Exhibit 99.4.2
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of PrimeCo Personal Communications, L.P.:
In our opinion, the accompanying balance sheets and the related statements of
operations and of cash flows present fairly, in all material respects, the
financial position of the Richmond Major Trading Area of PrimeCo Personal
Communications, L.P. ("PrimeCo") at December 31, 1999 and 1998, and the
results of its operations and its cash flows for each of the three years in
the period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States. These financial statements are the
responsibility of PrimeCo's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Dallas, Texas
February 14, 2000
1
RICHMOND MAJOR TRADING AREA
BALANCE SHEETS
(Dollars in thousands)
December 31,
-----------------
1999 1998
-------- --------
ASSETS
Current assets:
Cash and cash equivalents.................................. $ 422 $ --
Accounts receivable, trade, net of allowance for doubtful
accounts of $1,165 and $547, respectively................. 4,433 2,958
Accounts receivable, other................................. 258 2,092
Inventory, finished goods.................................. 1,461 1,278
Prepaid assets............................................. 541 586
Other...................................................... 50 23
-------- --------
Total current assets..................................... 7,165 6,937
PCS Licenses, net of accumulated amortization of $1,833 and
$1,254, respectively........................................ 21,318 21,897
Microwave relocation, net of accumulated amortization of $718
and $484, respectively...................................... 8,050 8,327
Property, plant and equipment, net........................... 101,107 103,799
Construction in progress..................................... 4,985 3,827
Other........................................................ 589 494
-------- --------
Total assets............................................. $143,214 $145,281
======== ========
LIABILITIES AND EQUITY
Current liabilities:
Current installments of capital leases..................... $ 3,742 $ 3,495
Accounts payable and accrued expenses...................... 9,857 8,569
Note payable to vendor..................................... -- 10,396
Accrued compensation....................................... 438 911
Taxes, other than income................................... 2,046 1,467
-------- --------
Total current liabilities................................ 16,083 24,838
Capital lease obligations, noncurrent........................ 20,255 23,303
Other noncurrent liabilities................................. 2,779 2,236
Commitments and contingent liabilities
PrimeCo equity investment.................................... 104,097 94,904
-------- --------
Total liabilities and equity............................. $143,214 $145,281
======== ========
The accompanying notes are an integral part of the financial statements.
2
RICHMOND MAJOR TRADING AREA
STATEMENTS OF OPERATIONS
Years Ended December 31, 1999, 1998 and 1997
(Dollars in thousands)
1999 1998 1997
-------- -------- --------
Revenues and sales:
Service revenues.............................. $ 41,015 $ 24,808 $ 6,963
Product sales................................. 7,671 5,546 3,728
Other......................................... 1,770 916 481
-------- -------- --------
Net revenue................................. 50,456 31,270 11,172
-------- -------- --------
Direct operating costs and expenses:
Cost of service............................... 941 489 167
Cost of products sold......................... 7,217 5,714 4,018
Operating expenses............................ 50,497 41,355 32,418
Depreciation and amortization................. 13,866 11,125 8,333
-------- -------- --------
Total....................................... 72,521 58,683 44,936
-------- -------- --------
Loss from operations........................ (22,065) (27,413) (33,764)
Interest expense, less capitalized interest of
$172, $565 and $0, respectively................ (1,462) (1,678) (1,951)
Gain (loss) on disposal of assets............... (806) 44 (174)
Other income (loss)............................. (171) -- --
-------- -------- --------
Net loss........................................ $(24,504) $(29,047) $(35,889)
======== ======== ========
The accompanying notes are an integral part of the financial statements.
