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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, 1997
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.)
1080 River Oaks Drive, Suite A150
Jackson, Mississippi
(Address of principal executive office)
39208
(Zip code)
(601) 936-1515
(Registrant's telephone number, including area code)
11301 Industriplex Blvd., Suite 4
Baton Rouge, Louisiana 70809-4115
(Former address of registrant's principal executive
office)
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 14, 1997
16,946,697
===========================================================
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements Page No.
Condensed Consolidated Balance Sheets as of
September 30, 1997 and December 31, 1996
(unaudited).............................................2
Condensed Consolidated Statements of Operations
for the three months ended September 30, 1997 and
1996, and the nine months ended September 30, 1997
and 1996 (unaudited)....................................3
Condensed Consolidated Statements of Cash
Flows for the nine months ended September 30, 1997
and 1996 (unaudited)....................................4
Notes to Condensed Consolidated Financial
Statements..............................................5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.....................8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.....................15
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
WIRELESS ONE, INC.
Condensed Consolidated Balance Sheets
(unaudited)
September 30, December 31,
Assets 1997 1996
---- ----
Current assets:
Cash and cash equivalents $31,697,070 $104,448,583
Marketable investment securities- 19,195,913 18,149,180
restricted
Subscriber receivables, net 1,542,622 998,734
Accrued interest and other receivables 884,878 464,166
Prepaid expenses
1,456,334 1,149,296
------------ ------------
Total current assets 54,776,817 125,209,959
Property and equipment, net 112,844,225 82,636,712
License and leased license investment, net 154,695,918 154,444,536
Marketable investment securities-restricted 9,106,677 18,885,565
Other assets 16,626,683 14,432,590
------------ ------------
$348,050,320 $395,609,362
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 2,408,538 $ 4,105,994
Accrued expenses 7,869,846 6,775,218
Accrued interest 9,695,782 4,482,864
Current maturities of long-term debt 301,628 3,169,383
------------ ------------
Total current liabilities 20,275,794 18,533,459
------------ ------------
Deferred income taxes 5,525,000 6,500,000
Long-term debt 313,621,091 299,909,221
------------ ------------
339,421,885 324,942,680
------------ ------------
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, 16,946,697 shares
issued and outstanding 169,467 169,467
Additional paid-in capital 120,284,507 120,284,507
Accumulated deficit (111,825,539) (49,787,292)
------------ ------------
Total stockholders' equity 8,628,435 70,666,682
------------ ------------
$348,050,320 $395,609,362
============ ============
See accompanying notes to condensed consolidated financial statements.
<TABLE>
<CAPTION>
WIRELESS ONE, INC.
Condensed Consolidated Statements of Operations
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ 9,128,119 3,509,450 24,533,913 5,949,136
--------- --------- ---------- ---------
Operating expenses:
System operations 5,752,564 2,209,341 16,610,147 4,322,799
Selling, general and
administrative 7,581,686 4,909,912 20,290,220 9,592,804
Depreciation and
amortization 9,123,868 3,387,076 23,305,099 5,260,167
---------- ---------- ---------- ----------
22,458,118 10,506,329 60,205,466 19,175,770
---------- ---------- ---------- ----------
Operating loss (13,329,999) (6,996,879) (35,671,553) (13,226,634)
---------- ---------- ---------- ----------
Other income (expense):
Interest expense (10,429,596) (7,974,496) (31,099,343) (18,385,408)
Interest income 964,752 1,984,357 4,055,683 5,848,134
Equity in income (losses)
of affiliate 26,534 (252,205) (298,034) (252,205)
---------- ---------- ---------- ----------
Total other expense (9,438,310) (6,242,344) (27,341,694) (12,789,479)
---------- ---------- ---------- ----------
Loss before income taxes (22,768,309) (13,239,223) (63,013,247) (26,016,113)
Income tax benefit 325,000 3,055,000 975,000 3,055,000
---------- ---------- ---------- ----------
Net loss (22,443,309) (10,184,223) (62,038,247) (22,961,113)
========== ========== ========== ==========
Net loss per common share $ (1.32) (.64) (3.66) (1.61)
Weighted average common ========== ========== ========== ==========
shares outstanding 16,946,697 15,856,421 16,946,697 14,293,278
========== ========== ========== ==========
See accompanying notes to condensed consolidated financial statements.
