<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] Annual Report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 [Fee Required]
For the fiscal year ended December 31, 1996 or
[ ] Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 [No Fee Required]
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 (IRS Employer
incorporation or organization) Identification Number)
45 Rockefeller Plaza, New York, New York 10020
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 757-5600
Securities registered pursuant to Section 12 (b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -------------------
Common Stock, par value $.01 per share American Stock Exchange
Boston Stock Exchange
Securities registered pursuant to Section 12 (g) Chicago Stock Exchange
of the Act: None. Pacific Stock Exchange
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 of 1934
<PAGE> 2
subsequent to the distribution of securities under its Plan of Reorganization as
confirmed by the court.
Yes X No
----- -----
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 the
filing requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to the Form 10-K. [ X ]
AGGREGATE MARKET VALUE OF THE VOTING STOCK
HELD BY NONAFFILIATES OF THE COMPANY
Aggregate market value of the Common Stock held by non-affiliates of
the Company, based on the last sale price on the American Stock Exchange
("AMEX") on February 21, 1997 ($9 as reported in the Wall Street Journal):
approximately $39.7 million.
The number of shares outstanding of the Company's common stock as of
February 19, 1997 was 7,207,114.
<PAGE> 3
PART I
Item 1. Business.
GENERAL
The Company has historically been a nationwide communications company.
Until consummation of their sale in March and February 1996, the Company owned
an ABC affiliate, WHTM-TV (which was acquired by the Company during 1994),
serving Harrisburg/Lancaster/Lebanon/York, Pennsylvania and three NBC affiliated
television stations, KSNF-TV, serving Joplin, Missouri/Pittsburg, Kansas;
KJAC-TV, serving Beaumont/Port Arthur, Texas; and KFDX-TV, serving Wichita
Falls, Texas/Lawton, Oklahoma (see "Recent Developments"), respectively. Prior
to 1995 the Company owned a number of television, radio, newspaper and other
media and related properties which were disposed of pursuant to the Company's
long-standing policy of buying and selling media properties at times deemed
advantageous by the Company's Board of Directors. The Company intends to
continue to investigate and pursue potential media and other acquisitions such
as television and radio properties and, possibly, outdoor advertising and
newspapers.
The Company's business strategy is to acquire communications properties
at prices it considers attractive, finance such properties on terms satisfactory
to it, manage such properties in accordance with its operating strategy and
dispose of them if and when the Company determines such disposition to be in its
best interest. See "Recent Developments" regarding sales of properties since the
beginning of 1995. For the foregoing reasons, the results of the Company's
historical operations are not comparable to or indicative of results in the
future. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
The Company was organized in New York in 1979 and began active
operations in 1981. Its principal executive offices are located at 45
Rockefeller Plaza, New York, New York 10020, and its telephone number is (212)
757-5600. References to the "Company" or "Price" in this report include Price
Communications Corporation and its subsidiaries, unless the context otherwise
indicates.
RECENT DEVELOPMENTS
On March 1, 1996, the Company sold substantially all of the assets,
except cash but including accounts receivable together with certain liabilities
of its ABC affiliate serving the Harrisburg-York-Lebanon-Lancaster, Pennsylvania
television market for approximately $115 million in cash to Allbritton
Communications Company. The Company recognized a pre-tax gain of approximately
$65.6 million from this transaction.
On February 2, 1996, the Company sold substantially all of the assets,
except cash and accounts receivable, together with certain liabilities, of its
three NBC affiliates, KJAC-TV, Beaumont/Port Arthur , Texas; KFDX-TV, Wichita
Falls, Texas/Lawton, Oklahoma
I-1
<PAGE> 4
and KSNF-TV, Joplin, Missouri/Pittsburg, Kansas for approximately $40.7 million
in cash. The stations were sold to US Broadcast Group, a newly organized
acquirer of television properties. The Company recognized a pre-tax gain of
approximately $29.9 million from this transaction.
Prior to 1995, the Company had written off its investment in Fairmont
Communications Corporation ("Fairmont"), with the result that the Company's
carrying value in such investment was zero. During 1994, the Company entered
into a settlement agreement with the various parties to the Fairmont bankruptcy
proceedings although the exact amount was uncertain until 1995. The Company
received during 1995 and 1996 cash payments totaling approximately $7.9 million
and $62.5 thousand respectively, as a result of sales of properties by Fairmont.
The Company has significant liquid assets on hand to invest in
communications properties and possibly in other companies that its Board of
Directors decides to be in the best interests of its shareholders. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity and Capital Resources." In that connection, during
December, 1995, the Company invested approximately $8.4 million in warrants to
acquire approximately 1.8 million shares of Class B Common Stock of PriCellular
Corporation ("PriCellular"), a publicly held cellular telephone company of which
Mr. Price is President.
During 1996, the Company purchased a total of 1,726,250 shares of
PriCellular Class A Common Stock for approximately $13.1 million. The Company's
Board of Directors will continue to investigate investments for the Company that
it believes provide opportunities for significant returns to shareholders,
including possible additional investments in PriCellular.
Due to the developments described above, the Company's historical
results of operation should not be regarded as indicative of its future results.
ACQUISITION STRATEGY
The Company has significant funds available for acquisition and
investment purposes. See "Business - Recent Developments." The Company continues
to actively review potential acquisitions and investments. Among the possible
acquisitions or investments which may be considered by the Company are: (i)
subject to the availability of such properties at prices deemed prudent by the
Company, making acquisitions of radio and television properties; (ii) exploring
related media activities, such as newspapers, outdoor advertising companies and
publishing enterprises; (iii) investing funds in media and media related
securities; (iv) making additional investments in PriCellular Corporation either
through the purchase of PriCellular securities or a business combination with
PriCellular; and (v) other acquisition and investment opportunities which may
present themselves from time to time.
I-2
<PAGE> 5
To finance its acquisitions and to provide funds for other purposes,
the Company may consider using a variety of sources in addition to its cash on
hand, including borrowings from banks and other institutional lenders, the
proceeds of debt sold to the public, seller financing, convertible preferred
stock and common stock issued by the Company or its subsidiaries. Historically,
the Company often acquired properties through newly organized subsidiaries,
based on the credit of the properties being acquired or by borrowing or issuing
securities at the parent level.
FEDERAL REGULATION OF BROADCASTING
Television and radio broadcasting (as well as some other potential
communications investments of the Company) are subject to the jurisdiction of
the FCC under the Communications Act of 1934, as amended ("Communications Act").
On February 8, 1996, President Clinton signed into law the Telecommunications
Act of 1996 (the "New Act"), which amends substantially the Communications Act.
The Communications Act, among other things, prohibits the assignment of a
broadcast license or the transfer of control of a corporation holding a license
without the prior approval of the FCC. Because many provisions of the New Act
require regulatory actions by the FCC that have not yet occurred, the Company
cannot predict the effect of any such new legislation or amendments on the
Company. The businesses in which the Company may engage in the future may be
subject to a greater or lesser degree of government regulation depending on the
nature of such businesses.
EMPLOYEES
As of December 31, 1996, the Company employed 4 full time persons at
its corporate headquarters in New York.
ITEM 2. PROPERTIES.
The Company leases office space for its headquarters in New York City.
(See Note 15 of the Notes to Consolidated Financial Statements for information
on minimum lease payments of the Company and its subsidiaries for the next five
years.)
