================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM 10-Q
-------------------
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
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 CELLULAR HOLDINGS, INC.
(Exact Name of Registrant as specified in its charter)
Delaware 13-3956940
(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 April 17,
1998 was 100.
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<PAGE>
PRICE COMMUNICATIONS CELLULAR HOLDINGS, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets- December 31, 1997
and March 31, 1998................................................I-1
Condensed Consolidated Statements of Operations - Three
months ended March 31, 1997 and 1998..............................I-2
Condensed Consolidated Statements of Stockholder's Equity..............I-3
Condensed Consolidated Statements of Cash Flows - Three
months ended March 31, 1997 and 1998..............................I-4
Notes to Condensed Consolidated Financial Statements...................I-5
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...............................I-7
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings................................................II-1
ITEM 2. Changes in Securities............................................II-1
ITEM 3. Defaults Upon Senior Securities..................................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
<PAGE>
Item 1. Financial Statements
PRICE COMMUNICATIONS CELLULAR HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
($ in thousands)
(Unaudited)
March 31, December 31,
1998 1997
----------- ------------
Assets
Current assets:
Cash and cash equivalents $ 7,823 $ 27,926
Trade accounts receivable, net of
allowance for doubtful accounts 16,441 15,940
Receivable from other cellular carriers 2,036 3,902
Deferred income taxes 4,807 5,402
Prepaid expenses and deposits 1,848 902
Inventory 2,005 1,280
---------- ----------
Total current assets 34,960 55,352
Net property and equipment 147,003 151,141
Licenses, net of amortization 911,923 918,488
Other intangible assets and other assets,
at cost less accumulated amortization 18,899 19,498
---------- ----------
$1,112,785 $1,144,479
========== ==========
Liabilities and Equity
Current liabilities:
Current installments of long-term debt $ 2,250 $ 2,812
Payable to Price Communications Corporation 658 2,328
Accounts payable 8,791 13,059
Accrued interest payable 5,285 11,361
Accrued salaries and employee benefits 2,028 2,324
Other accrued liabilities 16,237 16,031
Deferred revenue 3,839 3,755
Customer deposits 739 602
---------- ----------
Total current liabilities 39,827 52,272
Long-term debt, excluding current installments 681,624 690,300
Accrued income taxes - long term 48,571 50,491
Deferred income taxes 306,359 308,901
Minority interests 7,812 7,352
Commitments and contingencies -- --
Stockholder's equity 28,592 35,163
---------- ----------
$1,112,785 $1,144,479
========== ==========
See accompanying notes to condensed consolidated financial statements.
I-1
<PAGE>
PRICE COMMUNICATIONS CELLULAR HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
($ in thousands)
(Unaudited)
Company Predecessor
--------- -----------
For the three months
ended March 31,
-------------------------
1998 1997
-------- --------
Revenue:
Service $ 40,684 $ 42,220
Equipment sales and installation 2,591 2,463
-------- --------
Total revenue 43,275 44,683
-------- --------
Operating expenses:
Engineering, technical and other direct 6,751 7,430
Cost of equipment 5,496 5,807
Selling, general and administrative 11,717 13,360
Depreciation and amortization 11,928 8,281
-------- --------
Total operating expenses 35,892 34,878
-------- --------
Operating income 7,383 9,805
-------- --------
Other income (expense):
Interest expense, net (17,285) (7,872)
Other income (expense), net (37) 71
-------- --------
Total other expense (17,322) (7,801)
-------- --------
Income (loss) before minority interest
share of income and income taxes (9,939) 2,004
Minority interest share of income (460) (331)
-------- --------
Income (loss) before income taxes (10,399) 1,673
Income tax (expense) benefit 3,828 (496)
-------- --------
Net income (loss) $ (6,571) $ 1,177
======== ========
See accompanying notes to condensed consolidated financial statements.
