFORMATION
- --------------------------
Item 6. Exhibits and Reports on Form 8-K....................................11
SIGNATURES...................................................................12
- ----------
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CCPR Services, Inc.
Condensed Balance Sheets
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
--------------------------------------
(Unaudited) (see note)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 1,951,000 $ 1,919,000
Marketable securities 210,000 5,917,000
Accounts receivable - trade, less allowance for doubtful
accounts of $3,130,000 (1997) and $3,472,000 (1996) 20,683,000 18,553,000
Due from affiliates 23,110,000 20,160,000
Equipment inventory 5,616,000 2,292,000
Prepaid expenses 5,522,000 2,130,000
--------------------------------------
Total current assets 57,092,000 50,971,000
Property, plant and equipment, net 111,620,000 89,912,000
Investment in San Juan Cellular Telephone Company 100,503,000 21,401,000
Deferred financing costs, net of accumulated
amortization of $256,000 (1997) and $1,065,000 (1996) 6,049,000 4,118,000
Other assets, net of accumulated amortization
of $964,000 (1997) and $474,000 (1996) 1,153,000 866,000
--------------------------------------
Total assets $ 276,417,000 $ 167,268,000
======================================
Liabilities and shareholder's equity
Current liabilities:
Accounts payable $ 13,495,000 $ 6,703,000
Accrued expenses 22,051,000 10,238,000
Due to affiliates 24,492,000 26,122,000
Deferred revenue 2,459,000 2,454,000
--------------------------------------
Total current liabilities 62,497,000 45,517,000
Long-term debt 200,000,000 115,000,000
Obligation under capital lease 9,595,000 -
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) (934,000) 1,492,000
--------------------------------------
Total shareholder's equity 4,325,000 6,751,000
--------------------------------------
Total liabilities and shareholder's equity $ 276,417,000 $ 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 Six Months Ended
June 30 June 30
------------------------------------ ------------------------------------
1997 1996 1997 1996
------------------------------------ ------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Administrative and capital usage fees
charged to affiliates $ 10,032,000 $ 6,255,000 $ 18,644,000 $ 12,151,000
Depreciation and amortization 4,710,000 3,149,000 8,876,000 6,119,000
------------------------------------ ------------------------------------
Operating income 5,322,000 3,106,000 9,768,000 6,032,000
Other income (expense):
Intercompany interest income 181,000 204,000 350,000 398,000
Interest and other income (expense) (72,000) 111,000 (36,000) 168,000
Interest expense (5,075,000) (1,678,000) (9,058,000) (3,410,000)
Equity in net income of San Juan Cellular
Telephone Company 74,000 58,000 209,000 112,000
------------------------------------ ------------------------------------
Income before income taxes and extraordinary
item 430,000 1,801,000 1,233,000 3,300,000
Provision for income taxes (151,000) (134,000) (333,000) (221,000)
------------------------------------ ------------------------------------
Income before extraordinary item 279,000 1,667,000 900,000 3,079,000
Loss from early extinguishment of debt,
net of income tax benefit of $742,000 426,000 -- (3,326,000) --
------------------------------------ ------------------------------------
Net income (loss) $ 705,000 $ 1,667,000 $ (2,426,000) $ 3,079,000
==================================== ====================================
</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 six months
ended June 30, 1997 (2,426,000) (2,426,000)
---------------- ------------------- ------------------- --------------------
Balance at June 30, 1997 $ 1,000 $ 5,258,000 $ (934,000) $ 4,325,000
================ =================== =================== ====================
</TABLE>
See accompanying notes.
4
<PAGE>
CCPR Services, Inc.
Condensed Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30
-----------------------------------------
1997 1996
-----------------------------------------
<S> <C> <C>
Net cash provided by operating activities $ 10,695,000 $ 1,545,000
Investing activities
Proceeds from maturities of marketable securities 5,707,000 -
Purchase of San Juan Cellular Telephone Company interest (80,000,000) (56,000)
Acquisition of property, plant and equipment (15,280,000) (10,895,000)
Proceeds from sale of equipment 215,000 -
-----------------------------------------
Net cash used in investing activities (89,358,000) (10,951,000)
Financing activities
Additional deferred financing costs - (22,000)
Proceeds from borrowings - 5,000,000
Proceeds from issuance of Notes, net of financing costs 193,695,000 -
Repayment of bank loan (115,000,000) -
-----------------------------------------
Net cash provided by financing activities 78,695,000 4,978,000
-----------------------------------------
Net increase (decrease) in cash and cash equivalents 32,000 (4,428,000)
Cash and cash equivalents at beginning of period 1,919,000 6,968,000
-----------------------------------------
Cash and cash equivalents at end of period $ 1,951,000 $ 2,540,000
=========================================
Supplemental disclosure of cash flow information:
Cash paid during the period for interest exclusive of
amounts capitalized $ 2,403,000 $ 2,624,000
Income taxes paid 67,000 141,000
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 6,260,000 4,451,000
</TABLE>
See accompanying notes
5
<PAGE>
CCPR Services, Inc.
Notes to Condensed Financial Statements (Unaudited)
June 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 six months ended June 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
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 excess of the cost over Services' portion of the San Juan Cellular Telephone
Company's equity is being amortized. Accumulated amortization was $1,602,000 at
June 30, 1997 and $495,000 at December 31, 1996.
