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 March 31, 1998 or
[_] Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the transition period from to .
Commission file number 1-8309.
PRICE COMMUNICATIONS CORPORATION
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(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
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(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.
10,998,856 shares of Common Stock, par value $.01 per share, outstanding as of
April 30, 1998
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PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
March 31, 1998
PART I--FINANCIAL INFORMATION
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PAGE
NUMBER
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ITEM. 1 FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets March 31, 1998 and December 31, 1997 .. 1
Condensed Consolidated Statements of Operations for the Three
Months Ended March 31, 1998 and 1997 ....................................... 3
Condensed Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1998 and 1997 .............................................. 4
Condensed Consolidated Statements of Common Shareholders' Equity
March 31, 1998 and 1997 .................................................... 5
Notes to Condensed Consolidated Financial Statements ........................ 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS .................................................. 7
PART II--OTHER INFORMATION .................................................... 12
SIGNATURES .................................................................. 13
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PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
---------- ----------
(Unaudited) (Audited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 8,629 $ 29,451
Accounts receivable, net of allowance for
doubtful accounts 16,442 15,951
Other receivables 2,036 3,902
Investment securities:
Available-for-sale securities 33,512 22,849
Inventory 2,005 1,280
Deferred income taxes 4,807 5,402
Prepaid expenses and other current assets 2,234 1,114
---------- ----------
Total current assets 69,665 79,949
---------- ----------
Net property and equipment 147,112 151,264
Licenses and goodwill, net of accumulated amortization 911,923 918,488
Other intangible and other assets, at cost less
accumulated amortization 23,866 23,907
---------- ----------
Total assets $1,152,566 $1,173,608
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
1
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PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
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(Unaudited) (Audited)
<S> <C> <C>
Current liabilities:
Current installments of long-term debt $ 2,250 $ 2,812
Accounts payable and accrued expenses 9,558 14,477
Accrued interest payable 5,285 11,361
Accrued salaries and employee benefits 2,028 2,977
Deferred revenue 3,839 3,755
Customer deposits 739 602
Deferred tax liability 4,045 1,156
Other current liabilities 19,322 18,463
---------- ----------
Total current liabilities 47,066 55,603
Long-term debt, excluding current installments 681,624 690,300
Accrued income taxes - long-term 48,571 50,491
Deferred income taxes 306,359 308,901
Minority interests 7,812 7,352
Commitments and contingencies -- --
Redeemable preferred stock, Series A and B 35 35
Shareholders' equity 61,099 60,926
---------- ----------
Total liabilities and shareholders' equity $1,152,566 $1,173,608
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
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PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Company Predecessor
Three Months Ended March 31, Three Months Ended
1998 1997 March 31, 1997
------------ ------------ ----------------
<S> <C> <C> <C>
Revenue:
Cellular operations:
Service $ 40,684 $ -- $ 42,220
Equipment sales and installation 2,591 -- 2,463
------------ ------------ ------------
Total revenue 43,275 -- 44,683
------------ ------------ ------------
Operating expenses:
Engineering, technical and other direct 6,751 -- 7,430
Cost of equipment 5,496 -- 5,807
Selling, general and administrative 12,341 909 13,360
Depreciation and amortization 12,017 12 8,281
------------ ------------ ------------
Total operating expenses 36,605 921 34,878
------------ ------------ ------------
Operating income 6,670 (921) 9,805
------------ ------------ ------------
Other income (expense):
Interest (expense) income, net (17,254) 842 (7,872)
Other income 183 251 71
------------ ------------ ------------
Total other income (expense) (17,071) 1,093 (7,801)
------------ ------------ ------------
(Loss) income before minority interest
and income taxes (10,401) 172 2,004
Minority interest (460) -- (331)
------------ ------------ ------------
(Loss) income before income taxes (10,861) 172 1,673
Income tax benefit (expense) 4,016 -- (496)
------------ ------------ ------------
Net (loss) income $ (6,845) $ 172 $ 1,177
============ ============ ============
