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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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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 March 31, 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 13-3956941
(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
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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 April 22,
1999 was 100.
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<PAGE>
PRICE COMMUNICATIONS WIRELESS, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets- March 31, 1999 and December 31, 1998 ..... I-1
Condensed Consolidated Statements of Operations - Three months ended
March 31, 1999 and 1998 ................................................... 1-2
Condensed Consolidated Statements of Cash Flows - Three months ended
March 31, 1999 and 1998 ................................................... 1-3
Notes to Condensed Consolidated Financial Statements ............................ 1-4
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations ............................................................. 1-6
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings .......................................................... II-1
ITEM 2. Changes in Securities ...................................................... II-1
ITEM 3. Defaults Upon Senior Securities- None ...................................... II-1
ITEM 4. Submission of Matters to a Vote of Security Holders ........................ II-1
ITEM 5. Other Information .......................................................... II-1
ITEM 6. Exhibits and Reports on Form 8-K ........................................... II-1
SIGNATURES ............................................................................ II-2
</TABLE>
<PAGE>
Item 1. Financial Statements
PRICE COMMUNICATIONS WIRELESS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
($ in thousands)
(Unaudited) (Audited)
March 31, December 31,
1999 1998
=========== ============
Assets
------
Current assets:
Cash and cash equivalents $ 123,023 $ 109,137
Restricted cash 79,508 79,081
Trade accounts receivable, net of
allowance for doubtful accounts 20,913 20,508
Receivable from other cellular carriers 2,412 2,282
Prepaid expenses and deposits 989 303
Inventory 2,710 3,940
Deferred income taxes 572 1,383
----------- -----------
Total current assets 230,127 216,634
Net property and equipment 145,621 144,828
Licenses, net of amortization 871,263 876,952
Other intangible assets and other assets,
at cost less accumulated amortization 25,504 25,320
----------- -----------
$ 1,272,515 $ 1,263,734
=========== ===========
Liabilities and Equity (Deficit)
----------------------
Current liabilities:
Payable to Price Communications Corporation $ 937 $ 1,151
Accounts payable and accrued expenses 23,102 21,616
Accrued interest payable 18,462 11,779
Accrued salaries and employee benefits 1,974 2,656
Deferred revenue 5,799 5,535
Customer deposits 1,105 921
----------- -----------
Total current liabilities 51,379 43,658
Long-term debt 700,000 700,000
Obligation of Parent Company 215,065 209,432
Accrued income taxes - long term 22,892 22,775
Deferred income taxes 287,825 290,370
Minority interests 10,148 9,530
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Total liabilities 1,287,309 1,275,765
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Commitments and contingencies
Stockholder's equity (deficit) (14,794) (12,031)
----------- -----------
$ 1,272,515 $ 1,263,734
=========== ===========
See accompanying notes to condensed consolidated financial statements.
I - 1
<PAGE>
PRICE COMMUNICATIONS WIRELESS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
($ in thousands)
(Unaudited)
For the three months
ended March 31,
====================
1999 1998
-------- --------
Revenue:
Service $ 52,821 $ 40,684
Equipment sales and installation 3,770 2,591
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Total revenue 56,591 43,275
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Operating expenses:
Engineering, technical and other direct 8,313 6,367
Cost of equipment 6,840 5,496
Selling, general and administrative 13,383 12,101
Depreciation and amortization 10,720 11,388
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Total operating expenses 39,256 35,352
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Operating income 17,335 7,923
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Other income (expense):
Interest expense, net (21,156) (17,825)
Other income (expense), net 53 (37)
-------- --------
Total other expense (21,103) (17,862)
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Income (loss) before minority interest
share of income and income taxes (3,768) (9,939)
Minority interest share of income (617) (460)
-------- --------
Income (loss) before income taxes (4,385) (10,399)
Income tax benefit 1,622 3,828
-------- --------
Net income (loss) $ (2,763) $ (6,571)
======== ========
See accompanying notes to condensed consolidated financial statements.
