<PAGE>
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, 1997.
( ) 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 OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
3905 DAKOTA STREET S.W.
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
April 30, 1997:
CLASS A 7,487,858
CLASS B 1,365,438
<PAGE>
TABLE OF CONTENTS
PAGE NUMBER
-----------
PART I. - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS -
AS OF MARCH 31, 1997 AND DECEMBER 31, 1996. . . . . . . . . . . . . .3
CONSOLIDATED STATEMENTS OF OPERATIONS -
THREE MONTHS ENDED MARCH 31, 1997 AND 1996. . . . . . . . . . . . . .5
CONSOLIDATED STATEMENTS OF CASH FLOWS -
THREE MONTHS ENDED MARCH 31, 1997 AND 1996. . . . . . . . . . . . . .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 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . 14
SIGNATURE PAGE. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RURAL CELLULAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(UNAUDITED)
MARCH 31, DECEMBER 31,
1997 1996
-------------- --------------
CURRENT ASSETS:
Cash $ 75,151 $ 237,499
Accounts receivable, net 6,024,400 6,323,637
Inventories 904,019 1,309,862
Prepaid income tax 392,133 642,133
Other current assets 405,537 341,964
------------- -------------
Total current assets 7,801,240 8,855,095
------------- -------------
PROPERTY AND EQUIPMENT:
Land 1,276,204 1,233,007
Buildings and towers 13,888,888 13,680,928
Equipment 38,762,766 35,650,325
Furniture and fixtures 4,129,805 3,626,247
Assets under construction 983,033 1,241,124
Less - accumulated depreciation (15,450,213) (13,496,134)
------------- -------------
Net property and equipment 43,590,483 41,935,497
------------- -------------
INVESTMENTS AND OTHER ASSETS:
Licenses, net 6,708,128 6,710,419
Investments in unconsolidated affiliates 1,461,378 1,442,569
Restricted investments 912,709 884,844
Other assets, net 1,231,934 761,935
------------- -------------
Total investments and other assets 10,314,149 9,799,767
------------- -------------
$ 61,705,872 $ 60,590,359
------------- -------------
------------- -------------
The accompanying notes are an integral part of these
consolidated balance sheets.
3
<PAGE>
RURAL CELLULAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
(UNAUDITED)
MARCH 31, DECEMBER 31,
1997 1996
----------- ------------
CURRENT LIABILITIES:
Current maturities of long-term debt $15,047,442 $ 8,447,920
Accounts payable 3,610,561 8,913,734
Accrued expenses 2,397,013 2,065,884
----------- -----------
Total current liabilities 21,055,016 19,427,538
LONG-TERM DEBT 20,482 43,886
----------- -----------
Total liabilities 21,075,498 19,471,424
----------- -----------
MINORITY INTEREST 5,674,029 6,122,583
----------- -----------
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; 7,487,858 and
7,502,552 shares issued and outstanding 74,879 75,025
Class B common stock, $.01 par value
5,000,000 shares authorized; 1,365,438 and
1,350,744 shares issued and outstanding 13,654 13,508
Additional paid-in capital 34,445,849 34,445,849
Retained earnings 421,963 461,970
----------- -----------
Total shareholders' equity 34,956,345 34,996,352
----------- -----------
$61,705,872 $60,590,359
----------- -----------
----------- -----------
The accompanying notes are an integral part of these
consolidated balance sheets.
