<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
Form 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the period ended September 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 33-88350
PriCellular Wireless Corporation
(Exact name of the registrant as specified in its charter)
Delaware 13-3784318
(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)
(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.
Common Stock, $0.01 Par Value -- 100 shares as of October 10, 1996
<PAGE> 2
INDEX
PriCellular Wireless Corporation and Subsidiaries
<TABLE>
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheet -- September 30, 1996
and December 31, 1995........................................................................... 2
Condensed Consolidated Statements of Operations -- Three and Nine
Months Ended September 30, 1996 and 1995........................................................ 3
Condensed Consolidated Statements of Cash Flows -- Nine Months
Ended September 30, 1996 and 1995............................................................... 4
Notes to Condensed Consolidated Financial Statements.............................................. 5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations........ ............................................................................... 9
Part II. Other Information
Item 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
Signatures........................................................................................... 14
</TABLE>
1
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PriCellular Wireless Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(Dollars in Thousands, except share data)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
---------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 25,234 $ 26,669
Accounts receivable (less allowance of $2,837 in 1996 and $2,076 in 1995) 14,802 8,725
Due from affiliates 35 701
Inventory 1,731 1,651
Other current assets 723 568
--------- ---------
Total current assets 42,525 38,314
Fixed assets -- at cost:
Cellular facilities and equipment 73,710 58,050
Less accumulated depreciation (12,663) (6,009)
--------- ---------
Net fixed assets 61,047 52,041
Investment in cellular operations 36,581 37,386
Cellular licenses (less accumulated amortization of $10,165 in 1996 and
$3,833 in 1995) 390,373 305,375
Cellular license held for sale 8,179 --
Deferred financing costs (less accumulated amortization of $2,070 in 1996
and $971 in 1995) 8,938 9,989
Other assets 95 14
--------- ---------
Total assets $ 547,738 $ 443,119
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 17,859 $ 15,385
Long-term debt -- current portion 389 1,971
Income taxes payable 432 872
Other current liabilities 4,779 3,529
Due to affiliate -- 126
--------- ---------
Total current liabilities 23,459 21,883
Long-term debt 324,793 278,225
Junior Subordinated Discount Note to Parent -- 20,425
Other long-term liabilities (including $7,911 of due to parent) 10,379 1,673
Stockholder's equity:
Common stock, $0.01 par value per share; 100 shares authorized,
issued and outstanding -- --
Additional paid-in capital 211,642 130,291
Accumulated deficit (22,535) (9,378)
--------- ---------
Total stockholder's equity 189,107 120,913
--------- ---------
Total liabilities and stockholder's equity $ 547,738 $ 443,119
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
2
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PriCellular Wireless Corporation and Subsidiaries
Condensed Consolidated Statements of Operations (Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------------ ------------------------
1996 1995 1996 1995
--------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES
Cellular service $ 31,086 $ 10,599 $ 75,560 $ 23,696
Equipment sales 897 435 2,440 999
Other 864 492 2,978 492
-------- -------- -------- --------
32,847 11,526 80,978 25,187
COSTS AND EXPENSES
Cost of cellular service 8,479 2,620 20,999 6,353
Cost of equipment sold 2,407 1,326 6,822 2,825
General and administrative 4,564 2,212 12,067 5,126
Sales and marketing 4,044 1,995 11,568 4,002
Depreciation and amortization 5,475 2,444 15,295 6,443
-------- -------- -------- --------
24,969 10,597 66,751 24,749
-------- -------- -------- --------
Operating income 7,878 929 14,227 438
OTHER INCOME (EXPENSE)
Net gain on sale of investment in cellular
operations 177 -- 177 11,598
Interest expense, net (9,830) (3,858) (28,623) (10,750)
Other income, net 562 250 1,062 270
-------- -------- -------- --------
(9,091) (3,608) (27,384) 1,118
-------- -------- -------- --------
Net income (loss) $ (1,213) $ (2,679) $(13,157) $ 1,556
======== ======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements.