</TABLE>
WIRELESS ONE, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited)
Nine Months Ended
September 30,
1997 1996
Cash flows used in operating activities:
Net loss $(62,038,247) (22,961,113)
Adjustments to reconcile net loss to
net cash used in operating activities:
Bad debt expense 1,086,383 112,015
Depreciation and amortization 23,305,099 5,260,167
Amortization of debt discount 14,746,814 3,586,180
Accretion of interest income (406,845) (624,386)
Deferred income tax benefit (975,000) (3,055,000)
Equity in losses of affiliate 298,034 252,205
Gain on sale of assets (5,735) -
Changes in assets and
liabilities:
Receivables (2,050,983) (808,262)
Prepaid expenses (307,038) (123,017)
Deposits (112,796) 417,059
Accounts payable and
accrued expenses 4,610,090 9,386,712
Net cash used in operating ----------- -----------
activities (21,850,224) (8,557,440)
----------- -----------
Cash flows used in investing activities:
Purchase of investments and other
assets (3,240,294) (2,047,321)
Capital expenditures (49,801,966) (37,256,598)
Acquisition of license investment (4,024,945) (41,579,312)
Proceeds from sale of assets 68,649 -
Proceeds from maturities of securities 9,139,000 8,369,237
----------- -----------
Net cash used in investing
activities (47,859,556) (72,513,994)
----------- -----------
Cash flows from financing activities:
Payments on long-term debt (3,041,733) (13,013,456)
Proceeds from issuance of long-term
debt and warrants - 120,624,614
Debt issuance costs - (2,405,580)
----------- -----------
Net cash from financing
activities (3,041,733) 105,205,578
----------- -----------
Net increase (decrease)
in cash (72,751,513) 24,134,144
Cash and cash equivalents at beginning of
period 104,448,583 110,380,329
----------- -----------
Cash and cash equivalents at end of period $ 31,697,070 134,514,473
=========== ===========
See accompanying notes to condensed consolidated financial statements.
WIRELESS ONE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
(1) Description of Business and Summary of Significant
Accounting Policies
(a) Description of Organization
Wireless One, Inc. is engaged in the business of
developing, owning, and operating wireless cable
television systems and a high-speed, two-way
Internet access product, primarily in southern and
southeastern United States markets. At September
30, 1997, the Company had 34 systems in operation
("Operating System") and 49 other markets either
under construction or in development ("Future
Launch Markets"), 13 of which are held by a 50%
owned joint venture.
(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 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, 1996. The results of operations for
the interim periods are not necessarily indicative
of the results for the entire fiscal years.
(d) Net Loss Per Share
Net loss per share is based on the net loss 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.
(e) Reclassification
Certain expenses for the three and nine months
ended September 30, 1996 have been reclassified to
conform with current period's presentation. These
reclassifications had no effect on previously
reported net loss.
(f) Liquidity
The growth of the Company's business has and will
require substantial investment on a continuing
basis to finance capital expenditures and related
expenses for the expansion of the Company's
customer base in its wireless cable systems and
the development of the high-speed, two-way
Internet product. In addition, the Company has
recorded net losses since inception and expects to
continue to experience net losses while it
develops and expands its wireless cable and
Internet access systems. Management expects that
the Company will require significant additional
financing, through debt or equity financings,
joint ventures, sales of assets or other
arrangements, to achieve its targeted subscriber
levels in its current business plans and to cover
ongoing operating losses. Additional debt or
equity also may be required to finance future
acquisitions of wireless cable companies, wireless
cable systems or channel rights, if any. While
management believes the Company will be able to
obtain additional debt or equity capital on
satisfactory terms to meet its future financing
needs, there can be no assurance that either
additional debt or equity capital will be
available on such terms.
(g) Change in Estimate
Based on management's periodic review of the
assumptions used in determining the estimated
useful lives of the Company's depreciable assets,
the Company has changed its estimated useful life
for subscriber equipment from five years to four
years effective January 1, 1997. The impact of
this change resulted in increased net loss and net
loss per share of $969,000 and $.06, respectively,
for the three months ended September 30, 1997 and
$2,444,000 and $.14, respectively, for the nine
months ended September 30, 1997.