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
I-3
<PAGE> 6
PART II
ITEM 5. MARKET FOR COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.
a) Market for Common Stock
The Company's Common Stock is listed for trading on the American Stock
Exchange ("AMEX") under the ticker symbol "PR". The range of high and low last
sale prices for the Company's Common Stock on the AMEX as adjusted to reflect
its April, 1995 5 for 4 stock split, and rounded to the nearest eighth for each
of the four quarters of 1996 and 1995, as reported by the AMEX was:
<TABLE>
<CAPTION>
1996 1995
--------------------- --------------------
Quarter High Low High Low
------- ---- --- ---- ---
<S> <C> <C> <C> <C>
First 8-5/8 7-15/16 6-1/4 4-7/8
Second 9-3/16 7-7/8 7-11/16 5-5/16
Third 8-3/8 7-1/4 9 6-7/8
Fourth 7-15/16 6-7/8 8-3/4 7-1/2
</TABLE>
The high and low last sale prices for the Company's Common Stock on the AMEX for
February 21, 1997 as reported by the AMEX were $9 and $81/2, respectively. The
Company's Common Stock has been afforded unlisted trading privileges on the
Pacific Stock Exchange under the ticker symbol "PR.P", on the Chicago Stock
Exchange under the ticker symbol "PR.M" and on the Boston Stock Exchange under
the ticker symbol "PR.B".
b) Holders
On January 31, 1997, there were approximately 410 holders of record of
the Company's Common Stock. The Company estimates that brokerage firms hold
Common Stock in street name for approximately 1,700 persons.
c) Dividends
The Company, to date, has paid no cash dividends on its Common Stock.
The Board of Directors will determine future dividend policy based on the
Company's earnings, financial condition, capital requirements and other
circumstances. It is not anticipated that dividends will be paid on its Common
Stock in the foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth certain selected consolidated financial
data with
II-1
<PAGE> 7
respect to the Company for each of the five years in the period ended December
31, 1996, derived from audited consolidated financial statements of the Company
and Notes thereto. On December 30, 1992, the Company's consensual Plan of
Reorganization became effective. A vertical black line has been placed to
separate pre-organization consolidated operating statement items from the
post-reorganization consolidated operating statement items since they are not
prepared on a comparable basis.
CONSOLIDATED OPERATING STATEMENT ITEMS
(in thousands)
<TABLE>
<CAPTION>
Year Ended December 31 (2)
-------------------------------------------------------------------------------
Predecessor
Reorganized Company Company
-------------------------------------------------------------------------------
1996 1995 1994(1) 1993 1992
---- ---- ------ ---- ----
<S> <C> <C> <C> <C> <C>
Net Revenue $ 2,962 $ 29,155 $ 24,039 $ 22,790 $ 53,957
Operating Expenses 2,233 16,685 14,962 16,335 39,567
Corporate Expenses 2,373 2,687 4,475 3,649 4,973
Other (Income) Expense- Net (98,372) (7,280) (16,245) 539 (35)
Interest Expense 216 2,099 813 1,485 17,768
Amortization of Debt Discount and
Deferred Debt Expense -- 460 646 766 1,004
Depreciation and Amortization 467 3,459 3,312 2,343 4,873
Unrealized Noncash (Recovery)
Loss on Marketable Securities (3) 794 166 -- 146 (146)
Share of Loss of Partially
Owned Companies -- -- -- 1,118 2,934
--------- --------- --------- --------- ---------
Income (Loss) Before Reorganization
Items, Income Taxes, and Extraordinary Items 95,250 10,879 16,076 (3,591) (16,981)
Reorganization Items -- -- -- -- (5,983)
--------- --------- --------- --------- ---------
Income (Loss) Before Income Taxes and
Extraordinary Items 95,250 10,879 16,076 (3,591) (22,964)
Income Tax (Expense) Benefits (24,583) 247 (1,652) (124) (499)
--------- --------- --------- --------- ---------
Income (Loss) Before Extraordinary Items 70,667 11,126 14,424 (3,715) (23,463)
Extraordinary Items (Net of Income Taxes):
Gain on Early Extinguishments of Debt -- -- -- 2,010 --
Gain on Forgiveness of Debt and Partial
Sale of Subsidiary -- -- -- -- 312,678
--------- --------- --------- --------- ---------
Net Income (Loss) $ 70,667 $ 11,126 $ 14,424 $ (1,705) $ 289,215
========= ========= ========= ========= =========
Per Share Amounts (4):
Income (Loss) Before Extraordinary Items $ 7.45 $ 1.06 $ 1.15 $ (0.25)
Extraordinary Items -- -- -- 0.14
--------- --------- --------- ---------
Net Income (Loss) $ 7.45 $ 1.06 $ 1.15 $ (0.11)
========= ========= ========= =========
</TABLE>
(1) Reflects results of operations of WHTM-TV since its acquisition during
September 1994 through December 1994 and the results of the properties
disposed of through their respective dates of sale. See notes to 3 and
4 to Consolidated Financial Statements.
(2) Due to the dispositions discussed under "Business-Recent Developments,"
the acquisition and dispositions during 1994, the borrowings incurred
to effect such acquisition, the consummation of the Plan of
Reorganization and the adoption of Fresh Start Reporting, the Company's
historical results should not be regarded as indicative of its future
results.
(3) See Note 2 of Notes to Consolidated Financial Statements.
(4) Per share amounts for the Predecessor Company are neither comparable
nor meaningful due to the forgiveness of debt, partial sale of
subsidiary, issuance of new common stock and adoption of Fresh Start
Reporting. All per share amounts prior to 1995 have been restated to
reflect the April, 1995 5 for 4 stock split.
II-2
<PAGE> 8
CONSOLIDATED BALANCE SHEET ITEMS
(in thousands, including notes)
<TABLE>
<CAPTION>
As of December 31
----------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total Current Assets $ 96,605 $ 10,047 $ 9,093 $ 8,925 $ 28,494
Total Assets 115,888 95,985 90,852 37,272 74,327
Total Current Liabilities(1) 7,109 36,309 9,076 3,292 11,373
Long-Term Debt (2) -- -- 21,310 3,200 22,100
Sharehodlers' Equity 108,779 40,876 39,079 30,705 40,646
</TABLE>
(1) Includes $28,000 of a note payable to Bank of Montreal which was repaid
upon the sale of three television stations on February 2, 1996. See
"Business-Recent Developments."
(2) Net of unamortized original issue discount of $8,705 as of December 31,
1992.
ITEM 7. Management's Discussion and Analysis of Financial Condition and Result
of Operations
The Company reorganized and emerged from bankruptcy proceedings on
December 30, 1992 and adopted Fresh Start Reporting in accordance with the
guidelines established by the American Institute of Certified Public Accountants
in Statement of Position 90-7. Under Fresh Start Reporting, assets and
liabilities were recorded at their estimated fair market value and the
historical deficit was eliminated.
Due to the acquisition and dispositions discussed under "Business-
General" and "Recent Developments," the borrowings incurred to effect the
acquisition, the retirement of the Company's Secured Notes, the consummation of
the Plan of Reorganization and adoption of Fresh Start Accounting, the Company's
historical results of operations should not be regarded as indicative of its
future results. The following discussion should be read in conjunction with the
Consolidated Financial Statements and the Notes thereto.
RESULTS OF OPERATIONS- GENERAL
The comparability of results for future periods will be affected by
dispositions during 1996, (see Notes 3 and 4 of Notes to Consolidated Financial
Statements) and by the nature and timing of any future acquisitions or
dispositions. The Company currently has disposed of all of its operating
properties. Consequently, the Company will have no operating revenues and the
Company's future revenues will be derived from the investment of its funds and
from operating businesses which may be acquired by the Company. Future
acquisitions could substantially increase the Company's operating expenses,
depreciation and amortization charges and, if additional financing is required,
interest expense, as well as increasing revenues. 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.
II-3
<PAGE> 9
1996 COMPARED TO 1995
The Company's net revenue, operating expenses, depreciation and
amortization, and interest expense for the year ended December 31, 1996 are not
comparable to the year ended December 31, 1995 due to the disposition of all the
Company's television properties during the first quarter of 1996 and the
subsequent retirement of all the Company's long-term debt. During 1996, revenue
decreased to only $3.5 million from $34.4 million while for the same periods
operating expenses decreased to $2.2 million from approximately $16.7 million.
