UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED SEPTEMBER 30, 1996
Commission file number: 0-26836
WIRELESS ONE, INC.
(Exact name of registrant specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
72-1300837
(I.R.S. Employer Identification No.)
11301 Industriplex Blvd., Suite 4
Baton Rouge, Louisiana
(Address of principal executive office)
70809-4115
(Zip code)
(504) 293-5000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the proceeding 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 November 11, 1996
16,946,697
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements Page No.
Condensed Consolidated Balance Sheets as of
September 30, 1996 and December 31, 1995.......... 2
Condensed Consolidated Statements of Operations
for the three months ended September 30, 1996
and 1995, and the nine months ended September 30,
1996 and 1995..................................... 3
Condensed Consolidated Statements of Cash
Flows for the nine months ended September 30,
1996 and 1995..................................... 4
Notes to Condensed Consolidated Financial
Statements........................................ 5
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........................................... 14
Item 6. Exhibits and Reports on Form 8-K.................. 17
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
WIRELESS ONE, INC.
Condensed Consolidated Balance Sheets
(unaudited)
September December
Assets 30, 31,
1996 1995
Current assets:
Cash and cash equivalents $ 134,514,473 110,380,329
Marketable investment securities-
restricted 17,828,239 17,637,839
Subscriber receivables, net 915,173 143,633
Accrued interest and other receivables 746,433 405,241
Prepaid expenses 1,126,364 796,389
------------- -------------
Total current assets 155,130,682 129,363,431
Property and equipment, net 63,769,450 14,266,755
Leased license investment, net 153,524,511 26,724,238
Marketable investment securities -
restricted 27,820,254 35,755,505
Other assets 13,591,993 7,689,945
------------- -------------
413,836,890 213,799,874
============= =============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable 4,621,970 2,356,707
Accrued expenses 7,823,350 862,100
Accrued interest 9,159,143 3,683,333
Current maturities of long-term debt 2,761,086 376,780
------------- -------------
Total current liabilities 24,365,549 7,278,920
Deferred income taxes 8,145,000 -
Long-term debt 293,981,427 150,871,267
------------- -------------
326,491,976 158,150,187
------------- -------------
Stockholders' equity:
Preferred stock, $.01 par value,
10,000,000 shares authorized, no
shares issued or outstanding - -
Common stock, $.01 par value,
50,000,000 shares authorized,
16,941,697 and 13,498,752 shares
issued and outstanding in 1996 and
1995 respectively 169,417 134,988
Additional paid-in capital 120,253,507 65,631,596
Accumulated deficit (33,078,010) (10,116,897)
------------- -------------
Total stockholders' equity 87,344,914 55,649,687
------------- -------------
$ 413,836,890 213,799,874
============= =============
See accompanying notes to condensed consolidated financial statements.
WIRELESS ONE, INC.
Condensed Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ 3,428,231 318,202 5,800,363 810,197
Operating expenses:
System operations 1,643,812 567,943 2,910,438 1,056,291
Selling, general and
administrative 5,475,441 593,890 11,005,165 1,808,746
Depreciation and amortization 3,387,076 233,960 5,260,167 675,252
----------- ----------- ------------ -----------
Operating loss (7,078,098) (1,077,591) (13,375,407) (2,730,092)
Other income (expense):
Interest expense (7,974,496) (77,252) (18,385,408) (275,429)
Interest income 1,984,357 129,363 5,848,134 230,497
Equity in losses of affiliate (252,205) - (252,205) -
Other 81,219 - 148,773 -
----------- ----------- ------------ -----------
Total other income (expense) (6,161,125) 52,111 (12,640,706) (44,932)
----------- ----------- ------------ -----------
Net loss before taxes (13,239,223) (1,025,480) (26,016,113) (2,775,024)
Income tax benefit 3,055,000 - 3,055,000 -
Net loss $(10,184,223) (1,025,480) (22,961,113) (2,775,024)
Preferred stock dividend and
discount accretion - (421,078) - (786,389)
----------- ----------- ------------ -----------
Net loss applicable to common stock (10,184,223) (1,446,558) (22,961,113) (3,561,413)
=========== =========== ============ ===========
Net loss per common share $ (.64) (.72) (1.61) (1.77)
=========== =========== ============ ===========
Weighted average common shares
outstanding 15,856,421 2,013,950 14,293,278 2,013,950
=========== =========== ============ ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
WIRELESS ONE, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited)
Nine Months Ended
September 30,
1996 1995
Cash flows from operating activities:
Net loss $ (22,961,113) (2,775,024)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 5,260,167 675,252
Amortization of debt discount 3,586,180 221,016
Accretion of interest income (624,386) -
Bad debt expense 112,015 -
Deferred income tax benefit (3,055,000) -
Equity in losses of affiliates 252,205 -
Changes in assets and liabilities:
Receivables (808,262) 4,239
Prepaid expenses (123,017) 14,347
Deposits 417,059 -
Other assets - 115,649
Accounts payable and accrued
expenses 9,386,712 964,037
---------- --------
Net cash used in operating
activities (8,557,440) (780,484)
--------- --------
Cash flows from investing activities:
Investment in affiliates (338,300) -
Capital expenditures (37,256,598) (4,772,511)
Purchase of investments and other
assets (1,709,021) -
Proceeds from maturities of securities 8,369,237 -
Acquisition of leased licenses (41,579,312) (4,308,751)
----------- ----------
Net cash used in investing
activities (72,513,994) (9,081,262)
----------- ----------
Cash flows from financing activities:
Principal payments on long term debt (13,013,456) (1,496,911)
Debt issuance costs (2,405,580) -
Proceeds from issuance of long debt
and warrants 120,624,614 -
Issuance of common stock - 3,073,490
Issuance of preferred stock - 13,557,265
----------- ----------
Net cash provided by financing
activities 105,205,578 15,133,844
----------- ----------
Net increase in cash and cash
equivalents 24,134,144 5,272,098
Cash and cash equivalents at beginning of period 110,380,329 24,481
----------- ---------
Cash and cash equivalents at end of period $ 134,514,473 5,296,579
=========== =========
See accompanying notes to condensed consolidated financial statements.