(h) Impact of Standards Issued But Not Adopted
The Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS)
No. 128, "Earnings per Share". SFAS No. 128 is
effective for annual and interim periods ending
after December 15, 1997. Management does not
believe earnings per share under this
pronouncement will be materially different from
previously reported earnings per share amounts.
(i) Acquisitions
TruVision Transaction - On July 29, 1996, the
Company acquired all of the outstanding capital
stock of TruVision Wireless Inc. ("TruVision").
TruVision acquires, develops, owns and operates
wireless cable television systems within the
southeastern United States. The Company issued to
TruVision shareholders 3,262,945 shares of common
stock. 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
Property and equipment, net 16,427,882
Other assets 2,177,003
License and leased license
investment 80,736,479
Current liabilities 5,838,771
Deferred tax liability 11,200,000
Debt 32,046,244
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.
Lawrenceberg 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.
The foregoing 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 based on
management's estimates of fair values of assets
and liabilities acquired. Approximately $86
million of the purchase prices was allocated to
wireless cable channel rights and is being
amortized over 20 years.
Summarized below is the unaudited pro forma
information for the three and nine months ended
September 30, 1996, as if these transactions had
been consummated as of January 1, 1996. 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.
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1996
---- ----
Revenues $ 4,326,314 10,067,213
Net loss (12,548,538) (26,246,292)
Net loss per common share (.74) (1.55)
(2) Income Taxes
The Company recorded a net deferred tax liability
in conjunction with its acquisition of TruVision.
The liability principally relates to differences
in the basis of the underlying assets and
liabilities in excess of net operating loss
carryforwards. The Company recognized $325,000
of deferred income tax benefit for the three
months ended September 30, 1997 and $975,000 for
the nine months ended September 30, 1997,
representing the tax effect of the portion of net
operating loss carryforwards generated in the
current period which the company expects to
utilize to reduce the deferred tax liability.
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, particularly in "Cautionary
Statements." "Forward looking statements" provided by the Company
pursuant to the safe harbor established by the federal securities laws
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 THREE AND NINE MONTHS ENDED SEPTEMBER
30, 1997, COMPARED TO THE SAME PERIODS ENDED SEPTEMBER 30, 1996.
Management believes that period-to-period comparisons of the
Company's consolidated financial results 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,
program of system launches, and significant acquisitions within the
last two years.
Overview
Since its inception, the Company has significantly increased its
Operating Systems and number of subscribers. This controlled growth
has been achieved from internal expansion and through acquisitions.
The Company has sustained substantial net losses, primarily due to
fixed operating costs associated with the development of its systems,
interest expense and charges for depreciation and amortization.
During the third quarter of 1997, the Company refocused its
marketing efforts to developing its new contract with DirecTV, which
offers subscription video services to multiple dwelling units (MDU's)
and has devoted substantial resources to the development of a high-
speed, two-way Internet access product. Because of the lower capital
and operating costs per subscriber and the enhanced programming
available through its DirecTV MDU product, the Company believes that
this focus will provide the Company with the best use of its wireless
spectrum, existing infrastructure, and the opportunities provided by
the marketplace. Because of the increased opportunity provided by its
DirecTV MDU product, the Company has determined to deemphasis its SFU
business and currently does not plan to launch new systems focused on
SFUs. Accordingly, since October 1, 1997 the Company has begun
implementing changes to its business operations to reduce personnel
and expenses to the levels needed to implement these refocused
business objections, including the elimination of over 100 of 900
positions.
Nineteen of the Company's Operating Systems achieved positive
EBITDA by the end of the third quarter of 1997. "EBITDA" means net
income (loss) plus interest expense, income tax expense, depreciation
and amortization expense and all other non-cash charges less any non-
cash items which have the effect of increasing net income or
decreasing net loss. "System EBITDA" means EBITDA for a system and
includes all selling, general and administrative expenses ("SG&A")
attributable to employees in that system. None of the Company's
remaining systems had turned EBITDA positive as of September 30, 1997,
primarily as a result of their early stages of development and number
of subscribers. The Company does not anticipate generating net income
until after the year 2001, and there can be no assurance that other
factors, such as, but not limited to, economic conditions, its
inability to raise additional financing or disruptions in its
operations, will not result in further delays in the Company's
operating on a profitable basis. Losses are expected to continue as
the Company refocuses its resources to the marketing of its DirecTV
MDU product and development of its internet product and as additional
systems are commenced or acquired.
