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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number
1-8309
PRICE COMMUNICATIONS CORPORATION
(Exact Name of Registrant as specified in its charter)
New York 13-2991700
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
45 Rockefeller Plaza, 10020
New York, New York (Zip Code)
(Address of principal executive offices)
Registrant's telephone number (212) 757-5600
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, par value $.01per share New York Stock Exchange
Associated Common Stock Rights Under Rights Plan Boston Stock Exchange
Chicago Stock Exchange
Pacific Stock Exchange
Securities registered pursuant to Section 12(g)of the Act: None
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|
The number of shares outstanding of the issuer's common stock as of May 3, 2000
was 56,343,017.
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<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets - March 31, 2000 and
December 31, 1999 ......................................... I-1
Condensed Consolidated Statements of Operations - Three
months ended March 31, 2000 and 1999....................... I-2
Condensed Consolidated Statements of Cash Flows - Three
months ended March 31, 2000 and 19999...................... I-3
Condensed Consolidated Statement of Stockholders' Equity -
Three months ended March 31, 2000.......................... I-4
Notes to Condensed Consolidated Financial Statements......... I-5
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................... I-6
PART II. OTHER INFORMATION
ITEM 1.Legal Proceedings............................................. II-1
ITEM 2.Changes in Securities......................................... II-1
ITEM 3.Defaults Upon Senior Securities - None........................ II-1
ITEM 4.Submission of Matters to a Vote of Security Holders........... II-1
ITEM 5.Other Information............................................. II-1
ITEM 6.Exhibits and Reports on Form 8-K.............................. II-1
SIGNATURES................................................................. II-2
<PAGE>
Item 1. Financial Statements
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
($ in thousands)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
March 31, December 31,
2000 1999
---------- ----------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 170,509 $ 194,231
Trade accounts receivable, net of
allowance for doubtful accounts 20,374 25,056
Receivable from other cellular carriers 6,701 2,505
Available for sale securities 16,125 2,056
Inventory 3,945 5,205
Deferred income taxes 4,354 409
Prepaid expenses and other current assets 726 138
---------- ----------
Total current assets 222,734 229,600
Net property and equipment 150,451 144,313
Licenses, net of amortization 849,179 854,799
Other intangible and other assets, net of amortization 29,667 30,282
---------- ----------
$1,252,031 $1,258,994
========== ==========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued expenses 7,990 15,895
Accrued interest payable 18,813 11,942
Accrued salaries and employee benefits 1,722 1,642
Deferred revenue 5,713 5,525
Customer deposits 1,371 1,222
Other current liabilities 13,900 15,214
---------- ----------
Total current liabilities 49,509 51,440
Long-term debt 700,000 700,000
Accrued income taxes - long term 40,661 37,934
Deferred income taxes 291,982 292,482
Minority interests 4,251 3,948
---------- ----------
Total liabilities 1,086,403 1,085,804
---------- ----------
Commitments and contingencies
Shareholders' equity 165,628 173,190
---------- ----------
$1,252,031 $1,258,994
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
I-1
<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
($in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
For the three months
ended March 31,
2000 1999
------------ ------------
<S> <C> <C>
Revenue:
Service $ 60,950 $ 52,821
Equipment sales and installation 5,664 3,770
------------ ------------
Total revenue 66,614 56,591
------------ ------------
Operating expenses:
Engineering, technical and other direct 7,087 8,313
Cost of equipment 9,151 6,840
Selling, general and administrative 16,322 14,663
Non-cash compensation-selling, general and administration 912 375
Depreciation and amortization 11,730 10,734
------------ ------------
Total operating expenses 45,202 40,925
------------ ------------
Operating income 21,412 15,666
------------ ------------
Other income (expense):
Interest expense, net (15,450) (21,072)
Other income, net 3,361 774
------------ ------------
Total other expense (12,089) (20,298)
------------ ------------
Income (loss) before minority interest
share of income and income taxes 9,323 (4,632)
Minority interest share of income (309) (617)
------------ ------------
Income (loss) before income taxes 9,014 (5,249)
Income tax (expense) benefit (3,335) 1,942
------------ ------------
Net income (loss) $ 5,679 $ (3,307)
------------ ------------
Other comprehensive income, net of tax
Unrealized gains (losses) on available for sale securities (4,296) 2,864
Reclassification adjustment (2,049) (52)
------------ ------------
Comprehensive income (loss) $ (666) $ (495)
============ ============
Per share data:
Basic earnings (loss) per share $ 0.10 $ (0.09)
Weighted average shares outstanding 56,463,000 35,619,000
Diluted earnings (loss) per share $ 0.10 $ (0.09)
Weighted average shares outstanding 57,052,000 35,619,000
</TABLE>
See accompanying notes to condensed consolidated financial statements.
