SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 June 30, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 1-14108
360 COMMUNICATIONS COMPANY
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
47-0649117
(I.R.S. Employer Identification No.)
8725 W. Higgins Road
Chicago, Illinois
60631-2702(312) 399-2500
(Address and telephone number of 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
On July 31, 1996, 116,859,310 shares of the registrant's Common Stock were
outstanding.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements..............................................1
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................................15
Item 2. Changes in Securities ............................................*
Item 3. Defaults Upon Senior Securities...................................*
Item 4. Submission of Matters to a Vote of Security Holders...............*
Item 5. Other Information.................................................16
Item 6. Exhibits and Reports on Form 8-K..................................17
- ---------------
* No reportable information under this item.
When used in this Report, the words "intends," "expects," "plans,"
"anticipates," "estimates" and similar expressions are intended to identify
forward looking statements. Specifically, statements included in this Report
that are not historical facts, including statements about the Company's beliefs
and expectations about continued market and industry growth and ability to
maintain existing churn and increased penetration rates, are forward looking
statements. Such statements are subject to risks and uncertainties that could
cause actual results or outcomes to differ materially. Such risks and
uncertainties include, but are not limited to, the impact resulting from the
loss of the Sprint name and the uncertainties and costs associated with the
implementations of a new brand name; the Company's history of net losses and the
lack of assurance that the Company's earnings will be sufficient to cover fixed
charges in the future; the degree to which the Company is leveraged and the
restrictions imposed on the Company under its existing debt instruments which
may adversely affect the Company's ability to finance its future operations, to
compete effectively against better capitalized competitors and to withstand
downturns in its business or the economy generally; continued downward pressure
on the prices charged for cellular equipment and services resulting from
increased competition in the Company's markets; the lack of assurance that the
Company's ongoing network improvements and scheduled implementation of digital
technology in its markets will be sufficient to meet or exceed the capabilities
and quality of competing networks; the effect on the Company's operations and
financial performance of changes in the regulation of cellular activities; the
degree to which the Company incurs significant costs due to cellular fraud; the
impact on the Company of more restrictive standards on radio frequency emissions
that may arise from concerns suggesting cellular telephones may be linked to
cancer; and the other factors discussed under the heading "Certain Risk Factors"
in the Company's Information Statement set forth as Exhibit 99 to the Company's
Form 10 (File No. 1-14108) filed with the Securities and Exchange Commission,
which section is hereby incorporated by reference herein. Forward looking
statements included in this Report speak only as of the date hereof and the
Company undertakes no obligation to revise or update such statements to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
i
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
360 COMMUNICATIONS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
June 30, December 31,
ASSETS 1996 1995
-------------- -------------
(Unaudited)
Current Assets
Cash and Cash Equivalents $ 28,607 $ 19,023
Accounts Receivable, less allowances
of $3,780 and $2,370, respectively 86,275 68,087
Other Receivables 28,592 29,799
Unbilled Revenue 34,909 23,481
Inventory 16,731 19,576
Other 7,666 6,604
---------------- ---------------
Total Current Assets 202,780 166,570
---------------- ---------------
Property, Plant and Equipment 1,315,369 1,151,157
Less: Accumulated Depreciation 364,580 300,703
---------------- ---------------
Property, Plant and Equipment, net 950,789 850,454
---------------- ---------------
Investments in Unconsolidated Entities 333,851 318,287
Intangibles, net 709,363 632,756
Other Assets 20,210 5,179
---------------- ---------------
Total Assets $ 2,216,993 $ 1,973,246
================ ===============
LIABILITIES AND SHAREOWNERS' EQUITY
Current Liabilities
Trade Accounts and Other Payables $ 141,462 $ 111,770
Advance Billings 23,949 20,559
Accrued Taxes 32,589 19,690
Short-Term Borrowings 24,950 --
Accrued Agent Commissions 7,170 15,417
Other 31,336 27,092
---------------- ---------------
Total Current Liabilities 261,456 194,528
---------------- ---------------
Long-Term Debt 1,387,662 --
Advances From and Notes to Affiliates -- 1,517,729
---------------- ---------------
Deferred Credits and Other Liabilities
Deferred Income Taxes 103,741 99,168
Postretirement and Other Benefit Obligations 5,871 12,859
---------------- ---------------
Total Deferred Credits and Other Liabilities 109,612 112,027
---------------- ---------------
Minority Interests in Consolidated Entities 171,596 146,894
---------------- ---------------
Shareowners' Equity
Common Stock ($.01 par value; 1,000,000,000 shares authorized;
116,847,813 shares issued and outstanding) 1,168 11,541
Additional Paid-In Capital 627,309 360,978
Unamortized Restricted Stock (2,623) --
Accumulated Deficit (339,187) (370,451)
---------------- ---------------
Total Shareowners' Equity 286,667 2,068
---------------- ---------------
Total Liabilities and Shareowners' Equity $ 2,216,993 $ 1,973,246
================ ===============
The accompanying Notes are an integral part of the Consolidated
Financial Statements.
1
360 COMMUNICATIONS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Thousands of Dollars)
(Unaudited)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
--------------------------------- ---------------------------------
1996 1995 1996 1995
-------------- -------------- -------------- --------------
OPERATING REVENUES
Cellular Service Revenues $ 263,560 $ 196,478 $ 494,314 $ 364,556
Equipment Sales 10,613 12,417 19,554 23,814
-------------- -------------- -------------- --------------
Total Operating Revenues 274,173 208,895 513,868 388,370
-------------- -------------- -------------- --------------
OPERATING EXPENSES
Cost of Service 22,205 18,181 44,344 33,001
Cost of Equipment Sales 23,224 24,437 41,667 45,675
Other Operations Expense 11,783 8,930 24,326 17,832
Selling, General, Administrative 114,023 89,638 221,173 167,083
and Other Expenses
Depreciation and Amortization 35,157 27,502 68,154 54,286
-------------- -------------- -------------- --------------
Total Operating Expenses 206,392 168,688 399,664 317,877
-------------- -------------- -------------- --------------
OPERATING INCOME 67,781 40,207 114,204 70,493
Interest Expense (24,274) (31,864) (54,102) (62,705)
Minority Interests in Net Income
of Consolidated Entities (13,861) (8,895) (24,325) (16,915)
Equity in Net Income of
Unconsolidated Entities 14,348 7,455 24,020 11,563
Other Income (Expense), net (137) 53 322 48
-------------- -------------- -------------- --------------
Income Before Income Taxes 43,857 6,956 60,119 2,484
Income Tax Expense 19,573 7,714 28,855 9,161
-------------- -------------- -------------- --------------
Net Income (Loss) $ 24,284 $ (758) $ 31,264 $ (6,677)
============== ============== ============== ==============
Net Income (Loss) per Share (in Dollars) $ 0.21 $ (0.01) $ 0.27 $ (0.06)
============== ============== ============== ==============
Weighted Average Shares
Outstanding, in thousands 117,066 116,725 117,048 116,549
============== ============== ============== ==============
The accompanying Notes are an integral part of the
Consolidated Financial Statements.