3
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PriCellular Wireless Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
1996 1995
---------- ---------
<S> <C> <C>
Net cash provided by (used in) operating activities $ 25,445 $ (743)
--------- ---------
INVESTING ACTIVITIES
Redemption of short-term investments -- 991
Purchase of cellular equipment (12,966) (5,120)
Purchase of cellular licenses (1,925) --
Sale of investment in cellular operations 26,614 19,478
Acquisition of cellular operations, net of cash (78,555) (126,690)
Proceeds from parent 8,577 --
Amounts deposited in escrow to acquire cellular properties -- (8,000)
Investment in cellular operations (315) (258)
--------- ---------
Net cash used in investing activities (58,570) (119,599)
--------- ---------
FINANCING ACTIVITIES
Proceeds from capital contributions 33,613 21,278
Proceeds from issuance of 12-1/4% Senior Subordinated Discount Notes -- 143,307
Proceeds from notes payable -- 20,000
Repayments of notes payable and due to stockholder (1,875) (3,343)
Payments for deferred financing costs (48) (5,475)
--------- ---------
Net cash provided by financing activities 31,690 175,767
--------- ---------
(Decrease) increase in cash and cash equivalents (1,435) 55,425
Cash and cash equivalents at beginning of period 26,669 38,682
--------- ---------
Cash and cash equivalents at end of period $ 25,234 $ 94,107
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 881 $ 527
Income taxes 440 3,250
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES
Purchase of cellular equipment -- 85
Capital contribution of assets from Parent 26,079 8,763
Debt issued in connection with acquisition of cellular license 19,429 --
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES
Contribution to capital of junior subordinated debt 21,659 --
</TABLE>
See notes to condensed consolidated financial statements.
4
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PriCellular Wireless Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
September 30, 1996
1. BASIS OF PRESENTATION
On October 21, 1994, PriCellular Corporation (100% stockholder of Wireless)
("Parent") contributed all of the assets, net of certain liabilities, to
Wireless. The consolidated financial statements include the accounts of
PriCellular Wireless 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. In the opinion of management, the statements reflect all adjustments
necessary for a fair presentation of the results for the interim period. The
results of operations for the interim period 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.
2. ACQUISITION OF CELLULAR OPERATIONS
NEW YORK CLUSTER
During April 1996, the Company consummated the acquisitions of the non-wireline
NY-6 RSA and 83% of the non-wireline 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 borders 100 miles west to the Binghamton, NY 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 note
bearing interest at the prime rate.
5
<PAGE> 7
PriCellular Wireless Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
2. ACQUISITION OF CELLULAR OPERATIONS (CONTINUED)
During October 1996, the Company consummated an agreement with Vanguard Cellular
Systems, Inc. in which it exchanged 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
exchanged 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 (18,013 net
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).
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 payment was made
by the Company's parent which simultaneously contributed the system to the
Company. 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.
During July 1996, the Company consummated the acquisition of the non-wireline
cellular system serving the WV-3 RSA from Horizon Cellular Telephone Company for
approximately $34,700,000. The WV-3 RSA has approximately 269,000 Pops and abuts
the Company's PA-9 RSA and WV-2 RSA.
6
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PriCellular Wireless Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
3. DISPOSITION OF CELLULAR OPERATIONS
On July 1, 1996, the Company consummated the sale of its AL-4 RSA for
approximately $27,500,000 in cash or $200 per Pop of which $2,500,000 is
attributable to a two year covenant not to compete. The Company acquired this
stand-alone RSA in November 1995, for $10,000,000 in cash and $10,000,000 in a
five-year, 4% note that was subsequently converted into 1,468,860 shares of the
Parent's Class A Common Stock on the closing date. In addition, during the
quarter the Company sold an investment in minority Pops. As a result of both
transactions the Company recognized a net gain of $177,000.
The pro forma unaudited condensed results of operations for the nine months
ended September 30, 1996, assuming the acquisitions listed in Note 2 and the
disposition of the AL-4 RSA were consummated as of the beginning of the period,
are as follows:
<TABLE>
<S> <C>
Revenues........................................................................ $ 81,962,000
Net loss........................................................................ $ (16,329,000)
</TABLE>
4. CAPITAL CONTRIBUTION
The Company's Parent issued 96,000 shares of Series A cumulative convertible
preferred stock. The issuance resulted in net proceeds to the Parent of
approximately $80,000,000, of which $33,600,000 was contributed to the Company.
On September 30, 1996, the Company's Parent, contributed $21,659,000 of capital
in the form of forgiving the junior subordinated note.
5. PENDING TRANSACTIONS
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
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.
7
<PAGE> 9
PriCellular Wireless Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
5. PENDING TRANSACTIONS (CONTINUED)
On September 4, 1996, the Company entered into an agreement with a subsidiary of
BellSouth Corporation pursuant to which it will effectively exchange, subject to
certain conditions including FCC approval, its stand-alone wireline Systems in
Alabama for both the non-wireline WI-4 RSA and $18,000,000 in cash ($2,000,000
of which is attributable to a two year covenant not to compete). The Systems to
be exchanged are the Company's 136,816 Pop Florence, AL MSA and its 62,035 Pop
AL-1B RSA. The WI-4 RSA abuts the Company's MI-1 RSA to the northeast, its WI-3
RSA to the northwest, and its Wausau, WI MSA to the west.
