SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended
June 30, 1996.
( ) 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 0-27416
RURAL CELLULAR CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MINNESOTA 41-1693295
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
2819 HIGHWAY 29 SOUTH, MIDWAY MALL
ALEXANDRIA, MINNESOTA 56308
(320) 762-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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 ( )
Number of shares of common stock outstanding as of the close of
business on July 31, 1996:
CLASS A 7,407,717
CLASS B 1,445,566
TABLE OF CONTENTS
PAGE
NUMBER
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS-
AS OF JUNE 30, 1996 AND DECEMBER 31, 1995...........................3
CONSOLIDATED STATEMENTS OF OPERATIONS-
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995............5
CONSOLIDATED STATEMENTS OF CASH FLOWS-
SIX MONTHS ENDED JUNE 30, 1996 AND 1995.............................6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.............................7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.......................9
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.............15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................15
SIGNATURE PAGE..............................................................16
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
RURAL CELLULAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
JUNE 30, DECEMBER 31,
1996 1995
------------ ------------
(UNAUDITED)
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 304,437 $ 125,137
Accounts receivable, net 4,633,326 3,019,720
Inventories 910,011 628,016
Other current assets 113,283 95,693
------------ ------------
Total current assets 5,961,057 3,868,566
------------ ------------
PROPERTY AND EQUIPMENT:
Land 1,215,383 1,075,202
Buildings and towers 9,459,980 8,721,385
Equipment 28,179,867 16,066,315
Furniture and fixtures 2,650,403 2,193,718
Assets under construction 3,209,786 3,721,584
Less - Accumulated depreciation (10,453,389) (8,261,125)
------------ ------------
Net property and equipment 34,262,030 23,517,079
------------ ------------
INVESTMENTS AND OTHER ASSETS:
Investments in unconsolidated affiliates 1,416,281 1,165,891
Restricted investments 923,930 741,330
Deferred charges, less accumulated amortization
of $727,092 and $677,184 -- 49,908
Paging licenses and other assets, less accumulated
amortization of $127,137 and $114,358 335,515 795,707
------------ ------------
Total investments and other assets 2,675,726 2,752,836
------------ ------------
$ 42,898,813 $ 30,138,481
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
<TABLE>
<CAPTION>
RURAL CELLULAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
JUNE 30, DECEMBER 31,
1996 1995
------------ ------------
(UNAUDITED)
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt $ 1,571,907 $ 2,725,496
Accounts payable 7,373,933 4,041,906
Advance billings and customer deposits 1,223,802 964,463
Accrued interest 13,201 312,304
Other accrued liabilities 374,013 239,598
------------ ------------
Total current liabilities 10,556,856 8,283,767
LONG-TERM DEBT 58,258 16,397,209
------------ ------------
Total liabilities 10,615,114 24,680,976
------------ ------------
SHAREHOLDERS' EQUITY:
Undesignated shares, $.01 par value;
10,000,000 shares authorized;
no shares issued and outstanding -- --
Class A common stock, $.01 par value;
15,000,000 shares authorized;
7,407,717 and 4,382,154 shares issued and outstanding 74,077 43,822
Class B common stock, $.01 par value;
5,000,000 shares authorized;
1,445,566 and 1,601,266 shares issued and outstanding 14,456 16,013
Additional paid-in capital 34,445,849 8,412,634
Accumulated deficit (2,250,683) (3,014,964)
------------ ------------
Total shareholders' equity 32,283,699 5,457,505
------------ ------------
$ 42,898,813 $ 30,138,481
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
<TABLE>
<CAPTION>
RURAL CELLULAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
------------------------------- -------------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES:
Service revenues $ 5,554,796 $ 3,342,588 $ 9,961,831 $ 6,135,939
Roamer revenues 1,508,452 1,095,010 2,415,097 1,825,847
Equipment sales 382,752 502,348 750,744 869,726
------------ ------------ ------------ ------------
Total revenues 7,446,000 4,939,946 13,127,672 8,831,512
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Network costs 1,513,678 1,113,292 3,108,059 2,188,062
Cost of equipment sales 484,305 497,545 980,091 859,772
Selling, general and administrative 3,242,033 1,796,668 6,115,587 3,215,954
Depreciation and amortization 1,309,616 762,219 2,279,831 1,508,118
------------ ------------ ------------ ------------
Total operating expenses 6,549,632 4,169,724 12,483,568 7,771,906
------------ ------------ ------------ ------------
OPERATING INCOME 896,368 770,222 644,104 1,059,606
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest expense (14,376) (340,038) (205,546) (672,765)
Interest and dividend income 33,482 286,238 324,239 293,141
Equity in earnings of unconsolidated
affiliates 15,182 -- 27,734 --
------------ ------------ ------------ ------------
Other income (expense), net 34,288 (53,800) 146,427 (379,624)
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAX 930,656 716,422 790,531 679,982
INCOME TAX PROVISION 25,000 219,184 26,250 224,684
------------ ------------ ------------ ------------
NET INCOME $ 905,656 $ 497,238 $ 764,281 $ 455,298
============ ============ ============ ============
NET INCOME PER COMMON SHARE $ .10 $ .08 $ .09 $ .08
============ ============ ============ ============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 8,884,769 5,983,420 8,152,972 5,983,420
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<TABLE>
<CAPTION>
RURAL CELLULAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED JUNE 30,
-------------------------------
1996 1995
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 764,281 $ 455,298
Adjustments to reconcile net income to net cash provided by
operating activities -
Depreciation and amortization 2,279,831 1,508,118
Deferred income tax benefit -- 216,684
Gain on restricted investments (183,124) (217,523)
Equity in earnings of unconsolidated affiliates (27,734) --
Change in other operating elements:
Accounts receivable (1,613,606) (432,526)
Inventories (281,995) (8,727)
Other current assets (17,590) 19,055
Accounts payable 3,332,027 871,348
Advance billings and customer deposits 259,339 (199,716)
Accrued liabilities (164,688) (2,080)
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 4,346,741 2,209,931
------------ ------------
INVESTING ACTIVITIES:
Purchases of property and equipment, net (12,962,095) (3,927,503)
Contributions to unconsolidated affiliates (222,656) (116,193)
Purchase of restricted investments (75,404)
Other, net (30,238) (108,443)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (13,214,989) (4,227,543)
------------ ------------
FINANCING ACTIVITIES:
Proceeds from issuance of common stock,
net of offering costs 26,540,088 --
Proceeds from issuance of long-term debt 5,178,000 2,439,160
Repayment of long-term debt (22,670,540) (397,754)
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 9,047,548 2,041,406
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 179,300 23,794
CASH AND CASH EQUIVALENTS, AT BEGINNING OF PERIOD 125,137 236,122
------------ ------------
CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 304,437 $ 259,916
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
RURAL CELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
The accompanying consolidated balance sheet as of June 30, 1996, the
consolidated statements of operations for the three and six months ended June
30, 1996 and 1995, and the consolidated statements of cash flows for the six
months ended June 30, 1996 and 1995 have been prepared by the Company without
audit. In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations, and cash flows at June 30, 1996 and for all periods
presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
consolidated financial statements be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's December 31,
1995 Form 10-K. The results of operations for the periods ended June 30, 1996
are not necessarily indicative of the operating results for the full fiscal
year.
