-----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, JP4K/dUFc5TFakJME+qrg1e2rDC1QPl1alJY3JWz3tZ2oqbnV3TEZ+tRo+3mCScL FsIMlMowHMq6TuTProFUwg== 0000914749-96-000006.txt : 19960812 0000914749-96-000006.hdr.sgml : 19960812 ACCESSION NUMBER: 0000914749-96-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960809 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAI WIRELESS SYSTEMS INC CENTRAL INDEX KEY: 0000914749 STANDARD INDUSTRIAL CLASSIFICATION: CABLE & OTHER PAY TELEVISION SERVICES [4841] IRS NUMBER: 061324691 STATE OF INCORPORATION: CT FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-22888 FILM NUMBER: 96606591 BUSINESS ADDRESS: STREET 1: 18 CORPORATE WOODS BLVD STREET 2: THIRD FLOOR CITY: ALBANY STATE: NY ZIP: 12211 BUSINESS PHONE: 5184622632 MAIL ADDRESS: STREET 1: 18 CORPORATE WOODS BLVD STREET 2: 3RD FLOOR CITY: ALBANY STATE: NY ZIP: 12211 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 ( 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: 0-22888 CAI WIRELESS SYSTEMS, INC. (Exact name of registrant as specified in its charter)
Connecticut 06-1324691 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.)
18 Corporate Woods Boulevard, Albany, New York 12211 (Address and zip code of principal executive offices) (518) 462-2632 (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 _____ Number of shares outstanding of each of registrant's class of common stock at August 1, 1996: CLASS OUTSTANDING SHARES Common Stock, no par value 40,311,472 1 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, MARCH 31, 1996 1996 (UNAUDITED) * ASSETS Cash and cash equivalents $ 79,704,650 $103,263,094 Subscriber accounts receivable, less allowance for bad debts of $899,145 for June and $1,296,282 for March 1,347,605 1,432,674 Prepaid expenses 769,096 698,482 Property and equipment, net 62,943,341 52,568,619 Wireless channel rights, net 204,828,236 205,973,840 Investment in CS Wireless Systems, Inc. 110,126,098 113,054,069 Debt service escrow 78,714,005 77,621,088 Goodwill, net 129,022,676 131,282,996 Debt finance costs, net 10,234,786 10,631,263 Other assets 2,303,082 2,268,847 Total Assets $679,993,575 $698,794,972
LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities
Accounts payable $ 11,440,994 $ 8,244,577 Accrued expenses 19,087,573 10,186,374 Senior debt 275,000,000 275,000,000 Notes payable 40,910,895 43,434,667 Wireless channel rights obligations 33,782,650 41,025,866 Deferred income taxes 30,910,000 35,410,000 411,132,112 413,301,484 Commitments Mandatorily redeemable preferred stock 14% Senior convertible preferred stock (liquidation value $70,000,000) 69,055,003 69,020,002 Series A 8% redeemable convertible preferred stock (liquidation value $577,500/$18,050,000) 577,500 18,050,000 Accrued preferred stock dividends 8,841,631 5,812,562 78,474,134 92,882,564 Shareholders' Equity Preferred stock Common stock, shares issued and outstanding June 30, 1996 - 40,311,472 March 31, 1996 - 37,829,482 275,173,587 257,701,130 Accumulated deficit (84,786,258) (65,090,206) 190,387,329 192,610,924 Total Liabilities and Shareholders' Equity $679,993,575 $698,794,972
*Summarized from the Company's audited Consolidated Balance Sheet as of that date. See notes to condensed consolidated financial statements. 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE-MONTH PERIODS ENDED JUNE 30, JUNE 30, 1996 1995 REVENUES $ 9,304,823 $ 3,991,867 Costs and expenses Programming and license 3,892,596 1,664,905 Marketing 574,605 1,046,003 General and administrative 6,913,514 4,644,075 Depreciation and amortization 8,095,227 2,608,925 19,475,942 9,963,908 Operating loss (10,171,119) (5,972,041) Other income (expense) Equity in net loss of affiliate (3,000,000) - Interest income 2,172,064 88,312 Other income 39,454 37,946 Interest expense (10,160,834) (1,940,278) (10,949,316) (1,814,020) Loss before provision for income tax benefit and minority interest (21,120,435) (7,786,061) Provision for income tax benefit 4,500,000 - Loss before minority interest (16,620,435) (7,786,061) Minority interest in loss - 279,746 Net loss (16,620,435) (7,506,315) Preferred stock dividend (3,075,617) (352,449) Loss applicable to common stock shareholders $(19,696,052) $(7,858,764) Loss per common share $ (0.51) $ (0.49) Average common and equivalent shares outstanding 38,859,743 15,913,911
