-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ex5byOps8rjcN0AWJyVJgVC8LuW2vtbfLHVbb5bsnNImrqaBpdrFuwfC6EOL1XgC 4z0n7yxesXBSMO8JPE1MoQ== 0000897101-96-000939.txt : 19961113 0000897101-96-000939.hdr.sgml : 19961113 ACCESSION NUMBER: 0000897101-96-000939 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961112 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: RURAL CELLULAR CORP CENTRAL INDEX KEY: 0000869561 STANDARD INDUSTRIAL CLASSIFICATION: RADIO TELEPHONE COMMUNICATIONS [4812] IRS NUMBER: 411693295 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-27416 FILM NUMBER: 96657778 BUSINESS ADDRESS: STREET 1: 2819 HIGHWAY 29 SOUTH MIDWAY MALL CITY: ALEXANDRIA STATE: MN ZIP: 56308 BUSINESS PHONE: 2182835101 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended September 30, 1996. [ ] 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 0-27416 RURAL CELLULAR CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) MINNESOTA 41-1693295 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 2819 HIGHWAY 29 SOUTH, MIDWAY MALL ALEXANDRIA, MINNESOTA 56308 (320) 762-2000 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) 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 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 the close of business on October 31, 1996: CLASS A 7,502,238 CLASS B 1,351,058 TABLE OF CONTENTS PAGE NUMBER PART I. FINANCIAL INFORMATION ----------- ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS- AS OF SEPTEMBER 30, 1996 AND DECEMBER 31, 1995 .................... 3 CONSOLIDATED STATEMENTS OF OPERATIONS- THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 .......... 5 CONSOLIDATED STATEMENTS OF CASH FLOWS- NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 ..................... 6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ........................... 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ..................... 9 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ............................... 14 SIGNATURE PAGE ............................................................. 15 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS
RURAL CELLULAR CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS SEPTEMBER 30, DECEMBER 31, 1996 1995 ------------ ------------ (UNAUDITED) CURRENT ASSETS: Cash and cash equivalents $ 229,308 $ 125,137 Accounts receivable, net 5,109,918 3,019,720 Inventories 810,963 628,016 Other current assets 112,796 95,693 ------------ ------------ Total current assets 6,262,985 3,868,566 ------------ ------------ PROPERTY AND EQUIPMENT: Land 1,254,873 1,075,202 Buildings and towers 9,779,123 8,721,385 Equipment 31,456,359 16,066,315 Furniture and fixtures 2,825,482 2,193,718 Assets under construction 3,297,558 3,721,584 Less - Accumulated depreciation (11,874,854) (8,261,125) ------------ ------------ Net property and equipment 36,738,541 23,517,079 ------------ ------------ INVESTMENTS AND OTHER ASSETS: Investments in unconsolidated affiliates 1,431,111 1,165,891 Restricted and other investments 924,609 741,330 Paging licenses and other assets, net 354,637 845,615 ------------ ------------ Total investments and other assets 2,710,357 2,752,836 ------------ ------------ $ 45,711,883 $ 30,138,481 ============ ============ The accompanying notes are an integral part of these consolidated balance sheets.
RURAL CELLULAR CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY SEPTEMBER 30, DECEMBER 31, 1996 1995 ------------ ------------ (UNAUDITED) CURRENT LIABILITIES: Current maturities of long-term debt $ 2,497,409 $ 2,725,496 Accounts payable 6,764,116 4,041,906 Advance billings and customer deposits 1,318,316 964,463 Other accrued expenses 617,272 551,906 ------------ ------------ Total current liabilities 11,197,113 8,283,767 LONG-TERM DEBT 51,144 16,397,209 ------------ ------------ Total liabilities 11,248,257 24,680,976 ------------ ------------ SHAREHOLDERS' EQUITY: Undesignated shares, $.01 par value; 10,000,000 shares authorized; no shares issued and outstanding -- -- Class A common stock, $.01 par value; 15,000,000 shares authorized; 7,502,238 and 4,382,154 shares issued and outstanding 75,022 43,822 Class B common stock, $.01 par value; 5,000,000 shares authorized; 1,351,058 and 1,601,266 shares issued and outstanding 13,511 16,013 Additional paid-in capital 34,445,849 8,412,634 Accumulated deficit (70,756) (3,014,964) ------------ ------------ Total shareholders' equity 34,463,626 5,457,505 ------------ ------------ $ 45,711,883 $ 30,138,481 ============ ============ The accompanying notes are an integral part of these consolidated balance sheets.
