<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
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 (NO FEE REQUIRED)
Commission file number: 333-60639
AMERICAN CELLULAR CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 22-3043811
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1375 East Woodfield Road, Suite 700
Schaumburg, Illinois 60173
(Address of principal executive offices)
Registrant's telephone number, including area code: (847) 995-8770
Indicate by check mark whether the Company (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 Company was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No
The number of shares of Class A Common Stock, par value $.01 per share, and
Class B Common Stock, par value $.01 per share, of the Company outstanding as of
May 12, 1999 was approximately 250,000 and 19,387, respectively. There is no
trading market for the Common Stock of the Company.
<PAGE>
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
<TABLE>
<S> <C>
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets - March 31, 1999 and
December 31, 1998................................................. 1
Condensed Consolidated Statement of Operations for the Three
Months Ended March 31, 1999....................................... 3
Condensed Consolidated Statement of Cash Flows for the Three
Months Ended March 31, 1999....................................... 4
Notes to Condensed Consolidated Financial Statements.............. 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................... 6
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................. 13
Item 2. Changes in Securities and Use of Proceeds......................... 13
Item 3. Defaults Upon Senior Securities................................... 13
Item 4. Submission of Matters to a Vote of Security Holders............... 13
Item 5. Other Information................................................. 13
Item 6. Exhibits and Reports on Form 8-K.................................. 13
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
American Cellular Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
March 31
1999 December 31
(Unaudited) 1998
-------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $37,889 $34,015
Restricted short-term investments 26,902 26,550
Accounts receivable, net of allowance for
doubtful accounts of $1,596 in 1999 and
$2,084 in 1998 25,347 26,494
Inventories 2,080 2,005
Prepaids and other current assets 1,746 1,569
-----------------------------
Total current assets 93,964 90,633
Cellular facilities, equipment, and other, net 162,536 159,792
Other assets 1,251,418 1,267,175
-----------------------------
Total assets $1,507,918 $1,517,600
=============================
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
March 31
1999 December 31
Liabilities and stockholders' equity (Unaudited) 1998
---------------------------------
<S> <C> <C>
Current liabilities:
Current portion of long-term debt $ 4,000 $ 3,000
Accounts payable 9,967 6,022
Interest payable 28,370 22,061
Accrued operating expenses 13,999 16,620
Income and other taxes payable 4,728 3,398
Deferred revenue 5,080 6,170
Other current liabilities 1,023 989
--------------------------------
Total current liabilities 67,167 58,260
Long-term debt 1,195,025 1,195,971
Stockholders' equity:
Series A cumulative redeemable preferred
stock, $0.01 par value, net of $2,000 notes
receivable from stockholders; authorized
500,000 shares; 325,000 shares issued and
outstanding, including $31,767 in 1999 and
$21,375 in 1998 of accrued dividends 354,767 344,375
Common stock, $0.01 par:
Class A: Authorized 475,000 shares; issued
and outstanding 250,000 shares 3 3
Class B: Authorized 50,000 shares; 19,687
shares issued and 19,387 shares outstanding - -
Additional paid-in capital 25,191 25,191
Accumulated deficit (134,235) (106,200)
----------------------------
Total stockholders' equity 245,726 263,369
----------------------------
Total liabilities and stockholders' equity $1,507,918 $1,517,600
================================
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE>
American Cellular Corporation and Subsidiaries
Condensed Consolidated Statement of Operations (Unaudited)
Three months ended March 31, 1999
(In thousands)
<TABLE>
<CAPTION>
Revenues
<S> <C>
Subscriber revenues $ 29,471
Roaming revenues 17,199
Toll revenues 7,091
Equipment sales 1,981
Other 1,896
--------
Total revenue 57,638
Costs and expenses
Cost of cellular service 5,281
Cost of equipment sold 3,657
General and administrative 10,462
Sales and marketing 6,944
Depreciation and amortization 23,485
--------