I-2
<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
($ in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the three months
ended March 31,
-------------------------
2000 1999
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 5,679 $ (3,307)
--------- ---------
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization 11,730 10,734
Minority interest share of income 309 617
Deferred income taxes (1,164) (1,734)
Gain on available for sale securities (3,417) (731)
Non-cash compensation 912 375
Interest deferred and added to long-term debt -- 5,633
Amortization of deferred finance 608 594
Decrease (increase) in trade accounts receivable 486 (535)
Decrease in inventory 1,260 1,230
(Decrease) increase in accounts payable and accrued expenses (5,360) 585
Increase in accrued interest payable 6,871 6,683
Change in other accounts (150) (75)
--------- ---------
Total adjustments 12,085 23,376
--------- ---------
Net cash provided by operating activities 17,764 20,069
--------- ---------
Cash flows from investing activities:
Capital expenditures (12,085) (5,814)
Proceeds from sale of available for sale securities 18 1,443
Sale of available for sale securities 3,861 --
Purchase of available for sale securities (23,381) (921)
Purchase of minority interests (281) --
Increase in other intangible assets and other assets -- (788)
--------- ---------
Net cash used in investing activities (31,868) (6,080)
--------- ---------
Cash flows from financing activities:
Purchase and retirement of common stock (9,968) (7,928)
Exercise of employee stock options 350 15
--------- ---------
Net cash used in financing activities (9,618) (7,913)
--------- ---------
Net (decrease) increase in cash and cash equivalents (23,722) 6,076
Cash and cash equivalents at the beginning of period 194,231 204,999
--------- ---------
Cash and cash equivalents at the end of period $ 170,509 $ 211,075
========= =========
Supplemental disclosure of cash flow information:
Non-cash transaction-payment of bonus in stock $ -- $ 595
========= =========
Income taxes paid, net $ 1,413 $ 167
========= =========
Interest paid $ 10,281 $ 10,281
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
I-3
<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholder's Equity
($ in thousands)
<TABLE>
<CAPTION>
Common Stock
Class A Additional Total
----------------------- paid-in Unearned Unrealized Retained shareholders'
Shares Par Value capital compensation gain (loss) earnings equity
--------- --------- ---------- ------------ ----------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1999 56,649 $ 567 $ 219,896 $ (65,978) $ 1,291 $ 17,414 $ 173,190
Change in unrealized gain on
available for sale securities,
net of tax effect (5,587) (5,587)
Purchase and retirement of treasury
stock (423) (4) (9,964) (9,968)
Cashless stock option exercise 30 --
Stock options exercised for cash 172 2 348 350
Deferred compensation expense
associated with the conversion of
preferred stock to common stock 912 912
Tax benefit from the exercise of
stock options 1,052 1,052
Net income 5,679 5,679
--------- --------- --------- --------- --------- --------- ---------
Balances at March 31, 2000 56,428 $ 565 $ 211,332 $ (65,066) $ (4,296) $ 23,093 $ 165,628
========= ========= ========= ========= ========= ========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
I-4
<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(1) Summary of Significant Accounting Policies
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 of the outstanding shares of Palmer Wireless,
Inc. ("Palmer").
The Consolidated Financial Statements have been prepared by the Company
without audit in accordance with the 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 of interim periods.
All such adjustments are of a normal and recurring nature. The results of
operations for any interim period are not necessarily indicative of the results
to be expected for a full year.
Impact of New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Accounting Standards No. 133 ("Accounting for Derivative Instruments and Hedging
Activities"). This statement establishes accounting and reporting standards
requiring that all derivative instruments (including certain derivative
instruments embedded in other contracts) be recorded on the balance sheet as an
asset or a liability and measured at its fair value. This statement requires
that changes in the derivatives fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. This statement is effective
for fiscal years beginning after June 15, 2000, as amended by Statement of
Financial Standards No. 137 but can be adopted earlier. Management has not yet
determined the timing of or method to be used in adopting this statement.
