-----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, PZdqYTIvvhrfoYA3zUzx5WHYa1LxWjKYU/iRPJfbrh15gnNEFLZ04SgupoIl5aRq i2ZMIwKj0MA4AzrDectYDg== 0000940180-96-000366.txt : 19960816 0000940180-96-000366.hdr.sgml : 19960816 ACCESSION NUMBER: 0000940180-96-000366 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CELLULAR COMMUNICATIONS OF PUERTO RICO INC CENTRAL INDEX KEY: 0000881817 STANDARD INDUSTRIAL CLASSIFICATION: RADIO TELEPHONE COMMUNICATIONS [4812] IRS NUMBER: 133517074 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-44420 FILM NUMBER: 96612495 BUSINESS ADDRESS: STREET 1: 110 EAST 59TH STREET STREET 2: 26TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 212-906-8440 MAIL ADDRESS: STREET 1: 110 EAST 59TH STREET STREET 2: 26TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 10-Q 1 FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-19869 ------------------------------------------ CELLULAR COMMUNICATIONS OF PUERTO RICO, INC. ----------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 13-3517074 ------------------------------------- --------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 110 East 59th Street, New York, NY 10022 - ---------------------------------------- ----------------- (Address of principal executive offices) (Zip Code) (212) 355-3466 --------------------------------------------------------------- (Registrant's telephone number, including area code) 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 ---- ---- The number of shares outstanding of the issuer's common stock as of June 30, 1996 was 13,237,980. CELLULAR COMMUNICATIONS OF PUERTO RICO, INC. AND SUBSIDIARIES INDEX Page 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 4 Condensed consolidated statement of shareholders' equity--Six months ended June 30, 1996 5 Condensed consolidated statements of cash flows-- Six months ended June 30, 1996 and 1995 6 Notes to condensed consolidated financial statements 7 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 10 PART II. OTHER INFORMATION - -------------------------- Item 4. Submission of Matters to a Vote of Security Holders 14 Item 6. Exhibits and Reports on Form 8-K 14 SIGNATURES 15 - ---------- PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CELLULAR COMMUNICATIONS OF PUERTO RICO, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31, 1996 1995 ------------- ------------- (Unaudited) (See Note) ASSETS CURRENT ASSETS Cash and cash equivalents $ 3,142,000 $ 8,050,000 Accounts receivable-trade, less allowance for doubtful accounts of $3,710,000 (1996) and $3,233,000 (1995) 17,967,000 17,929,000 Equipment inventory 4,776,000 6,388,000 Prepaid expenses and other current assets 4,569,000 2,600,000 ------------ ------------ TOTAL CURRENT ASSETS 30,454,000 34,967,000 PROPERTY, PLANT & EQUIPMENT, net 83,779,000 75,769,000 UNAMORTIZED LICENSE ACQUISITION COSTS 159,765,000 139,952,000 DEFERRED FINANCING COSTS, less accumulated amortization of $759,000 (1996) and $455,000 (1995) 4,424,000 4,706,000 OTHER ASSETS, less accumulated amortization of $1,620,000 (1996) and $1,471,000 (1995) 1,368,000 1,603,000 ------------ ------------ $279,790,000 $256,997,000 ============ ============
Note: The balance sheet at December 31, 1995 has been derived from the audited financial statements at that date. 2 CELLULAR COMMUNICATIONS OF PUERTO RICO, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS--Continued
June 30, December 31, 1996 1995 ------------- ------------- (Unaudited) (See Note) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 6,874,000 $ 5,874,000 Accrued expenses 11,668,000 10,895,000 Due to Cellular Communications, Inc. 345,000 310,000 Interest payable 1,401,000 615,000 Deferred revenue 2,835,000 2,854,000 Current portion of long term debt - 1,975,000 ------------ ------------ TOTAL CURRENT LIABILITIES 23,123,000 22,523,000 LONG TERM DEBT 95,000,000 90,000,000 COMMITMENTS AND CONTINGENT LIABILITIES MINORITY INTERESTS - 322,000 SHAREHOLDERS' EQUITY Series preferred stock-$.01 par value; authorized 2,500,000 shares; issued and outstanding none - - Common stock-$.01 par value; authorized 30,000,000 shares; issued 13,431,000 (1996) and 12,803,000 (1995) shares 134,000 128,000 Additional paid-in capital 226,159,000 210,646,000 (Deficit) (59,436,000) (60,477,000) ------------ ------------ 166,857,000 150,297,000 Treasury stock-at cost, 193,000 (1996) and 207,000 (1995) shares (5,190,000) (6,145,000) ------------ ------------ 161,667,000 144,152,000 ------------ ------------ $279,790,000 $256,997,000 ============ ============