2
360 COMMUNICATIONS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
(Unaudited)
For the Six Months
Ended June 30,
------------------------------------
1996 1995
--------------- --------------
Operating Activities
Net Income (Loss) $ 31,264 $ (6,677)
Adjustments to Reconcile Net Income (Loss) to Net
Cash Provided by Operating Activities
Depreciation and Amortization 68,154 54,286
Deferred Income Taxes 11,919 7,294
Equity in Net Income of Unconsolidated
Entities, net of distributions (14,891) 529
Minority Interests in Net Income of
Consolidated Entities 24,325 16,915
Changes in Operating Assets and Liabilities
Receivables, net (12,010) 4,618
Other Current Assets (6,529) 8,746
Trade Accounts and Other Payables 26,573 14,448
Accrued Expenses and Other
Current Liabilities 7,759 (12,126)
Noncurrent Assets and Liabilities, net 255 588
Other, net (2) (522)
--------------- --------------
Net Cash Provided by Operating Activities 136,817 88,099
--------------- --------------
Investing Activities
Capital Expenditures (143,942) (178,732)
Acquisitions (109,642) --
Investment in Unconsolidated Entities and Other (2,476) (3,552)
--------------- --------------
Net Cash Used by Investing Activities (256,060) (182,284)
--------------- --------------
Financing Activities
Net Borrowings under Bank Revolving Credit Facility 473,658 --
Proceeds from Long-Term Debt 900,000 --
Net Short-Term Borrowings 24,950 --
Increase (Decrease) in Advances from Affiliates (1,400,000) 113,874
Equity Contributions 132,697 --
Contributions from Minority Investors 4,597 3,903
Distributions to Minority Investors (7,075) (3,537)
--------------- --------------
Net Cash Provided by Financing Activities 128,827 114,240
--------------- --------------
Increase in Cash and Cash Equivalents 9,584 20,055
Cash and Cash Equivalents at Beginning of Period 19,023 5,527
--------------- --------------
Cash and Cash Equivalents at End of Period $ 28,607 $ 25,582
=============== ==============
The accompanying Notes are an integral part of the Consolidated
Financial Statements.
3
360 COMMUNICATIONS COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Consolidation and Presentation
360 Communications Company and its subsidiaries (the "Company") provide
wireless voice and data telecommunications services. The Company operates as a
general and limited partner and majority owner of cellular systems in various
metropolitan and rural service areas and as a limited minority partner or
manager in other cellular systems. The Company operates in five regions in the
United States: Mid-Atlantic, Midwest, North Carolina, Southeast and West.
The Company was a wholly-owned subsidiary of Centel Corporation, a
wholly-owned subsidiary of Sprint Corporation ("Sprint"). On March 7, 1996,
Sprint completed the spin-off of the Company to Sprint shareholders through a
pro rata distribution of all of the Common Stock of the Company (the
"Spin-off"). For further discussion of the Spin-off, see Note 3.
The accompanying unaudited consolidated financial statements include the
accounts of the Company and its wholly-owned and majority owned subsidiaries.
The assets, liabilities and results of operations of entities (both corporations
and partnerships) in which the Company has a controlling interest have been
consolidated. The ownership interests of noncontrolling owners in such entities
are reflected as minority interests. The Company accounts for all other
investees using the equity method of accounting. All significant intercompany
accounts and transactions have been eliminated.
The unaudited consolidated financial statements have been prepared in
conformity with generally accepted accounting principles and are presented in
accordance with the rules and regulations of the Securities and Exchange
Commission applicable to interim financial information. In the Company's
opinion, the unaudited consolidated financial statements include all adjustments
necessary to present fairly the financial position and results of operations for
each interim period presented. All such adjustments are of a normal recurring
nature. These financials should be read in conjunction with the consolidated
financial statements, including the notes thereto, included in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1995.
2. Earnings Per Share
Earnings per share was computed using weighted average shares outstanding,
including common stock equivalents, totaling 117,065,513 and 116,725,486 for the
three months ended June 30, 1996 and 1995, respectively, and 117,047,971 and
116,548,862 for the six months ended June 30, 1996 and 1995, respectively. In
1995, Net Loss per Share was recalculated based upon the number of Sprint
weighted average shares outstanding for each respective period, adjusted for a
conversion ratio of 1 share of the Company's Common Stock to 3 shares of Sprint
common stock.
3. Spin-off
On July 26, 1995, Sprint announced that its Board of Directors decided to
pursue a tax-free Spin-off of the Company to Sprint shareholders. In the March
1995 Federal Communications Commission ("FCC") auction of wireless Personal
Communications Services ("PCS") licenses, Sprint Spectrum LP won the rights to
several markets which overlap service territories operated by the Company. Under
FCC rules, Sprint was required to divest or reduce its cellular holdings in
certain markets to clear conflicts with the PCS licenses awarded to Sprint
Spectrum LP. For these reasons, Sprint and its Board of Directors decided to
pursue a Spin-off of the cellular operations of Sprint.
4
3. Spin-off (continued)
On March 7, 1996, the Spin-off was consummated. In conjunction with the
Spin-off, the Company repaid $1.4 billion of intercompany debt to Sprint. The
remaining intercompany debt was contributed to the Company as Additional Paid-In
Capital. Funding for the repayment was derived from the proceeds of $900 million
of the Company's Senior Notes issued under an indenture ("Indenture") and $527
million of initial borrowings under a $800 million five-year revolving credit
facility ("Credit Facility") with a number of banks and institutional lenders.
In addition, a recapitalization of the Company's Common Stock was effected
pursuant to which the Company split the 10 shares of the then issued and
outstanding Common Stock into 116,733,983 new shares of the Common Stock to
allow for the pro rata distribution of such stock to the common shareholders of
Sprint. This distribution was effected as a tax-free stock dividend.