RURAL CELLULAR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30, ----------------------------- ----------------------------- 1996 1995 1996 1995 ------------ ------------ ------------ ------------ REVENUES: Service revenues $ 6,343,656 $ 4,058,692 $ 16,305,487 $ 10,194,632 Roamer revenues 2,497,077 1,684,836 4,912,174 3,510,683 Equipment sales 204,926 286,284 955,670 1,156,010 ------------ ------------ ------------ ------------ Total revenues 9,045,659 6,029,812 22,173,331 14,861,325 ------------ ------------ ------------ ------------ OPERATING EXPENSES: Network costs 1,800,439 1,206,674 4,908,498 3,394,736 Cost of equipment sales 278,255 393,817 1,258,346 1,253,589 Selling, general and administrative 3,112,664 2,030,866 9,228,251 5,246,820 Depreciation and amortization 1,500,357 865,720 3,780,188 2,373,838 ------------ ------------ ------------ ------------ Total operating expenses 6,691,715 4,497,077 19,175,283 12,268,983 ------------ ------------ ------------ ------------ OPERATING INCOME 2,353,944 1,532,735 2,998,048 2,592,342 ------------ ------------ ------------ ------------ OTHER INCOME (EXPENSE): Interest expense (45,171) (366,546) (250,717) (1,039,311) Interest and dividend income 6,324 (23,604) 330,563 269,537 Equity in earnings of unconsolidated affiliates 14,830 2,453 42,564 2,453 ------------ ------------ ------------ ------------ Other income (expense), net (24,017) (387,697) 122,410 (767,321) ------------ ------------ ------------ ------------ INCOME BEFORE INCOME TAX 2,329,927 1,145,038 3,120,458 1,825,021 INCOME TAX PROVISION 150,000 350,316 176,250 575,000 ------------ ------------ ------------ ------------ NET INCOME $ 2,179,927 $ 794,722 $ 2,944,208 $ 1,250,021 ============ ============ ============ ============ NET INCOME PER COMMON SHARE $ .25 $ .13 $ .35 $ .21 ============ ============ ============ ============ WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 8,861,821 5,983,420 8,393,838 5,983,420 The accompanying notes are an integral part of these consolidated financial statements.
RURAL CELLULAR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) NINE MONTHS ENDED SEPTEMBER 30, ----------------------------- 1996 1995 ------------ ------------ OPERATING ACTIVITIES: Net income $ 2,944,208 $ 1,250,021 Adjustments to reconcile net income to net cash provided by operating activities - Depreciation and amortization 3,780,188 2,373,838 Deferred income tax benefit -- 500,000 Gain on restricted investments (184,036) (186,332) Equity in earnings of unconsolidated affiliates (42,564) (2,453) Change in other operating elements: Accounts receivable (2,090,198) (1,181,439) Inventories (182,947) 196,245 Other current assets (17,103) 10,482 Accounts payable 2,722,210 1,820,192 Advance billings and customer deposits 353,853 76,416 Other accrued expenses 65,370 (78,403) ------------ ------------ NET CASH PROVIDED BY OPERATING ACTIVITIES 7,348,981 4,778,567 ------------ ------------ INVESTING ACTIVITIES: Purchases of property and equipment, net (16,933,150) (5,423,762) Contributions to unconsolidated affiliates (222,656) (116,193) Purchase of restricted investments -- (82,483) Other, net (54,940) (244,694) ------------ ------------ NET CASH USED IN INVESTING ACTIVITIES (17,210,746) (5,867,132) ------------ ------------ FINANCING ACTIVITIES: Proceeds from issuance of common stock, net of offering costs 26,540,088 -- Proceeds from issuance of long-term debt 8,790,927 2,464,992 Repayment of long-term debt (25,365,079) (871,427) ------------ ------------ NET CASH PROVIDED BY FINANCING ACTIVITIES 9,965,936 1,593,565 ------------ ------------ NET CHANGE IN CASH AND CASH EQUIVALENTS 104,171 505,000 CASH AND CASH EQUIVALENTS, AT BEGINNING OF PERIOD 125,137 236,122 ------------ ------------ CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 229,308 $ 741,122 ============ ============ The accompanying notes are an integral part of these consolidated financial statements.