WIRELESS ONE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1996
(1) Description of Business and Summary of Significant Accounting Policies
----------------------------------------------------------------------
(a) Description of Organization
---------------------------
Wireless One, Inc. (the "Company") acquires, develops, owns and
operates wireless cable television systems, primarily in small to
mid-size markets located in the southeastern United States. The Company
had systems in operation in 28 markets at September 30, 1996. In
addition, the Company had 52 other markets either under construction
or in development.
(b) Consolidation Policy
--------------------
The condensed consolidated financial statements include the accounts
of the Company and its majority-owned subsidiaries. All significant
inter-company balances and transactions are eliminated in
consolidation.
(c) Interim Financial Information
-----------------------------
The condensed consolidated financial statements are unaudited and
reflect all adjustments (consisting only of normal recurring
adjustments) which are, in the opinion of management, necessary for a
fair presentation of the financial position and operating results for
the interim periods. The condensed consolidated financial statements
should be read in conjunction with the consolidated financial
statements and notes thereto, together with the management's discussion
and analysis of financial condition and results of operations,
contained in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995. The results of operations for the
interim periods are not necessarily indicative of the results for the
entire fiscal year ending December 31, 1996.
(d) Net Loss Per Common Share
-------------------------
Net loss per common share is based on the net loss applicable to common
stock divided by the weighted average number of common shares
outstanding during the period presented. Shares issuable upon exercise
of stock options and warrants are anti-dilutive and have been excluded
from the calculation.
All share and per share data for the period ended September 30, 1995,
including the weighted average number of common shares outstanding,
have been restated for the Heartland Transaction consummated in
October of 1995 giving retroactive effect to the exchange of
approximately one share of Old Wireless One common stock for 4 shares
of Wireless One, Inc. common stock. See the Company's December 31,
1995 Annual Report on Form 10-K for further description of the
Heartland Transaction.
(2) Acquisitions
------------
Applied Video Acquisition - On May 15, 1996, the Company acquired 100%
of the stock of Applied Video Technologies (the "Applied Video
Acquisition") for a total purchase price of approximately $6.5 million
in cash. The Applied Video Acquisition added wireless cable rights
covering one operating system (Dothan, Alabama), one system under
construction (Albany, Georgia) and one near-term launch market
(Montgomery, Alabama). These three markets cover approximately 263,000
LOS households.
TruVision Transaction - On April 25, 1996, pursuant to an Agreement and
Plan of Merger among the Company, TruVision Wireless Inc. ("TruVision")
and Wireless One MergerSub, Inc. (the "TruVision Transaction"), the
Company agreed to acquire all of the outstanding capital stock of
TruVision through the merger of a subsidiary of the Company with and
into TruVision, with TruVision becoming a wholly-owned subsidiary of
the Company. Upon the consummation of the TruVision Transaction on
July 29, 1996, the Company issued to the then TruVision shareholders
3,262,945 shares of common stock, subject to certain adjustments and
escrow arrangements relating to TruVision's ownership of certain
assets and the closing of TruVision's pending acquisition
transactions. Shares of common stock placed in escrow and not
distributed to the then TruVision shareholders will be returned to the
Company. The Company also paid $1.8 million in cash and issued 180,000
shares of common stock to certain affiliates of TruVision.
The following table outlines the allocation of estimated fair market
value of the net assets acquired in the transaction.
Current Assets 1,146,604
PPE (net) 16,427,882
Other Assets 2,177,003
Intangibles 80,736,479
Current Liabilities 5,838,771
Deferred Tax Liability 11,200,000
Debt 12,733,528
TruVision acquires, develops, owns and operates wireless cable
television systems within the southeastern United States.