Interest expense and depreciation and amortization expense decreased to $217,000
and $470,000 from $2.1 million and $3.5 million, respectively. All of the
above-mentioned items decreased as a result of the sales of all the Company's
operating properties. The sale of such properties resulted in approximately a
$95.0 million pretax gain which was the primary reason for the Company's net
income of $70.7 million for the year ended December 31, 1996 compared to $11.1
million in 1995.
The Company had net income per share of $7.45 as opposed to $1.06 for
the year ended December 31, 1995.
1995 COMPARED TO 1994
The Company's net revenue, operating expenses, depreciation and
amortization, and interest expense for the year ended December 31, 1995 are not
comparable to the year ended December 31, 1994 due to the acquisition of WHTM-TV
and the borrowings under the Amended Line of Credit to effect such acquisition,
and the dispositions of the Company's radio properties and other assets (see
Notes 3 and 4 of Notes to Consolidated Financial Statements). During 1995, net
revenue increased by approximately 21% to $29.2 million from $24.0 million. This
increase was primarily due to the acquisition of WHTM-TV the results of which
were included in the Company's results for a full year as opposed to only three
months in 1994. Operating expenses of the Company increased overall to $16.7
million in 1995 from $15.0 million in 1994 due to the acquisition of WHTM-TV
which was owned for the full year. Depreciation and amortization expense rose to
$3.5 million in 1995 from $3.3 million in 1994 primarily as a result of the
amortization of intangibles associated with the acquisition of WHTM-TV, offset
by a reduction in the expense due to properties sold in 1994.
The Company recognized net income of approximately $11.1 million in
1995, as compared to $14.4 million in 1994 primarily as a result of the recovery
on the Fairmont Notes of approximately $7.9 million in 1995. Net income in 1994
was $14.4 million primarily due to the net gains on the sale of its radio
properties of $17.2 million. Additionally, interest expense was $2.1 million in
1995 as opposed to $.8 million in 1994 as a result of the acquisition of WHTM-TV
in September 1994 and the related borrowings under the Amended Line of Credit.
II-4
<PAGE> 10
The Company had net income per share of $1.06 in 1995, as opposed to
$1.15 in 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company had approximately $83.4 million in cash and cash
equivalents and net working capital of $89.8 million at December 31, 1996.
If the Company's acquisition strategy (see "Business- Acquisition
Strategy") is successful the Company may require substantial capital to finance
it. The Company has significant liquid assets on hand for such purposes.
Additionally, the Company may use a variety of sources including the proceeds of
debt sold to the public, additional borrowings from banks and other
institutional leaders, seller financing, convertible preferred stock and common
stock issued at the parent company or subsidiary level. There can be no
assurance that the Company will be successful in obtaining funds from those
sources.
The Company's sources of funds to serve its debt and meet its other
obligations historically have been provided by its liquid assets, cash flow from
its operating and investment activities, proceeds from the sale of properties
and proceeds from loans and financings.
In March, 1995, the Company's Board of Directors authorized the
repurchase by the Company of up to 1.3 million shares of its Common Stock in
addition to previous authorizations. The Company is authorized to make such
purchases from time to time in the market or in privately negotiated
transactions. During the year ended December 31, 1996, the Company repurchased
approximately 644,000 shares pursuant to that authorization.
During the months of January and February, 1997, the Company
repurchased approximately 1.9 million shares for a total of approximately $18.1
million, including a block of approximately 1,000,000 shares from an
institutional investor in a private transaction for approximately $10.6 million.
During February, 1997, the Company's Board of Directors authorized the purchase
of up to 2 million additional shares of the Company's Common Stock in addition
to previous purchases.
II-5
<PAGE> 11
ITEM 8. Financial Statements and Supplementary Data
Price Communications Corporation and Subsidiaries Consolidated
Financial Statements are set forth on the following pages of this Part II.
--------------
INDEX TO FINANCIAL STATEMENTS
--------------
PRICE COMMUNICATIONS CORPORATION SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
Auditors' Reports F-1
Consolidated Balance Sheets at December 31, 1996
and 1995 F-3
Consolidated Statements of Operations for
Years ended December 31, 1996, 1995
and 1994 F-4
Consolidated Statements of Cash Flows for
Years ended December 31, 1996, 1995
and 1994 F-5
Consolidated Statements of Shareholders'
Equity for Years ended
December 31, 1996, 1995 and 1994 F-6
Notes to Consolidated Financial Statements F-7
ITEM 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
Not applicable.
Schedule 1- Condensed Financial
Information of Registrant-as
of December 31, 1996 and for the
years ended December 31, 1995 and 1994 F-19
Schedule II- Valuation and Qualifications
Accounts , for the years ended December
31, 1996, 1995 and 1994 F-22
II-6
<PAGE> 12
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Price Communications Corporation:
We have audited the accompanying consolidated balance sheets of Price
Communications Corporation and subsidiaries (a New York corporation) as of
December 31, 1996 and 1995, and the related consolidated statements of
operations, shareholders' equity and cash flows for the years then ended. These
consolidated financial statements and the schedules referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and schedules based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Price Communications
Corporation and subsidiaries as of December 31, 1996 and 1995, and the results
of their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in the accompanying
index are presented for purposes of complying with the Securities and Exchange
Commissions rules and are not a required part of the basic financial statements.
These schedules have been subjected to the auditing procedures applied in the
audits of the basic financial statements and, in our opinion, fairly state in
all material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
New York, New York
February 24, 1997
F-1
<PAGE> 13
[KPMG Peat Marwick LLP Letterhead]
Independent Auditors' Report
The Board of Directors and Shareholders
Price Communications Corporation:
We have audited the accompanying consolidated statements of operations, cash
flows, and shareholders' equity of Price Communications Corporation and
subsidiaries for the year ended December 31, 1994. In connection with our
audit of the consolidated financial statements, we have also audited the
related financial statement schedules as listed in Part IV, Item 14(a). These
consolidated financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedules based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of
Price Communications Corporation and subsidiaries for the year ended December
31, 1994 in conformity with generally accepted accounting principles. Also in
our opinion, the related financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole
present fairly, in all material respects, the information set forth therein.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
New York, New York
January 20, 1995
F-2
<PAGE> 14
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
ASSETS 1996 1995
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 83,356,748 $ 1,206,557
Investment securities (Note 2):
Trading securities 4,045,628 237,975
Available-for-sale securities 8,694,966 --
Accounts receivable, net of allowance for doubtful
accounts of $473,579 in 1996 and $294,554 in 1995 488,882 6,096,446
Film broadcast rights -- 1,764,468
Prepaid expenses and other current assets 18,672 741,307
------------ ------------
Total current assets 96,604,896 10,046,753
------------ ------------
PROPERTY AND EQUIPMENT, AT COST LESS ACCUMULATED
DEPRECIATION (Note 7) 159,000 11,308,808
BROADCAST LICENSES AND OTHER INTANGIBLES, less accumulated
amortization of $2,559,354 in 1995 (Note 2) -- 65,434,705
FILM BROADCAST RIGHTS -- 231,225
LONG-TERM INVESTMENTS (Note 6) 18,204,429 8,350,000
DEFERRED TAX ASSET (Note 10) 350,000 --
NOTES RECEIVABLE (Note 5) 540,000 540,000
OTHER ASSETS 29,500 73,907
------------ ------------
Total assets 115,887,825 $ 95,985,398
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 2,755,497 $ 3,197,471
Accrued interest -- 510,119
Current portion of long-term debt (Note 9) -- 28,000,000
Deferred tax liability (Note 10) 1,042,862 --
Other current liabilities (Note 8) 3,310,774 4,601,409
------------ ------------
Total current liabilities 7,109,133 36,308,999
------------ ------------
DEFERRED TAX EFFECT OF BASIS DIFFERENCE ARISING ON
ACQUISITION (Note 10) -- 17,971,028
OTHER LIABILITIES (Note 8) -- 829,689
COMMITMENTS AND CONTINGENCIES (Note 15)
SHAREHOLDERS' EQUITY (Notes 13 and 14):
Preferred Stock, par value $.01 per share;
authorized 20,000,000, no shares outstanding -- --
Common Stock, par value $.01 per share; authorized
40,000,000 shares; outstanding 9,038,808 shares
in 1996 and 9,579,842 shares in 1995 90,388 95,798
Additional paid-in capital 12,240,133 16,935,009
Unrealized gain on marketable equity securities, net
of tax effect (Note 2) 1,936,743 --
Retained earnings 94,511,428 23,844,875
------------ ------------
Total shareholders' equity 108,778,692 40,875,682
------------ ------------
Total liabilities and shareholders' equity $115,887,825 $ 95,985,398
============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these balance sheets.