See notes to condensed consolidated financial statements. 3 CELLULAR COMMUNICATIONS OF PUERTO RICO, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Six Months Ended June 30 June 30 --------------------------- --------------------------- 1996 1995 1996 1995 ------------ ------------ ------------ ------------ Revenues: Service revenue $28,552,000 $22,271,000 $57,065,000 $41,760,000 Equipment revenue 3,162,000 3,912,000 6,125,000 7,227,000 ----------- ----------- ----------- ----------- 31,714,000 26,183,000 63,190,000 48,987,000 Costs and expenses: Cost of equipment sold 4,158,000 5,422,000 8,838,000 10,686,000 Operating expenses 4,139,000 2,323,000 8,024,000 4,512,000 Selling, general and administrative expenses 16,554,000 12,951,000 30,201,000 23,714,000 Depreciation of rental equipment 125,000 62,000 240,000 136,000 Depreciation expense 3,063,000 2,414,000 5,951,000 4,300,000 Amortization expense 1,555,000 1,520,000 3,082,000 2,874,000 ----------- ----------- ----------- ----------- 29,594,000 24,692,000 56,336,000 46,222,000 ----------- ----------- ----------- ----------- OPERATING INCOME 2,120,000 1,491,000 6,854,000 2,765,000 Other income (expense): Interest income and other, net 109,000 146,000 169,000 344,000 Interest expense (1,716,000) (2,452,000) (3,495,000) (4,637,000) ----------- ----------- ----------- ----------- INCOME(LOSS) BEFORE INCOME TAX PROVISION 513,000 (815,000) 3,528,000 (1,528,000) Income tax provision (761,000) (1,788,000) (2,487,000) (2,324,000) ----------- ----------- ----------- ----------- NET INCOME(LOSS) $ (248,000) $(2,603,000) $ 1,041,000 $(3,852,000) =========== =========== =========== =========== Net income (loss) per common share $(.02) $(.26) $.07 $(.39) =========== =========== =========== =========== Weighted average number of common shares used in computation of net income (loss) per share including common stock equivalents 13,292,000 9,921,000 14,118,000 9,964,000 =========== =========== =========== ===========
See notes to condensed consolidated financial statements. 4 CELLULAR COMMUNICATIONS OF PUERTO RICO, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
Common Stock Additional Treasury Stock --------------------- Paid-in ----------------------- Shares Amount Capital Deficit Shares Amount ---------- -------- ------------ ------------ --------- ----------- Balance, December 31, 1995 12,803,000 $128,000 $210,646,000 $(60,477,000) (207,000) $(6,145,000) Shares issued for interests in cellular license 820,000 8,000 21,528,000 Exercise of stock options 15,000 128,000 Common stock repurchased, at cost (193,000) (5,190,000) Retirement of treasury stock (207,000) (2,000) (6,143,000) 207,000 6,145,000 Net income for the six months ended June 30, 1996 1,041,000 ---------- -------- ------------ ------------ --------- ----------- Balance, June 30, 1996 13,431,000 $134,000 $226,159,000 $(59,436,000) (193,000) $(5,190,000) ========== ======== ============ ============ ========= ===========
See notes to condensed consolidated financial statements. 5 CELLULAR COMMUNICATIONS OF PUERTO RICO, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended June 30 ----------------------------- 1996 1995 ------------ ------------ NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ 10,609,000 $(10,517,000) ------------ ------------ INVESTING ACTIVITIES Purchase of property, plant and equipment (12,230,000) (15,367,000) Purchase of marketable securities (2,058,000) Proceeds from maturities of marketable securities 11,057,000 Purchase of cellular license interests (56,000) ------------ ------------ NET CASH (USED IN) INVESTING ACTIVITIES (12,286,000) (6,368,000) ------------ ------------ FINANCING ACTIVITIES Distributions to minority interest holders (1,172,000) Principal payments (1,975,000) Additional deferred financing costs (22,000) Repayment of amount due to Cellular Communications of Ohio, Inc. (47,942,000) Proceeds from borrowings, net of financing costs 5,000,000 64,921,000 Proceeds from exercise of stock options 128,000 226,000 Payments to acquire treasury stock (5,190,000) (2,950,000) ------------ ------------ NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (3,231,000) 14,255,000 ------------ ------------ DECREASE IN CASH AND CASH EQUIVALENTS (4,908,000) (2,630,000) Cash and cash equivalents at beginning of period 8,050,000 6,311,000 ------------ ------------ Cash and cash equivalents at end of period $ 3,142,000 $ 3,681,000 ============ ============ Supplemental disclosure of cash flow information: Cash paid during the period for interest exclusive of amounts capitalized $ 2,709,000 $ 14,881,000 Income taxes paid 4,667,000 411,000 Supplemental schedule of noncash investing activities: Common stock issued to acquire cellular license interests $ 21,536,000 Liabilities incurred to acquire property, plant and equipment 4,565,000 $ 4,779,000 Supplemental schedule of noncash financing activities: Partial conversion of Senior Subordinated Notes $ 65,000