Information with respect to EBITDA is included herein because it
is a widely accepted financial indicator of a company's ability to
service and/or incur indebtedness. EBITDA is not intended to
represent cash flows, as determined in accordance with generally
accepted accounting principles, nor has it been presented as an
alternative to operating income or as an indicator of operating
performance and should not be considered as a substitute for measures
of performance prepared in accordance with generally accepted
accounting principles.
Results of Operations
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
three months ended September 30, 1997 were $9.1 million as compared to
$3.5 million for the same period of 1996, an increase of $5.6 million
or 160%. Subscription revenues for the nine months ended September
30, 1997 were $24.5 million as compared to $5.9 million for the
comparable period of 1996, an increase of $18.6 million or 312%. This
increase in revenues for the third quarter and nine months ended
September 30, 1997 over the comparable prior-year periods was
primarily due to the average number of subscribers increasing from
33,905 and 19,626 subscribers, respectively, for the third quarter and
nine months ended September 30, 1996, to 107,042 and 93,405
subscribers for comparable 1997 periods. At September 30, 1996, the
Company had 51,234 subscribers versus 114,020 at September 30, 1997.
The increase in average number of subscribers is attributable to
strong growth in Operating Systems that were in operation in the 1996
period, new system launches and the acquisition of approximately
23,000 subscribers in markets acquired pursuant to the Company's
merger with TruVision Wireless, Inc. in July 1996 (the "TruVision
Transaction").
Systems Operations Expenses - Systems operations expense
includes programming costs, channel lease payments, tower and
transmitter site rentals, cost of program guides, certain repairs and
maintenance expenditures, vehicle expenses and other direct operating
and labor expenses. Programming costs, cost of program guides,
channel lease payments and certain labor (with the exception of
minimum payments) are variable expenses that increase as the number of
subscribers increases. Systems operations expenses for the three
months ended September 30, 1997 were $5.8 million as compared to $2.2
million for the same period of 1996, an increase of $3.5 million.
Systems operations expense for the nine months ended September 30,
1997 was $16.6 million as compared to $4.3 million for the same period
in 1996, an increase of $12.3 million. This increase is attributable
primarily to the increase in the average number of subscribers
outlined above. As a percent of revenues, systems operations expenses
were 63% of revenues for the three months ended September 30, 1997
compared to 63% for the same period of 1996. As a percent of
revenues, systems operations expense decreased to 68% of revenues for
the nine months ended September 30, 1997 from 73% for the same period
of 1996.
Selling, General and Administrative - SG&A expenses for the
three months ended September 30, 1997 were $7.6 million compared to
$4.9 million for the same period of 1996, an increase of $2.7 million.
SG&A expenses for the nine months ended September 30, 1997 were $20.3
million as compared to $9.6 million for the same period of 1996, an
increase of $10.7 million. SG&A expenses increased as a result of
increased activities and associated administrative costs, including
costs related to opening, acquiring and maintaining additional offices
and 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, SG&A expenses decreased to 83%
of revenues for the three months ended September 30, 1997 from 140%
for the same period of 1996. As a percent of revenues, SG&A expenses
decreased to 83% of revenues for the nine months ended September 30,
1997 from 161% for the same period of 1996.
The Company believes such SG&A costs will not stabilize until all
planned markets and products are 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, the Company's
anticipated schedule of system and product launches needs to be met
and desired penetration rates need to be achieved. The Company's
ability to meet its currently anticipated launch schedule is dependent
on numerous factors, including the ability of the Company to achieve
the necessary regulatory approvals for such systems in a timely manner
and its ability to finance the launch of such systems. Although
management currently expects to meet the anticipated systems and
product launch schedule, there can be no assurance that such schedule
will be met or the necessary penetration rates will be achieved in
such markets to provide for the stabilization of SG&A costs.