The Indenture and Credit Facility have general and financial covenants
which place certain restrictions on the Company. The Company is limited with
respect to: the making of payments (dividends and distributions); the incurrence
of certain liens; the sale of assets under certain circumstances; entering into
or otherwise permitting any subsidiary distribution restrictions; certain
transactions with affiliates; certain consolidations, mergers and transfers; and
the use of loan proceeds. In addition, the Indenture and Credit Facility limit
the aggregate amount of additional borrowings which can be incurred by the
Company.
4. Significant Equity Investments
The Company's investments in the Kansas City SMSA Limited Partnership,
Orlando SMSA Limited Partnership, New York SMSA Limited Partnership, and GTE
Mobilnet of South Texas Limited Partnership meet the conditions prescribed by
the Securities and Exchange Commission which require interim financial statement
disclosures for significant equity investments. Selected unaudited combined
interim financial information follows (in thousands):
For the Three Months Ended For the Six Months Ended
June 30, June 30,
-------------------------------- -------------------------------
1996 1995 1996 1995
Results of Operations
Cellular Service Revenues $ 308,792 $ 248,815 $ 595,039 $ 479,969
Equipment Sales 11,980 12,950 22,404 24,354
------- ------- ------- -------
Total Operating Revenues 320,772 261,765 617,443 504,323
------- ------- ------- -------
Cost of Equipment Sales 26,434 21,324 51,688 42,715
Operating, Selling, General,
Administrative and Other Expenses 155,165 130,593 305,114 266,858
Depreciation and Amortization 28,300 25,710 56,143 48,804
------- ------- ------- -------
Total Operating Expenses 209,899 177,627 412,945 358,377
------- ------- ------- -------
Operating Income 110,873 84,138 204,498 145,946
Other Income (Expense), net (2,347) 1,366 (4,123) 2,912
------- ------- ------- -------
Net Income $ 108,526 $ 85,504 $ 200,375 $ 148,858
------- ------- ------- -------
5
5. Income Taxes
In the second quarter of 1996, the Company identified certain tax planning
strategies. The annual effect of these tax planning strategies combined with the
effect of increased earnings estimates resulted in an effective tax rate of 48%
for the six months ended June 30, 1996.
6. Contingencies
On or about March 29, 1996, a class action lawsuit was brought in the
Chancery Court of Washington County, Jonesborough, Tennessee (the "Tennessee
Action") on behalf of all customers in the Company's Tennessee markets regarding
customer notification of the Company's practice with respect to billing for
fractional minutes of service. In April 1996, the original complaint was amended
to enlarge the class of plaintiffs to include all customers in all of the
Company's service areas. In late April 1996, the Tennessee Action was removed to
the United States District Court for the Eastern District of Tennessee, Northern
Division. The Company moved to dismiss the action and the plaintiff filed a
motion to remand. On July 16, 1996, the Tennessee District Court granted the
plaintiff's motion to remand and returned the case to the Chancery Court of
Washington County. The Company's Motion to Dismiss is currently pending before
the Chancery Court.
On or about May 28, 1996, a class action lawsuit was brought in the Common
Pleas Court of Erie County, Ohio (the "Ohio Action") on behalf of all customers
in all of the Company's service areas regarding notification of the Company's
practice with respect to billing for fractional minutes of service. On June 25,
1996, the Ohio Action was removed to the United States District Court for the
Northern District of Ohio, Western Division. On July 18, 1996, the Company filed
a Motion to Dismiss Or, In The Alternative, Stay pending resolution of the
Tennessee Action. The basis for the Motion to Stay is the duplicity of the two
actions. On July 24, 1996, the plaintiff filed a Motion to Remand to return the
case to the state court.
Discovery has not commenced in either case. The Company believes that both
lawsuits are without merit, however, the ultimate outcome of these matters and
the potential effect on the financial condition and results of operations of the
Company cannot be determined at this time.
The Company is party to various other legal proceedings in the ordinary
course of business. Although the ultimate resolution of these various
proceedings cannot be ascertained, management of the Company does not believe
that such proceedings, individually or in the aggregate, will have a material
adverse effect on the results of operations or financial position of the
Company.
7. Acquisitions
On January 31, 1996, the Company purchased additional partnership
interests in Centel Cellular Company of Ft. Walton Beach Limited Partnership and
Centel Cellular Company of Tallahassee Limited Partnership. Also on January 31,
1996, the Company purchased an operating license and related cellular assets in
the North Carolina RSA 14 market. On February 23, 1996, the Company acquired an
operating license and related assets in the Ohio RSA 1 market. In addition, on
February 29, 1996, the Company purchased a 50% interest in South Carolina RSA
No. 4 Cellular General Partnership, a 50% interest in South Carolina RSA No. 5
Cellular General Partnership and a 50% interest in South Carolina RSA No. 6
Cellular General Partnership. The aggregate purchase price of these acquisitions
was approximately $109,600,000.
Effective May 31, 1996, the Company entered into a definitive agreement to
acquire Independent Cellular Network's ("ICN") cellular operations. The Company
will acquire ICN's interests in 20 markets in Pennsylvania, Ohio, Kentucky and
West Virginia for $362 million of debt and 6.5 million shares of the Company's
Common Stock. The debt includes $122 million of subordinated debt and
approximately $240 million in senior debt. The proposed transaction is subject
to the receipt of all necessary consents and government approvals. The Company
expects to complete the transaction during 1996.
6
8. Contingencies of Unconsolidated Entities
The GTE Mobilnet of South Texas Limited Partnership, (the "South Texas
partnership"), an equity investee of the Company, filed suit in 1994 against a
former agent and its principals alleging that the former agent continued to hold
itself out as an agent of the South Texas partnership after its contract
expired. The former agent and its principals subsequently filed a counterclaim
against the South Texas partnership, claiming the South Texas partnership
falsely represented to them that all agent agreements were identical and that
all agents were paid the same amount. The complaint against the South Texas
partnership alleges fraud, breach of covenant of good faith and fair dealing,
tortuous interference with plaintiffs' business relations, violation of the
Texas Deceptive Trade Practices Act, and defamation. The plaintiff is seeking
unspecified damages.
On April 12, 1995, a suit which purports to be a class action was filed
alleging that the defendants (including the South Texas partnership) violated
the Telephone Consumer Protection Act ("TCPA") and invaded the plaintiff's
privacy by sending unauthorized facsimiles to the plaintiffs. The complaint
seeks $500 in damages for each alleged violation of the TCPA, plus treble
damages, or in the alternative, punitive damages. In addition, the plaintiffs
seek interest, cost and attorney's fees. The defendants filed a motion to
dismiss for want of subject matter jurisdiction and for failure to state a
proper claim. At a recent hearing, the court ruled that the TCPA applied only to
interstate faxing, and not to intrastate faxing, such as those allegedly
associated with the South Texas partnership. The action is stayed pending the
parties appeal.