F-3
<PAGE> 15
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Revenue $ 3,491,441 $ 34,377,543 $ 28,053,341
Agency and representatives' commissions 529,577 5,222,273 4,014,209
------------ ------------ ------------
Net revenue 2,961,864 29,155,270 24,039,132
------------ ------------ ------------
Operating expenses 2,233,347 16,684,608 14,961,399
Corporate expenses 2,373,045 2,687,064 4,474,787
Other income, net (Notes 4, 5 and 11) (98,372,359) (7,280,215) (16,244,568)
Interest expense 216,389 2,099,365 813,493
Amortization of debt discount and deferred debt expense -- 460,000 645,835
Depreciation and amortization 467,413 3,459,320 3,312,049
Realized loss on marketable securities, net 793,641 166,211 --
------------ ------------ ------------
Income before income taxes 95,250,388 10,878,917 16,076,137
Income tax (expense) benefit (Note 10) (24,583,835) 247,000 (1,652,588)
------------ ------------ ------------
Net income $ 70,666,553 $ 11,125,917 $ 14,423,549
============ ============ ============
Net income per share (Note 2) $ 7.45 $ 1.06 $ 1.15
============ ============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-4
<PAGE> 16
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 70,666,553 $ 11,125,917 $ 14,423,549
------------- ------------- -------------
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Items not affecting cash-
Amortization of debt discount and deferred debt expense -- 100,000 645,835
Depreciation and amortization 467,413 3,459,320 3,312,049
Loss on disposition of equipment -- -- 47,529
Loss on mark-down of long-term investment, net of tax effect 650,000 -- --
Change in assets and liabilities, net of effects of reorganization-
Decrease (increase) in net accounts receivable 3,191,494 (1,022,996) 307,979
Decrease in prepaid expenses and other assets 392,243 83,180 1,581,117
Decrease in film broadcast rights 333,800 1,862,277 536,910
Decrease in goodwill -- 295,477 --
(Decrease) increase in accounts payable and accrued expenses (936,802) (405,263) 1,563,455
(Decrease) increase in accrued interest payable, net of forgiveness (510,119) 510,119 (1,023,932)
Increase (decrease) in other liabilities 402,825 (2,267,942) 1,013,375
Reclassification of transactions to investing and financing activities-
Gain on sale of properties, net (94,998,417) -- (17,219,231)
Loss on purchase of common stock -- 1,185,662 --
Gain on sale of trading securities (2,121,897) -- --
Loss on sale of trading securities 2,915,538 166,211 --
Purchase of trading securities, net (4,601,295) -- --
(Recovery) reserve on notes receivable, net -- (7,884,884) 737,500
------------- ------------- -------------
Total adjustments (94,815,217) (3,918,839) (8,497,414)
------------- ------------- -------------
Net cash (used in) provided by operating activities (24,148,664) 7,207,078 5,926,135
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of businesses and equipment, net of cash retained 155,706,330 -- 32,451,283
Investment in businesses, net of cash acquired -- -- (50,270,793)
Capital expenditures (137,399) (1,469,505) (751,965)
Purchase of available-for-sale securities and long-term investments (16,569,790) (10,567,300) --
Proceeds from sale of marketable securities -- 1,813,115 --
Proceeds from (disbursements of) notes receivable, net -- 8,202,384 (390,000)
------------- ------------- -------------
Net cash provided by (used in) investing activities 138,999,141 (2,021,306) (18,961,475)
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term borrowings -- 1,000,000 --
Payment of short-term borrowings -- (1,000,000) --
Repurchases and payments of long-term debt (28,000,000) -- --
Payment of line of credit origination fee -- (100,000) (475,000)
Borrowings under line of credit agreements -- 6,360,000 45,000,000
Repayments under line of credit agreements -- (860,000) (25,700,000)
Repurchase of Company common stock (5,102,742) (10,659,200) (6,271,064)
Stock options exercised 402,456 143,975 222,312
------------- ------------- -------------
Net cash (used in) provided by financing activities (32,700,286) (5,115,225) 12,776,248
------------- ------------- -------------
Net increase (decrease) in cash and cash equivalents 82,150,191 70,547 (259,092)
CASH AND CASH EQUIVALENTS, beginning of year 1,206,557 1,136,010 1,395,102
------------- ------------- -------------
CASH AND CASH EQUIVALENTS, end of year $ 83,356,748 $ 1,206,557 $ 1,136,010
============= ============= =============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-5
<PAGE> 17
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
Common Stock
------------------------
Unrealized gain
on Marketable
Equity
Additional Securities,
Number Paid-in Net of Retained
of Shares Value Capital Tax Effect Earnings Total
--------- ----- ------- ---------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1993 12,354,646 $ 123,546 $ 32,285,576 $ -- $ (1,704,591) $ 30,704,531
Net Income -- -- -- -- 14,423,549 14,423,549
Purchase and retirement of common stock (1,245,115) (12,451) (6,258,613) -- -- (6,271,064)
Stock options exercised 104,079 1,041 221,271 -- -- 222,312
----------- --------- ------------ ---------- ------------ -------------
BALANCE, December 31, 1994 11,213,610 112,136 26,248,234 -- 12,718,958 39,079,328
Net income -- -- -- -- 11,125,917 11,125,917
Purchase and retirement of common stock (1,691,028) (16,910) (9,456,628) -- -- (9,473,538)
Stock options exercised 57,260 572 143,403 -- -- 143,975
----------- --------- ------------ ---------- ------------ -------------
BALANCE, December 31, 1995 9,579,842 95,798 16,935,009 -- 23,844,875 40,875,682
Net Income -- -- -- -- 70,666,553 70,666,553
Unrealized gain on marketable equity
securities, net of tax effect -- -- -- 1,936,743 -- 1,936,743
Purchase and retirement of common stock (643,700) (6,437) (5,096,305) -- -- (5,102,742)
Stock options exercised 102,666 1,027 401,429 -- -- 402,456
----------- --------- ------------ ---------- ------------ -------------
BALANCE, December 31, 1996 9,038,808 $ 90,388 $ 12,240,133 $1,936,743 $ 94,511,428 $ 108,778,692
=========== ========= ============ ========== ============ =============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-6
<PAGE> 18
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
1. OPERATIONS
Price Communications Corporation ("Price" or the "Company") is a nationwide
communications company. Until consummation of their sale in March and February
1996, the Company owned an ABC affiliate, WHTM-TV (which was acquired by the
Company during 1994) (See Note 3), serving Harrisburg/Lancaster/Lebanon/York,
Pennsylvania; and three NBC affiliated television stations, KSNF-TV, serving
Joplin, Missouri/Pittsburg, Kansas; KJAC-TV, serving Beaumont/Port Arthur,
Texas; and KFDX-TV, serving Wichita Falls, Texas/Lawton, Oklahoma (see Note 4),
respectively. Prior to 1995 the Company owned a number of television, radio,
newspaper and other media and related properties which were disposed of pursuant
to the Company's long-standing policy of buying and selling media properties at
times deemed advantageous by the Company's Board of Directors. The Company
intends to continue to investigate and pursue potential media and other
acquisitions such as television and radio properties and, possibly, outdoor
advertising and newspaper properties.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of Price and its
subsidiaries. All significant intercompany balances and transactions have been
eliminated in the consolidated financial statements.