4
<PAGE>
RURAL CELLULAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
----------------------------
1997 1996
------------ ------------
REVENUES:
Service $6,908,242 $4,407,035
Roamer 1,317,481 906,645
Equipment 96,714 367,993
---------- ----------
Total revenues 8,322,437 5,681,673
---------- ----------
OPERATING EXPENSES:
Network costs 2,000,215 1,594,381
Cost of equipment sales 287,376 495,786
Selling, general and administrative 4,426,573 2,873,554
Depreciation and amortization 1,962,781 970,215
---------- ----------
Total operating expenses 8,676,945 5,933,936
---------- ----------
OPERATING LOSS (354,508) (252,263)
---------- ----------
OTHER INCOME (EXPENSE):
Interest expense (215,209) (191,169)
Interest and dividend income 62,347 290,757
Equity in losses of unconsolidated affiliates 18,809 12,552
Minority interest 448,554 -
---------- ----------
Total other income, net 314,501 112,140
---------- ----------
LOSS BEFORE INCOME TAX (40,007) (140,123)
INCOME TAX PROVISION - 1,250
---------- ----------
NET LOSS $ (40,007) $ (141,373)
---------- ----------
---------- ----------
NET LOSS PER COMMON SHARE $ (.00) $ (.02)
---------- ----------
---------- ----------
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 8,853,296 7,546,087
The accompanying notes are an integral part of these
consolidated financial statements.
5
<PAGE>
RURAL CELLULAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
---------------------------------
1997 1996
-------------- ---------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (40,007) $ (141,373)
Adjustments to reconcile to net cash provided by (used in)
operating activities -
Depreciation and amortization 1,962,781 970,215
Equity in losses of unconsolidated affiliates (18,809) (12,553)
Change in minority interest (448,554) -
Other (28,177) (176,783)
Change in other operating elements:
Accounts receivable 299,237 (294,990)
Inventories 405,843 (407,331)
Other current assets 186,427 (55,904)
Accounts payable (5,303,173) 8,061,621
Accrued expenses 331,129 11,482
------------- -------------
Net cash provided by (used in)
operating activities (2,653,303) 7,954,384
------------- -------------
INVESTING ACTIVITIES:
Purchases of property and equipment, net (3,607,271) (9,697,565)
Contributions to unconsolidated affiliates - (199,771)
Acquisition costs and other, net (477,892) (6,214)
------------- -------------
Net cash used in investing activities (4,085,163) (9,903,550)
------------- -------------
FINANCING ACTIVITIES:
Proceeds from issuance of common stock,
net of offering expenses - 26,540,088
Proceeds from issuance of long-term debt 7,100,000 1,998,000
Repayment of long-term debt (523,882) (21,013,790)
------------- -------------
Net cash provided by financing activities 6,576,118 7,524,298
------------- -------------
NET INCREASE (DECREASE) IN CASH (162,348) 5,575,132
CASH, AT BEGINNING OF PERIOD 237,499 125,137
------------- -------------
CASH, AT END OF PERIOD $ 75,151 $ 5,700,269
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
6
<PAGE>
RURAL CELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
The accompanying consolidated balance sheet as of March 31, 1997, the
consolidated statements of operations for the three months ended March 31, 1997
and 1996, and the consolidated statements of cash flows for the three months
ended March 31, 1997 and 1996, 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 March 31, 1997, 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, 1996, Form
10-K. The results of operations for the period ended March 31, 1997, are not
necessarily indicative of the operating results for the full fiscal year or for
any other interim periods.
2. ACQUISITION:
Effective May 1, 1997 the Company consummated the previously announced
acquisition of the Maine wireless telephone operations and related assets of
Unity Cellular Systems, Inc. (Unicel) and related cellular and microwave
licenses from InterCel Licenses, Inc. Unicel and Intercel Licenses, Inc. are
wholly owned subsidiaries of InterCel, Inc. The Company will operate the
Maine operations through a wholly owned subsidiary known as MRCC, Inc. In
addition, the Company acquired Unicel's 51% interest in Northern Maine
Cellular Partnership (Northern Maine). As consideration for the acquisition,
the Company paid approximately $77 million in cash. These funds were borrowed
under a reducing revolving credit facility with a group of banks headed by
T.D. Securities (USA), Inc., formerly known as The Toronto-Dominion Bank. The
Company also acquired the remaining 49% interest in Northern Maine held by
Cellco Partnership dba Bell Atlantic NYNEX Mobile, Inc. for $7,357,350, also
provided under the credit facility. The acquisitions, which will be accounted
for under the purchase method of accounting, were formally completed on May
1, 1997 using proceeds from the debt facility discussed in Note 3.