Management does not believe at this time that such adoption would have a
material impact on its consolidated financial statements.
Reclassifications
Certain reclassifications have been made to the 1999 Financial Statements
to conform to the 2000 presentation.
(2) Shareholders' Equity
In January 1999, 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 January 12, 1999. The stated par value of each share was
not changed from $.01. Approximately $6.7 million shares were issued as a result
of the stock split.
In April 1999, the Company's Board of Directors declared a five-for-four
stock split of the Company's Class A Common Stock, payable in the form of 25%
stock dividend on May 4, 1999 to shareholders of record at the close of business
on April 21, 1999.
In August 1999, the Company's Board of Directors declared a stock dividend
of the Company's Class A Common Stock, payable in the form of a 5% stock
dividend on August 5, 1999 to shareholders of record at the close of business on
August 12, 1999.
The Company's Board of Directors has authorized stock repurchase programs
of the Company's Class A Common Stock. The company is authorized to make such
purchases from time to time in the market or in private negotiated transactions
when it is legally permissible to do so or believed to be in the best interests
of the Company. During the first quarter of 2000, the company repurchased and
retired 422,500 shares at an average price of $23.59 per share.
All prior year earnings (loss) per common share as well as all other share
data have been adjusted to reflect all of the stock splits and the stock
dividend during the year ended December 31, 1999.
I-5
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion is intended to facilitate an understanding and
assessment of significant changes and trends related to the financial condition
and results of operations of the Company. This discussion should be read in
conjunction with the Company's Condensed Consolidated Financial Statements and
related notes thereto.
The discussion contains statements which constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Such statements are made regarding the intent, belief or current
expectations of the Company its directors or 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.
References to the "Company" or "Price" in this report include Price
Communications Corporation and its subsidiaries unless the context otherwise
indicates.
OVERVIEW
The Company is engaged in the construction, development, management and
operation of cellular telephone systems in the southeastern United States. As of
March 31, 2000, the Company provided cellular telephone service to 476,661
subscribers in Alabama, Florida, Georgia, and South Carolina in a total of 16
licensed service areas, composed of eight Metropolitan Statistical Areas
("MSAs") and eight Rural Service Areas ("RSAs"), with an aggregate estimated
population of 3.3 million. The Company sells its cellular telephone service as
well as a full line of cellular products and accessories principally through its
network of retail stores. The Company markets all of its products and services
under the nationally-recognized service mark CELLULARONE.
During the course of the year, the Company has been engaged and continues
to be engaged in preliminary discussions and negotiations with respect to
potential acquisitions and exchanges, all with the object of being accretive in
the long term for shareholders and bondholders. There can be no assurance that
the Company will be successful in consummating any of such transactions or as to
the terms thereof.
Market Ownership
The Company's cellular telephone systems serve contiguous licensed service
areas in Georgia, Alabama and South Carolina. The Company also has a cellular
service area in Panama City, Florida. The following table sets forth as of March
31, 2000, with respect to each service area in which the Company owns a cellular
telephone system, the estimated population, the Company's beneficial ownership
percentage and the Net Pops as of March 31, 2000.
MSA Estimated
Service Area Rank Population (1) Percentage Net Pops
- ------------ ---- -------------- ---------- --------
Albany, GA ............. 271 118,442 100.0% 118,442
Augusta, GA ............ 106 440,242 100.0 440,242
Columbus, GA ........... 165 249,365 99.1 247,121
Macon, GA .............. 139 322,093 99.6 320,805
Savannah, GA ........... 153 287,349 98.5 283,039
Georgia-6 RSA .......... -- 204,765 99.5 203,741
Georgia-7 RSA .......... -- 134,698 100.0 134,698
Georgia-8 RSA .......... -- 159,858 100.0 159,858
Georgia-9 RSA .......... -- 119,299 100.0 119,299
Georgia-10 RSA ......... -- 152,871 100.0 152,871
Georgia-12 RSA ......... -- 220,340 100.0 220,340
Georgia-13 RSA ......... -- 150,714 100.0 150,714
Dothan, AL ............. 250 134,980 95.0 128,231
Montgomery, AL ......... 137 323,675 94.6 306,197
Alabama-8 RSA .......... -- 178,813 100.0 178,813
--------- ---------
Subtotal ............. 3,197,504 3,164,411
--------- ---------
Panama City, FL ........ 233 148,422 92.0 136,548
--------- ---------
Total 3,345,926 3,300,959
--------- ---------
(1) Based on population estimates for 1999 from the DLJ 1999-2000 Winter Book.