Total costs and expenses 49,829
--------
Operating income 7,809
Other income (expense)
Interest expense (26,683)
Interest income 1,204
Other income, net 68
--------
(25,411)
--------
Loss before provision for income taxes (17,602)
Provision for income taxes (41)
---------
Net loss $(17,643)
=========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
American Cellular Corporation and Subsidiaries
Condensed Consolidated Statement of Cash Flows (Unaudited)
Three months ended March 31, 1999
(In thousands)
<TABLE>
<CAPTION>
Operating activities
<S> <C>
Net loss $(17,643)
Adjustment to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization expense 23,485
Amortization of deferred financing costs 1,097
Accretion of discount on Senior Notes 54
Amortization of premium on restricted investments 89
Change in working capital components:
Accounts receivable 1,147
Inventories (75)
Prepaids and other current assets (177)
Accounts payable 3,945
Interest payable 6,309
Accrued operating expenses (2,621)
Income and other taxes payable 1,330
Deferred revenue (1,090)
Other current liabilities 34
---------
Net cash provided by operating activities 15,884
Investing activities
Purchase of fixed assets (10,610)
Increase in restricted investments, net (1,028)
---------
Net cash used in investing activities (11,638)
Financing activities
Deferred financing costs (372)
---------
Net cash used in financing activities (372)
---------
Increase in cash and cash equivalents 3,874
Cash and cash equivalents at beginning of period 34,015
---------
Cash and cash equivalents at end of period $37,889
=========
</TABLE>
See notes to condensed consolidated financial statements.
4
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American Cellular Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with rules and regulations of the Securities and Exchange
Commission for interim financial reporting. In the opinion of management, the
accompanying condensed consolidated financial statements reflect all
adjustments, consisting only of normal recurring accruals, considered necessary
for a fair presentation of the results for the interim period. The results of
operations for the interim period are not necessarily indicative of the results
for a full year. These condensed consolidated financial statements should be
read in conjunction with the financial statements and notes thereto included in
the Company's 1998 Annual Report on Form 10-K.
2. Reclassifications
Certain items have been reclassified in the December 31, 1998 consolidated
financial statements to conform to the current presentation.
5
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General
The following is a discussion and analysis of the historical results of
operations and financial condition of American Cellular Corporation ("American
Cellular" or the "Company") and factors affecting the Company's financial
resources. This discussion should be read in conjunction with the Company's
financial statements, including the notes thereto, included in this Quarterly
Report on Form 10-Q (the "Report").
On June 25, 1998, American Cellular acquired PriCellular pursuant to an
Agreement and Plan of Merger dated March 6, 1998 (the "Merger Agreement") for
approximately $1.5 billion. The acquisition was recorded in accordance with the
purchase method of accounting. The cost of the acquisition was allocated to the
tangible and intangible assets and liabilities assumed based on their respective
fair values. PriCellular had been partially owned (6.39%) by a group of
investors, which also own 27.2% of American Cellular (the 6.39% is considered
the continuing ownership interest). The cost to acquire the continuing
ownership interest in the net assets of PriCellular in excess of the predecessor
basis ($44.4 million) has been reflected as a reduction of stockholders' equity
of American Cellular pursuant to generally accepted accounting principles.
American Cellular accounted for the Merger using purchase accounting.
Accordingly, the PriCellular and American Cellular financial statements reflect
different bases of accounting and capitalization which can significantly impact
depreciation, amortization, interest and related tax expenses. However, for
purposes of the following discussion regarding 1999 and 1998 activity, the pre-
and post-acquisition financial information has been compared to provide the
reader with an indication of the trend of results. Specifically, the results of
operations of American Cellular for the three months ended March 31, 1999 will
be compared with the results of operations of PriCellular for the three months
ended March 31, 1998.