Certain reclassifications have been made to the December 31, 1995
consolidated balance sheet to conform to the June 30, 1996 presentation. These
reclassifications had no effect on net income or total shareholders' equity as
previously reported.
2. LONG TERM DEBT:
On April 25,1996, the Company entered into a $10,000,000 line of credit
agreement (the Agreement) with the St. Paul Bank for Cooperatives which expires
on March 31, 1997. The Agreement bears interest at the weekly Farm Credit Bank
rate plus 1.4% (6.76% at June 30, 1996), and $1,530,000 was outstanding under
the Agreement at June 30, 1996. The Agreement is subject to certain requirements
regarding levels of net worth, cash flow, certain financial ratios, and dividend
distributions. The Company is in compliance with all Agreement requirements as
of June 30, 1996.
3. SHAREHOLDERS' EQUITY:
During the first quarter of 1996, the Company completed an initial public
offering (the Offering) of 3,450,000 shares of Class A Common Stock, of which
2,869,863 shares were sold by the Company and 580,137 previously issued shares
were offered by certain shareholders. The Company received net proceeds of
approximately $26.0 million from the Offering with the proceeds used to repay
long-term debt and to provide capital for network expansion. In connection with
the Offering, the exercise price of 150,600 employee stock options was fixed at
$10.00 per share, the price at which the stock was sold to the public in this
offering.
4. SUPPLEMENTAL DISCLOSURE OF CONSOLIDATED CASH FLOW INFORMATION:
SIX MONTHS ENDED JUNE 30,
-----------------------------
1996 1995
------------- ------------
Cash paid during the period for interest $504,695 $705,607
Cash paid during the year for income taxes $ --- $ 8,000
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of commercial paper with original
maturities of three months or less.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table presents certain statements of operations data as a
percentage of total revenues as well as other cellular performance indicators
for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ------------------
1996 1995 1996 1995
----- ----- ----- -----
<S> <C> <C> <C> <C>
REVENUES:
Service revenues 74.6% 67.7% 75.9% 69.5%
Roamer revenues 20.3 22.2 18.4 20.7
Equipment sales 5.1 10.1 5.7 9.8
----- ----- ----- -----
Total revenues 100.0 100.0 100.0 100.0
----- ----- ----- -----
OPERATING EXPENSES:
Network expenses 20.3 22.5 23.7 24.8
Cost of equipment sales 6.5 10.1 7.5 9.7
Selling, general, and administrative 43.6 36.4 46.6 36.4
Depreciation and amortization 17.6 15.4 17.3 17.1
----- ----- ----- -----
Total operating expenses 88.0 84.4 95.1 88.0
----- ----- ----- -----
OPERATING INCOME 12.0 15.6 4.9 12.0
----- ----- ----- -----
OTHER INCOME (EXPENSE):
Interest expense (0.2) (6.9) (1.6) (7.6)
Interest and dividend income .5 5.8 2.5 3.3
Equity in earnings of
unconsolidated affiliates .2 -- .2 --
----- ----- ----- -----
Other income (expense), net .5 (1.1) 1.1 (4.3)
----- ----- ----- -----
INCOME BEFORE INCOME TAX 12.5 14.5 6.0 7.7
INCOME TAX PROVISION .3 4.4 .2 2.5
----- ----- ----- -----
NET INCOME 12.2 % 10.1% 5.8% 5.2%
===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -------------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
OTHER CELLULAR
PERFORMANCE INDICATORS:
Ending period penetration 6.0% 3.5% 6.0% 3.5%
Average monthly retention 98.9% 99.0% 98.9% 99.0%
Average monthly revenue per subscriber $ 68 $ 73 $ 64 $ 67
Average acquisition cost per subscriber(1) $ 324 $ 377 $ 322 $ 402
</TABLE>
(1) Determined by dividing the total of sales and marketing costs, agent
commissions, and gains or losses on cellular telephone sales and leases by the
gross subscribers added each period.