Huntsville Transaction - On August 2, 1996, the Company purchased a
wireless cable system and a hard-wire cable system currently operating
in Huntsville, Alabama for approximately $6.0 million in cash.
Lawrenceburg Transaction - On August 7, 1996, the Company purchased
all of the outstanding shares of Shoals Wireless, Inc., whose
principal asset is a wireless cable system in the Lawrenceberg,
Tennessee market for approximately $1.2 million in cash.
Other Acquisitions - In addition, the Company has consummated the
acquisition of (i) rights to 11 wireless cable channels in the Macon,
Georgia Market for aggregate consideration of approximately $.6
million and (ii) rights to eight wireless cable channels in the
Bowling Green, Kentucky Market for aggregate consideration of $.3
million.
The aforementioned transactions have been accounted for as business
combinations using the purchase method of accounting. The various
purchase prices have been allocated to the net assets acquired on a
preliminary basis based on management's estimates of fair values of
assets and liabilities acquired. The majority of the purchase prices
have been allocated to wireless cable channel rights and is being
amortized over 20 years.
The Company has also entered into several agreements with holders of
wireless cable channel rights, including (i) a letter of intent with
Wireless Ventures, L.L.C. ("Wireless Ventures") to acquire a fifty
percent interest in Wireless Ventures, which holds BTA authorizations
in certain markets in Georgia for approximately $1.0 million in cash
("Wireless Ventures Transaction") and (ii) a letter of intent with a
court appointed receiver to acquire rights to 11 MDS channels and
filings for 20 ITFS licenses and related transmission tower leases and
approvals in Auburn/Opelika, Alabama for $0.6 million.
Summarized below is the unaudited pro forma information for the nine
months ended September 30, 1996 and 1995 as if these transactions had
been consummated as of January 1, 1996 and 1995. The pro forma
information does not purport to represent what the Company's results
of operations actually would have been had such transactions occurred
on the date specified or to project the Company's results of
operations for any future periods.
Nine Months Ended September 30,
1996 1995
---- ----
Revenues 10,067,213 4,025,904
Net loss (26,246,292) (4,210,903)
Net loss per common share (1.55) (.77)
Other Transactions - The Company is presently participating with a
group of investors in FCC auctions for 10Mhz personal communication
service (PCS) licenses. As of September 30, 1996, the company had
invested approximately $1.5 million in this venture.
(3) Long-Term Debt
--------------
1996 Unit Offering - In August 1996, the Company offered 239,252 units
(the "Units") consisting of 239,252,000 of 13.5% senior discount notes
(the "Senior Discount Notes") due in 2006 and warrants to purchase,
in aggregate, 544,059 shares of the Company's common stock at an
exercise price of $16.64 (the "1996 Unit Offering"). The Units netted
proceeds to the Company of $118.6 million after expenses.
The Senior Discount Notes will accrete in value until August 1, 2001,
at a rate of 13.5% per annum to an aggregate principal amount of
$239,252,000. Cash interest on the notes will not accrue prior to
August 1, 2001. Thereafter, interest on the notes will accrue at a
rate of 13.5% payable semi-annually.
BTA Auction - During March 1996, the Federal Communications Commission
("FCC") completed an auction program (the "BTA Auction") designed to
award initial licenses for MDS channels. Successful bidders received
blanket authorizations to serve entire "Basic Trading Areas" or "BTAs"
(as directed by Rand McNally). The Company was the winning bidder in
66 BTAs at a total cost of $30.3 million. Upon grant of the BTA
authorizations during the third quarter, the Company was required to
remit total down payments amounting to 20% of the $30.3 million bids
with the remaining 80% being financed over a 10 year term. During
this ten-year period, the Company will be required to make quarterly
interest payments for the first two years and then quarterly
principal and interest payments for the remaining term. The interest
rate applicable to this debt is 9.5% (the 10 year U.S. Treasury rate
at the time of the issuance of the BTA authorization plus 2-1/2%). At
September 30, 1996, the Company had $22.9 million of indebtedness
related to these BTAs.
(4) Income Taxes
------------
The Company has recorded a net deferred tax liability in conjunction
with its acquisition of TruVision Wireless, Inc. in a non-taxable
acquisition (see footnote 2). Accordingly, the liability principally
relates to differences in the bases of the underlying assets and
liabilities, and net operating loss carryforwards. For the quarter
ended September 30, 1996, the Company recognized approximately
$3,055,000 of deferred income tax benefit based upon its estimate of
the anticipated overall effective income tax rate for the year ended
December 31, 1996.
Management estimates that its effective tax rate for the year is
approximately 11.75%.
(5) Subsequent Events
-----------------
Jacksonville Purchase - On October 24, 1996, the Company completed
the purchase of rights to 16 wireless cable channels in the
Jacksonville, North Carolina market for approximately $820,000 payable
in cash upon delivery of the four channel groups.