I-6
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth for the Company the percentage which certain
amounts bear to total revenue.
Three Months Ended
March 31,
---------------------
2000 1999
------ ------
Revenue:
Service ........................................ 91.5% 93.3%
Equipment sales and installation ............... 8.5 6.7
------ ------
Total revenue .............................. 100.0 100.0
Operating expenses:
Engineering, technical and other direct:
Engineering and technical (1) ................ 5.4 6.4
Other direct costs of services (2) ........... 5.3 8.3
Cost of equipment (3) .......................... 13.7 12.1
Selling, general and administrative:
Sales and marketing (4) ...................... 8.3 8.8
Customer service (5) ......................... 7.5 6.3
General and administrative (6) ............... 8.7 10.8
Non-cash compensation ........................ 1.4 0.7
Depreciation and amortization .................. 17.6 18.9
------ ------
Total operating expenses ................... 67.9 72.3
Operating income ............................... 32.1% 27.7%
Operating income before depreciation and
amortization - adjusted EBITDA (7) ........... 51.1% 47.3%
Operating income before depreciation and
amortization - Price Communications
Wireless, Inc. (8) ........................... 53.3% 49.6%
(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 incollect 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, advertising and promotion expenses and employee and agent
commissions.
(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) Adjusted EBITDA represents operating income before Depreciation and
amortization and non-cash compensation. Adjusted EBITDA should not be
considered in isolation or as an alternative measurement of operating
performance or liquidity to net income, operating income or any other
measure of performance under generally excepted accounting principles. The
Company believes that adjusted EBITDA is viewed as a relevant supplemental
measure of performance in the cellular telephone industry.
(8) Represents operating income before Depreciation and amortization of the
Company's operating subsidiary Price Communications Wireless, Inc. It does
not include $1.5 million for the current quarter and $1.3 million for the
same period last year of the Company's general and administrative
expenses.
Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999
Revenue. Service revenues totaled $61.0 million for the first quarter of
2000, an increase of 15.4% from $52.8 million for the same period in 1999. The
increase is attributable to a combination of several factors which showed
positive trends when comparing the current quarter to the first quarter of 1999.
An increase in the average number of cellular subscribers generated additional
access revenue ($2.6 million) as well as additional feature revenue ($600,000).
The three month period ending March 31, 2000 reflected an additional $3.1
million of prepaid airtime revenue and toll revenue compared to the first three
months of 1999. The Company's outcollect roaming revenue, which is revenue that
the Company collects from other cellular companies' subscribers using their
cellular phones in our markets, increased from $8.7 million for the first
quarter in 1999 to $9.8 million for the first quarter in 2000, an increase of
13.1%. The increase in the number of outcollect minutes from 18.2 million
minutes in the first quarter of 1999 to 26.7 million minutes for the same period
in 2000 (an increase of 46%) is not
I-7
<PAGE>
directly proportional to the increase in revenue because of negotiated
reimbursement rates with certain carriers that changed during the first quarter
of 2000.
Average monthly revenue per post-paid subscriber (based upon service
revenue only) includes local revenue as well as roaming revenue, but does not
include incollect revenue from subscribers, as this revenue is accounted for as
an offset to the Company's direct cost of service. Such revenue remained flat at
$46.23 for the current quarter compared to $46.22 for the same period last year.
The total local minutes used per subscriber increased from 201 minutes to 321
minutes thus indicating a greater acceptance by customers of the use of their
cellular service, which may eventually create increased airtime revenue for the
Company.
Equipment sales and installation revenue, which consists primarily of
cellular subscriber equipment and accessory sales, increased from $3.8 million
for the first quarter of 1999 to $5.7 million for the current three month
period. The increase is primarily due to a 38.6% increase in gross subscriber
activations in the current quarter of 2000 compared to the same period in 1999.
