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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q/A
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|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number
333-36253
PRICE COMMUNICATIONS WIRELESS, INC.
(Exact Name of Registrant as specified in its charter)
Delaware 65-0456627
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
45 Rockefeller Plaza, 10020
New York, New York (Zip Code)
(Address of principal executive offices)
Registrant's telephone number (212) 757-5600
--------------------
Securities registered pursuant to Section 12(b) or Section 12(g) of the Act:
None
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 October 23,
1999 was 100.
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<PAGE>
PRICE COMMUNICATIONS WIRELESS, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<S> <C>
PART 1. FINANCIAL INFORMATION
ITEM 1. Financial Statements (unaudited)
Price Communications Wireless, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets - September 30, 1999 and December 31, 1998................ 1
Condensed Consolidated Statements of Operations - Three months ended
September 30, 1999 and 1998 and nine months ended September 30, 1999 and 1998............. 2
Condensed Consolidated Statements of Cash Flows - Nine months ended
September 30, 1999 and 1998............................................................... 3
Notes to Condensed Consolidated Financial Statements............................................ 4
Palmer Wireless Holdings, Inc.
Condensed Consolidated Balance Sheets - September 30, 1999 and December 31, 1998................ 6
Condensed Consolidated Statements of Operations - Three months ended
September 30, 1999 and 1998 and nine months ended September 30, 1999 and 1998............. 7
Condensed Consolidated Statements of Cash Flows - Nine months ended
September 30, 1999 and 1998............................................................... 8
Notes to Condensed Consolidated Financial Statements............................................ 9
Cellular Systems of Southeast Alabama, Inc.
Condensed Consolidated Balance Sheets - September 30, 1999 and December 31, 1998................ 10
Condensed Consolidated Statements of Operations - Three months ended
September 30, 1999 and 1998 and nine months ended September 30, 1999 and 1998............. 11
Condensed Consolidated Statements of Cash Flows - Nine months ended
September 30, 1999 and 1998............................................................... 12
Notes to Condensed Consolidated Financial Statements............................................ 13
Albany Cellular Partners
Condensed Consolidated Balance Sheets - September 30, 1999 and December 31, 1998................ 14
Condensed Consolidated Statements of Operations - Three months ended
September 30, 1999 and 1998 and nine months ended September 30, 1999 and 1998............. 15
Condensed Consolidated Statements of Cash Flows - Nine months ended
September 30, 1999 and 1998............................................................... 16
Notes to Condensed Consolidated Financial Statements............................................ 17
Cellular Dynamics Telephone Company of Georgia
Condensed Consolidated Balance Sheets - September 30, 1999 and December 31, 1998................ 18
Condensed Consolidated Statements of Operations - Three months ended
September 30, 1999 and 1998 and nine months ended September 30, 1999 and 1998............. 19
Condensed Consolidated Statements of Cash Flows - Nine months ended
September 30, 1999 and 1998............................................................... 20
Notes to Condensed Consolidated Financial Statements............................................ 21
Columbus Cellular Telephone Company
Condensed Consolidated Balance Sheets - September 30, 1999 and December 31, 1998................ 22
Condensed Consolidated Statements of Operations - Three months ended
September 30, 1999 and 1998 and nine months ended September 30, 1999 and 1998............. 23
Condensed Consolidated Statements of Cash Flows - Nine months ended
September 30, 1999 and 1998............................................................... 24
Notes to Condensed Consolidated Financial Statements............................................ 25
</TABLE>
i
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<TABLE>
<S> <C>
Dothan Cellular Telephone Company, Inc.
Condensed Consolidated Balance Sheets - September 30, 1999 and December 31, 1998................ 26
Condensed Consolidated Statements of Operations - Three months ended
September 30, 1999 and 1998 and nine months ended September 30, 1999 and 1998............. 27
Condensed Consolidated Statements of Cash Flows - Nine months ended
September 30, 1999 and 1998............................................................... 28
Notes to Condensed Consolidated Financial Statements............................................ 29
Macon Cellular Telephone Systems Limited Partnership
Condensed Consolidated Balance Sheets - September 30, 1999 and December 31, 1998............... 30
Condensed Consolidated Statements of Operations - Three months ended
September 30, 1999 and 1998 and nine months ended September 30, 1999 and 1998............. 31
Condensed Consolidated Statements of Cash Flows - Nine months ended
September 30, 1999 and 1998............................................................... 32
Notes to Condensed Consolidated Financial Statements............................................ 33
Montgomery Cellular Holding, Co., Inc.
Condensed Consolidated Balance Sheets - September 30, 1999 and December 31, 1998................ 34
Condensed Consolidated Statements of Operations - Three months ended
September 30, 1999 and 1998 and nine months ended September 30, 1999 and 1998............. 35
Condensed Consolidated Statements of Cash Flows - Nine months ended
September 30, 1999 and 1998............................................................... 36
Notes to Condensed Consolidated Financial Statements............................................ 37
Montgomery Cellular Telephone Company, Inc.
Condensed Consolidated Balance Sheets - September 30, 1999 and December 31, 1998............... 38
Condensed Consolidated Statements of Operations - Three months ended
September 30, 1999 and 1998 and nine months ended September 30, 1999 and 1998............. 39
Condensed Consolidated Statements of Cash Flows - Nine months ended
September 30, 1999 and 1998............................................................... 40
Notes to Condensed Consolidated Financial Statements............................................ 41
Panama City Cellular Telephone Company, Ltd.
Condensed Consolidated Balance Sheets - September 30, 1999 and December 31, 1998
Condensed Consolidated Statements of Operations - Three months ended .......................... 42
September 30, 1999 and 1998 and nine months ended September 30, 1999 and 1998............. 43
Condensed Consolidated Statements of Cash Flows - Nine months ended
September 30, 1999 and 1998............................................................... 44
Notes to Condensed Consolidated Financial Statements............................................ 45
Panhandle Cellular Partnership
Condensed Consolidated Balance Sheets - September 30, 1999 and December 31, 1998................ 46
Condensed Consolidated Statements of Operations - Three months ended
September 30, 1999 and 1998 and nine months ended September 30, 1999 and 1998............. 47
Condensed Consolidated Statements of Cash Flows - Nine months ended
September 30, 1999 and 1998............................................................... 48
Notes to Condensed Consolidated Financial Statements............................................ 49
Savannah Cellular Limited Partnership
Condensed Consolidated Balance Sheets - September 30, 1999 and December 31, 1998............... 50
Condensed Consolidated Statements of Operations - Three months ended
September 30, 1999 and 1998 and nine months ended September 30, 1999 and 1998............. 51
Condensed Consolidated Statements of Cash Flows - Nine months ended
September 30, 1999 and 1998............................................................... 52
Notes to Condensed Consolidated Financial Statements............................................ 53
</TABLE>
ii
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<TABLE>
<S> <C>
CEI Communications, Inc.
Condensed Consolidated Balance Sheets - September 30, 1999 and December 31, 1998............... 54
Condensed Consolidated Statements of Operations - Three months ended
September 30, 1999 and 1998 and nine months ended September 30, 1999 and 1998............. 55
Condensed Consolidated Statements of Cash Flows - Nine months ended
September 30, 1999 and 1998............................................................... 56
Notes to Condensed Consolidated Financial Statements............................................ 57
Panama City Communications, Inc.
Condensed Consolidated Balance Sheets - September 30, 1999 and December 31, 1998................ 58
Condensed Consolidated Statements of Operations - Three months ended
September 30, 1999 and 1998 and nine months ended September 30, 1999 and 1998............. 59
Condensed Consolidated Statements of Cash Flows - Nine months ended
September 30, 1999 and 1998............................................................... 60
Notes to Condensed Consolidated Financial Statements............................................ 61
Price Communications Wireless II, Inc.
Condensed Consolidated Balance Sheets - September 30, 1999 and December 31, 1998................ 62
Condensed Consolidated Statements of Operations - Three months ended
September 30, 1999 and 1998 and nine months ended September 30, 1999 and 1998............. 63
Condensed Consolidated Statements of Cash Flows - Nine months ended
September 30, 1999 and 1998............................................................... 64
Notes to Condensed Consolidated Financial Statements............................................ 65
Price Communications Wireless III, Inc.
Condensed Consolidated Balance Sheets - September 30, 1999 and December 31, 1998................ 66
Condensed Consolidated Statements of Operations - Three months ended
September 30, 1999 and 1998 and nine months ended September 30, 1999 and 1998............. 67
Condensed Consolidated Statements of Cash Flows - Nine months ended
September 30, 1999 and 1998............................................................... 68
Notes to Condensed Consolidated Financial Statements............................................ 69
Price Communications Wireless IV, Inc.
Condensed Consolidated Balance Sheets - September 30, 1999 and December 31, 1998................ 70
Condensed Consolidated Statements of Operations - Three months ended
September 30, 1999 and 1998 and nine months ended September 30, 1999 and 1998............. 71
Condensed Consolidated Statements of Cash Flows - Nine months ended
September 30, 1999 and 1998............................................................... 72
Notes to Condensed Consolidated Financial Statements............................................ 73
Price Communications Wireless V, Inc.
Condensed Consolidated Balance Sheets - September 30, 1999 and December 31, 1998................ 74
Condensed Consolidated Statements of Operations - Three moths ended
September 30, 1999 and 1998 and nine months ended September 30, 1999 and 1998............. 75
Condensed Consolidated Statements of Cash Flows - Nine months ended
September 30, 1999 and 1998............................................................... 76
Notes to Condensed Consolidated Financial Statements............................................ 77
Price communications Wireless VI, Inc.
Condensed Consolidated Balance Sheets - September 30, 1999 and December 31, 1998................ 78
Condensed Consolidated Statements of Operations - Three months ended
September 30, 1999 and 1998 and nine months ended September 30, 1999 and 1998............. 79
Condensed Consolidated Statements of Cash Flows - Nine months ended
September 30, 1999 and 1998............................................................... 80
Notes to Condensed Consolidated Financial Statements............................................ 81
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
Price Communications Wireless VII, Inc.
Condensed Consolidated Balance Sheets - September 30, 1999 and December 31, 1998................ 82
Condensed Consolidated Statements of Operations - Three months ended
September 30, 1999 and 1998 and nine moths ended September 30, 1999 and 1998.............. 83
Condensed Consolidated Statements of Cash Flows - Nine months ended
September 30, 1999 and 1998............................................................... 84
Notes to Condensed Consolidated Financial Statements............................................ 85
Price Communications Wireless VIII, Inc.
Condensed Consolidated Balance Sheets - September 30, 1999 and December 31, 1998................ 86
Condensed Consolidated Statements of Operations - Three months ended
September 30, 1999 and 1998 and nine months ended September 30, 1999 and 1998............. 87
Condensed Consolidated Statements of Cash Flows - Nine months ended
September 30, 1999 and 1998............................................................... 88
Notes to Condensed Consolidated Financial Statements............................................ 89
Price Communications Wireless IX, Inc.
Condensed Consolidated Balance Sheets - September 30, 1999 and December 31, 1998................ 90
Condensed Consolidated Statements of Operations - Three months ended
September 30, 1999 and 1998 and nine months ended September 30, 1999 and 1998............. 91
Condensed Consolidated Statements of Cash Flows - Nine months ended
September 30, 1999 and 1998............................................................... 92
Notes to Condensed Consolidated Financial Statements............................................ 93
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............ 94
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk....................................... 102
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings......................................................................... 103
ITEM 2. Changes in Securities..................................................................... 103
ITEM 3. Defaults Upon Senior Securities - None.................................................... 103
ITEM 4. Submission of Matters to a Vote of Security Holders....................................... 103
ITEM 5. Other Information......................................................................... 103
ITEM 6. Exhibit and Reports on Form 8-K........................................................... 103
SIGNATURES................................................................................................ 104
</TABLE>
iv
<PAGE>
Item 1. Financial Statements
PRICE COMMUNICATIONS WIRELESS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
($ in thousands)
(Unaudited) (Audited)
September 30, December 31,
1999 1998
------------- ------------
Assets
Current assets:
Cash and cash equivalents $ 139,959 $ 109,137
Restricted cash -- 79,081
Trade accounts receivable, net of
allowance for doubtful accounts 25,215 20,508
Receivable from other cellular carriers 2,881 2,282
Prepaid expenses and deposits 455 303
Inventory 2,572 3,940
Deferred income taxes 572 1,383
----------- -----------
Total current assets 171,654 216,634
Net property and equipment 142,955 144,828
Licenses, net of amortization 863,216 876,952
Other intangible assets and other assets,
at cost less accumulated amortization 18,411 25,320
----------- -----------
$ 1,196,236 $ 1,263,734
=========== ===========
Liabilities and Stockholder's Equity (Deficit)
Current liabilities:
Payable to Price Communications Corporation $ 1,570 $ 1,151
Accounts payable and accrued expenses 22,920 21,616
Accrued interest payable 18,555 11,779
Accrued salaries and employee benefits 2,244 2,656
Deferred revenue 6,437 5,535
Customer deposits 1,280 921
----------- -----------
Total current liabilities 53,006 43,658
Long-term debt 700,000 700,000
Obligation of Parent Company -- 209,432
Accrued income taxes - long term 25,681 22,775
Deferred income taxes 291,315 290,370
Minority interests 7,322 9,530
----------- -----------
Total liabilities 1,077,324 1,275,765
----------- -----------
Commitments and contingencies -- --
Stockholder's equity (deficit) 118,912 (12,031)
----------- -----------
$ 1,196,236 $ 1,263,734
=========== ===========
See accompanying notes to condensed consolidated financial statements.
1
<PAGE>
PRICE COMMUNICATIONS WIRELESS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
($ in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the three months For the nine months
ended September 30, ended September 30,
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenue:
Service $ 60,113 $ 48,517 $ 172,773 $ 134,938
Equipment sales and installation 5,029 3,403 13,569 9,175
--------- --------- --------- ---------
Total revenue 65,142 51,920 186,342 144,113
--------- --------- --------- ---------
Operating expenses:
Engineering, technical and other direct 6,548 7,480 22,937 20,502
Cost of equipment 8,223 5,886 22,664 17,401
Selling, general and administrative 15,285 15,321 43,956 41,466
Depreciation and amortization 12,387 11,168 33,774 33,721
--------- --------- --------- ---------
Total operating expenses 42,443 39,855 123,331 113,090
--------- --------- --------- ---------
Operating income 22,699 12,065 63,011 31,023
--------- --------- --------- ---------
Other income (expense):
Interest expense, net (16,160) (24,879) (58,632) (60,786)
Other income (expense), net 43 (55) 143 (98)
--------- --------- --------- ---------
Total other expense (16,117) (24,934) (58,489) (60,884)
--------- --------- --------- ---------
Income (loss) before minority interest
share of income, income taxes
and extraordinary item 6,582 (12,869) 4,522 (29,861)
Minority interest share of income (382) (713) (1,369) (1,715)
--------- --------- --------- ---------
Income (loss) before income taxes
and extraordinary item 6,200 (13,582) 3,153 (31,576)
Income tax (expense) benefit (2,254) 5,051 (1,167) 11,566
--------- --------- --------- ---------
Income (loss) before extraordinary item 3,946 (8,531) 1,986 (20,010)
Extraordinary item - write-off of deferred
finance costs and premium on early
extinguishment of debt (net of income
tax benefit of $7,311 and $11,246
respectively) -- (13,246) -- (19,148)
--------- --------- --------- ---------
Net income (loss) $ 3,946 (21,777) $ 1,986 $ (39,158)
========= ========= ========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE>
PRICE COMMUNICATIONS WIRELESS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
($ in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the nine months
ended September 30,
1999 1998
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,986 $ (39,158)
--------- ---------
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization 33,774 33,721
Minority interest share of income 1,369 1,715
Deferred income taxes (1,734) (3,217)
Loss on disposal of property -- 151
Premium on early extinguishment of debt -- 18,194
Accrued interest satisfied by issuance of PCC Stock 11,309 --
Interest deferred and added to obligation of Parent Company -- 1,911
Write-off of deferred finance charges -- 12,200
Amortization of deferred finance charges 1,916 76
Interest earned on restricted cash (3,454) --
Increase in trade accounts receivable (5,306) (5,096)
Decrease (increase) in inventory 1,368 (2,070)
Increase (decrease) in accounts payable and accrued expenses 3,799 (5,434)
Decrease in accrued income taxes-long term -- (19,634)
Increase in accrued interest payable 6,776 8,932
Change in other accounts 1,110 4,825
--------- ---------
Total adjustments 50,927 46,274
--------- ---------
Net cash provided by operating activities 52,913 7,116
--------- ---------
Cash flows from investing activities:
Capital expenditures (14,545) (5,544)
Purchase of additional minority interests (7,177) --
--------- ---------
Net cash used in investing activities (21,722) (5,544)
--------- ---------
Cash flows from financing activities:
Repayment of long-term debt -- (518,112)
Repayment of advances from Price Communications Corporation 419 (930)
Proceeds from long-term debt -- 725,000
Premium on early extinguishment of debt -- (18,194)
Cash pledged for outstanding interest rate swap contracts -- (9,302)
Increase in other intangible assets and other assets (788) --
Payment of debt issuance costs -- (18,223)
--------- ---------
Net cash (used in ) provided by financing activities (369) 160,239
--------- ---------
Net increase in cash and cash equivalents 30,822 161,811
Cash and cash equivalents at the beginning of period 109,137 27,926
--------- ---------
Cash and cash equivalents at the end of period $ 139,959 $ 189,737
========= =========
Supplemental disclosure of cash flow information:
Income taxes paid, net $ 205 $ 643
========= =========
Interest paid $ 44,516 $ 82,620
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
PRICE COMMUNICATIONS WIRELESS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
($ in thousands)
(Unaudited)
(1) Summary of Significant Accounting Policies
Organization and Acquisition
Price Communications Wireless, Inc. ("PCW" or the "Company"), a
wholly-owned subsidiary of Price Communications Cellular Holdings, Inc.
("Holdings"), a wholly-owned subsidiary of Price Communications Cellular, Inc.,
a wholly owned subsidiary of Price Communications Corporation ("PCC"), was
incorporated on May 29, 1997 in connection with the purchase of Palmer Wireless,
Inc. and subsidiaries ("Palmer").
Basis of Presentation
The accompanying Condensed Consolidated Financial Statements of Price
Communications Wireless, Inc. and subsidiaries (the "Company") have been
prepared without audit pursuant to Rule 10-01 of Regulation S-X of the
Securities and Exchange Commission. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for financial statements. These Condensed Consolidated Financial Statements
should be read in conjunction with the audited Consolidated Financial Statements
previously filed on the Company's Form 10-K. In the opinion of management, all
adjustments (none of which were other than normal recurring items) considered
necessary for a fair presentation have been included. The results of operations
for the interim periods reported are not necessarily indicative of results to be
expected for the year.
Impact of New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Accounting Standards No. 133 ("Accounting for Derivative Instruments and Hedging
Activities"). This statement establishes accounting and reporting standards
requiring that all derivative instruments (including certain derivative
instruments embedded in other contracts) be recorded on the balance sheet as an
asset or a liability and measured at their fair value. As amended by Statement
of Accounting Standards No. 137, this statement is effective for fiscal years
beginning after June 15, 2000, but can be adopted earlier. Management has not
yet determined the timing of or method to be used in adopting this statement.
Management does not believe at this time that such adoption will have a material
impact on its consolidated financial statements.
Reclassifications
Certain reclassifications have been made to the 1998 Statements of
Operations and Statements of Cash Flows to conform to the 1999 presentation.
(2) Obligation of Parent Company
In June 1999, the Company's parent, PCH, allowed the conversion of the
outstanding indebtedness of the $200 million 11 1/4% Senior Exchangeable
Payable-in-Kind Notes according to the provisions of the indenture. Accordingly,
the obligation as of June 24, 1999, which amounted to $220.7 million including
accrued interest, was satisfied by the issuance of 17.2 million shares of PCC's
common stock. In addition, the restricted cash previously recorded on the
Company's Balance Sheets, as well as the unamortized finance costs and deferred
taxes associated with the accreted interest, have been written off against
paid-in-capital.
4
<PAGE>
Item 1. Financial Statements
PALMER WIRELESS HOLDINGS INC.
Condensed Consolidated Balance Sheets
($ in thousands)
(Unaudited) (Audited)
September 30, December 31,
1999 1998
----------- -----------
Assets
Current assets:
Cash and cash equivalents $ 139,959 $ 109,137
Restricted cash -- 79,081
Trade accounts receivable, net of
allowance for doubtful accounts 25,215 20,508
Receivable from other cellular carriers 2,881 2,282
Prepaid expenses and deposits 455 303
Inventory 2,572 3,940
Deferred income taxes 572 1,383
----------- -----------
Total current assets 171,654 216,634
Net property and equipment 142,955 144,828
Licenses, net of amortization 863,216 876,952
Other intangible assets and other assets,
at cost less accumulated amortization 18,411 25,320
----------- -----------
$ 1,196,236 $ 1,263,734
=========== ===========
Liabilities and Equity (Deficit)
Current liabilities:
Payable to Price Communications Corporation $ 1,570 $ 1,151
Accounts payable and accrued expenses 22,920 21,616
Accrued interest payable 18,555 11,779
Accrued salaries and employee benefits 2,244 2,656
Deferred revenue 6,437 5,535
Customer deposits 1,280 921
----------- -----------
Total current liabilities 53,006 43,658
Long-term debt 700,000 700,000
Obligation of Parent Company -- 209,432
Accrued income taxes - long term 25,681 22,775
Deferred income taxes 291,315 290,370
Minority interests 7,322 9,530
----------- -----------
Total liabilities 1,077,324 1,275,765
----------- -----------
Commitments and contingencies -- --
Stockholder's equity (deficit) 118,912 (12,031)
----------- -----------
$ 1,196,236 $ 1,263,734
=========== ===========
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
PALMER WIRELESS HOLDINGS, INC.