Depreciation and Amortization Expense - Depreciation and
amortization expense for the quarter ended September 30, 1997 was $9.1
million versus $3.4 million for the same period of 1996, an increase
of $5.7 million. Depreciation and amortization for the nine months
ended September 30, 1997 was $23.3 million as compared to $5.3 million
for the same period of 1996, an increase of $18.0 million. The
increase in depreciation expense during the period was due to
additional capital expenditures related to the launch of new systems,
the acquisition of additional Operating Systems and increased
depreciation of subscriber equipment due to the changing of the
estimated useful life from five to four years effective January 1,
1997. In addition, amortization of leased license costs increased due
to new launches and the acquisition of additional channel rights.
Interest Expense - Interest expense for the quarter ended
September 30, 1997 was $10.4 million versus $8.0 million for the same
period of 1996, an increase of $2.4 million. Interest expense for the
nine months ended September 30, 1997 was $31.1 million as compared to
$18.4 million for the same period of 1996, an increase of $12.7
million. This increase in interest expense was due to the issuance of
the 1996 Senior Discount Notes (as defined in "Liquidity and Capital
Resources") in August 1996.
Interest Income - Interest income for the quarter ended
September 30, 1997 was $1.0 million versus $2.0 million for the same
period of 1996, a decrease of $1.0 million. Interest income for the
nine months ended September 30, 1997 was $4.1 million as compared to
$5.8 million for the same period of 1996, a decrease of $1.7 million.
This decrease in interest income was due to smaller amount of funds
available for investment that resulted from the sale of securities
that were held for investment in 1996 in order to pay interest on the
1995 Senior Notes (as defined in "Liquidity and Capital Resources")
and the utilization of cash balances to build and develop new markets.
Liquidity and Capital Resources
The wireless cable television business is capital intensive. The
Company's operations require substantial amounts of capital for (i)
the installation of equipment at subscribers' premises, (ii) the
construction of transmission and headend facilities and related
equipment purchases, (iii) the funding of start-up losses and other
working capital requirements, (iv) the acquisition of wireless cable
channel rights and systems, and (v) investments in vehicles and
administrative offices.
In order to finance the expansion of its operating systems and
the launch of additional markets, in October 1995, the Company
completed the initial public offering of 3,450,000 shares of its
common stock (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 consisting
of $150 million aggregate principal amount of senior notes due 2003
(the "1995 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. 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 1995 Senior Notes as required by terms of the
indenture governing the 1995 Senior Notes.
In August 1996, the Company issued 239,252 units consisting of
$239 million aggregate principal amount of senior discount notes (the
"1996 Senior Discount Notes") and 239,252 warrants to purchase 544,059
shares of Common Stock at an exercise price of $16.64 per share. The
Company received $118.6 million after expenses. The proceeds are
being used to fund marketing of the Company's new DirecTV MDU product,
development of the Company's internet products, the launch of new
systems and expansion of the Company's existing markets.
For the nine months ended September 30 1997, cash used in
operating activities was $21.9 million consisting primarily of a net
loss of $62.0 million, in addition to an increase in receivables and
prepaid expenses of $2.4 million, an increase in deposits of $0.1
million, partially offset by depreciation and amortization of $23.3
million, an increase in accounts payable and accrued expenses of $4.6
million, and net non-cash expenses of $14.7 million. For the nine
months ended September 30, 1997, cash used in investing activities was
$47.9 million, consisting primarily of capital expenditures and
payments for licenses and organization costs of approximately $49.8
million and $4.0 million, respectively. In addition, the Company
received proceeds from the maturities of securities of $9.1 million
and made investments and purchased other assets at a cost of
approximately $3.2 million. These investing activities were
principally related to the acquisition of equipment in certain of the
Company's Operating Systems, as well as in Future Launch Markets, and
certain license and organization costs related to those markets. For
the nine months ended September 30, 1997, cash flows used in financing
activities were $3.0 million consisting of repayments of long-term
debt.