Results of Operations of American Cellular
General
The current three-month period ending March 31, 1999 reflects the continuing
financial growth of the Company's operations. Net subscriber additions
approximated 17,800 for the current quarter. The Company added approximately
25,600 subscribers in the three-month period ended March 31, 1998, of which
approximately 14,000 were from internal growth and 11,600 were from the
acquisition of an additional market. The Company ended the current period with
approximately 352,300 subscribers resulting in market penetration of 7.20%
compared with approximately 269,300 subscribers and a market penetration of
5.50% at March 31, 1998. Average monthly churn for the Company was 1.77% for the
three months ended March 31, 1999 compared to 1.38% for same period last year.
6
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<TABLE>
<CAPTION>
American Cellular
Period from
American Cellular February 26, 1998 PriCellular Combined
Three Months (Date of Formation) Three Months Three Months
ended through Ended Ended
March 31, 1999 March 31, 1998 March 31, 1998 March 31, 1998
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $ 57,638 $ - $ 42,634 $ 42,634
Cost of cellular service 5,281 - 4,591 4,591
Cost of equipment sold 3,657 - 2,630 2,630
General and administrative 10,462 - 8,535 8,535
Sales and marketing 6,944 - 6,244 6,244
Depreciation and 23,485 - 8,532 8,532
amortization
Non-recurring charges - - 2,389 2,389
-------- ---- -------- --------
Operating income 7,809 - 9,713 9,713
Interest income (expense), net (25,479) 33 (17,854) (17,821)
Other income 68 - 812 812
Provision for income taxes (41) (13) - (13)
-------- ---- -------- --------
Net loss $(17,643) $ 20 $ (7,329) $ (7,309)
======== ==== ======== ========
</TABLE>
Three months ended March 31, 1999 compared with the combined three months ended
March 31, 1998.
Revenues increased from $42.6 million in 1998 (consisting of $24.4 million for
subscriber revenue, $10.2 million for roaming revenue, $4.5 million for toll
revenue, $1.3 million for equipment sales and $2.2 million for other revenue) to
$57.6 million in 1999 (consisting of $29.5 million for subscriber revenue, $17.2
million for roaming revenue, $7.1 million for toll revenue, $2.0 million for
equipment sales and $1.8 million for other revenue). The increase represents
the continuing growth in the cellular industry impacting both subscriber and
roaming revenues, and the effect of improved coverage in the Company's markets
as a result of the increase in the number of cell sites in its systems.
Total costs and expenses increased from $32.9 million in 1998 (consisting of
$4.6 million for cost of cellular service, $2.6 million for cost of equipment
sales, $8.5 million for general and administrative expense, $6.3 million for
sales and marketing expense, $8.5 million for depreciation and amortization
expense and $2.4 million for non-recurring charges) to $49.8 million in 1999
(consisting of $5.3 million cost of cellular service, $3.7 million for cost of
equipment sales, $10.4 million for general and administrative expense, $6.9
million for sales and marketing expense and $23.5 million for depreciation and
amortization expense). The primary factor contributing to the increase in
expenses is the growth in the Company's subscriber base and the increase in
cellular service minutes provided. Cost of cellular service represents 9.8% of
subscriber, roaming and toll revenue in 1999 compared to 11.7% for the
same period in 1998. Operating expenses consisting of the cost of cellular
service, cost of equipment, general and administrative expense and selling and
marketing expense decreased as a percent of total revenue from 51.6% for the
three months ended March 31, 1998 to 45.7% for the current three month period.
This reduction represents cost efficiencies the Company has realized while
achieving a 27% increase in growth in net subscriber additions over the same
period in 1998 and the leveraging of various fixed costs over increased
revenues. Depreciation and amortization expense reflects the acquisition of
PriCellular by the Company.
The increase in net interest expense from $17.8 million for the three months
ended March 31, 1998 to $25.5 million in 1999 is primarily the result of the
acquisition of PriCellular by the Company and the related financing. Other
income decreased from $812,000 to $68,000 principally due to amortization of a
covenant not to compete that was fully amortized in 1998.