3. DEBT:
On May 1, 1997, the Company entered into an agreement with a group of banks
headed by The Toronto-Dominion Bank ("Toronto Bank") for a $140,000,000
Senior Secured Reducing Revolving Credit Facility (the Facility). Funds
available through the Facility will be used 1) to acquire the operating
assets of Unicel and to purchase the remaining 49% interest of Northern Maine
Cellular Partnership, not already owned by Unicel, from Cellco Partnership dba
Bell Atlantic NYNEX Mobile, 2) to refinance outstanding amounts under the
Company's existing loan facility with the St. Paul Bank for Cooperatives, 3)
fund the Wireless Alliance, LLC PCS investment requirements and 4) for other
general corporate purposes.
At the Company's discretion, advances under the Facility bear interest at
LIBOR (London Interbank Offering Rate) or the Base Rate (defined as the
higher of Toronto Bank's prime rate or the federal funds rate plus 1/2%) plus
an applicable margin, as defined. A commitment fee on the unused portion of
the Facility is payable quarterly. The Facility is secured by a pledge of all
the assets of the Company including stock of all present and future operating
subsidiaries owned by the Company and the ownership of Wireless Alliance,
LLC. The Facility is subject to various financial covenants including the
ratio of indebtedness to annualized operating cash flow and ratio of
annualized operating cash flow to interest expense.
4. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT:
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128),
which changes the way companies calculate their earnings per share (EPS).
SFAS 128 replaces primary EPS with basic EPS. Basic EPS is computed by
dividing reported net income (loss) by the weighted average common shares
outstanding, excluding potentially dilutive securities. Diluted EPS under
SFAS 128, formerly fully diluted EPS, is also required to
7
<PAGE>
be disclosed. The Company is required to adopt SFAS 128 for its December 31,
1997, financial statements, at which time all prior year EPS data is to be
restated in accordance with SFAS 128. If the Company had adopted SFAS 128,
the effect of this accounting change on reported net income (loss) per common
share for all periods reported would have been zero.
5. SUPPLEMENTAL DISCLOSURE OF CONSOLIDATED CASH FLOW INFORMATION:
THREE MONTHS ENDED
MARCH 31,
--------------------
1997 1996
-------- --------
Cash paid during the period for interest $ 91,468 $352,559
Cash received during the period for tax refund 250,000 -
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
All of the information presented in Item 2 refers to consolidated results
including Wireless Alliance, LLC unless otherwise indicated.
RESULTS OF OPERATIONS
The following tables present certain statements of operations data as a
percentage of total revenues as well as other cellular performance indicators
for the periods indicated.
THREE MONTHS ENDED MARCH 31,
----------------------------
1997 1996
------------ ------------
REVENUES:
Service 83.0% 77.5%
Roamer 15.8 16.0
Equipment 1.2 6.5
------------ ------------
Total revenues 100.0 100.0
------------ ------------
OPERATING EXPENSES:
Network costs 24.0 28.0
Cost of equipment sales 3.5 8.7
Selling, general, and administrative 53.2 50.6
Depreciation and amortization 23.6 17.1
------------ ------------
Total operating expenses 104.3 104.4
------------ ------------
OPERATING LOSS (4.3) (4.4)
------------ ------------
OTHER INCOME (EXPENSE):
Interest expense (2.6) (3.4)
Interest and dividend income 0.8 5.1
Equity in earnings of
unconsolidated affiliates 0.2 0.2
Minority interest 5.4 -
------------ ------------
Other income, net 3.8 1.9
------------ ------------
LOSS BEFORE INCOME TAX (0.5) (2.5)
INCOME TAX PROVISION - -
------------ ------------
NET LOSS (0.5)% (2.5)%
------------ ------------
------------ ------------
EBITDA (1) 19.3% 12.6%
- --------------------------------------------------------------------------------
(1) EBITDA is the sum of operating loss and depreciation and amortization.