On January 25, 1996, a suit was filed against the South Texas partnership
by a former employee of GTE Mobilnet, who alleges among other claims, certain
employment discrimination charges. The plaintiff seeks unspecified damages.
The ultimate outcome of these three matters cannot presently be
determined. Accordingly, no provision for any liability that might result from
these matters has been made in the financial statements of the South Texas
partnership and the Company's financial statements.
On July 26, 1995, a partnership which is a general partner in the New York
SMSA Limited Partnership (the "New York partnership"), an equity investee of the
Company, was named as a defendant in a class action lawsuit brought by a
subscriber, Mr. Daniel J. Mandell. The plaintiffs have alleged that the
defendant's cellular operations are engaged in fraudulent, misleading, and
deceptive practices by concealing the practice of rounding up airtime usage to
bill in full minute increments. The plaintiffs seek an accounting of monies
received as a result of the above conduct by the defendant, compensatory
damages, punitive damages, treble damages pursuant to the New Jersey Consumer
Fraud Act, and injunctive relief. Although the defendant has informed the New
York partnership that it believes that it has meritorious defenses to the claims
asserted against it, and intends to defend itself vigorously, the ultimate
outcome of this matter cannot be determined at the present time. The New York
partnership may be allocated a portion of the damages that may result upon
adjudication of this matter if the plaintiffs prevail in their action. If an
adverse judgment is entered, the potential effect on the financial condition and
the results of operations of the New York partnership general partner, the New
York partnership and the Company cannot be ascertained at this time but may be
material.
A general partner in the New York partnership was named as a defendant in
a class action lawsuit brought on behalf of New York retail customers. The
plaintiffs have alleged that the general partner has overcharged customers who
experienced an involuntary disconnection ("dropped calls") of their mobile
service calls during the period June 1985 through September 1994. Further, the
plaintiffs allege that the amount of credit given for a dropped call, the New
York partnership general partner's policy of requiring customers to specifically
request such credits, and the absence of sufficient notice advising customers to
actively request such credits constitutes a breach of contract and deceptive
practice. Discovery is ongoing at this time. The New York partnership is not a
defendant in this matter having been dismissed from the case in the early stages
of the litigation. The New York partnership has been informed that the defendant
intends to defend itself vigorously but that the ultimate outcome of the matter
cannot be determined. The New York partnership may be allocated a portion of the
damages that may result upon adjudication of this matter if the plaintiffs
prevail in their action. If an adverse judgment is entered, the potential effect
on the financial condition and the results of operations of the New York
partnership general partner, the New York partnership and the Company cannot be
ascertained at this time but may be material.
7
8. Contingencies of Unconsolidated Entities (continued)
On August 31, 1995, an unfair labor practice charge was filed with region
2 of the National Labor Relations Board ("NLRB") by the Communication Workers of
America, AFL-CIO ("CWA"), against NYNEX Corporation ("NYNEX"), a partner in
Cellco Partnership ("Cellco") which is a general partner in the New York
partnership, and Cellco. The charge alleges that since July 1, 1995, NYNEX and
Cellco have refused to recognize the CWA as the exclusive representative of
employees in the operations department in the New York metropolitan area,
repudiated the existing bargaining agreement, and constructively discharged
certain employees who would not accept unlawful conditions of employment. The
CWA is arguing that Cellco is either a successor employer or an alter ego of the
former cellular companies, and must honor prior collective bargaining agreements
with the CWA. Cellco filed its statement of position with the NLRB in March,
1996. NYNEX was not required to file a statement of position. Although both
NYNEX and Cellco have informed the New York partnership that they believe that
they have meritorious defenses to the claims asserted against them, and intend
to defend themselves vigorously, the ultimate outcome of this matter cannot be
determined at the present time. The New York partnership may be allocated a
portion of the damages that may result upon adjudication of this matter if the
CWA prevails in its action. If an adverse judgment is entered, the potential
effect on the financial condition and results of operation of the general
partner and the New York partnership cannot be ascertained at this time but may
be material.
On June 12, 1996, a class action lawsuit was filed against Bell Atlantic
Corporation and NYNEX, partners in Cellco all of which are partners with both
direct and indirect ownership interests in the New York partnership. Michael
Dubin on his own behalf and on the behalf of all others similarly situated,
plaintiff, alleges that the defendant has fraudulently and negligently
misrepresented their cellular services and prices since 1990 by, among other
things, failing to properly disclose to customers the practice of rounding
airtime to the next full minute and failing to disclose the pass through to
customers of landline termination charges. More generally, the complaint alleges
that consumers were defrauded by defendants' failure to disclose pricing
arrangements with their dealers to the public. To date the defendants have not
been legally served with the complaint in this matter. The ultimate outcome of
this matter cannot be determined at the present time. The New York partnership
may be allocated a portion of the damages that may result upon adjudication of
this matter if the plaintiff prevails in this action. If an adverse judgment is
entered, the potential effect on the financial condition and results of
operation of the general partner and the New York partnership cannot be
ascertained at this time but may be material.
On July 2, 1996, a class action lawsuit was filed against Cellco, which is
a general partner in the New York partnership. Steven Kahn, plaintiff, alleges
that the defendant has failed to adequately disclose its automatic renewal
policy, whereby annual agreements are automatically renewed unless a customer
cancels the agreement prior to its expiration. The plaintiff contends that the
renewals are unenforceable under a New York statute that requires a vendor to
give notice to the consumer by personal service or certified mail of the
automatic renewal at least 15 days and not more than 30 days prior to renewal.
As a result, the plaintiff alleges that the defendant has breached its contracts
by failing to provide the required notice, and seeks a ruling that all contracts
are void or voidable. The plaintiff further contends that the defendant has been
unjustly enriched by charges it has collected from consumers who were
automatically renewed without legally sufficient notification. The complaint
seeks compensatory damages in an amount not less than $10 million. The class
action is brought on behalf of all New York customers who contracted with the
defendant and who were automatically renewed since July 1990. The ultimate
outcome of this matter cannot be determined at the present time. The New York
partnership may be allocated a portion of the damages that may result upon
adjudication of this matter if the plaintiff prevails in this action. If an
adverse judgment is entered, the potential effect on the financial condition and
results of operation of the general partner and the New York partnership cannot
be ascertained at this time but may be material.
