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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
FORM 10-Q/A
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE PERIOD ENDED JUNE 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-13526
PRICELLULAR CORPORATION
(EXACT NAME OF THE REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 22-3043811
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
45 ROCKEFELLER PLAZA
NEW YORK, NY 10020
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
(212) 459-0800
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NOT APPLICABLE
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods 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___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Class A Common Stock, $0.01 Par Value -- 13,575,649 shares as of July 8, 1996
Class B Common Stock, $0.01 Par Value -- 17,218,621 shares as of July 8, 1996
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INDEX
PRICELLULAR CORPORATION AND SUBSIDIARIES
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -- June 30, 1996 and December 31, 1995.......... 2
Condensed Consolidated Statements of Operations -- Three and Six Months Ended June 30,
1996 and 1995...................................................................... 3
Condensed Consolidated Statements of Cash Flows -- Six Months Ended June 30, 1996
and 1995........................................................................... 4
Notes to Condensed Consolidated Financial Statements.................................. 5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations...................................................................... 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................................... 13
Item 2. Changes in Securities........................................................... 13
Item 3. Defaults upon Senior Securities................................................. 13
Item 4. Submission of Matters to a Vote of Security Holders............................. 13
Item 5. Other Information............................................................... 13
Item 6. Exhibits and Reports on Form 8-K................................................ 13
Signature............................................................................... 15
</TABLE>
1
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PRICELLULAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
----------- ------------
<S> <C> <C>
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents.................................................. $ 54,993 $123,444
Accounts receivable (less allowance of $2,443 in 1996 and $2,076 in
1995)................................................................... 13,872 8,725
Inventory.................................................................. 1,946 1,651
Other current assets....................................................... 710 4,744
-------- --------
Total current assets......................................................... 71,521 138,564
Fixed assets -- at cost:
Cellular facilities, equipment and other................................... 66,372 58,050
Less accumulated depreciation.............................................. (10,124) (6,009)
-------- --------
Net fixed assets............................................................. 56,248 52,041
Investment in cellular operations............................................ 37,629 37,386
Cellular licenses (less accumulated amortization of $7,705 in 1996 and $3,833
in 1995)................................................................... 357,085 305,375
Cellular licenses held for sale.............................................. 33,226 --
Deferred financing costs (less accumulated amortization of $1,842 in 1996 and
$1,029 in 1995)............................................................ 10,621 11,386
Other assets................................................................. 1,831 14
-------- --------
Total assets................................................................. $ 568,161 $544,766
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses...................................... $ 15,383 $ 15,777
Long-term debt -- current portion.......................................... 389 1,971
Income taxes payable....................................................... 521 872
Other current liabilities.................................................. 3,682 3,529
-------- --------
Total current liabilities.................................................... 19,975 22,149
Long-term debt............................................................... 354,408 315,216
Other long-term liabilities.................................................. 1,528 1,673
Stockholders' equity:
Preferred stock, $0.01 par: Series A, cumulative convertible:
Authorized 10,000,000 shares issued and outstanding 96,000 shares....... 1 1
Common stock, $0.01 par:
Class A: Authorized 100,000,000 shares (1996) and 40,000,000 shares
(1995); issued and outstanding 13,575,649 (1996) and 13,572,089
(1995)................................................................. 136 136
Class B: Authorized 20,000,000 shares; issued and outstanding 17,218,621
(1996) and 17,269,624 (1995)........................................... 172 173
Additional paid-in capital................................................. 214,443 215,618
Accumulated deficit........................................................ (22,502) (10,200)
-------- --------
Total stockholders' equity.............................................. 192,250 205,728
-------- --------
Total liabilities and stockholders' equity......................... $ 568,161 $544,766
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
2