The provision for income taxes in 1999 relates to current state income tax
requirements.
7
<PAGE>
Liquidity and Capital Resources
Cash Flows
As of March 31, 1999, the Company had approximately $37.9 million of cash and
cash equivalents and approximately $26.8 million of working capital. Net cash
generated by operations was approximately $15.9 million. Cash used in investing
activities was approximately $11.6 million, consisting primarily of fixed asset
additions. Cash used in financing activities was approximately $372,000,
relating to additional deferred financing cost associated with the Company's
Senior Notes.
Earnings before interest, taxes, depreciation and amortization ("EBITDA"),
which excludes non-recurring charges and gain (loss) on sale of investments in
cellular operations, amounted to $31.4 million for the three months ended March
31, 1999 compared to $21.4 million for 1998 or an increase of 46%. Management
believes that EBITDA is an effective measure of operating performance because it
is industry practice to use a multiple of EBITDA as one method of evaluating
cellular properties. EBITDA does not represent cash flow from operations as
defined by GAAP, and is not necessarily indicative of cash available to fund all
cash flow needs and should not be considered as an alternative to net income.
The Company expects to incur net accounting losses for the foreseeable future
due to interest and non-cash charges such as depreciation and amortization.
Liquidity and Capital Requirements
The Company has long-term debt aggregating approximately $1.2 billion.
Substantially all such indebtedness was incurred to pay the consideration to the
PriCellular stockholders in the Merger, repay the indebtedness of PriCellular,
pay the related fees and expenses and purchase the restricted securities.
The Company borrowed $916 million under a bank syndicated Credit Facility. The
Credit Facility provides the Company up to $1 billion in four tranches ($450
million on Tranche A, $200 million for each Tranche B and C, and up to $150
million on the Revolver Loan). Interest is payable quarterly at the adjusted
prime rate plus the applicable margin for each tranche (0.875% for the Revolver
and Tranche A, 1.75% for Tranche B and 2.00% for Tranche C) or LIBOR plus the
applicable margin for each tranche (1.875% for the Revolver and Tranche A,
2.750% for Tranche B and 3.000% for Tranche C), based on the Company's
consolidated leverage ratio. As of March 31, 1999, the interest rates applicable
on the tranches of the Credit Facility ranged from approximately 6.955% to
8.08%, yielding a weighted average rate of 7.3%. The Credit Facility contains
several financial covenants related to Company's leverage and debt service
ratios. The Company is in compliance with the terms of those covenants. Other
covenants also contain restrictions on the incurrence of additional debt, the
payment of dividends, the incurrence of liens, and payments and transfer of net
assets.
As part of its interest rate management program, the Company utilizes interest
swap and collar agreements to hedge variable interest rate risk under the Credit
Facility. At March 31, 1999, the Company had interest rate collars with an
aggregate notional amount of $700 million, effectively fixing the LIBOR rate
between 5.38% and 6.00%, expiring in 2001. At March 31, 1999, the Company had an
interest rate swap with a notional amount of $100 million, effectively fixing
the LIBOR rate to 5.84%, expiring in 2001. The fair value of the Company's
interest rate agreements is $(5.7) million at March 31, 1999 based on the
current underlying spot rates.
As a result of the Merger, the Company has significant cash requirements for
debt service and expansion and operation of its cellular systems. To meet its
liquidity needs, the Company will rely on internally generated funds, borrowings
under the Revolver Loan of the Credit Facility, and restricted securities. In
addition, the first six scheduled interest payments on the 10 1/2% Senior Notes
due 2008 (the "Notes") issued in May, 1998, will be met from the deposit of a
portion of the proceeds from the sale of the Notes. At March 31, 1999, the
Company had $84 million available under the Revolver Loan of the Credit
Facility. A portion of the Company's debt bears interest floating rates;
therefore, its financial condition is and will continue to be affected by
changes in prevailing interest rates.