EBITDA is provided because it is a measure commonly used in the cellular
industry. EBITDA is not a measurement of financial performance under
generally accepted accounting principles and does not reflect all
expenses of doing business (e.g., interest expense, depreciation).
Accordingly, EBITDA should not be considered an alternative to net loss
as a measure of performance or to cash flows as a measure of liquidity.
9
<PAGE>
THREE MONTHS ENDED
MARCH 31,
-------------------
1997 1996
------ ------
OTHER CELLULAR
PERFORMANCE INDICATORS (1):
End of period customers in service 47,730 31,272
End of period penetration rate 8.0% 5.2%
Average monthly retention rate (2) 98.8% 98.9%
Average monthly revenue per customer $ 52 $ 59
Average acquisition cost per customer (3) $ 389 $ 320
- --------------------------------------------------------------------------------
(1) Other Cellular Performance Indicators exclude Wireless Alliance, LLC.
(2) Determined for each period by dividing total customers discontinuing
service during the period by the average customers for the period
(beginning customers plus ending customers, divided by two), dividing that
result by the number of months in the period and subtracting from one. The
number of customers used in the calculation excludes reductions caused by
the migration of customers to Wireless Alliance, LLC.
(3) Determined by dividing the total of sales and marketing costs, agent
commissions, and gains or losses on cellular equipment sales and rentals by
the gross customers added each period.
10
<PAGE>
THREE MONTHS ENDED MARCH 31, 1997, COMPARED TO THREE MONTHS ENDED MARCH 31, 1996
REVENUES
Service revenues for the quarter ended March 31, 1997, increased 57% to
$6,908,242 from $4,407,035 for the comparable prior period, resulting primarily
from a 73% increase in the number of cellular customers, partially offset by a
decrease of 12% in the corresponding average revenue per customer. The Company
has achieved this growth through focused customer sales and service strategies
and by adherence to network service quality controls. This growth resulted in a
market penetration rate of 8.0% at March 31, 1997, up significantly from 5.2% on
March 31, 1996. Service revenues include paging revenues, which increased 45% to
$242,634 for the three months ended March 31, 1997, from $167,578 for the
comparable prior period.
Roamer revenues for the quarter ended March 31, 1997, increased 46% to
$1,317,481 from $906,645 for the comparable prior period. This increase was due
to a 45% increase in the number of roamer calls for the quarter ended March 31,
1997, from the comparable prior period resulting in part from expanded coverage
provided by additional cell sites and overall increased usage of the Company's
cellular service by a greater number of roamers in the Company's cellular
service area.
Equipment revenues for the quarter ended March 31, 1997, decreased 74% to
$96,714 from $367,993 for the comparable prior period. This decrease reflects
the continuing popularity of the Company's phone and paging equipment rental
program. The Company expects that equipment sales revenue will continue to
represent a less significant portion of total revenues. Rental revenues, which
are included in service revenues, are expected to continue to increase.
OPERATING EXPENSES
Network expenses as a percentage of total revenues for the quarter ended March
31, 1997, decreased to 24.0% from 28.0% for the comparable prior period. Network
expenses for the quarter ended March 31, 1997, increased 26% to $2,000,215 from
$1,594,381 for the comparable prior period. The increased expenses reflect new
cell sites and transport facilities that were added during 1996 and 1997 and
higher total variable costs resulting from increased network usage associated
with customer growth, partially offset by economy of scale efficiencies and
reductions in the per minute access charges the Company pays to Local Exchange
Operating Companies. 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 for the quarter ended
March 31, 1997, increased as a percentage of total revenues to 53.2% from
50.6% for the comparable prior period and to $4,426,573 from $2,873,554.