Note C - Property, Plant and Equipment
Property, plant and equipment consists of:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
-------------------------------------------
(Unaudited)
<S> <C> <C>
Land $ 1,928,000 $ 1,928,000
Office building 9,922,000 -
Operating equipment 100,733,000 90,337,000
Office furniture and other equipment 19,621,000 15,408,000
Rental equipment 897,000 712,000
Construction in progress 20,929,000 17,644,000
-------------------------------------------
154,030,000 126,029,000
Accumulated depreciation (42,410,000) (36,117,000)
-------------------------------------------
$ 111,620,000 $ 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 June 30, 1997, the total minimum
lease payments were $18,809,000, the estimated amount representing interest was
$8,955,000 and the present value of net minimum lease payments was $9,854,000.
This amount includes $259,000 current portion and $9,595,000 long-term
obligation under capital lease.
6
<PAGE>
CCPR Services, Inc.
Notes to Condensed Financial Statements (Unaudited)-(continued)
Note D - Accrued Expenses
Accrued expenses consist of:
<TABLE>
<CAPTION>
June 30, December 31
1997 1996
--------------------------------------------
(Unaudited)
<S> <C> <C>
Accrued franchise, property and income taxes $ 3,152,000 $ 2,874,000
Interest payable 8,333,000 1,678,000
Other 10,566,000 5,686,000
--------------------------------------------
$ 22,051,000 $ 10,238,000
============================================
</TABLE>
Note E - 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 $193,695,000
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 ($3,326,000 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 F - Commitments and Contingent Liabilities
As of June 30, 1997, Services was committed to purchase cellular network and
other equipment and construction services of approximately $7,400,000. In
addition, as of June 30, 1997, Services had commitments to purchase cellular
telephones, pagers and accessories of approximately $1,500,000.
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.
7
<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 June 30, 1997 and 1996
- -----------------------------------------
Administrative and capital usage fees charged to affiliates increased to
$10,032,000 from $6,255,000 as a result of increases in revenues and capital
costs in CCPR's Puerto Rico cellular system.
Depreciation and amortization increased to $4,710,000 from $3,149,000 primarily
because of an increase in property, plant and equipment.
Interest expense increased to $5,075,000 from $1,678,000 as a result of the
increase in long-term debt at a higher effective interest rate.
Equity in net income of San Juan Cellular Telephone Company increased to $74,000
from $58,000 as a result of the acquisition of an additional 21% ownership
interest in the partnership in January 1997.
The provision for income taxes, net of income tax benefit of $426,000 from the
loss from the early extinguishment of debt, changed to a benefit of $275,000
from a provision of $134,000 as a result of the federal income tax benefit of
the tax sharing agreement with CCPR beginning in 1997.
Six Months Ended June 30, 1997 and 1996
- ---------------------------------------
Administrative and capital usage fees charged to affiliates increased to
$18,644,000 from $12,151,000 as a result of increases in revenues and capital
costs in CCPR's Puerto Rico cellular system.
Depreciation and amortization increased to $8,876,000 from $6,119,000 primarily
because of an increase in property, plant and equipment.
8
<PAGE>
CCPR Services, Inc.
Interest expense increased to $9,058,000 from $3,410,000 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 of San Juan Cellular Telephone Company increased to
$209,000 from $112,000 as a result of the acquisition of an additional 21%
ownership interest in the partnership in January 1997.
The provision for income taxes, net of income tax benefit of $742,000 from the
loss from the early extinguishment of debt, changed to a benefit of $409,000
from a provision of $221,000 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 ($3,326,000 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 $23,000,000 in the remainder of 1997 for
contemplated additions to the Puerto Rico cellular system and for other non-cell
site related capital expenditures. Services' commitments at June 30, 1997 of
$7,400,000 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.
In January 1997, Services issued $200,000,000 principal amount 10% Senior
Subordinated Notes due 2007 (the "Notes") and received proceeds of $193,695,000
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
9
<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 operating activities was $10,695,000 and $1,545,000 for the six
months ended June 30, 1997 and 1996, respectively, an increase of $9,150,000.
Purchases of property, plant and equipment of $15,280,000 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 $3,130,000 as of June 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 6.4% for the six months ended June 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.
10
<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 June 30, 1997.
11
<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: August 8, 1997 By: /s/ J. Barclay Knapp
-------------------------
J. Barclay Knapp
President
Date: August 8, 1997 By: /s/ Gregg Gorelick
--------------------------
Gregg Gorelick
Vice President-Controller
(Principal Accounting Officer)
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,951,000
<SECURITIES> 210,000
<RECEIVABLES> 23,813,000
<ALLOWANCES> (3,130,000)
<INVENTORY> 5,616,000
<CURRENT-ASSETS> 5,522,000
<PP&E> 154,030,000
<DEPRECIATION> (42,410,000)
<TOTAL-ASSETS> 276,417,000
<CURRENT-LIABILITIES> 62,497,000
<BONDS> 200,000,000
0
0
<COMMON> 1,000
<OTHER-SE> 4,324,000
<TOTAL-LIABILITY-AND-EQUITY> 276,417,000
<SALES> 0
<TOTAL-REVENUES> 18,644,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,058,000
<INCOME-PRETAX> 1,233,000
<INCOME-TAX> 333,000
<INCOME-CONTINUING> 900,000
<DISCONTINUED> 0
<EXTRAORDINARY> (3,326,000)
<CHANGES> 0
<NET-INCOME> (2,426,000)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