I - 2
<PAGE>
PRICE COMMUNICATIONS WIRELESS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
($ in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the three months
ended March 31,
======================
1999 1998
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<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (2,763) $ (6,571)
--------- ---------
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 10,720 11,382
Minority interest share of income 618 460
Deferred income taxes (1,734) (1,947)
Loss on disposal of property -- 37
Interest deferred and added to long-term debt 5,633 2,886
Amortization of deferred finance 594 546
Increase in trade accounts receivable (535) (501)
Decrease (increase) in inventory 1,230 (725)
Increase (decrease) in accounts payable and accrued expenses 921 (6,278)
Increase (decrease) in accrued interest payable 6,683 (6,076)
Change in other accounts (238) 1,182
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Total adjustments 23,892 966
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Net cash provided by (used in) operating activities 21,129 (5,605)
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Cash flows from investing activities:
Capital expenditures (5,814) (704)
Increase in other intangible assets and other assets (788) --
--------- ---------
Net cash used in investing activities (6,602) (704)
--------- ---------
Cash flows from financing activities:
Repayment of long-term debt -- (12,124)
Interest earned on restricted cash (427) --
Reduction in advances from Price Communications Corporation (214) (1,670)
--------- ---------
Net cash used in financing activities (641) (13,794)
--------- ---------
Net increase (decrease) in cash and cash equivalents 13,886 (20,103)
Cash and cash equivalents at the beginning of period 109,137 27,926
--------- ---------
Cash and cash equivalents at the end of period $ 123,023 $ 7,823
========= =========
Supplemental disclosure of cash flow information:
Income taxes paid, net $ 167 $ 63
========= =========
Interest paid $ 10,281 $ 20,577
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
I - 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").
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. The
accompanying Balance Sheets include $79.5 million and $79.1 million of
restricted cash at March 31, 1999 and December 31, 1998 respectively and $215.1
million and $209.4 million at March 31, 1999 and December 31, 1998 respectively
(including accrued interest) of the 11 1/4% notes which are obligations of
Holdings and are included in the Balance Sheets solely pursuant to "push down"
accounting rules. The Company has no rights with respect to the restricted cash
included herein.
Basis of Presentation
The accompanying condensed consolidated financial statements of Price
Communications Wireless, Inc. and subsidiaries (the "Company") have been
prepared without audit pursuant to Rule 10-01 of Regulation S-X of the
Securities and Exchange Commission. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financials. These Consolidated Financial Statements should be read
in conjunction with the audited Consolidated Financial Statements previously
filed on the Company's Form 10-K. In the opinion of management, all adjustments
(none of which were other than normal recurring items) considered necessary for
a fair presentation have been included. The results of operations for the
interim periods reported are not necessarily indicative of results to be
expected for the year.
I - 4
<PAGE>
PRICE COMMUNICATIONS WIRELESS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements - (Continued)
($ in thousands)
(Unaudited)
(1) Summary of Significant Accounting Policies - (Continued)
For financial reporting purposes, PCW 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 its fair value. This statement is effective
for fiscal years beginning after June 15, 1999 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.
(2) Subsequent Event
In April 1999, the Company purchased existing minority interests in several
of its MSA's and RSA's. Based upon the percentages acquired, the Company
increased its existing POP holdings by 93,000 POPS at an aggregate purchase
price of approximately $7.1 million or an average of approximately $76.00 per
POP.
I - 5
<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
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 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).
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 Company is engaged in the construction, development, management and
operation of cellular telephone systems in the southeastern United States. As of
March 31, 1999, the Company provided cellular telephone service to 398,542
subscribers (excluding subscribers in the area where the Company had interim
operating authority) in Alabama, Florida, Georgia, and South Carolina in a total
of 16 licensed service areas, composed of eight Metropolitan Service Areas
("MSAs") and eight Rural Service Areas ("RSAs"), with an aggregate estimated
population of 3.4 million (including the acquisition of additional Pops in April
1999). 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.