8
Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations.
General
The following is a discussion and analysis of the historical results of
operations and financial condition of the Company and factors affecting the
Company's financial resources. This discussion should be read in conjunction
with the consolidated financial statements, including the notes thereto, set
forth herein under "Financial Statements" and the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995. This discussion contains
forward looking statements which are qualified by reference to, and should be
read in conjunction with, the Company's statement regarding forward looking
statements set forth on page (i) of this Report.
Results of Operations
Customer Growth Rate
Cellular customers increased to 1,750,329 at June 30, 1996 from 1,241,282
at June 30, 1995, a 41.0% increase. For the three months ended June 30, 1996 and
1995, the Company added 107,320 and 116,443 customers, respectively, through
internal growth. For the six months ended June 30, 1996, customer growth through
acquisitions added 46,647 customers and internal growth added 201,925 new
customers, while in the corresponding 1995 period, the Company added 201,293
customers through internal growth. The Company's penetration rate, which is the
number of customers divided by the total population in its licensed service
areas, reached 8.36% at June 30, 1996 compared to 6.31% at June 30, 1995. During
the three months ended June 30, 1996 and 1995, customer churn, the average
monthly rate of customer disconnects, was 1.80% and 1.72%, respectively, and
during the six months ended June 30, 1996 and 1995 was 1.80% and 1.74%,
respectively.
Cellular Service Revenues
Cellular service revenues consist primarily of charges for airtime,
access fees, roaming fees and other services. Cellular service revenues
increased 34.1% and 35.6% in the three and six months ended June 30, 1996 when
compared to the corresponding 1995 periods, principally from growth in the
number of cellular customers. Increased distribution channels, expanded network
capacity, declining cellular telephone equipment prices and pricing plans
targeted at particular market segments are key factors contributing to the
Company's customer growth. In addition, customers added through acquisitions
completed in the first quarter of 1996 contributed $10.0 million and $14.6
million of service revenues in the three and six months ended June 30, 1996,
respectively.
Consistent with the rest of the cellular industry, the Company has
experienced increased penetration in the consumer market, a trend attributable
to declining cellular telephone equipment prices and increased promotional
activities (i.e. packaging, free weekends), an increased awareness of the
benefits of cellular communications, widespread distribution channels in
consumer-oriented retail locations and expanded network coverage and capacity.
The Company expects this trend to continue. New customers generally use less
airtime than existing customers, causing the average service revenue per
customer per month to decline. As a result, cellular service revenue growth has
not kept pace with the level of growth in the number of customers. Service
revenue per average customer per month was $51.73 and $55.53 during the three
months ended June 30, 1996 and 1995, respectively, and $50.61 and $53.83 during
the six months ended June 30, 1996 and 1995, respectively. The Company expects
that service revenue per average customer per month will continue to decline as
penetration rates continue to increase.
9
In an effort to increase cellular telephone usage through increased
roaming airtime, the Company expects the continuation of the industry-wide trend
for negotiated reduced roaming rates between carriers, which may reduce revenues
derived from cellular service users who roam into the Company's systems. The
Company expects roaming airtime to increase as reduced roaming rates between
carriers are ultimately passed on to customers, thus stimulating increased
usage. Roaming airtime minutes increased during the three and six months ended
June 30, 1996, when compared to the same periods in 1995, the major factor
contributing to the $13.9 million and $25.1 million increase in roaming revenue
for the three and six months ended June 30, 1996.
Future revenue growth will be impacted by the Company's success in
maintaining customer growth in existing markets, additional revenue generated
from the increasing availability of a variety of enhanced services and products
and by the Company's success in acquiring additional cellular communications
systems to further strengthen its existing regional clusters. The growth rate of
new customers is expected to decline as the customer base grows. Future revenue
growth will also be impacted by the Company's entrance into the residential long
distance business. An improved competitive position, reduced cellular churn and
increased brand awareness are expected as residential long distance service is
initiated. In August 1996, the Company expects to begin marketing its
residential long distance service in a majority of its markets and expects to
complete the rollout in its remaining markets by year end.
Equipment Sales
Equipment sales consist of revenues from sales of cellular telephone
equipment and accessories. Equipment sales decreased 14.5% and 17.9% in the
three and six months ended June 30, 1996 when compared to the corresponding 1995
periods, despite an increase in the number of telephone units sold. Competitive
market pressures have resulted in a continued trend of selling equipment at
discounted prices. Although declining cellular telephone prices have generated
increased activations of cellular service, gross margins on equipment sales have
also declined as the Company continues to sell cellular telephones at or below
cost. The Company expects competitive market pressures and negative gross
margins on equipment sales to continue.
Cost of Service, Other Operations Expense and Selling, General, Administrative
and Other Expenses
Cost of service, other operations expense and selling, general,
administrative and other expenses increased principally due to growth in the
cellular customer base. During the three months ended June 30, 1996 and 1995,
these expenses as a percent of cellular service revenues were 56.2% and 59.4%,
respectively, and during the six months ended June 30, 1996 and 1995 were 58.6%
and 59.8%, respectively. The decline in these percentages reflect economies of
scale gained from serving additional customers, improved operational support
systems, strong revenue growth and improved productivity. Significant
expenditures associated with the rollout of the Company's new brand name
partially offset economies of scale produced during the six months ended June
30, 1996. The Company expects that these costs as a percentage of cellular
service revenues will continue to decrease as economies of scale continue to be
realized.
In the three and six months ended June 30, 1996, selling and customer
operations expenses were impacted by $6.6 million and $16.2 million,
respectively, of additional advertising, promotional and other marketing expense
associated with the planned introduction of the Company's new brand name. This
increase also resulted in an increase in sales, marketing and advertising costs
to acquire a new customer. Such costs were $250 and $215 during the three months
ended June 30, 1996 and 1995, respectively, and $262 and $213 during the six
months ended June 30, 1996 and 1995, respectively.
10
In an effort to control costs associated with acquiring new customers,
the Company has begun to utilize more extensively an internal sales force
located in Company retail outlets. Incremental sales costs at a Company retail
store are significantly lower than commissions paid to national dealers.