3
RICHMOND MAJOR TRADING AREA
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1999, 1998 and 1997
(Dollars in thousands)
1999 1998 1997
-------- -------- --------
Cash flows from operating activities:
Net loss....................................... $(24,504) $(29,047) $(35,889)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization................ 13,866 11,125 8,333
Bad debt expense............................. 1,281 511 347
(Gain) loss on disposal of assets............ 806 (44) 174
Changes in assets and liabilities:
Accounts receivable, trade................. (2,756) (1,740) (1,717)
Inventory, finished goods.................. (183) (671) (372)
Prepaid assets............................. 45 (72) (128)
Other assets............................... 1,712 (1,790) (740)
Accounts payable and accrued expenses...... 1,462 1,774 (38)
Accrued compensation....................... (473) 233 190
Taxes, other than income................... 579 738 704
Other noncurrent liabilities............... 1,210 2,107 957
-------- -------- --------
Net cash used in operating activities.... (6,955) (16,876) (28,179)
-------- -------- --------
Cash flows from investing activities:
Payments for microwave relocation.............. (119) (279) (1,794)
Recoveries of microwave relocation costs....... 263 197 --
Additions to property, plant and equipment..... (12,599) (14,776) (32,305)
-------- -------- --------
Net cash used in investing activities...... (12,455) (14,858) (34,099)
-------- -------- --------
Cash flows from financing activities:
Increase in intercompany payable to PrimeCo.... 33,696 34,919 64,846
Reductions of capital leases................... (3,468) (3,264) (2,967)
Proceeds from capital leases................... -- -- 400
Payment of note payable to vendor.............. (10,396) -- --
-------- -------- --------
Net cash provided by financing activities.. 19,832 31,655 62,279
-------- -------- --------
Increase (decrease) in cash and cash
equivalents..................................... 422 (79) 1
Cash and cash equivalents, beginning of period... -- 79 78
-------- -------- --------
Cash and cash equivalents, end of period......... $ 422 $ -- $ 79
======== ======== ========
Supplemental disclosure in Note 10.
The accompanying notes are an integral part of the financial statements.
4
RICHMOND MAJOR TRADING AREA
NOTES TO FINANCIAL STATEMENTS
1. Organization and Activities:
PrimeCo Personal Communications, L.P. ("PrimeCo" or the "Partnership") was
formed on May 8, 1995 as a Delaware limited partnership for the purpose of
acquiring licenses issued by the Federal Communications Commission ("FCC")
pursuant to Subpart E of Part 24 of the FCC rules ("PCS License") and to
design, build, own and operate broadband personal communications services
("PCS Business") in certain Major Trading Areas ("MTA"). An MTA is an urban
market within the United States, as defined by the FCC to determine geographic
coverage areas for Personal Communication System ("PCS") networks.
PCSCO Partnership (a wholly owned affiliate of Bell Atlantic Corporation) and
PCS Nucleus, L.P. (a wholly owned subsidiary of Air Touch Communications,
Inc.), collectively the "Partners", each hold a 20% general and 30% limited
interest in PrimeCo.
The Richmond Major Trading Area (the "Richmond MTA") of PrimeCo operates the
FCC license awarded to PrimeCo for the Richmond, Virginia market. The balance
sheets and the related statements of operations and cash flows of the Richmond
MTA (the "financial statements") represent the assets, liabilities and
operations of the Richmond MTA on a separate reporting basis. The financial
statements are maintained by PrimeCo on a separate reporting basis. As a
result, no allocations other than those discussed in footnote 6, "Related
Party Transactions", were made.
2. Summary of Significant Accounting Policies:
The following is a summary of significant accounting policies:
Cash and Cash Equivalents
Cash equivalents consist primarily of highly liquid investments with minimal
interest rate risk and original maturities of 90 days or less at date of
acquisition.
Inventory
Inventory consists of handsets and related accessories. Inventories purchased
for resale are carried at the lower of cost (determined using weighted
average) or market. Market is determined using replacement cost in accordance
with industry standards.
Revenue Recognition
The Richmond MTA records service revenues for the amount of communications
services rendered, primarily measured by billable minutes of traffic in
addition to a monthly charge for access and features, after deducting a
reserve for fraudulent unauthorized use or subscriber fraud.
Equipment sales consist of revenues from the sales of digital phones and
related accessories. Such sales are not considered a primary part of the
Richmond MTA's personal communications business. Upon shipment of products to
unaffiliated customers, the Richmond MTA recognizes sales and related costs
and expenses. The Richmond MTA has established programs which, under specified
conditions, enable customers to return products.