See notes to condensed consolidated financial statements. 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE-MONTH PERIODS ENDED JUNE 30, JUNE 30, 1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES Net loss $(16,620,435) $(7,506,315) Adjustments to reconcile net loss to net cash used in operating activities Depreciation and amortization 8,095,227 2,608,925 Equity in net loss of affiliate 3,000,000 - Deferred income tax benefit (4,500,000) - Debt finance costs and discounts amortization 502,325 770,960 Minority interest in loss - (279,746) Debt service escrow interest income (1,092,917) - Changes in assets and liabilities, net of effects from acquisitions Subscriber accounts receivable 36,394 (400,561) Other assets (121,094) 183,956 Accounts payable and accrued expenses 8,880,700 (14,873) Net cash used in operating activities (1,819,800) (4,637,654) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of wireless channel rights (1,129,955) (744,634) Purchase of property and equipment (9,999,304) (2,602,498) Proceeds from the sale of property and equipment - 69,828 Purchase of investments - (250,000) Proceeds from the sale of investments - 208,778 Other (268,300) (1,040,966) Net cash used in investing activities (11,397,559) (4,359,492) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of senior notes, other debt and warrants - 42,000,000 Payment of senior and other debt (10,329,492) (26,191,883) Debt financing costs paid - (642,747) Proceeds from issuance of common stock - 1,545,979 Registry and other stock issuance costs paid - (75,650) Other (11,593) - Net cash provided by (used in) financing activities (10,341,085) 16,635,699 Net increase (decrease) in cash and cash equivalents (23,558,444) 7,638,553 Cash and cash equivalents, beginning 103,263,094 1,201,932 Cash and cash equivalents, ending $ 79,704,650 $ 8,840,485
See notes to condensed consolidated financial statements 4 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 1. Basis of Presentation The condensed consolidated financial statements include the accounts of CAI Wireless Systems, Inc. and its wholly-owned subsidiaries (the "Company" or "CAI"). The balance sheets presented herein reflect the acquisitions of ACS Enterprises, Inc. and its subsidiaries ("ACS") and Eastern Cable Networks of Washington, Inc. ("ECNW") which were effective as of September 29, 1995. However, consistent with the purchase method of accounting, the statement of operations for the three-month period ended June 30, 1995 does not include any operating activity of ACS or ECNW. A 54% owned subsidiary, CS Wireless Systems, Inc. ("CS"), is accounted for on the equity method. Current summarized financial information regarding CS is presented in Note 3 below. 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. They do not include all information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of the Management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three-month period ended June 30, 1996 are not necessarily indicative of the results that may be expected for the year ending March 31, 1997. Note 2. Shareholders' Equity. During the three-month period ended June 30, 1996, a total of 174,725 shares of 8% Series A Preferred Stock were converted into 2,481,990 shares of common stock, resulting in an increase of $17,472,457 in common stock. Note 3. Investment in CS Wireless Systems, Inc. The Company's equity in net loss of affiliate of approximately $3,000,000 is based on CAI's pro-rata share of CS Wireless Systems, Inc.'s net loss of $3,063,000 for the three-month period ended March 31, 1996, taking into account CAI's complete ownership prior to February 23, 1996, plus CAI's amortization of the excess of its cost less its pro-rata share of equity acquired over a fifteen year period as follows:
CAI's share of affiliate's net loss $2,500,000 Amortization of CAI's excess cost 500,000 Equity in net loss of affiliate $3,000,000