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PRICELLULAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- -------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES
Cellular service.......................... $ 25,199 $ 7,751 $ 44,711 $ 13,097
Equipment sales........................... 791 377 1,543 564
Other..................................... 1,116 -- 2,114 --
---------- ---------- ---------- ----------
27,106 8,128 48,368 13,661
COSTS AND EXPENSES
Cost of cellular service.................. 7,085 2,039 12,520 3,733
Cost of equipment sold.................... 2,103 870 4,415 1,499
General and administrative................ 4,141 1,643 7,674 3,021
Sales and marketing....................... 3,673 1,306 7,524 2,007
Depreciation and amortization............. 5,343 2,126 9,900 3,999
---------- ---------- ---------- ----------
22,345 7,984 42,033 14,259
---------- ---------- ---------- ----------
Operating income (loss)................... 4,761 144 6,335 (598)
OTHER INCOME (EXPENSE)
Gain on sale of investment in cellular
operations.............................. -- -- -- 11,598
Interest expense, net..................... (10,365) (3,587) (19,137) (6,668)
Other income, net......................... 250 20 500 20
---------- ---------- ---------- ----------
(10,115) (3,567) (18,637) 4,950
---------- ---------- ---------- ----------
Income (loss) before income taxes......... (5,354) (3,423) (12,302) 4,352
Benefit for income taxes.................. -- 1,150 -- --
---------- ---------- ---------- ----------
Net income (loss)......................... $ (5,354) $ (2,273) $ (12,302) $ 4,352
========== ========== ========== ==========
Net income (loss) after adjustment for
accreted Preferred Stock dividend....... $ (6,888) $ (2,273) $ (15,360) $ 4,352
========== ========== ========== ==========
Net income (loss) per common share........ $ (.22) $ (.09) $ (.50) $ .17
========== ========== ========== ==========
Weighted average number of common shares
used in computation of net income (loss)
per common share........................ 30,793,000 25,054,000 30,796,000 25,086,000
</TABLE>
See notes to condensed consolidated financial statements.
3
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PRICELLULAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30
---------------------
1996 1995
-------- --------
<S> <C> <C>
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES.................... $ 10,219 $ (5,416)
-------- --------
INVESTING ACTIVITIES
Redemption of short-term investments................................... -- 991
Purchase of cellular equipment......................................... (7,804) (2,770)
Purchase of cellular licenses.......................................... (1,494) (156)
Sale of investment in cellular operations.............................. -- 19,478
Acquisition of cellular operations, net of cash of $16 (1995).......... (68,497) (24,809)
Refund of escrow deposit relating to the Personal Communication System
auction.............................................................. 4,140 --
Amounts deposited in escrow to acquire cellular properties............. (1,750) (2,000)
Investment in cellular operations...................................... (264) (944)
-------- --------
Net cash used in investing activities.................................. (75,669) (10,210)
-------- --------
FINANCING ACTIVITIES
Proceeds from sale of common stock, net................................ -- 2,566
Proceeds from exercise of stock options................................ 15 --
Repayments of notes payable............................................ (1,776) (2,670)
Payments for deferred financing costs.................................. (49) (126)
Purchase of treasury stock............................................. (450) (738)
Costs incurred in connection with the registration of previously
unregistered stock and the issue of preferred and common stock....... (741) --
-------- --------
Net cash used in financing activities.................................. (3,001) (968)
-------- --------
(Decrease) in cash and cash equivalents................................ (68,451) (16,594)
Cash and cash equivalents at beginning of period....................... 123,444 45,411
-------- --------
Cash and cash equivalents at end of period............................. $ 54,993 $ 28,817
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest............................................................. $ 456 $ 398
Income taxes......................................................... 351 2,404
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES
Purchase of cellular equipment......................................... -- 289
Debt issued in connection with acquisition of cellular license......... 19,429 --
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES
Debt issued in exchange for unregistered debt.......................... -- 115,755
Conversion of Class B Common Stock to Class A Common Stock............. 1 --
</TABLE>
See notes to condensed consolidated financial statements.
4
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PRICELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of PriCellular
Corporation and its subsidiaries (the "Company"). All significant intercompany
items and transactions have been eliminated.
The consolidated financial statements have been prepared by the Company
without audit, in accordance with rules and regulations of the Securities and
Exchange Commission ("SEC"). In the opinion of management, the statements
reflect all adjustments necessary for a fair presentation of the results for the
interim periods. The results of operations for the interim periods are not
necessarily indicative of the results for a full year. These financial
statements should be read in conjunction with the financial statements and notes
thereto included in the Company's 1995 Annual Report on Form 10-K.
