<PAGE>
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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 for the quarterly period ended June 30, 1997 or
[_] Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the transition period from to .
Commission file number 1-8309.
PRICE COMMUNICATIONS CORPORATION
_______________________________________________________________
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW YORK 13-2991700
_____________________________________ _____________________________________
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
45 ROCKEFELLER PLAZA, SUITE 3201 10020
NEW YORK, NEW YORK _____________________________________
_____________________________________ (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
(212) 757-5600
_______________________________________________________________
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes x No
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by sections 12, 13 or 15 (d) of the Securities
Exchange Act subsequent to the distribution of securities under the plan
confirmed by the court. Yes x No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
5,011,281 shares of Common Stock, par value $.01 per share, outstanding as
of August 8, 1997.
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<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
JUNE 30, 1997
PART I--FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
ITEM. 1 FINANCIAL STATEMENTS
Consolidated Balance Sheets at June 30, 1997 and December 31, 1996.... 3
Condensed Consolidated Statements of Operations for the Three and Six
Months Ended June 30, 1997 and 1996.................................. 4
Condensed Consolidated Statements of Cash Flows for the Six Months
Ended June, 1997
and 1996............................................................. 5
Notes to Consolidated Financial Statements............................ 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS............................................ 9
PART II--OTHER INFORMATION.............................................. 15
SIGNATURES............................................................ 17
</TABLE>
2
<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
ASSETS 1997 1996
------ ----------- ------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents............................... $35,989,185 $ 83,356,748
Investment securities:
Trading securities.................................... -- 4,045,628
Available-for-sale securities......................... 18,332,809 8,694,966
Securities fair value adjustment...................... 1,045,317 --
Accounts receivable, net of allowance for doubtful
accounts of $0 in 1997 and $473,579 in 1996............ -- 488,882
Prepaid expenses and other current assets............... 159,861 18,672
Deferred Costs.......................................... 3,000,000 --
----------- ------------
Total current assets................................ 58,527,172 96,604,896
----------- ------------
PROPERTY AND EQUIPMENT, AT COST LESS ACCUMULATED
DEPRECIATION............................................. 133,944 159,000
LONG-TERM INVESTMENTS..................................... 36,379,938 18,204,429
DEFERRED TAX ASSET........................................ 350,000 350,000
NOTES RECEIVABLE.......................................... 540,000 540,000
OTHER ASSETS.............................................. 29,500 29,500
----------- ------------
Total assets........................................ $95,960,554 $115,887,825
=========== ============
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable and accrued expenses................... $ 1,975,883 $ 2,755,497
Deferred tax liability.................................. 365,861 1,042,862
Other current liabilities............................... 3,265,793 3,310,774
----------- ------------
Total current liabilities........................... 5,607,537 7,109,133
Preferred Stock, Series A, no par value; 728,133 shares
authorized, issued and outstanding....................... 25,000 --
Preferred Stock, Series B, no par value; 364,066 shares
authorized, issued and outstanding....................... 10,000 --
SHAREHOLDERS' EQUITY:
Preferred Stock, par value $.01 per share; authorized
20,000,000, 1,009,000 shares issued and outstanding ... 10,900
Common Stock, par value $.01 per share; authorized
40,000,000 shares; outstanding 7,293,834 shares in 1997
and 9,038,808 shares in 1996........................... 72,938 90,388
Additional paid-in capital.............................. 19,855,352 12,240,133
Unrealized gain (loss) on marketable equity securities,
net of tax effect...................................... 679,456 1,936,743
Retained earnings....................................... 95,120,817 94,511,428
Treasury Stock, 2,291,953 shares of common stock at
cost................................................... (25,421,446) --
----------- ------------
Total shareholders' equity.......................... 90,318,017 108,778,692
----------- ------------
Total liabilities and shareholders' equity.......... $95,960,554 $115,887,825
=========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- -------------------------
1997 1996 1997 1996
----------- --------- ----------- ------------
<S> <C> <C> <C> <C>
Revenue..................... $ -- $ -- $ -- $ 3,491,444
Agency and representatives'
commissions................ -- -- -- 529,577
----------- --------- ----------- ------------
Net revenue................. -- -- -- 2,961,864
----------- --------- ----------- ------------
Operating expenses.......... -- -- -- 2,131,801
Corporate expenses.......... 420,406 483,810 1,362,736 1,210,919
Other income, net........... (1,352,754) (65,580) (2,464,005) (492,500)
Gain on sale of media
properties................. -- -- -- (95,451,876)
Interest expense............ 30,654 -- 48,302 212,376
Depreciation and