I - 6
<PAGE>
Market Ownership
The following is a summary of the Company's ownership interests in the
cellular telephone system in each licensed service area to which the Company
provided service at March 31, 1999 and December 31, 1998. The percentages for
March reflect the additional minority percentages acquired in April 1999.
December
March 31, 31,
1999 1998
---- ----
Dothan, Alabama .............. 95.0% 94.6%
Montgomery, Alabama .......... 94.6 92.8
Albany, Georgia .............. 96.8 86.5
Augusta, Georgia ............. 100.0 100.0
Columbus, Georgia ............ 98.9 85.2
Macon, Georgia ............... 99.2 99.2
Savannah, Georgia ............ 98.5 98.5
Panama City, Florida ......... 92.0 78.4
Alabama 8 - RSA .............. 100.0 100.0
Georgia 6 - RSA .............. 96.3 96.3
Georgia 7 - RSA .............. 100.0 100.0
Georgia 8 - RSA .............. 100.0 100.0
Georgia 9 - RSA .............. 100.0 100.0
Georgia 10 - RSA ............. 100.0 100.0
Georgia 12 - RSA ............. 100.0 100.0
Georgia 13 - RSA ............. 100.0 86.5
I - 7
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth for the Company the percentage which certain
amounts bear to total revenue.
Three Months Ended
March 31,
---------
1999 1998
---- ----
Revenue:
Service .......................................... 93.3% 94.0%
Equipment sales and installation ................. 6.7 6.0
----- -----
Total revenue .......................... 100.0 100.0
Operating expenses:
Engineering, technical and other direct:
Engineering and technical (1) .............. 6.4 7.5
Other direct costs of services (2) ......... 8.3 7.2
Cost of equipment (3) ............................ 12.1 12.7
Selling, general and administrative:
Sales and marketing (4) .................... 8.8 10.7
Customer service (5) ....................... 6.4 6.7
General and administrative (6) ............. 8.5 10.6
Depreciation and amortization .................... 18.9 26.3
----- -----
Total operating expenses ............. 69.4 81.7
Operating income ................................ 30.6% 18.3%
Operating income before depreciation and
amortization (7) ........................... 49.6% 44.6%
- -----------------
(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 incollect 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 billings generated in-house.
(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.
I - 8
<PAGE>
Three Months Ended March 31, 1999 Compared to Three Months Ended March 31, 1998
Revenue. Service revenues totaled $52.8 million for the first quarter of
1999, an increase of 29.8% from $40.7 million for the same period in 1998. The
increase is attributable to a combination of several factors all of which show
positive trends when comparing the current quarter to 1998's first quarter. A
significant increase in the average number of subscribers to 389,467 from
316,906, an increase in roaming revenue which is a result of an increase in
coverage, a significant increase in the number of minutes our subscribers are
using (an increase of 60.8%) and an increase in the average local revenue per
subscriber which consists primarily of a monthly access fee and billable airtime
(including roaming revenue) all contributed to the significant increase.
Average monthly revenue per subscriber (based upon service revenue only)
includes local revenue as well as roaming revenue but does not include incollect
revenue from subscribers, as this revenue offsets the Company's direct cost of
service. Such revenue increased to $44.38 for the current quarter from $42.80
for the same period last year or an increase of 3.7%. The significant increase
in total minutes used per subscriber from 148 minutes to 198 minutes is
noteworthy since this increase does indicate a greater acceptance by customers
of the use of cellular service which may manifest itself in increased revenue in
the future.