Customer accounts are monitored through an aging process that addresses the
customer credit class and number of days the balance is outstanding. A reserve
for uncollectible accounts is recorded based on historical accounts receivable
agings and write-offs and is further evaluated as a percentage of recorded
revenues. When a customer account is determined uncollectible, it is written-
off.
5
RICHMOND MAJOR TRADING AREA
NOTES TO FINANCIAL STATEMENTS, Continued
2. Summary of Significant Accounting Policies (Continued):
Licenses and Microwave Relocation
PCS Licenses include costs incurred to acquire the Richmond MTA FCC license on
frequency block B in the 1850-1990 MHz radio frequency bands.
The PCS licenses are issued conditionally for ten years. Historically, the FCC
has granted license renewals providing the licensees have complied with
applicable rules, policies and the Communications Act of 1934, as amended. The
Partnership believes it has complied with and intends to continue to comply
with these rules and policies.
Microwave relocation includes costs incurred to relocate incumbent microwave
links affecting the Richmond MTA's licensed frequencies.
The Richmond MTA amortizes the cost of the PCS Licenses and microwave
relocation costs on a straight-line basis over a 40 year life.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. These costs include cell
site acquisition, site development, network and switch hardware, capitalized
interest, and engineering and overhead. Depreciation is recorded on a
straight-line basis over the following estimated useful lives: buildings, 20
years, plant and other equipment, 3 to 15 years. Leasehold improvements are
depreciated over the shorter of the remaining term of the lease or the
estimated useful life of the improvement. When depreciable assets are retired
or otherwise disposed of, the related cost and accumulated depreciation are
removed from the respective accounts, and any gains or losses on disposition
are recognized in income. Repair and maintenance costs are charged to expense
when incurred; significant renewals and improvements are capitalized.
Long-Term Assets
The carrying values of all long-term assets are reviewed for impairment
whenever events or changes in circumstances (such as significant declines in
sales, earnings, or cash flows or material adverse changes in the business
climate) indicate they may not be recoverable.
Software Development Costs
Specific expenditures directly related to development projects for internal-
use software are capitalized and amortized over their estimated useful life.
Costs incurred in the preliminary project stage of development (prior to
technological feasibility) are expensed as incurred.
Initial operating systems software is capitalized and amortized over the life
of the related hardware. Initial network application software is capitalized
and amortized over three years.
Capitalized computer software of approximately $17.0 million and $16.8 million
at December 31, 1999 and 1998, respectively, is recorded in property, plant
and equipment. The Richmond MTA amortized computer software costs of
approximately $2.1 million, $2.4 million and $1.3 million for the periods
ended December 31, 1999, 1998 and 1997, respectively.
Foreign Currency
The Partnership has entered into forward exchange contracts to hedge foreign
currency transactions. The Partnership's forward exchange contracts do not
subject the Partnership to risk from exchange rate movements because gains and
losses on such contracts offset losses and gains, respectively, on the
Japanese yen denominated portion of its capital lease obligations. The
Richmond MTA had approximately $12.7 million and $12.0 million of foreign
exchange contracts outstanding relating to foreign currency denominated
capital lease obligations at December 31, 1999 and 1998, respectively. The
forward exchange contracts generally require the Partnership to exchange U.S.
dollars for foreign currencies at maturity, at rates agreed to at inception of
the contracts.
6
RICHMOND MAJOR TRADING AREA
NOTES TO FINANCIAL STATEMENTS, Continued
2. Summary of Significant Accounting Policies (Continued):
Credit risk associated with concentrations can arise when changes in economic,
industry or geographic factors affect groups of counterparties with similar
characteristics, whose aggregate credit exposure is significant to the
Partnership's total credit exposure. The current volatility in the Asian
markets creates an unfavorable environment for the counterparties to the
exchange contracts to fulfill their obligations to deliver the contracted
currencies. Accordingly, the Partnership could be at risk for any currency
related fluctuations if the counterparties do not contractually comply. Should
the counterparties not comply, the ultimate impact, if any, will be a function
of the difference in cost of acquiring yen at the time of delivery versus the
contractually agreed upon price.