Condensed Consolidated Statements of Operations
($ in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the three months For the nine months
ended September 30, ended September 30,
---------------------- ----------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenue:
Service $ 60,113 $ 48,517 $ 172,773 $ 134,938
Equipment sales and installation 5,029 3,403 13,569 9,175
--------- --------- --------- ---------
Total revenue 65,142 51,920 186,342 144,113
--------- --------- --------- ---------
Operating expenses:
Engineering, technical and other direct 6,548 7,480 22,937 20,502
Cost of equipment 8,223 5,886 22,664 17,401
Selling, general and administrative 15,285 15,321 43,956 41,466
Depreciation and amortization 12,387 11,168 33,774 33,721
--------- --------- --------- ---------
Total operating expenses 42,443 39,855 123,331 113,090
--------- --------- --------- ---------
Operating income 22,699 12,065 63,011 31,023
--------- --------- --------- ---------
Other income (expense):
Interest expense, net (16,160) (24,879) (58,632) (60,786)
Other income (expense), net 43 (55) 143 (98)
--------- --------- --------- ---------
Total other expense (16,117) (24,934) (58,489) (60,884)
--------- --------- --------- ---------
Income (loss) before minority interest
share of income, income taxes
and extraordinary item 6,582 (12,869) 4,522 (29,861)
Minority interest share of income (382) (713) (1,369) (1,715)
--------- --------- --------- ---------
Income (loss) before income taxes
and extraordinary item 6,200 (13,582) 3,153 (31,576)
Income tax (expense) benefit (2,254) 5,051 (1,167) 11,566
--------- --------- --------- ---------
Income (loss) before extraordinary item 3,946 (8,531) 1,986 (20,010)
Extraordinary item - write-off of deferred finance costs,
net of income tax benefit of $3,935 -- (13,246) -- (19,148)
--------- --------- --------- ---------
Net income (loss) $ 3,946 $ (21,777) $ 1,986 $ (39,158)
========= ========= ========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
PALMER WIRELESS HOLDINGS INC.
Condensed Consolidated Statements of Cash Flows
($ in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the nine months
ended September 30,
----------------------
1999 1998
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,986 $ (39,158)
--------- ---------
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization 33,774 33,721
Minority interest share of income 1,369 1,715
Deferred income taxes (1,734) (3,217)
Loss on disposal of property -- 151
Premium on early extinguishment of debt -- 18,194
Accrued interest satisfied by issuance of PCC stock 11,309 --
Interest deferred and added to obligation of Parent Company -- 1,911
Write off of deferred finance -- 12,200
Amortization of deferred finance charges 1,916 76
Interest earned on restricted cash (3,454) --
Increase in trade accounts receivable (5,306) (5,096)
Decrease (increase) in inventory 1,368 (2,070)
Increase (decrease) in accounts payable and accrued expenses 3,799 (5,434)
Decrease in accrued income taxes-long term -- (19,634)
Increase in accrued interest payable 6,776 8,932
Change in other accounts 1,110 4,825
--------- ---------
Total adjustments 50,927 46,274
--------- ---------
Net cash provided by operating activities 52,913 7,116
--------- ---------
Cash flows from investing activities:
Capital expenditures (14,545) (5,544)
Purchases of minority interests (7,177) --
--------- ---------
Net cash used in investing activities (21,722) (5,544)
--------- ---------
Cash flows from financing activities:
Repayment of long-term debt -- (518,112)
Repayment of advances from Price Communications Corporation 419 (930)
Proceeds from long-term debt -- 725,000
Premium on early extinguishment of debt -- (18,194)
Cash pledged for outstanding interest rate swap contracts -- (9,302)
Increase in other intangible assets and other assets (788)
Payment of debt issuance costs -- (18,223)
--------- ---------
Net cash (used in )/provided by financing activities (369) 160,239
--------- ---------
Net increase in cash and cash equivalents 30,822 161,811
Cash and cash equivalents at the beginning of period 109,137 27,926
--------- ---------
Cash and cash equivalents at the end of period $ 139,959 $ 189,737
========= =========
Supplemental disclosure of cash flow information:
Income taxes paid, net $ 205 $ 643
========= =========
Interest paid $ 44,516 $ 82,620
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
7
<PAGE>
PALMER WIRELESS HOLDINGS INC.
Notes to Condensed Consolidated Financial Statements
($ in thousands)
(Unaudited)
(1) Summary of Significant Accounting Policies
Organization and Acquisition
Palmer Wireless Holdings, Inc. (the "Company"), was incorporated in March
1995. It was the wholly-owned subsidiary of Palmer Wireless, Inc.
Price Communications Wireless, Inc. ("PCW" or the "Company"), a
wholly-owned subsidiary of Price Communications Cellular Holdings, Inc.
("Holdings"), a wholly-owned subsidiary of Price Communications Cellular, Inc.,
a wholly owned subsidiary of Price Communications Corporation ("PCC"), was
incorporated on May 29, 1997 in connection with the purchase of Palmer Wireless,
Inc. and subsidiaries ("Palmer").
In May 1997, PCC, PCW and Palmer entered into an Agreement and Plan of
Merger (the "Merger Agreement"). The Merger Agreement provided, among other
things, for the merger of PCW with and into Palmer with Palmer as the surviving
corporation (the "Merger"). In October 1997, the Merger was consummated and
Palmer changed its name to "Price Communications Wireless, Inc."
The acquisition was funded in part by the issuance of PCW of $175.0
million aggregate principal amount of 11 3/4% Senior Subordinated Notes due
2007, a $44.0 million equity contribution from PCC, the issuance and sale for
$80.0 million by Holdings of units consisting of $153.4 million principal amount
of 13 1/2% Senior Secured Discount Notes due 2007 and the cash proceeds
generated from the sale of Palmer's Fort Myers, Florida MSA and GA-1 RSA the
total of which approximated $190.2 million. In addition, the Company entered
into a syndicated senior loan facility providing for term loan borrowings in the
aggregate principal amount of $325.0 million and revolving loan borrowings of
$200.0 million.
In June 1998, the Company issued $525.0 million of 9 1/8% Senior Secured
Notes due December 15, 2006 with interest payable semi-annually commencing
December 15, 1998. The proceeds of these notes were used principally to replace
the previously existing syndicated loan facility mentioned above.
In August 1998, Holdings redeemed all of its outstanding 13 1/2% notes.
The redemption was financed out of the net proceeds of a new $200.0 million
Holdings offering of 11 3/4% Senior Exchangeable Payable-in-Kind notes due 2008.
In June 1999, PCC converted these notes by issuing to the holders 17.2 million
shares of its common stock. The accompanying Balance Sheets include $79.1
million at December 31, 1998 of restricted cash and $209.4 million (including
accrued interest) of the 11 1/4% notes which were obligations of Holdings and
were included in the Balance Sheets solely pursuant to "push down" accounting
rules. The Company had no rights with respect to the restricted cash included
herein.
Basis of Presentation
The accompanying Condensed Consolidated Financial Statements of the
Company have been prepared without audit pursuant to Rule 10-01 of Regulation
S-X of the Securities and Exchange Commission. Accordingly, they do not include
all of the information and footnotes required by generally accepted accounting
principles for financial statements. These Condensed Consolidated Financial
Statements should be read in conjunction with the audited Consolidated Financial
Statements previously filed on the Company's Form 10-K. In the opinion of
management, all adjustments (none of which were other than normal recurring
items) considered necessary for a fair presentation have been included. The
results of operations for the interim periods reported are not necessarily
indicative of results to be expected for the year.
8
<PAGE>
PALMER WIRELESS HOLDINGS INC.
Notes to Condensed Consolidated Financial Statements - (Continued)
($ in thousands)
(Unaudited)
(1) Summary of Significant Accounting Policies - (Continued)
For financial reporting purposes, the Company revalued its assets and
liabilities as of October 1, 1997 to reflect the price paid by PCC to acquire
100% of its Common Stock, a process generally referred to as "push down"
accounting.
Impact of New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Accounting Standards No. 133 ("Accounting for Derivative Instruments and Hedging
Activities"). This statement establishes accounting and reporting standards
requiring that all derivative instruments (including certain derivative
instruments embedded in other contracts) be recorded on the balance sheet as an
asset or a liability and measured at their fair value. As amended by Statement
of Accounting Standards No. 137, this statement is effective for fiscal years
beginning after June 15, 2000, but can be adopted earlier. Management has not
yet determined the timing of or method to be used in adopting this statement.
Management does not believe at this time that such adoption would have a
material impact on its consolidated financial statements.
Reclassifications
Certain reclassifications have been made to the 1998 Statement of
Operations and Statement of Cash Flows to conform to the 1999 presentation.
9
<PAGE>
CELLULAR SYSTEMS OF SOUTHEAST ALABAMA, INC.
AND SUBSIDIARY
Consolidated Balance Sheets
($ in thousands)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
September 30, December 31,
1999 1998
---- ----
<S> <C> <C>
Assets
Current Assets:
Cash $ 65 $ 57
Trade accounts receivable, less allowance for doubtful
accounts of $52 in 1999 and $30 in 1998 1,789 1,618
Inventory 104 120
Other current assets 20 8
----------------------
Total current assets 1,978 1,803
----------------------
Property and equipment :
Land and land improvements 364 356
Buildings and leasehold improvements 286 196
Equipment and furnishings 329 324
Cellular equipment 6,886 5,474
----------------------
7,865 6,350
Less accumulated depreciation and amortization 1,619 794
----------------------
Net property and equipment 6,246 5,556
Licenses and other intangibles, less
accumulated amortization of $2,494 in 1999
and $1,576 in 1998 46,450 47,368
----------------------
$54,674 $54,727
======================
Liabilities and Stockholder's Equity
Current liabilities:
Accrued salaries and benefits $ 29 $ 23
Other accrued expenses 486 125
Deferred revenue 534 427
Customer deposits 63 53
----------------------
Total current liabilities 1,112 628
Deferred income taxes 17,562 17,895
Advances from affiliates 2,763 4,717
----------------------
Total liabilities 21,437 23,240
----------------------
Commitments and contingencies
Stockholder's equity :
Common stock, par value $.01 per share
Class A, authorized and issued 5,001 shares -- --
Class B, authorized and issued 4,999 shares -- --
Class C, authorized 90,000 shares, none issued -- --
Additional paid-in capital 30,343 30,343
Retained earnings 2,894 1,144
----------------------
Total stockholder's equity 33,237 31,487
------- -------
$54,674 $54,727
======================
</TABLE>
See accompanying notes to consolidated financial statements.
10
<PAGE>
CELLULAR SYSTEMS OF SOUTHEAST ALABAMA, INC.
AND SUBSIDIARY
Consolidated Statements of Operations
($ in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the three months For the nine months
ended September 30, ended September 30,
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenue:
Service revenue $ 4,128 $ 3,283 $11,938 $ 8,940
Equipment sales and installation 369 291 983 814
----------------------------------------------------
Total revenue 4,497 3,574 12,921 9,754
----------------------------------------------------
Operating expenses:
Engineering, technical and other direct service 1,360 1,336 4,574 3,139
Cost of equipment 418 392 1,228 1,226
Sales and marketing 207 288 660 630
General and administrative 706 484 2,079 1,810
Depreciation and amortization 506 457 1,490 1,436
----------------------------------------------------
Total operating expenses 3,197 2,957 10,031 8,241
----------------------------------------------------
Operating income 1,300 617 2,890 1,513
Interest expense 5 104 112 344
----------------------------------------------------
Net income before taxes 1,295 513 2,778 1,169
Provision for income taxes 479 159 1,028 402
----------------------------------------------------
Net income $ 816 $ 354 $ 1,750 $ 767
====================================================
</TABLE>
See accompanying notes to consolidated financial statements.
11
<PAGE>
CELLULAR SYSTEMS OF SOUTHEAST ALABAMA, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows
($ in thousands)
(Unaudited)
For the nine months
ended September 30,
1999 1998
---- ----
Cash flows from operating activities:
Net income $ 1,750 $ 767
--------------------
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 1,490 1,436
Deferred taxes (333) (320)
Increase in trade accounts receivable (171) (380)
Decrease (increase) in inventory (4) (99)
('Increase) decrease in other current assets (12) 6
Increase in accrued expenses 367 19
Increase in deferred revenue 110 149
Increase in customer deposits 10 24
--------------------
Total adjustments 1,457 835
--------------------
Net cash provided by operating activities 3,207 1,602
Cash flows from investing activities:
Purchases of property and equipment (999) (504)
--------------------
Net cash used in investing activities (999) (504)
Cash flows from financing activities:
Decrease in advances from affiliates, net (2,200) (1,108)
--------------------
Net (decrease) increase in cash 8 (10)
Cash at beginning of year 57 88
--------------------
Cash at end of year $ 65 $ 78
====================
Supplemental disclosure of cash flow information -
Cash paid during the year for interest $ 112 $ --
====================
See accompanying notes to consolidated financial statements.
12
<PAGE>
CELLULAR SYSTEMS OF SOUTHEAST ALABAMA, INC.
AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1) Summary of Significant Accounting Policies
Corporate Information
Cellular Systems of Southeast Alabama (the "Company") was formed on
October 7, 1987, and its wholly owned subsidiary, Dothan Cellular Telephone
Company, Inc., was formed on June 7, 1988, to operate the non-wireline cellular
telephone system in the Dothan, Alabama, Metropolitan Statistical Area. Palmer
Communications Incorporated (Palmer) acquired an interest in the outstanding
stock of Cellular Systems of Southeast Alabama, Inc. on December 20, 1988.
Effective August 4, 1989, Palmer transferred its investment in and
advances to the Cellular Systems of Southeast Alabama, Inc. and subsidiary (the
Company) to Palmer Cellular Partnership (PCP). Palmer owned a majority interest
in PCP. When Palmer's interest in the Company was transferred to PCP, it had no
effect on the carrying value of the assets of the Company.
In March of 1995, Palmer Wireless, Inc. (PWI) issued common stock for 100
percent of the Partnership interest of PCP. Palmer owned a majority interest in
PWI. Since this exchange was between related parties, it was accounted for in a
manner similar to a pooling of interests. References to PWI in the accompanying
consolidated financial statements and notes to consolidated financial statements
include the activity of PWI and its predecessor, PCP.
On May 23, 1997, Price Communications Wireless , Inc. ("PCW") and PWI
entered into a plan of merger whereby PCW merged into PWI with PWI as the
surviving corporation. On October 6, 1997 the merger was completed and PWI
changed its name to PCW. The direct owner of the Company is Palmer Wireless
Holdings, Inc.("Holdings"), which was formed in January, 1994. PCW is the 100%
owner of Holdings.
The Company's subsidiary is the 100% owner of Price Communications
Wireless III, Inc., the license holder for the Dothan MSA.
Basis of Presentation
Holdings owns approximately 95.0% of the Company. For financial reporting
purposes, PCW revalued its assets and liabilities as of October 6, 1997 to
reflect the price paid by Price Communications Corporation to acquire 100% of
PWI's common stock, a process generally referred to as "push down accounting".
On October 6, 1997, PCW allocated the purchase price to each of the markets
purchased and the Company revalued its assets and liabilities to reflect this
allocation. The preliminary allocation of the purchase price resulted in
licenses of approximately $50.4 million. During 1998, the allocation was
finalized resulting in an allocation of approximately $48.9 million to licenses,
with an adjustment also made to deferred tax liability and paid-in-capital to
finalize "push-down" accounting. The license is being amortized over a period of
40 years.
The Consolidated Financial Statements include the accounts of the Company
and its subsidiary. All significant inter-company balances and transactions have
been eliminated.
The Consolidated Financial Statements have been prepared by the Company
without audit in accordance with the rules and regulations of the Securities and
Exchange Commission. In the opinion of management, the statements reflect all
adjustments necessary for a fair presentation of the results of interim periods.
All such adjustments are of a normal and recurring nature. The results of
operations for any interim period are not necessarily indicative of the results
to be expected for a full year.
13
<PAGE>
ALBANY CELLULAR PARTNERS AND SUBSIDIARY
(A Georgia Partnership)
Consolidated Balance Sheets
( $ in thousands)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
September 30, December 31,
1999 1998
-------- --------
<S> <C> <C>
Assets
Current Assets:
Cash $ (44) $ 161
Trade accounts receivable, less allowance for doubtful
accounts of $133 in 1999 and $77 in 1998 2,294 2,063
Inventory 197 280
Other current assets 23 14
---------------------
Total current assets 2,470 2,518
---------------------
Property and equipment :
Land and land improvements 123 123
Buildings and leasehold improvements 109 279
Equipment and furnishings 777 772
Cellular equipment 9,439 8,520
---------------------
10,448 9,694
Less accumulated depreciation and amortization 2,285 1,368
---------------------
Net property and equipment 8,163 8,326
---------------------
License and other intangibles, less accumulated amortization of
$3,899 in 1999 and $2,444 in 1998 72,772 74,209
---------------------
$ 83,405 $ 85,053
=====================
Liabilities and Partners' Equity
Current liabilities:
Accrued salaries and benefits $ 91 $ 53
Other accrued expenses 303 231
Deferred revenue 762 651
Customer deposits 94 58
---------------------
Total current liabilities 1,250 993
Deferred income taxes 11,528 11,759
Advances from affiliates 29,451 32,023
---------------------
Total liabilities 42,229 44,775
Commitments and contingencies
Partners' equity 41,176 40,278
---------------------
$ 83,405 $ 85,053
=====================
</TABLE>
See accompanying notes to consolidated financial statements.
14
<PAGE>
ALBANY CELLULAR PARTNERS AND SUBSIDIARY
(A Georgia Partnership)
Consolidated Statements of Operations
( $ in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the three months For the nine months
ended September 30, ended September 30
---------------------------------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue:
Service revenue $ 5,476 $ 4,863 $ 16,075 $ 13,560
Equipment sales and installation 448 293 1,289 803
---------------------------------------------
Total revenue 5,924 5,156 17,364 14,363
---------------------------------------------
Operating expenses:
Engineering, technical and other direct 1,483 1,823 4,648 4,437
Cost of equipment 633 490 1,898 1,537
Sales and marketing 395 586 1,332 1,366
General and administrative 1,198 814 3,420 3,039
Depreciation and amortization 791 764 2,356 2,276
---------------------------------------------
Total operating expenses 4,500 4,477 13,654 12,655
---------------------------------------------
Operating income 1,424 679 3,710 1,708
Interest expense 781 835 2,284 2,376
---------------------------------------------
Net income (loss) before income taxes 643 (156) 1,426 (668)
Provision for income taxes (benefit) 238 (307) 528 (496)
---------------------------------------------
Net income (loss) $ 405 $ 151 $ 898 ($ 172)
=============================================
</TABLE>
See accompanying notes to consolidated financial statements.
15
<PAGE>
ALBANY CELLULAR PARTNERS AND SUBSIDIARY
(A Georgia Partnership)
Consolidated Statements of Cash Flows
( $ in thousands)
(Unaudited)
For the nine months
ended September 30,
-------------------
1999 1998
---- ----
Cash flows from operating activities:
Net income (loss) $ 898 $ (172)
-------------------
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 2,356 2,276
Deferred income taxes (231) (496)
Increase in trade accounts receivable (231) (423)
Decrease (increase) in inventory 83 (109)
Increase in other current assets (9) (3)
Increase in accrued expenses 110 91
Increase in deferred revenue 111 184
Increase in customer deposits 36 13
-------------------
Total adjustments 2,225 1,533
-------------------
Net cash provided by operating activities 3,123 1,361
-------------------
Cash flows from investing activities:
Purchases of property and equipment (960) (814)
-------------------
Net cash used in investing activities (960) (814)
-------------------
Cash flows from financing activities:
Decrease in advances from affiliates, net (2,368) (580)
-------------------
Net increase (decrease) in cash (205) (33)
Cash at beginning of year 161 111
-------------------
Cash at end of period ($ 44) $ 78
===================
Supplemental disclosure of cash flow information -
Cash paid during the period for interest $ 2,284 $ 2,376
===================
See accompanying notes to consolidated financial statements.
16
<PAGE>
ALBANY CELLULAR PARTNERS AND SUBSIDIARY
(A Georgia Partnership)
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1) Summary of Significant Accounting Policies
Partnership Operations
Albany Cellular Partners (the "Partnership") was formed on December 21,
1987, and its wholly owned subsidiary, Cellular Dynamics Telephone Company of
Georgia, was formed on September 17, 1987, to operate the non-wireline cellular
telephone system in the Albany, Georgia, Metropolitan Statistical Area. Palmer
Communications Incorporated ("Palmer") acquired an interest in the outstanding
Partnership interest in the Partnership on December 2, 1988.
Effective August 4, 1989, Palmer transferred its investment in and
advances to the Partnership to Palmer Cellular Partnership ("PCP"). Palmer owned
a majority interest in PCP. When Palmer's interest in the Partnership was
transferred to PCP, it had no effect on the carrying value of the assets of the
Partnership.