Per share data:
Basic (loss) earnings per share $ (0.63) $ 0.01 $ 0.04
Weighted average shares outstanding 10,950,869 15,098,235 27,813,259
Diluted (loss) earnings per share $ (0.63) $ 0.01 $ 0.04
Weighted average shares outstanding 10,950,869 15,335,168 27,813,259
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
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PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Predecessor
Company Three Months
Three Months Ended March 31, Ended March 31,
1998 1997 1997
------------ ------------ ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (6,845) $ 172 $ 1,177
------------ ------------ ------------
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Deprecation and amortization 12,017 13 8,281
Minority interest share of income 460 -- 331
Deferred income taxes (1,037) -- 496
Interest deferred and added to long-term debt 2,886 -- --
(Increase) decrease in accounts receivable (491) 410 1,730
Decrease in accounts payable (4,420) (727) 1,252
Decrease in accrued interest payable (6,076) -- (1,514)
Increase (decrease) in other current liabilities 131 (45) --
Changes in other accounts 23 313 577
------------ ------------ ------------
Total adjustments 3,493 (36) 11,153
------------ ------------ ------------
Net cash (used in) provided by operating activities (3,352) 136 12,330
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (704) -- (16,987)
Purchase of cellular systems -- -- (31,096)
Purchase of marketable securities -- (9,540) --
Proceeds from sale of marketable securities -- 5,349 --
Purchase of available-for-sale securities and long-term investments (4,144) (22,581) --
Sale of available-for-sale securities and long-term investments -- 5,359 --
Other (497) -- 404
------------ ------------ ------------
Net cash used in investing activities (5,346) (21,413) (48,487)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (12,124) -- (3,782)
Proceeds from issuance of debt -- -- 40,332
Repurchase of Company common stock -- (20,877) --
------------ ------------ ------------
Net cash (used in) provided by financing activities (12,124) (20,877) 36,550
------------ ------------ ------------
Net (decrease) increase in cash and cash equivalents (20,822) (42,154) 393
CASH AND CASH EQUIVALENTS, beginning of period 29,451 83,356 1,698
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 8,629 $ 41,202 $ 2,091
============ ============ ============
Supplemental disclosure of cash flow information:
Non-cash transactions - stock bonus $ 500 $ --
============ ============
Income taxes paid, net $ 63 $ 53
============ ============
Interest paid $ 20,577 $ 18 $ 8,615
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
4
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PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
($ in thousands, except per share data)
<TABLE>
<CAPTION>
As of
----------------------------
March 31, December 31,
1998 1997
------------ ------------
(Unaudited) (Audited)
<S> <C> <C>
Common Shareholders' Equity:
Class A Common Stock, par value $.01 per share;
authorized 60,000,000 shares; outstanding
8,794,104 in 1998 and 6,994,435 in 1997 $ 88 $ 70
Additional paid in Capital 10,411 9,930
Retained Earnings 41,933 48,778
Accumulated Other Comprehensive Income:
Unrealized Gains on Marketable Securities 8,667 2,148
------------ ------------
Total Shareholders' Equity $ 61,099 $ 60,926
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements
5
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PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED 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. On October
6, 1997, the Company acquired all the outstanding shares of Palmer Wireless,
Inc. ("Palmer").
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.
The combined consolidated statements of operations include, for
comparative purposes only, the results of Palmer Wireless Inc. ("Predecessor").
2. SHAREHOLDERS' EQUITY
During the quarter ended March 31, 1998, the Company issued 61,728 shares
of its Common Stock to an officer of the Company as payment for a bonus accrued
to the officer during the year ended December 31, 1997.
3. COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 "Reporting Comprehensive Income", which
is effective for fiscal years beginning after December 15, 1997. Comprehensive
income is the total of net income and all other nonowner changes in equity in a
given period. Reclassification of financial statements for earlier periods is
required. In the Company's case comprehensive income is computed as follows:
Quarter Ended
March 31, March 31,
1998 1997
------------- --------------
Net income (loss) $(6,845) $ 172
Other comprehensive income, net of tax
Unrealized gains (loss) on available for
sale securities 5,363 (2,365)
------- -------
Comprehensive income (loss) $(1,482) $(2,193)
4. PRO FORMA INFORMATION
Total revenue, loss before taxes and net loss for the three months ended
March 31, 1997, assuming the acquisition of Palmer had occurred on January 1,
1997, would have been $37,573, $(14,412) and $(12,195).