amortization............... 12,528 11,948 25,056 442,357
----------- --------- ----------- ------------
(889,166) 430,178 (1,027,911) (91,946,923)
----------- --------- ----------- ------------
Income (loss) before income
taxes...................... 889,166 (430,178) 1,027,911 94,908,787
Income tax expense
(benefit).................. 451,964 (154,992) 451,964 24,866,075
----------- --------- ----------- ------------
Net income (loss)........... $ 437,202 $(275,186) $ 609,389 $ 70,042,712
=========== ========= =========== ============
Income per share............ $ 0.06 $ (0.03) $ 0.08 $ 7.03
=========== ========= =========== ============
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------------
1997 1996
----------- -----------
<S> <C> <C>
Net cash provided by (used in) operating activities.. $ (269,391) $(7,323,542)
Cash flows provided by (used in) investing
activities:
Purchase of marketable securities.................. (9,539,996) --
Sale of marketable securities...................... 10,138,379 --
Proceeds from sale of media properties............. -- 156,007,011
Gain on sale of media properties................... -- (71,662,104)
Purchase of available-for-sale securities and long-
term investments.................................. (32,496,562) --
Sale of available-for-sale securities and long-term
investments....................................... 5,577,308 --
Long-term investment in equity securities.......... -- (2,010,000)
Capital expenditures............................... -- (100,619)
----------- -----------
Net cash provided by (used in) investing activities.. (26,320,871) 82,234,288
----------- -----------
Cash flows used in financing activities:
Repayment of long-term debt........................ -- (28,000,000)
Proceeds from issuance of Preferred Stock, Series
A................................................. 25,000 --
Proceeds from issuance of Preferred Stock, Series
B................................................. 10,000 --
Purchase of Company common stock................... (20,877,152) (2,097,200)
Proceeds from stock options exercised.............. 64,851 293,059
----------- -----------
Net cash used in financing activities................ (20,777,301) (29,804,141)
----------- -----------
Net increase (decrease) in cash and cash equivalents. (47,367,563) 45,106,605
Cash and cash equivalents at beginning of quarter.... 83,356,748 1,206,557
----------- -----------
Cash and cash equivalents at end of quarter.......... $35,989,185 $46,313,162
=========== ===========
Supplemental information:
Income taxes paid, net of refunds.................. $ 53,289 $11,789,500
=========== ===========
Interest paid...................................... $ 36,604 $ 712,855
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Price
Communications Corporation and its subsidiaries (the "Company" or "Price").
All significant intercompany items and transactions have been eliminated.
The consolidated financial statements have been prepared by the Company
without audit, in accordance with rules and regulations of the Securities and
Exchange Commission. In the opinion of management, the statements reflect all
adjustments necessary for a fair presentation of the results for the interim
periods. All such adjustments are of a normal, recurring nature. The results
of operations for any interim period are not necessarily indicative of the
results for a full year.
2. REDEEMABLE PREFERRED STOCK
In May 1997, the Company's Board of Directors and Compensation Committee
authorized the issuance to Robert Price, President of the Company, of
approximately 728,000 shares of the Company's newly authorized Series A
Preferred Stock ("Preferred Stock"), in respect of which, in the event of (i)
a merger of the Company, the sale or exchange of all or substantially all of
the Company's assets or the occurrence of any other transaction or event as a
result of which the holders of Common Stock receive at least $22.00 per share
or (ii) the acquisition of more than 50% of the voting power of the securities
of the Company then outstanding by any person, entity or group, provided the
market value of the Common Stock of the Company at such time is at least
$22.00 per share (the amount per share received by holders of Common Stock or
the market price per share of Common Stock described above being referred to
as the "Transaction Price"), Mr. Price would receive a payment per each share
of the Preferred Stock equal to the sum of 25% of the excess of the
Transaction Price per share (up to $32.00) over $9.125, 50% of the excess of
the Transaction Price per share (up to $42.00) over $32.00, 100% of the excess
of the Transaction Price per share (up to $52.00) over $42.00, and 125% of the
excess of the Transaction Price per share over $52.00. Each share of Preferred
Stock is entitled to one vote per share, and to receive dividends and
liquidation distributions (other than in a transaction resulting in a payment
as described above) at the rate of 1% of the dividends and liquidation
distributions payable with respect to a share of Common Stock.
The shares of Preferred Stock will be repurchased by the Company in the
event of Mr. Price's death or termination of employment prior to a transaction
resulting in a payment as aforesaid, as follows:
(i) If his employment with the company terminates because of death or
disability or termination by the Company not for cause, or his retirement
subsequent to the Company's Common Stock trading for an average of at least
$22.00 per share over a period of 10 consecutive trading days, the Company
will repurchase the Preferred Stock at its then fair market value, as
determined by appraisal.
(ii) If his employment terminated for any reason except as aforesaid, the
Company will repurchase the Preferred Stock at the lower of the price paid
by him for such stock or its then fair market value, as determined by
appraisal.