Net Income (Loss) Per Share
Net income (loss) per share for the three and six months ended June 30,
1996 and June 30, 1995 was computed by using the weighted average shares
outstanding during the periods after giving retroactive effect to the 5-for-4
Class A and Class B Common Stock Splits in March 1996 and August 1995. The net
loss per common share was increased for the impact of the accreted dividends
attributable to the Company's 6 1/4% Series A Cumulative Preferred Stock.
2. ACQUISITION OF CELLULAR OPERATIONS
New York Cluster
During April 1996, the Company consummated the acquisitions of the NY-6 RSA
and 83% of the Dutchess County, NY MSA ("Poughkeepsie, NY MSA") from United
States Cellular Corporation, boosting its New York contiguous cluster to over
750,000 Pops.
The NY-6 RSA consists of approximately 111,000 Pops in Greene and Columbia
Counties between Albany and New York City. The NY-6 RSA abuts PriCellular's
previously acquired NY-5 RSA and includes 30 miles of the New York State
Thruway, 10 miles of the Interstate connecting the New England Thruway with the
New York State Thruway in Albany and 30 miles of the Taconic State Parkway. The
acquisition price of the NY-6 RSA was approximately $19,800,000.
The Poughkeepsie, NY MSA abuts the Company's NY-6 RSA and NY-5 RSA and
extends the Company's New York cluster across the Hudson Valley from the
Connecticut and Massachusetts border 100 miles west to the Binghamton area. The
MSA has approximately 263,000 Pops of which the Company acquired 83% for $178
per Pop or $38,900,000, with one-half paid in cash and the balance in a
three-year prime note with a bullet maturity.
Mid-Atlantic Cluster
During February 1996 the Company consummated the acquisition of the
non-wireline cellular system serving the PA-9 RSA from United States Cellular
Corporation for approximately $26,100,000 or $139 per Pop. The PA-9 RSA has
approximately 188,000 Pops and abuts the Company's Ohio Cluster on the South and
McCaw/AT&T's Pittsburgh MSA on the North.
The pro forma unaudited condensed results of operations for the six months
ended June 30, 1996, assuming the above acquisitions were consummated as of the
beginning of the period, are as follows:
<TABLE>
<S> <C>
Revenues.......................................................... $ 48,182
Net loss.......................................................... (14,262)
Net loss per common share......................................... $ (.56)
</TABLE>
5
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PRICELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. COMMON STOCK
The Company filed a registration statement with the SEC and is in the
process of registering for resale 3.6 million outstanding shares of Class A
Common Stock to the public. The Company requested large and founding
shareholders to register and sell a portion of their already outstanding but
privately held stock to increase liquidity of its Class A Common Stock without
creating dilution. AT&T/McCaw, Robert Price, the Thomas H. Lee Company and the
Pennsylvania Public School Employees' Retirement System have stated that they
will not participate in this sale. Aeneas Venture Corporation, Spectrum Equity
Investors, L.P., Investment Advisors, Inc. and Dominion Cellular have complied
with the Company's request to create liquidity without dilution and sell a
portion of these shares.
During 1995, the Company's Board of Directors authorized the Company to
purchase up to 750,000 shares of its Common Stock on the open market or in
private transactions from time to time. To date, the Company has repurchased and
retired 209,062 shares of its Common Stock.
On February 29, 1996, the Board of Directors authorized a 5-for-4 common
stock split in the form of a twenty-five percent stock dividend payable March
28, 1996 to shareholders of record March 11, 1996. Stockholders' equity has been
restated to give retroactive recognition to the stock split for all periods
presented. In addition, references in the financial statements to number of
shares, per share amounts and market price of the Company's common stock have
been restated.
4. PENDING TRANSACTIONS
New York Cluster
The Company has reached agreement, pursuant to which it will exchange
certain of its Systems for, among other things, the Orange County, NY MSA and an
additional 11.1% of the Company's majority-owned Poughkeepsie, NY MSA. Pursuant
to the agreement the Company will exchange an aggregate of 548,016 Net Pops
consisting of its OH-9 RSA, a portion of its OH-10 RSA (excluding Perry and
Hocking counties) and the Parkersburg, WV/Marietta, OH MSA for the Orange
County, NY MSA (324,323 Pops), 11.1% of the Poughkeepsie, NY MSA (262,663 Pops),
12.2% of the Janesville, WI MSA (147,650 Pops) and approximately 23,571
additional net Pops, including small interests in the Eau Claire, WI and Wausau,
WI MSAs (in each of which the Company currently has a majority interest). The
Orange County, NY MSA abuts the Company's NY-5 RSA to the north, the Company's
Poughkeepsie, NY MSA to the east and the New York City MSA of McCaw/AT&T
Wireless to the south and east (bordering Westchester, Putnam and Rockland
counties). The exchange is subject to, among other things, FCC approval.