5. SUBSEQUENT EVENT
In April 1998, 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 April 30, 1998. The Company issued approximately 2.3
million shares of Common Stock. The stated par value of each share was not
changed from $.01.
6
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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 heading, "Management's Discussion and Analysis of Financial Condition
and Results of Operations", 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.
OVERVIEW
In May, 1997, Price and Price Communications Wireless, Inc. ("PCW"), a
wholly owned indirect subsidiary, entered into an Agreement and Plan of Merger
(the "Merger Agreement") with Palmer Wireless, Inc. ("Palmer"). The Merger
Agreement provided, among other things, for the merger of PCW with and into
Palmer with Palmer as the surviving corporation (the "Merger"). In October 1997,
the Merger was consummated and Palmer changed its name to "Price Communications
Wireless, Inc."
PCW is engaged in the construction, development, management and operation
of cellular telephone systems in the southeastern United States. As of March 31,
1998, PCW provided cellular telephone service to 326,721 subscribers in Alabama,
Florida, Georgia and South Carolina in a total of 16 licensed service areas,
composed of eight Metropolitan Statistical Areas ("MSAs") and eight Rural
Service Areas ("RSAs"), with an aggregate estimated population of 3.3 million.
PCW sells its cellular telephone service, as well as a full line of cellular
products and accessories, principally through its network of retail stores. PCW
markets all of its products and services under the nationally recognized service
mark CELLULAR ONE.
MARKET OWNERSHIP
The following is a summary of Palmer's ownership interest in the cellular
telephone system in each licensed service area to which the Company provided
service at March 31, 1998 and December 31, 1997.
March 31, December 31,
Cellular Service Area 1998 1997
---------------------
Albany, Georgia...................... 86.5 86.5%
Augusta, Georgia..................... 100.0 100.0
Columbus, Georgia.................... 85.2 85.2
Macon, Georgia....................... 99.2 99.2
Savannah, Georgia.................... 98.5 98.5
Dothan, Alabama...................... 94.6 94.6
Montgomery, Alabama.................. 92.8 92.8
Georgia 6 - RSA...................... 96.3 96.3
Georgia 7 - RSA...................... 100.0 100.0
Georgia 8 - RSA...................... 100.0 100.0
Georgia 9 - RSA...................... 100.0 100.0
Georgia 10 - RSA..................... 100.0 100.0
Georgia 12 - RSA..................... 100.0 100.0
Georgia 13 - RSA..................... 86.5 86.5
Alabama 8 - RSA...................... 100.0 100.0
Panama City, Florida................. 78.4 78.4
7
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RESULTS OF OPERATIONS
The Company sold its television stations in February and March of 1996 and
consequently had no operating revenues for the three months ended March 31,
1997. Income earned in this period was derived from the investment of its funds.
On October 6, 1997, the Company, through an indirect subsidiary, acquired all
the outstanding stock of Palmer Wireless, Inc. ("Palmer"). Palmer is engaged in
the construction, development, management and operation of cellular telephone
systems in the Southeastern United States. For these reasons, the results of the
Company's historical operations are not comparable from period to period.
RESULTS OF OPERATIONS OF PALMER WIRELESS, INC. AND SUBSIDIARIES (PREDECESSOR)
The following discussion is intended to facilitate an understanding and
assessment of significant changes and trends related to the financial condition
and results of operations of the Company. This discussion should be read in
conjunction with the Company's Consolidated Financial Statements and related
Notes thereto and the Consolidated Financial Statements and Notes thereto of
Palmer Wireless, Inc. and Subsidiaries (the "Predecessor") included as a
supplement to this report. References to the Company where appropriate also
include its subsidiaries, PCW, Holdings and the Predecessor.
The following table sets forth for the Company, for the periods indicated,
the percentage which certain amounts bear to total revenue.
