Ken, this seems to be missing in your post.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
During the six-month period ended September 30, 1996, CAI expended approximately $22.2 million to purchase equipment, $19.2 million to fund operating activities of which $16.8 million represents senior note interest expense paid from the escrow account, $2.9 million to acquire wireless channel rights and $26.5 million to pay senior and other debt including $17.2 million against the amount due on the FCC MMDS license auctions. During this period, CAI funded its cash requirements out of existing cash
balances. At September 30, 1996, CAI had cash and cash equivalents of approximately $45.5 million.
Pursuant to the Company's capital expenditure plans for fiscal 1997,CAI is committed as of September 30, 1996 through open purchase orders to expend approximately $16.4 million primarily for capital expenditures associated with the development of digital transmission facilities. In addition, during the six-month period ending March 31, 1997, the Company is obligated to pay approximately $21.9 million in MMDS license auction fees, of which CS is obligated to reimburse CAI $4.1 million for licenses transferred to CS, and approximately $3.2 million of minimum license fees and lease payments.
Management believes that the Company's growth plan will require additional funds during the 1997 fiscal year, especially if CAI determines to effect additional acquisitions or if the BANX Affiliates fails to exercise their options with respect to markets as contemplated by the BR Agreement. Such additional funds may take the form of debt or equity securities issuances, borrowings under loan arrangements or sales of assets including channel rights or wireless cable systems. CAI's ability to engage in financings, asset sales or acquisition transactions is limited by the contractual arrangements entered into with BANX Partnership, and significant transactions likely will require its prior consent. In addition, the Company's 12 1/4 % Senior Notes due 2002 (the "Senior Notes") impose similar restrictions on the incurrence of additional debt and on the ability to effect asset sales. There is no assurance that any additional financings will be available to the Company on satisfactory terms and conditions, if at all.
In the event that such additional financings are not available to the Company, management can and will defer capital expenditures and other costs currently contemplated, including the deployment of Digital head-end equipment which will affect the Company's ability to implement its obligations under the BR Agreement. The present revenue stream and cash resources available to the Company are adequate to sustain the Company's needs into the first quarter of fiscal 1998 if such actions were taken. However, expansion plans would be adversely impacted. There is no assurance that any additional financings will be available to the Company on satisfactory terms and conditions, if at all.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
SIX AND THREE-MONTH PERIODS ENDED SEPTEMBER 30, 1996 COMPARED TO SIX AND THREE-MONTH PERIODS ENDED SEPTEMBER 30, 1995
CAI's total revenue was $18.5 million and $9.2 million for the six and three-month periods ended September 30, 1996 as compared to $7.9 million and $3.9 million for the six and three-month periods ended September 30, 1995, respectively. While the ACS and ECNW acquisitions were reflected in the balance sheet as of September 30, 1995, no operating activity was reflected until after September 29, 1995, the date of acquisition, pursuant to purchase accounting principles. Accordingly, the six and three-month periods of operations for the Philadelphia and Washington systems reflected in the 1996 period are not included in the comparable 1995 period.
The Philadelphia and Washington systems (the "Acquired Systems") accounted for $11.5 million and $5.7 million of revenue for the six and three-month periods ended September 30, 1996, respectively. The revenue derived from the systems included in both the six and three-month periods ended September 30, 1996 and 1995 (the "Same Systems") decreased by $0.9 million and $0.5 million, respectively. The decrease in revenue is primarily attributable to decreased revenues in the New York system of $1.3 million for the six-month period and $0.6 million for the three-month period due to decreased subscribers offset by increases totaling $0.4 million and $0.1 million, respectively, due to growth of subscribers in other systems.