In May 1997, the Company's Board of Directors and Compensation Committee
authorized the issuance to Mr. Price of approximately 364,000 shares of the
Company's newly authorized Series B Preferred Stock, in respect of which, in
the event of (i) a merger of the Company, the sale or exchange of all or
substantially all of the Company's assets of the occurrence of any other
transaction or event as a result of which the holders of Common Stock receive
at least $15.00 per share or (ii) the acquisition of more than 50% of the
voting power of the securities of the Company then outstanding by any person,
entity or group, provided that the market value of the Common Stock of the
Company at such time is at least $15.00 per share (the amount per share
received by holders of Common Stock or the market price per share of Common
Stock described above being referred to as
6
<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
"Series B Transaction Price"), Mr. Price would receive a payment per each
share of Series B Preferred Stock equal to the Series B Transaction Price per
share over $10.00. Each share of the Series B Preferred Stock is entitled to
one-half vote per share, and to receive dividends and liquidation
distributions (other than in a transaction resulting in the payment as
described above) at a rate of 1% of the dividends and liquidation
distributions payable with respect to a share of the common stock.
The shares of the Series B Preferred Stock will be repurchased by the
Company upon Mr. Price's request, provided that the trading price of the
Company's Common Stock during any period of 10 consecutive trading days prior
to such request was at least $15.00 per share, for a purchase price equal to
its then fair market value, as determined by appraisal. In addition, the
shares of Series B Preferred Stock will be repurchased by the Company in the
event Mr. Price's death or termination of employment prior to the transaction
resulting in the payment as set forth in the preceding paragraph, as follows:
(i)If his employment with the Company terminated because of death or
disability or termination by the Company not for cause, or his retirement
subsequent to the Company's Common Stock trading for an average of at least
$15.00 per share over a period of 10 consecutive trading days, the Company
will repurchase the Series B Preferred Stock at its then fair market value,
as determined by appraisal.
(ii)If his employment terminates for any reason as aforesaid, the Company
will repurchase the Series B Preferred Stock at the lower of the price paid
by him for such stock or its then fair market value, as determined by
appraisal.
Both the Series A Preferred Stock and the Series B Preferred Stock have been
shown outside of Shareholder's Equity as the redemption of these issuances are
outside the control of the Company.
3. THE ACQUISITION
On May 23, 1997, the Company, Price Communications Wireless, Inc., a wholly-
owned indirect subsidiary of the Company ("PCW") and Palmer Wireless, Inc.
("Palmer") entered into an Agreement and Plan of Merger (the "Palmer Merger
Agreement") which provides, among other things, for the merger of PCW with and
into Palmer, with Palmer as the surviving corporation (the "Palmer Merger").
At or subsequent to the Palmer Merger, Palmer will change its name to "Price
Communications Wireless, Inc." Pursuant to the Palmer Merger Agreement, the
Company has agreed to acquire each issued and outstanding share of common
stock of Palmer for a purchase price of $17.50 per share in cash and to
purchase outstanding options and rights under Palmer's employee and director
stock purchase plans for an aggregate purchase price of $488.9 million. In
addition, the Company has agreed to repay the outstanding indebtedness of
Palmer estimated to be up to approximately $389 million. In connection with
this transaction, PCW has entered into an agreement to sell (subject to the
satisfaction of certain conditions) at the effective time of the Palmer
Merger, Palmer's Fort Myers, Florida MSA for $168 million (which will generate
proceeds to the Company of approximately $166.3 million) (the "Fort Myers
Sale" and, together with the Palmer Merger, the "Acquisition"). The proceeds
of the Fort Myers Sale will be used to fund a portion of the Acquisition.
The consummation of the Acquisition is subject to the satisfaction of
certain conditions contained in the Palmer Merger Agreement, including, among
other things, Federal Communications Commission and Palmer shareholder
approval. The Company also entered into an agreement with Palmer
Communications Incorporated ("PCI"), which is the majority shareholder of
Palmer, pursuant to which PCI has agreed to vote its shares of common stock of
Palmer in favor of the Palmer Merger. The Company expects the Acquisition to
be consummated in October 1997
In order to fund the Acquisition and pay related fees and expenses, on July
2, 1997 PCW issued $175 million aggregate principal amount of 11 3/4% Senior
Subordinated Notes due 2007 (the "PCW Offering") and
7
<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
will enter into a syndicated senior loan facility providing for term loan
borrowings in the aggregate principal amount of approximately $325 million and
revolving loan borrowings of $200 million (the "New Credit Facility").
Although the PCW Offering has been consummated, the notes issued thereunder
are subject to mandatory redemption if the Acquisition has not occurred by
December 31, 1997 or if in the sole judgment of the Company it appears that
the Acquisition will not be consummated by December 31, 1997. At the effective
time of the Palmer Merger, PCW is expected to borrow all term loans available
under the New Credit Facility and approximately $100 million of revolving
loans. The remaining revolving loans will, subject to a borrowing base and
certain other conditions, be available to fund the working capital
requirements of PCW. On July 2, 1997, the Company received an executed
commitment letter from a financial institution to provide the New Credit
Facility. The commitment is subject to significant conditions, including the
absence of material adverse change in the business of Palmer, and negotiation,
execution and delivery of definitive documentation and consummation of the
Fort Myers Sale (or arrangements satisfactory to the lenders under the New
Credit Facility for short-term financing bridging such sale).
