================================================================
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 JUNE 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 August 11,
1997:
16,946,697
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INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements Page No.
Condensed Consolidated Balance Sheets as of
June 30, 1997 and December 31, 1996 2
Condensed Consolidated Statements of Operations
for the three months ended June 30, 1997 and 1996,
and the six months ended June 30, 1997 and 1996 3
Condensed Consolidated Statements of Cash
Flows for the six months ended June 30, 1997
and 1996 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 15
Item 6. Exhibits and Reports on Form 8-K 16
Part I. FINANCIAL INFORMATION
==============================
Item 1. Financial Statements
WIRELESS ONE, INC.
Condensed Consolidated Balance Sheets
(unaudited)
June 30, December 31,
1997 1996
---- ----
Assets
- ------
Current assets:
Cash and cash equivalents $ 53,525,204 $ 104,448,583
Marketable investment
securities-restricted 18,661,784 18,149,180
Subscriber receivables, net 1,472,871 998,734
Accrued interest and other
receivables 573,528 464,166
Prepaid expenses 1,909,255 1,149,296
----------- ------------
Total current assets 76,142,642 125,209,959
Property and equipment, net 105,726,820 82,636,712
License and leased license
investment, net 155,188,650 154,444,536
Marketable investment securities-
restricted 9,551,727 18,885,565
Other assets 15,420,329 14,432,590
----------- -----------
$ 362,030,168 $ 395,609,362
=========== ===========
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities:
Accounts payable $ 1,464,846 $ 4,105,994
Accrued expenses 6,761,708 6,775,218
Accrued interest 4,813,120 4,482,864
Current maturities of
long-term debt 3,320,814 3,169,383
---------- ----------
Total current liabilities 16,360,488 18,533,459
Deferred income taxes 5,850,000 6,500,000
Long-term debt 308,747,936 299,909,221
----------- -----------
330,958,424 324,942,680
----------- -----------
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 (89,382,230) (49,787,292)
------------ ------------
Total stockholders' equity 31,071,744 70,666,682
------------ ------------
$ 362,030,168 $ 395,609,362
=========== ===========
See accompanying notes to condensed consolidated financial statements.
WIRELESS ONE, INC.
Condensed Consolidated Statements of Operations
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
Revenues $ 8,325,863 1,478,485 15,402,782 2,439,686
---------- ---------- ---------- ----------
Operating expenses:
System operations 5,724,078 1,029,933 10,570,841 2,113,458
Selling, general
and administrative 6,832,133 2,572,922 12,997,996 4,682,892
Depreciation and
amortization 7,923,792 1,298,501 14,181,233 2,262,506
---------- --------- ---------- ---------
20,480,003 4,901,356 37,750,070 9,058,856
---------- --------- ---------- ---------
Operating loss (12,154,140) (3,422,871) (22,347,288) (6,619,170)
---------- --------- ---------- ---------
Other income (expense):
Interest expense (10,364,644) (5,011,604) (20,669,747)(10,021,497)
Interest income 1,348,161 1,737,417 3,090,931 3,863,777
Equity in losses of
affiliate (172,434) - (324,569) -
Other 2,403 - 5,735 -
---------- ---------- ----------- ---------
Total other
expense (9,186,514) (3,274,187) (17,897,650) (6,157,720)
---------- ---------- ----------- ---------
Loss before income
taxes (21,340,654) (6,697,058) (40,244,938) (12,776,890)
Income tax benefit 650,000 - 650,000 -
---------- --------- ---------- ----------
Net loss (20,690,654) (6,697,058) (39,594,938) (12,776,890)
========== ========= ========== ==========
Net loss per common $ (1.22) (.50) (2.34) (.95)
share ========== ========= ========== ==========
Weighted average
common shares 16,946,697 13,498,752 16,946,697 13,498,752
outstanding ========== ========== ========== ==========
See accompanying notes to condensed consolidated financial statements.