THREE MONTHS ENDED JUNE 30, 1996 VS. THREE MONTHS ENDED JUNE 30, 1995
REVENUES
Service revenues increased 66.2% to $5,554,796 for the quarter ended June
30, 1996 from $3,342,588 for the comparable prior period, resulting primarily
from a 70.8% increase since June 30, 1995 in the number of cellular subscribers,
partially offset by a decrease of 6.2% in the corresponding average revenue per
subscriber. The Company has achieved this growth through the implementation of
customer sales and service strategies and by adherence to network service
quality controls. This growth resulted in a market penetration rate of 6.0% at
June 30, 1996, up significantly from 3.5% for the comparable prior period.
Service revenues include paging revenues which increased 83.2% to $198,405 for
the quarter ended June 30, 1996 from $108,279 for the comparable prior period.
Roamer revenues increased 37.8% to $1,508,452 for the quarter ended June
30, 1996 from $1,095,010 for the comparable prior period. This increase was
primarily due to a 55.8% increase in the number of roamer minutes, resulting in
part from expanded coverage provided by additional cell sites added in 1995 and
1996 and overall increased usage of the Company's cellular service by a greater
number of roamers in the Company's cellular service area. While total roamer
revenues increased, the average revenue per roamer declined due in part to
reciprocal agreements with certain surrounding carriers in which the Company
discounted its intercarrier exchange rates.
Equipment revenues decreased 23.8% to $382,752 for the quarter ended June
30, 1996 from $502,348 for the comparable prior period reflecting the Company's
strategy of leasing rather than selling equipment to cellular subscribers. As
the Company continues to lease equipment to cellular subscribers, the Company
expects that equipment revenue will remain flat or decline.
OPERATING EXPENSES
Network costs decreased as a percentage of total revenues to 20.3% for the
quarter ended June 30, 1996 from 22.5% for the comparable prior period and
increased by 36.0% to $1,513,678 from $1,113,292. The increased expenses reflect
additional operating expenses from new cell sites that were added during 1995
and 1996 and higher total variable costs resulting from increased network usage
associated with subscriber growth, partially offset by the effects of economies
of scale. Network expenses include switching and transport expenses and the
expenses associated with the maintenance and operation of the Company's cellular
and paging network facilities.
Selling, general, and administrative (SG&A) expenses increased as a
percentage of total revenue to 43.6% for the quarter ended June 30, 1996 from
36.4% for the comparable prior period, due primarily to an increase in the
number of commissions paid as a result of the Company's marketing and
promotional strategies, additional employees and incremental wage and benefit
increases. SG&A expenses include salaries, benefits, and operating expenses such
as marketing, bad debt, customer support, accounting, administration,
commissions and billing. Although SG&A expenses increased due to strong
subscriber growth, the average acquisition cost per gross cellular subscriber
decreased by 14.0% to $324 for the quarter ended June 30, 1996 from $377 for the
comparable prior period due to subscriber growth.
Depreciation and amortization expenses increased 71.8% to $1,309,616 for
the quarter ended June 30, 1996 from $762,219 for the comparable prior period,
resulting primarily from the continued increase in investments made by the
Company in network facilities.
OPERATING INCOME
Operating income for the quarter ended June 30, 1996 was $896,368 with an
operating margin of 12.0% as compared to operating income of $770,222 with an
operating margin of 15.6% in the comparable prior period. The reduced operating
margin is due primarily to increased agent commission expenses in SG&A.
OTHER INCOME (EXPENSES)
Interest and dividend income decreased to $33,482 for the quarter ended
June 30, 1996 from $286,238 for the comparable prior period primarily as a
result of The St. Paul Bank for Cooperatives patronage refund being recorded in
the first quarter of 1996 and the second quarter of 1995. Interest expense
decreased 95.8% for the quarter ended June 30, 1996 as a result of the repayment
of substantially all outstanding debt upon completion of the Company's initial
public offering in 1996.
NET INCOME
Income before income taxes increased to $930,656 for the quarter ended June
30, 1996 from $716,422 in the comparable prior period. The provision for taxes
of $25,000 for the quarter ended June 30, 1996 reflects corporate alternative
minimum income taxes and the use of net operating loss carryforwards.
Net income increased to $905,656 in the second quarter of 1996 from $497,238 in
the second quarter of 1995.
SIX MONTHS ENDED JUNE 30, 1996 VS. SIX MONTHS ENDED JUNE 30, 1995
REVENUES
Service revenues increased 62.4% to $9,961,831 for the six months ended
June 30, 1996 from $6,135,939 for the comparable prior period, resulting
primarily from a 70.8% increase since June 30, 1995 in the number of cellular
subscribers, partially offset by a decrease of 5.0% in the corresponding average
revenue per subscriber. The Company has achieved this growth through the
implementation of customer sales and service strategies and by adherence to
network service quality controls. This growth resulted in a market penetration
rate of 6.0% at June 30, 1996, up significantly from 3.5% for the comparable
prior period. Service revenues include paging revenues which increased 75.7% to
$365,983 for the six months ended June 30, 1996 from $208,270 for the comparable
prior period.
Roamer revenues increased 32.3% to $2,415,097 for the six months ended June
30, 1996 from $1,825,847 for the comparable prior period. This increase was
primarily due to a 65.0% increase in the number of roamer minutes, resulting in
part from expanded coverage provided by additional cell sites added in 1996 and
1995 and overall increased usage of the Company's cellular service by a greater
number of roamers in the Company's cellular service area. While total roamer
revenues increased, the average revenue per roamer declined due in part to
reciprocal agreements with certain surrounding carriers in which the Company
discounted its intercarrier exchange rates.
Equipment revenues decreased 13.7% to $750,744 for the six months ended
June 30, 1996 from $869,726 for the comparable prior period reflecting the
Company's strategy of leasing rather than selling equipment to cellular
subscribers. As the Company continues to lease equipment to cellular
subscribers, the Company expects that equipment revenue will remain flat or
decline.