For fiscal 1999, the Company intends to fund its interest obligations, capital
expenditures and working capital requirements with cash flows from operations,
borrowings under the Revolver Loan of the Credit Facility and the restricted
securities. In future periods, the Company may need to raise additional capital
to fund the acquisition and integration of additional cellular systems. The
Company may raise such funds through bank financings or public or private
offerings of its securities. There can be no assurance that the Company will be
able to secure such funding, if necessary, or on favorable terms. If the Company
is not successful in securing such funding, the Company's ability to pursue its
business strategy may be impaired and results of operations of future periods
may be adversely affected.
8
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The Company plans to continue to expand its marketing efforts which will
include, but are not limited to, an increase in funds for advertising, cellular
telephone inventory purchases and other expenditures relating to subscriber
growth. During the 1999 calendar year, American Cellular anticipates that it
will spend an aggregate of approximately $53 million in capital expenditures.
However, actual capital requirements may change. The ability of the Company to
meet its debt service obligations and reduce its total debt will be dependent on
the future performance of the Company, which in turn, will be subject to general
economic conditions and to financial, business and other factors, including
factors beyond the Company's control.
Year 2000 Issues
The term "Year 2000 problem" is a general term used to describe the various
problems that may result from the improper processing of dates and time-
sensitive calculations by computers and other machinery as the year 2000 is
reached. These problems generally arise from the fact that most of the world's
computer hardware and software has historically used only two digits to identify
the year component of a date. This will often result in a computer reading a
date of "00" as meaning, 1900, and not 2000. Problems may also arise from other
sources, including the use of special codes and conventions in software that
make use of a date field.
The Company's Year 2000 issue is primarily the result of the Company's
reliance on third party vendors for the major systems integral to its
operations. These systems include all hardware and software directly related to
the Company's cellular networks, interconnect systems which provide for the
delivery of data and voice messaging between the Company's networks and networks
of other carriers, information management systems that provide customer support
and billing functionality, and other administrative systems that support the
operations. The Company is also reliant upon third party manufacturers that
provide cellular telephone equipment and accessories that are sold to the
Company's subscribers. The Company is working with its vendors to ensure Year
2000 compliance of these systems. However, if required modifications to these
systems are not completed, the Year 2000 issue could have a material impact on
the operations of the Company.
Status of Becoming Year 2000 Compliant
The Company's Year 2000 readiness program involves the following four phases:
system assessment, remediation, testing and implementation. To date, the Company
has substantially completed its assessment of all systems that could be
significantly affected by the Year 2000 issue. The assessment indicated all of
the systems could be affected because of the heavy reliance on information
technology products and services. The assessment also indicated that hardware
and software used in administrative operations are also at risk. The Company has
been gathering information about the Year 2000 compliance status of its vendors
that support these systems. The Company's vendors are at various stages in their
Year 2000 compliance programs, and there is no assurance that each vendor will
achieve its goals. Additionally, the Company has identified all carriers that
provide direct interconnect services for local or long distance telephone
services and requested certification as to Year 2000 compliance, however, there
is no assurance that the Company will be able to test these systems beyond the
representations of these carriers.
While management considers that the assessment phase of the Company's Year
2000 program is substantially completed, the Company will continue to review all
areas of operations to identify any other potential Year 2000 issues. In
addition, any new system that may be implemented during the remainder of the
year will be evaluated for Year 2000 compliance prior to the deployment of the
system.
In the remediation phase, the Company is determining the Year 2000 compliance
status of each component of each system identified as a risk during the
assessment phase. This process includes contacting each vendor and obtaining
representations regarding the Year 2000 compliance of that vendor's products as
it impacts the Company's systems. In the event that a product is determined to
be non-compliant, the Company is requesting information as to the vendor's
procedures to bring the product into compliance. The Company's vendors are at
various stages in their Year 2000 compliance programs, and there is no assurance
that each vendor will achieve its goals. This phase is approximately 61%
completed overall and is expected to be 100% completed by July, 1999.