Mid-Atlantic Cluster
The Company has contracted to acquire the non-wireline cellular system
serving the WV-3 RSA which has approximately 269,000 Pops for approximately
$35,000,000. The WV-3 RSA abuts the Company's PA-9 RSA and WV-2 RSA. The
acquisition is subject to certain conditions including, but not limited to, FCC
approval and is expected to close in the third quarter.
Upper Midwest Cluster
In a disputed acquisition on November 14, 1994, RFB Cellular, Inc. signed a
contract to acquire the MI-2 RSA. The Company believed it should have had the
right to purchase the property and initiated legal proceedings. In May 1995, as
a result of this litigation, the Court of Chancery of the State of Delaware
awarded the Company the right to acquire the MI-2 RSA. The defendant in the
lawsuit appealed the decision. On March 22, 1996, the Delaware Supreme Court
reversed the lower court's decision and ordered the Company to unwind the
acquisition and sell the license and operating assets to the defendant. The
Company
6
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PRICELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
believes that the completion of this transaction will not result in any material
economic gain or loss and the loss of MI-2's operating results will not be
material to the Company's results of operations.
5. SUBSEQUENT EVENT
On July 1, 1996, the Company consummated the sale of its recently acquired
AL-4 RSA for approximately $27,500,000 in cash or approximately $200 per Pop.
The Company acquired this stand-alone RSA in November 1995, for $10,000,000 in
cash and $10,000,000 in a 5-year, 4% Note that was subsequently converted into
1,468,860 shares of the Company's Class A Common Stock on the closing date. For
financial reporting purposes , the sale of the AL-4 RSA will not result in a
material gain or loss.
7
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
For the three months ending June 30, 1996, the Company continued its strong
operating performance. Net subscriber additions amounted to 15,177. Included in
the second quarter for 1996 are the two month results of the Company's newly
acquired NY-6 RSA and the Poughkeepsie MSA which abut the Company's NY-5 RSA.
For the current six month period, the Company has increased its subscriber base
by 30,123.
Since most of the 1995 acquisitions occurred after June 30, 1995, the
results of operations for the three and six months ended June 30, 1996 are not
comparable with the same period in 1995. Comparison of operating results for
such periods is neither meaningful nor indicative of the Company's results of
operations or future growth.
Although the Company expects to incur net accounting losses for the
foreseeable future due primarily to interest and amortization expenses, it
currently is experiencing increased positive earnings before interest, taxes,
depreciation and amortization (EBITDA) which it expects to grow over the next
several years.
THREE MONTHS ENDED JUNE 30, 1996 COMPARED WITH THREE MONTHS ENDED JUNE 30, 1995
Revenues for the quarter ended June 30, 1996 increased to $27,106,000
(consisting of cellular service revenues of $25,199,000, equipment sales
revenues of $791,000 and other revenues of $1,116,000) from $8,128,000
(consisting of cellular service revenues of $7,751,000 and equipment sales
revenues of $377,000).
Total operating expenses for the quarter ended June 30, 1996 increased to
$22,345,000 (consisting of cost of cellular service of $7,085000, cost of
equipment sold of $2,103,000, general and administrative expenses of $4,141,000,
sales and marketing expenses of $3,673,000 and depreciation and amortization of
$5,343,000) from $7,984,000 of operating expenses for the quarter ended June 30,
1995 (consisting of cost of cellular service of $2,039,000, cost of equipment
sold of $870,000, general and administrative expenses of $1,643,000, sales and
marketing expenses of $1,306,000 and depreciation and amortization of
$2,126,000).
The primary factors contributing to the increase in revenues, operating
expenses and operating income was the acquisition of a significant portion of
the operating systems of the Company subsequent to June 30, 1995 and the
inclusion for two months of the Company's NY-6 RSA and Poughkeepsie MSA
acquisitions. Both the acquisitions subsequent to June 30, 1995 and the recent
acquisitions are included in the current quarter but are not included for the
same period in 1995.