OPERATING EXPENSES
Network costs decreased as a percentage of total revenues to 23.7% for the
six months ended June 30, 1996 from 24.8% for the comparable prior period and
increased by 42.0% to $3,108,059 from $2,188,062. The increased expenses reflect
additional operating costs from new cell sites that were added during 1996 and
1995 and higher total variable expenses resulting from increased network usage
associated with subscriber growth, partially offset by the effects of increases
in economies of scale.
SG&A increased as a percentage of total revenue to 46.6% for the six months
ended June 30, 1996 from 36.4% for the comparable prior period, due primarily to
subscriber growth and commissions paid as a result of the Company's successful
marketing and promotional strategies and to additional employees and incremental
wage and benefit increases. Although SG&A expenses increased due to strong
subscriber growth, the average acquisition cost per gross cellular subscriber
decreased by 19.9% to $322 for the six months ended June 1996 from $402 for the
comparable prior period due to subscriber growth.
Depreciation and amortization expenses increased 51.2% to $2,279,831 for
the six months ended June 30, 1996 from $1,508,118 for the comparable prior
period, resulting primarily from a continued increase in investments in the
Company's network facilities.
OPERATING INCOME
Operating income for the six months ended June 30, 1996 was $644,104 with a
4.9% operating margin as compared to operating income of $1,059,606 with an
operating margin of 12.0% in the comparable prior period. The reduced operating
margin is due primarily to increased agent commission expenses in SG&A.
OTHER INCOME (EXPENSE)
Interest and dividend income increased to $324,239 for the six months ended
June 30, 1996 from $293,141 for the comparable prior period as a result of the
increase in the St. Paul Bank for Cooperatives patronage refund and increases in
interest on cash balances from the initial public offering. Interest expense
decreased 69.4% for the six months ended June 30, 1996 as a result of the
repayment of substantially all outstanding debt.
NET INCOME
Income before income taxes increased to $790,531 for the six months ended
June 30, 1996 from $679,982 in the comparable prior period. The provision for
taxes of $26,250 for the six months ended June 30, 1996 reflects corporate
minimum income taxes and the usage of net operating loss carryforwards. Net
income increased to $764,281 for the first six months of 1996 from $455,298 in
the first six months of 1995.
SEASONALITY
The Company experiences seasonal fluctuations in revenues and operating
income. The Company's average monthly revenue per cellular subscriber has
historically increased during the second and third quarters. These increases
reflect greater demand in the Company's cellular service area by weekend and
recreational subscribers and use in seasonal industries, such as agriculture and
construction. Because the Company's cellular service area includes many seasonal
recreational areas, the Company expects that roaming revenues will continue to
be more seasonally volatile than local service revenues.
The Company believes that the anticipated increase in cellular usage,
together with the increased number of subscribers, reduced acquisition costs,
and enhanced operating leverage, should result in net income for the third and
fourth quarters of 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary liquidity requirements are for operating expenses and
for expansion of network services and facilities to support subscriber growth.
As of June 30, 1996, the Company had 66 cell sites and 32 paging transmitters.
The Company will continue to construct additional cell sites and purchase
cellular equipment in order to increase capacity as subscriber and usage volumes
increase. Specific capital requirements of the Company are based on the
property, equipment, and network facilities requirements associated with the
Company's expansion plans and rate of subscriber growth. The Company currently
estimates that it will spend approximately $10 million for capital expansion
during the last two quarters of 1996.
Under a previous loan agreement with the St. Paul Bank for Cooperatives,
the Company was able to borrow up to $27,231,970 subject to certain requirements
regarding levels of net worth, cash flow, certain financial ratios, and dividend
distributions. As a result of the Offering, the Company repaid all amounts
outstanding under the agreement. On April 25, 1996, the Company entered into a
new loan agreement with the St. Paul Bank for Cooperatives consisting of a
$10,000,000 line of credit. The outstanding balance on this line was $1,530,000
as of June 30, 1996. The interest rate ranged from 6.7% to 7.0% during the
quarter ended June 30, 1996.
Net cash provided by operating activities during the six months ended June
30, 1996 and 1995 was $4,346,741 and $2,209,931, respectively. The primary
source of the increase during the first half of fiscal 1996 was an increase in
accounts payable resulting from the construction of the Company's digital
microwave network facilities. Funds available under the line of credit agreement
will be used to reduce accounts payable.
Net cash used in investing activities during the six months ended June 30,
1996 and 1995 was $13,214,989 and $4,227,543, respectively. The principal use of
cash in fiscal year 1996 was for the purchase of property and equipment for the
Company's cellular network and construction of the digital microwave network,
which became operational in the second quarter of 1996. In July, 1996 the
Company filed applications to bid for 10Mhz PCS licenses in its service area and
is required to make a refundable deposit of approximately $1.4 million for
license fees. The Company recently began construction of a new corporate office
headquarters in Alexandria, Minnesota, completion of which is expected in the
fourth quarter of 1996. The total cost of the new building is anticipated to be
between $2.5 and $3.0 million. The office headquarters and PCS license fees will
be funded through additional borrowings under the line of credit agreement.
Net cash provided by financing activities during the six months ended June
30, 1996 and 1995 was $9,047,548 and $2,041,406, respectively. In February 1996,
the Company completed its Offering of 2,869,863 shares of Class A Common Stock
and received proceeds of $26,061,914, net of offering expenses. The Company used
approximately $20,484,759 of the net proceeds to repay substantially all
outstanding debt. The Company has used the remaining net proceeds of the
Offering, together with the funds available under its line of credit agreement,
to fund planned capital expenditures and operating expenses.