In March of 1995, Palmer Wireless, Inc. ("PWI") issued common stock for
100 percent of the Partnership interest of PCP. Palmer owned a majority interest
in PWI. Since this exchange was between related parties, it was accounted for in
a manner similar to a pooling of interest. References to PWI in the accompanying
consolidated financial statements and notes to consolidated financial statements
include the activity of PWI and its predecessor, PCP.
On May 23, 1997, Price Communications Wireless, Inc. ("PCW") and PWI
entered into a plan of merger whereby PCW merged into PWI with PWI as the
surviving corporation. On October 6, 1997 the merger was completed and PWI
changed its name to PCW. The direct owner of the Partnership is Palmer Wireless
Holdings, Inc. ("Holdings"), which was formed in January, 1994. PCW is the 100%
owner of Holdings.
The partnership's subsidiary is the 100% owner of Price Communications
Wireless V, Inc., the license holder for the Albany MSA.
Basis of Presentation
For financial reporting purposes, PCW revalued its assets and liabilities
as of October 6, 1997 to reflect the price paid by Price Communications
Corporation to acquire 100% of PWI's common stock, a process generally referred
to as "push down accounting". On October 6, 1997, PCW allocated the purchase
price to each of the markets purchased and the partnership revalued its assets
and liabilities to reflect this allocation. The preliminary allocation of the
purchase price resulted in licenses of approximately $78.3 million. During 1998
the allocation was finalized resulting in an allocation of approximately $76.7
million to licenses, with an adjustment also made to deferred tax liability and
paid-in-capital to finalize "push-down" accounting. The license is being
amortized over a period of 40 years.
The Consolidated Financial Statements include the accounts of the
Partnership and its subsidiary. All significant intercompany balances and
transactions have been eliminated. The consolidated financial statements of the
Partnership do not include the assets and liabilities of the partners.
The Consolidated Financial Statements have been prepared by the
Partnership without audit in accordance with the rules and regulations of the
Securities and Exchange Commission.
In the opinion of management, the statements reflect all adjustments
necessary for a fair presentation of the results of interim periods. All such
adjustments are of a normal and recurring nature. The results of operations for
any interim period are not necessarily indicative of the results to be expected
for a full year.
17
<PAGE>
CELLULAR DYNAMICS TELEPHONE COMPANY OF GEORGIA
Consolidated Balance Sheets
($ in thousands)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
September 30, December 31,
1999 1998
---------------------------
<S> <C> <C>
Assets
Current Assets:
Cash $ (44) $ 161
Trade accounts receivable, less allowance for doubtful
accounts of $133 in 1999 and $77 in 1998 2,294 2,063
Inventory 197 280
Other current assets 23 14
---------------------
Total current assets 2,470 2,518
---------------------
Property and equipment :
Land and land improvements 124 123
Buildings and leasehold improvements 109 279
Equipment and furnishings 777 772
Cellular equipment 9,438 8,520
---------------------
10,448 9,694
Less accumulated depreciation and amortization 2,285 1,368
---------------------
Net property and equipment 8,163 8,326
---------------------
License and other intangibles, less accumulated amortization of
$3,899 in 1999 and $2,444 in 1998 72,772 74,209
---------------------
$ 83,405 $ 85,053
=====================
Liabilities and Stockholder's Equity
Current liabilities:
Accrued salaries and benefits $ 91 $ 53
Other accrued expenses 303 231
Deferred revenue 762 651
Customer deposits 94 58
---------------------
Total current liabilities 1,250 993
Deferred income taxes 11,528 11,759
Advances from affiliates 29,451 32,023
---------------------
Total liabilities 42,229 44,775
Commitments and contingencies
Stockholder's equity
Common stock; no par value, 200 shares authorized; 100 shares issued 1 1
Paid-in capital 44,811 44,811
Retained earnings (deficit) (3,636) (4,534)
---------------------
Total stockholder's equity 41,176 40,278
---------------------
$ 83,405 $ 85,053
=====================
</TABLE>
See accompanying notes to consolidated financial statements.
18
<PAGE>
CELLULAR DYNAMICS TELEPHONE COMPANY OF GEORGIA
Consolidated Statements of Operations
($ in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the three months For the nine months
ended September 30, ended September 30,
---------------------------------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue:
Service revenue $ 5,476 $ 4,863 $ 16,075 $ 13,560
Equipment sales and installation 448 293 1,289 803
---------------------------------------------
Total revenue 5,924 5,156 17,364 14,363
---------------------------------------------
Operating expenses:
Engineering, technical and other direct 1,483 1,823 4,648 4,437
Cost of equipment 633 490 1,898 1,537
Sales and marketing 395 586 1,332 1,366
General and administrative 1,198 814 3,420 3,039
Depreciation and amortization 791 764 2,356 2,276
---------------------------------------------
Total operating expenses 4,500 4,477 13,654 12,655
---------------------------------------------
Operating income 1,424 679 3,710 1,708
Interest expense 781 835 2,284 2,376
---------------------------------------------
Net income (loss) before taxes 643 (156) 1,426 (668)
Provision for income taxes (benefit) 238 (307) 528 (496)
---------------------------------------------
Net income (loss) income $ 405 $ 151 $ 898 ($ 172)
=============================================
</TABLE>
See accompanying notes to consolidated financial statements.
19
<PAGE>
CELLULAR DYNAMICS TELEPHONE COMPANY OF GEORGIA
Consolidated Statements of Cash Flows
($ in thousands)
(Unaudited)
For the nine months
ended September 30,
--------------------
1999 1998
------- -------
Cash flows from operating activities:
Net income (loss) $ 898 $ (475)
--------------------
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 2,356 2,276
Deferred income taxes (231) (193)
Increase in trade accounts receivable (231) (423)
Decrease (increase) in inventory 83 (109)
Increase in other current assets (9) (3)
Increase in accrued expenses 110 91
Increase in deferred revenue 111 184
Increase in customer deposits 36 13
--------------------
Total adjustments 2,225 1,836
--------------------
Net cash provided by operating activities 3,123 1,361
--------------------
Cash flows from investing activities:
Purchases of property and equipment (960) (814)
--------------------
Net cash used in investing activities (960) (814)
--------------------
Cash flows from financing activities -
Decrease in advances from affiliates, net (2,368) (580)
--------------------
Net (decrease) in cash (205) (33)
Cash at beginning of year 161 111
--------------------
Cash at end of period $ (44) $ 78
====================
Supplemental disclosure of cash flow information -
Cash paid during the period for interest $ 2,284 $ 2,377
====================
See accompanying notes to consolidated financial statements.
20
<PAGE>
CELLULAR DYNAMICS TELEPHONE COMPANY OF GEORGIA
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1) Summary of Significant Accounting Policies
Company Operations
Cellular Dynamics Telephone Company of Georgia (the "Company"), was formed
on September 17, 1987 to operate the non-wireline cellular telephone system in
the Albany, Georgia, Metropolitan Statistical Area. Albany Cellular Partners was
formed on December 21, 1987, and is the 100% owner of the Company. The financial
statements of Albany Cellular Partners are included elsewhere in this document.
Palmer Communications Incorporated ("Palmer") acquired an interest in the
outstanding Partnership interest of the Partnership on December 2, 1988.
Effective August 4, 1989, Palmer transferred its investment in and
advances to the Partnership to Palmer Cellular Partnership ("PCP"). Palmer owned
a majority interest in PCP. When Palmer's interest in the Partnership was
transferred to PCP, it had no effect on the carrying value of the assets of the
Partnership.
In March of 1995, Palmer Wireless, Inc. ("PWI") issued common stock for
100 percent of the Partnership interest of PCP. Palmer owned a majority interest
in PWI. Since this exchange was between related parties, it was accounted for in
a manner similar to a pooling of interests. References to PWI in the
accompanying consolidated financial statements and notes to consolidated
financial statements include the activity of PWI and its predecessor, PCP.
On May 23, 1997, Price Communications Wireless , Inc. ("PCW") and PWI
entered into a plan of merger whereby PCW merged into PWI with PWI as the
surviving corporation. On October 6, 1997 the merger was completed and PWI
changed its name to PCW. The direct owner of the Company is Palmer Wireless
Holdings, Inc. ("Holdings") which was formed in January 1994. PCW is the 100%
owner of Holdings.
The Company is the 100% owner of Price Communications Wireless V, Inc.,
the license holder for the Albany MSA.
Basis of Presentation
Holdings owned approximately 96.8% of the Company at June 30, 1999. For
financial reporting purposes, PCW revalued its assets and liabilities as of
October 6, 1997 to reflect the price paid by Price Communications Corporation to
acquire 100% of PWI's common stock, a process generally referred to as "push
down accounting". On October 6, 1997, PCW allocated the purchase price to each
of the markets purchased and the partnership revalued its assets and liabilities
to reflect this allocation. The preliminary allocation of the purchase price
resulted in licenses of approximately $78.3 million. During 1998 the allocation
was finalized resulting in an allocation of approximately $76.7 million to
licenses, with an adjustment also made to deferred tax liability and
paid-in-capital to finalize "push-down" accounting. The license is being
amortized over a period of 40 years.
The Consolidated Financial Statements include the accounts of the Company
and its subsidiary. All significant inter-company balances and transactions have
been eliminated.
The Consolidated Financial Statements have been prepared by the Company
without audit in accordance with the rules and regulations of the Securities and
Exchange Commission. In the opinion of management, the statements reflect all
adjustments necessary for a fair presentation of the results of interim periods.
All such adjustments are of a normal and recurring nature. The results of
operations for any interim period are not necessarily indicative of the results
to be expected for a full year.
21
<PAGE>
COLUMBUS CELLULAR TELEPHONE COMPANY
(A Georgia Partnership)
Consolidated Balance Sheets
($ in thousands)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
September 30, December 31,
1999 1998
-------- --------
<S> <C> <C>
Assets
Current Assets:
Cash $ 107 $ 41
Trade accounts receivable, less allowance for doubtful
accounts of $181 in 1999 and $213 in 1998 2,387 1,847
Inventory 410 472
Other current assets 38 31
----------------------------
Total current assets 2,942 2,391
----------------------------
Property and equipment :
Land and land improvements 282 277
Buildings and leasehold improvements 331 287
Equipment and furnishings 391 378
Cellular equipment 10,721 10,030
----------------------------
11,725 10,972
Less accumulated depreciation and amortization 2,644 1,655
----------------------------
Net property and equipment 9,081 9,317
----------------------------
Licenses and other intangibles less
accumulated amortization
of $4,543 in 1999 and $2,860 in 1998 85,158 86,841
Advances to affiliates, net 6,659 671
----------------------------
$103,840 $ 99,220
============================
Liabilities and Partners' Equity
Current liabilities:
Accrued salaries and benefits $ 57 $ 39
Other accrued expenses 789 318
Deferred revenue 679 545
Customer deposits 138 110
----------------------------
Total current liabilities 1,663 1,012
Deferred income taxes 27,926 28,505
----------------------------
Total liabilities 29,589 29,517
Commitments and contingencies
Partners' equity 74,251 69,703
----------------------------
$103,840 $ 99,220
============================
</TABLE>
See accompanying notes to consolidated financial statements.
22
<PAGE>
COLUMBUS CELLULAR TELEPHONE COMPANY
(A Georgia Partnership)
Consolidated Statements of Operations
($ in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the three months For the nine months
ended September 30, ended September 30,
---------------------------------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue:
Service revenue $ 5,234 $ 4,715 $ 14,976 $ 12,799
Equipment sales and installation 549 333 1,505 900
---------------------------------------------
Total revenue 5,783 5,048 16,481 13,699
---------------------------------------------
Operating expenses:
Engineering, technical and other direct 973 1,175 3,088 2,644
Cost of equipment 751 522 2,179 1,557
Sales and marketing 445 654 1,387 1,433
General and administrative 1,189 848 3,407 3,059
Depreciation and amortization 892 939 2,672 2,694
---------------------------------------------
Total operating expenses 4,250 4,138 12,733 11,387
---------------------------------------------
Operating income 1,533 910 3,748 2,312
Interest income (expense), net 92 (35) 221 (187)
---------------------------------------------
Net income before taxes 1,625 875 3,969 2,125
Deferred tax benefit 193 194 579 580
---------------------------------------------
Net income $ 1,818 $ 1,069 $ 4,548 $ 2,705
=============================================
</TABLE>
23
<PAGE>
COLUMBUS CELLULAR TELEPHONE COMPANY
(A Georgia Partnership)
Consolidated Statements of Cash Flows
($ in thousands)
(Unaudited)
For the nine months
ended September 30,
1999 1998
------- -------
Cash flows from operating activities:
Net income $ 4,548 $ 2,705
------- -------
Adjustments to reconcile net income to
net cash provided by operating :
Depreciation and amortization 2,672 2,694
Deferred income taxes (579) (580)
Increase in trade accounts receivable (540) (286)
Decrease (increase) in inventory 62 (222)
Increase in other current assets (7) (29)
Increase in accrued expenses 489 77
Increase in deferred revenue 134 167
Increase in customer deposits 28 47
------- -------
Total adjustments 2,259 1,868
------- -------
Net cash provided by operating activities 6,807 4,573
------- -------
Cash flows from investing activities:
Purchase of property and equipment (753) (926)
------- -------
Net cash used in investing activities (753) (926)
------- -------
Cash flows from financing activities:
Increase in advances to afiliates, net (5,988) (3,635)
------- -------
Net increase in cash 66 12
Cash at beginning of year 41 66
------- -------
Cash at end of period $ 107 $ 78
======= =======
Supplemental disclosure of cash flow information -
Cash paid during the period for interest $ -- $ 187
======= =======
See accompanying notes to consolidated financial statements.
24
<PAGE>
COLUMBUS CELLULAR TELEPHONE COMPANY
(A Georgia Partnership)
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1) Summary of Significant Accounting Policies
Partnership Operations
The formal partnership agreement of Columbus Cellular Telephone Company
(the "Partnership") was entered into by the partners effective March 1, 1988.
The Partnership was inactive for the period March 1, 1988, through June 9, 1988,
at which date Palmer Communications Incorporated ("Palmer") acquired and
transferred the FCC license to operate the non-wireline cellular telephone
system in the Columbus, Georgia, Metropolitan Statistical Area to the
Partnership. The non-wireline cellular telephone system was constructed after
June 9, 1988, and actual operations of the system began on November 24, 1988.
Effective August 4, 1989, Palmer transferred its investment in and
advances to the Partnership to Palmer Cellular Partnership ("PCP"). Palmer owned
a majority interest in PCP. When Palmer's interest in the Partnership was
transferred to PCP, it had no effect on the carrying value of the assets of the
Partnership.
In March of 1995, Palmer Wireless, Inc. ("PWI") issued common stock for
100 percent of the partnership interests of PCP. Palmer owned a majority
interest in PWI. Since this exchange was between related parties, it was
accounted for in a manner similar to a pooling of interests. References to PWI
in the accompanying financial statements and notes to financial statements
include the activity of PWI and its predecessor, PCP.
On May 23, 1997, Price Communications Wireless Inc. ("PCW") and PWI
entered into a plan of merger whereby PCW merged into PWI with PWI as the
surviving corporation. On October 6, 1997 the merger was completed and PWI
changed its name to PCW. The direct owner of the Partnership is Palmer Wireless
Holdings, Inc. ("Holdings") which was formed in January, 1994. PCW is the 100%
owner of Holdings.
The Partnership is the 100% owner of Price Communications Wireless VI
Inc., the license holder for the Columbus MSA.
Basis of Presentation
Holdings owned approximately 99.1% of the Partnership at June 30, 1999.
For financial reporting purposes, PCW revalued its assets and liabilities as of
October 6, 1997 to reflect the price paid by Price Communications Corporation to
acquire 100% of PWI's common stock, a process generally referred to as "push
down accounting". On October 6, 1997, PCW allocated the purchase price to each
of the markets purchased and the Partnership revalued its assets and liabilities
to reflect this allocation. The preliminary allocation of the purchase price
resulted in licenses of approximately $91.5 million. During 1998 the allocation
was finalized resulting in an allocation of approximately $89.7 million to
licenses, with an adjustment also made to deferred tax liability and
paid-in-capital to finalize "push-down" accounting. The license is being
amortized over a period of 40 years.
The financial statements of the Partnership do not include the assets and
liabilities of the partners.
The Consolidated Financial Statements include the accounts of the
Partnership and its subsidiary. All significant inter-company balances and
transactions have been eliminated.
The Consolidated Financial Statements have been prepared by the
Partnership without audit in accordance with the rules and regulations of the
Securities and Exchange Commission. In the opinion of management, the statements
reflect all adjustments necessary for a fair presentation of the results of the
interim periods. All such adjustments are of a normal and recurring nature. The
results of operations for any interim period are not necessarily indicative of
the results to be expected for a full year.
25
<PAGE>
DOTHAN CELLULAR TELEPHONE CO., INC.
Consolidated Balance Sheets
($ in thousands)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
September 30, December 31,
1999 1998
------- -------
<S> <C> <C>
Assets
Current Assets:
Cash $ 65 $ 57
Trade accounts receivable, less allowance for doubtful
accounts of $52 in 1999 and $30 in 1998 1,789 1,618
Inventory 104 120
Other current assets 20 8
---------------------
Total current assets 1,978 1,803
---------------------
Property and equipment :
Land and land improvements 364 356
Buildings and leasehold improvements 286 196
Equipment and furnishings 329 324
Cellular equipment 6,886 5,474
---------------------
7,865 6,350
Less accumulated depreciation and amortization 1,619 794
---------------------
Net property and equipment 6,246 5,556
Licenses and other intangibles, less accumulated
amortization of $2,494 in 1999
and $1,576 in 1998 46,450 47,368
---------------------
$54,674 $54,727
=====================
Liabilities and Stockholder's Equity
Current liabilities:
Accrued salaries and benefits $ 29 $ 23
Other accrued expenses 486 125
Deferred revenue 534 427
Customer deposits 63 53
---------------------
Total current liabilities 1,112 628
Deferred income taxes 17,562 17,895
Advances from affiliates 2,763 4,717
---------------------
Total liabilities 21,437 23,240
---------------------
Commitments and contingencies
Stockholder's equity:
Common stock, par value $.01 per share;
authorized 3,000 shares
issued and outstanding 200 shares -- --
Additional paid-in capital 30,343 30,343
Retained earnings 2,894 1,144
---------------------
Total stockholder's equity 33,237 31,487
---------------------
$54,674 $54,727
=====================
</TABLE>
See accompanying notes to consolidated financial statements.
26
<PAGE>
DOTHAN CELLULAR TELEPHONE CO., INC.
Consolidated Statements of Operations
($ in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the three months For the nine months
ended September 30, ended September 30,
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenue:
Service revenue $ 4,128 $ 3,283 $11,938 $ 8,940
Equipment sales and installation 369 291 983 814
-------------------------------------------------
Total revenue 4,497 3,574 12,921 9,754
-------------------------------------------------
Operating expenses:
Engineering, technical and other direct 1,360 1,336 4,574 3,139
Cost of equipment 418 392 1,228 1,226
Sales and marketing 207 288 660 630
General and administrative 706 484 2,079 1,810
Depreciation and amortization 506 457 1,490 1,436
-------------------------------------------------
Total operating expenses 3,197 2,957 10,031 8,241
-------------------------------------------------
Operating income 1,300 617 2,890 1,513
Interest expense 5 104 112 344
-------------------------------------------------
Net income before taxes 1,295 513 2,778 1,169
Provision for income taxes 479 159 1,028 402
-------------------------------------------------
Net income $ 816 $ 354 $ 1,750 $ 767
=================================================
</TABLE>
See accompanying notes to consolidated financial statements.
27
<PAGE>
DOTHAN CELLULAR TELEPHONE CO., INC.
Consolidated Statements of Cash Flows
($ in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the nine months
ended September 30,
1999 1998
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,750 $ 767
----------------------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,490 1,436
Deferred taxes (333) (320)
Increase in trade accounts receivable (171) (380)
Increase in inventory (4) (99)
(Increase) decrease in other current assets (12) 6
Increase in accrued expenses 367 19
Increase in deferred revenue 110 149
Increase in customer deposits 10 24
----------------------
Total adjustments 1,457 835
----------------------
Net cash provided by operating activities 3,207 1,602
----------------------
Cash flows from investing activities:
Purchases of property and equipment (999) (504)
----------------------
Net cash used in investing activities (999) (504)
Cash flows from financing activities:
Decrease in advances from affiliates, net (2,200) (1,108)
----------------------
Net (decrease) in cash 8 (10)
Cash at beginning of year 57 88
----------------------
Cash at end of period $ 65 $ 78
----------------------
Supplemental disclosure of cash flow information -
Cash paid during the period for interest $ 112 $ --
----------------------
</TABLE>
See accompanying notes to consolidated financial statements.
28
<PAGE>
DOTHAN CELLULAR TELEPHONE CO., INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1) Summary of Significant Accounting Policies
Corporate Information
Dothan Cellular Telephone Company, Inc. (the "Company") was formed on June
7,1988 to operate the non-wireline cellular telephone system in the Dothan,
Alabama, Metropolitan Statistical Area. Cellular Systems of Southeast Alabama,
the 100% owner of the Company, was formed on October 7, 1987. On December 20,
1988 Palmer Communications Incorporated (Palmer) acquired an interest in the
outstanding stock of Cellular Systems of Southeast Alabama, Inc. whose financial
statements are included elsewhere in this document.
Effective August 4, 1989, Palmer transferred its investment in and
advances to the Cellular Systems of Southeast Alabama, Inc. and the Company to
Palmer Cellular Partnership (PCP). Palmer owned a majority interest in PCP. When
Palmer's interest in the Company was transferred to PCP, it had no effect on the
carrying value of the assets of the Company.