An additional $47.5 million of the purchase price has been raised through an
offering by Price Communications Cellular Holdings, Inc., a wholly-owned
indirect subsidiary of the Company and the direct parent of PCW, of units
consisting of Senior Secured Discount Notes due 2007 and warrants to purchase
shares of Common Stock of the Company.
4. SHAREHOLDER'S EQUITY
On April 21, 1997, Mr. Price, exercised 625,000 employee stock options. The
options were issued at fair market value.
During the quarter ended June 30, 1997, the Company repurchased
approximately 2,177,000 shares of its common stock at an average price of
$9.59 per share.
In June 1997, the Company entered into a transaction with NatWest Capital
Markets Limited ("NatWest"), whereby the Company issued to NatWest 1,129 units
(the "PIK Units") of PIK Preferred Stock and warrants ("PIK Warrants"), in
part, in exchange for 2,291,953 shares of Common Stock held by NatWest and, in
part, in payment of $3 million of NatWest's fee in connection with its acting
as initial purchaser in connection with the Cellular Holdings Offering. Each
PIK Unit consists of 1,000 shares of PIK Preferred Stock, each with a
liquidation value of $25.00 per share, and PIK Warrants to purchase an
aggregate of 582,112 shares of the Company's Common Stock, representing in the
aggregate 10% of the fully diluted shares of Common Stock of the Company) at
an exercise price of $0.01 per share. The PIK Preferred Stock is callable,
together with the PIK Warrants, by the Company, at any time in whole or in
part on or prior to 90 days from issue date and at any time thereafter if
NatWest or an affiliate is the holder of all the PIK Preferred Stock, at a
redemption price equal to 100% of the liquidation preference of the PIK
Preferred Stock, plus accrued dividends.
5. LONG-TERM INVESTMENTS
Long-term investments include shares of Palmer common stock that the Company
acquired on the open market for approximately $13,991,000 in connection with
the Acquisition (see Note 3).
6. PER SHARE DATA
Primary income per common share is based on income for the period divided by
the weighted average number of shares of common stock and common stock
equivalents outstanding, which was approximately 7,148,832 and 7,505,616 for
the three and six months ended June 30, 1997, respectively, and 9,896,000 and
9,962,000 for the three and six months ended June 30, 1996, respectively.
8
<PAGE>
This Quarterly Report contains statements which constitute forward looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. Those statements appear in a number of places in this Quarterly
Report and include statements regarding the intent, belief or current
expectations of the Company, its directors or its 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. The
accompanying information contained in this Quarterly Report, including without
limitation the information set forth under the headings, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
identifies important factors that could cause such differences.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
References to the "Company" or "Price" in this report include Price
Communications Corporation and its subsidiaries, unless the context otherwise
indicates.
RESULTS OF OPERATIONS
The Company sold its television stations in February and March of 1996 and
consequently has no operating revenues for the three and six months ended June
30, 1997 income earned in these periods is derived from the investment of its
funds. Future acquisitions could substantially increase the Company's
operating expenses, depreciation and amortization charges and interest
expense. For these reasons, the results of the Company's historical operations
may not be comparable from period to period or indicative of results in the
future.
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996
The Company did not have any results from operations for the three months
ended June 30, 1997 or the three months ended June 30, 1996. Other income for
the three months ended June 30, 1997 principally includes recoveries on
accounts and notes receivable of approximately $187,000, interest income of
approximately $677,000, and realized gains on sale of marketable securities of
approximately $412,000. Other income for the three months ended June 30, 1997
and the three months ended June 30, 1996 are not comparable as the Company was
in a wind down period from its operating television stations and not
principally concentrating on investing its funds as in the three months ended
June 30, 1997.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
The Company's results of operations are not comparable for the six months
ended June 30, 1997 to the six months ended June 30, 1996 as the six months
ended June 30, 1996 include revenue from television stations which are not
included in the six month period ended June 30, 1997. Other income for the six
months ended June 30, 1997 includes recoveries on accounts and notes
receivable of approximately $636,000, interest income of approximately
$1,596,000 and gain on sales of marketable securities of approximately
$412,000 partially offset by an unrealized loss on marketable securities of
approximately $327,000.
LIQUIDITY AND CAPITAL RESOURCES
The Company had approximately $35.9 million and $83.4 million in cash and
cash equivalents at June 30, 1997 and December 31, 1996, respectively. The
Company has approximately $47.1 million of working capital and no long-term
debt outstanding at June 30, 1997.