Certain prior year amounts have been reclassified to conform with current year
presentation.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from these estimates.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments, including Treasury
bills, purchased with maturities of three months or less at the time of purchase
to be cash equivalents.
F-7
<PAGE> 19
Investment Securities
The Company adopted Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" ("SFAS No.
115") effective January 1, 1994. At December 31, 1996, the Company's Investment
Securities were in marketable equity securities, and classified as "Trading
Securities" as well as "Available-for-Sale Securities" under the provisions of
SFAS No. 115. At December 31, 1995, the Company's Investment Securities were in
marketable equity securities and classified as Trading Securities. Unrealized
holding gains and losses for Available-for-Sale Securities are excluded from
earnings and reported, net of taxes, as a separate component of shareholders'
equity. Net unrealized holding gains and losses for Trading Securities are
included in net income.
Trading Securities are carried at fair value which approximates cost.
Available-for-Sale Securities are shown at fair value, which is based on quoted
market prices for these investments.
Property and Equipment
Property and equipment are recorded at cost. Depreciation and amortization are
computed using the straight-line method over estimated useful lives, as follows:
Buildings- 15 to 25 years
Broadcasting equipment- 10 to 12 years
Leasehold improvements- the life of the underlying lease
Furniture and fixtures- 3 to 10 years
Transportation equipment- 3 years
Broadcast Licenses and Other Intangibles
Excess of purchase price over the fair value of net assets acquired includes FCC
licenses, station call letters, and goodwill. These assets are integral
determinants of a communications property's economic value and have long and
productive lives. The Company amortized such assets over a 40-year life
commencing from the original date of acquisition.
Deferred expenses associated with debt instruments were amortized under the
straight-line method over the respective life of such debt instruments. Debt
discounts were amortized using the effective interest method.
Film Broadcast Rights
The cost of film broadcast rights is stated at the lower of cost or estimated
net realizable value. The total cost of the rights is recorded as an asset and a
liability when the program becomes available for broadcast. The cost of film
broadcast rights is charged to operations on the basis of the estimated number
of showings or, if unlimited showings are permitted, over the terms of the
broadcast license agreements. The current portion of film broadcast rights
represent those rights that will be amortized in the succeeding year.
Amortization of film broadcast rights included in operating expenses amounted to
approximately $333,800, $1,831,300, and $1,077,000 for the years ended December
31, 1996, 1995, and 1994, respectively.
F-8
<PAGE> 20
Revenue Recognition
Advertising revenue is recognized as income when the advertisements are
broadcast.
Revenue from barter transactions (advertising provided in exchange for goods and
services) is recognized as income when advertisements are broadcast, and
merchandise or services received are charged to expense when received or used.
Credit Risk
The Company provides an allowance for doubtful accounts based on reviews of its
customers' accounts. Included in operating expenses is bad debt expense of
approximately $179,000, $84,000, and $319,000 for the years ended December 31,
1996, 1995, and 1994, respectively.
Per Share Data
Net income per share is based on net income for the period divided by the
weighted average number of shares of common stock and common stock equivalents
outstanding, which were approximately 9.5, 10.4, and 12.4 million shares for
1996, 1995, and 1994, respectively. All presentations of shares outstanding and
amounts for 1995 and 1994 have been restated to reflect the five-for-four common
stock split in April, 1995 (Note 13).
Fair Market Value of Stock Options
During 1996, Statement of Financial Accounting Standards No. 123 "Accounting for
Stock-Based Compensation" ("SFAS 123") became effective. SFAS 123 requires all
companies to change what they disclose about their employee stock-based
compensation plans. This statement requires that companies either (1) record, as
compensation expense, the fair market value, as defined, of stock options issued
to employees, or (2) if the company elects to not record the fair market value
of stock options granted as compensation expense, to disclose the pro forma
impact on net income and earnings per share as if such compensation expense was
recorded. The Company has elected to adopt the disclosure requirements.
The impact of adopting these disclosure requirements was immaterial to the
Company in 1995 and 1996.
Income Taxes
The Company accounts for income taxes in accordance with the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS No. 109"). Under the asset and liability method of SFAS 109,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled.
F-9
<PAGE> 21
3. ACQUISITION OF WHTM-TV
On September 16, 1994, the Company acquired all of the outstanding shares of the
corporation which owns all of the assets of WHTM-TV, the ABC affiliate serving
the Harrisburg-York-Lancaster-Lebanon, Pennsylvania television market for
approximately $47 million plus a working capital adjustment of approximately $4
million. The acquisition was accounted for under the purchase method, and
accordingly, the operating results of WHTM-TV have been included in the
consolidated operating results since the date of acquisition. Funds for the
acquisition were provided by cash on hand and a credit facility from the Bank of
Montreal ("BMO") of $45 million (Note 9), which was reduced to $22.5 million
upon the sale of the Company's radio properties in West Palm Beach during
October of 1994 (Note 4). The acquisition resulted in intangible assets,
primarily broadcast licenses of approximately $44.2 million and goodwill of
approximately $18.6 million, both of which were being amortized over a forty
year period.
4. DISPOSITIONS
In February 1994, the Company sold its outdoor advertising business for a total
of $875,000 in cash and notes receivable (Note 5). This disposition resulted in
a pretax loss of $350,000.
In April 1994, the Company sold substantially all of the assets of its radio
properties, WWKB-AM and WKSE-FM in Buffalo, New York, for $5 million in cash.
The Company realized a pretax gain of approximately $3.2 million on this
transaction.
In May 1994, the Company sold all of the stock of Eimar Realty Corporation, its
then wholly owned subsidiary, which held a building in Nashville, Tennessee, to
TLM Corporation, a former subsidiary of the Company. The purchase price was
$815,000 including a note from the purchaser of $540,000 (Note 5). The Company's
pretax gain on the transaction was deminimis.
In October 1994, the Company sold substantially all of the assets, together with
certain liabilities of radio stations WBZT-AM and WIRK-FM, West Palm Beach,
Florida, for approximately $23 million in cash. The Company realized a pretax
gain of approximately $13.5 million on this transaction. The net proceeds were
used to retire $22.5 million under the BMO credit facility (Note 9).
In October 1994, the Company sold its building in Red Bank, New Jersey for $1.7
million in cash. The Company realized a deminimis gain on the sale.
In November 1994, the Company sold substantially all of the assets of radio
stations WOWO-AM and WOWO-FM in Fort Wayne and Huntington, Indiana,
respectively, for $2.3 million in cash. The Company recognized a pretax gain on
the sale of approximately $.8 million.
On February 2, 1996, the Company sold substantially all of the assets, except
cash and accounts receivable, together with certain liabilities, of its three
NBC affiliates, for approximately $40.7 million in cash. Of the sale proceeds,
approximately $28.7 million was used to repay the principal and interest due
under the BMO term loan agreement. The Company recognized a pre-tax gain of
approximately $29.4 million.
F-10
<PAGE> 22
On March 1, 1996, the Company sold substantially all of the assets except cash
and accounts receivable, together with certain liabilities of WHTM-TV, its ABC
affiliate serving the Harrisburg-Lancaster-Lebanon-York, Pennsylvania,
television market, for $115 million in cash to Allbritton Communications
Company. The Company recognized a pre-tax gain of approximately $65.6 million.
The gains and losses on the dispositions outlined above have been included in
other (income) expense, net on the Company's statement of operations.