Chattanooga Purchase - Also on October 24, 1996, the Company completed
the purchase of rights to 12 wireless cable channels in the
Chattanooga, Tennessee market for $517,000 in cash.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Management's Discussion and Analysis of Financial Condition and Results
of Operations contains certain "forward looking statements" within the
meaning of Section 27A of the Securities Act of 1933 (the "Securities Act")
and Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"),
which reflect management's best judgment based on factors currently known.
Actual results could differ materially from those anticipated in these
"forward looking statements" as a result of a number of factors, including but
not limited to those discussed below. "Forward looking statements" provided
by the Company pursuant to the safe harbor established by recent securities
legislation should be evaluated in the context of these factors.
This discussion and analysis should be read in conjunction with the Company's
condensed consolidated financial statements and notes thereto.
RESULTS OF OPERATIONS FOR THE THIRD QUARTER AND NINE MONTHS ENDED
SEPTEMBER 30, 1996 COMPARED TO THE THIRD QUARTER AND NINE MONTHS
ENDED SEPTEMBER 30, 1995.
Management believes that period-to-period comparisons of the Company's
consolidated financial results to date are not necessarily meaningful and
should not be relied upon as an indication of future performance due to the
Company's historically high growth rate, system launches, and acquisitions
during the periods presented.
Revenues. The Company's revenues consist of monthly fees paid by subscribers
for the basic programming package and for premium programming services. The
Company's subscription revenues for the third quarter of 1996 were $3,428,231
as compared to $318,202 for the comparable period of 1995, an increase of
$3,110,029 or 977%. Subscription revenues for the nine months ended September
30, 1996 were $5,800,363 as compared to $810,197 for the comparable period of
1995, an increase of $4,990,167 or 615%. This increase in revenues for the
third quarter and nine months ended September 30, 1996 over the comparable
prior-year periods was primarily due to the average number of subscribers
increasing from 3,141 and 2,963 subscribers for the third quarter and nine
months ended September 30, 1995 to 33,905 and 19,626 subscribers for
comparable 1996 periods. This increase in the average number of subscribers
is attributed to the launch of 12 new systems during the remaining three
months of 1995 and during the first three quarters of 1996, the
contributions of two operating systems from Heartland in October 1995, and the
addition of nine operating systems from the TruVision Transaction on July 29,
1996.
<TABLE>
<CAPTION>
Subscriber Growth Per Period
----------------------------
Nine Months Nine Months Quarter Quarter
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Beginning Subscribers 7,525 2,504 19,038 2,860
Same System Growth (Reduction)* 13,446 (45) 6,786 423
New Launch Growth 5,165 963 312 139
Acquisition Growth 25,098 - 25,098 -
------- ------ ------- ------
51,234 3,422 51,234 3,422
======= ====== ======= ======
</TABLE>
* Growth from (Reductions in) systems in operation at the beginning of period.
Systems Operations Expenses. Systems operations expense includes programming
costs, channel lease payments, tower and transmitter site rentals, cost of
program guides and certain repairs and maintenance expenditures. Programming
costs, cost of program guides and channel lease payments (with the exception
of minimum payments) are variable expenses which increase as the number of
subscribers increases. Systems operations expense for the quarter ended
September 30, 1996 was $1,643,812 (47% of revenue) as compared to $567,943
(178% of revenue) for the same period of 1995, reflecting an increase of
$1,075,869 or 189%. Systems operations expense for the nine months ended
September 30, 1996 was $2,910,438 (50% of revenue) as compared to
$1,056,291(130% of revenue) for the same period of 1995, reflecting an
increase of $1,854,147 or 175%. These increases are attributable primarily to
the increase in the number of subscribers for such periods in 1996 compared to
the same periods in 1995 as outlined above. As a percent of revenues, systems
operations expenses have decreased as more systems mature.
Selling, General and Administrative. Selling, general and administrative
expenses for the quarter ended September 30, 1996 were $5,475,441 (160% of
revenue) compared to $593,890 (187% of revenue) for the same period of 1995,
an increase of $4,881,551 or 821%. Selling, general and administrative
expenses for the nine months ended September 30, 1996 were $11,005,165 (190%
of revenue) compared to $1,808,746 (223% of revenue) for the same period of
1995, an increase of $9,196,419 or 508%. The Company has experienced
increasing selling, general and administrative expenses as a result of its
increased wireless cable activities and associated administrative costs
including costs related to opening, acquiring and maintaining additional
offices and additional compensation expense. The increase is due primarily to
increases in personnel costs, advertising and marketing expenses and other
overhead expenses required to support the expansion of the Company's
operations. As a percent of revenues, selling general and administrative
expenses have decreased as more systems mature.
The Company believes such selling, general and administrative costs will not
stabilize until 1998 when all Markets are expected to be launched. At that
time, administrative expenses should remain constant with selling and general
expense stabilizing when desired penetration rates are achieved. In order for
such stabilization to occur within this time period, however, the current
system launch schedule must be met and desired penetration rates must be
achieved. As the foregoing constitutes a "forward looking statement", within
the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act, the Company acknowledges that there can be no assurance that the
Company will meet the current launch schedule or that desired penetration
rates will be achieved or consequently that such selling, general and
administrative expenses will stabilize within this time period. The ability
of the Company to meet the current launch schedule and desired penetration
rates depends on a number of factors, including competition, consumer
acceptance, advances in technology, changes in laws and regulations, and other
factors, many of which are beyond the control of management.