The aggregate hedge payable (receivable) and capital lease receivable
(payable) as of December 31, 1999 and 1998 is ($804,000) and $434,000,
respectively. The associated gain and (loss) on the hedging activities, which
has been netted in the statements of operations against capital lease (gains)
and losses for the periods ended December 31, 1999, 1998 and 1997 is $1.2
million, $1.5 million and ($1.2) million, respectively.
Advertising Costs
Advertising costs included in operating expenses are expensed as incurred.
Advertising expenses totalled approximately $13.9 million, $12.7 million and
$8.8 million in 1999, 1998 and 1997, respectively. These costs include handset
subsidy expenses of $7.1 million, $7.9 million and $6.5 million, in 1999, 1998
and 1997, respectively.
Income Taxes
The Richmond MTA is not a separate legal taxable entity for federal, state or
local income tax purposes and therefore, a provision for income taxes has not
been presented in these financial statements. The operations of the Richmond
MTA are included in the consolidated results of operations of PrimeCo and
therefore will be included in the income tax returns of the Partners of
PrimeCo.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities on the date of the financial statements and
the reported amounts of expenses during the reporting period. Actual results
could differ from those estimates.
Recently Issued Accounting Pronouncements
Comprehensive Income
Effective December 31, 1998, the Richmond MTA adopted Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income," which
establishes standards for reporting and display of comprehensive income and
its components in a full set of general-purpose financial statements. It
requires all items that are required to be recognized under accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. There were no items of comprehensive income for the years ended
December 31, 1999, 1998, and 1997.
Segment of an enterprise and related information
The Richmond MTA has one reportable industry segment that constructs and
operates a wireless network for the provision of wireless services to
customers in the Richmond-Norfolk PCS license area.
7
RICHMOND MAJOR TRADING AREA
NOTES TO FINANCIAL STATEMENTS, Continued
Accounting for Derivative Instruments
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," (SFAS 133) which, as amended, is effective for fiscal years
beginning after June 15, 2000, was issued. Earlier application for certain
provisions of this standard is permitted. SFAS 133 establishes accounting and
reporting standards for derivative instruments. SFAS 133 requires that an
entity recognize all derivatives as either assets or liabilities in the
financial statements and measure those instruments at fair value, and it
defines the accounting for changes in the fair value of the derivatives
depending on the intended use of the derivative. Management is evaluating SFAS
133 and does not believe that adoption of the Statement will have a material
impact on its results of operations, financial position, or cash flows.
3. Property, Plant and Equipment:
Property, plant and equipment consists of the following at December 31, 1999
and 1998:
1999 1998
-------- --------
(Dollars in
thousands)
Land, buildings and leasehold improvements.................. $ 2,640 $ 2,130
Network equipment........................................... 128,753 119,023
Data processing............................................. 1,174 1,336
Furniture and fixtures...................................... 670 558
-------- --------
133,237 123,047
Accumulated depreciation and amortization................... (32,130) (19,248)
-------- --------
Total....................................................... $101,107 $103,799
======== ========
Network equipment with a cost of approximately $32.2 million at December 31,
1999 and 1998 is subject to capital lease obligations. Accumulated
amortization of capitalized leases at December 31, 1999 and 1998 was $10.1
million and $7.0 million, respectively.