I-2
<PAGE>
PRICE COMMUNICATIONS CELLULAR HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholder's Equity
($ in thousands)
<TABLE>
<CAPTION>
Common Stock
Class A Additional Total
------------------ paid-in Retained stockholder's
Shares Amount capital earnings equity
-------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Balances at May 29, 1997 -- $ -- $ -- $ -- $ --
Capital contribution 100 -- 44,015 -- 44,015
Net loss -- -- -- (8,852) (8,852)
-------- ------- -------- -------- --------
Balances at December 31, 1997 100 -- 44,015 (8,852) 35,163
Net loss -- -- -- (6,571) (6,571)
-------- ------- -------- -------- --------
Balances at March 31, 1998 100 $ -- $ 44,015 $(15,423) $ 28,592
======== ======= ======== ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
I-3
<PAGE>
PRICE COMMUNICATIONS CELLULAR HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
($ in thousands)
(Unaudited)
Company Predecessor
--------- -----------
For the three months
ended March 31,
-------------------------
1998 1997
-------- --------
Cash flows from operating activities:
Net income (loss) $ (6,571) $ 1,177
-------- --------
Adjustments to reconcile net income (loss)
to net cash provided by (used
in) operating activities:
Depreciation and amortization 11,928 8,281
Minority interest share of income 460 331
Deferred income taxes (1,947) 496
Loss on disposal of property 37 5
Interest deferred and added to
long-term debt 2,886 --
Payment of deferred interest -- (1,514)
Decrease (increase) in trade accounts
receivable (501) 1,730
Decrease (increase) in inventory (725) 1,223
Increase (decrease) in accounts payable
and accrued expenses (6,278) 1,252
Decrease in accrued interest payable (6,076) --
Change in other accounts 1,182 (651)
-------- --------
Total adjustments 966 11,153
-------- --------
Net cash provided by (used in)
operating activities (5,605) 12,330
-------- --------
Cash flows from investing activities:
Capital expenditures (704) (16,987)
Proceeds from sales of property and equipment -- 12
Purchase of cellular systems -- (31,096)
Purchases of minority interests -- (368)
Increase in other intangible assets and
other assets -- (48)
-------- --------
Net cash used in investing activities (704) (48,487)
-------- --------
Cash flows from financing activities:
Increase in short-term notes payable -- 1,332
Repayment of long-term debt (12,124) (3,782)
Repayment of advances from Price
Communications Corporation (1,670) --
Proceeds from long-term debt -- 39,000
-------- --------
Net cash provided by (used in)
financing activities (13,794) 36,550
-------- --------
Net increase (decrease) in cash
and cash equivalents (20,103) 393
Cash and cash equivalents at the beginning of period 27,926 1,698
-------- --------
Cash and cash equivalents at the end of period $ 7,823 $ 2,091
======== ========
Supplemental disclosure of cash flow information:
Income taxes (received) paid, net $ 63 $ (648)
======== ========
Interest paid $ 20,577 $ 8,615
======== ========
See accompanying notes to condensed consolidated financial statements.
I-4
<PAGE>
PRICE COMMUNICATIONS CELLULAR HOLDINGS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
($ in thousands)
(Unaudited)
(1) Summary of Significant Accounting Policies
Organization and Acquisition
Price Communications Cellular Holdings, Inc. ("Holdings" or the
"Company"), 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" or the "Predecessor").
In May, 1997, PCC, Price Communications Wireless, Inc. ("PCW"), a wholly
owned subsidiary of Holdings 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."
In June, 1997, PCW entered into an agreement to sell Palmer's Fort Myers,
Florida MSA as part of the financing of the merger (the "Fort Myers Sale"). In
October, 1997, the Fort Myers Sale was consummated, and generated proceeds to
the Company of approximately $166,000. The proceeds of the Fort Myers Sale were
used to fund a portion of the acquisition of Palmer. Accordingly, no gain or
loss was recognized on the Fort Myers Sale.
Also in connection with the merger, on October 21, 1997, PCC and PCW
entered into an Asset Purchase Agreement with MJ Cellular Company, L.L.C. (the
"Georgia Sale Agreement") which provided for the sale by PCW of substantially
all of the assets used in the operation of the non-wireline cellular telephone
system serving the Georgia-1-Whitfield Rural Service Area ("Georgia-1"),
including the FCC licenses to operate Georgia-1 (the "Georgia Sale"). The sale
of the assets of Georgia-1 was consummated on December 30, 1997 for $24,200. In
January, 1998 the proceeds from the Georgia Sale were used to retire a portion
of the debt used to fund the Palmer acquisition. Accordingly, no gain or loss
was recognized on the Georgia Sale.
Basis of Presentation
The accompanying condensed consolidated financial statements of Price
Communications Cellular Holdings, Inc. and subsidiaries (the "Company") have
been prepared without audit pursuant to Rule 10-01 of Regulation S-X of the
Securities and Exchange Commission. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financials. In the opinion of management, all adjustments (none of
which were other than normal recurring items) considered necessary for a fair
presentation have been included. The results of operations for the interim
periods reported are not necessarily indicative of results to be expected for
the year.