Also contributing to the increase are higher accessory sales, as well as an
increase in the price point for phone sales, as the Company continues to sell
more digital phones. As a percentage of revenue, equipment sales and
installation revenue increased to 8.5% in the current quarter of 2000 from 6.7%
in the same quarter of 1999.
Operating Expenses. Total operating expenses increased from $40.9 million
in the first quarter of 1999 to $45.2 million in the current quarter. As a
percentage of total revenue, however, operating expenses decreased to 67.9% of
revenue for the current quarter in 2000 from 72.3 % of revenue for the same
quarter in 1999.
Engineering, technical and other direct decreased by $1.2 million to $7.1
million in the current quarter from $8.3 million in the first quarter of 1999.
Included in engineering, technical and other direct is the net cost of incollect
roaming which represents the difference between the amount paid to other
cellular carriers for the Company's subscribers roaming in those carriers'
markets and the amount billed to these subscribers by the Company. This net
decrease amounted to $1.6 million for the current three month period compared to
the same period in the prior year. The primary reason for the decrease was the
more favorable rates negotiated with the other cellular carriers during the
first three months of 2000 which as previously stated, had an effect on roaming
revenue. Partially offsetting this decrease, were increases in long distance,
directory assistance and other variable telephone costs directly related to
additional usage due to the increase in the average number of subscribers.
The increase in cost of equipment from $6.8 million in the first quarter
of 1999 to $9.2 million in the first quarter of 2000 is a direct result of
additional phone sales to the increased number of gross subscriber additions in
the current quarter over the same period last year. In the current period, the
Company was able to recover approximately 62% of its cost which compares
favorably to the 55% recovery in the same quarter of 1999.
Selling, general and administrative expenses increased $1.7 million, but
as a percentage of revenue decreased from 25.9% to 24.5% when comparing the
first quarter of 2000 to the same period in 1999. Sales and marketing (including
the cost of installation) increased $553,000 when comparing the current quarter
to last year's first quarter. Increases in advertising and commissions were the
principal expenses that contributed to the increase. The cost to add a gross
subscriber, which includes sales and marketing costs combined with the loss on
equipment sales, an important statistic in the cellular industry, decreased from
approximately $199 per subscriber for the first three months of 1999 to
approximately $161 for the first quarter in 2000. The increase in the number of
prepaid subscribers in the current quarter compared to last year's first quarter
is the primary reason for the decrease. Prepaid subscriber additions usually
result in smaller commissions and a reduced equipment loss thus positively
effecting the cost to add a gross subscriber.
Customer service, which is included in general and administrative
expenses, amounted to $5.0 million for the current three month period compared
to $3.6 million for the same period last year. Increases in the costs relating
to the generation of subscribers' monthly invoices, as well as additional
payroll costs, were the primary items that contributed to the increase. Both of
these expenses were higher because of the increase in the number of subscribers
for the first quarter of 2000 compared to the first quarter of 1999. For the
current three month period, customer service costs amounted to 7.5% of revenue
compared to 6.3% for the same period in 1999.
General and administrative expenses decreased $316,000 for the current
quarter compared to the same quarter in 1999. The decrease was principally due
to a $411,000 decrease in the provision for bad debts. Most other items,
including payroll and related benefits, had little or no increase. General and
administrative expenses, without customer service costs, decreased to 8.7% of
total revenue for the current quarter compared to 10.8% for the same period in
1999.
Included in operating expenses is a charge of $912,000 for the current
quarter and $375,000 for the same period in 1999, for non-cash compensation on
the conversion by an officer of the Corporation of the Company's Preferred stock
into common
I-8
<PAGE>
stock. Such charges are being amortized over the vesting period of the common
stock. The current three month period represents three months of amortization
for all of the conversions whereas the first quarter in 1999 represents
amortization for those that occurred prior to March 31, 1999.
Depreciation and amortization increased $1.0 million to $11.7 million for
the first quarter of 2000 from $10.7 million for the first quarter of 1999 as a
result of fixed asset additions during 1999 and the first three months of 2000.
As a percentage of revenue, depreciation and amortization decreased to 17.6% for
the first quarter of 2000 compared to 18.9% for the first quarter of 1999.