9
<PAGE>
In the testing phase, the Company is performing its own evaluation of Year
2000 compliance and, to the extent possible, testing each system or component in
a forward date environment to insure compliance of the system. Although the
Company can verify Year 2000 compliance of its systems in this fashion, the
complexity and variability of systems to which the Company interconnects
prohibits the testing of the telecommunications network as a whole. For example,
the failure of a local power grid or local exchange carrier as a result of a
Year 2000 event will adversely affect the performance of the Company's cellular
network. This phase is approximately 46% completed overall and is expected to be
100% completed by August, 1999.
The implementation phase involves the deployment of Year 2000 compliant
software upgrades and patches into the operating systems, the development of
contingency plans and work around procedures for those systems found to be non-
compliant and the replacement of non-compliant hardware and software used in
administrative support functions. This phase is approximately 46% completed
overall and is expected to be 100% completed by September, 1999.
No systems that are considered to be material to the operations and that are
not expected to be Year 2000 compliant have been identified. Set forth below is
a table of the various systems of the Company and the level of completion of
each of the phases of the Company's Year 2000 readiness program with respect to
such systems.
COMPLIANCE PROGRAM PHASE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
SYSTEMS Assessment Remediation Testing Implementation
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cellular 98% Completed 65% Completed 50% Completed 50% Completed
Networks
Expected Expected Expected Expected
Completion Date Completion Date Completion Date Completion Date
May, 1999 June, 1999 July, 1999 September, 1999
- -------------------------------------------------------------------------------------------------------------------------
Interconnect 100% Completed 38% Completed 0% Completed 23% Completed
Systems
Expected Expected Expected
Completion Date Completion Date Completion Date
July, 1999 Not Applicable September, 1999
- -----------------------------------------------------------------------------------------------------------------------
Information 100% Completed 79% Completed 54% Completed 54% Completed
Management
Systems Expected Expected Expected
Completion Date Completion Date Completion Date
July, 1999 August, 1999 September, 1999
- -----------------------------------------------------------------------------------------------------------------------
Other 100% Completed 63% Completed 34% Completed 34% Completed
Administrative
Systems Expected Expected Expected
Completion Date Completion Date Completion Date
June, 1999 July, 1999 September, 1999
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Costs Related to Year 2000 Compliance
The Company will utilize internal resources in completing its Year 2000
readiness plan. Company personnel are assigned specific tasks relating to Year
2000 compliance on the basis of technical skill and availability. The Company
does not account for the time spent on Year 2000 compliance as a separate item
as these costs are not incremental to the operations. The Company has budgeted
for software upgrade costs relating to vendor software of approximately
$100,000. The Company also anticipates an additional $100,000 required to
replace administrative hardware and software that are not Year 2000 compliant.
As of April 30, 1999, actual expenditures for these items were approximately
$40,000.
10
<PAGE>
Risks Associated with Year 2000 Issues
Management believes that it has an effective program in place to resolve those
Year 2000 issues in which it can exert significant influence. As noted in the
table above, the program is not yet completed. In the event the Company does not
complete the additional phases of the program, the Company would be unable to
provide cellular telephone service, invoice customers or collect payments.
Disruption of cellular service would also negatively impact customer
satisfaction, which may impact future sales and growth of the operations. In
addition, disruptions in the economy generally resulting from Year 2000 issues
could materially adversely affect the Company. The amount of potential liability
or lost revenue to the Company cannot be reasonably estimated at this time.
Year 2000 Contingency Plans
The Company is in the process of developing contingency plans with its primary
vendors for cellular network operations and information management services.
These plans include detail recovery plans, vendor contacts and work around
procedures upon the occurrence of a Year 2000 event. The Company will continue
to evaluate the necessity and adequacy of its contingency plans as additional
information relating to the Year 2000 readiness of its vendors becomes
available.