FORWARD-LOOKING INFORMATION
Forward-looking statements herein are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. There are
certain important factors that could cause results to differ materially from
those anticipated by some of the statements made herein. Investors are cautioned
that all forward-looking statements involve risks and uncertainty. Some of the
factors that could affect results are the impact of seasonality on cellular
usage, higher than planned operating expenses and capital expenditures, and the
rate at which subscriber acquisition costs are recovered for new subscribers.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
(a) The Company held its Annual Meeting of Shareholders on
May 23, 1996.
(c)1. The Shareholders voted for three Class II Directors,
each to serve a three year term. The vote was as follows
for each of the nominees:
Name Affirmative Authority Withheld
---- ----------- ------------------
George M. Revering 15,078,734 3,250
Don Swenson 15,078,734 3,250
Lawrence C. Ware * 15,072,534 9,450
* Mr. Ware, who was listed as a nominee in the
proxy statement dated April 12, 1996,
subsequently announced that he would be unable to
continue his service as a director following the
Annual Meeting.
2. The Shareholders also considered an amendment to the
Stock Option Plan for Nonemployee Directors. Voting on
approval of the amendment was as follows: 14,875,458
shares in favor, 70,817 opposed, 12,409 abstentions, and
123,300 broker nonvotes
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10 Loan Agreement with St. Paul Bank for Cooperatives dated
April 25, 1996
11 Statement Re Computation of Earnings Per Share
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
June 30, 1996.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
RURAL CELLULAR CORPORATION
(Registrant)
Dated: August 12, 1996 /s/ Richard P. Ekstrand
---------------
--------------------------------------------
Richard P. Ekstrand
President and Chief Executive Officer
Dated: August 12, 1996 /s/ Wesley E. Schultz
---------------
--------------------------------------------
Wesley E. Schultz
Vice President and Chief Financial Officer
(Principal Financial Officer)
EXHIBIT 10
ST. PAUL BANK FOR COOPERATIVES
LOAN AGREEMENT
Borrower:
RURAL CELLULAR CORPORATION
ALEXANDRIA, MINNESOTA
New Loan
$10,000,000.00 - Bridge Loan, Note No. 22130
The St. Paul Bank for Cooperatives (the "Bank") and Borrower agree to the above
loan (the "Loan") to the Borrower subject to all the terms and conditions of
this loan agreement.
I. NOTES AND SECURITY
Advances under this loan agreement hereunder, together with any existing
indebtedness of the Borrower to the Bank, shall be evidenced by a
promissory note or notes acceptable to the Bank, and shall be secured to
the extent of all collateral presently held by the Bank, including but not
limited to all real estate mortgages and security agreements including,
but not limited to:
A. The existing first security interest covering all personal property
and fixtures, including but not limited to, all machinery and
equipment, inventory, receivables, investment property, accounts,
contract rights, chattel paper, documents and instruments, general
intangibles and all proceeds of the above, now owned or hereafter
acquired;
B. First real estate mortgages, covering all of the Borrower's real
property, with acceptable title opinion or title insurance on the
property included in the mortgages;
C. The existing collateral assignments of the Cellular Switch User
Agreements, together with such third party consents as the Bank
shall deem reasonably necessary;
D. Collateral assignments of the leasehold interests of the Borrower in
each lease to which it is a party, together with such third party
consents as the Bank shall deem reasonably necessary; and
E. Assignments of the notes of RCC Paging, Inc., RCC Wireless, Inc.,
and RCC Network, Inc. (the "Subsidiaries"), together with an
assignment of all security therefor. Borrower shall execute and
deliver to the Bank such further mortgages, security agreements,
security documents, and collateral assignments and such third party
consents as the Bank shall require including such documents
applicable to future acquired assets and property. All property
under lien to the Bank as security for the Loan shall be collateral
for all indebtedness of the Borrower to the Bank.
II. LIMITATION ON ADVANCES
The following conditions shall be satisfied prior to each advance made
under the Loan:
A. The first advances on the Bridge Loan shall be used to repay the
existing indebtedness on Seasonal Loan, Note No. 27030 and Term
Loan, Note No. 37040, made by the Bank to the Borrower. Upon
repayment, all loan commitments will be cancelled with the exception
of the Loan.
B. Borrower shall have entered into and provided the Bank with copies
of legal descriptions for all owned sites and leases for all leased
sites on which equipment being used in the construction and
operation of a cellular telephone system ("System") is to be
located.
C. All necessary permits and FCC licenses shall continue to be in full
force and effect at the time of each advance.
D. At the time of each advance, the Cellular Switch User Agreements
shall remain in full force and effect.
E. There shall be no event of default and making the advance shall not
cause an event of default.
III. INTEREST
A. All outstanding Loan balances hereunder shall bear a rate of
interest as the Bank shall from time to time prescribe; provided,
however, the fixed amounts shall bear such rates of interest as
described in the statements (as defined in the "FIXED RATE SEASONAL
ADVANCES AND MATURITIES" section of this loan agreement).
B. Interest on the Loan shall be payable on the last day of each
calendar quarter or as the Bank may specify.
IV. FIXED RATE SEASONAL ADVANCES AND MATURITIES
In accordance with and subject to the BANK'S FIXED RATE SEASONAL LOAN
PROGRAM, and subject to the Bank's overall program funding limitations, it
is agreed the interest rate may be fixed on any seasonal loan indebtedness
(the "fixed amount") made under this loan agreement as follows:
A. The minimum fixed amount shall be $100,000.
B. Each fixed amount and each selected pricing maturity date will be
treated as a separate indebtedness for interest rate designation and
interest billing purposes.
C. Fixed amount pricing maturities shall not be less than 30 days nor
greater than 180 days from the day of advance to be based on the
maturity selection of the Borrower; however, all fixed amounts shall
have pricing maturities no later than September 30, 1997.
D. The Borrower may receive same day interest rate quotes if a firm
request is placed and accepted by the Bank before 12:01 p.m.