Operating income increased approximately $5.7 million or 36.7% to $21.4
million in the first quarter of 2000 from $15.7 million for the same period in
1999. Operating income before depreciation and amortization and non-cash
compensation amounted to 51.1% of total revenue in the current quarter compared
to 47.3.% of total revenue for the quarter ended March 31, in 1999. This
increase in operating margin is a combined result of the strong increase in
revenue as a result of subscriber growth, increases in roaming revenue, and the
continuing emphasis by management of maintaining cost controls, which has
resulted in an average operating cost per subscriber (total operating costs
before depreciation and amortization, non-cash compensation and Corporate
overhead) of $18.24 for the current three month period compared to $21.20 for
the first quarter of 1999.
Net Interest Expense, Income Taxes and Net Income. Net interest expense
decreased to $15.5 million for the quarter ended March 31, 2000 from $21.1
million in the first quarter of 1999. In June of 1999, the Company allowed the
conversion of the $200 million 11 1/4% Payable-in-Kind Notes and therefore did
not incur any interest expense on that debt for the first three months of 2000.
The current period's income tax provision of $3.3 million compared to the
income tax benefit of $1.9 million in the first quarter of 1999 is a result of
financial statement taxable income for the first three months of 2000 compared
to a financial statement taxable loss for the first three months of 1999 accrued
at a rate of approximately 37%.
The net income of $5.7 million for the first quarter of 2000 compared to a
net loss of $3.3 million for the first quarter of 1999 is a function of the
items discussed above.
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 the issuance of debt, and to a lesser
extent, operating cash flow. During the three month period ended March 31, 2000,
the Company generated $17.8 million of cash from operating activities as shown
in the Condensed Consolidated Statements of Cash Flows. The Company's EBITDA
(earnings before interest, depreciation and amortization and non-cash
compensation) was $34.1 million for the current quarter. The Company's debt
service requirements for the current year consist of cash interest payments of
$68.5 million of which $10.3 million was paid in January 2000. The remaining
cash interest requirements are approximately $24.0 million during the second
quarter, $10.3 million during the third quarter and $24.0 million in the fourth
quarter. Based upon the Company's current ability to generate operating cash
flow combined with its available cash position ($170.5 million), there does not
appear to be a necessity to provide additional funding for the foreseeable
future. The Company's outstanding debt instruments consist of $525 million 9
1/8% Senior Secured Notes due December 15, 2006, and $175 million 11 3/4% Senior
Subordinated Notes due July 15, 2007. Both of these instruments contain
covenants that restrict the payment of dividends, incurrence of debt and sale of
assets.
YEAR 2000 IMPACT
The Company with guidance from its current billing vendor and MIS outsource
provider (EDS), completed all testing and upgrades during the fourth quarter of
1999. As a result of the upgrades, the Company did not experience any
significant operational or financial reporting problems including any problems
related to the leap year.
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
The Company utilizes fixed rate debt instruments to fund its acquisitions.
Management believes that the use of fixed rate debt minimizes the Company's
exposure to market conditions and the ensuing increases and decreases that could
arise with variable rate financing.
I-9
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description
------ -----------
27 Financial Data Schedule
(b) Reports on Form 8-K
None
II-1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has fully caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PRICE COMMUNICATIONS CORPORATION
Date: May 10, 2000 By: /s/ Robert Price
----------------------------------------
Robert Price
Director, President and Treasurer
By: /s/ Kim I Pressman
----------------------------------------
Kim I Pressman
Vice President and Chief Financial Officer
By: /s/ Michael Wasserman
----------------------------------------
Michael Wasserman
Vice President and Chief Accounting Officer
II-2
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
- ------ -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 170,509
<SECURITIES> 16,125
<RECEIVABLES> 20,374
<ALLOWANCES> 0
<INVENTORY> 3,945
<CURRENT-ASSETS> 222,734
<PP&E> 150,451
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,252,031
<CURRENT-LIABILITIES> 49,509
<BONDS> 700,000
0
0
<COMMON> 565
<OTHER-SE> 165,628
<TOTAL-LIABILITY-AND-EQUITY> 1,252,031
<SALES> 5,664
<TOTAL-REVENUES> 66,614
<CGS> 9,151
<TOTAL-COSTS> 45,202
<OTHER-EXPENSES> 3,361
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (17,760)
<INCOME-PRETAX> 0
<INCOME-TAX> (3,335)
<INCOME-CONTINUING> 5,679
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,679
<EPS-BASIC> .10
<EPS-DILUTED> .10
</TABLE>
