PRICE COMMUNICATIONS CORP - 10-Q Quarterly Report

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM 10-Q

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/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2003

OR

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

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Commission file number
1-8309

PRICE COMMUNICATIONS CORPORATION
(Exact Name of Registrant as specified in its charter)

New York 13-2991700
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)

45 Rockefeller Plaza, 10020
New York, New York (Zip Code)
(Address of principal executive offices)

Registrant's telephone number (212) 757-5600

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

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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 / /

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes /X/ No / /

The number of shares outstanding of the issuer's common stock as of March 31,
2003 was 54,435,551.

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PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES

INDEX

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets - March 31, 2003 and December 31, 2002...... I-1

Condensed Consolidated Statements of Operations - Three months ended
March 31, 2003 and 2002 (Restated)............................................. I-2

Condensed Consolidated Statements of Cash Flows - Three months ended
March 31, 2003 and 2002 (Restated)............................................. I-3

Condensed Consolidated Statement of Shareholders' Equity - Three months ended
March 31, 2003................................................................. I-4

Notes to Condensed Consolidated Financial Statements.............................. I-5

ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations..................................................................... I-7

ITEM 3 Quantitative and Qualitative Disclosures About Market Risk

ITEM 4 Procedures and Controls

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings................................................................. II-1

ITEM 2. Changes in Securities............................................................. II-1

ITEM 3. Defaults Upon Senior Securities - None............................................ II-1

ITEM 4. Submission of Matters to a Vote of Security Holders............................... II-1

ITEM 5. Other Information................................................................. II-1

ITEM 6. Exhibits and Reports on Form 8-K.................................................. II-1

SIGNATURES.................................................................................. II-2

CERTIFICATIONS

ITEM 1. FINANCIAL STATEMENTS

PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
($ IN THOUSANDS)

See accompanying notes to condensed consolidated financial statements.

I-1

PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

($ IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

See accompanying notes to condensed consolidated financial statements.

I-2

PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

($ IN THOUSANDS)
(UNAUDITED)

See accompanying notes to condensed consolidated financial statements.

I-3

PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

($ IN THOUSANDS)

(UNAUDITED)

See accompanying notes to condensed consolidated financial statements.

I-4

PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The Consolidated Financial Statements include the accounts of Price
Communications Corporation and its subsidiaries (the "Company", "Price" or
"PCC"). Price Communications Wireless, Inc. ("PCW") is a wholly owned subsidiary
of Price Communications Corporation and prior to the consummation of the asset
contribution, which occurred on August 15, 2002, was the operating entity for
the cellular business engaged in the construction, development management
and operation of cellular telephone systems in the southeastern United States.
All significant intercompany items and transactions have been eliminated.

The Consolidated Financial Statements have been prepared by the Company
without audit in accordance with the rules and regulations of the Securities and
Exchange Commission. These Condensed Consolidated Financial Statements should be
read in conjunction with the audited Consolidated Financial Statements
previously filed on the Company's Form 10-K . In the opinion of management, the
statements reflect all adjustments necessary for a fair presentation of the
results of interim periods. All such adjustments are of a normal and recurring
nature. The results for any interim period are not necessarily indicative of the
results to be expected for a full year.

EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS- In January 2003, the Financial
Accounting Standards Board issued INterpretation No. 46, "Consolidation of
Variable Interest Entities, an Interpretation of Accounting Research Bulletin
No. 51," ("FIN No. 46"), which requires all variable interest entities
("VIEs") to be consolidated by the primary beneficiary. The primary
beneficiary is the entity that holds the majority of the beneficial
interests in the VIE. In addition, the interpretation expands disclosure
requirements for both variable interest entities that are consolidated as
well as VIEs from which the entity is the holder of a significant amount of
the beneficial interests, but not the majority. The disclosure requirements of
this interpretation are effective for all financial statements issued after
January 31, 2003. The consolidation requirements of this interpretation are
effective for all periods beginning after June 15, 2003. The Company does not
have any disclosure related to FIN No. 46, and does not anticipate that the
adoption of the consolidation requirement of this interpretation will have a
material effect on its results of operations or financial condition.