RURAL CELLULAR CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION: The accompanying consolidated balance sheet as of September 30, 1996, the consolidated statements of operations for the three and nine months ended September 30, 1996 and 1995, and the consolidated statements of cash flows for the nine months ended September 30, 1996 and 1995 have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at September 30, 1996 and for all periods presented have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company's December 31, 1995 Form 10-K. The results of operations for the periods ended September 30, 1996 are not necessarily indicative of the operating results for the full fiscal year or for any other interim periods. Certain December 31, 1995 amounts in the consolidated balance sheet have been reclassified to conform to the September 30, 1996 presentation. These reclassifications had no effect on net income or total shareholders' equity as previously reported. 2. LONG TERM DEBT: On April 25,1996, the Company entered into a $10,000,000 line of credit agreement (the Agreement) with the St. Paul Bank for Cooperatives which expires on March 31, 1997. Borrowings under the Agreement bear interest at the weekly Farm Credit Bank rate plus 1.4% (6.76% at September 30, 1996), and $2,455,000 was outstanding under the Agreement at September 30, 1996. The Agreement is subject to certain requirements regarding levels of net worth, cash flow and certain financial ratios. The Company was in compliance with all Agreement requirements as of September 30, 1996. 3. INCOME TAXES: The Company's effective tax rate was lower than the statutory tax rate due to the utilization of alternative minimum tax and net operating loss carryforwards. The provision for income taxes of $150,000 for the quarter ended September 30, 1996, and $176,250 for the nine months ended September 30, 1996, was the result of alternative minimum taxes. 4. SHAREHOLDERS' EQUITY: During the first quarter of 1996, the Company completed an initial public offering (the Offering) of 3,450,000 shares of Class A Common Stock, 2,869,863 shares of which were sold by the Company and 580,137 previously issued shares were offered by certain shareholders. The Company received net proceeds of approximately $26.0 million from the Offering with the proceeds used to repay long-term debt and to provide capital for network expansion. In connection with the Offering, the exercise price of 150,600 employee stock options was fixed at $10.00 per share, the price at which the stock was sold to the public. 5. SUPPLEMENTAL DISCLOSURE OF CONSOLIDATED CASH FLOW INFORMATION: NINE MONTHS ENDED SEPTEMBER 30, ------------------------------- 1996 1995 ---------- ---------- Cash paid during the period for interest $ 518,946 $1,052,175 Cash paid during the period for income taxes $ -- $ 12,136 CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of commercial paper with original maturities of three months or less. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The following table presents certain statements of operations data as a percentage of total revenues as well as other cellular performance indicators for the periods indicated.