Year 2000 Forward-Looking Statements
The foregoing Year 2000 discussions contain "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
statements, including without limitation, anticipated costs and dates by which
the Company expects to complete certain actions, are based on management's best
current estimates, which are derived utilizing numerous assumptions about future
events, including continued availability of certain resources, representations
derived from third parties and other factors. However, there can be no guarantee
that these estimates will be achieved, and the actual results could differ
materially from those anticipated. Specific factors that might cause such
material differences include, but are not limited to, the ability to identify
and remediate all relevant information technology and non-information technology
systems, results of Year 2000 testing, adequate resolution of Year 2000 issues
by business and other third parties who are service providers, suppliers or
customers of the Company, unanticipated system costs, the adequacy of and the
ability to develop and implement contingency plans and similar uncertainties.
The "forward-looking statements" made in the foregoing Year 2000 discussion
speak only as to the date such statements are made, and the Company undertakes
no obligation to update any forward-looking statement to reflect events or
circumstances after the date on which such statement is made or to reflect the
occurrence of unanticipated events. The foregoing information constitutes a Year
2000 readiness disclosure under the Year 2000 Information and Readiness
Disclosure Act.
Uncertainties Associated with Forward Looking Statements
American Cellular has made in this Report, and from time to time may otherwise
make, statements which constitute forward looking statements. These statements
include statements regarding the intent, belief, plans or current expectations
of the Company, its directors or its officers primarily with respect to the
Company's operations and financial performance. Investors are cautioned that any
such forward looking statements are not guarantees of future performance and
involve risks and uncertainties, and that actual results may differ materially
from those in the forward looking statements as a result of various factors.
Some of these factors may include: (i) the Company's high degree of leverage and
the requirement for significant and sustained growth in the Company's cash flow
to meet its debt service requirements; (ii) the Company's limited operating
history, the Company's history of net losses and the expectation of future
losses; (iii) the Company's prospects in the event of a general economic
downturn; (iv) that the Company will be managed by a new team of senior
management; (v) that members of the Company's management have other commitments;
(vi) competition from the other cellular operator in the Company's clusters or
from other technologies; (vii) that new Systems and Systems recently acquired
may not perform as expected; (viii) that the telecommunications industry is
subject to rapid and significant changes in technology; (ix) that the Company
relies upon the registered service mark CELLULAR ONE(R) to market the services
of its non-wireline systems; (x) that there is potential for adverse regulatory
change and the need for renewal of cellular licenses; (xi) fluctuations in
market value of licenses; (xii) equipment failure or natural disaster; (xiii)
concerns about RF
11
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emissions; (xiv) the costs associated with the unauthorized use of the Company's
network; (xv) that the Indenture governing the Notes imposes significant
operating and financial restrictions on the Company; and (xvi) the potential
effect of Year 2000 computer issues.
Fluctuations in Quarterly Results
Traditionally, subscriber revenues fluctuate from quarter to quarter and are
influenced by such factors as weather, holiday periods and typical vacation
periods. Additionally, losses are generally higher in the fourth quarter due to
the lower revenues coupled with higher sales and marketing costs incurred during
the holiday selling season.
12
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company is not currently involved in any pending legal proceedings that
individually, or in the aggregate, are material to the Company.
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
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:
The following exhibits are included as part of this Report:
Exhibit
No. Description of Exhibit
------- ----------------------
27 Financial Data Schedule for the three months ended March 31, 1999.
(b) Reports on Form 8-K:
None.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMERICAN CELLULAR CORPORATION
Registrant
By: /s/ John Fujii
--------------------------
John Fujii
Chief Executive Officer
By: /s/ James J. Walter, Jr.
--------------------------
James J. Walter, Jr.
Vice President of Finance,
Chief Financial Officer
and Secretary
Dated: May 13, 1999
14
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