<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: June 20, 1996
(Date of earliest event reported)
PRICELLULAR CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State of Incorporation)
1-13526 13-3784318
(Commission File Number) (IRS Employer Identification No.)
45 Rockefeller Center, New York, New York 10020
(Address of principal executive offices)
Registrant's Telephone Number, including area code:
(212) 459-0800
<PAGE> 2
ITEM 5. OTHER EVENTS
The purpose of this report is to file the financial statements
of Horizon Cellular Telephone Company of Monongalia, L.P. for the year ended
December 31, 1995 with Report of Independent Auditors.
The aforementioned financial statements are attached as
exhibits to this report and are hereby incorporated by reference herein.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
27.1 Financial Data Schedule of Horizon Cellular Telephone
Company of Monongalia, L.P. for the year ended
December 31, 1995
99.1 Financial statements of Horizon Cellular Telephone Company
of Monongalia, L.P. for the year ended December 31, 1995
with Report of Independent Auditors
2
<PAGE> 3
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 hereunto duly authorized.
PRICELLULAR CORPORATION
By: /s/ Robert Price
----------------------------
Robert Price
President
Dated: June 20, 1996
<PAGE> 4
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Page
- ----------- ----
<S> <C> <C>
27.1 Financial Data Schedule of Horizon
Cellular Telephone Company of
Monongalia, L.P. for the year ended
December 31, 1995
99.1 Financial statements of Horizon Cellular
Telephone Company of Monongalia, L.P. for the
year ended December 31, 1995 with Report of
Independent Auditors
</TABLE>
4
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<CASH> 86,165
<SECURITIES> 0
<RECEIVABLES> 662,313
<ALLOWANCES> 62,533
<INVENTORY> 52,687
<CURRENT-ASSETS> 766,014
<PP&E> 3,581,534
<DEPRECIATION> 1,365,330
<TOTAL-ASSETS> 16,690,033
<CURRENT-LIABILITIES> 660,290
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 751,675
<TOTAL-LIABILITY-AND-EQUITY> 16,690,033
<SALES> 0
<TOTAL-REVENUES> 4,237,315
<CGS> 0
<TOTAL-COSTS> 4,404,357
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,598,205
<INCOME-PRETAX> (1,765,247)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,765,247)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,765,247)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
FINANCIAL STATEMENTS
HORIZON CELLULAR TELEPHONE COMPANY
OF MONONGALIA, L.P.
YEAR ENDED DECEMBER 31, 1995
WITH REPORT OF INDEPENDENT AUDITORS
<PAGE> 2
HORIZON CELLULAR TELEPHONE COMPANY
OF MONONGALIA, L.P.
FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1995
CONTENTS
Report of Independent Auditors................................... 1
Audited Financial Statements
Balance Sheet.................................................... 2
Statement of Operations.......................................... 3
Statement of Partners' Equity.................................... 4
Statement of Cash Flows.......................................... 5
Notes to Financial Statements.................................... 6
<PAGE> 3
REPORT OF INDEPENDENT AUDITORS
The Board of Horizon, G.P., Inc.
We have audited the accompanying balance sheet of Horizon Cellular Telephone
Company of Monongalia, L.P., a majority-owned subsidiary of Horizon Cellular
Telephone Company, L.P., as of December 31, 1995, and the related statements of
operations, partners' equity, and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Horizon Cellular Telephone
Company of Monongalia, L.P. at December 31, 1995, and the results of its
operations and its cash flows for the year the ended, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Philadelphia, Pennsylvania
May 21, 1996
1
<PAGE> 4
HORIZON CELLULAR TELEPHONE COMPANY OF MONONGALIA, L.P.