In March of 1995, Palmer Wireless, Inc. (PWI) issued common stock for 100
percent of the Partnership interest of PCP. Palmer owned a majority interest in
PWI. Since this exchange was between related parties, it was accounted for in a
manner similar to a pooling of interests. References to PWI in the accompanying
consolidated financial statements and notes to consolidated financial statements
include the activity of PWI and its predecessor, PCP.
On May 23, 1997, Price Communications Wireless , Inc. ("PCW") and PWI
entered into a plan of merger whereby PCW merged into PWI with PWI as the
surviving corporation. On October 6, 1997 the merger was completed and PWI
changed its name to PCW. The direct owner of the Company is Palmer Wireless
Holdings, Inc. ("Holdings") which was formed in January, 1994. PCW is the 100%
owner of Holdings.
The Company is the 100% owner of Price Communications Wireless III Inc.,
the license holder for the Dothan MSA.
Basis of Presentation
Holdings owned approximately 95.0% of the Company at June 30, 1999. For
financial reporting purposes, PCW revalued its assets and liabilities as of
October 6, 1997 to reflect the price paid by Price Communications Corporation to
acquire 100% of PWI's common stock, a process generally referred to as "push
down accounting". On October 6, 1997, PCW allocated the purchase price to each
of the markets purchased and the Company revalued its assets and liabilities to
reflect this allocation. The preliminary allocation of the purchase price
resulted in licenses of approximately $50.4 million. During 1998, the allocation
was finalized resulting in an allocation of approximately $48.9 million to
licenses, with an adjustment also made to deferred tax liability and
paid-in-capital to finalize "push-down" accounting. The license is being
amortized over a period of 40 years.
The consolidated financial statements include the accounts of the Company
and its subsidiary All significant inter-company balances and transactions have
been eliminated.
The Consolidated Financial Statements have been prepared by the Company
without audit in accordance with the rules and regulations of the Securities and
Exchange Commission. In the opinion of management, the statements reflect all
adjustments necessary for a fair presentation of the results of interim periods.
All such adjustments are of a normal and recurring nature. The results of
operations for any interim period are not necessarily indicative of the results
to be expected for a full year.
29
<PAGE>
MACON CELLULAR TELEPHONE SYSTEMS LIMITED PARTNERSHIP
(A New Hampshire Limited Partnership)
Consolidated Balance Sheets
( $ in thousands)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
December 31, September 30,
1999 1998
-------- --------
<S> <C> <C>
Assets
Current Assets:
Cash $ 178 $ 145
Trade accounts receivable, less allowance for doubtful
accounts of $176 in 1999 and $142 in 1998 3,379 2,921
Inventory 466 680
Other current assets 96 58
-----------------------
Total current assets 4,119 3,804
-----------------------
Property and equipment:
Land and leasehold improvements 204 203
Buildings & improvements 36 36
Equipment and furnishings 798 792
Cellular equipment 17,966 15,947
-----------------------
19,004 16,978
Less accumulated depreciation and amortization 4,419 2,569
-----------------------
Net property and equipment 14,585 14,409
Advances to affiliate, net 14,997 119
Licenses and other intangibles less accumulated
amortization of $7,150 in 1999 and $4,603 in 1998 129,030 131,577
-----------------------
$162,731 $149,909
-----------------------
Liabilities and Partners' Equity
Current liabilities:
Accrued salaries and benefits $ 84 $ 113
Other accrued expenses 789 460
Deferred revenue 1,057 824
Customer deposits 200 158
-----------------------
Total current liabilities 2,130 1,555
Deferred income taxes 40,093 40,888
-----------------------
Total liabilities 42,223 42,443
Commitments and contingencies
Partners' equity 120,508 107,466
-----------------------
$162,731 $149,909
=======================
</TABLE>
See accompanying notes to consolidated financial statements.
30
<PAGE>
MACON CELLULAR TELEPHONE SYSTEMS LIMITED PARTNERSHIP
(A New Hampshire Limited Partnership)
Consolidated Statements of Operations
( $ in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the three months For the nine months
ended September 30, ended September 30,
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue:
Service revenue $ 9,810 $ 7,998 $ 29,563 $ 22,272
Equipment sales and installation 628 432 1,646 1,138
------------------------------------------------------
Total revenue 10,438 8,430 31,209 23,410
------------------------------------------------------
Operating expenses:
Engineering, technical and other direct 1,999 2,243 6,753 5,726
Cost of equipment 984 729 2,577 1,995
Sales and marketing 624 996 1,920 1,776
General and administrative 1,296 802 3,861 3,306
Depreciation and amortization 1,445 1,544 4,265 4,259
------------------------------------------------------
Total operating expenses 6,348 6,314 19,376 17,062
------------------------------------------------------
Operating income 4,090 2,116 11,833 6,348
Interest income (expense), net 275 (100) 414 (494)
------------------------------------------------------
Net income before income taxes 4,365 2,016 12,247 5,854
Deferred tax benefit 265 293 795 879
------------------------------------------------------
Net income $ 4,630 $ 2,309 $ 13,042 $ 6,733
======================================================
</TABLE>
See accompanying notes to consolidated financial statements.
31
<PAGE>
MACON CELLULAR TELEPHONE SYSTEMS LIMITED PARTNERSHIP
(A New Hampshire Limited Partnership)
Consolidated Statements of Cash Flows
( $ in thousands)
(Unaudited)
For the nine months
ended September 30,
1999 1998
-------- --------
Cash flows from operating activities:
Net income $ 13,042 $ 6,733
---------------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 4,265 4,260
Deferred income taxes 795 (879)
Increase in trade accounts receivable (458) (615)
Decrease (increase) in inventory 214 (120)
Increase in other current assets (38) --
Increase in accrued expenses 300 110
Increase in deferred revenue 233 276
Increase in customer deposits 42 44
---------------------
Total adjustments 5,353 3,076
---------------------
Net cash provided by operating activities 18,395 9,809
---------------------
Cash flows from investing activities:
Purchases of property and equipment (2,026) (256)
---------------------
Net cash used in investing activities (2,026) (256)
---------------------
Cash flows from financing activities:
Decrease in advances from affiliates, net (16,336) (9,440)
Net increase in cash 33 113
Cash at beginning of year 145 50
---------------------
Cash at end of period $ 178 $ 163
=====================
Supplemental disclosure of cash flow information -
Cash paid during the period for interest $ -- $ 491
=====================
See accompanying notes to consolidated financial statements.
32
<PAGE>
MACON CELLULAR TELEPHONE SYSTEMS LIMITED PARTNERSHIP
(A New Hampshire Limited Partnership)
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1) Summary of Significant Accounting Policies
Partnership Operations and Asset Exchange Agreement
Macon Cellular Telephone Systems Limited Partnership (the "Partnership")
was formed on November 11, 1986, to construct and operate certain non-wireline
cellular telephone systems. On October 24, 1989, Palmer Cellular Partnership
("PCP"), a subsidiary of Palmer Communications Incorporated ("Palmer"), directly
or indirectly acquired the Partnership's general partner (approximately 1
percent) and approximately 94 percent of the limited partnership units. In
conjunction with this acquisition, the Partnership entered into an Asset
Exchange Agreement with Macon Cellular Telephone Corp. ("Macon"), whereby the
assets consisted primarily of FCC licenses and a nonwireline cellular telephone
system serving the Macon, Georgia, Metropolitan Statistical Area. The
partnership operates the non-wireline cellular telephone system serving the
Georgia-6 RSA which was acquired on July 5, 1996.
In March of 1995, Palmer Wireless, Inc. ("PWI") issued common stock for
100 percent of the partnership interests of PCP. Palmer owns a majority interest
in PWI. Since this exchange was between related parties, it was accounted for in
a manner similar to a pooling of interests. References to PWI in the
accompanying financial statements and notes to financial statements include the
activity of PWI and its predecessor, PCP.
On May 23, 1997, Price Communications Wireless, Inc. ("PCW") and PWI
entered into a plan of merger whereby PCW merged into PWI with PWI as the
surviving corporation. On October 6, 1997 the merger was completed and PWI
changed its name to PCW. The direct owner of the Partnership is Palmer Wireless
Holdings, Inc. ("Holdings") which was formed in January, 1994. PCW is the 100%
owner of Holdings.
The Partnership is the 100% owner of Price Communications Wireless VII
Inc., the licenseholder for the Macon MSA.
Basis of Presentation
For financial reporting purposes, PCW revalued its assets and liabilities
as of October 6, 1997 to reflect the price paid by Price Communications
Corporation to acquire 100% of PWI's common stock, a process generally referred
to as "push down accounting". On October 6, 1997, PCW allocated the purchase
price to each of the markets purchased and the partnership revalued its assets
and liabilities to reflect this allocation. The preliminary allocation of the
purchase price resulted in licenses of approximately $138.7 million. During 1998
the allocation was finalized resulting in an allocation of approximately $136.2
million to licenses, with an adjustment also made to deferred tax liability and
paid-in-capital to finalize "push-down" accounting. The license is being
amortized over a period of 40 years. Prior to October 6, 1997, PWI also utilized
"push down accounting", as PWI owned approximately 99.1% of the Partnership. As
of June 30, 1999 PWI owns approximately 99.6% of the Partnership.
The accompanying financial statements do not include the assets and
liabilities of the partners.
The Consolidated Financial Statements include the accounts of the
Partnership and its subsidiary. All significant inter-company balances and
transactions have been eliminated.
The Consolidated Financial Statements have been prepared by the
Partnership without audit in accordance with the rules and regulations of the
Securities and Exchange Commission. In the opinion of management, the statements
reflect all adjustments necessary for a fair presentation of the results of
interim periods. All such adjustments are of a normal and recurring nature. The
results of operations for any interim period are not necessarily indicative of
the results to be expected for a full year.
33
<PAGE>
MONTGOMERY CELLULAR HOLDING CO., INC.
AND SUBSIDIARY
Consolidated Balance Sheets
($ in thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
September 30, December 31,
1999 1998
-------- --------
<S> <C> <C>
Assets
Current Assets:
Cash $ 262 $ 36
Trade accounts receivable, less allowance for doubtful
accounts of $174 in 1999 and $98 in 1998 3,229 2,365
Inventory 376 182
Other current assets 48 22
-----------------------
Total current assets 3,915 2,605
-----------------------
Property and equipment :
Land and leasehold improvements 145 136
Equipment and furnishings 563 418
Cellular equipment 12,642 11,958
-----------------------
13,350 12,512
Less accumulated depreciation and amortization 3,122 1,820
-----------------------
Net property and equipment 10,228 10,692
-----------------------
Advances to affiliates 6,702 1,242
Licenses and other intangibles,
less accumulated amortization
of $5,589 in 1999 and $3,507 in 1998 105,362 107,444
-----------------------
126,207 121,983
=======================
Liabilities and Stockholder's Equity
Current liabilities:
Accrued salaries and benefits $ 79 $ 51
Other accrued expenses 686 296
Deferred revenue 748 525
Customer deposits 110 68
-----------------------
Total current liabilities 1,623 940
Deferred income taxes 39,904 40,624
Other notes payable 13 15
-----------------------
Total liabilities 41,540 41,579
Commitments and contingencies
Stockholder's equity:
Preferred stock, $.01 par value;
authorized 50,000 shares
none issued -- --
Common stock, $.01 par value;
authorized 100,000 shares,
issued 10,000 shares -- --
Additional paid in capital 69,031 69,031
Retained earnings 15,636 11,373
-----------------------
Total stockholder's equity 84,667 80,404
-----------------------
$126,207 $121,983
=======================
</TABLE>
See accompanying notes to consolidated financial statements.
34
<PAGE>
MONTGOMERY CELLULAR HOLDING CO., INC.
AND SUBSIDIARY
Consolidated Statements of Operations and
Retained Earnings
($ in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the three months For the nine months
ended September 30, ended September 30,
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue:
Service revenue $ 7,431 $ 5,841 $ 21,375 $ 16,327
Equipment sales and installation 629 375 1,654 1,032
-----------------------------------------------------
Total revenue 8,060 6,216 23,029 17,359
-----------------------------------------------------
Operating expenses:
Engineering, technical and other direct 1,414 1,402 4,231 3,131
Cost of equipment 1,025 617 2,863 1,907
Sales and marketing 534 624 1,585 1,338
General and administrative 1,595 857 4,550 3,610
Depreciation and amortization 1,128 1,106 3,335 3,308
-----------------------------------------------------
Total operating expenses 5,696 4,606 16,564 13,294
-----------------------------------------------------
Operating income 2,364 1,610 6,465 4,065
Interest income (expense) 159 6 302 (75)
-----------------------------------------------------
Income before income tax expense 2,523 1,616 6,767 3,990
Provision for income taxes 934 598 2,504 1,476
-----------------------------------------------------
Net income $ 1,589 $ 1,018 $ 4,263 $ 2,514
=====================================================
</TABLE>
See accompanying notes to consolidated financial statements.
35
<PAGE>
MONTGOMERY CELLULAR HOLDING CO., INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows
($ In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the nine months
ended September 30,
1999 1998
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,263 $ 2,514
----------------------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 3,335 3,308
Deferred income tax (720) (719)
Increase in trade accounts receivable (864) (430)
Increase in inventory (194) (303)
Increase in other current assets (26) (28)
Increase (decrease) in accrued expenses 418 (31)
Increase in deferred revenue 223 175
Increase in customer deposits 42 33
----------------------
Total adjustments 2,214 2,005
----------------------
Net cash provided by operating activities 6,477 4,519
----------------------
Cash flows from investing activities:
Purchases of property and equipment (785) (1,267)
----------------------
Cash flows from financing activities:
Long-term borrowings (2) (2)
Increase in advances to affiliates, net (5,464) --
Decrease in advances from affiliates, net -- (3,328)
----------------------
Net cash used in financing activities (5,466) (3,330)
----------------------
Net increase (decrease) in cash 226 (78)
Cash at beginning of year 36 184
----------------------
Cash at end of period $ 262 $ 106
======================
Supplemental disclosure of cash flow information -
Cash paid during the year for interest $ -- $ 83
======================
</TABLE>
See accompanying notes to consolidated financial statements
36
<PAGE>
MONTGOMERY CELLULAR HOLDING CO., INC.
AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1) Summary of Significant Accounting Policies
Corporate Information
Montgomery Cellular Holding Co., Inc. and its wholly owned subsidiary,
Montgomery Cellular Telephone Company, Inc., (the "Company") were formed in
February 1988 to operate the non-wireline cellular telephone system in the
Montgomery, Alabama, Metropolitan Statistical Area. Palmer Communications
Incorporated ("Palmer") acquired an interest in the outstanding stock of
Montgomery Cellular Holding Co., Inc. on December 31, 1988.
Effective August 4, 1989, Palmer transferred its investment in and
advances to the Company to Palmer Cellular Partnership ("PCP"). Palmer owned a
majority interest in PCP. When Palmer's interest in the Company was transferred
to PCP, it had no effect on the carrying value of the assets of the Company.
In March of 1995, Palmer Wireless, Inc. ("PWI") issued common stock for
100 percent of the partnership interests of PCP. Palmer owns a majority interest
in PWI. Since this exchange was between related parties, it was accounted for in
a manner similar to a pooling of interests.
On May 23, 1997, Price Communications Wireless , Inc. ("PCW") and PWI
entered into a plan of merger whereby PCW merged into PWI with PWI as the
surviving corporation. On October 6, 1997 the merger was completed and PWI
changed its name to PCW. The direct owner of the Company is Palmer Wireless
Holdings Inc. ("Holdings") which was formed in January 1994. PCW is the 100%
owner of Holdings.
The Company's subsidiary is the 100% owner of Price Communications
Wireless IV, Inc. the license holder for the Montgomery MSA.
Basis of Presentation
Holdings owned approximately 94.6% of the Company at June 30, 1999. For
financial reporting purposes, PCW revalued its assets and liabilities as of
October 6, 1997 to reflect the price paid by Price Communications Corporation to
acquire 100% of PWI's common stock, a process generally referred to as "push
down accounting". On October 6, 1997, PCW allocated the purchase price to each
of the markets purchased and the Company revalued its assets and liabilities to
reflect this allocation. The preliminary allocation of the purchase price
resulted in licenses of approximately $113.4 million. During 1998 the allocation
was finalized resulting in an allocation of approximately $111.0 million to
licenses, with an adjustment also made to deferred tax liability and
paid-in-capital to finalize "push-down" accounting. The license is being
amortized over a period of 40 years.
The Consolidated Financial Statements include the accounts of Montgomery
Cellular Holding Co., Inc. and its Subsidiary. All significant inter-company
balances and transactions have been eliminated.
The Consolidated Financial Statements have been prepared by the Company
without audit in accordance with the rules and regulations of the Securities and
Exchange Commission. In the opinion of management, the statements reflect all
adjustments necessary for a fair presentation of the results of interim periods.
All such adjustments are of a normal and recurring nature. The results of
operations for any interim period are not necessarily indicative of the results
for a full year.
37
<PAGE>
MONTGOMERY CELLULAR TELEPHONE CO., INC.
Consolidated Balance Sheets
($ In thousands Except Per Share Amounts))
<TABLE>
<CAPTION>
(Unaudited) (Audited)
September 30, December 31,
1999 1998
-------- --------
<S> <C> <C>
Assets
Current Assets:
Cash $ 262 $ 36
Trade accounts receivable, less allowance for doubtful
accounts of $174 in 1999 and $98 in 1998 3,229 2,365
Inventory 376 182
Other current assets 48 22
-----------------------
Total current assets 3,915 2,605
-----------------------
Property and equipment :
Land and leasehold improvements 145 136
Equipment and furnishings 563 418
Cellular equipment 12,642 12,000
-----------------------
13,350 12,554
Less accumulated depreciation and amortization 3,122 1,862
-----------------------
Net property and equipment 10,228 10,692
-----------------------
Advances to affiliates 6,702 1,242
License and other intangibles,
less accumulated amortization
of $5,589 in 1999 and $3,507 in 1998 105,362 107,444
-----------------------
126,207 121,983
=======================
Liabilities and Stockholder's Equity
Current liabilities:
Accrued salaries and benefits $ 79 $ 51
Other accrued expenses 686 296
Deferred revenue 748 525
Customer deposits 110 68
-----------------------
Total current liabilities 1,623 940
Deferred income taxes 39,904 40,624
Other notes payable 13 15
-----------------------
Total liabilities 41,540 41,579
Commitments and contingencies
Stockholder's equity:
Common stock, $1.00 par value;
authorized 5,000 shares,
100 shares, issued and outstanding -- --
Additional paid in capital 69,031 69,031
Retained earnings 15,636 11,373
-----------------------
Total stockholder's equity 84,667 80,404
-----------------------
$126,207 $121,983
=======================
</TABLE>
See accompanying notes to consolidated financial statements.
38
<PAGE>
MONTGOMERY CELLULAR TELEPHONE CO., INC.
Consolidated Statements of Operations and
Retained Earnings
($ in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the three months For the nine months
ended September 30, ended September 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue:
Service revenue $ 7,431 $ 5,841 $ 21,375 $ 16,327
Equipment sales and installation 629 375 1,654 1,032
-----------------------------------------------------
Total revenue 8,060 6,216 23,029 17,359
-----------------------------------------------------
Operating expenses:
Engineering, technical and other direct 1,414 1,402 4,231 3,131
Cost of equipment 1,025 617 2,863 1,907
Sales and marketing 534 624 1,585 1,338
General and administrative 1,595 857 4,550 3,610
Depreciation and amortization 1,128 1,106 3,335 3,308
-----------------------------------------------------
Total operating expenses 5,696 4,606 16,564 13,294
-----------------------------------------------------
Operating income 2,364 1,610 6,465 4,065
Interest income (expense) 159 6 302 (75)
-----------------------------------------------------
Income before income tax expense 2,523 1,616 6,767 3,990
Provision for income taxes 934 598 2,504 1,476
-----------------------------------------------------
Net income $ 1,589 $ 1,018 $ 4,263 $ 2,514
=====================================================
</TABLE>
See accompanying notes to consolidated financial statements.
39
<PAGE>
MONTGOMERY CELLULAR TELEPHONE CO., INC.
Consolidated Statements of Cash Flows
($ In thousands)
(Unaudited)
For the nine months
ended September 30,
1999 1998
------- -------
Cash flows from operating activities:
Net income $ 4,263 $ 2,514
----------------------
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 3,335 3,308
Deferred income tax (720) (719)
Increase in trade accounts receivable (864) (430)
Increase in inventory (194) (303)
Increase in other current assets (26) (28)
Increase (decrease) in accrued expenses 418 (31)
Increase in deferred revenue 223 175
Increase in customer deposits 42 33
----------------------
Total adjustments 2,214 2,005
----------------------
Net cash provided by operating activities 6,477 4,519
----------------------
Cash flows from investing activities:
Purchases of property and equipment (785) (1,267)
----------------------
Cash flows from financing activities:
Long-term borrowings (2) (2)
Increase in advances to affiliates, net (5,464) --
Decrease in advances from affiliates, net -- (3,328)
----------------------
Net cash used in financing activities (5,466) (3,330)
----------------------
Net increase (decrease) in cash 226 (78)
Cash at beginning of year 36 184
----------------------
Cash at end of period $ 262 $ 106
----------------------
Supplemental disclosure of cash flow information -
Cash paid during the period for interest $ -- $ 83
----------------------
See accompanying notes to consolidated financial statements.