The summarized financial information disclosed below is extracted from CS Wireless Systems, Inc. unaudited historical March 31, 1996 financial statements. 5 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED Note 3. Investment in CS Wireless Systems, Inc., continued The following is an unaudited condensed consolidated balance sheet of CS Wireless Systems, Inc. as of March 31, 1996:
ASSETS Cash and cash equivalents $165,072,000 Subscriber receivables, net 902,000 Prepaid expenses and other 545,000 Plant and equipment 31,196,000 Net assets held for sale 27,290,000 Wireless channel rights, net 142,237,000 Goodwill, net 39,883,000 Other assets 9,635,000 $416,760,000 LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Accounts payable and accrued expenses $ 5,954,000 Other liabilities 655,000 Debt 246,876,000 Deferred income taxes 16,435,000 269,920,000 STOCKHOLDERS' EQUITY Common stock 10,000 Additional paid-in-capital 151,100,000 Accumulated deficit (4,270,000) Total Stockholders' Equity 146,840,000 $416,760,000
The following is an unaudited condensed consolidated statement of operations of CS Wireless Systems, Inc. for the three months ended March 31, 1996:
Revenues $3,856,000 Operating expenses: Systems operations 2,301,000 Selling, general and administrative 1,427,000 Depreciation and amortization 2,506,000 Total operating expenses 6,234,000 Operating loss (2,378,000) Other income (expense): Interest income 899,000 Interest expense (3,023,000) Total other income (expense), net (2,124,000) Loss before income taxes (4,502,000) Income tax benefit 1,439,000 Net loss $(3,063,000)
6 PART I. FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OPERATIONS As of June 30, 1996, the Company had approximately 83,800 subscribers of which approximately 50,400 subscribers are attributable to the ACS acquisition and approximately 3,300 subscribers are attributable to the ECNW acquisition. The remaining approximately 30,100 subscribers compared to approximately 34,000 subscribers as of June 30, 1995. The decrease is primarily due to the New York system decrease of approximately 5,500 subscribers, offsetting the increases in the other systems. The New York system is losing subscribers to hardwire cable operators due to greater channel capacity. This trend in New York will likely continue until CAI builds digital transmission facilities which will provide even greater channel capacity. The Company's recently completed digital transmission facilities located in Boston and Norfolk/Virginia Beach are currently being tested by NYNEX Corporation and Bell Atlantic Corporation, respectively. LIQUIDITY AND CAPITAL RESOURCES During the three-month period ended June 30, 1996, CAI expended approximately $10.0 million to purchase equipment, $1.8 million to fund operating activities, $1.1 million to acquire wireless channel rights and $10.3 million to pay senior and other debt, including $6.1 million against the amount due to the Federal Communications Commission (FCC) in connection with its MMDS license auction. During this period, CAI funded its cash requirements out of existing cash balances. At June 30, 1996, CAI had cash and cash equivalents of approximately $79.7 million. Pursuant to the Company's capital expenditure plans for fiscal 1997, CAI is committed as of June 30, 1996, through open purchase orders, to expend approximately $13.3 million primarily for capital expenditures associated with the development of digital transmission facilities. In addition, during the nine- month period ending March 31, 1997, the Company is obligated to pay approximately $39.0 million in MMDS license auction fees, of which CS is obligated to reimburse CAI $10.1 million for licenses transferred to CS, and approximately $4.9 million of minimum license fees and lease payments. RESULTS OF OPERATIONS THREE-MONTH PERIOD ENDED JUNE 30, 1996 COMPARED TO THREE-MONTH PERIOD ENDED JUNE 30, 1995: CAI's total revenue was $9.3 million for the three-month period ended June 30, 1996 ("1996 Period") as compared to $4.0 million for the three-month period ended June 30, 1995 ("1995 Period"). The ACS and ECNW acquisitions accounted for $5.8 million of such revenue increase for the 1996 Period, but was offset by a net decrease of $0.5 million attributable to decreased revenues of $0.8 million in the New York system resulting from decreased subscribers, offset by increases totaling $0.3 million resulting from growth of subscribers in the other systems. 