In May 1997, the Company's Board of Directors and Compensation Committee
authorized the issuance to Robert Price, President of the Company, 728,000
shares of the Company's newly authorized Series A Preferred Stock and 364,000
shares of newly authorized Series B Preferred Stock.
9
<PAGE>
On May 23, 1997, the Company, Price Communications Wireless, Inc., a wholly-
owned indirect subsidiary of the Company ("PCW"), and Palmer Wireless, Inc.
("Palmer") entered into an Agreement and Plan of Merger (the "Palmer Merger
Agreement") which provides, among other things, for the merger of PCW with and
into Palmer, with Palmer as the surviving corporation (the "Palmer Merger").
Pursuant to the Palmer Merger Agreement, the Company has agreed to acquire
each issued and outstanding share of common stock of Palmer for a purchase
price of $17.50 per share in cash and to purchase outstanding options and
rights under Palmer's employee and director stock purchase plans for an
aggregate purchase price of $488.9 million. In addition, the Company has
agreed to repay the outstanding indebtedness of Palmer estimated to be up to
approximately $389 million ("Palmer Existing Indebtedness"). In connection
with this transaction, PCW has entered into an agreement to sell (subject to
the satisfaction of certain conditions) at the effective time of the Palmer
Merger, Palmer's Fort Myers, Florida MSA for $168 million (which will generate
proceeds to the Company of approximately $166.3 million) (the "Fort Myers
Sale" and, together with the Palmer Merger, the "Acquisition"). The proceeds
of the Fort Myers Sale will be used to fund a portion of the Acquisition.
In order to fund the Acquisition and pay related fees and expenses, PCW
issued (the "PCW Offering") $175 million aggregate principal amount of 11 3/4%
Senior Subordinated Notes due 2007 (the "PCW Notes") and will enter into a
syndicated senior loan facility providing for term loan borrowings in the
aggregate principal amount of approximately $325 million and revolving loan
borrowings of $200 million ("the New Credit Facility") in order to fund the
Acquisition and provide working capital following the Acquisition. Interest on
the PCW Notes is payable semi-annually commencing on January 15, 1998. The PCW
Notes are unsecured obligations of PCW and are subordinate in right of payment
to senior indebtedness of PCW, including indebtedness under the New Credit
Facility. The indenture under which the PCW Notes were issued imposes certain
limitations on, among other things, the ability of PCW and its subsidiaries to
incur indebtedness and to pay dividends to the Company. Upon certain
acquisitions of more than 50% of the ownership of the Company's equity and
upon a change in the majority of the Company's Board of Directors over any 12
month period that was not approved by a majority of the directors at the
beginning of such 12 month period, the holders of the PCW Notes will have the
right to cause the PCW Notes to be repurchased at 101% of the principal amount
thereof, plus accrued and unpaid interest thereon. The consummation of the
Exchange Offer, referred to below, will not give rise to such repurchase
right. PCW has granted certain registration rights with respect to the PCW
Notes.
At the effective time of the Palmer Merger, PCW is expected to borrow all
term loans available under the New Credit Facility and up to approximately
$100 million of revolving loans. The remaining revolving loans will, subject
to a borrowing base and certain other conditions, be available to fund the
working capital requirements of PCW. On July 2, 1997, the Company received an
executed commitment letter from a financial institution to provide the New
Credit Facility. The commitment is subject to significant conditions,
including the absence of material adverse change in the business of Palmer,
negotiation, execution and delivery of definitive documentation and
consummation of the Fort Myers Sale (or arrangements satisfactory to the
lenders under the New Credit Facility for short-term financing bridging such
sale). The Company believes that the Fort Myers Sale will take place as
contemplated in conjunction with the remainder of the Acquisition with the
result that the Company will not require short-term bridge financing. It is
anticipated that loans under the New Credit Facility will bear interest at a
floating rate between .25% and 1.50% above the lenders' prime borrowing rate
or between 1.25% to 2.50% above the lenders' Euro-dollar base rate, depending
on the ratio of the consolidated total debt to consolidated earnings before
interest, taxes, depreciation and amortization of the Company and its
subsidiaries. The New Credit Facility will be secured by liens on
substantially all of the real and personal property of the Company and its
subsidiaries. It is anticipated that the New Credit Facility will contain
limitations on, among other things, the ability of the Company to pay
dividends or incur additional indebtedness and will require the Company to
maintain compliance with certain financial ratios.