5. NOTES RECEIVABLE
Investments in notes receivable include the following:
During 1996, the Company loaned $1,000,000 to the Hamilton Group LLC
("Hamilton") in the form of a Promissory Note bearing interest at the rate of 6%
and payable on December 31, 1999. The maturity date is extendible at the Maker's
option until December 31, 2001. A Director of the Company is a participant in
Hamilton.
In 1995 the Company received a $655,000 payment on a note receivable originating
from the sale of its outdoor advertising business in 1994. During 1994, the
Company set up a reserve of $337,500 against this note receivable. Since this
note receivable was collected in full, the previously established reserve was
reversed and treated as income and included in other (income) expense, net on
the Company's consolidated statement of operations.
During 1994, in connection with the sale of Eimar Realty Corporation, the
Company received a note from the buyer, TLM Corporation (a former subsidiary of
the Company) (Note 4), in the amount of $540,000. The note bears interest at the
rate of 5% per annum, payable quarterly, with principal payable on May 20, 1998.
In connection with the sale in 1987 of seven radio stations to Fairmont
Communications Corporation ("Fairmont") for an aggregate sale price of $120
million, the Company loaned $50 million to Fairmont (the "Fairmont Notes") and
acquired a 27% equity interest in Fairmont. The Fairmont Notes were issued in
three series of 12 1/2% increasing rate subordinated notes due in 1992,
extendible at Fairmont's option to 1994. Interest on the notes was payable
quarterly in cash or additional notes at Fairmont's election.
During 1992, Fairmont filed for voluntary relief under Chapter 11 of the U.S.
Bankruptcy Code. At that time the Company ceased to record additional notes
related to interest paid in kind since it was not entitled to interest after
that date under the Bankruptcy Code.
During 1993, the United States Bankruptcy Court for the Southern District of New
York confirmed the Chapter 11 Plan of Reorganization (the "Fairmont Plan") for
Fairmont and its subsidiaries. Essentially, the Fairmont Plan provided for the
orderly liquidation of the assets of Fairmont and its subsidiaries, and the
distribution of the proceeds derived therefrom according to the relative
priorities of the parties asserting interests therein. In 1996 and 1995, the
Company received net cash payments totaling approximately $62.5 thousand and
$7.9 million from the proceeds of the liquidation of Fairmont, respectively.
This amount has been treated as income and included in other (income) expense,
net on the Company's consolidated statement of operations.
F-11
<PAGE> 23
6. INVESTMENT IN PARTIALLY OWNED COMPANIES
On December 21, 1995, the Company acquired warrants for $8,350,000 to purchase
1,819,610 shares of PriCellular Corporation's ("PriCellular") Class B Common
Stock. The exercise price at December 31, 1996 was approximately $4.77 per share
of Class B Common Stock, and escalates over the next three years to $6.29.
During 1996, the Company purchased 1,726,250 shares of PriCellular Class A
Common Stock for approximately $13.1 million.
The President of PriCellular is the President of the Company.
7. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
December 31
--------------------------------
1996 1995
------------ ------------
<S> <C> <C>
Land $ -- $ 685,000
Buildings -- 2,403,409
Broadcasting equipment -- 10,783,560
Leasehold improvements 257,236 119,836
Furniture and fixtures -- 551,332
Transportation equipment -- 596,829
------------ ------------
257,236 15,139,966
Less- Accumulated depreciation and amortization (98,236) (3,831,158)
------------ ------------
Net property and equipment $ 159,000 $ 11,308,808
============ ============
</TABLE>
8. OTHER LIABILITIES
Other liabilities consist of:
<TABLE>
<CAPTION>
December 31
---------------------------
1996 1995
---------- ----------
<S> <C> <C>
Liability for broadcast rights $ -- $2,722,343
Income and franchise taxes payable 3,310,774 1,461,995
Other -- 1,246,760
---------- ----------
3,310,774 5,431,098
Less- Amounts due currently 3,310,774 4,601,409
---------- ----------
$ -- $ 829,689
========== ==========
</TABLE>
F-12
<PAGE> 24
9. LONG-TERM DEBT
Long-term debt consists of the following notes payable by wholly-owned
subsidiaries of the Company at December 31, 1995:
<TABLE>
<CAPTION>
1995
-----------
<S> <C>
Atlantic Broadcasting Corporation, Federal Broadcasting Corporation,
Southeast Texas Broadcasting Corporation and Tri-State
Broadcasting Corporation:
Note payable to BMO under term loan agreement $28,000,000
-----------
Total debt 28,000,000
Less- Amount due currently 28,000,000
-----------
Total long-term debt $ --
===========
</TABLE>
On December 12, 1995, the Company entered into an amended line of credit
agreement ("Credit Agreement") with The Bank of Montreal ("BMO"). The Credit
Agreement created a line of credit for $28 million. Borrowings under the Credit
Agreement were subject to base interest at the BMO base rate, as defined, plus a
maximum of .75% and were secured by the assets of the subsidiaries.
Additionally, there was a commitment fee of .5% on the unused portion of the
Credit Agreement. On December 31, 1995, the effective interest rate was 8.5%.
On February 2, 1996, the Company sold its three NBC affiliates and used a
portion of the proceeds to pay $28 million plus interest to BMO to terminate the
Credit Agreement.
10. INCOME TAXES
Provision (benefit) for income taxes is approximately:
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------------------------
1996 1995 1994
------------ ------------ ------------
Current:
<S> <C> <C> <C>
Federal $ 13,673,000 $ -- $ 300,000
State and local 10,219,000 447,000 1,489,000
------------ ------------ ------------
23,892,000 447,000 1,789,000
------------ ------------ ------------
Deferred:
Federal 692,000 (560,000) (97,000)
State and local -- (134,000) (39,000)
------------ ------------ ------------
692,000 (694,000) (136,000)
------------ ------------
Tax provision (benefit) $ 24,584,000 $ (247,000) $ 1,653,000
============ ============ ============
</TABLE>
For the years ended December 31, 1996 and 1995, the provision for income taxes
differs from the amount computed by applying the federal income tax rate (35%)
because of the effect of the following items:
F-13
<PAGE> 25
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Tax at federal income tax rate $ 33,338,000 $ 3,808,000 $ 5,627,000
State taxes, net of federal income tax benefit 7,487,000 291,000 942,000
Benefits of utilization of operating loss
carryforwards (33,729,000) (4,975,000) (5,120,000)
Amortization of goodwill and other
intangibles 117,000 217,000 309,000
Basis difference and Goodwill on sold
Properties 17,088,000 -- --
Other 283,000 412,000 (105,000)
------------ ------------ ------------
$ 24,584,000 $ (247,000) $ 1,653,000
============ ============ ============
</TABLE>
The Company had, as of December 31, 1996 and 1995, deferred tax assets of
$516,000 and $34,295,000 which were subject to a valuation allowance of
approximately $166,000 and $31,925,000, respectively. The allowance has been
recognized to offset the related tax asset due to the uncertainty of the
realization of benefit of such amount. These deferred tax assets and liabilities
consist of the following:
<TABLE>
<CAPTION>
December 31
-----------------------------
1996 1995
----------- -----------
<S> <C> <C>
Deferred tax assets:
Accounts receivable, principally due to allowance for doubtful
accounts $ 166,000 $ 100,000
Notes from and investment in partially owned companies --
Minimum tax credit carryforward -- 642,000
Capital loss carryforwards -- 10,681,000
Net operating loss carryforwards -- 22,406,000
Investment tax credit carryforwards -- 100,000
Notes receivable, principally due to reserves -- 136,000
Reserve on long-term investments 350,000 --
Other -- 230,000
----------- -----------
516,000 34,295,000
Deferred tax liabilities: ----------- -----------
Unrealized gain on available-for-sale securities times the
estimated tax rate of 35% 1,043,000 --
Property and equipment, principally due to differences in
depreciation and the effect of Fresh Start Reporting -- 2,370,000
Intangible asset FCC license -- 17,971,000
----------- -----------
$ 1,043,000 $20,341,000
=========== ===========
</TABLE>
F-14
<PAGE> 26
11. OTHER INCOME, NET
Other income, net, consists of:
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Gains on sales of properties, net $(94,998,417) $ -- $(17,219,231)
Interest income (4,583,297) -- (201,896)
Loss on disposition of equipment -- -- 47,529
(Recovery) reserve for losses on notes receivable,
net (Note 5) (62,500) (7,884,884) 737,500
Loss on write-down of long-term investment 1,000,000 -- --
Loss on purchase of common stock (Note 13) -- 1,185,662 --
Other, net 271,855 (580,993) 391,530
------------ ------------ ------------
$(98,372,359) $ (7,280,215) $(16,244,568)
============ ============ ============
</TABLE>
12. SEGMENT DATA
The Company's business operations were previously classified into two segments:
Television and Radio Broadcasting and Other. The Company sold its radio stations
and outdoor advertising business during 1994 and accordingly operated in only
one segment in 1996 and 1995. The segment data for 1994 is as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1994
-------------------------------------------------------------------
Broadcasting
-----------------------------
Television Radio Other Consolidated
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Net revenue $16,756,288 $ 7,233,424 $ 49,420 $24,039,132
Operating expenses 9,651,752 5,250,629 59,018 14,961,399
Depreciation and amortization 2,464,785 577,430 269,834 3,312,049
----------- ----------- ----------- -----------
Operating income (loss)* $ 4,639,751 $ 1,405,365 $ (279,432) $ 5,765,684
=========== =========== =========== ===========
</TABLE>
*Operating income (loss) is before corporate expenses, other income-net,
interest expense, amortization of debt discount and deferred debt expense, share
of loss of partially owned companies, reorganization items, income taxes and
extraordinary items.