For the nine months ended September 30, 1996, cash used in
operating activities was $8.6 million consisting primarily of a net
loss of $23.0 million, in addition to an increase in receivables and
prepaid expenses of $0.9 million; partially offset by an increase in
accounts payable and accrued expenses of $9.4 million, depreciation
and amortization of $5.3 million, a decrease in deposits of $0.4
million, non-cash income of $3.7 million and non-cash expenses of
$4.0 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 $37.3 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 $2.0 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 $13.0 million in repayments of
long-term debt and $2.4 million in payments for debt issue costs.
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 $60.4 million for the years
ended December 31, 1995 and 1996, respectively. For the nine months
ended September 30, 1996 and 1997, the Company's capital expenditures
were approximately $37.3 million and $49.8 million respectively.
These expenditures primarily relate to the purchase of equipment in
the Company's Operating Systems, and Future Launch Markets.
Historically, the Company has generated operating and net losses
and is expected to do so for at least the foreseeable future as it
continues to market its new DirecTV MDU product, develop its internet
product and develop additional operating systems. Such losses may
increase as these products are implemented and 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, 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 its new
products and its operating 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. The Company's ability to meet its currently
anticipated launch schedule and achieve its targeted penetration rates
and subscriber levels is dependent on numerous factors, including the
Company's ability to finance new launches and expansion of existing
systems, its experience with its DirecTV MDU product, which remains a
relatively new product for the Company, the ability of the Company to
achieve the necessary regulatory approvals for the anticipated
launches in a timely manner, and general economic and competitive
factors with respect to the wireless cable business, many of which are
beyond the Company's control. There can be no assurance that the
Company will be able to achieve the necessary subscriber or revenue
levels to attain such EBITDA levels at any time.
Based on the factors and results discussed above, the Company
believes that the $31.7 million in unrestricted cash at September 30,
1997 is sufficient to meet its expected capital and operating needs
through the end of 1997. In order to finance the launch and build-out
of additional systems, the Company is actively seeking to raise
additional funds through the sale of assets or through financing
arrangements at the operating system level, additional borrowings, the
sale of additional debt or equity securities, joint ventures or other
arrangements, if such financing is available to the Company on
satisfactory terms. The Company is currently in discussions with
potential investors regarding capital raising transactions; however,
there is no assurance that the Company will be able to raise
additional capital within the limitations of the indentures governing
the 1995 Senior Notes or the 1996 Senior Discount Notes or on terms
the Company considers acceptable. The Company could operate at
a reduced non-growth level if additional funds are not available;
however, in such case the Company may not be able to continue to
launch new systems or to further develop its internet product and
marketing its DirecTV MDU product may be curtailed. Further, the
Company needs to raise additional capital or generate positive EBITDA to
satisfy its debt service obligations beginning in April 1999 and to
continue to maintain the listing of its stock on the NASDAQ national
market system.
As a result of the issuance of the 1995 Senior Notes and the 1996
Senior Discount Notes the Company is required to satisfy significant
debt service requirements. Beginning in April 1999, a substantial
portion of the Company's cash flow will be devoted to debt service on
the 1995 Senior Notes, and, after August 1, 2001, on the 1996 Senior
Discount Notes. The ability of the Company to make payments of
principal and interest on these Notes 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 payments when due on the 1995 Senior Notes and
the 1996 Senior Discount Notes or other indebtedness of the Company.
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.
New Accounting Pronouncements
The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per Share".
SFAS No. 128 is effective for annual and interim periods ending after
December 15, 1997. Management does not believe earnings per share
under this pronouncement will be materially different from previously
reported earnings per share amounts.
Cautionary Statements
Management's Discussion and Analysis of Financial Condition and
Results of Operations and the notes to the financial statements
contained herein contain "forward-looking statements." All statements
other than statements of historical fact included in this report,
including, without limitation, statements regarding future liquidity,
cash needs and financing, and the Company's expectations regarding
positive system EBITDA, losses, subscriber and revenue levels,
profitability and SG&A costs, the expected results of the Company's
business strategy, and other plans and objectives of management of the
Company for future operations and activities are forward-looking
statements.