THREE MONTHS NINE MONTHS ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, ------------------ ------------------ 1996 1995 1996 1995 ------ ------ ------ ------ REVENUES: Service revenues 70.1% 67.3% 73.5% 68.6% Roamer revenues 27.6 27.9 22.2 23.6 Equipment sales 2.3 4.8 4.3 7.8 ------ ------ ------ ------ Total revenues 100.0 100.0 100.0 100.0 ------ ------ ------ ------ OPERATING EXPENSES: Network costs 19.9 20.0 22.1 22.8 Cost of equipment sales 3.1 6.5 5.7 8.4 Selling, general, and administrative 34.4 33.7 41.7 35.3 Depreciation and amortization 16.6 14.4 17.0 16.0 ------ ------ ------ ------ Total operating expenses 74.0 74.6 86.5 82.5 ------ ------ ------ ------ OPERATING INCOME 26.0 25.4 13.5 17.5 ------ ------ ------ ------ OTHER INCOME (EXPENSE): Interest expense (0.5) (6.0) (1.1) (7.0) Interest and dividend income 0.1 (0.4) 1.5 1.8 Equity in earnings of unconsolidated affiliates 0.2 0.0 0.2 0.0 ------ ------ ------ ------ Other income (expense), net (0.2) (6.4) 0.6 (5.2) ------ ------ ------ ------ INCOME BEFORE INCOME TAX 25.8 19.0 14.1 12.3 INCOME TAX PROVISION 1.7 5.8 0.8 3.9 ------ ------ ------ ------ NET INCOME 24.1 % 13.2 % 13.3 % 8.4 % ====== ====== ====== ====== EBITDA (1) 42.8 % 39.4 % 32.3 % 35.2 % THREE MONTHS NINE MONTHS ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, ------------------ ------------------ 1996 1995 1996 1995 ------ ------ ------ ------ OTHER CELLULAR PERFORMANCE INDICATORS: End of period penetration 6.6% 3.8% 6.6% 3.8% Average monthly retention 98.9% 99.1% 98.9% 99.1% Average monthly revenue per subscriber $ 77 $ 86 $ 69 $ 74 Average acquisition cost per subscriber (2) $ 362 $ 420 $ 334 $ 409 - ----------------------------- (1) Earnings before interest, taxes, depreciation and amortization. (2) Determined by dividing the total of sales and marketing costs, agent commissions, and gains or losses on cellular equipment sales and leases by the gross subscribers added each period.
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1995 REVENUES Service revenues for the quarter ended September 30, 1996, increased 56.3% to $6,343,656 from $4,058,692 for the comparable prior period, resulting primarily from a 72.2% increase in the number of cellular subscribers, partially offset by a decrease of 10.5% in the corresponding average revenue per subscriber. Service revenues for the nine months ended September 30, 1996 increased 59.9% to $16,305,487 from $10,194,632 for the comparable prior period, resulting primarily from the increase in the number of cellular subscribers, partially offset by a decrease of 6.8% in the corresponding average revenue per subscriber. The Company has achieved this growth through focused customer sales and service strategies and by adherence to network service quality controls. This growth resulted in a market penetration rate of 6.6% at September 30, 1996, up significantly from 3.8% for the comparable prior period. Service revenues include paging revenues, which increased 78.6% to $591,223 for the nine months ended September 30, 1996 from $331,084 for the comparable prior period. Roamer revenues for the quarter ended September 30, 1996, increased 48.2% to $2,497,077 from $1,684,836 for the comparable prior period. Roamer revenues for the nine months ended September 30, 1996, increased 39.9% to $4,912,174 from $3,510,683 for the comparable prior period. These increases were primarily due to a 54.0% increase in the number of roamer minutes resulting in part from expanded coverage provided by additional cell sites and overall increased usage of the Company's cellular service by a greater number of roamers in the Company's cellular service area. While total roamer revenues increased, the average revenue per roamer declined due in part to reductions in intercarrier exchange rates under reciprocal agreements with certain surrounding carriers. Equipment revenues for the quarter ended September 30, 1996, decreased 28.4% to $204,926 from $286,284 for the comparable prior period. Equipment revenues for the nine months ended September 30, 1996, decreased 17.3% to $955,670 from $1,156,010 for the comparable prior period. These decreases reflect the growing popularity of the Company's equipment rental program. The Company expects that equipment sales revenues will become a less significant portion of total revenues and rental revenues will continue to increase. OPERATING EXPENSES Network costs for the quarter ended September 30, 1996, increased 49.2% to $1,800,439 from $1,206,674 for the comparable prior period. Network costs for the nine months ended September 30, 1996, increased 44.6% to $4,908,498 from $3,394,736 for the comparable prior period. While network costs as a percentage of revenues were relatively constant in both periods, the increased expenses reflect additional operating expenses from new cell sites that were added during 1995 and 1996 and higher total variable costs resulting from increased network usage associated with subscriber growth, partially