(2) CONTRIBUTION OF THE COMPANY'S WIRELESS BUSINESS TO THE VERIZON PARTNERSHIP

As per an agreement of December 18, 2001, on August 15, 2002 the Company
contributed substantially all of the assets and liabilities of PCW to Verizon
Wireless of the East (the "Verizon Partnership"). As consideration for such
contribution, the Company received a preferred exchangeable interest in the
Verizon Partnership initially valued at approximately $1.112 billion. According
to the Partnership agreement, the Company is entitled to an allocation of any
profits from the Verizon Partnership for a period of up to four years subsequent
to August 15, 2002 equal to its preferred return, which currently approximates
2.9% per annum. The Company will receive in cash 50% of its preferred return,
with the balance being added to its capital account.

Under a letter agreement dated August 9, 2002, PCW is a guarantor of $350
million of the Verizon Partnership debt to Verizon Communications. However, PCW
is not obligated to make payment under the guaranty until Verizon Communications
has exhausted all remedies against the Verizon Partnership. The Company
initially deposited $70 million in a separate collateral account to support such
guaranty. The Company has the right to withdraw certain sums such as interest
and dividends from the account and has the right to withdraw up to $5 million
from this account to cover its ordinary operating expenses.

The preferred exchangeable interest is exchangeable into either Verizon
Communications common stock or Verizon Wireless common stock depending on the
circumstances. If a public offering of Verizon Wireless occurs, the exchangeable
interest can be exchanged at the initial public offering price if Price obtains
shareholder approval. On January 29, 2003, however, Verizon Wireless' announced
the withdrawal of its registration statement for an intial public offering of
common stock, given that company's ongoing strong cash flow and lack of
significant funding requirements.

If Verizon Wireless does not complete such an initial public offering by
August 15, 2006 or an initial public offering does occur within the proscribed
time frame but such exchange does not occur because of a breach of contract by
Verizon Wireless, the preferred exchangeable interest will be manditorily
exchanged for shares of Verizon Communications common stock on approximately
August 15, 2006. The price used for the calculation of the number of shares that
would be issued in such an exchange is the trailing 20-day average for Verizon
communications common stock but not less than $40, nor more than $74.

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PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

The Company accounts for the Preferred Exchangeable Interest using the
equity method of accounting. The initial investment equaled the credit in the
capital account on the partnership's financial statement. Thereafter, the
Company increases its investment by the amount of income it is entitled to
receive based on the availability of profits and the agreed upon preferred rate
of return and reduces such investment by any cash distributions to the Company.

(3) STOCK-BASED COMPENSATION

In 1995, the FASB issued SFAS No. 123 "Accounting for Stock-Based
Compensation" (SFAS No. 123"). As permitted by SFAS No. 123, the Company
continues to apply the recognition and measurement provisions of Accounting
Principles Board Opinion No. 25 "Accounting for Stock Issued to Employees"
("APB 25"). As permitted by SFAS No. 123, the Company has chosen to continue
accounting for stock options at their intrinsic value. Accordingly, no
compensation expense is recognized. Had the fair value method of accounting been
applied, the proforma net income would be as follows:

(4) SHAREHOLDERS' EQUITY

The Company's Board of Directors had authorized stock repurchase programs
of the Company's Common Stock. As a result of the transaction agreement with the
Verizon Partnership, the company is precluded from using certain of its funds to
repurchase any of its outstanding stock.

(5) RESTATEMENT RELATED TO REDEEMABLE PREFERRED STOCK

As a result of an accounting correction of non-cash charges attributable to
the conversions of preferred stocks in 1998 and 1999 into the Company's Common
Stock and the associated tax effects, the Company has restated financial results
for the four year period ended December 31, 2001 and the nine-month period ended
September 30, 2002. There was no cumulative effect of such restatement on the
Company's financial statements as of December 31, 2002.