13. SHAREHOLDERS' EQUITY
The Company currently has outstanding warrants on its common stock exercisable
for approximately 124,000 shares at an exercise price of $4.23 per share during
the five-year period ending September 30, 1998.
In October 1994, the Company's Board of Directors enacted a Stockholders' Rights
Plan (the "Plan") designed to protect the interests of the Company's
shareholders in the event of a potential takeover for a price which does not
reflect the Company's full value or which is conducted in a manner or on terms
not approved by the Board as being in the best interests of the Company and its
shareholders. The Board has declared a dividend distribution of One Common Stock
Purchase Right on each outstanding share of Common Stock of the Company. The
Rights provide, in substance, that should any person or group acquire 20% or
more of the Company's Common Stock, each Right, other than Rights held by the
acquiring person or group, would entitle its holder
F-15
<PAGE> 27
to purchase a specified number of Price Communications Corporation common shares
for 50% of their then current market value. In addition, the Rights may be
exercised at the holders option, at a purchase price of $22.50 per share at any
time prior to the termination of the Plan. Unless a 20% acquisition has
occurred, the Rights may be redeemed by the Company at any time prior to the
termination date of the Plan.
On February 10, 1994, the Company's Board of Directors authorized the repurchase
by the Company of up to 2,500,000 shares of its Common Stock. The Company is
authorized to make such purchases from time to time in the market or in
privately negotiated transactions when it is legally permissible to do so or
believed to be in the best interests of its shareholders. During the year ended
December 31, 1994, the Company repurchased and retired approximately 1,245,000
shares pursuant to that authorization.
On February 1, 1995, Price purchased 1,077,875 shares of its common stock from
S.A.C. Capital Management, L.P. for approximately $6.6 million. This transaction
was approved by the Company's Board of Directors. The Company paid a premium
over the daily quoted market price of approximately $1.2 million that is
recorded as other (income) expense on the Company's consolidated statement of
operations.
In March 1995, at the Company's Annual Meeting, the shareholders authorized the
creation of 20 million shares of undesignated Preferred Stock for acquisitions
and other purposes. No preferred stock had been issued as of December 31, 1996.
On April 8, 1995, the Company's Board of Directors approved a five-for-four
stock split of the Company's Common Stock to shareholders of record as of the
close of business on March 27, 1995. The Company issued approximately 2 million
shares of Common Stock. The stated par value of each share was not changed from
$.01. All presentations of shares outstanding and amounts per share in years
prior to 1995 have been restated to reflect the 1995 stock split.
In March 1995, the Company's Board of Directors authorized the purchase of up to
1.3 million shares of its Common Stock in the open market or in privately
negotiated transactions when it is legally permissible to do so or believed to
be in the best interest of Price's shareholders, in addition to previous
authorizations. Approximately 644,000 and 1.7 million shares were purchased and
retired in 1996 and 1995, respectively, under this new authorization and
previous authorizations.
14. STOCK OPTION PLAN
The Company has a long-term incentive plan, (the "1992 Long Term Incentive
Plan") which provides for granting incentive stock options, as defined under
current tax law, and other stock-based incentives to key employees and officers.
The maximum number of shares of the Company that are subject to awards granted
under the 1992 Long Term Incentive Plan is 1,250,000. The exercise of such
options, other than those granted on December 10, 1992, will be exercisable at a
price not less than the fair market value on the date of the grant, for a period
up to ten years.
The following table sets forth information with respect to the Company's stock
options for the years ended December 31, 1996 and 1995:
F-16
<PAGE> 28
<TABLE>
<CAPTION>
Number of Shares
----------------
Under Option
------------
Option
1996 1995 Price Range
--------- --------- ------------------
<S> <C> <C> <C>
Exercised 102,666 57,260 $ 2.15
Canceled 39,094 - 2.15 - 3.00
Granted 22,000 145,750 3.00 - 7.88
Outstanding 704,750 824,510 2.15 - 7.88
Reserved for issuance 240,759 262,759
</TABLE>
The above has been restated to reflect the April, 1995 five-for-four common
stock split.
15. COMMITMENTS AND CONTINGENCIES
The Company is involved in various claims and litigation in the ordinary course
of business. In the opinion of legal counsel and management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's financial condition.
The Company has an employment agreement with Robert Price covering base salary
and incentive compensation. The agreement is for a term of three years
commencing October 1994, at a base salary of $300,000 and is extendible for
periods of three years at the Company's option. Cash performance bonuses and
stock option awards are determined solely at the discretion of the Board of
Directors or the Stock Option Committee, respectively.
The Company and its subsidiaries lease a variety of assets used in their
operations, including office space. Renewal options are available in the
majority of leases. The following is a schedule of the Company's minimum rental
commitment for operating leases of real and personal property for each of the
five years subsequent to 1996 and in the aggregate:
<TABLE>
<CAPTION>
Operating Leases
----------------
Year:
<S> <C>
1997 $ 268,009
1998 268,009
1999 268,009
2000 281,905
2001 281,905
Thereafter 536,810
</TABLE>
Rental expense, net of sublease income, for operating leases was approximately
$158,000, $187,250 and $312,000 for the years ended December 31, 1996, 1995, and
1994, respectively.
16. SUBSEQUENT EVENTS
In January and February 1997, the Company purchased 50,000 shares of
PriCellular's Class A Common Stock for approximately $478,000.
F-17
<PAGE> 29
In January and February 1997, the Company repurchased 1.9 million shares of its
Common Stock in the open market and in privately negotiated transactions for
approximately $18.1 million.