I-5
<PAGE>
PRICE COMMUNICATIONS CELLULAR HOLDINGS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements - (Continued)
($ 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.
The Company's condensed consolidated Statement of Operations and Statement
of Cash Flows for the first quarter 1997 reflect its historical results of
operations and are referred to as the "Predecessor" condensed consolidated
financial statements. Accordingly, the accompanying financial statements of the
Predecessor and the Company are not comparable in all material respects since
those financial statements report results of operations and cash flows of these
two separate entities.
Reclassifications
Certain reclassifications have been made to the 1997 Statement of
Operations and Statement of Cash Flows to conform to the 1998 presentation.
I-6
<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. References to the Company also include its predecessor,
Palmer Wireless, Inc.
Results for the Predecessor for the three months ended March 31, 1997 are
based solely on the historical operations of the Predecessor prior to the
merger. The discussion for the three months ended March 31, 1998 is based upon
the results of the Company.
OVERVIEW
Price Communications Cellular Holdings, Inc. ("Holdings" or the
"Company"), 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. ("Palmer).
In May, 1997, PCC, Price Communications Wireless, Inc. ("PCW"), a wholly
owned subsidiary of Holdings 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, 1998, the Company provided cellular telephone service to 326,721
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 CELLULAR ONE.
I-7
<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 December 31, 1997 and March 31, 1998.
December 31, March 31,
Cellular Service Area 1997 1998
--------------------- ---- ----
Dothan, Alabama ................................ 94.6% 94.6%
Montgomery, Alabama ............................ 92.8 92.8
Albany, Georgia ................................ 86.5 86.5
Augusta, Georgia ............................... 100.0 100.0
Columbus, Georgia .............................. 85.2 85.2
Macon, Georgia ................................. 99.2 99.2
Savannah, Georgia .............................. 98.5 98.5
Panama City, Florida ........................... 78.4 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 ............................... 86.5 86.5
I-8
<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.
Predecessor Company
----------- -------
Three Months Ended
March 31,
-----------------------
1997 1998
------- -------
Revenue:
Service ............................................ 94.5% 94.0%
Equipment sales and installation ................... 5.5 6.0
----- -----
Total revenue .............................. 100.0 100.0
Operating expenses:
Engineering, technical and other direct:
Engineering and technical (1) .............. 7.9 8.4
Other direct costs of services (2) ......... 8.7 7.2
Cost of equipment (3) .............................. 13.0 12.7
Selling, general and administrative:
Sales and marketing (4) .................... 8.6 9.8
Customer service (5) ....................... 6.7 6.7
General and administrative (6) ............. 14.6 10.6
Depreciation and amortization ...................... 18.5 26.3
----- -----
Total operating expenses ................... 78.0 81.7
Operating income ................................... 22.0% 18.3%
Operating income before depreciation
and amortization (7) ............................. 40.5% 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 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, employee and agent commissions and advertising and promotional
expenses.
(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-9
<PAGE>
Three Months Ended March 31, 1998 Compared to Three Months Ended March 31, 1997
Revenue. Service revenues totaled $40.7 million for the first quarter of
1998, a decrease of 3.6% from $42.2 million for the first quarter of 1997. The
decrease is primarily attributable to service revenues of the cellular telephone
systems sold in the Ft. Myers Sale and the Georgia Sale which totaled $7.4
million in the first quarter of 1997. This was partially offset by an increase
in the average number of subscribers to 314,068 in the first quarter 1998 from
295,320 in 1997. The average number of subscribers attributable to the Ft. Myers
Sale and Georgia Sale was 37,362 in the first quarter of 1997.
Average monthly revenue per subscriber decreased 9.5% to $43.18 for the
first quarter of 1998 from $47.70 for the first quarter of 1997. This is in part
due to the trend, common in the cellular telephone industry, where, on average,
new subscribers are using less airtime than existing subscribers. Therefore,
service revenues generally do not increase proportionately with the increase in
subscribers. In addition, the decline reflects more competitive rate plans
introduced into the Company's markets.
Equipment sales and installation revenue, which consists primarily of
cellular subscriber equipment sales, increased by 5.2% to $2.6 million for the
first quarter of 1998 compared to $2.5 million for the first quarter of 1997.