Important factors that could cause actual results to differ
materially from the Company's expectations include, without
limitation, business opportunities that may be presented to and
pursued by the Company, changes in laws or regulations, the
substantial indebtedness of the Company, uncertainty created by the
Company's limited operating history, negative cash flow and lack of
profitable operations, the Company's need for additional financing,
uncertainty of ability to obtain FCC authorizations, government
regulations, competition, physical limitations of wireless cable
transmission, and other factors, many of which are beyond the control
of the Company. Further information regarding these and other factors
that might cause future results to differ from those projected in the
forward-looking statements are described in more detail under the
heading "Factors That May Affect Future Results of the Company" in the
Company's Form 10-K for the year ended December 31, 1996.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: See Exhibit Index on page E-1
(b) No reports on Form 8-K were filed during the periods
presented.
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, 1997 /s/ Henry M. Burkhalter
------------------------
Henry M. Burkhalter
Chief Executive Officer
Date: November 14, 1997 /s/ Henry G. Schopfer, III
---------------------------
Henry G. Schopfer, III
Executive Vice President and
Chief Financial Officer
Date: November 14, 1997 /s/ Laurence O. Woolhiser, Jr.
-------------------------------
Laurence O. Woolhiser, Jr.
Vice President and Controller
(Chief Accounting Officer)
EXHIBIT INDEX
Exhibit No. Description of Exhibit
3.1(i) Amended and Restated Certificate of
Incorporation of the Registrant(1)
3.1(ii) Bylaws of the Registrant(1)
4.1 Indenture between the Registrant and United
States Trust Company of New York, as Trustee,
dated October 24, 1995(2)
4.2 Warrant Agreement between Registrant and United
States Trust Company of New York, as Warrant
Agent, dated October 24, 1995(2)
4.3 Escrow and Disbursement Agreement between the
Registrant and Bankers Trust Corporation,
Escrow Agent, dated October 24, 1995(2)
4.4 Supplemental Indenture between the Registrant
and United States Trust Company of New York, as
trustee, dated July 26, 1996(3)
4.5 Indenture between the Registrant and United
States Trust Company of New York as Trustee,
dated August 12, 1996(3)
4.6 Warrant Agreement between the Registrant and
United States Trust Company of New York, as
Warrant Agent, dated August 12, 1996(4)
11.1 Statement re computation of per share earnings(5)
27.1 Financial Data Schedule (5)
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) Filed herewith.
<TABLE>
<CAPTION>
Wireless One, Inc. Exhibit 11
Earnings Per Share Computation Information
Three Months Ended September 30 Nine Months Ended September 30
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net loss (22,443,309) (10,184,223) (62,038,247) (22,961,113)
Weighted average common
shares outstanding 16,946,697 15,856,421 16,946,697 14,293,278
Net loss per common share (1.32) (0.64) (3.66) (1.61)
========== ========== ========== ==========
The above earnings per share (EPS) calculations are submitted in accordance with APB Opinion No. 15.
An EPS calculation in accordance with Regulation 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 16,946,697 15,856,421 16,946,697 14,293,278
Shares issuable upon exercise
of options and warrants - 561,026 - 591,982
---------- ---------- ---------- ----------
Weighted average shares
outstanding 16,946,697 16,417,447 16,946,697 14,885,260
Net loss per common share (1.32) (0.62) (3.66) (1.54)
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 31,697,070
<SECURITIES> 28,302,590
<RECEIVABLES> 2,131,412
<ALLOWANCES> 588,790
<INVENTORY> 0
<CURRENT-ASSETS> 54,776,817
<PP&E> 134,992,319
<DEPRECIATION> 22,148,094
<TOTAL-ASSETS> 348,050,320
<CURRENT-LIABILITIES> 20,275,794
<BONDS> 313,621,091
0
0
<COMMON> 169,467
<OTHER-SE> 120,284,507
<TOTAL-LIABILITY-AND-EQUITY> 348,050,320
<SALES> 24,533,913
<TOTAL-REVENUES> 24,533,913
<CGS> 0
<TOTAL-COSTS> 60,205,466
<OTHER-EXPENSES> (3,757,649)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31,099,343
<INCOME-PRETAX> (63,013,247)
<INCOME-TAX> 975,000
<INCOME-CONTINUING> (62,038,247)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (62,038,247)
<EPS-PRIMARY> (3.66)
<EPS-DILUTED> (3.66)
</TABLE>