These expenses include salaries, benefits, and operating expenses such as
marketing, bad debt, customer support, accounting, administration,
commissions and billing. The increase was due primarily to an increase in the
number and amount of commissions paid as a result of new customers,
additional employees and to a lesser extent increases in the provision for
uncollectible accounts and incremental wage and benefit increases. The
average acquisition cost per gross cellular customer increased by 22% to $389
for the quarter ended March 31, 1997, from $320 for the comparable prior
period due primarily to the increase in depreciation on rental phone
equipment and the number and amount of commissions paid to agents for new
customers during the quarter.
Depreciation and amortization expense for the quarter ended March 31, 1997,
increased 103% to $1,962,781 from $970,215 for the comparable prior period.
The increase was primarily a result of depreciation of network and rental
phone equipment placed in service during 1996. Also, the Company changed the
depreciable life from three years to two years for rental phone equipment
11
<PAGE>
issued during 1997. This change was made in order to better match the
depreciable life with the expected useful life of the rental phone equipment.
OPERATING LOSS
Operating loss for the quarter ended March 31, 1997, was $354,508 with an
operating margin loss of 4.3% compared to an operating loss of $252,263 with an
operating margin loss of 4.4% in the comparable prior period. The increase in
operating loss was due primarily to the number and amount of commissions paid to
agents for new customers during the quarter.
OTHER INCOME (EXPENSE)
Other income for the quarter ended March 31, 1997, increased 180% to $314,501
from $112,140 for the comparable prior period. Minority interest income
represents the minority interest's portion of the net loss of Wireless
Alliance, LLC. Interest expense for the quarter ended March 31, 1997,
increased 13% to $215,209 from $191,169 for the comparable prior period as a
result of increased outstanding debt. Interest and dividend income decreased
79% to $62,347 from $290,757 for the comparable prior period as a result of
higher first quarter 1996 cash balances resulting from the Company's February
1996 IPO.
NET LOSS
Loss before income taxes for the quarter ended March 31, 1997, improved to
$40,007 from $140,123 in the comparable prior period. Net loss for the quarter
ended March 31, 1997, improved to $40,007 from $141,373 in the comparable prior
period.
SEASONALITY
The Company experiences seasonal fluctuations in revenues and operating income
(loss). The Company's average monthly revenue per cellular customer 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 customers 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.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary liquidity requirements are for operating expenses and for
acquisitions and expansion of network services and facilities to support
customer growth. As of March 31, 1997, the Company had 74 cell sites and 45
paging transmitters. The Company will continue to construct additional cell
sites and purchase cellular equipment in order to respond to increases in
customer demand. Specific capital requirements of the Company are based on the
property, equipment, and network facilities requirements associated with the
Company's acquisition and expansion strategy and rate of customer growth. The
Company currently estimates that it will spend approximately $30 million for
capital expansion during the remainder of 1997.
Effective May 1, 1997, the Company entered into an agreement with a group of
banks headed by The Toronto-Dominion Bank for a $140,000,000 Senior Secured
Reducing Revolving Credit Facility. Funds available through the Facility will
be used 1) to acquire the operating assets of Unicel and to purchase the
remaining 49% interest of Northern Maine, not already owned by Unicel, from
Cellco Partnership dba Bell Atlantic NYNEX Mobile, 2) to refinance
outstanding amounts under the Company's existing loan facility with the St.
Paul Bank for Cooperatives, 3) fund the Wireless Alliance, LLC PCS investment
requirements and 4) for other general corporate purposes.
12
<PAGE>
At the Company's discretion, advances under the Facility bear interest at
LIBOR (London Interbank Offering Rate) or Base Rate plus their respective
applicable margin. A commitment fee on the unused portion of the Facility is
payable quarterly. The Facility is secured by a pledge of all the assets
of the Company including stock of all present and future operating
subsidiaries owned by the Company and the ownership of Wireless Alliance,
LLC. Mandatory commitment reductions will be required upon any material sale
of assets. The Facility is subject to various financial covenants including
the ratio of indebtedness to annualized operating cash flow and the ratio of
annualized operating cash flow to interest expense.