7 PART I. FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED Operating expenses, including depreciation and amortization, of $19.5 million for the 1996 Period increased by $9.5 million over the $10.0 million reported for the 1995 Period. Depreciation and amortization of $8.1 million for the 1996 Period increased by $5.5 million over the $2.6 million for the 1995 Period, which increase substantially resulted from the ACS and ECNW acquisitions. Operating expenses, excluding depreciation and amortization, of $11.4 million for the 1996 Period increased by $4.0 million over the $7.4 million for the 1995 Period. The ACS and ECNW acquisitions accounted for $5.0 million of this increase, which was offset by a $1.0 million decrease in operating expenses, primarily attributable to a $0.8 million decrease in marketing costs, reflecting CAI's change from an aggressive growth strategy in the 1995 Period to a limited growth strategy in the 1996 Period, as the Company awaits the commercial availability of digital wireless subscriber equipment. CAI's operating loss was $10.2 million for the 1996 Period, or $4.2 million more than the 1995 Period operating loss of $6.0 million. While revenue was up by $5.3 million, operating expenses increased by $9.5 million. However, after taking into account the depreciation and amortization increase mentioned above, operating expenses requiring cash increased $4.0 million, which is less than the revenue increase, resulting in a $1.3 million improvement. CAI's 1996 Period includes a $3.0 million loss relating to CAI's investment in CS, representing its pro-rata share of CS's net loss for CS's three-month period ended March 31, 1996. CAI did not acquire its investment in CS until September 29, 1995. Interest income was $2.2 million for the 1996 Period as compared to $0.1 million for the 1995 Period. The increase is primarily due to interest earned on the Debt Service Escrow established in connection with the Company's offering of 12 1/4 % Senior Notes Due 2002 and the investment of the cash remaining from the net proceeds of the Senior Notes offering and other concurrent September 29, 1995 transactions. Interest expense increased to $10.2 million for the 1996 Period from $2.0 million for the 1995 Period, a change of $8.2 million, primarily due to interest expense incurred on the Senior Notes issued on September 29, 1995. 8 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits The following Exhibits are filed herewith or incorporated by reference as indicated:
Incorporation by Reference Page EXHIBIT NO. DESCRIPTION (SEE LEGEND) REFERENCE 3.1 Amended and Restated Certificate of 1-Exhibit 3.1 Incorporation of CAI 3.2 Amended and Restated Bylaws of CAI 1-Exhibit 3.2 11.1 Schedule Regarding Computation of Loss Per Common Share 11.2 Schedule Regarding Computation of Fully Diluted Loss Per Common Share 27 Financial Data Schedule 13
LEGEND 1 Incorporated by reference to the exhibits to the Quarterly Report on Form 10-Q for September 30, 1995. Filed herewith (b) Reports on Form 8-K b1) Form 8-K dated April 25, 1996, regarding the following item: Item 5. OTHER EVENTS The Company announced on April 25, 1996 that it had constructed the first digital wireless cable television system on the Eastern seaboard, in the Hampton Roads area of Virginia, which includes Norfolk and Virginia Beach, and has also completed construction of the core transmission facility of its digital wireless cable television system in Boston, Massachusetts, comprised of a main transmitter and booster. b2) Form 8-K dated May 23, 1996 (filed May 30, 1996), regarding the following item: Item 5. OTHER EVENTS The Company announced on May 23, 1996 that it had begun testing in Washington of the first Internet-access product delivered by a wireless television company, and on May 29, 1996 had announced the 1995 fourth quarter and year end results. b3) Form 8-K dated June 27, 1996 (filed July 3, 1996), regarding the following item: Item 5. OTHER EVENTS The Company successfully transmitted digital video, audio programming and data signals on June 27, 1996 at a demonstration held in Rochester, New York for members of the financial community. 9 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SIGNATURE TITLE DATE