Operating expenses of $40.0 million and $20.5 million for the six and three-month periods ended September 30, 1996 increased by $20.0 million and $10.5 million over the $20.0 million and $10.0 million reported for the six and three-month periods ended September 30, 1995, respectively. Depreciation and amortization accounted for $11.0 million and $5.5 million of the six and three-month period increases, respectively, substantially resulting from the ACS and ECNW acquisitions. Programming and license fees were up by $4.4 million for the six-month period ended September 30, 1996, also resulting from the Acquired Systems. The $0.5 million marketing expense decrease consists of a $0.7 million increase attributable to Acquired Systems, offset by a $1.2 million decrease attributable to the Same Systems, reflecting CAI's change from an aggressive growth strategy in the 1995 period to a limited growth strategy in the 1996 period, as the Company awaits the commercial availability of digital wireless subscriber equipment. General and administrative expenses increased by $5.2 million for the six-month period ended September 30, 1996, primarily attributable to the Acquired Systems.
CAI's operating loss was $21.5 million and $11.3 million for the six and three-month periods ended September 30, 1996, or $9.4 million and $5.2 million higher, as compared to the six and three-month periods ended September 30, 1995 operating loss of $12.1 million and $6.1 million, respectively. While revenue increased by $10.6 million for the six-month period ended September 30, 1996, operating expenses also increased (by $20.0 million). However, after considering the non-cash depreciation and amortization increase discussed above, operating expenses requiring cash increased by $9.0 million while revenue increased by $10.6 million. For the three-month period ended September 30, 1996, operating expenses increased by $10.5 million of which non-cash depreciation and amortization accounted for $5.5 million of that increase, leaving operating expenses requiring cash increasing $5.0 million against a revenue increase of $5.3 million.
CAI's six and three-month periods ended September 30, 1996 include a $7.8 million and a $4.8 million loss relating to CAI's investment in CS, representing its pro-rata share of CS's net loss for CS's six-month period ended June 30, 1996 and three-month period ended June 30, 1996, respectively. CAI acquired ACS Ohio, Inc., the predecessor of CS on September 29, 1995.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (continued)
Interest income was $4.0 million and $1.8 million for the six and three-month periods ended September 30, 1996 as compared to $0.3 million and $0.2 million for the six and three-month periods ended September 30, 1995. The increase is primarily due to interest earned on the Debt Service Escrow established in connection with the Company's offering of the Senior Notes and the investment of the cash remaining from the net proceeds of the Senior Notes offering and other concurrent September 29, 1995 transactions.
Interest expense increased to $20.3 million and $10.1 million for the six and three-month periods ended September 30, 1996 up from $3.8 million and $1.9 million for the six and three-month periods ended September 30, 1995, a change of $16.5 million and $8.3 million, respectively, primarily due to interest expense incurred on the Senior Notes issued on September 29, 1995.
PART I. FINANCIAL INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Shareholders of CAI Wireless Systems, Inc. was held on October 16, 1996, for the purposes of electing a Board of Directors, approving a new 1996 Outside Directors' Stock Option Plan, and approving certain amendments to the Company's 1993 Stock Option and Incentive Plan.
(b) All of management's nominees for directors as listed in the proxy statement were elected with the following vote:
Shares
Voted Shares
"For" "Withheld"
Jared E. Abbruzzese 28,839,707 1,003,588
John J. Prisco 28,839,807 1,003,488
George M. Williams 28,839,807 1,003,488
James P. Ashman 28,839,807 1,003,488
Arthur C. Belanger 28,839,707 1,003,588
Harold A. Bouton 28,839,807 1,003,488
David M. Tallcott 28,791,707 1,051,588
Alan Sonnenberg 28,839,807 1,003,488
Robert D. Happ 28,839,807 1,003,488
(c) The other matters voted upon were as follows:
The 1996 Outside Directors' Stock Option Plan was approved with the following vote:
Votes For: 27,280,367
Votes Against: 2,404,621
Abstentions: 62,507
Broker non-votes: 95,800
The Amendments to the Company's 1993 Stock Option and Incentive Plan were approved with the following vote:
Votes For: 22,531,807
Votes Against: 7,115,671
Abstentions: 100,017
Broker non-votes: 95,800 |