Although the Company intends to continue to support its large dealer network,
continued increases in its own retail distribution channels are planned. The
Company has experienced lower churn levels in the consumer segment acquired
through its retail distribution channel, thereby helping to control the cost of
growing its customer base. The Company is unable to anticipate whether the cost
to add new customers will increase as savings associated with the transition to
the use of an internal sales force levels off, the growth rate of new customers
declines and competition for local and national dealers intensifies.
Following the Spin-off, the Company began to perform certain functions
previously provided to the Company by Sprint. The undertaking of such functions
is not expected to have a significant impact on the Company's operating
expenses.
Depreciation and Amortization
Acquisitions of cellular communications systems generated intangibles,
assets such as FCC license costs and goodwill, which are currently being
amortized over 40 years. During the three and six months ended June 30, 1996
amortization expense increased 11.6% and 9.1%, respectively, when compared to
the corresponding periods in 1995. The increase is attributable to acquisitions
completed in the first quarter of 1996.
During the three and six months ended June 30, 1996 depreciation expense
increased 31.2% and 29.1%, respectively, when compared to the corresponding
period in 1995. During the three months ended June 30, 1996 and 1995,
depreciation as a percent of cellular service revenues was 11.3% and 11.6%,
respectively, and during the six months ended June 30, 1996 and 1995 was 11.7%
and 12.3%, respectively. The increase in depreciation expense in the first and
second quarter of 1996 when compared to the corresponding 1995 periods is the
result of increased capital investment in the Company's cellular network.
Interest Expense
Interest expense decreased in the three and six months ended June 30,
1996 when compared to the corresponding prior year periods due to decreases in
interest rates and borrowing levels. Prior to the Spin-off, the Company borrowed
from Sprint, primarily to fund construction costs and start-up losses, at
interest rates based on prime plus 2 percent and a 30 day commercial paper rate.
The annualized average interest rate for the three and six months ended June 30,
1995 was 8.8% and 8.7%, respectively. Current borrowings consist of $450 million
of 7 1/8% Senior Notes due 2003, $450 million of 7 1/2% Senior Notes due 2006,
borrowings under the Credit Facility with interest rates based on the London
Interbank Offered Rate plus 50 basis points and market based short-term
borrowings. The annualized interest rate for the three and six months ended June
30, 1996 was 6.8% and 7.4%, respectively.
Equity in Net Income of Unconsolidated Entities
"Equity in Net Income of Unconsolidated Entities" represents the
Company's share of operating results of cellular systems in which the Company
does not have a controlling interest. Equity earnings increased for the three
and six months ended June 30, 1996, when compared to the prior year periods,
primarily as a result of increased income generated by minority cellular
investments in the Company's larger and more mature systems in Houston, Kansas
City, New York and Orlando. The Company expects that its minority cellular
investments operating in other cities will add increasing income as those
markets continue to mature and penetration increases.
11
GTE Mobilnet of South Texas Limited Partnership ("South Texas L.P.") and
New York SMSA Limited Partnership ("New York L.P."), two of the Company's equity
investees, are parties to separate legal proceedings. Because the outcome of
such legal proceedings has not been determined by the South Texas L.P. and the
New York L.P., no provision for any liability that may result upon adjudication
of that litigation has been made in the unaudited interim consolidated financial
statements. The Company's combined investments in these partnerships, including
intangible assets recorded in connection with the acquisitions of these
partnerships, was $220.2 million at June 30, 1996 and its combined equity in the
net income of these partnerships, net of amortization of intangible assets, was
$5.9 million and $11.6 million for the three and six months ended June 30, 1996,
respectively. In view of the uncertainty regarding such litigation, there can be
no assurance that the outcome of such litigation will not have a material
adverse effect on the Company's investment in these partnerships or in its
equity in the combined income of such partnerships.
Competition
Cellular carriers compete primarily against the other cellular carriers
in each market. However, companies with PCS licenses have begun to offer their
products and services in several of the Company's serving areas. The Company is
preparing for this new competitive environment by enhancing its networks,
expanding its service territory and offering new features, products and services
to its customers. The Company believes it will benefit from its position as an
incumbent in the cellular field with a high quality network, extensive
geographic footprint that is not capacity constrained, strong distribution
channels, superior customer service capabilities and an experienced management
team.
Liquidity and Capital Resources
Spin-off
On March 7, 1996, the Spin-off was consummated. In conjunction with the
Spin-off, the Company repaid $1.4 billion of intercompany debt to Sprint. The
remaining intercompany debt was contributed to the Company as Additional Paid-In
Capital. Funding for the repayment was derived from the proceeds of $900 million
of the Company's Senior Notes issued under the Indenture and $527 million of
initial borrowings under the Credit Facility. In addition, a recapitalization of
the Company's Common Stock was effected pursuant to which the Company split the
10 shares of the then issued and outstanding Common Stock into 116,733,983 new
shares of the Common Stock to allow for the pro rata distribution of such stock
to the common shareholders of Sprint. This distribution was effected as a
tax-free stock dividend.
Cash Flows - Operating Activities
Cash flows from operating activities were $136.8 million and $88.1
million for the six months ended June 30, 1996 and 1995, respectively. Operating
cash flow increases are due to improved operating results. Although future
operating cash flows will continue to be impacted by the advertising,
promotional and other marketing expenses associated with the introduction and
promotion of the Company's new brand name, the Company expects cash flows
generated by operating activities to continue to increase.
Cash Flows - Investing Activities
During the six months ended June 30, 1996 and 1995 the Company's
investing activities used cash of $256.1 million and $182.3 million,
respectively, of which capital expenditures were $143.9 million and $178.7
million, respectively. The decrease in capital expenditures was the result of a
gradual decline in the building of cellular systems as the Company's network
matures. In previous years, the Company concentrated on satisfying FCC cellular
systems building requirements regarding the expansion of the geographic
footprint or coverage area of Company held licenses. The Company currently
focuses on capital investment to support customer growth and on improving
customer call quality. In August 1996, the Company began offering Code Division
Multiple Access ("CDMA") digital technology to the Company's new and existing
customers in Las Vegas, Nevada. The introduction of CDMA technology in Las Vegas
followed a six month market trial that began in early 1996. The Company plans to
implement a gradual transition to CDMA technology in its other markets on a
market by market basis as additional calling capacity is required to accommodate
growth in call volume. This approach should provide time for anticipated digital
technology improvements to be proven, while also avoiding premature capital
expenditures. The Company expects that its investment in digital technology will
increase over time as network capacity needs warrant.
12
In the 1996 first quarter, the Company acquired cellular properties in
South Carolina, North Carolina and Ohio and acquired additional partnership
interests in Florida. The aggregate purchase price of these acquisitions totaled
$109.6 million.