offset by economy of scale efficiencies. Network expenses include switching and transport expenses and the expenses associated with the maintenance and operation of the Company's cellular and paging network facilities. Selling, general, and administrative (SG&A) for the quarter ended September 30, 1996, increased as a percentage of total revenues to 34.4% from 33.7% for the comparable prior period and to $3,112,664 from $2,030,866. SG&A expenses for the nine months ended September 30, 1996, increased as a percentage of total revenues to 41.7% from 35.3% for the comparable prior period and to $9,228,251 from $5,246,820. The increases were due primarily to an increase in the number and amount of commissions paid as a result of the Company's marketing and promotional strategies, additional employees and incremental wage and benefit increases. SG&A expenses include salaries, benefits, and operating expenses such as marketing, bad debt, customer support, accounting, administration, commissions and billing. Although SG&A expenses increased due to strong subscriber growth, the average acquisition cost per gross cellular subscriber decreased by 13.8% to $362 for the quarter ended September 30, 1996 from $420 for the comparable prior period due primarily to subscriber growth. Depreciation and amortization expenses for the quarter ended September 30, 1996, increased 73.3% to $1,500,357 from $865,720 for the comparable prior period. Depreciation and amortization expenses for the nine months ended September 30, 1996 increased 59.2% to $3,780,188 from $2,373,838 for the comparable prior period. The increases were primarily a result of the continued increase in investments made by the Company in network facilities and rental equipment placed into service during 1996. OPERATING INCOME Operating income for the quarter ended September 30, 1996, was $2,353,944 with an operating margin of 26.0% as compared to operating income of $1,532,735 with an operating margin of 25.4% in the comparable prior period. Operating income for the nine months ended September 30, 1996, was $2,998,048 with an operating margin of 13.5% as compared to operating income of $2,592,342 with an operating margin of 17.5% for the comparable prior period. The increases in operating income were due primarily to the increases in total revenues for the respective periods. OTHER INCOME (EXPENSE) Interest expense for the quarter ended September 30, 1996, decreased 87.7% to $45,171 from $366,546 for the comparable prior period. Interest expense for the nine months ended September 30, 1996, decreased 75.9% to $250,717 from $1,039,311 for the comparable prior period as a result of the repayment of debt with proceeds from the Company's initial public offering. NET INCOME Income before income taxes for the quarter ended September 30, 1996, increased 103.5% to $2,329,927 from $1,145,038 in the comparable prior period. Income before income taxes for the nine months ended September 30, 1996, increased 71.0% to $3,120,458 from $1,825,021 in the comparable prior period. The Company's effective tax rate is lower than the statutory rate because of the utilization of alternative minimum tax and net operating loss carryforwards. The provision for income taxes of $150,000 for the quarter ended September 30, 1996, and $176,250 for the nine months ended September 30, 1996, results from the application of alternative minimum tax guidelines. Net income for the quarter ended September 30, 1996, increased 174.3% to $2,179,927 from $794,722 in the comparable prior period. Net income for the nine months ended September 30, 1996, increased 135.5% to $2,944,208 from $1,250,021 in the comparable prior period. The increases in net income for the respective periods were due primarily to increases in total revenues and decreases in interest expense. SEASONALITY The Company experiences seasonal fluctuations in revenues and operating income. The Company's average monthly revenue per cellular subscriber has historically increased during the second and third quarters. These increases reflect greater demand in the Company's cellular service area by weekend and recreational subscribers and use in seasonal industries, such as agriculture and construction. Because the Company's cellular service area includes many seasonal recreational areas, the Company expects that roaming revenues will continue to be more seasonally volatile than local service revenues. The Company believes that the anticipated increase in cellular usage, together with the increased number of subscribers, reduced acquisition costs, and enhanced operating leverage, should result in net income for the fourth quarter of 1996. LIQUIDITY AND CAPITAL RESOURCES The Company's primary liquidity requirements are for operating expenses and for expansion of network services and facilities to support subscriber growth. As of September 30, 1996, the Company had 70 cell sites and 32 paging transmitters. The Company will continue to construct additional cell sites