Depreciation and Amortization Expense. Depreciation and amortization expense
for the quarter ended September 30, 1996 was $3,387,076 versus $233,960 for
the same period of 1995, an increase of $3,153,116 or 1,348%. Depreciation
and amortization expense for the nine months ended September 30, 1996 was
$5,260,167 versus $675,252 for the same period of 1995, an increase of
$4,584,915 or 679%. The increase in depreciation expense during the periods
presented was due to additional capital expenditures related to the launch of
new systems and acquisitions of operating systems. In addition, amortization
of leased license costs increased due to new launches and the acquisition of
additional channel rights - see note 2 to condensed consolidated financial
statements.
Interest Expense. Interest expense for the quarter ended September 30, 1996
was $7,974,496 versus $77,252 for the same period of 1995, an increase of
$7,897,244 or 10,222%. Interest expense for the nine months ended September
30, 1996 was $18,385,408 versus $275,429 for the same period of 1995, an
increase of $18,109,979 or 6,575%. This increase in interest expense is due
to the issuance in October of 1995 of the 1995 Unit Offering, and the issuance
of the 1996 Unit Offering in August of 1996 (as described in Liquidity and
Capital Resources).
Interest Income. Interest income for the quarter ended September 30, 1996 was
$1,984,357 versus $129,363 for the same period of 1995, an increase of
$1,854,994 or 1,433%. Interest income for the nine months ended September
30, 1996 was $5,848,134 versus $230,497 for the same period of 1995, an
increase of $5,617,637 or 2,437%. This increase in interest income is due to
the temporary investment of net proceeds from the issuance of the 1995 and
1996 Unit Offerings.
Liquidity and Capital Resources
The wireless cable television business is a capital intensive business. The
Company's operations require substantial amounts of capital for (i) the
installation of equipment at subscribers' premises (ii) the construction of
additional transmission and headend facilities and related equipment
purchases, (iii) the funding of start-up losses and other working capital
requirements, (iv) the acquisition of additional wireless cable channel rights
and systems and (v) investments in and, maintenance of, vehicles and
administrative offices. Since inception, the Company has expended funds to
lease or otherwise acquire channel rights in various markets, to construct or
acquire its operating systems, to commence construction of operating systems
in different markets and to finance initial operating losses.
The Company estimates that a launch of a wireless cable system in a typical
market (assuming an initial programming package of 12 channels) will involve
the initial capital expenditure of approximately $.7 million to $.9 million
for wireless cable system transmission equipment and tower construction and
incremental installation costs of approximately $375 to $475 per subscriber
for equipment, labor, overhead charges and direct commission. Other launch
costs include the cost of securing adequate space for marketing and warehouse
facilities, as well as costs related to employees. As a result of these
costs, operating losses are likely to be incurred by systems during the start-
up period. The Company estimates that subsequent additions of transmission
equipment to enhance the channel offering of the system will approximate
$.4 million, but may vary depending upon the power of the transmission
equipment. As the foregoing constitute "forward looking statements" within
the meaning of Section 27A of the Securities Act and 21E of the Exchange Act,
the Company acknowledges that the amount of such capital expenditures and
costs depend on a number of factors beyond the control of management and there
can be no assurance that they will not be greater than those estimated. Any
such increased costs and expenditures will likely increase operating losses.
In order to finance the expansion of its operating systems and finance the
launch of additional markets, in October 1995, the Company completed its
initial public offering of 3,450,000 shares of common stock, $0.01 par value
at $10.50 per share (the "Common Stock Offering"). The Company received
approximately $32.3 million in net proceeds from the Common Stock Offering.
Concurrently, the Company issued 150,000 units (the "Units") consisting of
$150 million aggregate principal amount of senior notes (the "Senior Notes")
and 450,000 warrants to purchase an equal number of shares of Common Stock at
an exercise price of $11.55 per share to the initial purchasers (the "1995
Unit Offering"). The Company placed approximately $53.2 million of the
approximately $143.8 million of net proceeds realized from the sale of the
Units into an escrow account to cover the first three years' interest payments
on the Senior Notes as required by terms of the Indenture.
In August 1996, the 1996 Unit Offering (see notes to condensed consolidated
financial statements) netted proceeds to the Company of $118.6 million after
expenses. The proceeds will be used to fund the additional requirements
necessary to carry out the business plan of the newly acquired markets from
the TruVision Acquisition and to continue to fund the launch and expansions of
existing markets.
Prior to the consummation of the TruVision Transaction, the Company committed
to provide a bridge loan to TruVision of up to $15 million. This loan was to
be secured by certain assets of TruVision and its subsidiaries. At the close
of the Merger, the loan was fully funded.