WIRELESS ONE, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited)
Six Months Ended
June 30,
1997 1996
Cash flows from operating activities:
Net loss $ (39,594,938) (12,776,890)
Adjustments to reconcile net loss to net
cash used in operating activities:
Bad debt expense 680,257 23,694
Depreciation and
amortization 14,181,233 2,262,506
Amortization of debt
discount 9,707,237 263,598
Accretion of interest
income (317,766) (447,297)
Deferred income tax
benefit (650,000) -
Equity in losses of
affiliates 324,569 -
Gain on sale of assets (5,735) -
Changes in assets and liabilities:
Receivables (1,263,756) (123,281)
Prepaid expenses (759,959) 125,054
Deposits (103,047) (23,711)
Accounts payable
and accrued
expenses (2,324,400) 2,256,504
--------- ---------
Net cash used in
operating activities (20,126,305) (8,439,823)
---------- ---------
Cash flows from investing activities:
Purchase of investments and
other assets (1,777,500) (209,021)
Capital expenditures (34,866,847) (20,192,427)
Acquisition of license
investment (3,211,523) (10,210,874)
Proceeds from sale of assets 68,649 -
Issuance of note receivable - (5,722,482)
Proceeds from maturities of
securities 9,139,000 8,369,237
--------- ---------
Net cash used in
investing activities (30,648,221) (27,965,567)
---------- ----------
Cash flows from financing activities:
Payments on long-term debt (148,853) (2,680)
Debt issuance costs - (94,305)
---------- ----------
Net cash used in financing
activities (148,853) (96,985)
---------- ----------
Net decrease in cash (50,923,379) (36,502,375)
Cash and cash equivalents at
beginning of period 104,448,583 110,380,329
----------- -----------
Cash and cash equivalents at end
of period $ 53,525,204 73,877,954
========== ==========
See accompanying notes to condensed consolidated financial statements.
WIRELESS ONE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 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
primarily in southern and southeastern United States markets.
At June 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 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, 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 six months ended June 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 expansion of the
Company's customer base and systems development. 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 systems. Management expects that
the Company will require significant additional financings,
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
$815,000 and $.05, respectively, for the three months ended
June 30, 1997 and $1,475,000 and $.09, respectively, for the
six months ended June 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. 129, "Disclosure of Information about Capital
Structure", SFAS No. 130 "Reporting Comprehensive Income", and
SFAS No. 131 "Disclosure about Segments of an Enterprise and
Related Information". SFAS No. 128 is effective for annual and
interim periods ending after December 15, 1997. SFAS No. 129
is effective for fiscal years ending after December 15, 1997.
SFAS No. 130 is effective for fiscal years beginning after
December 15, 1997. SFAS No. 131 is effective for financial
statements for periods beginning after December 15, 1997.
Management does not believe that these pronouncements will have
a material impact on its fiscal 1997 consolidated financial
statements.
(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.
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.
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 have been 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 six months ended June 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 Six Months Ended
June 30, June 30,
1996 1996
-------- --------
Revenues $ 3,230,197 $ 5,740,899
Net loss (8,490,192) (13,697,754)
Net loss per common share (.50) (.81)
(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 bases of the underlying assets and
liabilities in excess of net operating loss carryforwards. For
the quarter ended June 30, 1997, the Company recognized $650,000
of deferred income tax benefit 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 SIX MONTHS ENDED JUNE
30, 1997, COMPARED TO THE SAME PERIODS ENDED JUNE 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 and mergers. 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. The
Company expects to experience positive system EBITDA (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) in the second
half of 1997 and positive consolidated EBITDA in the first half
of 1998. "System EBITDA" means EBITDA for a system and
includes all selling, general and administrative expenses
("SG&A") attributable to employees in that system. Sixteen of
the Company's Operating Systems achieved positive EBITDA by the
end of the second quarter of 1997. None of the Company's
remaining systems had turned EBITDA positive as of June 30,
1997, primarily as a result of their early stages of
development and number of subscribers. The Company does not
anticipate being able to generate 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 may increase as operations in
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.
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 June 30, 1997 were $8.3
million as compared to $1.5 million for the same period of
1996, an increase of $6.8 million or 453%. Subscription
revenues for the six months ended June 30, 1997 were $15.4
million as compared to $2.4 million for the comparable period
of 1996, an increase of $13.0 million or 542%. This increase
in revenues for the second quarter and six months ended June
30, 1997 over the comparable prior-year periods was primarily
due to the average number of subscribers increasing from 15,301
and 12,592 subscribers, respectively, for the second quarter
and six months ended June 30, 1996, to 94,286 and 86,647
subscribers for comparable 1997 periods. At June 30, 1996, the
Company had 19,037 subscribers versus 100,640 at June 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 June 30,
1997 were $5.7 million as compared to $1.0 million for the same
period of 1996, an increase of $4.7 million. Systems
operations expense for the six months ended June 30, 1997 was
$10.6 million as compared to $2.1 million for the same period
in 1996, an increase of $8.5 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 decreased to 69% of revenues for the three
months ended June 30, 1997 from 70% for the same period of
1996. As a percent of revenues, systems operations expense
decreased to 69% of revenues for the six months ended June 30,
1997 from 87% for the same period of 1996.