Equipment sales and installation revenue, which consists primarily of
cellular subscriber equipment sales, increased from $2.6 million for the first
quarter of 1998 to $3.8 million for the first quarter of 1999. The increase is
primarily due to a 19.4% increase in gross subscriber activations in the current
quarter of 1999 compared to 1998. Also contributing to the increase is an
increase in accessory sales, as well as an increase in the price point for phone
sales, as the Company continues to sell more digital phones instead of analog
phones. As a percentage of revenue, equipment sales and installation revenue
increased to 6.7% in the current quarter of 1999 from 6.0% in the same quarter
of 1998.
Operating Expenses. Total operating expenses increased from $35.4 million
in the first quarter of 1998 to $41.4 million in the current quarter. As a
percentage of total revenue, however, operating expenses decreased to 73.1% for
the current quarter in 1999 from 81.7 % for the same quarter in 1998.
Engineering, technical and other direct expenses increased by $2.1 million
to $8.8 million in the current quarter from $6.8 million in the first quarter of
1998. Included in engineering, technical and other direct is the expense which
represents the difference between the amount the Company charges its subscribers
when they roam in other markets compared to the amount the Company is charged by
other cellular providers. The increase in this expense for the current quarter
in 1999 compared to the same quarter in 1998 amounted to approximately $739,000
as a result of the increased subscribers in 1999. The ratio of revenue to cost
remained relatively constant. The significant increase in subscribers and
minutes of use resulted in an increase in long distance telephone charges
($672,000), increases in fixed span lines to provide additional capacity
($192,000), and increases in the variable telephone costs from charges per
minute of use ($355,000).
The increase in cost of equipment from $5.5 million in the first quarter of
1998 to $6.8 million in the first quarter of 1999 is a direct result of
additional phone sales to the increased number of subscribers added in the
current quarter over the same period last year. In the current period, the
Company was able to recover approximately 55% of its cost which compares
favorably to the 47% recovery in the same quarter of 1998.
Selling, general and administrative expenses increased only $1.3 million,
and as a percentage of revenue decreased from 28.0 % to 23.6% when comparing the
current three month period to the same period in 1998. Sales and marketing
(including the cost of installation) increased $336,000 when comparing the
current quarter to last year's first quarter. Advertising and commissions were
variable expenses that contributed to the increase. The cost to add a gross
subscriber, which includes sales and marketing costs combined with the loss on
equipment sales, an important statistic in the cellular industry, decreased from
approximately $223 per subscriber for the first three months of 1998 to
approximately $199 in the first quarter of 1999. General and administrative
expenses, which include customer service expenses, amounted to $8.4 million for
the current three month period versus $7.5 million for the same period last
year. Customer service, which consists primarily of costs relating to the
generation of the subscribers monthly invoice and payroll costs, increased
$681,000 for the current period. The cost per subscriber,
I - 9
<PAGE>
however, remained flat at approximately $3 per subscriber.
General and administrative expenses increased only $265,000 for the current
quarter compared to the same quarter in 1998. Payroll and related expenses
decreased by $535,000 for the current three month period when compared to the
first quarter in 1998. Management's restructuring and commitment to cost control
were the principal factors in this 27% reduction. Offsetting the decreases in
payroll and their related expenses were increases in "MIS" support, related to
the increase in the average number of subscribers. License and maintenance fees
related to the various systems maintained by the Company, including the
Company's fraud prevention system and prepay system contributed to this
increase. General and administrative expenses without customer service costs
decreased to 8.5% of total revenue for the 1999 quarter compared to 10.5% for
the same period in 1998.
Depreciation and amortization decreased 5.9% to $10.7 million for the first
quarter of 1999 from $11.4 million for the first quarter of 1998. As a
percentage of revenue, depreciation and amortization decreased to 18.9% for the
first quarter of 1999 compared to 26.3% for the first quarter of 1998. The
reduction reflects the adjustment of the value of the licenses in the fourth
quarter of 1998 to finalize purchase accounting.
Operating income increased approximately 119% to $17.3 million in the first
quarter of 1999 from $7.9 million for the same period in 1998. Operating income
before depreciation and amortization amounts to 49.6% of total revenue in the
current quarter compared to 44.6% of total revenue in the same quarter of 1998.