The increase is partially due to a 3.3% increase in gross subscriber activations
in the first quarter of 1998 compared to 1997. As a percentage of revenue,
equipment sales and installation revenue increased to 6.0% in the first quarter
of 1998 from 5.5% in the first quarter of 1997.
Operating Expenses. Engineering and technical expenses increased by 3.0%
to $3.6 million for the first quarter of 1998 from $3.5 million in the first
quarter of 1997, due primarily to the increase in subscribers. As a percentage
of revenue, engineering and technical expenses increased to 8.4% for the first
quarter of 1998 from 7.9% for the first quarter of 1997 primarily because
centralized engineering is being spread over a smaller number of markets than
last year, a result of the Ft. Myers Sale and Georgia Sale. Engineering and
technical expenses attributable to the cellular telephone systems sold in the
Ft. Myers Sale and Georgia Sale totaled $.4 million for the first quarter of
1997.
Other direct costs of service decreased to $3.1 million for the first
quarter of 1998 from $3.9 million for the first quarter of 1997 reflecting the
decrease in interconnection costs as a result of the Company's renegotiation of
interconnection agreements with the local exchange carriers ("LECs") in most of
the Company's markets. As a percentage of revenue, these costs of service
declined to 7.2% from 8.7%, reflecting improved interconnection agreements with
LECs, as well as efficiencies gained from the growing subscriber base. Other
direct costs of service attributable to the cellular telephone systems sold in
the Ft. Myers Sale and Georgia Sale totaled $1.2 million for the first quarter
of 1997.
The cost of equipment decreased 5.4% to $5.5 million for the first quarter
of 1998 from $5.8 million for the first quarter of 1997, due primarily to
reductions of equipment costs by manufacturers. Equipment sales resulted in
losses of $2.9 million in 1998 versus $3.3 million in 1997 primarily as a result
of reduced equipment costs and slightly better retail margins. The Company sells
equipment below its costs in an effort to address market competition and improve
market share. Cost of equipment attributable to the cellular telephone systems
sold in the Ft. Myers Sale and Georgia Sale totaled $.9 million for the first
quarter of 1997.
Selling, general and administrative expenses decreased 12.3% to $11.7
million in the first quarter of 1998 from $13.4 million in the first quarter of
1997. These expenses are comprised of (i) sales and marketing costs, (ii)
customer service costs and (iii) general and administrative expenses.
Sales and marketing costs increased 10.5% to $4.2 million for the first
quarter of 1998 from $3.8 million for the same period in 1997. This increase is
primarily due to the 3.3% increase in gross subscriber activations and the costs
to acquire them, including advertising and commissions. As a percentage of total
I-10
<PAGE>
revenue, sales and marketing costs increased to 9.8% for the first quarter of
1998 compared to 8.6% for the first quarter of 1997. The Company's cost to add a
gross subscriber, including loss on telephone sales, decreased to $223 for the
first quarter of 1998 from $235 for the first quarter of 1997. This decrease in
cost to add a net subscriber was caused primarily by decreased losses from the
Company's sales of cellular telephones. Sales and marketing expenses
attributable to the cellular telephone systems sold in the Ft. Myers Sale and
Georgia Sale totaled $.4 million for the first quarter of 1997.
Customer service costs decreased 2.3% to $2.9 million for the first
quarter of 1998 from $3.0 million for the first quarter of 1997. As a percentage
of revenue, customer service costs remained flat at 6.7% for the first quarter
of both 1998 and 1997. Customer service expenses attributable to the cellular
telephone systems sold in the Ft. Myers Sale and Georgia Sale totaled $.3
million for the first quarter of 1997.
General and administrative expenditures decreased 30.2% to $4.6 million
for the first quarter of 1998 from $6.5 million for the first quarter of 1997,
due primarily to expense savings and reorganization efforts. General and
administrative expenses decreased as a percentage of revenue to 10.6% in the
first quarter of 1998 from 14.6% in the first quarter of 1997. As the Company
continues to add more subscribers, and generates associated revenue, general and
administrative expenses should decrease as a percentage of total revenues. There
can be no assurance, however, that this forward-looking statement will not
differ materially from actual results due to unforeseen general and
administrative expenses and other factors. General and administrative expenses
attributable to the cellular telephone systems sold in the Ft. Myers Sale and
Georgia Sale totaled $.6 million for the first quarter of 1997.