Selling, General and Administrative - SG&A expenses for the
three months ended June 30, 1997 were $6.8 million compared to
$2.6 million for the same period of 1996, an increase of $4.2
million. SG&A expenses for the six months ended June 30, 1997
were $13.0 million as compared to $4.7 million for the same
period of 1996, an increase of $8.3 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 82% of revenues for the three months ended June
30, 1997 from 174% for the same period of 1996. As a percent
of revenues, SG&A expenses decreased to 84% of revenues for the
six months ended June 30, 1997 from 192% for the same period
of 1996.
The Company believes such SG&A costs will not stabilize until
1998 or 1999 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, the Company's
anticipated schedule of system 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 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
the currently expected stabilization of SG&A costs in 1998 or
1999.
Depreciation and Amortization Expense - Depreciation and
amortization expense for the quarter ended June 30, 1997 was
$7.9 million versus $1.3 million for the same period of 1996,
an increase of $6.6 million. Depreciation and amortization for
the six months ended June 30, 1997 was $14.2 million as
compared to $2.3 million for the same period of 1996, an
increase of $11.9 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
June 30, 1997 was $10.4 million versus $5.0 million for the
same period of 1996, an increase of $5.4 million. Interest
expense for the six months ended June 30, 1997 was $20.7
million as compared to $10.0 million for the same period of
1996, an increase of $10.7 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 June
30, 1997 was $1.3 million versus $1.7 million for the same
period of 1996, a decrease of $.4 million. Interest income for
the six months ended June 30, 1997 was $3.1 million as compared
to $3.9 million for the same period of 1996, a decrease of $.8
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 (the "1995 Unit Offering") 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 (the "1996
Unit Offering") 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 the launch and expansion of the
Company's markets.
For the six months ended June 30 1997, cash used in operating
activities was $20.1 million consisting primarily of a net loss
of $39.6 million in addition to a decrease in accounts payable
and accrued expenses of $2.3 million, an increase in
receivables and prepaid expenses of $2.0 million, an increase
in deposits of $.1 million, and offset by depreciation and
amortization of $14.2 million, and net non-cash expenses of
$9.7 million. For the six months ended June 30, 1997, cash
used in investing activities was $30.6 million, consisting
primarily of capital expenditures and payments for licenses and
organization costs of approximately $34.9 million and $3.2
million, respectively. In addition, the Company received
proceeds from the maturities of securities of $9.1 million,
made investments and purchased other assets at a cost of
approximately $1.7 million, and received proceeds of $.07
million from the sale of capital assets. 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 six
months ended June 30, 1997, cash flows used in financing
activities were $.15 million consisting of payments on long-
term debt.
For the six months ended June 30, 1996, cash used in operating
activities was $8.4 million consisting primarily of a net loss
of $12.8 million in addition to an increase in deposits of $.02
million, net non-cash income of $.2 million and offset by an
increase in accounts payable and accrued expenses of $2.3
million, and depreciation and amortization of $2.3 million.
For the six months ended June 30, 1996, cash used in investing
activities was $27.9 million, consisting primarily of capital
expenditures and payments for licenses and organization costs
of approximately $20.2 million and $10.2 million, respectively.
In addition, the Company received proceeds from the maturities
of securities of $8.4 million, an acquisition of note
receivable of $5.7 million, and made investments and purchased
other assets at a cost of approximately $.2 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 six months ended June 30,
1996, cash flows used in financing activities was $.1 million,
consisting primarily of 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, 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. 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 ability of the
Company to achieve the necessary regulatory approvals for the
anticipated launches in a timely manner, its ability to finance
such launches 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 by the fourth
quarter of 1997, or at any time.
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 six months ended June 30, 1996 and 1997,
the Company's capital expenditures were approximately $20.2
million and $34.9 million respectively. These expenditures
primarily relate to the purchase of equipment in the Company's
Operating Systems, and Future Launch Markets.
Based on the factors and results discussed above, the Company
believes that the $53.5 million in unrestricted cash at June
30, 1997 is sufficient to meet its expected capital and
operating needs through the end of 1997. The Company may,
however, subject to the limitations of the indentures governing
the 1995 Senior Notes and the 1996 Senior Discount Notes, in
order to accelerate its growth rate and to finance general
corporate activities and the launch or build-out of additional
systems, 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, joint ventures or other arrangements, if such
financing is available to the Company on satisfactory terms.