See notes to condensed consolidated financial statements. 6 CELLULAR COMMUNICATIONS OF PUERTO RICO, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE A--BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months and six months ended June 30, 1996 are not necessarily indicative of the results that may be expected for the year ending December 31, 1996. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1995. Net income (loss) per share is computed based upon the weighted average number of common shares outstanding during the periods, including common stock equivalents in the net income per share computation. Common stock equivalents are excluded from the calculation of net loss per share as their effect would be antidilutive. NOTE B--ACCOUNTING CHANGE In October 1995, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock Based Compensation." Although all entities are encouraged to adopt this method of accounting for all employee stock compensation plans, SFAS No. 123 allows an entity to continue to measure compensation costs for its plans as prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees." At this time, management expects to continue its accounting in accordance with APB Opinion No. 25. NOTE C--UNAMORTIZED LICENSE ACQUISITION COSTS
June 30, December 31, 1996 1995 ------------- ------------ (Unaudited) Deferred cellular license costs $ 5,935,000 $ 5,935,000 Excess of purchase price paid over the fair market value of tangible assets acquired 183,565,000 161,123,000 ------------ ------------ 189,500,000 167,058,000 Accumulated amortization 29,735,000 27,106,000 ------------ ------------ $159,765,000 $139,952,000 ============ ============
7 CELLULAR COMMUNICATIONS OF PUERTO RICO, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)-Continued NOTE C--UNAMORTIZED LICENSE ACQUISITION COSTS-continued In February 1996, the Company acquired the remaining minority interests aggregating approximately 6% in the San Juan Cellular Telephone Company in exchange for approximately 820,000 shares of the Company's common stock. The stock was valued at $21,536,000, the fair market value on the date of acquisition. In addition, the San Juan Cellular Telephone Company made a special cash distribution of $1,172,000 to the minority interest holders. The aggregate purchase price of $21,536,000 plus expenses of $56,000 and the deficiency in net assets acquired of $850,000 have been classified as license acquisition costs. NOTE D--PROPERTY, PLANT AND EQUIPMENT
June 30, December 31, 1996 1995 ------------- ------------ (Unaudited) Land $ 2,026,000 $ 1,962,000 Operating equipment 79,530,000 73,152,000 Office furniture and other equipment 14,298,000 12,092,000 Rental equipment 967,000 739,000 Construction in progress 18,651,000 13,535,000 ----------- ------------ 115,472,000 101,480,000 Allowance for depreciation 31,693,000 25,711,000 ----------- ------------ $ 83,779,000 $ 75,769,000 =========== ============ NOTE E--ACCRUED EXPENSES June 30, December 31, 1996 1995 ------------- ------------ (Unaudited) Accrued compensation $ 1,120,000 $ 1,056,000 Accrued franchise, property and income taxes 3,480,000 5,354,000 Commissions payable 1,083,000 349,000 Accrued equipment purchases 1,952,000 280,000 Subscriber deposits 1,737,000 1,952,000 Other 2,296,000 1,904,000 ----------- ------------ $11,668,000 $ 10,895,000 ============ ============
8 CELLULAR COMMUNICATIONS OF PUERTO RICO, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)-Continued NOTE F--LONG TERM DEBT
June 30, December 31, 1996 1995 ----------- ------------ (Unaudited) Bank loan $95,000,000 $90,000,000 Subsidiary note payable 225,000 Subsidiary note payable 1,750,000 ----------- ------------ 95,000,000 91,975,000 Less current portion 1,975,000 ----------- ------------ $95,000,000 $90,000,000 =========== ============
NOTE G--TREASURY STOCK In April 1996, the Company announced that its Board of Directors authorized the repurchase of up to an additional 750,000 shares of the Company's common stock through open market purchases from time to time as market conditions warrant. This repurchase plan is in addition to a previously announced repurchase plan for up to 250,000 shares. To date the Company has repurchased 400,000 shares for an aggregate of $11,335,000, of which 207,000 shares that cost an aggregate of $6,145,000 were retired. NOTE H--COMMITMENTS AND CONTINGENT LIABILITIES As of June 30, 1996, the Company was committed to purchase approximately $10,964,000 for cellular network and other equipment and for construction services. In 1992, the Company entered into an agreement which in effect provides for a twenty year license to use its service mark which is also licensed to many of the non-wireline cellular systems in the United States. The Company is required to pay licensing and advertising fees and to maintain certain service quality standards. The total fees paid for 1996 were $202,000 which were determined by the size of the Company's markets. 