Cash Flows - Financing Activities
During the six months ended June 30, 1996 and 1995 net cash received from
financing activities was $128.8 million and $114.2 million, respectively. In
1995, cash received from financing activities principally reflects borrowings
from Sprint. Following the Spin-off, capital to meet funding requirements is not
available from Sprint and its subsidiaries. In conjunction with the Spin-off,
the Company repaid $1.4 billion of intercompany debt to Sprint. The remaining
intercompany debt was contributed to the Company as Paid-In Capital. Funding for
the repayment was derived from proceeds of the Company's Senior Notes issued
under the Indenture and initial borrowings under the Credit Facility. As part of
its cash management program, the Company also incurs short-term borrowings based
on market interest rates to support its daily cash requirements. The aggregate
amount of these borrowings is limited to $50 million under certain debt
covenants.
Liquidity and Capital Requirements
Substantial capital is required to expand and operate the Company's
existing cellular systems and to acquire interests in additional cellular
systems. The Company has met its funding requirements in the past through
existing cash resources, cash flow from operations and borrowings from Sprint.
Prior to the Spin-off, the Company borrowed from Sprint to the extent its
existing cash needs were not met through existing cash resources and cash flows
from operations.
The Company expects to make capital expenditures, excluding acquisitions,
of approximately $280 million in 1996. Funding for these expenditures is
expected to be derived from existing cash resources, cash flow from operations
and borrowings under the Credit Facility. These expenditures will expand and
enhance existing cellular systems. Enhancements will include a minimal level of
digital technology deployment.
Contingencies have been identified regarding class action lawsuits
regarding customer notification as to the practice of billing for fractional
minutes of service. The ultimate outcome of these matters and the potential
effect on the financial condition and results of operations of the Company
cannot be determined at this time. In addition, contingencies have been
identified in the South Texas L.P. and New York L.P., the outcome of which
cannot presently be determined.
For the next several years, the Company does not expect its operations to
generate sufficient cash flows to meet both future capital requirements for
operating activities and cash requirements for acquisitions of ownership
interests in cellular communications systems. Acquisition activities may include
acquisitions of new cellular communications systems or additional investments in
cellular communications systems in which the Company already holds an ownership
interest. The Company expects that it will need to raise additional funds
through borrowings under the Credit Facility, the public or private sale of debt
or the issuance of equity securities to make such acquisitions, subject to the
limitations of an agreement entered into for a period of two years after the
Spin-off by the Company and Sprint designed to preserve the tax-free status of
the Spin-off. The Company believes that it will be able to obtain the needed
access to the capital markets on suitable terms and that, together with
borrowings under the Credit Facility and net cash provided by operations, it
will have adequate capital to satisfy its projected funding requirements for
operations in 1996 and thereafter. However, acquisitions and possibly other
contingencies may require access to the capital markets in addition to funding
under the Credit Facility. There can be no assurance that access to the capital
markets can be obtained in amounts and on terms adequate to meet its objectives
or that the borrowings or net cash from operations will be adequate to meet the
Company's projected funding requirements.
13
At June 30, 1996, the Company was not restricted or limited in its
borrowing capacity under the Credit Facility. The aggregate amount of additional
borrowings which can be incurred is ultimately limited by certain covenants
included in the Credit Agreement and the Indenture.
Effective May 31, 1996, the Company entered into a definitive agreement
to acquire ICN's cellular operations. The Company will acquire ICN's interests
in 20 markets in Pennsylvania, Ohio, Kentucky and West Virginia for $362 million
of debt and 6.5 million shares of Company Common Stock. The debt includes $122
million of subordinated debt and approximately $240 million in senior debt. The
proposed transaction is subject to the receipt of all necessary consents and
government approvals. The Company expects to obtain the required amendments to
certain covenants under the Credit Facility. In addition, the Company expects to
have the borrowing capacity to incur the additional borrowings associated with
the acquisition and may need to increase the commitment level available under
the Credit Facility in order to meet future cash requirements for general
corporate purposes.
14
15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
On or about March 29, 1996, a class action lawsuit was brought in the
Chancery Court of Washington County, Jonesborough, Tennessee (the "Tennessee
Action") on behalf of all customers in the Company's Tennessee markets regarding
customer notification of the Company's practice with respect to billing for
fractional minutes of service. In April 1996, the original complaint was amended
to enlarge the class of plaintiffs to include all customers in all of the
Company's service areas. In late April 1996, the Tennessee Action was removed to
the United States District Court for the Eastern District of Tennessee, Northern
Division. The Company moved to dismiss the action and the plaintiff filed a
motion to remand. On July 16, 1996, the Tennessee District Court granted the
plaintiff's motion to remand and returned the case to the Chancery Court of
Washington County. The Company's Motion to Dismiss is currently pending before
the Chancery Court.
On or about May 28, 1996, a class action lawsuit was brought in the Common
Pleas Court of Erie County, Ohio (the "Ohio Action") on behalf of all customers
in all of the Company's service areas regarding notification of the Company's
practice with respect to billing for fractional minutes of service. On June 25,
1996, the Ohio Action was removed to the United States District Court for the
Northern District of Ohio, Western Division. On July 18, 1996, the Company filed
a Motion to Dismiss Or, In The Alternative, Stay pending resolution of the
Tennessee Action. The basis for the Motion to Stay is the duplicity of the two
actions. On July 24, 1996, the plaintiff filed a Motion to Remand to return the
case to the state court.
Discovery has not commenced in either case. The Company believes that both
lawsuits are without merit, however, the ultimate outcome of these matters and
the potential effect on the financial condition and results of operations of the
Company cannot be determined at this time.
The Company is party to various other legal proceedings in the ordinary
course of business. Although the ultimate resolution of these various
proceedings cannot be ascertained, management of the Company does not believe
that such proceedings, individually or in the aggregate, will have a material
adverse effect on the results of operations or financial position of the
Company.
15
Item 5. Other Information.
360 COMMUNICATIONS COMPANY AND SUBSIDIARIES
SELECTED PROPORTIONATE OPERATING RESULTS AND DATA
(Unaudited)
The following table sets forth supplemental financial data reflecting the
proportionate consolidation of entities in which the Company holds interests
significant to its operations. This presentation differs from the consolidation
methodology used to prepare the Company's principal financial statements in
accordance with Generally Accepted Accounting Principles ("GAAP") (see Note 1 of
"360 Communications Company and Subsidiaries Notes to Unaudited Interim
Consolidated Financial Statements" set forth herein under "Financial
Statements") and does not reflect operating results in accordance with GAAP. The
proportionate operating data reflects the Company's ownership percentage of
entities consolidated for financial reporting purposes and the Company's
ownership percentage of certain of its significant unconsolidated entities which
are accounted for under the equity method for financial reporting purposes.