8
RICHMOND MAJOR TRADING AREA
NOTES TO FINANCIAL STATEMENTS, Continued
4. Leases:
Capital Leases
During 1997 and 1996, the Richmond MTA entered into a series of sale/leaseback
transactions for a portion of its network equipment. The sale/leasebacks were
accounted for as financings, wherein the property remains on the books and a
capital lease obligation is recorded for the proceeds received. The underlying
amounts due under these leases have been guaranteed by the partners of
PrimeCo. There was no gain or loss associated with the transactions. Future
minimum payments applicable to the Richmond MTA under these obligations, a
portion of which are payable in Japanese yen, less imputed interest, are as
follows:
(Dollars
in
thousands)
Years:
2000............................................................... $ 4,465
2001............................................................... 4,465
2002............................................................... 4,695
2003............................................................... 5,874
2004............................................................... 9,194
Thereafter......................................................... 101
-------
Total minimum lease payments......................................... 28,794
Less: Imputed interest............................................... (4,797)
-------
Present value of minimum lease payments.............................. 23,997
Less: current installments........................................... (3,742)
-------
Long-term capital lease obligations at December 31, 1999............. $20,255
=======
Operating Leases
The Richmond MTA also has various operating leases, primarily related to
rentals for towers, sites, stores and offices. At December 31, 1999, the
aggregate minimum rental commitments under noncancelable operating leases for
the periods shown are as follows:
(Dollars
in
thousands)
Years:
2000............................................................... $ 2,956
2001............................................................... 2,956
2002............................................................... 2,989
2003............................................................... 2,982
2004............................................................... 2,966
Thereafter......................................................... 5,890
-------
Total................................................................ $20,739
=======
Rental expense was approximately $3.4 million, $3.2 million and $2.3 million
in 1999, 1998 and 1997, respectively.
9
RICHMOND MAJOR TRADING AREA
NOTES TO FINANCIAL STATEMENTS, Continued
5. Commitments and Contingencies:
Litigation
PrimeCo is involved in various claims and legal proceedings of a nature
considered normal to its business. Management believes that these will not
have a material effect on the Richmond MTA's operating results or financial
position.
Vendor Agreements
PrimeCo has an agreement with its equipment supplier with regards to equipment
costs, payment terms and available credits. This equipment supplier is the
primary provider for the Richmond MTA's network equipment. Vendor credits were
made available to the Richmond MTA based upon the volume of equipment
purchased in accordance with the agreements. The assets purchased under this
agreement are passed to the Richmond MTA through intercompany accounts.
Microwave Relocation Costs
The FCC requires PCS License holders to compensate incumbents for relocating
to new frequencies. The Richmond MTA has incurred approximately $8.8 million
in microwave relocation costs as of December 31, 1999 and 1998.
PrimeCo is legally entitled to partial recoveries of these amounts in the
future as other PCS providers establish service requiring clearance of the
same microwave links; however, the aggregate recovery cannot be reasonably
estimated. Amounts received with respect to these recoveries are recorded as a
reduction to the related asset account.
Recoverability of Assets and Network Expansion
The realization of the Partnership's assets is dependent upon continued
financial support from its partners and successful implementation of its
business strategy. The Richmond MTA will continue to incur significant
expenditures in connection with expanding and improving its coverage areas.
The Partners of PrimeCo have committed funding for 2000 capital and operating
expenditures. In addition, they have provided letters of support to PrimeCo
which ensure, up to the respective partners proportionate share of ownership,
that the financial support necessary to meet all cash flow requirements will
be provided to PrimeCo for the twelve-month period ending January 1, 2001.
On September 21, 1999, the Partners of PrimeCo entered into an agreement that
contemplates, among other things, the combination of certain assets, including
the assets of PrimeCo. At this time, management is unable to predict the
precise effect of this agreement on PrimeCo or the Richmond MTA.
6. Related Party Transactions
Overhead is allocated according to a formula based on gross subscriber
additions or network infrastructure buildout in the Richmond MTA, and other
usage factors. These operating expenses include the direct costs incurred by
PrimeCo and an allocation of PrimeCo overhead, and amounted to approximately
$17.3 million, $13.1 million, and $11.4 million for 1999, 1998, and 1997,
respectively. Management believes the method of allocation is reasonable.
10
RICHMOND MAJOR TRADING AREA
NOTES TO FINANCIAL STATEMENTS, Continued
7. Employee Benefits:
Effective September 1, 1995, PrimeCo established a defined contribution profit
sharing employee savings plan under Section 401(k) of the Internal Revenue
Code (the "401(k) Plan") for all employees of the Partnership. PrimeCo
received a favorable determination letter confirming the 401(k) Plan's
qualification from the Internal Revenue Service during 1996.