/S/ JARED E. ABBRUZZESE Chairman, Chief Executive Officer August 8, 1996 JARED E. ABBRUZZESE and Director (Principal Executive Officer) /S/ JAMES P. ASHMAN Executive Vice President, Chief August 8, 1996 JAMES P. ASHMAN Financial Officer and Director (Principal Financial Officer) /S/ CRAIG J. KESSLER Vice President and Controller August 8, 1996 CRAIG J. KESSLER (Principal Accounting Officer)
10 EX-11.1 2 EXHIBIT 11.1 CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES Computation of Loss per Common Share For the Three-Month Period Ended June 30, 1996
Net loss $ (16,620,435) Preferred stock dividend (3,075,617) Loss applicable to common stock shareholders $ (19,696,052) Weighted average number of shares outstanding 38,859,743 Loss per common share $ (0.51)
COMPUTATION OF WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
WEIGHTED AVERAGE SHARES SHARES FOR THE QUARTER ENDED JUNE 30, 1996 Beginning Balance 37,829,482 37,829,482 Series A Preferred Stock - converted 2,481,990 1,030,261 Series A Preferred Stock - not converted 64,167 0 Warrants - BANX 36,751,083 0 Warrants - Other 2,310,541 0 Options 1,274,134 0 38,859,743
(a) Outstanding convertible preferred stock, warrants and options are not considered for the purposes of calculating the weighted average shares outstanding since these securities are anti-dilutive. (b) The Series A Redeemable Convertible Preferred Stock of 5,775 shares which have not been converted are assumed converted at a conversion price of $9 per share. 11 EX-11.2 3 Exhibit 11.2 CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES Computation of Fully Diluted Loss Per Common Share For the Three-Month Period Ended June 30, 1996
Loss applicable to common stock shareholders $ (19,696,052) Less: Preferred stock dividends 3,075,617 Net loss used to calculate fully diluted loss per common share, before adjustments (16,620,435) LESS : ADJUSTMENTS Interest expense on term notes assumed to be CONVERTED, NET OF DEFERRED TAX EFFECT.................. 729,000 Interest expense reduction resulting from the assumed proceeds from exercise of warrants and options in excess of the 20 % buyback applied against short and long term debt, NET OF DEFERRED TAX EFFECT................................... 2,627,000 Adjusted net loss $ (13,264,435) Weighted average fully diluted loss per common share $ (0.19) Weighted average common and equivalent shares outstanding as of June 30, 1996 38,859,743 ADD SHARES ASSUMING CONVERSION OF : Warrants, BANX 36,751,083 Warrants, other 2,310,541 Options 1,274,134 Series A preferred stock - not converted 64,167 Treasury stock repurchase with proceeds (8,062,294) Weighted average number of shares used to compute fully diluted loss per common share 71,197,374
a. Interest expense reduction resulting from excess proceeds ( over 20 % treasury stock purchase ) used to reduce debt is calculated based on actual interest expense incurred on the Senior Notes. b. Treasury method used on options and warrants to the extent of their proceeds up to the 20 % repurchase limit. This calculation is submitted in accordance with Regulation S-K item 601(b) (11) although it is contrary to paragraph 40 of APB Opinion No. 15 because it produces an anti-dilutive result. 12 EX-27 4
5 Unaudited Financial Information As Of And For The Three Months Ended June 30, 1996 3-MOS MAR-31-1997 APR-01-1996 JUN-30-1996 79,704,650 0 2,246,750 899,145 0 0 80,705,361 17,762,020 679,993,575 0 315,910,895 69,632,503 0 275,173,587 (84,786,258) 679,993,575 0 9,304,823 0 19,475,942 3,000,000 571,215 10,160,834 (21,120,435) (4,500,000) (16,620,435) 0 0 0 (16,620,435) (0.51) 0
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