17. SUPPLEMENTAL CASH FLOW INFORMATION
The following is supplemental disclosure cash flow information for the years
ended December 31, 1996, 1995, and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
-------------- -------------- --------------
Cash paid for:
<S> <C> <C> <C>
Income taxes paid, net of refunds $ 23,275,000 $ 339,862 $ 240,102
Interest paid 712,855 1,534,245 813,493
Non-cash operating activities:
Trade/barter revenue - 1,439,760 1,117,218
Trade/barter expense - 1,439,760 962,356
</TABLE>
F-18
<PAGE> 30
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
<CAPTION>
1995
----
<S> <C>
ASSETS:
Cash and cash equivalents $ 979,817
Short-term investment 237,975
Prepaid expenses and other current assets 346,075
-----------
Total current assets 1,563,867
Investments in and receivables from subsidiaries* 33,877,001
Property and equipment, net 70,553
Long-term investment 8,350,000
-----------
$43,861,421
===========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Accounts payable and accrued expenses 1,799,879
Other current liabilities 1,185,860
-----------
Total current liabilities 2,985,739
Shareholders' equity 40,875,682
-----------
$43,861,421
===========
</TABLE>
* Eliminated in consolidation
<PAGE> 31
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1995 1994
---- ----
<S> <C> <C>
Corporate expenses $ 2,710,307 $ 4,474,787
Other (income) expense, net (6,836,333) 615,608
Interest expense -- 9,731
Depreciation and amortization 31,024 77,051
Realized loss on marketable securities 166,211 --
Earnings of unconsolidated subsidiaries (7,223,406) (19,978,726)
------------ ------------
Income before income taxes 11,152,197 14,801,549
Income tax expense (26,280) (378,000)
------------ ------------
Net income $ 11,125,917 $ 14,423,549
============ ============
</TABLE>
<PAGE> 32
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 11,125,917 $ 14,423,549
------------- -------------
Adjustments to reconcile net income to cash used in operating activities:
Items not affecting cash:
Depreciation and amortization 31,024 77,051
Reserve on note receivable - 400,000
Earnings of unconsolidated subsidiaries (7,223,406) (19,978,726)
Change in assets and liabilities, net of effects of reorganization:
(Increase) decrease in prepaid expenses and other assets (174,688) 2,150,932
(Decrease) increase in accounts payable and accrued expenses (189,637) 1,103,917
Increase in other liabilities, net of forgiveness 525,451 139,504
Reclassification of transactions to investing and financing activities:
Loss on purchase of common stock 1,185,662 -
Loss on sale of securities, net 166,211 -
Recovery on note receivable (7,547,384) -
------------- -------------
Total adjustments (13,226,767) (16,107,322)
------------- -------------
Net cash used in operating activities (2,100,850) (1,683,773)
------------- -------------
Cash flows from investing activities:
Cash received from subsidiaries* 14,030,247 8,004,863
Purchases of marketable securities and PriCellular Warrants (10,567,300) -
Proceeds from sales of marketable securities and mutual funds 1,813,115 -
Capital expenditures (4,837) (7,098)
Proceeds from (disbursement of) notes receivable 7,547,384 (400,000)
------------- -------------
Net cash provided by investing activities 12,818,609 7,597,765
------------- -------------
Cash flows from financing activities:
Short-term borrowings 1,000,000 -
Payment of short-term borrowings (1,000,000) -
Purchase of common stock (10,659,201) (6,271,064)
Proceeds from stock options exercised 143,975 222,312
------------- -------------
Net cash used in financing activities (10,515,226) (6,048,752)
------------- -------------
Net increase (decrease) in cash and cash equivalents 202,533 (134,760)
Cash and cash equivalents at beginning of year 777,284 912,044
------------- -------------
Cash and cash equivalents at end of year $ 979,817 $ 777,284
============= =============
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Income taxes, net of refunds $ 339,862 $ 240,102
============= =============
Interest $ 1,534,245 $ 813,493
============= =============
</TABLE>
* Eliminated in consolidation
<PAGE> 33
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
DECEMBER 1996, 1995 AND 1994
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS
BEGINNING OF CHARGED TO BALANCE AT
DESCRIPTION PERIOD EXPENSES DEDUCTIONS (a) END OF PERIOD
- ----------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C>
For the year ended December 31, 1996:
Allowance for doubtful accounts $ 294,554 $ 179,025 $ - $ 473,579
For the year ended December 31, 1995:
Allowance for doubtful accounts $ 395,012 $ 83,775 $ (184,233) $ 294,554
For the year ended December 31, 1994:
Allowance for doubtful accounts $ 487,576 $ 319,204 $ (411,768) (b) $ 395,012
</TABLE>
(a) Amounts written off as uncollectible and payments.
(b) Includes adjustments for the disposition and acquisition of properties.
<PAGE> 34
PART III
The information called for by Items 10, 11, 12 and 13 is incorporated
herein by reference from the following portions of the definitive proxy
statement to be filed by the Company in connection with its 1996 Meeting of
Shareholders.
Item Incorporated from
---- -----------------
ITEM 10. Directors and Executive "Directors and Executive
Officers of the Company Officers"
ITEM 11. Executive Compensation "Executive Compensation"
and "Related Transactions"
ITEM 12. Security Ownership of "Principal Shareholders"
Certain Beneficial and "Security Ownership of
Owners and Management Management"
ITEM 13. Certain Relationships "Executive Compensation"
and Related Transactions and " Related Transactions"
III-1
<PAGE> 35
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
(a)(1) and (2) List of financial statements and financial statement schedules:
Independent Auditors' Reports
Consolidated Balance Sheets at December 31, 1996 and 1995
Consolidated Statements of Operations for Years ended December 31, 1996, 1995
and 1994
Consolidated Statements of Shareholders' Equity for Years ended December 31,
1996, 1995 and 1994
Consolidated Statements of Cash Flows for the Years ended December 31, 1996,
1995 and 1994
Notes to Consolidated Financial Statements
I. Condensed Financial Information of Registrant
II. Valuation and Qualifying Accounts
(Schedules other than those listed are omitted for the reason that they are
not required or are not applicable or the required information is shown in
the financial statements or notes thereto.)
(3) Exhibits
See Exhibit Index at page E-1, which is incorporated herein by reference.
(b) Reports on Form 8-K.
None.
IV-1
<PAGE> 36
SIGNATURES
Pursuant to the requirements of Section 13 and 15 (d) of the Securities
and Exchange Act of 1934, the Company has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
PRICE COMMUNICATIONS CORPORATION
By /s/ Robert Price
-----------------------------------------
Robert Price, President
Dated: March 1, 1997
Pursuant to the requirements of the Securities and Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Company and in the capacities and on the dates indicated. Each person whose
signature appears below hereby authorizes and appoints Robert Price as his
attorney-in-fact to sign and file in his behalf individually and in each
capacity stated below any and all amendments to this Annual Report.
Dated: March 1, 1997 By /s/ Robert Price
-----------------------------------------
Robert Price, Director and President
(Principal Executive Officer,
Financial Officer and Accounting Officer)
Dated: March 1, 1997 By /s/ George H. Cadgene
------------------------------------------
George H. Cadgene,
Director
Dated: March 1, 1997 By /s/ Robert F. Ellsworth
------------------------------------------
Robert F. Ellsworth,
Director
Dated: March 1, 1997 By /s/ Kim I. Pressman
------------------------------------------
Kim I. Pressman,
Director
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 83,356,748
<SECURITIES> 12,740,594
<RECEIVABLES> 962,461
<ALLOWANCES> 473,579
<INVENTORY> 0
<CURRENT-ASSETS> 96,604,896
<PP&E> 159,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 115,887,825
<CURRENT-LIABILITIES> 7,109,133
<BONDS> 0
0
0
<COMMON> 90,388
<OTHER-SE> 108,688,304
<TOTAL-LIABILITY-AND-EQUITY> 115,887,825
<SALES> 3,491,441
<TOTAL-REVENUES> 3,491,441
<CGS> 529,577
<TOTAL-COSTS> 2,233,347
<OTHER-EXPENSES> 2,373,045
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 216,389
<INCOME-PRETAX> 95,250,388
<INCOME-TAX> 24,583,835
<INCOME-CONTINUING> 70,666,553
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 70,666,553
<EPS-PRIMARY> 7.45
<EPS-DILUTED> 0
</TABLE>