Interest expense, net increased to $10,365,000 from $3,587,000 due to the
Company's issuance of $205,000,000 face amount of Senior Subordinated Discount
Notes at 12 1/4% in September 1995 and $60,000,000 face amount of Senior
Subordinated Convertible Discount Notes at 10 3/4% in August 1995.
Other income for the current quarter consists of $250,000 resulting from
the Company's agreement not to compete with Western Wireless within the Lubbock,
TX MSA. The noncompete agreement was $3,000,000 over a three year period. As of
June 30, 1996, two years remain on the agreement.
The income tax benefit for the prior year's quarter was primarily due to
the Company fully utilizing its NOLs to offset the provision recorded in the
first quarter.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1995
Revenues for the six months ended June 30, 1996 increased to $48,368,000
(consisting of cellular service revenues of $44,711,000, equipment sales
revenues of $1,543,000 and other revenues of $2,114,000) from $13,661,000
(consisting of cellular service revenues of $13,097,000 and equipment sales
revenues of $564,000).
Total operating expenses for the six months ended June 30, 1996 increased
to $42,033,000 (consisting of cost of cellular service of $12,520,000, cost of
equipment sold of $4,415,000, general and administrative expenses of $7,674,000,
sales and marketing expenses of $7,524,000 and depreciation and amortization of
$9,900,000) from $14,259,000 (consisting of cellular service of $3,733,000, cost
of equipment sold of
8
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$1,499,000, general and administrative expenses of $3,021,000, sales and
marketing expenses of $2,007,000 and depreciation and amortization of
$3,999,000).
The principal factor contributing to the increases in revenues, operating
expenses and operating income was the company's acquisition of a significant
portion of its existing systems after June 30, 1995, results of which, are
therefor included in the results for the current six month period but not in the
same period of the prior year.
Other income (expense) includes for 1995 gain on the sale of investment in
cellular operations of $11,598,000 resulting from the disposition of the
Company's interest in the non-wireline system serving the Abilene, TX, MSA.
Interest expense, net increased to $19,137,000 from $6,668,000 due
primarily to the Company's issuance of $205,000,000 face amount of Senior
Subordinated Discount Notes at 12-1/4% in September 1995 and $60,000,000 face
amount of Senior Subordinated Convertible Discount Notes at 10-3/4% in August
1995.
Other income for the current six month period consists of $500,000
resulting from the Company's agreement not to compete with Western Wireless
within the Lubbock, TX, MSA. The noncompete agreement is $3,000,000 for a period
of three years.
There is no income tax provision for the six months ended June 30, 1995
primarily due to the Company fully utilizing its NOLs.
LIQUIDITY AND CAPITAL RESOURCES
The cellular telephone business requires substantial capital to acquire,
construct and expand cellular telephone systems and to fund operating
requirements. The Company historically has financed its acquisitions and other
capital needs through the proceeds received from the issuance of debt
securities, the sale of equity interests, borrowings, vendor credit facilities
and more recently operating cash flow. As of June 30, 1996, the Company had
$54,993,000 of cash and cash equivalents and $51,546,000 of working capital.
During February 1996, the Company acquired substantially all of the assets
of the system serving the
PA-9 RSA (which represents 188,000 Pops) for $139 per Pop or $26,100,000 in
cash. The PA-9 RSA abuts the Company's WV-2 RSA and McCaw/AT&T's Pittsburgh, PA
MSA.
During April 1996, the Company consummated the acquisition of the NY-6 RSA
consisting of approximately 111,000 Pops for approximately $19,800,000.
Additionally, the Company acquired 83% of the Poughkeepsie, NY MSA which has
approximately 263,000 Pops for approximately $38,900,000, with one-half paid in
cash and the balance in a three-year prime note with a bullet maturity.
During July 1996, the Company consummated the sale of its recently acquired
AL-4 RSA for $27,500,000 in cash or $200 per Pop.
The Company has contracted to acquire the WV-3 RSA which has approximately
269,000 Pops for approximately $35,000,000 in cash. The WV-3 abuts the Company's
PA-9 RSA and the Company's WV-2 RSA. The acquisition is subject to certain
conditions including, but not limited to, FCC approval and is expected to close
during the third quarter of 1996.