40
<PAGE>
MONTGOMERY CELLULAR TELEPHONE CO., INC.
Notes to Consolidated Financial Statements
(Unaudited)
1) Summary of Significant Accounting Policies
Corporate Information
Montgomery Cellular Telephone Co., Inc., (the "Company") and its parent
Montgomery Cellular Holding Co., Inc., whose financial statements are included
elsewhere in this document, were formed in February 1988 to operate the
non-wireline cellular telephone system in the Montgomery, Alabama, Metropolitan
Statistical Area. Palmer Communications Incorporated ("Palmer") acquired an
interest in the outstanding stock of Montgomery Cellular Holding Co., Inc. on
December 31, 1988.
Effective August 4, 1989, Palmer transferred its investment in and
advances to the Company to Palmer Cellular Partnership ("PCP"). Palmer owned a
majority interest in PCP. When Palmer's interest in the Company was transferred
to PCP, it had no effect on the carrying value of the assets of the Company.
In March of 1995, Palmer Wireless, Inc. ("PWI") issued common stock for
100 percent of the partnership interests of PCP. Palmer owns a majority interest
in PWI. Since this exchange was between related parties, it was accounted for in
a manner similar to a pooling of interests.
On May 23, 1997, Price Communications Wireless , Inc. ("PCW") and PWI
entered into a plan of merger whereby PCW merged into PWI with PWI as the
surviving corporation. On October 6, 1997 the merger was completed and PWI
changed its name to PCW. The Company's direct owner Montgomery Cellular Holding
Co., Inc. ("Montgomery Holding"). Montgomery Holding in turn is 100% owned by
Palmer Wireless Holdings, Inc. which was formed in January, 1994. PCW is the
100% owner of Holdings.
The Company is the 100% owner of Price Communications Wireless IV, Inc.,
the license holder for the Montgomery MSA.
Basis of Presentation
Holdings owned approximately 94.6% of the Company at June 30, 1999. For
financial reporting purposes, PCW revalued its assets and liabilities as of
October 6, 1997 to reflect the price paid by Price Communications Corporation to
acquire 100% of PWI's common stock, a process generally referred to as "push
down accounting". On October 6, 1997, PCW allocated the purchase price to each
of the markets purchased and the Company revalued its assets and liabilities to
reflect this allocation. The preliminary allocation of the purchase price
resulted in licenses of approximately $113.4 million. During 1998 the allocation
was finalized resulting in an allocation of approximately $111.0 million to
licenses, with an adjustment also made to deferred tax liability and
paid-in-capital to finalize "push-down" accounting. The license is being
amortized over a period of 40 years.
The Consolidated Financial Statements include the accounts of the Company
and its subsidiary. All significant inter-company balances and transactions have
been eliminated.
The Consolidated Financial Statements have been prepared by the Company
without audit in accordance with the rules and regulations of the Securities and
Exchange Commission. In the opinion of management, the statements reflect all
adjustments necessary for a fair presentation of the results of interim periods.
All adjustments are of a normal and recurring nature. The results of operations
for any interim period are not necessarily indicative of the results to be
expected for a full year.
41
<PAGE>
PANAMA CITY CELLULAR TELEPHONE COMPANY, LTD.
(A Florida Limited Partnership)
Balance Sheets
($ in thousands)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
September 30, December 31,
1999 1998
------- -------
<S> <C> <C>
Assets
Current Assets:
Cash $ 22 $ 18
Trade accounts receivable, less allowance for doubtful
accounts of $61 in 1999 and $29 in 1998 1,285 961
Inventory 130 135
Other current assets 129 15
---------------------
Total current assets 1,566 1,129
---------------------
Property and equipment :
Land and land improvements 295 295
Buildings and leasehold improvements 109 109
Equipment and furnishings 240 239
Cellular equipment 4,902 4,810
---------------------
5,546 5,453
Less accumulated depreciation and amortization 1,232 692
---------------------
Net property and equipment 4,314 4,761
---------------------
Advances to affiliates 12,269 6,809
License and other intangibles,
less accumulated amortization
of $2,219 in 1999 and $1,406 in 1998 41,116 41,929
---------------------
$59,265 $54,628
=====================
Liabilities and Partners' Equity
Current liabilities:
Accrued salaries and benefits $ 26 $ 20
Other accrued expenses 252 98
Deferred revenue 299 225
Customer deposits 84 68
---------------------
Total current liabilities 661 411
Deferred income taxes 12,914 13,169
---------------------
Total liabilities 13,575 13,580
---------------------
Commitments and contingencies
Partners' equity 45,690 41,048
---------------------
$59,265 $54,628
=====================
</TABLE>
See accompanying notes to consolidated financial statements.
42
<PAGE>
PANAMA CITY CELLULAR TELEPHONE COMPANY, LTD.
(A Florida Limited Partnership)
Consolidated Statements of Operations
($ in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the three months For the nine months
ended September 30, ended September 30,
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenue:
Service revenue $3,186 $2,738 $8,688 $7,227
Equipment sales and installation 249 215 709 585
---------------------------------------------
Total revenue 3,435 2,953 9,397 7,812
---------------------------------------------
Operating expenses:
Engineering, technical and other direct 278 261 934 917
Cost of equipment 351 466 1,012 1,101
Sales and marketing 179 313 590 613
General and administrative 623 388 1,724 1,506
Depreciation and amortization 451 443 1,354 1,368
---------------------------------------------
Total operating expenses 1,882 1,871 5,614 5,505
---------------------------------------------
Operating income 1,553 1,082 3,783 2,307
Interest income 194 133 604 271
---------------------------------------------
Income before taxes 1,747 1,215 4,387 2,578
Deferred tax benefit 85 94 255 280
---------------------------------------------
Net income $1,832 $1,309 $4,642 $2,858
=============================================
</TABLE>
See accompanying notes to consolidated financial statements.
43
<PAGE>
PANAMA CITY CELLULAR TELEPHONE COMPANY, LTD.
(A Florida Limited Partnership)
Consolidated Statements of Cash Flows
($ in thousands)
(Unaudited)
For the nine months
ended September 30,
1999 1998
------- -------
Cash flows from operating activities:
Net income $ 4,642 $ 2,858
----------------------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,354 1,368
Deferred taxes (255) (280)
Increase in trade accounts receivable (324) (98)
Decrease in inventory 5 (126)
Increase in other current assets (114) (2)
Increase in accrued expenses 159 92
Increase in deferred revenue 74 46
Increase in customer deposits 16 27
----------------------
Total adjustments 915 1,027
----------------------
Net cash provided by operating activities 5,557 3,885
----------------------
Cash flows from investing activities:
Purchases of property and equipment (93) (15)
Purchases of other intangibles -- (3)
----------------------
Net cash used in investing activities (93) (18)
Cash flows from financing activities -
Increase in advances to affiliates, net (5,460) (3,852)
Net (decrease) increase in cash 4 15
Cash at beginning of year 18 13
----------------------
Cash at end of period $ 22 $ 28
======================
See accompanying notes to consolidated financial statements.
44
<PAGE>
PANAMA CITY CELLULAR TELEPHONE COMPANY, LTD.
(A Florida Limited Partnership)
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1) Summary of Significant Accounting Policies
Partnership Operations
Panama City Cellular Telephone Company Ltd. (the "Partnership") was formed
on April 1, 1988, to construct and operate non-wireline cellular telephone
systems in the Panama City, Florida, Metropolitan Statistical Area. On July 25,
1991, Palmer Cellular Partnership ("PCP"), a subsidiary of Palmer Communications
Incorporated ("Palmer"), acquired 100 percent of the general partners' interest
and a portion of the limited partners' interest.
In March of 1995, Palmer Wireless, Inc. ("PWI") issued common stock for
100 percent of the partnership interests of PCP. Palmer owns a majority interest
in PWI. Since this exchange was between related parties, it was accounted for in
a manner similar to a pooling of interests. References to PWI in the
accompanying financial statements and notes to financial statements include the
activity of PWI and its predecessor, PCP.
On May 23, 1997, Price Communications Wireless , Inc. ("PCW") and PWI
entered into a plan of merger whereby PCW merged into PWI with PWI as the
surviving corporation. On October 6, 1997, the merger was completed and PWI
changed its name to PCW. The Partnership's direct owner is Panhandle Cellular
Partnership ("Panhandle") whose financial statements are included elsewhere in
this document. Panhandle in turn is owned by Palmer Wireless Holdings, Inc.
("Holdings"). PCW is the 100% owner of Holdings.
The Partnership is the 100% owner of Price Communications Wireless IX,
Inc., the license holder for the Panama City MSA.
Basis of Presentation
Holdings owned approximately 92.0% of the Partnership at June 30, 1999.
For financial reporting purposes, PCW revalued its assets and liabilities as of
October 6, 1997 to reflect the price paid by Price Communications Corporation to
acquire 100% of PWI's common stock, a process generally referred to as "push
down accounting". On October 6, 1997, PCW allocated the purchase price to each
of the markets purchased and the Partnership revalued its assets and liabilities
to reflect this allocation. The preliminary allocation of the purchase price
resulted in licenses of approximately $44.2 million. During 1998 the allocation
was finalized resulting in an allocation of approximately $43.3 million to
licenses, with an adjustment also made to deferred tax liability and
paid-in-capital. The license is being amortized over a period of 40 years.
The accompanying financial statements do not include the assets and
liabilities of the partners.
The Consolidated Financial Statements include the accounts of the
Partnership and its subsidiary. All significant inter-company balances and
transactions have been eliminated.
The Consolidated Financial Statements have been prepared by the
Partnership without audit in accordance with rules and regulations of the
Securities and Exchange Commission. In the opinion of management, the statements
reflect all adjustments necessary for a fair presentation of the results of the
interim periods. All such adjustments are of a normal and recurring nature. The
results of operations for any interim period are not necessarily indicative of
the results for a full year.
45
<PAGE>
PANHANDLE CELLULAR PARTNERSHIP
Consolidated Balance Sheets
($ in thousands)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
September 30, December 31,
1999 1998
------- -------
<S> <C> <C>
Assets
Current Assets:
Cash $ 22 $ 18
Trade accounts receivable, less allowance for doubtful
accounts of $61 in 1999 and $29 in 1998 1,285 961
Inventory 130 135
Other current assets 129 15
---------------------
Total current assets 1,566 1,129
---------------------
Property and equipment :
Land and land improvements 295 295
Buildings and leasehold improvements 109 109
Equipment and furnishings 240 239
Cellular equipment 4,902 4,810
---------------------
5,546 5,453
Less accumulated depreciation and amortization 1,232 692
---------------------
Net property and equipment 4,314 4,761
Advances to affiliates 12,269 6,809
Licenses and other intangibles,
less accumulated amortization
of $2,219 in 1999 and $1,406 in 1998 41,116 41,929
---------------------
$59,265 $54,628
=====================
Liabilities and Partners' Equity
Current liabilities:
Accrued salaries and benefits $ 26 $ 20
Other accrued expenses 252 98
Deferred revenue 299 225
Customer deposits 84 68
---------------------
Total current liabilities 661 411
Deferred income taxes 12,914 13,169
Minority interest 592 549
---------------------
Total liabilities 14,167 14,129
Commitments and contingencies
Partners' equity 45,098 40,499
---------------------
$59,265 $54,628
=====================
</TABLE>
See accompanying notes to consolidated financial statements.
46
<PAGE>
PANHANDLE CELLULAR PARTNERSHIP
Consolidated Statements of Operations
($ in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the three months For the nine months
ended September 30, ended September 30,
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenue:
Service revenue $ 3,186 $ 2,738 $ 8,688 $ 7,227
Equipment sales and installation 249 215 709 585
----------------------------------------------------
Total revenue 3,435 2,953 9,397 7,812
----------------------------------------------------
Operating expenses:
Engineering, technical and other direct 278 445 934 1,101
Cost of equipment 351 282 1,012 917
Sales and marketing 179 313 590 613
General and administrative 623 388 1,724 1,506
Depreciation and amortization 451 443 1,354 1,368
----------------------------------------------------
Total operating expenses 1,882 1,871 5,614 5,505
----------------------------------------------------
Operating income 1,553 1,082 3,783 2,307
Interest income 194 133 604 271
Minority interest (17) (12) (43) (26)
----------------------------------------------------
Income before taxes 1,730 1,203 4,344 2,552
Deferred tax benefit 85 94 255 280
----------------------------------------------------
Net income $ 1,815 $ 1,297 $ 4,599 $ 2,832
====================================================
</TABLE>
See accompanying notes to consolidated financial statements.
47
<PAGE>
PANHANDLE CELLULAR PARTNERSHIP
Consolidated Statements of Cash Flows
($ in thousands)
(Unaudited)
For the nine months
ended September 30,
1999 1998
------- -------
Cash flows from operating activities:
Net income $ 4,599 $ 2,832
----------------------
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 1,354 1,368
Minority interest share of income 43 26
Deferred taxes (255) (280)
Increase in trade accounts receivable (324) (98)
Decrease in inventory 5 (126)
Increase in other current assets (114) (2)
Increase in accrued expenses 159 92
Increase in deferred revenue 74 46
Increase in customer deposits 16 27
----------------------
Total adjustments 958 1,053
----------------------
Net cash provided by operating activities 5,557 3,885
----------------------
Cash flows from investing activities:
Purchases of property and equipment (93) (15)
Purchases of other intangibles -- (3)
----------------------
Net cash used in investing activities (93) (18)
Cash flows from financing activities:
Increase in advances to affiliates, net (5,460) (3,852)
Net increase (decrease) in cash 4 15
Cash at beginning of year 18 13
----------------------
Cash at end of period $ 22 $ 28
======================
See accompanying notes to consolidated financial statements.
48
<PAGE>
PANHANDLE CELLULAR PARTNERSHIP
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1) Summary of Significant Accounting Policies
Partnership Operations
Panhandle Cellular Partnership. (the "Partnership") was formed on January
1, 1987, to construct and operate non-wireline cellular telephone systems in the
Panama City, Florida, Metropolitan Statistical Area. The Partnership is the
99.01% partner of Panama City Cellular Telephone Co., Ltd. which was formed on
April 1, 1988 and whose financial statements are included elsewhere in this
document. On July 25, 1991, Palmer Cellular Partnership ("PCP"), a subsidiary of
Palmer Communications Incorporated ("Palmer"), acquired an interest in the
Partnership.
In March of 1995, Palmer Wireless, Inc. ("PWI") issued common stock for
100 percent of the partnership interests of PCP. Palmer owns a majority interest
in PWI. Since this exchange was between related parties, it was accounted for in
a manner similar to a pooling of interests. References to PWI in the
accompanying financial statements and notes to financial statements include the
activity of PWI and its predecessor, PCP.
On May 23, 1997, Price Communications Wireless, Inc. ("PCW") and PWI
entered into a plan of merger whereby PCW merged into PWI with PWI as the
surviving corporation. On October 6, 1997, the merger was completed and PWI
changed its name to PCW. The direct owner of the Partnership is Palmer Wireless
Holdings, Inc. ("Holdings") which has a 78.41% ownership interest. Holdings,
which was formed in January, 1994, is 100% owned by PCW.
The Partnership's subsidiary is the 100% owner of Price Communications
Wireless IX, Inc., the license holder for the Panama City MSA.
Basis of Presentation
Holdings owned approximately 77.7% of the Partnership at March 31, 1999.
For financial reporting purposes, PCW revalued its assets and liabilities as of
October 6, 1997 to reflect the price paid by Price Communications Corporation to
acquire 100% of PWI's common stock, a process generally referred to as "push
down accounting". On October 6, 1997, PCW allocated the purchase price to each
of the markets purchased and the Partnership revalued its assets and liabilities
to reflect this allocation. The preliminary allocation of the purchase price
resulted in licenses of approximately $44.2 million. During 1998 the allocation
was finalized resulting in an allocation of approximately $43.3 million to
licenses, with an adjustment also made to deferred tax liability and
paid-in-capital to finalize "push-down" accounting. The license is being
amortized over a period of 40 years.
The accompanying financial statements do not include the assets and
liabilities of the partners.
The Consolidated Financial Statements include the accounts of the
Partnership and its subsidiary. All significant inter-company balances and
transactions have been eliminated.
The Consolidated Financial Statements have been prepared by the
Partnership without audit in accordance with the rules and regulations of the
Security and Exchange Commission. In the opinion of management, the statements
reflect all adjustments necessary for a fair presentation of the results of
interim periods. All such adjustments are of a normal and recurring nature. The
results of operations for any interim period are not necessarily indicative of
the results to be expected for a full year.
49
<PAGE>
SAVANNAH CELLULAR LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
Consolidated Balance Sheets
($ in thousands)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
September 30, December 31,
1999 1998
------- -------
<S> <C> <C>
Assets
Current Assets:
Cash $ 168 $ 14
Trade accounts receivable, less allowance for doubtful
accounts of $133 in 1999 and $108 in 1998 2,360 1,751
Inventory 132 368
Other current assets 39 30
---------------------
Total current assets 2,699 2,163
---------------------
Property and equipment:
Land and land improvements 810 715
Buildings and leasehold improvements 985 975
Equipment and furnishings 286 278
Cellular equipment 12,272 10,457
---------------------
14,353 12,425
Less accumulated depreciation and amortization 3,657 2,469
---------------------
Net property and equipment 10,696 9,956
---------------------
Advances to affiliates 7,387 3
Licenses and other intangibles, less
accumulated amortization of $4,032 in
1999 and $2,583 in 1998 73,241 74,690
---------------------
$94,023 $86,812
=====================
Liabilities and Partners' Equity
Current liabilities:
Accrued salaries and benefits $ 77 $ 43
Other accrued expenses 342 190
Deferred revenue 459 390
Customer deposits 113 64
---------------------
Total current liabilities 991 687
Deferred income taxes 21,674 22,103
---------------------
Total liabilities 22,665 22,790
Commitments and contingencies
Partners' equity 71,358 64,022
---------------------
$94,023 $86,812
=====================
</TABLE>
See accompanying notes to consolidated financial statements.
50
<PAGE>
SAVANNAH CELLULAR LIMITED PARTNERHIP
(A Delaware Limited Partnership)
Consolidated Statements of Operations
($ in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the three months For the nine months
ended September 30, ended September 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue:
Service revenue $ 6,074 $ 4,818 $ 17,488 $ 13,012
Equipment sales and installation 486 310 1,129 874
------------------------------------------------------
Total revenue 6,560 5,128 18,617 13,886
------------------------------------------------------
Operating expenses:
Engineering, technical and other direct 1,057 1,002 3,354 2,550
Cost of equipment 841 509 2,117 1,503
Sales and marketing 473 790 1,315 1,701
General and administrative 899 531 2,546 2,069
Depreciation and amortization 899 818 2,637 2,568
------------------------------------------------------
Total operating expenses 4,169 3,650 11,969 10,391
------------------------------------------------------
Operating income 2,391 1,478 6,648 3,495
Interest income (expense) 157 (80) 259 (338)
------------------------------------------------------
Income before taxes 2,548 1,398 6,907 3,157
Deferred tax benefit 143 166 429 500
------------------------------------------------------
Net income $ 2,691 $ 1,564 $ 7,336 $ 3,657
======================================================
</TABLE>
See accompanying notes to consolidated financial statements.
51
<PAGE>
SAVANNAH CELLULAR LIMITED PARTNERHSIP
(A Delaware Limited Partnership)
Consolidated Statements of Cash Flows
($ in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the nine months
ended September 30,
1999 1998
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 7,336 $ 3,657
----------------------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 2,637 2,568
Deferred taxes (286) (500)
Increase in trade accounts receivable (609) (903)
Decrease (increase) in inventory 236 (286)
Increase in other current assets (9) (7)
Increase in accrued expenses 186 68
Increase in deferred revenue 69 189
Increase (decrease) in customer deposits 49 (14)
----------------------
Total adjustments 2,273 1,115
----------------------
Net cash provided by operating activities 9,609 4,772
Cash flows from investing activities:
Purchases of property and equipment (1,928) (322)
Cash flows from financing activities:
Decrease in advances from affiliates, net (7,527) (4,491)
----------------------
Net increase in cash 154 (41)
Cash at beginning of year 14 24
----------------------
Cash at end of period $ 168 $ (17)
======================
Supplemental disclosure of cash flow information -
Cash paid during the period for interest $ -- $ 338
======================
</TABLE>
See accompanying notes to consolidated financial statements
52
<PAGE>
SAVANNAH CELLULAR LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1) Summary of Significant Accounting Policies
Partnership Operations
Savannah Cellular Limited Partnership (the "Partnership") was formed on
June 21, 1987, to construct and operate certain non-wireline cellular telephone
systems in Bryan, Chatham and Effingham counties, Georgia. On December 1, 1995,
Palmer Wireless Holdings, Inc. ("Holdings"), a subsidiary of Palmer Wireless,
Inc. ("PWI"), acquired Georgia Metronet, Inc., which owned 47.6226 percent of
the Partnership directly through its 100 percent ownership of the Savannah
General Partnership, the general partner of the Partnership. As such, Holdings
purchased 97.8816 percent of the Partnership's general and limited partnership
interests on December 1, 1995.
On May 23, 1997, Price Communications Wireless , Inc. ("PCW") and PWI
entered into a plan of merger whereby PCW merged into PWI with PWI as the
surviving corporation. On October 6, 1997 the merger was completed and PWI
changed its name to PCW. The direct owner of the Partnership is Holdings which
was formed in January, 1994. PCW is the 100% owner of Holdings.