BALANCE SHEET
December 31, 1995
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash $ 86,165
Accounts receivable, net of allowance for doubtful
accounts of $62,533 599,780
Inventory 52,687
Prepaid expenses 27,382
-----------
Total current assets 766,014
Property and equipment:
Cellular system 3,097,889
Other 483,645
-----------
3,581,534
Accumulated depreciation (1,365,330)
-----------
2,216,204
License, net of accumulated amortization of $1,050,123 12,962,972
Other assets, net of accumulated amortization of $1,079,167 744,843
-----------
Total assets $16,690,033
===========
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Accounts payable $ 138,678
Accrued expenses 342,858
Deferred revenue 178,754
-----------
Total current liabilities 660,290
Advances from affiliates 15,278,068
Commitments and contingencies
Partners' equity:
Partners' contributions 6,477,697
Cumulative net loss (5,726,022)
-----------
Total partners' equity 751,675
-----------
Total liabilities and partners' equity $16,690,033
===========
</TABLE>
See accompanying notes.
2
<PAGE> 5
HORIZON CELLULAR TELEPHONE COMPANY OF MONONGALIA, L.P.
STATEMENT OF OPERATIONS
Year Ended December 31, 1995
<TABLE>
<S> <C>
Revenues and sales:
Subscriber revenues $ 2,788,129
Roaming revenues 1,251,735
Equipment sales 197,451
-----------
Total revenues and sales 4,237,315
Costs and expenses:
Cost of services 598,958
Cost of equipment sales 513,929
General and administrative expenses 1,231,629
Selling 887,734
Depreciation and amortization 1,172,107
-----------
4,404,357
-----------
Loss from operations (167,042)
Interest expense -- affiliate 1,598,205
-----------
Net loss $(1,765,247)
===========
</TABLE>
See accompanying notes.
3
<PAGE> 6
HORIZON CELLULAR TELEPHONE COMPANY OF MONONGALIA, L.P.
STATEMENT OF PARTNERS' EQUITY
<TABLE>
<CAPTION>
Horizon
Cellular
Telephone KCCGP,
Company, L.P. L.P. Total
---------------------------------------------
<S> <C> <C> <C>
Partners' equity at December 31, 1994 $ 2,491,753 $ 25,169 $ 2,516,922
Net loss (1,747,595) (17,652) (1,765,247)
---------------------------------------------
Partners' equity at December 31, 1995 $ 744,158 $ 7,517 $ 751,675
=============================================
</TABLE>
See accompanying notes.
4
<PAGE> 7
HORIZON CELLULAR TELEPHONE COMPANY OF MONONGALIA, L.P.
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net loss $(1,765,247)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 1,172,107
Provision for bad debts 75,596
Accrued interest expense - affiliate 1,598,205
Changes in operating assets and liabilities:
Accounts receivable (129,172)
Inventory 39,905
Prepaid expenses 2,911
Accounts payable and accrued expenses (32,043)
Deferred revenue 58,218
-----------
Net cash provided by operating activities 1,020,480
-----------
INVESTING ACTIVITIES
Purchases of property and equipment, net of $34,737
purchased on account (564,761)
Other (6,501)
-----------
Net cash used in investing activities (571,262)
FINANCING ACTIVITIES
Advances from affiliates, net (462,802)
-----------
Net cash used in financing activities (462,802)
-----------
Net decrease in cash (13,584)
Cash at beginning of period 99,749
-----------
Cash at end of period $ 86,165
===========
</TABLE>
See accompanying notes.
5
<PAGE> 8
HORIZON CELLULAR TELEPHONE COMPANY OF MONONGALIA, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. DESCRIPTION OF BUSINESS
Horizon Cellular Telephone Company of Monongalia, L.P. (the "Company" or
"Monongalia") is a limited partnership in which KCCGP, L.P. ("KCCGP") is the
managing and sole general partner, and Horizon Cellular Telephone Company, L.P.
("HCTC") is the sole limited partner. The Company was formed in 1992 to own,
design, develop, and operate a cellular communications system in the West
Virginia non-wireline Rural Service Area No. 3 ("WV-3").