The Company has reached agreement, pursuant to which it will exchange
certain of its Systems for, among other things, the Orange County, NY MSA and an
additional 11.1% of the Company's majority-owned Poughkeepsie, NY MSA. Pursuant
to the agreement, the Company will exchange an aggregate of 548,016 Net Pops
consisting of its OH-9 RSA, a portion of its OH-10 RSA (excluding Perry and
Hocking counties) and the Parkersburg, WV/Marietta, OH MSA for the Orange
County, NY MSA (324,323 Pops), 11.1% of the Poughkeepsie, NY MSA (262,663 Pops),
12.2% of the Janesville, WI MSA (147,650 Pops) and approximately 23,571
additional net Pops, including small interests in the Eau Claire, WI and Wausau,
WI MSAs (in each of which the Company currently has a majority interest). The
Orange County, NY MSA abuts the Company's NY-5 RSA to the north, the Company's
Poughkeepsie, NY MSA to the east and the
9
<PAGE> 11
New York City MSA of McCaw/AT&T Wireless to the south and east (bordering
Westchester, Putnam and Rockland counties). The exchange is subject to, among
other things, FCC approval.
In connection with the pending disposition of the MI-2 RSA, the Company
expects to receive gross proceeds of approximately $6 million.
The Company has expanded its marketing efforts significantly over prior
periods, including but not limited to, the increased use of funds for
advertising, cellular telephone inventory purchases and other expenditures
relating to subscriber growth.
The Company has plans for future growth through acquisition which may
require additional financing. Although the Company has historically been able to
obtain such financing, there is no guarantee that such financing will continue
to be available.
10
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In a disputed acquisition on November 14, 1994, RFB Cellular, Inc. signed a
contract to acquire the MI-2 RSA. The Company believed it should have had the
right to purchase the property and initiated legal proceedings. In May 1995, as
a result of this litigation, the Court of Chancery of the State of Delaware
awarded the Company the right to acquire the MI-2 RSA. The defendant in the
lawsuit appealed the decision. On March 22, 1996 the Delaware Supreme Court
reversed the lower court's decision and ordered the Company to unwind the
acquisition and sell the license and operating assets to the defendant. The
Company believes that the completion of this transaction will not result in any
economic gain or loss and the loss of MI-2's operating results will not be
material to the Company's results of operations.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<C> <S>
10.1 Asset Sale Agreement dated April 9, 1996 between PriCellular Corporation and
Mississippi One Cellular Telephone
10.2 Asset Purchase Agreement dated as of May 8, 1996 between PriCellular
Corporation and Horizon Cellular Telephone Company of Monongalia, L.P.
10.3 Asset Exchange Agreement dated June 17, 1996 between PriCellular Corporation
and Vanguard Cellular Systems, Inc.
</TABLE>
(b) The Company filed the following current reports on Form 8-K during the
three months ended June 30, 1996.
A current report on Form 8K dated May 8, 1996 which includes:
Audited Financial Statements of Cellular of Upstate New York, Inc.
for the year ended December 31, 1995.
Audited Financial Statements of Hudson Cellular Limited
Partnership for the year ended December 31, 1995.
Audited Financial Statements of PA Rural Service Area No. 9
Limited Partnership for the year ended December 31, 1995.
Audited Financial Statements of Dutchess County Cellular Telephone
Company, Inc., for the year ended December 31, 1995.
A current report on form 8K dated May 14, 1996 which includes:
Audited Financial Statements of Dominion Cellular, Inc. for the
year ended September 30, 1995.
Unaudited Financial statements of Dutchess County Cellular
Telephone and Hudson Cellular Limited partnership for the three months
ended March 31, 1996.
A current report on form 8K dated June 20, 1996 which includes:
Audited Financial Statements of Horizon Cellular Telephone Company
of Monongahela, L.P. for the year ended December 31, 1995.
11
<PAGE> 13
SIGNATURE
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.
PRICELLULAR CORPORATION
By: /s/ ROBERT PRICE
------------------------------------
Name: Robert Price
Title: President
By: /s/ STUART ROSENSTEIN
------------------------------------
Name: Stuart Rosenstein
Title: Vice President of Finance/
Chief Financial Officer
Date: July 19, 1996
12