and purchase cellular equipment in order to increase capacity as subscriber and usage volumes increase. Specific capital requirements of the Company are based on the property, equipment, and network facilities requirements associated with the Company's expansion plans and rate of subscriber growth. The Company currently estimates that it will spend approximately $3,000,000 million for capital expansion during the fourth quarter of 1996. On April 25, 1996, the Company entered into a loan agreement with the St. Paul Bank for Cooperatives consisting of a $10,000,000 line of credit. The outstanding balance on this line was $2,455,000 as of September 30, 1996. The interest rate ranged from 6.68% to 6.86% during the quarter ended September 30, 1996. Net cash provided by operating activities during the nine months ended September 30, 1996 and 1995 was $7,348,981 and $4,778,567, respectively. The increase was due primarily to increases in net income and depreciation. Net cash used in investing activities during the nine months ended September 30, 1996 and 1995 was $17,210,746 and $5,867,132, respectively. The principal use of cash in fiscal year 1996 was for the purchase of property and equipment for the Company's cellular network and construction of the digital microwave network, which became operational in the second quarter of 1996 and equipment purchased for the Company's rental program. The Company recently began construction of a new corporate office headquarters in Alexandria, Minnesota, completion of which is expected in the fourth quarter of 1996. The total cost of the new building is anticipated to be between $2.5 and $3.0 million. The office headquarters will be funded initially through additional borrowings under the line of credit agreement. Net cash provided by financing activities during the nine months ended September 30, 1996 and 1995 was $9,965,936 and $1,593,565, respectively. In February 1996, the Company completed its Offering of 2,869,863 shares of Class A Common Stock and received proceeds of $26,061,914, net of offering expenses. The Company used approximately $20,484,759 of the net proceeds to repay substantially all outstanding debt. The Company has used the remaining net proceeds of the Offering, together with the funds available under its line of credit agreement, to fund planned capital expenditures and operating expenses. On August 26, 1996, the Company and American Portable Telecom Inc. (APT) announced the signing of a letter of intent to establish a joint venture named Wireless Alliance, LLC. Wireless Alliance will construct and operate Personal Communications Service (PCS) networks in Duluth, Minnesota, Fargo and Grand Forks, North Dakota and Superior, Wisconsin and is expected to open PCS markets for the Company that will nearly double the population base currently served by the Company. Wireless Alliance will be 51 percent owned by the Company and 49 percent owned by APT and is subject to execution of a definitive agreement and obtaining required regulatory approvals. The Company will be responsible for managing Wireless Alliance. The Company expects that the joint venture will have a limited effect on liquidity, capital resources and results of operations in 1996. FORWARD-LOOKING INFORMATION Forward-looking statements herein are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. There are certain important factors that could cause results to differ materially from those anticipated by some of the statements made herein. Investors are cautioned that all forward-looking statements involve risks and uncertainty. Some of the factors that could affect results are the impact of seasonality on cellular usage, higher than planned operating expenses and capital expenditures, and the rate at which subscriber acquisition costs are recovered for new subscribers. PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 27 Financial Data Schedule (b) Reports on Form 8-K A Report on Form 8-K dated August 26, 1996, was filed during the quarter ended September 30, 1996, reporting under Item 5, a joint venture with American Portable Telecom Inc. No financial statements were filed as part of that report. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. RURAL CELLULAR CORPORATION (Registrant) Dated: November 8, 1996 /s/ Richard P. Ekstrand ---------------- ------------------------------------------ Richard P. Ekstrand President and Chief Executive Officer Dated: November 8, 1996 /s/ Wesley E. Schultz ---------------- ------------------------------------------ Wesley E. Schultz Vice President and Chief Financial Officer (Principal Financial Officer) EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-1996 SEP-30-1996 229,308 0 5,295,774 185,856 810,963 6,262,985 48,613,395 11,874,854 45,711,883 11,197,113 0 0 0 88,533 34,375,093 45,711,883 955,670 22,173,331 1,258,346 6,166,844 12,674,577 333,862 250,717 3,120,458 176,250 2,944,208 0 0 0 2,944,208 .35 .35
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