For the nine months ended September 30, 1995, cash used in operating
activities was $.8 million consisting primarily of a net loss of $2.8 million
offset by an increase in accounts payable and accrued expenses of $1 million,
non-cash expenses of $.2 million, a decrease in other assets of $.1 million,
and depreciation and amortization expenses of $.7 million. For the nine
months ended September 30, 1995, cash used in investing activities was $9
million, consisting primarily of capital expenditures and payments for
licenses and organizational costs of approximately $4.7 million and $4.3
million respectively. These capital expenditures were principally related to
the construction of new markets and certain license and organizational costs.
For the nine months ended September 30, 1995, cash flows provided by financing
activities was $15.1 million, consisting primarily of $3.1 million in proceeds
from the subscription of common stock, $13.5 million in proceeds from the
issuance of preferred stock, and offset by $1.5 million in principal payments
of long-term debt.
For the nine months ended September 30, 1996, cash used in operating
activities was $8.5 million consisting primarily of a net loss of $23 million
offset by an increase in accounts payable and accrued expenses of $9.4
million, an increase in receivables and prepaids of $.9 million, a decrease in
deposits of $.4 million, depreciation and amortization of $5.3 million, non-
cash income of $3.7 million and non-cash expenses of $4 million. For the nine
months ended September 30, 1996, cash used in investing activities was $72.5
million, consisting primarily of capital expenditures and payments for
licenses and organization costs of approximately $37.2 million and $41.6
million, respectively. In addition, the Company received proceeds from the
maturities of securities of $8.4 million, and made investments and purchased
other assets at a cost of approximately $2.1 million. These investing
activities were principally related to the acquisition of equipment in certain
of the Company's operating markets, as well as those markets under
construction or near term launch markets and certain license and organization
costs related to those markets. For the nine months ended September 30, 1996,
cash flows provided by financing activities was $105.2 million, consisting of
$120.6 million in proceeds from the issuance of long term debt, offset by $13
million in repayments of long-term debt and $2.4 million in payments for debt
issue costs.
Historically, the Company has generated operating and net losses and can be
expected to do so for at least the foreseeable future as it continues to
develop additional operating systems. Such losses may increase as operations
in additional systems are commenced or acquired. There can be no assurance
that the Company will be able to achieve or sustain positive net income in the
future. As the Company continues to develop systems, earnings before
interest, taxes, depreciation and amortization ("EBITDA") from more mature
systems is expected to be partially or completely offset by negative EBITDA
from less developed systems and from development costs associated with
establishing systems in new markets. This trend is expected to continue until
the Company has a sufficiently large subscriber base to absorb operating and
development costs of recently launched systems. Based on its current system
launch schedule and targeted penetration and subscriber revenue rates, the
Company believes it will reach a subscriber level in its more mature systems
(those systems with positive System EBITDA) in the fourth quarter of 1997 to
generate revenues sufficient to offset these operating and development costs.
As the foregoing constitute "forward looking statements", within the meaning
of Section 27A of the Securities Act and Section 21E of the Exchange Act, the
Company acknowledges that there can be no assurance that the Company will
meet its system launch schedule or achieve the penetration and subscriber
revenue rates necessary to acquire this subscriber base or that revenues will
be sufficient to offset such costs by that time. The ability of the Company
to meet its system launch schedule, or achieve the desired penetration and
subscriber revenue rates, depends on a number of factors, many of which are
beyond the control of management, including competition, consumer acceptance,
advances in technology, and changes in laws and regulation. EBITDA is a
commonly used measure of performance in the wireless cable industry. However,
EBITDA does not purport to represent cash provided by or used by operating
activities and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with generally accepted
accounting principles.
The Company made capital expenditures, exclusive of acquisitions of wireless
cable systems and additions to leased license acquisition costs, of
approximately $9.8 million and $3.0 million for the years ended December 31,
1995 and 1994, respectively. For the nine months ended September 30, 1996 and
1995, the Company's capital expenditures were approximately $37.2 million and
$4.7 million respectively. These expenditures primarily related to the
acquisition of equipment in the Company's operating markets, as well as those
markets under construction or near-term launches.
The Company estimates that approximately $104 million in capital expenditures
will be required over the next twelve months to continue to fund growth in the
operating systems and the systems under construction and to complete the
construction and finance the development of additional markets.
Based on the factors and results discussed above, the Company believes that
the $135 million in unrestricted cash on hand at September 30, 1996 is
sufficient to meet its expected capital needs at least over the next twelve
months.
Subject to the limitations of the Company's indentures relating to the 1995
and 1996 Unit Offerings, in order to accelerate its growth rate and to finance
general corporate activities and the launch or build-out of additional
systems, the Company may supplement its existing sources of funding with
financing arrangements at the operating system level or through additional
borrowings, the sale of additional debt or equity securities, including a sale
to strategic investors, joint ventures or other arrangements, if such
financing is available to the Company on satisfactory terms.