Depreciation and amortization increased 37.5% to $11.4 million for the
first quarter of 1998 from $8.3 million for the first quarter of 1997. This
increase was primarily due to the depreciation and amortization associated with
the new carrying value of assets as a result of the "push down" of the purchase
price to the Company. As a percentage of revenue, depreciation and amortization
increased to 26.3% for the first quarter of 1998 compared to 18.5% for the first
quarter of 1997. Depreciation and amortization attributable to the cellular
telephone systems sold in the Ft. Myers Sale and Georgia Sale totaled $.7
million for the first quarter of 1997.
Operating income decreased 19.2% to $7.9 million in the first quarter of
1998, from $9.8 million for the first quarter of 1997. This decrease in
operating results is attributable primarily to the increase in depreciation and
amortization expense.
Net Interest Expense, Income Taxes and Net Income. Net interest expense
increased 126.4% to $17.8 million for the first quarter of 1998 from $7.9
million in the first quarter of 1997 primarily due to rate increases and
additional borrowings incurred as a result of the recent merger.
Income tax benefit was $3.8 million in the first quarter of 1998
representing utilization of the net operating losses carried back against
previous earnings. Income tax expense was $.5 million in the first quarter of
1997 based on earnings.
Net loss for the first quarter of 1998 was $6.6 million compared to net
income of $1.2 million for the first quarter of 1997. The decrease in net income
is primarily attributable to increases in interest expense and depreciation and
amortization partially offset by the income tax benefit.
I-11
<PAGE>
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.
In October 1997, PCW entered into a Credit agreement ("Credit Agreement")
with a syndicate of banks, financial institutions and other "accredited
investors" providing for loans of up to $525 million. The Credit Agreement
includes a $325 million term loan facility and a $200 million revolving credit
facility. The term loan facility is comprised of tranche A term loans of up to
$100 million, which mature on September 30, 2005, and tranche B term loans of up
to $225 million, which mature on September 30, 2006. The revolving credit
facility will terminate September 30, 2005. The Credit Agreement bears interest
at the alternate base rate, as defined in the Credit Agreement, or the reserve
adjusted Euro-Dollar rate plus, in each case, applicable margins of (i) in the
case of tranche A term loans and revolving loans (x) 2.5% for Euro-dollar rate
loans and (y) 1.5% for base rate loans and (ii) in the case of tranche B term
loans (x) 2.75% for Euro-Dollar rate loans and (y) 1.5% for base rate loans. The
Credit Agreement contains restrictions on the subsidiary's ability to engage in
certain activities, including limitations on incurring additional indebtedness,
capital expenditures, liens and investments, payment of dividends and the sale
of assets. Holdings is a guarantor of the Credit Agreement. As of March 31, 1998
there was $425.9 million outstanding under the Credit Agreement.
In July 1997, PCW issued $175 million of $11.75% Senior Subordinated Notes
("11.75% Notes") due July 15, 2007 with interest payable semi-annually
commencing January 15, 1998. The 11.75% Notes contain covenants that restrict
the payment of dividends, incurrence of debt and sale of assets.
In August 1997 Holdings issued 153,400 units, consisting of Notes and
Warrants, in exchange for $80 million. The Notes accrete at a rate of 13.5%
compounded semi-annually, to an aggregate principal amount of approximately
$153.4 million by August 1, 2002. Cash interest will not commence to accrue on
the Notes prior to August 2, 2002. Commencing on February 1, 2003, cash interest
on the Notes will be payable at a rate of 13.5% per annum, payable
semi-annually. The Notes will be redeemable at the option of Holdings, in whole
or in part, at any time after August 1, 1998 in cash at the redemption price as
defined, plus accrued and unpaid interest, if any, thereon to the redemption
date; provided that the trading price of the common stock of PCC shall equal or
exceed certain levels. The Notes mature on August 1, 2007 and contain covenants
that restrict payment of dividends, incurrence of debt and sale of assets.
INFLATION
The Company believes that inflation affects its business no more than it
generally affects other similar businesses.
I-12
<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-1
<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 CELLULAR HOLDINGS, INC.
Date: May 6, 1998 By: /s/ Robert Price
----------------------------
Robert Price
Director, President and Treasurer
II-2
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 7,823
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0
0
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<INCOME-TAX> (3,828)
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</TABLE>