In order to provide financing for the Acquisition and the redemption of the
PIK Preferred Stock and PIK Warrants, held by NatWest Capital Markets Limited,
Price Communication Cellular Holdings, Inc., a wholly-owned subsidiary of the
Company and the direct parent of PCW ("Cellular Holdings") has issued (the
"Cellular Holdings Offering") units consisting of $153.4 million in aggregate
principal amount of its 13 1/2% Senior
10
<PAGE>
Secured Discount Notes due 2007 (the "Cellular Holdings Notes") together with
warrants to purchase 527,696 shares of Common Stock at an exercise price of
$.01 per share. The issue price of the Cellular Holdings Notes (approximately
$80 million in the aggregate) represents a yield to maturity of 13 1/2%; cash
interest will not begin to accrue on the Cellular Holdings Notes prior to
August 2, 2002 and will be first payable on February 1, 2003. Approximately
$47.5 million of the proceeds of the Cellular Holdings Offering will be used
to fund the Acquisition, while the remainder will be used to redeem the PIK
Preferred Stock and the PIK Warrants. The Cellular Holdings Notes are
guaranteed by a subsidiary of the Company (which in itself does not have any
assets or operations) and secured by a pledge of the stock of Cellular
Holdings. The holders of the Cellular Holdings Notes will have the right to
cause Cellular Holdings to repurchase such Notes at 101% of the accrued value
thereof upon certain change of control events parallel to those applicable to
the PCW Notes. The indenture under which the Cellular Holdings Notes were
issued contains restrictions on, among other things, the payment of dividends
and the incurrence of indebtedness. The holders of the Cellular Holdings Notes
have certain registration rights.
The Company intends to make, subject to approval by the Company's
shareholders of the issuance of the Company's shares therein (the "Stock
Issuance") the Stock Issuance and the satisfaction of certain other
conditions, an exchange offer (the "Exchange Offer") of shares of the
Company's Common Stock for up to 3,000,000 shares of Palmer common stock. The
Exchange Offer would be consummated immediately prior to the consummation of
the Palmer Merger and would reduce the number of shares of Palmer common stock
to be acquired in the Palmer Merger, thus reducing the aggregate cash
consideration to be paid in the Merger. In such event, the initial borrowings
under the New Credit Facility are expected to be reduced.
In the Exchange Offer, the Company will offer, for each share of Palmer
common stock that is purchased in the Exchange Offer, shares of the Company's
Common Stock with an aggregate market value of $18.00. For purposes of
determining the exchange ratio, the market value of the Company's Common Stock
will be determined by taking the average closing price per share of the
Company's Common Stock for the five trading days ending on September 12, 1997.
If the Stock Issuance is not approved by the Company's shareholders, if the
conditions to the Palmer Merger have not been satisfied or waived by the
parties thereto, or various other conditions to the Exchange Offer are not
fulfilled, the Exchange Offer will not be consummated. In the event the
exchange ratio based upon the average closing price per share of the Company's
Common Stock for the five trading days ending on September 12, 1997 could
result in a requirement that the Company issue more than the 10,000,000 shares
of its Common Stock in exchange for the Palmer shares sought in the Exchange
Offer (i.e., if the average closing price of the Company's Common Stock
determined as aforesaid were less than $5.40 per share), the Company would
amend the Exchange Offer by reducing the number of Palmer shares sought in the
Exchange Offer and/or by determining the exchange ratio on a basis different
than that described above, or otherwise, so as to permit the Exchange Offer to
be consummated without requiring the issuance of more than 10,000,000 shares
of the Company's Common Stock.
11
<PAGE>
The following table sets forth the estimated cash sources and uses of funds
for the Acquisition, the contemplated redemption of the PIK Preferred Stock
and the PIK Warrants and related fees and expenses, assuming that 5,000,000
shares of the Company's Common Stock are issued in exchange for 2,239,541
shares of Palmer common stock in the Exchange Offer. The alternative
consequences of (i) 6,697,674 shares of the Company's Common Stock being
issued in the Exchange Offer for 3,000,000 shares of Palmer common stock, (ii)
3,348,837 shares of the Company's Common Stock being issued in the Exchange
Offer for 1,500,000 shares of Palmer common stock or (iii) no shares of the
Company's Common Stock being issued in the Exchange Offer, are disclosed in a
footnote to the table. The maximum number of shares of Palmer common stock
that can be purchased with 10,000,000 shares of the Company's Common Stock
will be determined based on the average closing price per share of Common
Stock during the five trading days ending September 12, 1997. The numbers set
forth in the table and footnotes below assume an average closing price of $8
1/16.
<TABLE>
<CAPTION>
TOTAL SOURCES (IN MILLIONS)
<S> <C>
New Credit Facility
Term Loan.................................................... $325.0
Revolving Loan............................................... 55.7
11 3/4% Senior Subordinated Notes due 2007..................... 175.0
Units.......................................................... 80.0
Equity contributions by the Company+........................... 80.0
Proceeds from Fort Myers Sale.................................. 166.3
------
Total cash sources........................................... $882.0*
======
TOTAL USES:
Cash consideration for Palmer common stock..................... $448.6*
Palmer Existing Indebtedness (as of June 30, 1997)............. 380.3
Estimated transaction fees and expenses........................ 23.6
Cash for Redemption of PIK Preferred Stock and PIK Warrants.... 29.5**
------
Total uses................................................... $882.0*
======
</TABLE>
- --------
+ Payable either in cash or by delivery of shares of Palmer common stock.