As a result of the 1995 and 1996 Unit Offerings, and the possible incurrence
of additional indebtedness, the Company will be required to satisfy
significant debt service requirements. Following the disbursement of all of
the funds in the escrow account in October 1998, a substantial portion of the
Company's cash flow will be devoted to debt service on the Senior Notes.
Additionally, beginning on August 1, 2001, cash interest will begin to accrue
on the Senior Discount Notes related to the 1996 Unit Offering and thereafter
a substantial portion of the Company's cash flow will be devoted to such debt
service. The ability of the Company to make payments of principal and
interest will be largely dependent upon its future performance. Many factors,
some of which will be beyond the Company's control (such as prevailing
economic conditions), may affect its performance. There can be no assurance
that the Company will be able to generate sufficient cash flow to cover
required interest and principal payment when due on the offerings or other
indebtedness of the Company. If the Company is unable to meet interest and
principal payments in the future, it may, depending upon circumstances which
then exist, seek additional equity or debt financing, attempt to refinance its
existing indebtedness or sell all or part of its business or assets to raise
funds to repay its indebtedness. The incurrence of additional indebtedness is
restricted by the Indentures governing the Senior Notes and the Senior
Discount Notes.
In managing its wireless cable assets, the Company may, at its option,
exchange or trade existing wireless cable channel rights for channel rights in
markets that have a greater strategic value to the Company. The Company
continually evaluates opportunities to acquire, either directly or indirectly
through the acquisition of other entities, wireless cable channel rights.
There is no assurance that the Company will not pursue any such opportunities
that may utilize capital currently expected to be available for its current
markets.
PART II. -OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's Annual Meeting of Shareholders held on July 26, 1996, the
following individuals were elected to the Board of Directors.
Votes Votes
For Withheld
--- --------
Arnold L. Chavkin 10,518,338 31,800
Hans J. Sternberg 10,518,338 31,800
David E. Webb 10,518,338 31,800
The following proposals were approved at the Company's Annual Meeting:
<TABLE>
<CAPTION>
Affirmative Negative Votes
Votes Votes Withheld
<S> <C> <C> <C>
1. Issuance of up to 3,553,333 shares of the 10,523,438 25,700 1,000
Company's Common Stock pursuant to the
TruVision Transaction
2. Adoption of Non-Employee Directors' Stock 10,176,426 62,805 310,907
Option Plan
3. Ratify the Appointment of KPMG Peat 10,549,638 500 -
Marwick LLP as independent auditors
for the fiscal year ending December 31, 1996
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: See Exhibit Index on page 17
(b) Reports on Form 8-K
1) Date of Filing: August 13, 1996
2) Items Reported: The "TruVision Transaction" (Item 2)
3) Financial Statements Filed (incorporated by
reference to schedule 14A filed on July 13, 1996):
a) TruVision Wireless, Inc.
1. Balance Sheets
--------------
December 31, 1994
December 31, 1995
December 31, 1996
2. Statement of Operations and Cash Flows and Changes
in Stockholder's Equity
-----------------------
Inception to December 31, 1994
Year Ended December 31, 1995
Three Months Ended March 31, 1996
Three Months Ended March 31, 1995
b) Mississippi Wireless TV L.P.
1. Statement of Operations and Partners Capital
--------------------------------------------
Inception to December 31, 1994
January 1, 1994 to August 24, 1994
c) Madison & Beasley Communications
1. Balance Sheets
--------------
December 31, 1994
December 31, 1995
December 31, 1996
2. Statement of Operations and Accumulated Deficit and Cash Flows
--------------------------------------------------------------
Year Ended December 31. 1993
Year Ended December 31, 1994
Year Ended December 31, 1995
Three Months Ended March 31, 1995
Three Months Ended March 31, 1996
d) BarTel, Inc.
1. Balance Sheet
-------------
December 31, 1995
2. Statement of Income, Retained Earnings, and Cash Flows
------------------------------------------------------
Twelve Months Ended December 31, 1995
e) Unaudited Proforma Condensed Financial Information
1. Combined Balance Sheets
-----------------------
March 31, 1996
2. Combined Statement of Operations
--------------------------------
Twelve Months Ended December 31, 1995
Three Months Ended March 31, 1996
SIGNATURES
Pursuant to the requirements 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.
WIRELESS ONE, INC.
Date: November 14, 1996 \s\ Sean Reilly
---------------------------
Sean Reilly
President and Chief Executive Officer
Date: November 14, 1996 \s\ Michael C. Ellis
---------------------------
Michael C. Ellis
Vice President and Controller
(Principal Financial and
Accounting Officer)
EXHIBIT INDEX
Exhibit No. Description Page No.
No.