9 CELLULAR COMMUNICATIONS OF PUERTO RICO, INC. AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS Three Months Ended June 30, 1996 and 1995 - ----------------------------------------- Service revenues increased to $28,552,000 from $22,271,000 as a result of subscriber growth that increased the Company's current revenue stream. Average monthly revenue per subscriber for the second quarter decreased to $71 in 1996 from $81 in 1995. Ending subscribers were 138,700 and 98,000 as of June 30, 1996 and 1995, respectively. The loss from equipment, before depreciation of rental equipment, decreased to $996,000 from $1,510,000 primarily because of reductions in the cost of cellular telephones offset by an increase in the loss from pager sales. The Company sells cellular telephones and pagers below cost in response to competition and to generate subscriber growth. Operating expenses increased to $4,139,000 from $2,323,000 primarily due to increased usage of the network and additional costs associated with the expanded network (including paging operations), which account for 90% and 10% of the increase, respectively. Selling, general and administrative expenses increased to $16,554,000 from $12,951,000 as a result of increased selling and marketing to increase the customer base and additional personnel to service the expanding customer base. Increases in bad debt expense, customer retention expense and subscriber billing expense also contributed to this increase. The increases in selling and marketing costs, personnel costs, bad debt expense, customer retention expense and subscriber billing expense were 14%, 7%, 23%, 12% and 11%, respectively, of the total $3,603,000 increase. Depreciation of rental equipment increased to $125,000 from $62,000 due to an increase in the number of rental pagers, offset by a decrease in rental telephone depreciation due to rental telephones becoming fully depreciated. Depreciation expense increased to $3,063,000 from $2,414,000 because of an increase in property, plant and equipment. Amortization expense increased to $1,555,000 from $1,520,000 primarily due to increases in license acquisition costs. Interest income and other, net, decreased to $109,000 from $146,000 due to a decrease in interest income on short term investments. Interest expense decreased to $1,716,000 from $2,452,000 primarily because of reductions in the principal balance and interest rates on the Company's debt. Paging operations commenced in the second quarter of 1995. As of June 30, 1996, there were 21,700 pagers in use. 10 CELLULAR COMMUNICATIONS OF PUERTO RICO, INC. AND SUBSIDIARIES (Continued) Six Months Ended June 30, 1996 and 1995 - ---------------------------------------- Service revenues increased to $57,065,000 from $41,760,000 as a result of subscriber growth that increased the Company's current revenue stream. Average monthly revenue per subscriber for the six months ended June 30 decreased to $75 in 1996 from $84 in 1995. Ending subscribers were 138,700 and 98,000 as of June 30, 1996 and 1995, respectively. The loss from equipment, before depreciation of rental equipment, decreased to $2,713,000 from $3,459,000 primarily because of reductions in the cost of cellular telephones offset by an increase in the loss from pager sales. The Company sells cellular telephones and pagers below cost in response to competition and to generate subscriber growth. Operating expenses increased to $8,024,000 from $4,512,000 primarily due to increased usage of the network and additional costs associated with the expanded network (including paging operations), which account for 85% and 15% of the increase, respectively. Selling, general and administrative expenses increased to $30,201,000 from $23,714,000 as a result of increased selling and marketing to increase the customer base and additional personnel to service the expanding customer base. Increases in bad debt expense, customer retention expense and subscriber billing expense also contributed to this increase. The increases in selling and marketing costs, personnel costs, bad debt expense, customer retention expense and subscriber billing expense were 19%, 8%, 23%, 12% and 12%, respectively, of the total $6,487,000 increase. Depreciation of rental equipment increased to $240,000 from $136,000 due to an increase in the number of rental pagers, offset by a decrease in rental telephone depreciation due to rental telephones becoming fully depreciated. Depreciation expense increased to $5,951,000 from $4,300,000 because of an increase in property, plant and equipment. Amortization expense increased to $3,082,000 from $2,874,000 primarily due to increases in license acquisition costs. Interest income and other, net, decreased to $169,000 from $344,000 due to a decrease in interest income on short term investments and an increase in losses on disposals of equipment. Interest expense decreased to $3,495,000 from $4,637,000 primarily because of reductions in the principal balance and interest rates on the Company's debt. In October 1995, the FASB issued SFAS No. 123, "Accounting For Stock-Based Compensation." Although all entities are encouraged to adopt this method of accounting for all employee stock compensation plans, SFAS No. 123 allows an entity to continue to measure compensation costs for its plans as prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees." At this time, management expects to continue its accounting in accordance with APB Opinion No. 25. 