(6) EQUITY INVESTMENT IN VERIZON PARTNERSHIP

The following table summarizes financial information of the Verizon
Partnership ($ in thousands):

The Company's portion of total partners' capital in the amount of
$1.126 billion currently earns a preferred return of approximately 2.9% per
annum, which amounted to $8.2 million for the three-months ended March 31,
2003. The Verizon Partnership did not acquire the Company's operating
subsidiary until August 15, 2002. Accordingly, operating results for the
three month period ending March 31, 2002 are not presented herein as any
comparison with the current quarter is not meaningful.

I-6

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion is intended to facilitate an understanding and
assessment of significant changes and trends related to the financial condition
and results of operations of the Company. This discussion should be read in
conjunction with the Company's Condensed Consolidated Financial Statements and
related notes thereto.

The discussion contains statements, which constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Such statements are made regarding the intent, belief, or current
expectations of the Company, its directors, or officers primarily with respect
to the future operating performance of the Company. Readers are cautioned that
any such forward-looking statements are not guarantees of future performance and
may involve risks and uncertainties and that actual results may differ from
those in the forward-looking statements as a result of factors, many of which
are outside the control of the Company.

References to the "Company" or "Price" in this report include Price
Communications Corporation and its subsidiaries unless the context otherwise
indicates.

OVERVIEW

The Company has been engaged in the construction, development, management
and operation of cellular telephone systems in the southeastern United States.
Effective August 15, 2002, the Company contributed substantially all of the
assets and liabilities of its operating subsidiary, Price Communications
Wireless, Inc. ("PCW"), to the Verizon Partnership. Accordingly, the financial
information for the three-months ended March 31, 2003 is not comparable to the
same period in 2002.

The Company and Mr. Price (in his capacity as chief executive officer of
the Company and in his personal capacity) have been shown a variety of potential
acquisitions and opportunities. These include the purchase of a mutual fund
management company, banks, cellular properties, independent telephone companies,
broadcasting and /or publishing companies and a proposal for the conversion of
the Company into a closed-end investment company. Management and the Board of
Directors continue to evaluate these and other opportunities.

THREE MONTHS ENDED MARCH 31, 2003 COMPARED TO THREE MONTHS ENDED MARCH 31, 2002
(RESTATED)

REVENUE. As a result of the contribution on August 15, 2002 of the
Company's operating subsidiary to the Verizon Partnership, the sole source of
operating revenue during the quarter was the earnings on the Company's preferred
investment in the Verizon Partnership. Since there were sufficient earnings as
indicated in Note 6 in the Notes to Condensed Consolidated financial Statements,
the Company recorded its proportionate share of profits at a rate of
approximately 2.9% per annum on its average investment balance in the limited
partnership.

OPERATING EXPENSES. The principal expense during the current three-month
period was payroll and related expenses. Additional payroll in the form of
bonuses and severance payments, were incurred during the quarter. This level of
overhead expenditures is not expected to continue during the next two current
quarterly periods.

NET INTEREST EXPENSE, OTHER INCOME, INCOME TAXES AND NET INCOME. Net
interest expense decreased by $16.6 million for the quarter ended March 31, 2003
since the previously outstanding debt was assumed by the Verizon Partnership on
August 15, 2002 as part of the contribution transaction. Other income increased
from $338,000 to $1.7 million principally as a result of an increase in net
gains from marketable securities transactions as well as an increase in dividend
income from the investments maintained in the collateral account.

The current period's income tax provision of $2.8 million compared to the
income tax provision of $3.1 million in the first quarter of 2002 is a result of
lower financial statement taxable income combined with a higher estimated tax
rate used to compute the current quarter's provision.

The net income of $4.6 million for the first quarter of 2003 compared to
net income of $5.3 million for the first quarter of 2002 is primarily a function
of revenue and operating expenses from the operating subsidiary for the first
quarter of 2002 compared with income earned from the Verizon Partnership during
the first three months of 2003, expenses of the parent company during the period
as well as the elimination of interest expense during the current quarter
associated with the outstanding debt that was assumed by the Verizon Partnership
on August 15, 2002.