3.1(i) Amended and Restated Certificate of Incorporation
of the Registrant(2)
3.1(ii) Bylaws of the Registrant(2)
4.1 Indenture between the Registrant and United States
Trust Company of New York, as Trustee, dated
October 24, 1995(3)
4.2 Warrant Agreement between the Registrant and United
States Trust Company of New York, as Warrant Agent,
dated October 24, 1995(3)
4.3 Escrow and Disbursement Agreement between the
Registrant and Bankers Trust Corporation, Escrow
Agent, dated October 24, 1995(3)
4.4 Supplemental Indenture between the Registrant and
United States Trust Company of New York, as Trustee,
dated July 26, 1996(4)
4.5 Indenture between the Registrant and United States
Trust Company of New York as Trustee, dated August
12, 1996(4)
4.6 Warrant Agreement between the Registrant and United
States Trust Company of New York, as Warrant Agent,
dated August 12,1996(4)
4.7 Unit Agreement between the Registrant and United
States Trust Company of New York, as Unit Agent,
dated August 12,1996(4)
10.1 1996 Director's Stock Option Plan of the Registrant(4)
10.2 Amended and Restated Registration Rights Agreement
among the Registrant, Heartland and certain
stockholders dated July 29, 1996(4)
10.3 Amended and Restated Stockholders Agreement among
the Registrant, and certain stockholders dated
July 29, 1996(4)
10.4 Form of Employment Agreement between the Registrant
and certain executive officers(1)*
10.5 Acquisition and Market Escrow Agreement among the
Registrant, TruVision and Wireless One Merger Sub,
Inc., dated July 29, 1996(1)
10.6 Amendment to Amended and Restated Stockholders
Agreement among the Registrant, and certain
stockholders dated as of September 17, 1996(5)
11.1 Statement re computation of per share earnings (6)
27.1 Financial Data Schedule (6)
______________________
(1) Incorporated herein by reference from the Registrant's Registration
Statement on Form S-1 (Registration Number 333-05109 ) as declared
effective by the Commission on August 7, 1996
(2) Incorporated herein by reference from the Registrant's Registration
Statement on Form S-1 (Registration Number 33-94942) as declared
effective by the Commission on October 18, 1995.
(3) Incorporated herein by reference from the Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter ended September 30, 1995.
(4) Incorporated herein by reference to the Registrant's Registration
Statement on Form S-1 (Registration Number 333-12449) as declared
effective on October 18, 1996.
(5) Incorporated herein by reference to the Registrant's Post-Effective
Amendment No. 1 to Form S-1 on Form S-3 (Registration Number 333-
12449) as declared effective on October 21, 1996.
(6) Filed herewith.
* Management contract or compensatory plan or arrangement.
Exhibit 11.1
<TABLE>
<CAPTION>
Wireless One, Inc
Earnings Per Share Computation Information
<S> <C> <C> <C> <C>
Net Loss (10,184,223) (1,025,480) (22,961,113) (3,561,413)
Preferred stock dividends
and discount accretion - (421,078) - (786,389)
----------- ---------- ----------- ----------
Net loss applicable to
common stock (10,184,223) (1,446,558) (22,961,113) (4,347,802)
=========== ========== =========== ==========
Weighted average common
shares outstanding 15,856,421 2,013,950 14,293,278 2,013,950
Net loss per common share (0.64) (0.72) (1.61) (2.16)
=========== ========== =========== ==========
The above earnings per share (EPS) calculations are submitted in accordance
with APB Opinion No. 15.
An EPS calculation in accordance with Regulations S-K item 601 (b) (11) is
not shown above because it produces an antidilutive result.
The following information is disclosed for purposes of calculating the
antidilutive EPS.
Weighted average common
shares outstanding 15,856,421 2,013,950 14,293,278 2,013,950
Shares issuable upon
exercise of options
and warrant 561,026 380,331 591,982 380,331
---------- ---------- ----------- ----------
Weighted average shares
outstanding 16,417,447 2,394,281 14,885,260 2,394,281
Net loss per common share (0.62) (0.43) (1.54) (1.49)
========== ========== =========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 134,514,473
<SECURITIES> 45,648,493
<RECEIVABLES> 1,215,876
<ALLOWANCES> 300,703
<INVENTORY> 0
<CURRENT-ASSETS> 155,130,682
<PP&E> 74,041,013
<DEPRECIATION> 10,271,564
<TOTAL-ASSETS> 413,836,890
<CURRENT-LIABILITIES> 24,365,549
<BONDS> 326,491,976
0
0
<COMMON> 169,417
<OTHER-SE> 120,253,507
<TOTAL-LIABILITY-AND-EQUITY> 413,836,890
<SALES> 5,800,363
<TOTAL-REVENUES> 5,800,363
<CGS> 0
<TOTAL-COSTS> 19,175,770
<OTHER-EXPENSES> (5,996,907)
<LOSS-PROVISION> 112,015
<INTEREST-EXPENSE> 18,637,613
<INCOME-PRETAX> (26,016,113)
<INCOME-TAX> (3,055,000)
<INCOME-CONTINUING> (22,961,113)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (22,961,113)
<EPS-PRIMARY> (1.61)
<EPS-DILUTED> (1.61)
</TABLE>