Predecessor Company
----------- -------
Three Months Ended
March 31,
-----------------------
1997 1998
------- -------
Revenue:
Service ............................................ 94.5% 94.0%
Equipment sales and installation ................... 5.5 6.0
----- -----
Total revenue .............................. 100.0 100.0
Operating expenses:
Engineering, technical and other direct:
Engineering and technical (1) .............. 7.9 8.4
Other direct costs of services (2) ......... 8.7 7.2
Cost of equipment (3) .............................. 13.0 12.7
Selling, general and administrative:
Sales and marketing (4) .................... 8.6 9.8
Customer service (5) ....................... 6.7 6.7
General and administrative (6) ............. 14.6 10.6
Depreciation and amortization ...................... 18.5 26.3
----- -----
Total operating expenses ................... 78.0 81.7
Operating income ................................... 22.0% 18.3%
Operating income before depreciation
and amortization (7) ............................. 40.5% 44.6%
- ------------
(1) Consists of costs of cellular telephone network, including inter-trunk
costs, span-line costs, cell site repairs and maintenance, cell site
utilities, cell site rent, engineers' salaries and benefits and other
operational costs.
(2) Consists of net costs of roaming, costs of long distance, costs of
interconnection with wireline telephone companies and other costs of
services.
(3) Consists primarily of the costs of the cellular telephones and accessories
sold.
(4) Consists primarily of salaries and benefits of sales and marketing
personnel, employee and agent commissions and advertising and promotional
expenses.
(5) Consists primarily of salaries and benefits of customer service personnel
and costs of printing and mailing billings generated in-house.
(6) Includes salaries and benefits of general and administrative personnel and
other overhead expenses.
(7) Operating income before depreciation and amortization should not be
considered in isolation or as an alternative to net income, operating
income or any other measure of performance under generally accepted
accounting principles. The Company believes that operating income before
depreciation and amortization is viewed as a relevant supplemental measure
of performance in the cellular telephone industry.
8
<PAGE>
Three Months Ended March 31, 1998 Compared to Three Months Ended March 31, 1997
Revenue. Service revenues totaled $40.7 million for the first quarter of
1998, a decrease of 3.6% from $42.2 million for the first quarter of 1997. The
decrease is primarily attributable to service revenues of the cellular telephone
systems sold in the Ft. Myers Sale and the Georgia Sale which totaled $7.4
million in the first quarter of 1997. This was partially offset by an increase
in the average number of subscribers to 314,068 in the first quarter 1998 from
295,320 in 1997. The average number of subscribers attributable to the Ft. Myers
Sale and Georgia Sale was 37,362 in the first quarter of 1997.
Average monthly revenue per subscriber decreased 9.5% to $43.18 for the
first quarter of 1998 from $47.70 for the first quarter of 1997. This is in part
due to the trend, common in the cellular telephone industry, where, on average,
new subscribers are using less airtime than existing subscribers. Therefore,
service revenues generally do not increase proportionately with the increase in
subscribers. In addition, the decline reflects more competitive rate plans
introduced into the Company's markets.
Equipment sales and installation revenue, which consists primarily of
cellular subscriber equipment sales, increased by 5.2% to $2.6 million for the
first quarter of 1998 compared to $2.5 million for the first quarter of 1997.
The increase is partially due to a 3.3% increase in gross subscriber activations
in the first quarter of 1998 compared to 1997. As a percentage of revenue,
equipment sales and installation revenue increased to 6.0% in the first quarter
of 1998 from 5.5% in the first quarter of 1997.
Operating Expenses. Engineering and technical expenses increased by 3.0%
to $3.6 million for the first quarter of 1998 from $3.5 million in the first
quarter of 1997, due primarily to the increase in subscribers. As a percentage
of revenue, engineering and technical expenses increased to 8.4% for the first
quarter of 1998 from 7.9% for the first quarter of 1997 primarily because
centralized engineering is being spread over a smaller number of markets than
last year, a result of the Ft. Myers Sale and Georgia Sale. Engineering and
technical expenses attributable to the cellular telephone systems sold in the
Ft. Myers Sale and Georgia Sale totaled $.4 million for the first quarter of
1997.