11 CELLULAR COMMUNICATIONS OF PUERTO RICO, INC. AND SUBSIDIARIES (Continued) LIQUIDITY AND CAPITAL RESOURCES The Company requires capital to expand its cellular network, for its paging business and for debt service. The Company is currently adding cell sites and increasing capacity throughout its Puerto Rico and U.S. Virgin Islands markets. The Company expects to use approximately $21,400,000 through 1996 for contemplated additions to the cellular system, for its paging business and for other non-cell site related capital expenditures. As of June 30, 1996, debt service through 1996 for the outstanding debt at the rates in effect on June 30, 1996 was expected to be approximately $3,400,000. The Company's commitments at June 30, 1996 of $10,964,000 for cellular network and other equipment and for construction services are included in the total anticipated expenditures. The Company will be able to meet these requirements with cash on hand, cash from operations or borrowings under its revolving credit facility. The preceding forward-looking statements are based on the Company's current expectations which are subject to a number of risks and uncertainties that could materially reduce demand for the Company's cellular and/or paging service, thereby reducing the need for capacity expansion and reducing the operating cash flows from such service. The primary risks and uncertainties include, but are not limited to: a change in economic conditions in the Company's markets which adversely effects the level of demand for cellular and/or paging services, greater than anticipated competition resulting in price reductions or higher customer acquisition costs, and earlier than expected competition from new wireless services. In addition, increased cellular fraud could reduce operating cash flow while increasing the need for capacity expansion. In May 1996, the Company announced that its Board of Directors authorized the review of strategic alternatives to enhance shareholder value including the exploration of partnering opportunities in the region through a business combination, an appropriate acquisition, the sale of the Company or similar transactions. At this time, the Company is engaged in discussions with certain entities regarding these alternatives. To date, no decision has been made to pursue any particular alternative and there can be no assurance that any transaction will result from these discussions. Salomon Brothers Inc has been engaged by the Company to aid it in this matter. In April 1996, the Company announced that its Board of Directors authorized the repurchase of up to an additional 750,000 shares of the Company's common stock through open market purchases from time to time as market conditions warrant. This repurchase plan is in addition to a previously announced repurchase plan for up to 250,000 shares. To date, the Company has repurchased 400,000 shares for an aggregate of $11,335,000. 12 CELLULAR COMMUNICATIONS OF PUERTO RICO, INC. AND SUBSIDIARIES (Continued) In April 1995, the Company and one of its subsidiaries entered into a $200,000,000 revolving credit facility with various banks. To date, the Company has borrowed $137,000,000. The line of credit is available until March 31, 1999, on which date it converts into a term loan with principal payments based on an amortization schedule until September 30, 2003. The terms include the payment of interest each quarter at a floating rate, which is, at the borrower's option, either (a) the higher of the bank's base rate or the Federal Funds Rate plus 1/2%, (b) the London Interbank Offering Rate or (c) the 936 Rate, plus, based on the ratio of the Company's debt to cash flow and the floating rate in effect, either .25% to 1.875% or 1.25% to 2.875%. The effective rate on the Company's borrowings as of June 30, 1996 was 6.61%. The terms also include an unused commitment fee of 1/2% per annum which is payable quarterly. Subject to the restrictions described below, the line of credit is available for funding capital expenditures, stock repurchases up to $60,000,000, acquisitions of or investments in communications related businesses in Puerto Rico, the southeastern United States and other approved countries, and for working capital and other general corporate purposes. In connection with the loan agreement, the Company has