Employees may elect to contribute up to 16% of their annual compensation. The
Partnership will match employee contributions up to 4% of compensation and, at
its discretion, may elect to make additional contributions under the profit
sharing provisions of the 401(k) Plan. Total expenses related to the 401(k)
Plan for the periods ended December 31, 1999, 1998 and 1997 amounted to
approximately $152,000, $110,000 and $171,000, respectively.
8. Short Term Borrowing and Credit Facilities:
On December 18, 1998, PrimeCo entered into a short term note payable with one
of its primary vendors. The Richmond MTA's allocated principal portion
approximating $10.4 million, based on asset purchases under the note, was
outstanding at December 31, 1998, with a 6% interest rate. The note was paid
in full in January 1999.
9. Fair Value of Financial Instruments:
The Company's financial instruments include cash and cash equivalents,
accounts receivable, notes payable to vendor, accounts payable, and microwave
relocation and capital lease obligations. Because of their short maturity,
cash and cash equivalents, accounts receivable, notes payable to vendor and
accounts payable approximate their fair value.
Amounts payable related to foreign currency forward contracts, which are used
to hedge foreign commitments, are recorded at fair value based on currency
exchange rates in effect at the balance sheet date. Capital lease and
microwave relocation obligations approximate fair value based on interest
rates for similar transactions.
10. Supplemental Data to Statements of Cash Flows:
Years Ended December
31,
---------------------
1999 1998 1997
------ ------- ------
(Dollars in
thousands)
Interest paid was as follows:
Interest paid.......................................... $1,143 $ 1,456 $1,372
====== ======= ======
Noncash investing activities were as follows:
Additions to property, plant and equipment............. $ -- $10,184 $4,510
====== ======= ======
Reductions and credits to property, plant and
equipment............................................. $ 779 $ -- $6,212
====== ======= ======
Note payable to vendor in exchange for equipment....... $ -- $10,396 $ --
====== ======= ======
Additions to microwave relocation obligations.......... $ 221 $ 150 $ 780
====== ======= ======
Additions to PCS License............................... $ -- $ -- $ 107
====== ======= ======
11
RICHMOND MAJOR TRADING AREA
BALANCE SHEETS
(Dollars in thousands)
March 31, December 31,
2000 1999
----------- ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents........................... $ 269 $ 422
Accounts receivable, trade, net of allowance for
doubtful accounts of $1,161 and $1,165
respectively....................................... 4,568 4,433
Accounts receivable, other.......................... 316 258
Inventory, finished goods........................... 94 1,461
Prepaid assets...................................... 752 541
Other............................................... 107 50
-------- --------
Total current assets.............................. 6,106 7,165
PCS Licenses, net of accumulated amortization of
$1,977 and $1,833 respectively....................... 21,173 21,318
Microwave relocation, net of accumulated amortization
of $772 and $718, respectively....................... 7,981 8,050
Property, plant and equipment, net.................... 99,965 101,107
Construction in progress............................ 4,540 4,985
Other............................................... 559 589
-------- --------
Total assets...................................... $140,324 $143,214
======== ========
LIABILITIES AND EQUITY
Current liabilities:
Current installments of capital leases.............. $ 3,857 $ 3,742
Accounts payable and accrued expenses............... 6,631 9,857
Accrued compensation................................ 405 438
Taxes, other than income............................ 2,297 2,046
-------- --------
Total current liabilities......................... 13,190 16,083
Capital lease obligations, noncurrent................. 18,838 20,255
Other noncurrent liabilities.......................... 2,933 2,779
Commitments and contingent liabilities
PrimeCo equity investment............................. 105,363 104,097
-------- --------
Total liabilities and equity...................... $140,324 $143,214
======== ========
The accompanying notes are an integral part of the financial statements.