Other direct costs of service decreased to $3.1 million for the first
quarter of 1998 from $3.9 million for the first quarter of 1997 reflecting the
decrease in interconnection costs as a result of the Company's renegotiation of
interconnection agreements with the local exchange carriers ("LECs") in most of
the Company's markets. As a percentage of revenue, these costs of service
declined to 7.2% from 8.7%, reflecting improved interconnection agreements with
LECs, as well as efficiencies gained from the growing subscriber base. Other
direct costs of service attributable to the cellular telephone systems sold in
the Ft. Myers Sale and Georgia Sale totaled $1.2 million for the first quarter
of 1997.
The cost of equipment decreased 5.4% to $5.5 million for the first quarter
of 1998 from $5.8 million for the first quarter of 1997, due primarily to
reductions of equipment costs by manufacturers. Equipment sales resulted in
losses of $2.9 million in 1998 versus $3.3 million in 1997 primarily as a result
of reduced equipment costs and slightly better retail margins. The Company sells
equipment below its costs in an effort to address market competition and improve
market share. Cost of equipment attributable to the cellular telephone systems
sold in the Ft. Myers Sale and Georgia Sale totaled $.9 million for the first
quarter of 1997.
Selling, general and administrative expenses decreased 12.3% to $11.7
million in the first quarter of 1998 from $13.4 million in the first quarter of
1997. These expenses are comprised of (i) sales and marketing costs, (ii)
customer service costs and (iii) general and administrative expenses.
Sales and marketing costs increased 10.5% to $4.2 million for the first
quarter of 1998 from $3.8 million for the same period in 1997. This increase is
primarily due to the 3.3% increase in gross subscriber activations and the costs
to acquire them, including advertising and commissions. As a percentage of total
9
<PAGE>
revenue, sales and marketing costs increased to 9.8% for the first quarter of
1998 compared to 8.6% for the first quarter of 1997. The Company's cost to add a
gross subscriber, including loss on telephone sales, decreased to $223 for the
first quarter of 1998 from $235 for the first quarter of 1997. This decrease in
cost to add a net subscriber was caused primarily by decreased losses from the
Company's sales of cellular telephones. Sales and marketing expenses
attributable to the cellular telephone systems sold in the Ft. Myers Sale and
Georgia Sale totaled $.4 million for the first quarter of 1997.
Customer service costs decreased 2.3% to $2.9 million for the first
quarter of 1998 from $3.0 million for the first quarter of 1997. As a percentage
of revenue, customer service costs remained flat at 6.7% for the first quarter
of both 1998 and 1997. Customer service expenses attributable to the cellular
telephone systems sold in the Ft. Myers Sale and Georgia Sale totaled $.3
million for the first quarter of 1997.
General and administrative expenditures decreased 30.2% to $4.6 million
for the first quarter of 1998 from $6.5 million for the first quarter of 1997,
due primarily to expense savings and reorganization efforts. General and
administrative expenses decreased as a percentage of revenue to 10.6% in the
first quarter of 1998 from 14.6% in the first quarter of 1997. As the Company
continues to add more subscribers, and generates associated revenue, general and
administrative expenses should decrease as a percentage of total revenues. There
can be no assurance, however, that this forward-looking statement will not
differ materially from actual results due to unforeseen general and
administrative expenses and other factors. General and administrative expenses
attributable to the cellular telephone systems sold in the Ft. Myers Sale and
Georgia Sale totaled $.6 million for the first quarter of 1997.
Depreciation and amortization increased 37.5% to $11.4 million for the
first quarter of 1998 from $8.3 million for the first quarter of 1997. This
increase was primarily due to the depreciation and amortization associated with
the new carrying value of assets as a result of the "push down" of the purchase
price to the Company. As a percentage of revenue, depreciation and amortization
increased to 26.3% for the first quarter of 1998 compared to 18.5% for the first
quarter of 1997. Depreciation and amortization attributable to the cellular
telephone systems sold in the Ft. Myers Sale and Georgia Sale totaled $.7
million for the first quarter of 1997.
Operating income decreased 19.2% to $7.9 million in the first quarter of
1998, from $9.8 million for the first quarter of 1997. This decrease in
operating results is attributable primarily to the increase in depreciation and
amortization expense.
Net Interest Expense, Income Taxes and Net Income. Net interest expense
increased 126.4% to $17.8 million for the first quarter of 1998 from $7.9
million in the first quarter of 1997 primarily due to rate increases and
additional borrowings incurred as a result of the recent merger.