(Central Time) on any business day. A firm request is one placed by
telephone or in writing by an authorized representative of the
Borrower.
E. Fixed amounts shall be automatically converted to the variable rate
seasonal loan at maturity.
F. Fixed amounts cannot be repaid or repriced by the Borrower prior to
their respective pricing maturity dates without being subject to
prepayment penalties. Such penalties shall be determined according
to a methodology specified by the Bank which preserves the Bank's
yield on the fixed amount prepaid or repriced and which is based
upon the difference between the Bank's cost of like funds to pricing
maturity at the time of prepayment and the existing fixed rate on
the fixed amount.
G. Each fixed amount shall be summarized in the Daily Activity
Statement (the "statement") to the Borrower. Each statement shall
reference and confirm at least the following:
1. Note No. 22130.
2. The fixed amount and its Contract No.
3. The rate of interest.
4. The effective date.
5. The pricing maturity date.
H. The Borrower agrees that the statement shall verify the
understanding reached by the parties, and that the Borrower shall be
bound by the statement without its signature; provided, however, if
there is an error reflected in the statement, the Borrower shall
notify the Bank of the error within five days after receipt of the
statement and an appropriate correction will be made.
I. If there is a question on the interest rate applicable to the fixed
amount, the rate as established by the Bank for such amounts shall
be controlling.
V. CONDITIONS
While this loan agreement is in effect, the Borrower agrees to comply with
the following conditions:
A. Eligibility Status: The Borrower will maintain its status as an
entity eligible to borrow from a bank for cooperatives as that
eligibility criteria is defined in Section 3.8 of the Farm Credit
Act of 1971, as amended (12 U.S.C. 2129).
B. Stock Investment: The Borrower will purchase equities of the Bank in
such amounts as prescribed by the Bank's capital plan and any
amendments to the plan.
C. Insurance: The Borrower will (and will cause the Subsidiaries to)
maintain business and property insurance and fidelity bond coverage
on its officers and employees, with financially sound insurers, in
amounts sufficient to protect the Loan. The Borrower shall notify
the Bank promptly of any damage or loss of assets, or any incurrence
of liability outside the ordinary course of business, of $50,000 or
more.
D. Financial Information: The Borrower will furnish the Bank
consolidated unqualified annual audits prepared by a certified
public account within 150 days of the fiscal year end, unaudited
consolidated quarterly balance sheets and operating statements, and
such other financial information as the Bank may request relative to
the Borrower's business, and permit such examination of books and
records as the Bank may specify. The Borrower also agrees that
parties preparing such financial information are authorized to
release to the Bank such financial information as the Bank may
request.
E. Negative Pledge: The Borrower will not (and will cause its
Subsidiaries not to) mortgage, pledge, assign, or grant security
interests in any assets to any other party without the prior written
consent of the Bank.
F. Dividends: The Borrower will not (and will cause its Subsidiaries
not to) pay any dividends or make any other distribution to its
shareholders without the prior written consent of the Bank, unless
both before and after such dividend or distribution, the Borrower
shall be in compliance with all its obligations under this loan
agreement.
G. Expenses: Any reimbursement of expenses to shareholders (or
affiliates of shareholders or their shareholders or officers) shall
be for ordinary and necessary expenses and shall be reasonable in
amount.
H. Event of Default: As soon as the existence of any event of default
becomes known to any officer of the Borrower, the Borrower shall,
within 10 days, give the Bank notice of such event of default.
I. Change in Officers: the Borrower shall notify the Bank within 30
days of any change in its officers.
J. Change in Financial Condition: The Borrower shall, within 10 days
after the event, notify the Bank of any material adverse change in
the financial condition, business, results of operation or prospects
of the Borrower or its Subsidiaries, (which shall include any
litigation, or matters with the Federal Communications Commission,
or other regulatory agencies) which has or may have an adverse
material affect on the financial operation of the Borrower or its
Subsidiaries.
K. Compliance with Law: The Borrower shall (and shall cause its
Subsidiaries to) comply with all laws, rules, regulations, and
orders applicable to the Borrower's business.
L. Licenses: The Borrower shall not (and shall cause its Subsidiaries
not to) take any action nor fail to take any action which results in
an adverse modification, cancellation, or surrender of licenses,
certificates, approvals, filings, or reports as required in the
operation of its business.
M. Operating Agreements: The Borrower has in place the Cellular Switch
User Agreements necessary for the operation of the System. The
Borrower may amend any agreement(s) necessary to the operation of
the System and shall provide the Bank with notice of such changes.
Upon receipt by the Borrower of any notice of default under any of
the Agreements, the Borrower shall, within 10 days, notify the Bank
in writing and enclose a copy of the notice of default. The Bank
shall have the right but shall not be obligated to cure any default
of the Borrower. The Borrower shall reimburse the Bank for all
expenses reasonably incurred by the Bank in making any cure.
N. Liquidation, Mergers, Consolidation, or Reorganization: The Borrower
will not (and will cause its Subsidiaries not to) liquidate, merge,
consolidate, or reorganize with or into any other organization
without the prior written consent of the Bank, which consent shall
not be unreasonably withheld.
O. Application of Law: This loan agreement shall be interpreted in
accordance with and governed by the laws of Minnesota.
VI. FINANCIAL COVENANTS
While this loan agreement is in effect, the Borrower agrees to comply with
the following covenants:
A. Equity Ratio: The Borrower shall maintain a minimum equity ratio of
30%. Equity ratio shall be defined as total equity divided by total
assets. Compliance with this covenant will be measured on a
consolidated basis and will be certified by the Borrower within 45
days after the end of each calendar quarter commencing June 30,
1996.