The partnership is the 100% owner of Price Communications Wireless VIII,
Inc., the license holder for the Savannah MSA.
Basis of Presentation
For financial reporting purposes, PCW revalued its assets and liabilities
as of October 6, 1997 to reflect the price paid by Price Communications
Corporation to acquire 100% of PWI's common stock, a process generally referred
to as "push down accounting". On October 6, 1997, PCW allocated the purchase
price to each of the markets purchased and the partnership revalued its assets
and liabilities to reflect this allocation. The preliminary allocation of the
purchase price resulted in licenses of approximately $79.0 million. During 1998,
the allocation was finalized resulting in an allocation of approximately $77.3
million to licenses, with an adjustment also made to deferred tax liability and
paid-in-capital to finalize "push-down" accounting. The license is being
amortized over a period of 40 years. Prior to October 6, 1997, Holdings utilized
"push down accounting."
The accompanying financial statements do not include the assets and
liabilities of the partners.
The Consolidated Financial Statements include the accounts of the
Partnership and its subsidiary. All significant inter-company balances and
transactions have been eliminated.
The Consolidated Financial Statements have been prepared by the
Partnership without audit in accordance with rules and regulations of the
Securities and Exchange Commission. In the opinion of management, the statements
reflect all adjustments necessary for a fair presentation of the results of
interim periods. All such adjustments are of a normal and recurring nature. The
results of operations for any interim period are not necessarily indicative of
the results to be expected for a full year.
53
<PAGE>
CEI COMMUNICATIONS, INC.
Balance Sheets
($ in thousands)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
September 30, December 31,
1999 1998
--------------------------
<S> <C> <C>
Assets
Investment in Macon Cellular Telephone Systems Limited Partnership $802 $664
=======================
Commitments and contingencies
Equity
Common stock, $1.00 par value, 150,000 shares authorized,
500 shares issued and outstanding $ -- $ --
Retained earnings 802 664
-----------------------
$802 $664
=======================
</TABLE>
See accompanying notes to financial statements.
54
<PAGE>
CEI COMMUNICATIONS, INC.
Statements of Operations
'($ in thousands)
(Unaudited)
For the three months For the nine months
ended September 30, ended September 30,
1999 1998 1999 1998
-----------------------------------------
Partnership income from Macon
Cellular Telephone Systems
Limited Partnership $49 $24 $138 $71
=========================================
See accompanying notes to financial statements.
55
<PAGE>
CEI COMMUNICATIONS, INC.
'Statements of Cash Flows
($ in thousands)
Unaudited
For the nine months
ended September 30,
1999 1998
--------------------
Net income $ 138 $ 71
Increase in investment account (138) (71)
--------------------
Increase in cash $ -- $ --
====================
See accompanying notes to financial statements.
56
<PAGE>
CEI COMMUNICATIONS, INC.
Notes to Unaudited Financial Statements
1) Summary of Significant Accounting Policies
CEI Communications, Inc. (the "Company:) has a 1.06% partnership interest
in Macon Cellular Telephone Systems Limited Partnership. The Company is owned
100% by Palmer Wireless Holdings, Inc.
57
<PAGE>
PANAMA CITY COMMUNICATIONS INC.
'Balance Sheets
($ in thousands)
(Unaudited) (Audited)
September 30, December 31,
1999 1998
---- ----
Assets
Investment in Panama City Cellular
Telephone Co. Inc. $154 $111
=================
Equity
Common stock, no par value: 100 shares authorized,
issued and outstanding $ -- $ --
Retained earnings 154 111
-----------------
$154 $111
=================
See accompanying notes to financial statements.
58
<PAGE>
PANAMA CITY COMMUNICATIONS INC.
'Statements of Operations
($ in thousands)
(Unaudited)
For the three months For the nine months
ended September 30, ended September 30,
1999 1998 1999 1998
----- ----- ----- ---
Partnership income from Panama
City Cellular Telephone Co. Ltd. $ 27 $ 14 $ 43 $28
=======================================
See accompanying notes to financial statements.
59
<PAGE>
PANAMA CITY COMMUNICATIONS INC.
'Statements of Cash Flows
($ in thousands)
(Unaudited)
For the nine months
ended September 30,
1999 1998
---- ----
Net income $ 43 $ 28
Increase in investment account (43) (28)
----------------------
Increase in cash $ -- $ --
======================
See accompanying notes to financial statements.
60
<PAGE>
PANAMA CITY COMMUNICATIONS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1) Summary of Significant Accounting Policies
Basis of Presentation
Panama City Communications, Inc. (the "Company") has a .99% partnership interest
in Panama City Cellular Telephone Co., Ltd. The Company is owned 100% by Palmer
Wireless Holdings, Inc.
61
<PAGE>
PRICE COMMUNICATIONS WIRELESS II, INC.
Balance Sheets
($ in thousands except share data)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
September 30, December 31,
1999 1998
--------- ---------
<S> <C> <C>
Assets
Cellular license, net of accumulated
amortization of $16,593 in 1999
and $10,533 in 1998 $ 306,673 $ 312,733
============================
Liabilities and Stockholder's Equity
Deferred taxes $ 94,080 $ 95,724
Commitments and contingencies -- --
Stockholder's Equity
Common stock, par value $.01 per share; authorized, issued
and outstanding 1,000 shares -- --
Paid-in capital 224,058 224,058
(Accumulated deficit) (11,465) (7,049)
----------------------------
Total stockholder's equity 212,593 217,009
----------------------------
Total liabilities and stockholder's equity $ 306,673 $ 312,733
============================
</TABLE>
See accompanying notes to financial statements.
62
<PAGE>
PRICE COMMUNICATIONS WIRELESS II, INC.
Statements of Operations
($ in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the three months For the nine months
ended September 30, ended September 30,
1999 1998 1999 1998
----------------------------------------------------------
<S> <C> <C> <C> <C>
Amortization of cellular license $ 2,020 $ 1,945 $ 6,060 $ 6,181
----------------------------------------------------------
Deferred tax benefit 548 696 1,644 2,090
----------------------------------------------------------
Net (loss) ($1,472) ($1,249) ($4,416) ($4,091)
==========================================================
</TABLE>
See accompanying notes to financial statements.
63
<PAGE>
PRICE COMMUNICATIONS WIRELESS II, INC.
Statements of Cash Flows
($ in thousands)
(Unaudited)
For the nine months ended
September 30,
1999 1998
------- -------
Net (loss) ($4,416) ($4,091)
Amortization of cellular license 6,060 6,181
Decrease in deferred tax liability (1,644) (2,090)
--------------------------
Net change in cash $ -- $ --
==========================
See accompanying notes to financial statements.
64
<PAGE>
PRICE COMMUNICATIONS WIRELESS II, INC.
Notes to Condensed Financial Statements
(Unaudited)
1) Summary of Significant Accounting Policies
Corporation Operations
Price Communications Wireless II, Inc. ("Wireless II") (the "Company") was
incorporated in the state of Delaware on October 7, 1997. The Company is 100%
owned by its parent Palmer Wireless Holdings Inc. which in turn is 100% owned by
its parent Price Communications Wireless Inc. ("PCW"), the Registrant. The
Company owns the non-wireline licenses of the AL-8 RSA, GA-7 RSA, GA-8 RSA, GA-9
RSA, GA-10 RSA, GA-12 RSA, Augusta Georgia MSA and the interim operating
authority for SC-7 RSA.
Financial Statement Basis
On May 23, 1997, PCW and Palmer Wireless, Inc. ("PWI") entered into a plan
of merger whereby PCW merged into PWI with PWI as the surviving corporation. On
October 6, 1997 the merger was completed and PWI changed its name to PCW.
For financial reporting purposes, PCW revalued its assets and liabilities
as of October 6, 1997 to reflect the price paid by Price Communications
Corporation to acquire 100% of Palmer's common stock, a process generally
referred to as "push down accounting". On October 6, 1997, PCW allocated the
purchase price to each of the markets purchased and the various operating
entities revalued their assets and liabilities to reflect this allocation. The
preliminary allocation of the purchase price resulted in licenses of
approximately $330.0 million. During 1998, the preliminary allocation was
finalized resulting in an allocation of approximately $323.3 million to
licenses, with an adjustment also made to deferred tax liability and
paid-in-capital to finalize "push-down" accounting. Palmer Wireless Holdings
Inc. is 100% owned by PCW and accordingly the value of the license allocated to
it was contributed to Wireless II
Licenses
Subsequent to the initial license valuation, the Company continually
evaluates whether later events and circumstances have occurred that indicate the
remaining estimated useful life of the license or licenses may warrant revision
or that the remaining balance of the license rights may not be recoverable. The
Company utilizes projected undiscounted cash flows over the remaining life of
the license or licenses and sales of comparable businesses to evaluate the
recorded value of these licenses. The assessment of the recoverability of the
remaining balance of the license rights will be impacted if projected cash flows
are not achieved.
Deferred Tax Liability
For financial statement purposes, the Company, recognizes deferred taxes
as it relates to the difference between financial statement and income tax basis
of the licenses.
Commitments and Contingencies
The Company is listed as a guarantor for PCW's $525.0 million 91/8% Senior
Secured Notes due 2006. All of PCW's direct or indirect subsidiaries are also
listed as guarantors.
65
<PAGE>
PRICE COMMUNICATIONS WIRELESS III, INC.
Balance Sheets
($ in thousands except share data)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
September 30, December 31,
1999 1998
-------- --------
<S> <C> <C>
Assets
Cellular license, net of accumulated
amortization of $2,494 in 1999
and $1,576 in 1998 $ 46,450 $ 47,368
==========================
Liabilities and Stockholder's Equity
Deferred taxes $ 17,193 $ 17,526
Commitments and contingencies
Stockholder's Equity
Common stock, par value $.01 per share; authorized, issued
and outstanding 1,000 shares -- --
Paid-in capital 30,884 30,884
(Accumulated deficit) (1,627) (1,042)
--------------------------
Total stockholder's equity 29,257 29,842
--------------------------
Total liabilities and stockholder's equity $ 46,450 $ 47,368
==========================
</TABLE>
See accompanying notes to financial statements.
66
<PAGE>
PRICE COMMUNICATIONS WIRELESS III, INC.
Statements of Operations
($ in thousands)
(Unaudited)
For the three months For the nine months
ended September 30, ended September 30,
1999 1998 1999 1998
----- ----- ----- -----
Amortization of cellular license $ 306 $ 316 $ 918 $ 946
Deferred tax benefit 111 106 333 320
--------------------------------------------
Net (loss) ($195) ($210) ($585) ($626)
============================================
See accompanying notes to financial statements.
67
<PAGE>
PRICE COMMUNICATIONS WIRELESS III, INC.
Statements of Cash Flows
($ in thousands)
(Unaudited)
For the nine months ended
September 30,
1999 1998
----- -----
Net (loss) ($585) ($626)
Amortization of cellular license 918 946
Decrease in deferred tax liability (333) (320)
-----------------------
Net change in cash $ -- $ --
=======================
See accompanying notes to financial statements.
68
<PAGE>
PRICE COMMUNICATIONS WIRELESS III, INC.
Notes to Condensed Financial Statements
(Unaudited)
1) Summary of Significant Accounting Policies
Corporation Operations
Price Communications Wireless III, Inc. ("Wireless III") (the "Company")
was incorporated in the state of Delaware on October 7, 1997. The Company is
100% owned by its parent Dothan Cellular Telephone Co. Inc. ("Dothan") whose
financial statements are included elsewhere in this document. Dothan in turn is
100% owned by Cellular Systems of Southeast Alabama, Inc. ("Cellular Systems").
Palmer Wireless Holdings, Inc.("Holdings") has a 95.0% ownership interest in
Cellular Systems. Holdings is 100% owned by Price Communications Wireless, Inc.
("PCW"). The Company owns the non-wireline license of Dothan (Dothan MSA), the
operating entity.
Financial Statement Basis
On May 23, 1997, PCW, and Palmer Wireless, Inc. ("PWI") entered into a
plan of merger whereby PCW merged into PWI with PWI as the surviving
corporation. On October 6, 1997, the merger was completed and PWI changed its
name to PCW.
For financial reporting purposes, PCW revalued its assets and liabilities
as of October 6, 1997 to reflect the price paid by Price Communications
Corporation to acquire 100% of Palmer's common stock, a process generally
referred to as "push down accounting". On October 6, 1997, PCW allocated the
purchase price to each of the markets purchased and the various operating
entities revalued their assets and liabilities to reflect this allocation. The
preliminary allocation of the purchase price resulted in licenses of
approximately $50.4 million. During 1998, the preliminary allocation was
finalized resulting in an allocation of $48.9 million to licenses, with an
adjustment also made to deferred tax liability and paid-in-capital to finalize
"push-down" accounting. Palmer Wireless Holdings Inc. contributed the value of
the license allocated to it by PCW to Wireless III.
Licenses
Subsequent to the initial license valuation, the Company continually
evaluates whether later events and circumstances have occurred that indicate the
remaining estimated useful life of the license or licenses may warrant revision
or that the remaining balance of the license rights may not be recoverable. The
Company utilizes projected undiscounted cash flows over the remaining life of
the license or licenses and sales of comparable businesses to evaluate the
recorded value of these licenses. The assessment of the recoverability of the
remaining balance of the license rights will be impacted if projected cash flows
are not achieved.
Deferred Income Taxes
For financial statement purposes, the Company recognizes a deferred tax
liability as it relates to the difference between the financial statement and
income tax basis of the licenses. The Company recognizes a deferred tax benefit
for the turnaround in the deferred tax liability attributable to the additional
amortization of the licenses.
Commitments and Contingencies
The Company is listed as a guarantor for PCW's $525.0 million 91/8% Senior
Secured Notes due 2006. All of PCW's direct or indirect subsidiaries are also
listed as guarantors.
69
<PAGE>
PRICE COMMUNICATIONS WIRELESS IV, INC.
Balance Sheets
($ in thousands except share data)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
September 30, December 31,
1999 1998
--------- ---------
<S> <C> <C>
Assets
Cellular license, net of accumulated
amortization of $5,626 in 1999
and $3,544 in 1998 $ 105,367 $ 107,449
============================
Liabilities and Stockholder's Equity
Deferred taxes $ 39,003 $ 39,756
Commitments and contingencies
Stockholder's Equity
Common stock, par value $.01 per share; authorized, issued
and outstanding 1,000 shares -- --
Paid-in capital 70,038 70,038
(Accumulated deficit) (3,674) (2,345)
----------------------------
Total stockholder's equity 66,364 67,693
----------------------------
Total liabilities and stockholder's equity $ 105,367 $ 107,449
============================
</TABLE>
See accompanying notes to financial statements.
70
<PAGE>
PRICE COMMUNICATIONS WIRELESS IV, INC.
Statements of Operations
($ in thousands)
(Unaudited)
For the three months For the nine months
ended September 30, ended September 30,
1999 1998 1999 1998
---- ---- ---- ----
Amortization of cellular license $694 $708 $2,082 $2,126
Deferred tax benefit 251 239 753 719
--------------------------------------------
Net (loss) ($443) ($469) ($1,329) ($1,407)
============================================
See accompanying notes to financial statements.
71
<PAGE>
PRICE COMMUNICATIONS WIRELESS IV, INC.
Statements of Cash Flows
($ in thousands)
(Unaudited)
For the nine months ended
September 30,
1999 1998
------- -------
Net (loss) ($1,329) ($1,407)
Amortization of cellular license 2,082 2,126
Decrease in deferred tax liability (753) (719)
--------------------------
Net change in cash $ -- $ --
==========================
See accompanying notes to financial statements.
72
<PAGE>
PRICE COMMUNICATIONS WIRELESS IV, INC.
Notes to Condensed Financial Statements
(Unaudited)
1) Summary of Significant Accounting Policies
Corporation Operations
Price Communications Wireless IV, Inc. ("Wireless IV") (the "Company") was
incorporated in the state of Delaware on October 7, 1997. The Company is 100%
owned by its parent Montgomery Cellular Telephone Co. Inc. ("Montgomery").
Montgomery in turn is 100% owned by its parent, Montgomery Cellular Holding Co.
Inc. ("Montgomery Holdings"), the operating entity. Palmer Wireless Holdings,
Inc. has a 94.6% ownership interest in Montgomery Holdings. Palmer Wireless
Holdings, Inc. is 100% owned by Price Communications Wireless, Inc.,("PCW"). The
Company owns the non-wireline license of Montgomery Holdings (Montgomery MSA).
Financial Statement Basis
On May 23, 1997, PCW and Palmer Wireless, Inc. ("PWI") entered into a plan
of merger whereby PCW merged into PWI with PWI as the surviving corporation. On
October 6, 1997, the merger was completed and PWI changed its name to PCW.
For financial reporting purposes, PCW revalued its assets and liabilities
as of October 6, 1997 to reflect the price paid by Price Communications
Corporation to acquire 100% of Palmer's common stock, a process generally
referred to as "push down accounting". On October 6, 1997, PCW allocated the
purchase price to each of the markets purchased and the various operating
entities revalued their assets and liabilities to reflect this allocation. The
preliminary allocation of the purchase price resulted in licenses of
approximately $113.4 million to licenses. During 1998, the preliminary
allocation was finalized resulting in an allocation of approximately $111.0
million to licenses, with an adjustment also made to deferred tax liability and
paid-in-capital to finalize "push-down" accounting. Palmer Wireless Holdings
Inc. contributed the value of the license allocated to it by PCW to Wireless
IV..
Licenses
Subsequent to the initial license valuation, the Company continually
evaluates whether later events and circumstances have occurred that indicate the
remaining estimated useful life of the license or licenses may warrant revision
or that the remaining balance of the license rights may not br recoverable. The
Company utilizes projected undiscounted cash flows over the remaining life of
the license or licenses and sales of comparable businesses to evaluate the
recorded value of these licenses. The assessment of the recoverability of the
remaining balance of the license rights will be impacted if projected cash flows
are not achieved.
Deferred Income Taxes
For financial statement purposes, the Company recognizes a deferred tax
liability as it relates to the difference between the financial statement and
income tax basis of the licenses. The Company recognizes a deferred tax benefit
for the turnaround in the deferred tax liability attributable to the additional
amortization of the licenses.
Commitments and Contingencies
The Company is listed as a guarantor for PCW's $525.0 million 91/8% Senior
Secured Notes due 2006. All of PCW's direct or indirect subsidiaries are also
listed as guarantors.
73
<PAGE>
PRICE COMMUNICATIONS WIRELESS V, INC.
Balance Sheets
($ in thousands except share data)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
September 30, December 31,
1999 1998
-------- --------
<S> <C> <C>
Assets
Cellular license, net of accumulated amortization of $3,881 in 1999
and $2,444 in 1998 $ 72,772 $ 74,209
==========================
Liabilities and Stockholder's Equity
Deferred taxes $ 11,528 $ 11,759
Commitments and contingencies
Stockholder's Equity
Common stock, par value $.01 per share; authorized, issued
and outstanding 1,000 shares -- --
Paid-in capital 64,069 64,069
(Accumulated deficit) (2,825) (1,619)
--------------------------
Total stockholder's equity 61,244 62,450
--------------------------
Total liabilities and stockholder's equity $ 72,772 $ 74,209
==========================
</TABLE>
See accompanying notes to financial statements.
74
<PAGE>
PRICE COMMUNICATIONS WIRELESS V, INC.
Statements of Operations
($ in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the three months For the nine months
ended September 30, ended September 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Amortization of cellular license $479 $490 $1,437 $1,468
Deferred tax benefit 77 164 231 496
--------------------------------------------------
Net (loss) ($402) ($326) ($1,206) ($972)
==================================================
</TABLE>
See accompanying notes to financial statements.
75
<PAGE>
PRICE COMMUNICATIONS WIRELESS V, INC.
Statements of Cash Flows
($ in thousands)
(Unaudited)
For the nine months ended
September 30,
1999 1998
------- -------
Net (loss) ($1,206) ($ 972)
Amortization of cellular license 1,437 1,468
Decrease in deferred tax liability (231) (496)
--------------------------
Net change in cash $ -- $ --
==========================
See accompanying notes to financial statements.
76
<PAGE>
PRICE COMMUNICATIONS WIRELESS V, INC.
Notes to Condensed Financial Statements
(Unaudited)
1) Summary of Significant Accounting Policies
Corporation Operations
Price Communications Wireless V, Inc. ("Wireless V") (the "Company") was
incorporated in the state of Delaware on October 7, 1997. The Company is 100%
owned by its parent Cellular Dynamics Telephone Company of Georgia ("Cellular
Dynamics"). Cellular Dynamics in turn is 100% owned by its parent Albany
Cellular Partners ("Albany"), the operating entity. Palmer Wireless Holdings,
Inc.("Holdings"), has an 96.8% ownership interest in Albany. Holdings is 100%
owned by Price Communications Wireless, Inc.("PCW"). The Company owns the
non-wireline license of Albany (Albany MSA and GA-13 RSA).
Financial Statement Basis
On May 23, 1997, PCW and Palmer Wireless, Inc. ("PWI") entered into a plan
of merger whereby PCW merged into PWI with PWI as the surviving corporation. On
October 6, 1997 the merger was completed and PWI changed its name to PCW.