On September 27, 1996, the Company entered into an agreement to purchase,
subject to certain conditions including FCC approval, the non-wireline WI-2 RSA
for approximately $4,300,000 in cash (approximately $51 per Pop). The system is
contiguous to the Company's Eau Claire, WI MSA, WI-1 and WI-3 RSA's and its MI-1
RSA.
6. SUBSEQUENT EVENTS
During October 1996, the Company and Parent entered into an agreement, subject
to, among other things, FCC approval and negotiation of definitive
documentation, with a subsidiary of Horizon Cellular Telephone Company, L.P. to
purchase four non-wireline RSAs in Kentucky consisting of approximately 775,000
Net Pops for $116,500,000 consisting of $94,000,000 in cash and $22,500,000 in
the Parent's Class A Common Stock. Parent has agreed to contribute to the
Company as an equity contribution the assets it will acquire pursuant to the
Kentucky Cluster Acquisition. This will make the fourth operating cluster
established by the Company within two years of the Parent's Initial Public
Offering.
The acquisition will be financed with approximately $140,000,000 of debt
financing, which the Company is currently in the process of obtaining.
8
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
The current three month period ending September 30, 1996 reflects the continuing
strong financial growth of the Company's operations. Net subscriber additions
exceeded 46,000 and 16,000 for the nine and three months ended September 30,
1996, respectively.
Of the approximately 4,200,000 Pops in the Company's markets as of September 30,
1996, 2,400,000 or 57% are not included in the Company's financial results prior
to October 1, 1995. Thus a comparison for the three and nine month 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 it currently is experiencing
increased positive earnings before interest, taxes, depreciation and
amortization ("EBITDA").
Three Months Ended September 30, 1996 Compared with Three Months Ended September
30, 1995
Revenues for the quarter ended September 30, 1996 increased to $32,847,000
(consisting of cellular service revenues of $31,086,000, equipment sales
revenues of $897,000 and other revenues of $864,000) from $11,526,000
(consisting of cellular service revenues of $10,599,000, equipment sales
revenues of $435,000 and other revenue of $492,000).
Total operating expenses for the quarter ended September 30, 1996 increased to
$24,969,000 (consisting of cost of cellular service of $8,479,000, cost of
equipment sold of $2,407,000, general and administrative expenses of $4,564,000,
sales and marketing expenses of $4,044,000 and depreciation and amortization of
$5,475,000) from $10,597,000 of operating expenses for the quarter ended
September 30, 1995 (consisting of cost of cellular service of $2,620,000, cost
of equipment sold of $1,326,000, general and administrative expenses of
$2,212,000, sales and marketing expenses of $1,995,000 and depreciation and
amortization of $2,444,000).
The primary factors contributing to the increase in revenues, operating expenses
and operating income were through acquisitions of operating systems and the
growth from existing system operations.
9
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Interest expense, net increased to $9,830,000 from $3,858,000 due to the
Company's issuance of $205,000,000 face amount of Senior Subordinated Discount
Notes at 12-1/4% and the junior subordinated discount note to Parent in
September 1995 and the issuance of the Poughkeepsie Note on April 23, 1996. The
Company expects interest expense to increase in the future as a result of the
issuance of the incurrence of approximately $140,000,000 of debt financing in
connection with the Kentucky acquisition, which the Company is currently in the
process of obtaining.
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 and $312,000 resulting from the Company's two year agreement not to compete
connected with the sale of the AL-4 RSA on July 1, 1996. The non-compete
agreement with Western Wireless was $3,000,000 over a three year period
commencing December 1, 1994. The prior three month period includes $250,000. The
non-compete agreement related to the sale of AL-4 was for $2,500,000 over a two
year period.
Other income (expense) includes for 1996 the sale of the Company's AL-4 RSA as
well as the sale of an investment in minority Pops. The result of both
transactions resulted in a net gain of $177,000.
Nine Months Ended September 30, 1996 Compared with Nine Months Ended September
30, 1995
Revenues for the nine months ended September 30, 1996 increased to $80,978,000
(consisting of cellular service revenues of $75,560,000, equipment sales
revenues of $2,440,000 and other revenues of $2,978,000) from $25,187,000
(consisting of cellular service revenues of $23,696,000, equipment sales
revenues of $999,000 and other revenue of $492,000).