* If 6,697,674 shares of the Company's Common Stock are issued in exchange
for 3,000,000 shares of Palmer common stock, the cash consideration for the
Palmer shares would be reduced to $434.9 million, and the amount initially
borrowed under the revolving loan under the New Credit Facility would be
reduced to $42.0 million. If 3,348,837 shares of the Company's Common Stock
are issued in the Exchange Offer for 1,500,000 shares of Palmer common
stock, the cash consideration for the Palmer shares would be $461.9
million, and the amount initially borrowed under the revolving loan would
be $69.0 million. If the Exchange Offer is not consummated, then the cash
consideration for the Palmer common stock would be increased to $488.9
million, and the amount initially borrowed under the revolving loan under
the New Credit Facility will be increased to $100.0 million.
** Assuming the consummation of the Acquisition and the redemption of the PIK
Preferred Stock and the PIK Warrants occur on October 15, 1997.
The foregoing table does not reflect any provision for any taxes payable in
connection with the Fort Myers Sale. The Company has a tax planning strategy
which it believes will avoid the payment of the $56.2 million tax which would
otherwise be payable in connection with the Fort Myers Sale. While there can
be no assurances that the Company's position will prevail if challenged, the
Company has received a written opinion from a "big six" accounting firm (other
then Arthur Andersen LLP) that, under existing laws, it is more likely than
not that the Company's position will prevail if challenged. This tax planning
strategy (among others) would be eliminated, however, if certain proposals by
the Joint Committee on Taxation were to be adopted by Congress. There can be
no assurances that the Company will be able to implement this tax planning
strategy before any of such proposals are adopted or that the Company's tax
position would be "grandfathered" under any of such proposals, if adopted.
12
<PAGE>
The foregoing table also does not reflect $1.4 million which will be
immediately payable to William J. Ryan, the Chief Executive Officer and
President of Palmer, as a severance payment pursuant to his existing
employment contract upon consummation of the Acquisition and approximately
$2.6 million of severance payments which could become payable over several
years pursuant to existing employment contracts between Palmer and its other
executive officers. The Company has entered into an employment contract with
William J. Ryan to continue as an officer after the consummation of the
Acquisition and expects to enter into a comparable employment contract with M.
Wayne Wisehart, the Chief Financial Officer of Palmer, and employment
contracts with other key employees prior to the consummation of the
Acquisition. Except for the $1.4 million payable to William J. Ryan, there can
be no assurances as to the amount of payments that may be made to such
officers, in recognition of such severance rights, whether or not they
continue with the Company after the consummation of the Acquisition.
If the Company were unable to borrow under the New Credit Facility and the
Company also failed to find alternative sources of financing, the Company
would be unable to consummate the Acquisition and would be in breach of its
obligations under the Palmer Merger Agreement. Although the PCW Offering and
Cellular Holdings Offering have been consummated, the notes issued thereunder
are subject to mandatory redemption of 101% of the principal amount thereof,
plus accrued interest thereon, if the Acquisition has not occurred by December
31, 1997 or if in the sole judgment of the Company it appears that the
Acquisition will not be consummated by December 31, 1997. Pending the
consummation of the Acquisition, the proceeds from these offerings, plus cash
sufficient to pay principal, premium and interest through December 31, 1997,
are being held in escrow by the trustee for the holders of such notes.
Following the Acquisition, the Company's principal sources of liquidity are
expected to be cash flow from operations and borrowings under the New Credit
Facility. The Company's principal uses of cash will be debt service
requirements, capital expenditures and working capital.
The following table sets forth the Company's scheduled estimated payments of
principal and interest on a pro forma basis as if the Acquisition had occurred
on January 1, 1997, assuming (i) an Exchange Offer in which 2,239,541 shares
of the Palmer common stock are purchased prior to the Palmer Merger, (ii) the
entry into the New Credit Facility with an interest rate of 8.5% and (iii) the
redemption of the PIK Preferred Stock with a portion of the proceeds of the
Cellular Holdings Offering.
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Principal(1)........................... $ 0 $ 0 $38,070 $42,829 $44,970
Interest (excluding amortization of
original issue discount)(2)........... 52,922 52,922 49,686 46,046 36,823
------- ------- ------- ------- -------
$53,017 $53,017 $87,954 $89,076 $87,389
======= ======= ======= ======= =======
</TABLE>
(1) If 3,000,000 shares of Palmer common stock were purchased in the Exchange
Offer, the principal payments in 1997, 1998, 1999, 2000 and 2001 would have
been $0, $0, $36.7 million, $41.3 million and $43.4 million, respectively.