In December 1992, HCTC acquired the Federal Communications Commission ("FCC")
WV-3 Operating License (the "Operating License") and certain operating assets
and liabilities, pursuant to an acquisition Agreement dated September 11, 1992
between HCTC and the holder (the "Seller") of the Operating License, for $6.4
million in cash, a $6.0 million subordinated note payable to the seller and
issuance of 60 HCTC limited partnership units with a stated value of $6.0
million. Also in December 1992, HCTC contributed the Operating License to
Monongalia in exchange for a 99.0% interest in the Company valued at
approximately $6.4 million (based on total acquisition cost to HCTC). KCCGP
contributed approximately $64,800 to Monongalia for a 1.0% interest in the
Company.
Pursuant to the partnership agreement, the Company's net profits and losses are
allocated proportionately to the partners based upon their respective ownership
interests. The partnership shall terminate in September, 2002; however, the
partners may extend the term of the partnership at their discretion.
The WV-3 system became operational in January 1991.
2. BASIS OF PRESENTATION
The accompanying financial statements reflect the financial position, results
of operations and cash flows of Monongalia as of December 31, 1995 and for the
year then ended. KCCGP performs certain administrative functions for Monongalia
and, accordingly, certain expenses of KCCGP (see Note 5) have been allocated to
the Company on a basis which, in the opinion of management, is reasonable.
However, such expenditures are not necessarily indicative of, and it is not
practicable for management to estimate, the nature and level of expenses which
might have been incurred had the system been operating as a separate
independent company.
6
<PAGE> 9
HORIZON CELLULAR TELEPHONE COMPANY OF MONONGALIA, L.P.
NOTES TO FINANCIAL STATEMENTS (continued)
3. ACCOUNTING POLICIES
INVENTORIES
Inventories are carried at the lower of cost (using the first-in, first-out
method) or market.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and are depreciated over their
estimated useful lives (three to twelve years) using the straight-line method.
Depreciation expense amounted to approximately $461,800 in 1995.
LICENSE
License primarily represents the acquisition cost of the Operating License.
Such costs are being amortized over a period of 40 years using the
straight-line method.
The Company periodically reviews the carrying value of its license to determine
whether such amount is recoverable based on undiscounted future cash flows and
whether a reduction to fair value is necessary. There have been no such
reductions through December 31, 1995.
OTHER ASSETS
Other assets primarily represent the acquisition cost of the customer list
which is being amortized over a period of 5 years using the straight-line
method.
ADVANCES FROM AFFILIATES
Advances from affiliates primarily represent cash advances from HCTC and KCCGP
which provided funds for investing and operating activities, and have no
specific repayment terms. Interest expense is charged monthly at a rate of
11-3/8% of the ending balance payable to HCTC.
7
<PAGE> 10
HORIZON CELLULAR TELEPHONE COMPANY OF MONONGALIA, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. ACCOUNTING POLICIES (CONTINUED)
REVENUE AND EXPENSE RECOGNITION
Cellular airtime revenue and access charges are recognized as service is
provided. Cellular airtime is billed in arrears and a majority of access
charges are billed in advance. Subscriber acquisition costs (mainly commissions
and loss on equipment sales) are expensed when incurred. Accounts receivable
consist mainly of amounts due from subscribers and other cellular companies
whose subscribers use the Company's cellular service.
Approximately 20% of the Company's 1995 roaming revenues were generated from
subscribers of a cellular company serving an adjacent market when such
subscribers place or receive calls on the Company's system.
ADVERTISING EXPENSES
Advertising expenses are charged to operations as incurred and amounted to
approximately $50,200 in 1995.
INCOME TAXES
The Company is a limited partnership organized under the laws of Delaware.
Accordingly, federal and state income taxes are not paid at the partnership
level but by the ultimate partners of the Company. The tax basis of the
Company's assets amounted to approximately $11.1 million at December 31, 1995.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
8
<PAGE> 11
HORIZON CELLULAR TELEPHONE COMPANY OF MONONGALIA, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. ACCOUNTING POLICIES (CONTINUED)
NEW ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of," which
requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. The Company will adopt SFAS 121 in the first quarter of 1996
and, based upon current circumstances, does not believe the effect of the
adoption will be material.