Income tax benefit was $3.8 million in the first quarter of 1998
representing utilization of the net operating losses carried back against
previous earnings. Income tax expense was $.5 million in the first quarter of
1997 based on earnings.
Net loss for the first quarter of 1998 was $6.6 million compared to net
income of $1.2 million for the first quarter of 1997. The decrease in net income
is primarily attributable to increases in interest expense and depreciation and
amortization partially offset by the income tax benefit.
10
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's long-term capital requirements consist of funds for capital
expenditures, acquisitions and debt service. Historically, the Company has met
its capital requirements primarily through equity contributions, bank debt and,
to a lesser extent, operating cash flow.
In October 1997, PCW entered into a credit agreement with a syndicate of
banks, financial institutions and other "accredited investors" providing for
loans of up to $525 million (the "Credit Agreement"). The Credit agreement
includes a $325 million term loan facility and a $200 million revolving credit
facility. The term loan facility is comprised of tranche A term loans of up to
$100 million, which mature on September 30, 2005, and tranche B term loans of up
to $225 million, which mature on September 30, 2006. The revolving credit
facility will terminate on September 30, 2005. The Credit Agreement bears
interest at the alternate base rate, as defined in the credit Agreement, or the
reserve Euro-Dollar rate plus, in each case, applicable margins of (i) in the
case of tranche A term loans and revolving loans (x) 2.5% for Euro-Dollar rate
loans and (y) 1.5% for base rate loans and (ii) in the case of tranche B term
loans (x) 2.75% for Euro-Dollar rate loans and (y) 1.75% for base rate loans.
The Credit agreement contains restrictions on PCW's ability to engage in certain
activities, including limitations on incurring additional indebtedness, capital
expenditures, liens and investments, payments of dividends and the sale of
assets. As of March 31, 1998, there was $426 million outstanding under the
Credit Agreement.
In July 1997, PCW issued $175 million of 11.75% Senior Subordinated Notes
("11.75% Notes") due July 15, 2007 with interest payable semi-annually
commencing January 15, 1998. The 11.75% Notes contain certain covenants that
restrict the payment of dividends, incurrence of debt and sale of assets.
In August 1997, Price Communications Cellular Holdings, Inc. ("Holdings"),
an indirect subsidiary of Price and the parent company of PCW, issued 153,400
units, consisting of Notes and Warrants, in exchange for $80 million. The Notes
accrete at a rate of 13.5%, compounded semi-annually, to an aggregate principal
amount of approximately $153.4 million by August 1, 2002. Cash interest will not
commence to accrue on the Notes prior to August 2, 2002. Commencing on February
1, 2003, cash interest on the Notes will be payable at a rate of 13.5% per
annum, payable semi-annually. The Notes will be redeemable at the option of
Holdings, in whole or in part, at any time after August 1, 1998 in cash at the
redemption price as defined, plus accrued and unpaid interest, if any, thereon
to the redemption date.; provided that the trading price of the common stock of
Price shall equal or exceed certain levels. The Notes mature on August 1, 2007
and contain covenants that restrict payment of dividends, incurrence of debt and
sale of assets.
INFLATION
The Company believes that inflation affects its business no more than it
generally affects other similar businesses.
11
<PAGE>
PART II--OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
Pro Forma Financial Information - previously reported
Item 6. Exhibits and Reports on Form 8-K
12
<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: May 14, 1998 Price Communications Corporation
By /s/ Robert Price
-----------------------------------
Robert Price
President and Chief Financial
Officer
13
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 8,629
<SECURITIES> 0
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<ALLOWANCES> (1,222)
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<PP&E> 156,154
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<CURRENT-LIABILITIES> 47,066
<BONDS> 681,624
0
35
<COMMON> 0
<OTHER-SE> 61,099
<TOTAL-LIABILITY-AND-EQUITY> 1,152,566
<SALES> 2,591
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<CGS> 5,496
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<INCOME-PRETAX> (10,861)
<INCOME-TAX> 4,016
<INCOME-CONTINUING> (6,845)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,845)
<EPS-PRIMARY> (0.63)
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