The Company has relationships with investment bankers to
discuss possible capital raising transactions, including asset
sales and debt or equity issuances and to advise the Company as
to methods of increasing liquidity and maximizing shareholder
value.
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. Following the
final disbursement in October 1998 of the funds that were
placed in escrow after the 1995 Unit Offering, 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. 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 1995
Senior Notes and the 1996 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.
New Accounting Pronouncements
- -----------------------------
The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share", SFAS No. 129, "Disclosure of Information about Capital
Structure", SFAS No. 130 "Reporting Comprehensive Income", and
SFAS No. 131 "Disclosure about segments of an Enterprise and
Related Information". SFAS No. 128 is effective for annual and
interim periods ending after December 15, 1997. SFAS No. 129
is effective for fiscal years ending after December 15, 1997.
SFAS No. 130 is effective for fiscal years beginning after
December 15, 1997. SFAS No. 131 is effective for financial
statements for periods beginning after December 15, 1997.
Management does not believe that these pronouncements will have
a material impact on its fiscal 1997 consolidated financial
statements.
Cautionary Statements
- ---------------------
Management's Discussion and Analysis of Financial Condition and
Results of Operation 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 financings, 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.
Part II. OTHER INFORMATION
===========================
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders of the Company was held on
May 20, 1997 (the "Annual Meeting"). Proxies were solicited
pursuant to Regulation 14A under the Securities Exchange Act
1934 , as amended.
At the Annual Meeting, William K. Luby, J.R. Holland, Jr., and
William J. Van Devender were elected to serve until the 2000
annual meeting of Stockholders. In addition to the directors
elected at the Annual Meeting, the terms of Henry M.
Burkhalter, Sean B. Reilly, Daniel L. Shimer, Hans J.
Sternberg, Arnold L. Chavkin, and L. Allen Wheeler continued
after the Annual Meeting.
At the Annual Meeting, holders of shares of the Company's
Common Stock elected three directors with the number of votes
cast for or withheld from such nominees as follows:
Name For Withheld
- ---- --- --------
William K. Luby 10,254,917 7,950
J. R. Holland, Jr. 10,254,917 7,950
William J. Van Devender 10,254,917 7,950
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: August 14, 1997 /s/ Henry M. Burkhalter
-------------------
Henry M. Burkhalter
Chief Executive Officer
Date: August 14, 1997 /s/ Henry G. Schopfer, III
----------------------
Henry G. Schopfer, III
Executive Vice President and
Chief Financial Officer
Date: August 14, 1997 /s/ Michael C. Ellis
----------------
Michael C. Ellis
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.
Exhibit 11
<TABLE>
<CAPTION>
Wireless One, Inc.
Earnings Per Share Computation Information
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Loss (20,690,655) (6,697,058) (39,594,938) (12,776,890)
Weighted Average
Common Shares
Outstanding 16,946,697 13,498,752 16,946,697 13,498,752
Net loss per common
share (1.22) (0.50) (2.34) (0.95)
=========== =========== =========== ===========
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.
<S> <C> <C> <C> <C>
Weighted Average
Common Shares
Outstanding 16,946,697 13,498,752 16,946,697 13,498,752
Shares Issuable
upon Exercise of
Options and
Warrants - 611,089 - 656,628
---------- ---------- ---------- ----------
Weighted Average
Shares
Outstanding 16,946,697 14,109,841 16,946,697 14,155,380
Net loss per
Common Share (1.22) (0.47) (2.34) (0.90)
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 53,525,204
<SECURITIES> 28,213,511
<RECEIVABLES> 1,648,461
<ALLOWANCES> 175,590
<INVENTORY> 0
<CURRENT-ASSETS> 76,142,642
<PP&E> 122,518,114
<DEPRECIATION> 16,791,294
<TOTAL-ASSETS> 362,030,168
<CURRENT-LIABILITIES> 16,360,488
<BONDS> 308,747,936
0
0
<COMMON> 169,467
<OTHER-SE> 120,284,507
<TOTAL-LIABILITY-AND-EQUITY> 362,030,168
<SALES> 15,402,782
<TOTAL-REVENUES> 15,402,782
<CGS> 0
<TOTAL-COSTS> 37,750,070
<OTHER-EXPENSES> (2,772,097)
<LOSS-PROVISION> 420,469
<INTEREST-EXPENSE> 20,669,747
<INCOME-PRETAX> (40,244,938)
<INCOME-TAX> 650,000
<INCOME-CONTINUING> (39,594,938)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (39,594,938)
<EPS-PRIMARY> (2.34)
<EPS-DILUTED> (2.34)
</TABLE>