B. Ratio of Term Debt to the Sum of Operating Cash Flow: The Borrower
shall maintain a maximum ratio of term debt to sum of operating cash
flow of 4.0:1 for the combined four consecutive calendar quarters
ending March 31, 1996; and for the sum of each subsequent four
consecutive calendar quarters thereafter.
Term Debt shall include loans and capital leases from all sources
with a final maturity of more than one year from the original date
of the loan including the current portion of the Loan. Deferred
taxes and other deferred liabilities income, and credits shall not
be included. Operating cash flow shall be defined as earnings before
depreciation and amortization, interest expense and income,
patronage refunds from the Bank, gain or loss from the sale of
assets, extraordinary items and income taxes. Compliance with this
covenant will be measured on a consolidated basis and will be
certified by the Borrower within 45 days after the end of each
calendar quarter commencing June 30, 1996.
C. Debt Service Coverage Ratio: The Borrower shall maintain debt
service coverage ratio of 1.50:1 for the combined four consecutive
calendar quarters ending June 30, 1996, and for the sum of each
subsequent four consecutive calendar quarters thereafter.
Debt service coverage ratio shall be defined as (1) net income after
taxes, less distributions to its shareholders and dividends on
preferred and common stock, plus total long-term debt interest
expense, plus depreciation and amortization (2) divided by total
senior debt service (total accrued interest plus total scheduled
principal payments). Compliance with this covenant shall be measured
on a consolidated basis and will be certified by the Borrower within
45 days after the end of each calendar quarter commencing June 30,
1996.
VII. ENVIRONMENTAL REPRESENTATIONS, CONDITIONS AND INDEMNITY CLAUSE
Except as disclosed in writing to the Bank, the Borrower (and will cause
its Subsidiaries to) represents and agrees to the following:
A. Hazardous Material Notice: The Borrower represents that it has not
received a notice from any governmental agency or other persons nor
is there any present or threatened suit, investigation, or other
proceeding, with regard to Hazardous Materials (defined in paragraph
7 below) on, in, or affecting its owned or leased property. It shall
immediately give the Bank oral and written notice if it receives
such a notice.
B. No Violation of Environmental Laws: The Borrower has not and will
not violate any federal, state, or local environmental laws relating
to or affecting its owned or leased property, which violation would
have a material affect on the Borrower's or Subsidiaries' business
or materially affects the value of the collateral.
C. No Releases of Hazardous Material: There has been no release, nor
shall the Borrower (and shall cause its Subsidiaries not to) permit
any release, of such nature requiring notification to proper
authorities of any Hazardous Material onto the Borrower's or its
Subsidiaries' owned or leased property.
D. Storage Tank Registered; No Leaks: All above ground and underground
storage tanks have been duly registered with all applicable federal,
state and local government authorities. Neither the Borrower nor its
Subsidiaries have knowledge of any leaks from any of its above
ground or underground storage tanks.
E. Investigation of Released Hazardous Materials: If there is a
suspected release of Hazardous Materials, the Borrower shall (and
shall cause its Subsidiaries to), at its own expense conduct all
investigations, testing, and other actions, including an
environmental audit made at the Bank's request, necessary to
determine the extent (if any) of the release of Hazardous Materials
and to clean up and remove all Hazardous Material in accordance with
environmental laws.
F. Indemnity: The Borrower agrees to indemnify, hold harmless, and
defend the Bank against all claims of whatever kind (including
attorneys', consultants', and experts' fees) paid or asserted
against the Bank as a direct result of the Borrower's or its
Subsidiaries' violation of any environmental law. This indemnity
shall continue for the benefit of the Bank after the termination of
this loan agreement or other loan or security documents.
G. Definition: Hazardous Material is defined as any toxic, radioactive,
or hazardous substance, material, waste, pollutant, emission, or
contaminant, including but not limited to: (a) asbestos, (b) urea
formaldehyde, (c) the group of organic compounds known as
polychlorinated biphenyls (PCBs), (d) any petroleum product and
byproduct including but not limited to gasoline, fuel oil, crude
oil, and the various constituents of such products, and (e)
pesticides, fertilizers, and other agricultural chemicals.
VIII. REPAYMENT
The indebtedness arising from the Loan shall be repaid as follows:
The Bridge Loan, Note No. 22130, of not to exceed $10,000,000 shall mature
on March 31, 1997; provided, however, any balances outstanding under the
fixed rate seasonal loan provisions shall mature as specified in the
statement. Any outstanding fixed amounts as of March 31, 1997 shall be
repaid no later than September 30, 1997.
The Bank, at its discretion, shall apply repayments to the reduction of
any of the indebtedness outstanding between the Bank and the Borrower;
provided, that it shall not apply payments to any fixed rate portion of
the loan in excess of current amounts due thereunder without Borrower's
consent.
IX. LATE FEE PENALTY
Payments received fifteen (15) calendar days after the scheduled repayment
date are subject to a late payment penalty equal to 1% of the past due
amount but not less than $25.00 per transaction.
X. EXPIRATION
The unadvanced portion of this Loan shall be cancelled as indicated below;
provided, however, the Bank may, at its option, extend the expiration date
of the Loan and the maturity date of the Seasonal Loan without notice to
or consent of the Borrower.
Bridge Loan, Note No. 22130 - March 31, 1997
XI. REINSTATEMENT
In order to facilitate repayments and reborrowings under this loan
agreement, the Bank is authorized to reinstate all sums repaid on the
Bridge Loan through the expiration date specified in this loan agreement;
provided, however, that the total amount outstanding under this loan
agreement shall not exceed the face amount of the Bridge Loan; and
provided, further, that the right of the Borrower to such reinstatement
may be denied and cancelled at any time at the option of the Bank.