If 1,500,000 shares of Palmer common stock were purchased in the Exchange
Offer, the principal payments in 1997, 1998, 1999 , 2000 and 2001 would have
been $0 million, $0 million, $39.4 million, $44.3 million and $46.5 million
respectively. If no shares of Palmer common stock were purchased in the
Exchange Offer, principal payments in 1997, 1998, 1999, 2000 and 2001 would
have been $0, $0, $42.2 million, $47.5 million and $49.9 million
respectively.
(2) If 3,000,000 shares of Palmer common stock were purchased in the Exchange
Offer, the interest payments in 1997, 1998, 1999, 2000 and 2001 would have
been $51.8 million, $51.8 million, $48.6 million, $45.1 million and 36.0
million, respectively. If 1,500,000 shares of Palmer common stock were
purchased in the Exchange Offer, the interest payments in 1997, 1998, 1999,
2000 and 2001 would have been $54.1 million, $54.1 million, $50.7 million,
$46.9 million and $37.6 million, respectively. If no shares of Palmer common
stock were purchased in the Exchange Offer, interest payments in 1997, 1998,
1999, 2000 and 2001 would have been $56.4 million, $56.4 million, $52.9
million, $48.8 million and $39.2 million, respectively.
13
<PAGE>
During the five years ended December 31, 1996, Palmer generated operating
income (loss) of $(4.3 million), $2.16 million, $15.1 million, $26.6 million
and $41.2 million in the years ended 1992, 1993, 1994, 1995 and 1996,
respectively.
The Company will be highly leveraged upon consummation of the Acquisition.
The Company's ability to meet its debt service requirements, including those
represented by the Notes and the New Credit Facility, will require significant
and sustained growth in the Company's cash flow. Based on the historical
growth in Palmer's cash flow from operations and the Company's assessment of
Palmer's potential ability to increase market penetration while controlling
costs, the Company believes that Palmer's cash flow from operations will be
sufficient to enable the Company to meet its debt service requirements. If
Palmer's cash flow from operations does not meet the Company's current
expectations, the Company could seek alternative debt or equity financing.
There can be no assurance, however, that the Company will be successful in
improving its cash flow by a sufficient magnitude or in a timely manner or in
raising additional equity or debt financing to enable the Company to meet its
debt service requirements.
Historically, Palmer met its capital requirements primarily through equity
contributions, bank and intercompany debt and, to a lesser extent, through
operating cash flow. The Company expects to meet its capital requirements
following the Acquisition from cash from operations and borrowings under the
New Credit Facility. Upon consummation of the Acquisition, the Company's only
committed source of liquidity is expected to be the New Credit Facility. While
the Company expects to have sufficient availability under the New Credit
Facility to meet its liquidity needs, the terms of the New Credit Facility
which determine the availability thereunder are still under negotiation. The
Company has availability under the New Credit Facility for general corporate
purposes and, if the Company's tax planning strategy is unsuccessful, to
finance the $56.2 million tax payment due with respect to the Fort Myers Sale.
There can be no assurances, however, that the New Credit Facility will be
entered into. In addition, borrowings under the New Credit Facility will be
subject to significant conditions, including compliance with certain financial
ratios and the absence of any material adverse change.
In 1996, Palmer spent approximately $38.5 million for capital expenditures.
The Company expects to spend approximately $35 million and $25 million for
capital expenditures for the years ended December 31, 1997 and 1998,
respectively. The Company expects to use net cash provided by operating
activities and borrowings available under the New Credit Facility to fund such
capital expenditures.
14
<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
None
15
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Dated: August 14, 1997 Price Communications Corporation
/s/ Robert Price
By __________________________________
Robert Price
President and Chief Financial
Officer
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> APR-01-1997 APR-01-1996
<PERIOD-END> JUN-30-1997 JUN-30-1996
<CASH> 35,989,185 83,356,748
<SECURITIES> 19,378,126 12,740,594
<RECEIVABLES> 0 962,461
<ALLOWANCES> 0 473,579
<INVENTORY> 0 0
<CURRENT-ASSETS> 3,159,861 18,672
<PP&E> 257,236 257,236
<DEPRECIATION> 123,292 98,236
<TOTAL-ASSETS> 95,960,554 115,887,825
<CURRENT-LIABILITIES> 5,607,537 7,109,133
<BONDS> 0 0
35,000 0
10,900 0
<COMMON> 72,938 90,388
<OTHER-SE> 90,234,179 108,688,304
<TOTAL-LIABILITY-AND-EQUITY> 95,960,554 115,887,825
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 420,406 483,810
<OTHER-EXPENSES> (1,352,754) (65,580)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 30,654 0
<INCOME-PRETAX> 889,166 (430,178)
<INCOME-TAX> 451,964 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 437,202 (275,186)
<EPS-PRIMARY> 0.06 (0.03)
<EPS-DILUTED> 0 0
</TABLE>