Net cash used in operating activities during the three months ended March 31,
1997, was $2,685,290 as compared to net cash provided by operating activities
during the three months ended March 31, 1996 of $7,954,384. The decrease was due
primarily to a decrease in accounts payable as a result of significant payments
made to contractors for switching equipment and network facilities construction.
Net cash used in investing activities during the three months ended March 31,
1997 and 1996, was $4,053,176 and $9,903,550, respectively. The principal use of
cash in the first quarter of 1997 was for the purchase of property and equipment
for the Company's cellular network, expansion of the digital microwave network,
the purchase of switching equipment and equipment purchased for the Company's
phone and paging rental program.
Net cash provided by financing activities during the three months ended March
31, 1997 and 1996, was $6,576,118 and $7,524,298, respectively. During the first
quarter 1997, the Company borrowed approximately $7.1 million to fund capital
expenditures and operating expenses.
NEW ACCOUNTING PRONOUNCEMENT
See Note 4 of Notes to Consolidated Financial Statements for a discussion of
SFAS 128, "Earnings Per Share."
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 uncertainties. Such
factors include but are not limited to: economic conditions, customer growth
rates and the rate at which customer acquisition costs are recovered, higher
than planned operating expenses and capital expenditures, competition from other
cellular operators and the financial uncertainties associated with managing the
Company's market expansion through the Wireless Alliance, LLC joint venture and
the Unity acquisition.
13
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10 Loan Agreement with The Toronto-Dominion Bank, et al.
dated May 1, 1997 (Filed as an exhibit to Report on Form 8-K
dated May 1, 1997 and incorporated herein by reference)
27 Financial Data Schedule
(b) Reports on Form 8-K
A report on Form 8-K dated December 23, 1996, reporting under
Item 5 the signing of an agreement to purchase certain assets of
Unity Cellular Systems, Inc. and InterCel Licenses, Inc. and
filing under Item 7 a copy of the agreement was filed during the
quarter ended March 31, 1997.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this amendment to be signed
on its behalf by the undersigned, thereunto duly authorized.
RURAL CELLULAR CORPORATION
(Registrant)
Dated: May 14, 1997 /s/ Richard P. Ekstrand
------------ ----------------------------------------
Richard P. Ekstrand
President and Chief Executive Officer
(Principal Executive Officer)
Dated: May 14, 1997 /s/ Wesley E. Schultz
------------ ----------------------------------------
Wesley E. Schultz
Vice President of Finance and
Chief Financial Officer
(Principal Financial and Accounting Officer)
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL CONSOLIDATED STATEMENTS FOR THE THREE MONTHS ENDED
MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL CONSOLIDATED STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 75,151
<SECURITIES> 0
<RECEIVABLES> 6,344,400
<ALLOWANCES> 320,000
<INVENTORY> 904,019
<CURRENT-ASSETS> 7,801,240
<PP&E> 59,040,696
<DEPRECIATION> 15,450,213
<TOTAL-ASSETS> 61,705,872
<CURRENT-LIABILITIES> 21,055,016
<BONDS> 20,482
0
0
<COMMON> 88,533
<OTHER-SE> 34,867,812
<TOTAL-LIABILITY-AND-EQUITY> 61,705,872
<SALES> 96,714
<TOTAL-REVENUES> 8,322,437
<CGS> 287,376
<TOTAL-COSTS> 2,287,591
<OTHER-EXPENSES> 6,088,627
<LOSS-PROVISION> 300,727
<INTEREST-EXPENSE> 215,209
<INCOME-PRETAX> (40,007)
<INCOME-TAX> 0
<INCOME-CONTINUING> (40,007)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (40,007)
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