For financial reporting purposes, PCW revalued its assets and liabilities
as of October 6, 1997 to reflect the price paid by Price Communications
Corporation to acquire 100% of Palmer's common stock, a process generally
referred to as "push down accounting". On October 6, 1997, PCW allocated the
purchase price to each of the markets purchased and the various operating
entities revalued their assets and liabilities to reflect this allocation. The
preliminary allocation of the purchase price resulted in licenses of
approximately $78.3 million. During 1998, the preliminary allocation was
finalized resulting in an allocation of approximately $76.7 million to licenses,
with an adjustment also made to deferred tax liability and paid-in-capital to
finalize "push-down" accounting. Palmer Wireless Holdings Inc. contributed the
value of the license allocated to it by PCW to Wireless V.
Licenses
Subsequent to the initial license valuation, the Company continually
evaluates whether later events and circumstances have occurred that indicate the
remaining estimated useful life of the license or licenses may warrant revision
or that the remaining balance of the license rights may not be recoverable. The
Company utilizes projected undiscounted cash flows over the remaining life of
the license or licenses and sales of comparable businesses to evaluate the
recorded value of these licenses. The assessment of the recoverability of the
remaining balance of the license rights will be impacted if projected cash flows
are not achieved.
Deferred Income Taxes
For financial statement purposes, the Company recognizes a deferred tax
liability as it relates to the difference between the financial statement and
income tax basis of the licenses. The Company recognizes a deferred tax benefit
for the turnaround in the deferred tax liability attributable to the additional
amortization of the licenses.
Commitments and Contingencies
The Company is listed as a guarantor for PCW's $525.0 million 91/8% Senior
Secured Notes due 2006. All of PCW's direct or indirect subsidiaries are also
listed as guarantors.
77
<PAGE>
PRICE COMMUNICATIONS WIRELESS VI, INC.
Balance Sheets
($ in thousands except share data)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
September 30, December 31,
1999 1998
-------- --------
<S> <C> <C>
Assets
Cellular license, net of accumulated amortization of $4,543 in 1999
and $2,860 in 1998 $ 85,158 $ 86,841
==========================
Liabilities and Stockholder's Equity
Deferred taxes $ 27,954 $ 28,506
Commitments and contingencies
Stockholder's Equity
Common stock, par value $.01 per share; authorized, issued
and outstanding 1,000 shares -- --
Paid-in capital 60,229 60,229
(Accumulated deficit) (3,025) (1,894)
--------------------------
Total stockholder's equity 57,204 58,335
--------------------------
Total liabilities and stockholder's equity $ 85,158 $ 86,841
==========================
</TABLE>
See accompanying notes to financial statements.
78
<PAGE>
PRICE COMMUNICATIONS WIRELESS VI, INC.
Statements of Operations
($ in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the three months For the nine months
ended September 30, ended September 30,
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Amortization of cellular license $ 561 $ 572 $ 1,683 $ 1,716
Deferred tax benefit 184 194 552 580
----------------------------------------------------------
Net (loss) ($ 377) ($ 378) ($1,131) ($1,136)
==========================================================
</TABLE>
See accompanying notes to financial statements.
79
<PAGE>
PRICE COMMUNICATIONS WIRELESS VI, INC.
Statements of Cash Flows
($ in thousands)
(Unaudited)
For the nine months ended
September 30,
1999 1998
------- -------
Net (loss) ($1,131) ($1,136)
Amortization of cellular license 1,683 1,716
Decrease in deferred tax liability (552) (580)
--------------------------
Net change in cash $ -- $ --
==========================
See accompanying notes to financial statements.
80
<PAGE>
PRICE COMMUNICATIONS WIRELESS VI, INC.
Notes to Condensed Financial Statements
(Unaudited)
1) Summary of Significant Accounting Policies
Corporation Operations
Price Communications Wireless VI, Inc. ("Wireless VI") (the "Company") was
incorporated in the state of Delaware on October 7, 1997. The Company is 100%
owned by its parent Columbus Cellular Telephone Company ("Columbus Cellular").
Palmer Wireless Holdings, Inc.("Holdings") has an 99.1% ownership interest in
Columbus Cellular Holdings and is 100% owned by Price Communications Wireless,
Inc. ("PCW"). The Company owns the non-wireline licenses of Columbus Cellular
(Columbus MSA and the GA-6 A2 RSA.
Financial Statement Basis
On May 23, 1997, PCW and Palmer Wireless, Inc. ("PWI") entered into a plan
of merger whereby PCW merged into PWI with PWI as the surviving corporation. On
October 6, 1997, the merger was completed and PWI changed its name to PCW.
For financial reporting purposes, PCW revalued its assets and liabilities
as of October 6, 1997 to reflect the price paid by Price Communications
Corporation to acquire 100% of Palmer's common stock, a process generally
referred to as "push down accounting". On October 6, 1997, PCW allocated the
purchase price to each of the markets purchased and the various operating
entities revalued their assets and liabilities to reflect this allocation. The
preliminary allocation of the purchase price resulted in licenses of
approximately $91.5 million. During 1998, the preliminary allocation was
finalized resulting in an allocation of approximately $89.7 million to licenses,
with an adjustment also made to deferred tax liability and paid-in-capital to
finalize "push-down" accounting. Palmer Wireless Holdings Inc. contributed the
value of the license allocated to it by PCW to Wireless VI.
Licenses
Subsequent to the initial license valuation, the Company continually
evaluates whether later events and circumstances have occurred that indicate the
remaining estimated useful life of the license or licenses may warrant revision
or that the remaining balance of the license rights may not be recoverable. The
Company utilizes projected undiscounted cash flows over the remaining life of
the license or licenses and sales of comparable businesses to evaluate the
recorded value of these licenses. The assessment of the recoverability of the
remaining balance of the license rights will be impacted if projected cash flows
are not achieved.
Deferred Income Taxes
For financial statement purposes, the Company recognizes a deferred tax
liability as it relates to the difference between the financial statement and
income tax basis of the licenses. The Company recognizes a deferred tax benefit
for the turnaround in the deferred tax liability attributable to the additional
amortization of the licenses.
Commitments and Contingencies
The Company is listed as a guarantor for PCW's $525.0 million 9 1/8%
Senior Secured Notes due 2006. All of PCW's direct or indirect subsidiaries are
also listed as guarantors.
81
<PAGE>
PRICE COMMUNICATIONS WIRELESS VII, INC.
Balance Sheets
($ in thousands except share data)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
September 30, December 31,
1999 1998
--------- ---------
<S> <C> <C>
Assets
Cellular license, net of accumulated amortization of $6,881 in 1999
and $4,334 in 1998 $ 129,030 $ 131,577
============================
Liabilities and Stockholder's Equity
Deferred taxes $ 40,093 $ 40,888
Commitments and contingencies
Stockholder's Equity
Common stock, par value $.01 per share; authorized, issued
and outstanding 1,000 shares -- --
Paid-in capital 93,558 93,558
(Accumulated deficit) (4,621) (2,869)
----------------------------
Total stockholder's equity 88,937 90,689
----------------------------
Total liabilities and stockholder's equity $ 129,030 $ 131,577
============================
</TABLE>
See accompanying notes to financial statements.
82
<PAGE>
PRICE COMMUNICATIONS WIRELESS VII, INC.
Statements of Operations
($ in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the three months For the nine months
ended September 30, ended September 30,
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Amortization of cellular license $ 849 $ 866 $ 2,547 $ 2,600
Deferred tax benefit 265 293 795 879
----------------------------------------------------------
Net (loss) ($ 584) ($ 573) ($1,752) ($1,721)
==========================================================
</TABLE>
See accompanying notes to financial statements.
83
<PAGE>
PRICE COMMUNICATIONS WIRELESS VII, INC.
Statements of Cash Flows
($ in thousands)
(Unaudited)
For the nine months ended
September 30,
1999 1998
------- -------
Net (loss) ($1,752) ($1,721)
Amortization of cellular license 2,547 2,600
Decrease in deferred tax liability (795) (879)
--------------------------
Net change in cash $ -- $ --
==========================
See accompanying notes to financial statements.
84
<PAGE>
PRICE COMMUNICATIONS WIRELESS VII, INC.
Notes to Condensed Financial Statements
(Unaudited)
1) Summary of Significant Accounting Policies
Corporation Operations
Price Communications Wireless VII, Inc. ("Wireless VII") (the "Company")
was incorporated in the state of Delaware on October 7, 1997. The Company is
100% owned by its parent Macon Cellular Telephone Systems Limited Partnership
("Macon"). C.E.I. Communications Inc. ("CEI") is the general partner of Macon
and holds a 1.06% ownership interest in Macon. Palmer Wireless Holdings,
Inc.("Holdings") is the 100% owner of CEI and has a 99.6% ownership interest in
Macon when combined with its ownership of CEI. Holdings is 100% owned by Price
Communications Wireless, Inc. ("PCW"). The Company owns the non-wireline
licenses of Macon (Macon MSA and the GA-6 A1 RSA.
Financial Statement Basis
On May 23, 1997, PCW, and Palmer Wireless, Inc. ("PWI") entered into a
plan of merger whereby PCW merged into PWI with PWI as the surviving
corporation. On October 6, 1997, the merger was completed and PWI changed its
name to PCW.
For financial reporting purposes, PCW revalued its assets and liabilities
as of October 6, 1997 to reflect the price paid by Price Communications
Corporation to acquire 100% of Palmer's common stock, a process generally
referred to as "push down accounting". On October 6, 1997, PCW allocated the
purchase price to each of the markets purchased and the various operating
entities revalued their assets and liabilities to reflect this allocation. The
preliminary allocation of the purchase price resulted in licenses of
approximately $138.7 million. During 1998, the preliminary allocation was
finalized resulting in an allocation of approximately $135.9 million to
licenses, with an adjustment also made to deferred tax liability and
paid-in-capital to finalize "push-down' accounting. Palmer Wireless Holdings
Inc. contributed the value of the license allocated to it by PCW to Wireless
VII.
Licenses
Subsequent to the initial license valuation, the Company continually
evaluates whether later events and circumstances have occurred that indicate the
remaining estimated useful life of the license or licenses may warrant revision
or that the remaining balance of the license rights may not be recoverable. The
Company utilizes projected undiscounted cash flows over the remaining life of
the license or licenses and sales of comparable businesses to evaluate the
recorded value of these licenses. The assessment of the recoverability of the
remaining balance of the license rights will be impacted if projected cash flows
are not achieved.
Deferred Income Taxes
For financial statement purposes, the Company recognizes a deferred tax
liability as it relates to the difference between the financial statement and
income tax basis of the licenses. The Company recognizes a deferred tax benefit
for the turnaround in the deferred tax liability attributable to the additional
amortization of the licenses.
Commitments and Contingencies
The Company is listed as a guarantor for PCW's $525.0 million 91/8% Senior
Secured Notes due 2006. All of PCW's direct or indirect subsidiaries are also
listed as guarantors.
85
<PAGE>
PRICE COMMUNICATIONS WIRELESS VIII, INC.
Balance Sheets
($ in thousands except share data)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
September 30, December 31,
1999 1998
-------- --------
<S> <C> <C>
Assets
Cellular license, net of accumulated
amortization of $4,032 in 1999
and $2,583 in 1998 $ 73,241 $ 74,690
==========================
Liabilities and Stockholder's Equity
Deferred taxes $ 21,674 $ 22,103
Commitments and contingencies
Stockholder's Equity
Common stock, par value $.01 per share; authorized, issued
and outstanding 1,000 shares -- --
Paid-in capital 54,336 54,336
(Accumulated deficit) (2,769) (1,749)
--------------------------
Total stockholder's equity 51,567 52,587
--------------------------
Total liabilities and stockholder's equity $ 73,241 $ 74,690
==========================
</TABLE>
See accompanying notes to financial statements.
86
<PAGE>
PRICE COMMUNICATIONS WIRELESS VIII, INC.
Statements of Operations
($ in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the three months For the nine months
ended September 30, ended September 30,
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Amortization of cellular license $ 483 $ 434 $ 1,449 $ 1,480
Deferred tax benefit 143 166 429 500
-----------------------------------------------------
Net (loss) ($ 340) ($ 268) ($1,020) ($ 980)
=====================================================
</TABLE>
See accompanying notes to financial statements.
87
<PAGE>
PRICE COMMUNICATIONS WIRELESS VIII, INC.
Statements of Cash Flows
($ in thousands)
(Unaudited)
For the nine months ended
September 30,
1999 1998
------- -------
Net (loss) ($1,020) ($ 980)
Amortization of cellular license 1,449 1,480
Decrease in deferred tax liability (429) (500)
--------------------------
Net change in cash $ -- $ --
==========================
See accompanying notes to financial statements.
88
<PAGE>
PRICE COMMUNICATIONS WIRELESS VIII, INC.
Notes to Condensed Financial Statements
(Unaudited)
1) Summary of Significant Accounting Policies
Corporation Operations
Price Communications Wireless VIII, Inc. ("Wireless VIII") (the "Company")
was incorporated in the state of Delaware on October 7, 1997. The Company is
100% owned by its parent Savannah Cellular Limited Partnership ("Savannah").
Palmer Wireless Holdings, Inc.("Holdings") has a 98.5% ownership interest in
Savannah. Holdings is 100% owned by Price Communications Wireless, Inc. ("PCW").
The Company owns the non-wireline license of Savannah (Savannah MSA).
Financial Statement Basis
On May 23, 1997, PCW and Palmer Wireless, Inc. ("PWI") entered into a plan
of merger whereby PCW merged into PWI with PWI as the surviving corporation. On
October 6, 1997, the merger was completed and PWI changed its name to PCW.
For financial reporting purposes, PCW revalued its assets and liabilities
as of October 6, 1997 to reflect the price paid by Price Communications
Corporation to acquire 100% of Palmer's common stock, a process generally
referred to as "push down accounting". On October 6, 1997, PCW allocated the
purchase price to each of the markets purchased and the various operating
entities revalued their assets and liabilities to reflect this allocation. The
preliminary allocation of the purchase price resulted in licenses of
approximately $79.0 million. During 1998, the preliminary allocation was
finalized resulting in an allocation of approximately $77.3 million to licenses,
with an adjustment also made to deferred tax liability and paid-in-capital to
finalize "push-down" accounting. Palmer Wireless Holdings Inc. contributed the
value of the license allocated to it by PCW to Wireless VIII.
Licenses
Subsequent to the initial license valuation, the Company continually
evaluates whether later events and circumstances have occurred that indicate the
remaining estimated useful life of the license or licenses may warrant revision
or that the remaining balance of the license rights may not be recoverable. The
Company utilizes projected undiscounted cash flows over the remaining life of
the license or licenses and sales of comparable businesses to evaluate the
recorded value of these licenses. The assessment of the recoverability of the
remaining balance of the license rights will be impacted if projected cash flows
are not achieved.
Deferred Income Taxes
For financial statement purposes, the Company recognizes a deferred tax
liability as it relates to the difference between the financial statement and
income tax basis of the licenses. The Company recognizes a deferred tax benefit
for the turnaround in the deferred tax liability attributable to the additional
amortization of the licenses.
Commitments and Contingencies
The Company is listed as a guarantor for PCW's $525.0 million 9 1/8%
Senior Secured Notes due 2006. All of PCW's direct or indirect subsidiaries are
also listed as guarantors.
89
<PAGE>
PRICE COMMUNICATIONS WIRELESS IX, INC.
Balance Sheets
($ in thousands except share data)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
September 30, December 31,
1999 1998
-------- --------
<S> <C> <C>
Assets
Cellular license, net of accumulated
amortization of $2,194 in 1999
and $1,381 in 1998 $ 41,116 $ 41,929
==========================
Liabilities and Stockholder's Equity
Deferred taxes $ 12,915 $ 13,170
Commitments and contingencies
Stockholder's Equity
Common stock, par value $.01 per share; authorized, issued
and outstanding 1,000 shares -- --
Paid-in capital 29,674 29,674
(Accumulated deficit) (1,473) (915)
--------------------------
Total stockholder's equity 28,201 28,759
--------------------------
Total liabilities and stockholder's equity $ 41,116 $ 41,929
==========================
</TABLE>
See accompanying notes to financial statements.
90
<PAGE>
PRICE COMMUNICATIONS WIRELESS IX, INC.
Statements of Operations
($ in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the three months For the nine months
ended September 30, ended September 30,
1999 1998 1999 1998
----- ----- ----- -----
<S> <C> <C> <C> <C>
Amortization of cellular license $ 271 $ 278 $ 813 $ 830
Deferred tax benefit 85 94 255 280
--------------------------------------------------
Net (loss) ($186) ($184) ($558) ($550)
==================================================
</TABLE>
See accompanying notes to financial statements.
91
<PAGE>
PRICE COMMUNICATIONS WIRELESS IX, INC.
Statements of Cash Flows
($ in thousands)
(Unaudited)
For the nine months ended
September 30,
1999 1998
----- -----
Net (loss) ($558) ($550)
Amortization of cellular license 813 830
Decrease in deferred tax liability (255) (280)
-----------------------
Net change in cash $ -- $ --
=======================
See accompanying notes to financial statements.
92
<PAGE>
PRICE COMMUNICATIONS WIRELESS IX, INC.
Notes to Condensed Financial Statements
(Unaudited)
1) Summary of Significant Accounting Policies
Corporation Operations
Price Communications Wireless IX, Inc. ("Wireless IX") ("Company") was
incorporated in the state of Delaware on October 7, 1997. The Company is 100%
owned by its parent Panama Cellular Telephone Company, Ltd. ("Panama City"), the
operating entity. Panama City in turn is owned by Panhandle Cellular Partnership
("PCP") and by Panama City Communications, Inc. ("PCCI"), which owns .99% of
Panama City and which is 100% owned by Palmer Wireless Holdings,
Inc.("Holdings"). Through its ownership of PCP and PCCI, Palmer Wireless
Holdings, Inc. has a 92.0% ownership interest in Panama City. Holdings is 100%
owned by Price Communications Wireless, Inc. ("PCW"). The Company owns the
non-wireline license of Panama City(Panama City MSA).
Financial Statement Basis
On May 23, 1997, Price Communications Wireless, Inc. ("PCW"), the parent
of Palmer Wireless Holdings, Inc. and Palmer Wireless, Inc. ("PWI") entered into
a plan of merger whereby PCW merged into PWI with PWI as the surviving
corporation. On October 6, 1997, the merger was completed and PWI changed its
name to PCW.
For financial reporting purposes, PCW revalued its assets and liabilities
as of October 6, 1997 to reflect the price paid by Price Communications
Corporation to acquire 100% of Palmer's common stock, a process generally
referred to as "push down accounting". On October 6, 1997, PCW allocated the
purchase price to each of the markets purchased and the various operating
entities revalued their assets and liabilities to reflect this allocation. The
preliminary allocation of the purchase price resulted in licenses of
approximately $44.2 million. During 1998, the preliminary allocation was
finalized resulting in an allocation of approximately $43.3 million to licenses,
with an adjustment also made to deferred tax liability and paid-in-capital to
finalize "push-down" accounting. Palmer Wireless Holdings Inc. contributed the
value of the license allocated to it by PCW to Wireless IX.
Licenses
Subsequent to the initial license valuation, the Company continually
evaluates whether later events and circumstances have occurred that indicate the
remaining estimated useful life of the license or licenses may warrant revision
or that the remaining balance of the license rights may not be recoverable. The
Company utilizes projected undiscounted cash flows over the remaining life of
the license or licenses and sales of comparable businesses to evaluate the
recorded value of these licenses. The assessment of the recoverability of the
remaining balance of the license rights will be impacted if projected cash flows
are not achieved.
Deferred Income Taxes
For financial statement purposes, the Company recognizes a deferred tax
liability as it relates to the difference between the financial statement and
income tax basis of the licenses. The Company recognizes a deferred tax benefit
for the turnaround in the deferred tax liability attributable to the additional
amortization of the licenses.
Commitments and Contingencies
The Company is listed as a guarantor for PCW's $525.0 million 91/8% Senior
Secured Notes due 2006. All of PCW's direct or indirect subsidiaries are also
listed as guarantors.
93
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion is intended to facilitate an understanding and
assessment of significant changes and trends related to the financial condition
and results of operations of the Company. This discussion should be read in
conjunction with the Company's Condensed Consolidated Financial Statements and
the related notes thereto.
The discussion contains statements which constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Such statements are made regarding the intent, belief or current
expectations of the Company and its directors or officers primarily with respect
to the future operating performance of the Company. Readers are cautioned that
any such forward-looking statements are not guarantees of future performance and
may involve risks and uncertainties, and that actual results may differ from
those in the forward-looking statements as a result of factors, many of which
are outside the control of the Company.
OVERVIEW
Price Communications Wireless, Inc. ("PCW" or the "Company"), a
wholly-owned subsidiary of Price Communications Cellular Holdings, Inc.
("Holdings"), a wholly-owned subsidiary of Price Communications Corporation
Cellular, Inc., a wholly owned subsidiary of Price Communications Corporation
("PCC"), was incorporated on May 29, 1997 in connection with the purchase of
Palmer Wireless, Inc. ("Palmer).
The Company is engaged in the construction, development, management and
operation of cellular telephone systems in the southeastern United States. As of
September 30, 1999, the Company provided cellular telephone service to
approximately 434,000 subscribers in Alabama, Florida, Georgia, and South
Carolina in a total of 16 licensed service areas, composed of eight Metropolitan
Statistical Areas ("MSAs") and eight Rural Service Areas ("RSAs"), with an
aggregate estimated population of 3.3 million. The Company sells its cellular
telephone service as well as a full line of cellular products and accessories
principally through its network of retail stores. The Company markets all of its
products and services under the nationally-recognized service mark CELLULARONE.