XII. DEFAULT PROVISION
In the event of default by the Borrower as to any of its undertakings or
covenants contained herein, the Bank, upon notice to the Borrower, may in
its absolute discretion, declare the Borrower to be in default under this
loan agreement, whereupon the Bank shall be relieved of the making of any
further loans to the Borrower. Upon the occurrence of such an event of
default, the Bank may, at its option, declare the unpaid balance of the
principal and interest of any or all notes, or of any other obligations of
the Bank to it, due and payable forthwith, provided, however, that for any
event of default, the Bank shall provide Borrower written notice of the
default and provide 10 business days from the date of receipt of the
notice to cure the default prior to taking action under this provision.
The Bank may exercise any rights given to it by law or other agreement
with the Borrower. The Borrower further agrees that all reasonable and
necessary costs and attorney's fees for the collection and enforcement of
the obligation or obligations of the Borrower (including Bank attorney's
fees in bankruptcy or in the collection of a judgment), which may be
incurred by the Bank in connection with advances made under this loan
agreement even though no foreclosure sale of collateral takes place, shall
be paid by the Borrower.
Each and every right or remedy granted to the Bank pursuant to this loan
agreement and other documents shall be cumulative. Failure or delay on the
part of the Bank to exercise any right or remedy shall not operate as a
waiver.
XIII. NOTICES
All notices, requests and demands required or permitted under the terms of
this loan agreement or other documents shall be in writing and shall be
addressed as set forth below:
Bank: St. Paul Bank for Cooperatives
PO Box 64949
St. Paul, MM 55164-0949
Borrower: Mr. Richard Ekstrand, President
Rural Cellular Corporation
PO Box 1027
Alexandria, MN 56308
XIV. WAIVER OF TERMS AND CONDITIONS
The Bank may at is discretion waive any of the terms and conditions of
this loan agreement including the extension of the final maturity date of
the Loan without the Borrower executing an amendment thereto.
NONNEGOTIABLE NOTE OF
RURAL CELLULAR CORPORATION
ALEXANDRIA, MINNESOTA
NOTE NO. 22130
$ 10,000,000.00 April 25, 1996
For value received, the undersigned ("Maker") promises to pay to the St.
Paul Bank for Cooperatives ("Bank"), at its office in the City of St. Paul,
Minnesota, the sum of Ten Million and no/100 Dollars ($10,000,000.00) with
interest on the unpaid balance at a variable rate of interest which may increase
or decrease as the Bank may, from time to time, determine as provided in the
Loan Agreement of even date between the Maker and the Bank. The unpaid balance
of this note, with accrued interest, and required equity purchases, may be paid
at any time subject to a prepayment penalty, if any, in accordance with the
terms of the Loan Agreement between the Bank and Maker.
This note shall at all times evidence and constitute prima facie proof
of the indebtedness of the Maker to the Bank or its successors or assigns, of
such amount of money (not in excess of the amount of the principal indebtedness
stated above plus accrued interest and required equity purchases) as shown to be
owing by the records of the Bank, or its successors or assigns.
In the event that suit is brought on this note, the Maker agrees to pay
such reasonable attorneys' fees and costs of collection as permitted by law to
be charged.
The Maker hereby waives presentment for payment, demand, protest, notice
of protest, and notice of dishonor and nonpayment of this note.
If requested by the Bank, its successors or assigns, the Maker agrees to
deliver in substitution for this note, a negotiable note for the amount of the
unpaid balance of Maker's indebtedness, plus accrued interest and required
equity purchases.
RURAL CELLULAR CORPORATION
By /s/ Richard Ekstrand
Its President
By /s/ DS
Its Secretary
XV. ACCEPTANCE
This loan agreement is the full agreement under the terms and conditions
of the Loan. It shall not be modified except in writing, and shall not
become effective unless the Borrower shall, within 60 days from date,
signify its acceptance of these terms and conditions by signing and
returning a copy of this loan agreement to the Bank.
BY DIRECTION of the loan committee this 25th day of April, 1996.
ST. PAUL BANK FOR COOPERATIVES
By /s/ Lee Rosin
Its Vice President
ACCEPTED AND AGREED TO:
/s/ Richard Ekstrand
RURAL CELLULAR CORPORATION
ALEXANDRIA, MINNESOTA
By /s/ Richard Ekstrand
Its President
Date May 24, 1996
<TABLE>
<CAPTION>
RURAL CELLULAR CORPORATION AND SUBSIDIARIES EXHIBIT 11
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
-------------------------- --------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NET INCOME $ 905,656 $ 497,238 $ 764,281 $ 455,298
========== ========== ========== ==========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:
Common shares outstanding 8,853,283 5,983,420 8,133,206 5,983,420
Common stock equivalents 31,486 -- 19,766 --
---------- ---------- ---------- ----------
8,884,769 5,983,420 8,152,972 5,983,420
========== ========== ========== ==========
NET INCOME PER COMMON SHARE $ .10 $ .08 $ .09 $ .08
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 304,437
<SECURITIES> 0
<RECEIVABLES> 4,805,395
<ALLOWANCES> 172,069
<INVENTORY> 910,011
<CURRENT-ASSETS> 5,961,057
<PP&E> 44,715,419
<DEPRECIATION> 10,453,389
<TOTAL-ASSETS> 42,898,813
<CURRENT-LIABILITIES> 10,556,856
<BONDS> 0
0
0
<COMMON> 88,533
<OTHER-SE> 32,195,166
<TOTAL-LIABILITY-AND-EQUITY> 42,898,813
<SALES> 750,744
<TOTAL-REVENUES> 13,127,672
<CGS> 980,091
<TOTAL-COSTS> 4,088,150
<OTHER-EXPENSES> 8,151,293
<LOSS-PROVISION> 244,125
<INTEREST-EXPENSE> 205,546
<INCOME-PRETAX> 790,531
<INCOME-TAX> 26,250
<INCOME-CONTINUING> 764,281
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 764,281
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