Total operating expenses for the nine months ended September 30, 1996 increased
to $66,751,000 (consisting of cost of cellular service of $20,999,000, cost of
equipment sold of $6,822,000, general and administrative expenses of
$12,067,000, sales and marketing expenses of $11,568,000 and depreciation and
amortization of $15,295,000) from $24,749,000 (consisting of cellular service of
$6,353,000, cost of equipment sold of $2,825,000, general and administrative
expenses of $5,126,000, sales and marketing expenses of $4,002,000 and
depreciation and amortization of $6,443,000).
The principal factors contributing to the increases in revenues, operating
expenses and operating income were through acquisitions of operating systems and
the growth from existing system operations.
Other income (expense) includes for 1996 the sale of the Company's AL-4 RSA as
well as the sale of an investment in minority Pops which transactions resulted
in a net gain of $177,000. For the comparable period in 1995, other income
(expense) includes the gain on sale of the Company's investment in cellular
operations of the non-wireline system serving the Abilene, TX MSA.
10
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Other income for the current nine month period consists of $750,000 resulting
from the Company's agreement not to compete with Western Wireless within the
Lubbock, TX, MSA and $312,000 resulting from the Company's two year agreement
not to compete connected with the sale of the AL-4 RSA on July 1, 1996. The
prior nine month period includes $250,000 for the not to compete agreement with
Western Wireless.
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 September 30, 1996, the Company
had $25,234,000 of cash and cash equivalents and $19,066,000 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. The payment was made by the Company's Parent
which simultaneously contributed the system to the Company.
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 note bearing interest at the prime rate.
On July 1, 1996, the Company consummated the sale of its stand-alone AL-4 RSA
for approximately $27,500,000 in cash or $200 per Pop.
During July 1996, the Company consummated the acquisition of the non-wireline
cellular system serving the WV-3 RSA for approximately $34,700,000 in cash. The
WV-3 RSA has approximately 269,000 Pops and abuts the Company's PA-9 RSA and
WV-2 RSA.
During October 1996, the Company consummated an agreement with Vanguard Cellular
Systems, Inc., in which it exchanged 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
exchanged 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 (18,013 net
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
11
<PAGE> 13
the New York City MSA of McCaw/AT&T Wireless to the south and east (bordering
Westchester, Putnam and Rockland counties).
On September 4, 1996, the Company entered into an agreement with a subsidiary of
BellSouth Corporation pursuant to which it will effectively exchange, subject to
certain conditions including FCC approval, its stand-alone wireline Systems in
Alabama for both the WI-4 RSA and $18,000,000 in cash ($2,000,000 of which is
attributable to a covenant not to compete). The Systems to be exchanged are the
Company's 136,816 Pop Florence, AL MSA and its 62,035 Pop AL-1B RSA. The WI-4
RSA abuts the Company's MI-1 RSA to the northeast, its WI-3 RSA to the northwest
and its Wausau, WI MSA to the west.
On September 27, 1996, the Company entered into an agreement to purchase,
subject to certain conditions including FCC approval, the WI-2 RSA for
approximately $4,300,000 in cash (approximately $51 per Pop). The system is
contiguous to the Company's Eau Claire, WI MSA, WI-1 and WI-3 RSA's and its MI-1
RSA.
During October 1996, the Company and Parent entered into an agreement, subject
to among other things FCC approval, and negotiation of definitive documentation,
with a subsidiary of Horizon Cellular Telephone Company, L.P. to purchase four
RSAs in Kentucky consisting of approximately 775,000 Net Pops for $116,500,000
consisting of $94,000,000 in cash and $22,500,000 in the Parent's Class A Common
Stock. Parent has agreed to contribute to the Company as an equity contribution
the assets it will acquire pursuant to the Kentucky Cluster Acquisition. This
will establish the Company's fourth operating cluster within two years of its
Initial Public Offering.
The acquisition will be financed by the issuance of approximately $140,000,000
of debt financing, which the Company is currently in the process of obtaining.
In connection with the pending disposition of the MI-2 RSA, the Company expects
to receive gross proceeds of approximately $6,500,000.
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 assurance that such financing will continue to be
available.
On September 30, 1996, the Company's Parent contributed $21,659,000 of capital
in the form of forgiving the junior subordinated note.
12
<PAGE> 14
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
None
13
<PAGE> 15
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.
PriCellular Wireless 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: October 17, 1996
14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
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