During the course of the year, the Company has been engaged and continues
to be engaged in preliminary discussions and negotiations with respect to
potential acquisitions and exchanges, all with the object of being accretive in
the long term for shareholders and bondholders. There can be no assurances that
the Company will be successful in consummating any of such transactions or as to
the terms thereof.
94
<PAGE>
Market Ownership
The following is a summary of the Company's ownership interest in the
cellular telephone system in each licensed service area to which the Company
provided service at September 30, 1999.
September 30, 1999
DLJ Winter 98-9 --------------------
Cellular MSA Estimated Percentage Net POPS
Service Area Rank Market POPS Ownership Owned
------------ ---- ----------- --------- -----
Albany 270 117,984 96.8% 114,209
Augusta 105 440,864 100.0% 440,864
Columbus 165 250,845 99.1% 248,587
Macon 139 318,227 99.6% 316,954
Savannah 152 288,736 98.5% 284,405
Montgomery 138 320,687 94.6% 303,370
Dothan 252 133,618 95.0% 126,937
Panama City 230 149,953 92.0% 137,957
GA-6 203,899 96.5% 196,763
GA-7 135,121 100.0% 135,121
GA-8 157,912 100.0% 157,912
GA-9 118,111 100.0% 118,111
GA-10 151,827 100.0% 151,827
GA-12 215,935 100.0% 215,935
GA-13 148,361 96.8% 143,613
AL-8 173,677 100.0% 173,677
--------- ---------
3,325,757 3,266,242
========= =========
95
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth for the Company for the periods indicated,
the percentage which certain amounts bear to total revenue.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenue:
Service ................................. 92.3% 93.4% 92.7% 93.6%
Equipment sales and installation ........ 7.7 6.6 7.3 6.4
----- ----- ----- -----
Total revenue ................. 100.0 100.0 100.0 100.0
----- ----- ----- -----
Operating expenses:
Engineering, technical and other direct:
Engineering and technical (1) ..... 4.8 6.7 5.4 6.8
Other direct costs of services (2) 5.3 7.7 6.9 7.4
Cost of equipment (3) ................... 12.6 11.3 12.2 12.1
Selling, general and administrative:
Sales and marketing (4) ........... 7.5 10.9 8.2 11.2
Customer service (5) .............. 6.4 6.5 6.3 6.5
General and administrative (6) .... 9.5 12.2 9.1 11.1
Depreciation and amortization ........... 19.0 21.5 18.1 23.4
----- ----- ----- -----
Total operating expenses .... 65.1 76.8 66.2 78.5
----- ----- ----- -----
Operating income ....................... 34.9% 23.2% 33.8% 21.5%
Operating income before depreciation and
Amortization (7) .................. 53.9% 44.8% 51.9% 44.9%
</TABLE>
- ----------
(1) Consists of costs of cellular telephone network, including inter-trunk
costs, span-line costs, cell site repairs and maintenance, cell site
utilities, cell site rent, engineers' salaries and benefits and other
operational costs.
(2) Consists of net costs of roaming, costs of long distance, costs of
interconnection with wireline telephone companies and other costs of
services.
(3) Consists primarily of the costs of the cellular telephones and accessories
sold.
(4) Consists primarily of salaries and benefits of sales and marketing
personnel, advertising and promotion expenses and employee and agent
commissions.
(5) Consists primarily of salaries and benefits of customer service personnel
and costs of printing and mailing subscriber invoices.
(6) Includes salaries and benefits of general and administrative personnel and
other overhead expenses.
(7) Operating income before depreciation and amortization should not be
considered in isolation or as an alternative to net income, operating
income or any other measure of performance under generally accepted
accounting principles. The Company believes that operating income before
depreciation and amortization is viewed as a relevant supplemental measure
of performance in the cellular telephone industry.
Three Months Ended September 30, 1999 Compared to Three Months Ended September
30, 1998
Revenue. Service revenues totaled $60.1 million for the third quarter of
1999, an increase of 23.9% from $48.5 million for the third quarter of 1998. The
increase is primarily attributable to an increase in the average number of
subscribers for the period. The average number of subscribers increased by
approximately 51,000 for the current three months compared to last year's third
quarter. In addition, roaming revenue increased by $3.1 million or 44% over last
year's third quarter results.
Average monthly revenue per subscriber (defined as service revenue per the
financial statement) excludes incollect revenue from our subscribers since this
revenue is offset against incollect expense in the other direct cost caption.
For the third quarter of 1999, the average monthly revenue per subscriber
96
<PAGE>
amounted to $49.21 compared to $45.63 for the same period last year or an
increase of 7.9%. In the future, the Company may realize a decrease in the
average monthly revenue per subscriber as a result of the new roaming rates
negotiated with roaming partners. Minutes of use per subscriber has also
markedly increased improving from 203 minutes from last year's third quarter to
268 minutes for the current quarter or an increase of 24%. Although this
increase does not immediately result in a direct corresponding increase in
airtime revenue, greater usage by subscribers may eventually lead to additional
billable minutes of use.
Equipment sales and installation revenue, which consists primarily of
subscriber equipment sales, increased to $5.0 million for the third quarter of
1999 compared to $3.4 million for the third quarter of 1998. The increase is
primarily due to the emphasis on recovering a greater percentage of the phone
cost from subscribers. Increased sales of accessories, as well as the sale of
digital phones and upgrades to digital phones which have a higher price point,
have contributed to the increase in equipment revenue.
Operating Expenses. Operating expenses, excluding depreciation and
amortization, increased by $1.4 million for the current three month period but
decreased as a percentage of total revenue to 46.1% for the current three months
from 55.3% for the third quarter of 1998.
Engineering, technical and other direct costs of service decreased from
$7.5 million for the third quarter of 1998 to $6.5 million for the same period
in 1999. Included in this category is the net cost of incollect which represents
the difference between the amount paid to other cellular carriers for the
Company's subscribers roaming in other markets and the amount charged to these
subscribers. The net cost decreased to $239,000 for the current three month
period from $2.5 million in the third quarter of 1998. The decrease results from
the increase in the amount recovered from our subscribers ($2.0 million)
combined with the more favorable reimbursement rates negotiated with the other
carriers during the second quarter of 1999. The decrease was partially offset by
increases in long distance charges as a result of the increased subscriber base,
the corresponding increase in usage as well as increases in span line and
inter-trunk costs due to increased network capacity necessitated by the
increased cellular usage.
Cost of equipment increased to $8.2 million for the third quarter of 1999
from $5.9 million for the third quarter of 1998, primarily as a result of an
increase in the average cost of a phone as more subscribers buy digital phones
and the increase in accessories now being sold to subscribers. The percentage of
cost recovered increased from 57.8% for the third quarter of 1998 to 61.2% for
the current quarter. This positive trend is a result of the emphasis on selling
more accessories per subscriber addition and an effort to reduce the loss on the
sale of phones, which loss is standard practice in the industry.
Selling, general and administrative expenses ("SG&A") was flat at $15.3
million for both three month periods. As a percentage of revenue, SG&A for the
current three month period is 23.5% of revenue compared to 29.5% for the same
three month period in 1998 or an improvement of 20.3%. The ability to maintain
the same level of SG&A expenses in conjunction with significant increases in
service revenue is a result of strong budgetary controls initiated by
management. Selling expenses decreased by $800,000 principally as a result of
decreases in salaries and related benefits combined with reductions in
advertising expenditures. The cost to add a subscriber (gross), which consists
of the cost of equipment sold reduced by the sales revenue, installation costs
and sales and marketing, has improved, decreasing from $212.16 for the third
quarter of 1998 to $187.73 for the same period in 1999 or a decrease of 13.0%.
General and administrative expenses, which include customer service expenses,
increased to $10.4 million for the current three month period from $9.7 million
for the same period in 1998. As a percentage of revenue, the current quarter
amounts to 16.0% of revenue compared to 18.6% of revenue for the third quarter
of 1998. Customer service expenses increased $840,000 for the current quarter
but remained at 6.4% of revenue as it was in last year's third quarter. As the
number of subscribers increase, billing costs, which comprise the major portion
of customer service, increase. General and administrative expenses decreased
slightly as a result of an increase in the provision for bad debts, which was
offset by decreases in payroll and related expenses.
Depreciation and amortization increased to $12.4 million for the current
three month period from $11.2 million for the same period of the prior year. The
increase is related to the additional depreciation for fixed assets purchased as
well as a reclass in the third quarter of 1998 for amortization of deferred
finance
97
<PAGE>
charges previously included as amortization but reclassified as interest during
the third quarter of 1998. In addition, amortization of cellular licenses
reflects a decrease due to the reduction in the carrying value of the licenses
as a result of the finalization of purchase accounting in the fourth quarter of
1998. As a percentage of revenue, depreciation and amortization decreased to
19.0% for the third quarter of 1999 compared to 21.5% for the third quarter of
1998.
Operating income increased to $22.7 million in the third quarter of 1999
from $12.1 million for the third quarter of 1998. Operating income before
depreciation and amortization increased to 53.9% as a percentage of revenue
compared to 44.8% for the third quarter of 1998. This increase in operating
margin is attributable primarily to the increase in operating revenue combined
with the control of operating costs.
Net Interest Expense, Income Taxes, Extraordinary Item and Net Income. Net
interest expense decreased to $16.2 million for the third quarter of 1999 from
$24.9 million in the third quarter of 1998. During the second quarter of 1999,
the Company's parent, PCH, allowed the conversion of the outstanding
indebtedness of the 11 1/4% Senior Exchangeable Payable-in-Kind Notes which were
obligations of PCH but were included in the balance sheets of the Company
because of "push down" rules of accounting. As a result of the conversion of
these notes, the Company no longer accrues interest on the indebtedness.
The provision for taxes of $2.3 million in the current quarter is a result
of income before taxes for the current three month period compared to an income
tax benefit of $5.1 million in the third quarter of 1998 as a result of the loss
for that period in 1998. The income tax benefit in 1998 represents the reduction
of the accrued tax liability associated with the sale of the Ft. Myers and GA-1
properties which was established as the result of purchase accounting.
The net income for the current three month period of $3.9 million compared
to a net loss for the third quarter of 1998 of $21.8 million is a function of
the items discussed above. In addition, the third quarter of 1998 includes $13.2
million net of taxes for the write off of deferred finance charges and the
premium paid as the result of the early extinguishment of debt.
Nine Months Ended September 30, 1999 Compared to Nine Months Ended September 30,
1998
Revenue. Service revenues totaled $172.8 million for the nine month period
of 1999, an increase of 28.0% from $134.9 million for the same period of 1998.
The increase is primarily attributable to the increase in the average number of
subscribers for the period. The average number of cellular subscribers increased
by approximately 53,000 for the current nine month period compared to last
year's comparable period. In addition, roaming revenue, which is income the
Company earns from other cellular carriers whose subscribers use their cellular
phones in our markets, increased by $10.0 million or 52% over last year's nine
month results.
Average monthly revenue per subscriber (defined as service revenue per the
financial statement) excludes incollect revenue from our subscribers since this
revenue is offset against incollect expense in the other direct cost caption.
For 1999, the average cellular monthly revenue for the nine months amounted to
$48.67 compared to $44.61 for the same period last year or an increase of 9.1%.
In the future, the Company may realize a decrease in the average monthly revenue
per subscriber as a result of the new roaming rates negotiated in the second
quarter of 1999 with the Company's roaming partners. Minutes of use per
subscriber has also increased improving from 180 minutes for last year's nine
month period to 239 minutes for the current nine months. Although this increase
does not immediately result in a direct corresponding increase in airtime
revenue, greater usage by our subscribers may eventually lead to additional
billable minutes of use.
Equipment sales and installation revenue, which consists primarily of
cellular subscriber equipment sales, increased to $13.6 million for the first
nine months of 1999 compared to $9.2 million for the same period in 1998. The
increase is primarily due to the emphasis on recovering a greater percentage of
the phone cost from subscribers. In addition, increased sales of accessories, as
well as the sale of and upgrade to digital phones which have a higher price
point, have contributed to the increase in equipment revenue.
98
<PAGE>
Operating Expenses. Operating expenses, excluding depreciation and
amortization, increased by $10.2 million for the current nine month period but
decreased as a percentage of total revenue to 48.1% from 55.1% for last year's
comparable period.
Engineering, technical and other direct costs of service increased to
$22.9 million for the current nine months from $20.5 million for the same period
in 1998. Included in this category is the net cost of incollect which represents
the difference between the amount paid to other cellular carriers for our
subscribers roaming in their markets and the amount we charge our subscribers.
The cost decreased by $1.8 million, principally as a result of the decrease in
the amount we pay other cellular carriers due to renegotiated rates while
maintaining the amount the company charges its subscribers. In the future, the
recovery ratio amount may improve based on the negotiated decrease in rates
reimbursed to various outside carriers (see outcollect roaming revenue for a
similar decrease in rates). The increase of $2.4 million is a result of the
increased subscriber base which generates increases in long distance costs, span
and inter-trunk cost increases as a result of the increase in the systems
capacity necessitated by additional cellular usage, additional rent and
utilities associated with the increase in the number of cell sites, partially
offset by reductions in net incollect expense as mentioned previously, and
reductions in payroll and related costs.
Cost of equipment increased to $22.7 million for the current nine month
period from $17.4 million for the first nine months of 1998, primarily as a
result of an increase in the average cost of a phone as more subscribers buy or
upgrade to digital phones and an increase in accessories now being sold to
subscribers. The percentage of cost recovered increased from 52.7% for the nine
month period in 1998 to 59.9% for the same period in 1999. This positive trend
is a result of the emphasis on selling more accessories per subscriber addition
and an effort to reduce the loss on the sale of phones, which loss is standard
practice in the industry.
Selling, general and administrative expenses ("SG&A") increased $2.5
million to $44.0 million from $41.5 million in 1998. As a percentage of revenue,
SG&A for the current nine month period is 23.6% of revenue compared to 28.8% for
the same nine month period in 1998 or an improvement of 18.1%. SG&A expenses
consist of sales and marketing expenses, customer service expenses and general
and administrative expenses. Sales and marketing expenses decreased from $16.2
million for the nine months in 1998 to $15.2 million for the current nine month
period. Decreases in payroll and related expenses were the principal causes of
such decrease. The cost to add a subscriber (gross), which consists of the cost
of equipment sold reduced by sales revenue, installation costs and sales and
marketing, has improved, decreasing from $218.77 for last year's nine month
period to $197.13 for the current nine month period or a decrease of 9.9%.
General and administrative expenses, including customer service expenses,
increased to $28.8 million for the current nine month period from $25.3 million
for the same period in 1998. As a percentage of revenue, the current nine month
period amounts to 15.4% of revenue compared to 17.6% of revenue for the same
period in 1998. Customer service expenses increased by $1.7 million but at 6.4%
of revenue represents a slight decrease from the 6.5% for last year's nine month
period. As the number of subscribers increase, billing costs, which comprise the
major portion of customer service, increase. For the current nine month period,
billing costs are at $1.80 per cellular subscriber compared to $1.75 for the
nine months in 1998. General and administrative expenses increased by $927,000
to $16.9 million for the nine month period in 1999 from $16.0 million in the
same period in 1998. The increase principally was a result of an increase in the
provision for bad debts, which was partially offset by decreases in payroll and
related expenses. As a percentage of total revenue, general and administrative
expenses amounted to 9.1% for the current nine month period compared to 11.1%
for the same period in 1998.
Depreciation and amortization remained flat at $33.8 million for both nine
month periods. The decrease in amortization for the licenses, which was
primarily due to the reduction in the carrying value of the licenses as a result
of the finalization of purchase accounting in the fourth quarter of 1998, was
offset by the increase in depreciation related to the additional purchases of
fixed assets. As a percentage of revenue, depreciation and amortization
decreased to 18.1% for 1999 from 23.4% for 1998.
Operating income increased significantly to $63.0 million for the first
nine months of 1999, from $31.0 million for the same period in 1998. Operating
income before depreciation and amortization increased to 51.9% as a percentage
of total revenue compared to 44.9% for the first nine months of 1998.
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This increase in operating margin is attributable primarily to the increase in
operating revenue combined with control of operating costs.
Net Interest Expense, Income Taxes, Extraordinary Item and Net Income. Net
interest expense decreased to $58.6 million for the current nine month period
from $60.8 million for the same period in 1998. During the second quarter of
1999 the Company's parent, PCH, allowed the conversion of the outstanding
indebtedness of the 11 1/4% Senior Exchangeable Payable-in-Kind Notes which were
obligations of PCH but were included in the balance sheets of the Company
because of "push down" rules of accounting. As a result of the conversion of
these notes, the Company no longer accrues interest on the indebtedness.
The provision for taxes in the current nine month period of $1.2 million
is a result of income before taxes for 1999 compared to an income tax benefit of
$11.6 million for the nine months in as a result of the loss for 1998. The
income tax benefit in 1998 represents the reduction of the accrued tax liability
associated with the sale of the Ft. Myers and GA-1 properties which was
established as the result of purchase accounting.
The net income for the current nine month period of $2.0 million compared
to a net loss for the nine months of 1998 of $39.2 million is a function of the
items discussed above. In addition, the nine month period in 1998 includes $19.1
million net of taxes for the write off of deferred finance charges and the
premium paid as the result of the early extinguishment of debt.
LIQUIDITY AND CAPITAL RESOURCES
The Company's long-term capital requirements consist of funds for capital
expenditures, acquisitions and debt service. Historically, the Company has met
its capital requirements primarily through equity contributions, bank debt, debt
issued to the public, and, to a lesser extent, operating cash flow. During the
current nine month period, the Company generated $52.9 million of operating cash
flow as shown in the Condensed Consolidated Statements of Cash Flows compared to
$7.1 million for 1998. At September 30, 1999, the Company had $140.0 million of
cash and cash equivalents. The Company's debt service requirements for the
current year consist of cash interest payments of $68.5 million, of which $44.6
million has been paid through September 30, 1999. The remaining cash interest
requirements are approximately $24.0 million in the fourth quarter. Based upon
the Company's current ability to generate operating cash flow combined with its
current available cash position, there appears no necessity to provide
additional funding for the current level of operations. The Company's
outstanding debt instruments consist of $525 million of 9 1/8% Senior Secured
Notes due December 15, 2006 and $175 million 11 3/4% Senior Subordinated Notes
due July 15, 2007. Both of these instruments contain covenants that restrict the
payment of dividends, incurrence of debt and sale of assets, among other things.
YEAR 2000 IMPACT
The Company is in the process of reviewing the full impact Year 2000 could
have on its operational and financial systems. The Company has chosen its
current billing and MIS outsource provider to coordinate the testing of all the
operating and financial systems that could effect the Company's operations.
Several of these systems, such as the point of sale system, the prepaid calling
system, wide area network and local area network, and general ledger system are
currently integrated into the billing system.
The Company's billing vendor (EDS) and MIS outsource provider has
committed to apply upgrades to the above systems to the levels recommended by
these third party providers to achieve Year 2000 Compliance. Most of these third
party providers deal with other cellular companies, which enables the Company to
leverage the knowledge obtained from servicing these other cellular and
telecommunications companies. The Company anticipates a reduction in the testing
and validation time necessary for a comprehensive review. The Company has
completed its survey of key suppliers of products and services and anticipates
no significant problems as a result of their responses. The company has
completed supplier recommendation upgrades to the Company's infrastructure such
as switches, computer hardware and software, departmental file servers, and
desktop computers in order to achieve Year 2000 readiness and
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compliance. Upgrades to many of the Business Applications critical to the
operations of the company have been completed with the remainder scheduled
during the fourth quarter of 1999.
Additionally, the current billing vendor has reviewed their own internal
operating systems based on the company's Year 2000 Compliance requirements.
Future date testing and integration of the Year 2000 Ready version of the
billing system was successfully completed during the third quarter 1999.
The Company, with the billing provider's guidance, has formulated its
strategy after analyzing all systems that could have an effect on the Company's
operations prioritizing the impact into high, medium, and low risk. The Company
estimates that the total costs of these testing and upgrading procedures will be
less than $2.0 million. However, the Company is unable to predict all of the
implications of the Year 2000 issue as it relates to the Company's suppliers and
other entities. It is anticipated that the substantial portion of these costs
will be incurred during 1999 and will be expensed when incurred.
The Company's dependence on a few key third party providers, which
provides service to most of the cellular industry, combined with the lack of
accessibility of alternative systems makes a total back up contingency plan
impractical. Should external failures cause an impact to the Company's
information systems, the Company has a recovery services agreement in place to
cover mission critical telecommunications and data center systems. The Company
is still in the process of developing contingency plans, which are scheduled for
completion in the fourth quarter of 1999 for key business processes.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company utilizes fixed rate debt instruments to fund its acquisitions.
Management believes that the use of fixed rate debt minimizes the Company's
exposure to market conditions and the ensuing increases and decreases that could
arise with variable rate financing. See notes to consolidated financial
statements for description and terms of long term debt.
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PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description
------ -----------
27 Financial Data Schedule
(b) Reports on Form 8-K
None
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has fully caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PRICE COMMUNICATIONS WIRELESS, INC.
Date: October 27, 1999 By: /s/ Robert Price
-------------------------------------------
Robert Price
Director, President and Treasurer
By: /s/ Kim I Pressman
-------------------------------------------
Kim I Pressman
Vice President and Chief Financial Officer
By: /s/ Michael Wasserman
-------------------------------------------
Michael Wasserman
Vice President and Chief Accounting Officer
INDEX TO EXHIBITS
Exhibit
Number Description
- ------ -----------
27 Financial Data Schedule
103