SFAS No. 123, "Accounting of Stock-Based Compensation," is effective for fiscal
years beginning after December 15, 1995. SFAS 123 provides companies with a
choice to follow the provisions of SFAS 123 in determining stock-based
compensation expense or to continue with the provisions of APB 25, "Accounting
for Stock Issued to Employees." The Company expects to continue to follow APB
25 with respect to the LPAR Plan (see Note 6) and will provide disclosures as
required by SFAS 123 in the December 31, 1996 notes to the financial
statements.
4. COMMITMENTS AND CONTINGENCIES
The Company leases office space, office equipment and cellular sites and
facilities under operating leases with initial terms ranging from 1 to 20
years. Most cellular sites contain renewal options ranging up to 25 years.
Future minimum payments under noncancelable operating leases with initial terms
of one year or more consisted of the following at December 31, 1995, assuming
cellular site leases are renewed through the year 2000:
<TABLE>
<CAPTION>
Cellular
Sites Other
------------------------
<S> <C> <C>
1996 $38,500 $ 95,700
1997 39,500 90,900
1998 39,700 82,300
1999 40,300 69,400
2000 41,300 52,100
--------
$390,400
========
</TABLE>
9
<PAGE> 12
HORIZON CELLULAR TELEPHONE COMPANY OF MONONGALIA, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The minimum lease payments for cellular sites in the year 2000 are expected to
approximate the minimum payments thereafter, subject to contractual increases
and payments for additional sites.
Rental expense amounted to approximately $151,900 in 1995.
The Company has guaranteed and pledged substantially all of its assets as
collateral for certain debt of HCTC.
5. RELATED PARTY TRANSACTIONS
KCCGP provides various administrative services to the Company, including
accounting, engineering, and marketing and advertising services, in addition to
funding working capital requirements and capital expenditures as necessary.
These expenses are charged, first on the basis of direct usage when
identifiable, with the remainder allocated equally among its operating systems.
Allocated expenses amounted to $50,000 in 1995.
6. BENEFIT PLANS
HCTC has granted an officer of the Company limited partnership appreciation
rights in HCTC pursuant to a Limited Partnership Unit Appreciation Rights Plan
("LPAR Plan") that was adopted September 1, 1994 to be effective January 1,
1993. Upon the occurrence of certain events as specified therein ("Termination
Events"), participants are entitled to share in the amounts, if any, of
distributions to HCTC's partners after all capital contributions made by HCTC's
partners have been repaid, together with a fixed return on such contributions.
Such rights vest over a period of five years, however vesting is automatically
accelerated upon the occurrence of a Termination Event. Compensation expense
will be recognized when distributions become probable under the LPAR Plan.
Effective July 1, 1994, KCCGP established an employee savings plan (the "Plan")
that qualifies as a deferred salary arrangement under Section 401 (k) of the
Internal Revenue Code. Under the Plan, which covers employees of the Company
who have met certain eligibility requirements, participating employees may
defer up to 15% of their pretax
10
<PAGE> 13
HORIZON CELLULAR TELEPHONE COMPANY OF MONONGALIA, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. BENEFIT PLANS (CONTINUED)
earnings, up to the Internal Revenue Service annual contribution limit ($9,240
for calendar year 1995). The Company matches up to 50% of the employee's
contributions, up to a maximum of 3% of the employee's earnings. Employees who
participate in the LPAR Plan are excluded from matching contributions. Matching
Plan contributions, which vest equally over five years, amounted to
approximately $5,800 in 1995.
7. SUBSEQUENT EVENT
On May 8, 1996, the Company entered into a definitive agreement to sell its
FCC Operating License, together with certain operating assets and liabilities,
to PriCellular Corporation and an affiliate for approximately $35 million. The
financial statements do not reflect either the estimated gain, or any expenses
incurred or expected to be incurred related to the sale of the system. The sale
is expected to close during the third quarter of 1996, and is subject to certain
regulatory and other approvals.
11