This increase in operating margin is attributable primarily to the strong
increase in revenue as a result of significant subscriber growth, increases in
roaming revenue, and management's emphasis on cost control which has resulted in
an average operating cost (total operating costs before depreciation and
amortization) of $21.20 for the current three month period compared to $22.48
for the first quarter of 1998.
Net Interest Expense, Income Taxes and Net Income. Net interest expense
increased to $21.2 million for the first quarter of 1999 from $17.8 million in
the first quarter of 1998 primarily due to the increased level of debt from the
refinancings which took place in the second and third quarters of 1998. Somewhat
offsetting the increase in interest expense is the increase in interest income,
as a result of the higher level of available cash during the first quarter of
1999 compared with the first quarter of 1998.
The current period income tax benefit of $1.6 million compared to the
income tax benefit of $3.8 million in the first quarter of 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,
which carryback is less for the current quarter due to the smaller loss before
taxes.
The net loss for the first quarter of 1999 was $2.8 million compared to a
net loss of $6.6 million for the first quarter of 1998 represents a decrease of
approximately 58%. The decrease in the net loss is primarily attributable to the
factors discussed above.
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, and,
to a lesser extent, operating cash flow. During the three month period ended
March, 31 1999, the Company generated $21.1 million in operating cash flow. The
Company's debt service requirements for the current year consists of cash
interest payments of 68.5 million of which $10.3 million was paid in January
1999. The remaining cash interest requirements are approximately $24.0 million
during the second quarter, $10.3 million during the third quarter and $24.0
million in the fourth quarter. Based upon the Company's current ability to
generate operating cash flow combined with its available cash position, there
does not appear to be any necessity to provide additional funding for the
current level of operations. The Company's outstanding debt instruments consist
of $525 million 9 1/8% Senior Secured Notes due June 15, 2002, $175 million and
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.
I - 10
<PAGE>
YEAR 2000 IMPACT
The Company is in the process of reviewing the full impact that the 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
of 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 current billing vendor and MIS outsource provider has
committed to test the compliance of the above systems with the Year 2000
requirements by reviewing each system's upgrade releases which these third party
providers maintain will make their systems Year 2000 compliant. Most of these
third party providers deal with other cellular companies which enable the
Company to leverage the knowledge obtained from servicing these other cellular
and telecommunications companies. The Company anticipates that this will reduce
the testing and validation time necessary for a comprehensive review.
In addition to the testing of third party provider systems, the current
billing vendor will review their own internal operating systems to verify Year
2000 compliance. They will then test the integration of the updated Year 2000
versions with their own updated version to ensure compliance and operational
compatibility.
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 and 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 has investigated the possibility of establishing a contingency
plan in the event the above is not successful. The Company's dependence on a few
key third party providers which providers service most of the cellular industry
to a great extent and therefore the lack of accessibility of alternative systems
make a contingency plan impractical.
INFLATION
The Company believes that inflation affects its business no more than it
generally affects other similar businesses.
Item 7a. 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.
I - 11
<PAGE>
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
II - 12
<PAGE>
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: April 26, 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
II - 13
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
- ------ -----------
27 Financial Data Schedule
II - 14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 123,023
<SECURITIES> 0
<RECEIVABLES> 20,913
<ALLOWANCES> 0
<INVENTORY> 2,710
<CURRENT-ASSETS> 230,127
<PP&E> 145,621
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,272,515
<CURRENT-LIABILITIES> 51,379
<BONDS> 700,000
0
0
<COMMON> 0
<OTHER-SE> (14,794)
<TOTAL-LIABILITY-AND-EQUITY> 1,272,515
<SALES> 3776
<TOTAL-REVENUES> 58591
<CGS> 6840
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 53
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (21156)
<INCOME-PRETAX> 0
<INCOME-TAX> 41622
<INCOME-CONTINUING> (2763)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2763)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