12
RICHMOND MAJOR TRADING AREA
STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2000 and 1999
(Dollars in thousands)
(Unaudited)
2000 1999
------- -------
Revenues and sales:
Service revenues.......................................... $11,453 $ 9,408
Product sales............................................. 1,385 2,171
Other..................................................... 492 402
------- -------
Net revenue............................................. 13,330 11,981
Direct operating costs and expenses:
Cost of service........................................... 339 185
Cost of products sold..................................... 1,454 2,110
Operating expenses........................................ 13,681 13,689
Depreciation and amortization............................. 3,111 3,348
------- -------
Total................................................... 18,585 19,332
Loss from operations.................................... (5,255) (7,351)
Interest expense, less capitalized interest of $18 and $83,
respectively............................................... (359) (372)
Gain (loss) on disposal of assets........................... 24 (169)
------- -------
Net loss.................................................... $(5,590) $(7,892)
======= =======
The accompanying notes are an integral part of the financial statements.
13
RICHMOND MAJOR TRADING AREA
STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2000 and 1999
(Dollars in thousands)
(Unaudited)
2000 1999
------- --------
Cash flows from operating activities:
Net loss.................................................. $(5,590) $ (7,892)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................... 3,111 3,348
Bad debt expense........................................ 388 359
(Gain) loss on disposal of assets....................... (24) 169
Changes in assets and liabilities:
Accounts receivable, trade............................ (523) (1,028)
Inventory, finished goods............................. 1,367 89
Prepaid assets........................................ (211) (207)
Other assets.......................................... (85) 1,246
Accounts payable and accrued expenses................. (2,968) (95)
Accrued compensation.................................. (33) (472)
Taxes, other than income.............................. 251 415
Other noncurrent liabilities.......................... 293 19
------- --------
Net cash used in operating activities............... (4,024) (4,049)
------- --------
Cash flows from investing activities:
Payments for microwave relocation......................... -- (173)
Recoveries of microwave relocation costs.................. 12 --
Additions to property, plant and equipment................ (1,556) (434)
------- --------
Net cash used in investing activities................. (1,544) (607)
------- --------
Cash flows from financing activities:
Increase in intercompany payable to PrimeCo............... 6,856 15,413
Reductions of capital leases.............................. (1,441) (218)
Payment of note payable to vendor......................... -- (10,396)
------- --------
Net cash provided by investing activities............. 5,415 4,799
------- --------
Increase (decrease) in cash and cash equivalents............ (153) 143
Cash and cash equivalents, beginning of period.............. 422 --
------- --------
Cash and cash equivalents, end of period.................... $ 269 $ 143
======= ========
The accompanying notes are an integral part of the financial statements.
14
RICHMOND MAJOR TRADING AREA
NOTES TO FINANCIAL STATEMENTS
1. Business and Significant Accounting Policies:
The accompanying unaudited financial statements, in the opinion of the PrimeCo
Personal Communications, L.P. ("PrimeCo") management, contain all material,
normal and recurring adjustments necessary to present accurately the financial
condition of the Richmond Major Trading Area ("Richmond MTA") and the results
of its operations for the periods indicated. The results of operations for the
interim periods reported are not necessarily indicative of the results to be
experienced for the entire year.
These unaudited financial statements should be used in conjunction with the
financial statements and notes thereto for the year ended December 31, 1999.
Significant accounting policies followed by the Richmond MTA were disclosed in
the notes to the Richmond MTA's financial statements for the year ended
December 31, 1999. The year-end balance sheet data included within was derived
from the audited financial statements, but does not include all of the
disclosures required by generally accepted accounting principles.
Business
The Richmond MTA of PrimeCo designs, builds, and operates broadband personal
communications services ("PCS") under the PCS license awarded to PrimeCo in
the Richmond, Virginia Market.
Litigation
PrimeCo is involved in various claims and legal proceedings of a nature
considered normal to its business. Management believes that these will not
have a material effect on the Richmond MTA's operating results or financial
position.
2. Subsequent Events:
Effective April 3, 2000, in order to comply with Federal Communications
Commission ("FCC") regulations regarding overlap properties, the operations of
the Richmond MTA were contributed by PrimeCo to PrimeCo PCS, LP., a separate
legal entity jointly controlled by Bell Atlantic Corporation and Vodafone
AirTouch.
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