Because significant assets of the Company are not consolidated, the Company
believes the following proportionate operating results facilitate the
understanding and assessment of the overall extent of its investments. However,
the operating data presented below are not indicative of the cash flow available
to the Company with respect to its interests in unconsolidated entities. Such
interests are subject to partnership agreements and other restrictions limiting
the Company's ability to effect distributions of cash and other assets of the
entity in which the Company holds a noncontrolling interest. The following table
is not required by GAAP, and is not intended to replace and should not be viewed
as being of greater significance than, or in isolation from, the consolidated
financial statements prepared in accordance with GAAP.
For the Three Months Ended For the Six Months Ended
and as of June 30,(1) <F1> and as of June 30,(1)<F1>
-------------------------------- ---------------------------------
1996 1995 1996 1995
(Thousands of Dollars)
Operating Results:
Operating Revenues
Cellular Service Revenues $ 258,676 $ 195,545 $ 489,143 $ 365,272
Equipment Sales 10,839 12,339 20,102 23,548
------- ------- ------- -------
Total Operating Revenues 269,515 207,883 509,245 388,820
------- ------- ------- -------
Operating Expenses
Cost of Equipment Sales 23,390 23,200 42,637 44,027
Operating, Selling, General, Administrative
and Other Expenses 142,769 114,314 281,894 217,229
Depreciation and Amortization 35,810 28,630 69,895 56,285
------- ------- ------- -------
Total Operating Expenses 201,969 166,143 394,426 317,541
------- ------- ------- -------
Operating Income $ 67,546 $ 41,740 $ 114,819 $ 71,279
------- ------- ------- -------
Other Operating Data:
EBITDA(2) <F2> $ 103,356 $ 70,370 $ 184,714 $ 127,564
EBITDA Margin (3)<F3> 38.35% 33.85% 36.27% 32.81%
Capital Expenditures(4)<F4> 86,185 $ 118,330 $ 141,283 $ 164,447
Selected Net POPs (5) <F5> 21,061,767 20,007,309 21,061,767 20,007,309
Proportionate Customers (6) <F6> 1,696,375 1,110,093 1,696,375 1,110,093
Average Proportionate Customers (7) <F7> 1,624,804 1,081,153 1,599,639 1,059,419
Churn 1.8% 1.8% 1.8% 1.8%
Penetration 8.1% 5.5% 8.1% 5.5%
Service Revenue per Average Customer per
Month $ 53.07 $ 60.29 $ 50.96 $ 57.46
<FN>
- -------------
Notes to Selected Proportionate Operating Results and Data
<F1>
(1) The proportionate operating results include the Company's ownership
percentage of entities consolidated for financial reporting purposes as
well as the Company's ownership percentage of certain unconsolidated equity
investments which are significant to the Company, consisting of the
Company's investments in cellular partnerships serving markets such as
Chicago, IL; Houston, TX; Kansas City, MO; New York, NY; Omaha, NE;
Orlando, FL; and Richmond, VA.
<F2>
(2) EBITDA is defined as operating income plus depreciation and amortization
and is included herein as supplemental disclosure because it is generally
considered useful information regarding a company's ability to service
debt. EBITDA, however, is not a measure determined in accordance with GAAP
and should not be considered in isolation or as an alternative to net
income (loss), cash flow provided by operating activities or other income
or cash flow data prepared in accordance with GAAP or as a measure of a
company's performance or liquidity. Proportionate EBITDA represents the
Company's ownership interest in the respective entities multiplied by the
entities' EBITDA and, therefore, does not represent cash available to the
Company.
<F3>
(3) EBITDA Margin represents EBITDA divided by Total Operating Revenues.
<F4>
(4) Capital Expenditures exclude acquisitions.
<F5>
(5) Selected Net POPs are the estimated market population multiplied by the
Company's ownership interest in each presented market and excludes certain
markets as described above.
<F6>
(6) Proportionate customers reflect total customers in each presented market in
which the Company owns an interest multiplied by the Company's ownership
interest.
<F7>
(7) Average Proportionate Customers represents a simple average of beginning of
period plus end of period proportionate customers divided by 2.
</FN>
16
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
Exhibits are listed in the Exhibit Index.
(b) Reports on Form 8-K:
On Form 8-K dated April 23, 1996, under "Item 5. Other Events," the Company
filed a press release announcing its consolidated operating results for the
first quarter of 1996 and the Company's execution of a letter of intent to
acquire from ICN certain cellular properties in Pennsylvania, Ohio, Kentucky and
West Virginia.
17
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
360 Communications Company
By: /s/ Gary L. Burge
Gary L. Burge
Senior Vice President - Finance
(Principal Accounting Officer)
Date: August 14, 1996
18
EXHIBIT INDEX
Exhibit
Number Description of Exhibits
2.2 Exchange and Merger Agreement, dated as of May 31, 1996, by and
among Independent Cellular Network Partners, James A. Dwyer, Jr.,
David Winstel, CC Industries, Inc., Ohio Cellular RSA, L.P., Ohio
RSA Corporation, Quality Cellular Communications of Ohio, Inc.,
Cellular Plus, L.P., C-Plus, Inc., Quality Cellular Plus
Communications, Inc., Henry Crown and Company (Not Incorporated )
and 360 Communications Company.
3.1 Amended and Restated Certificate of Incorporation of 360
Communications Company, as amended as of March 4, 1996.*
3.2 Amended and Restated Bylaws of 360 Communications Company.*
3.3 Certificate of Designation of First Series Junior Participating
Preferred Stock of 360 Communications Company. (Filed
as Exhibit 3.3 to Amendment No. 4 to Registration Statement
No. 33-99756 and incorporated herein by reference.)
4.1 360 Communications Company's 7 1/8% Senior Note Due 2003
and 7 1/2% Senior Note Due 2006.*
4.2 Indenture dated as of March 7, 1996 between 360
Communications Company and Citibank, N.A., as Trustee.*
4.3 Form of 360 Communications Company Common Stock, $0.01
par value, certificate.*
27 Financial Data Schedule.
- ------------
* Filed as an Exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995 and incorporated herein by reference.