pledged to the banks the stock of the Company's subsidiaries and has given the banks a security interest in the Company and its subsidiaries' assets and a guaranty by the Company and its subsidiaries of the obligations of the borrowers under the loan agreement. The loan agreement also includes, among other things, restrictions on (i) dividends, (ii) acquisitions and investments, (iii) sales and dispositions of assets, (iv) additional indebtedness and (v) liens, and requires the maintenance of certain ratios of indebtedness to cash flow, fixed charges to cash flow and debt service to cash flow. Cash provided by operating activities was $10,609,000 in 1996 and cash used in operating activities was $10,517,000 in 1995. Cash used in operating activities in 1995 includes $12,978,000 of accrued interest expense that was paid in connection with the repayment of the amount due to Cellular Communications of Ohio, Inc. The increase in cash flow from operating activities is also a result of the increase in net income and from changes in operating assets and liabilities. Purchases of property, plant and equipment of $12,230,000 were primarily for additional cell sites and increased capacity in the Company's cellular and paging systems. The San Juan Cellular Telephone Company made a special cash distribution of $1,172,000 to its minority interest holders in 1996. The Company repaid $1,975,000 in notes payable on their due dates in 1996. The allowance for doubtful accounts was $3,710,000 and $3,233,000 as of June 30, 1996 and December 31, 1995, respectively. Write-offs net of recoveries as a percentage of service revenue was 5.4% for the six months ended June 30, 1996 compared to 4.8% for the year ended December 31, 1995. The bad debt expense percentage may remain at the current level as the subscriber base continues to grow. The Company may also require additional capital for acquisitions of minority interests in its Aguadilla or Adjuntas markets, or for the acquisition of certain RSAs, PCS licenses, or in other telecommunications related industries, if opportunities for such acquisitions arise. The Company has from time to time engaged in discussions with third parties regarding such acquisitions. In August 1996, the Company borrowed $37,000,000 under its revolving credit facility for the purpose of pursuing possible wireless opportunities. 13 CELLULAR COMMUNICATIONS OF PUERTO RICO, INC. AND SUBSIDIARIES (Continued) PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. On June 4, 1996, the Company held its annual meeting of stockholders. The following management proposals were adopted: (i) The ratification of the selection of Ernst & Young LLP as the Company's independent auditors for 1996, (ii) the re-election of Sidney R. Knafel, Ted H. McCourtney and Del Mintz to the Board of Directors and (iii) the amendment of the Company's Employee Stock Option Plan. The stockholders approved the first proposal by a vote of 11,449,945 shares in favor, 492 shares against and 50,938 shares abstaining from voting. The stockholders approved the election of Sidney R. Knafel by a vote of 11,411,353 shares in favor and 90,022 shares withheld from voting. The stockholders approved the election of Ted H. McCourtney by a vote of 11,415,353 shares in favor and 86,022 shares withheld from voting. The stockholders approved the election of Del Mintz by a vote of 11,411,353 shares in favor and 90,022 shares withheld from voting. The stockholders approved the third proposal by a vote of 8,475,217 shares in favor, 2,449,033 shares against and 82,838 shares abstaining from voting. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Included Within: ------------------------ 27. Financial Data Schedule (b) Reports on Form 8-K During the quarter ended June 30, 1996, the Company filed a current report on Form 8-K dated April 23, 1996, reporting under Item 5, Other Events, the authorization by the Board of Directors for the repurchase of up to an additional 750,000 shares of the Company's common stock through open market purchases. No financial statements were filed with this Report. 14 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. CELLULAR COMMUNICATIONS OF PUERTO RICO, INC. Date: August 12, 1996 By: /s/ J. Barclay Knapp --------------------------- J. Barclay Knapp President Date: August 12, 1996 By: /s/ Gregg Gorelick --------------------------- Gregg Gorelick Vice President-Controller (Principal Accounting Officer) 15 EX-27 2 FINANCIAL DATA SCHEDULE
5 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 3,142,000 0 21,677,000 (3,710,000) 4,776,000 4,569,000 115,472,000 (31,693,000) 279,790,000 23,123,000 95,000,000 0 0 134,000 161,533,000 279,790,000 6,125,000 63,190,000 8,838,000 16,862,000 30,201,000 0 3,495,000 3,528,000 2,487,000 1,041,000 0 0 0 1,041,000 0.07 0
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