LIQUIDITY AND CAPITAL RESOURCES

I-7

As previously discussed, the Company's primary source of revenue is
currently its earnings from the Verizon Partnership. Based upon the current
results for the Verizon Partnership, there appears to be minimal possibility
that the Company will not receive its proportionate share of partnership
earnings through August 15, 2006, the last period for which the company is
entitled to its preferred interest if a conversion to Verizon common or Verizon
Wireless common does not occur before that date. For the period that the Company
is entitled to receive a preferred return, 50% of such return will be paid in
cash with the balance being added to the Company's capital account. If the
Verizon Partnership incurs losses, such losses are first allocated to Cellco
Partnership and its affiliates up to an amount equaling their capital account in
the Verizon Partnership before being allocated to the Company.

Under a letter agreement dated August 9, 2002, Verizon Communications
provided the Verizon Partnership with $350 million of debt financing which was
used in connection with the covenant defeasance and redemption of PCW's
outstanding debt. PCW agreed to guarantee the $350 million indebtedness.
However, PCW is not obligated to make payment under the guarantee until Verizon
Communications has exhausted all remedies against the Verizon Partnership. The
Company believes that the probability of the guarantee being enforced is remote.
In connection with the guaranty, Price established a $70 million collateral
account, which now consists principally of marketable securities. Price controls
the investment decisions for this account and has the right to withdraw certain
sums such as dividends and interest on its investments and has the right to
withdraw up to an additional $5 million in the aggregate from the account in
order to cover its ordinary operating expenses.

As of March 31, 2003, the Company has approximately $14.1 million of cash
and cash equivalents and $6.9 million in marketable securities. It anticipates
receiving approximately $16.0 million during the current year as its 50%
distribution from its preferred investment. Based on its current and anticipated
cash receipts, the Company believes that it can meet its current cash
requirements. There is a remote risk, however, if significant unexpected cash
needs arise, that its funds will be insufficient to meet its obligations and if
the Company needs to borrow money to meet such obligations, it may be forced to
do so on unfavorable terms.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risk as it relates to its investment
securities, whose values fluctuate with the market and whose values have been
adjusted to reflect their market values as of March 31, 2003. In addition, the
realizability of the Company's investment in the Verizon Partnership could be
affected if the price of Verizon Communications common stock is below $40 per
share for an extended period of time. The Company believes its investment in the
Verizon Partnership is realizable at its recorded value at March 31, 2003.

ITEM 4. PROCEDURES AND CONTROLS

Within the 90 days prior to the date of this report. The Company carried
out an evaluation, under the supervision and with the participation of the
Company's management, including the Company's Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures pursuant to Exchange Act Rule
13a-14. Based upon that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that the Company's disclosure controls and
procedures are effective. There were no significant changes in the Company's
internal controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation.

I-8

PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 2. CHANGES IN SECURITIES

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not Applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) EXHIBITS

99.1 Certification of the Chief Executive Officer and Chief
Financial Officer

(b) REPORTS ON FORM 8-K

None

II-1

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has fully caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

PRICE COMMUNICATIONS CORPORATION

Date: May 14, 2003 By: /s/ Robert Price
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Robert Price
Director, President and Treasurer

By: /s/ Kim I. Pressman
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Kim I. Pressman
Director, Executive Vice President
and Principal Financial Officer

II-2

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER OF PRICE COMMUNICATIONS CORPORATION

I, Robert Price, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Price
Communications Corporation;

2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the periods covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:

a. designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;

b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and

c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):

a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified to the
registrant's auditors any material weaknesses in internal
controls; and

b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.

Dated, May 14, 2003

/s/ ROBERT PRICE
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Robert Price
President

II-3

CERTIFICATION OF CHIEF FINANCIAL OFFICER OF PRICE COMMUNICATIONS CORPORATION

I, Kim I. Pressman, certify that:

7. I have reviewed this quarterly report on Form 10-Q of Price
Communications Corporation;

8. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the periods covered by this quarterly report;

9. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;

10. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:

a. designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;

b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and

c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;

11. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):

a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified to the
registrant's auditors any material weaknesses in internal
controls; and

b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and

12. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.

Dated, May 14, 2003

By: /s/ KIM I. PRESSMAN
-----------------------
Kim I Pressman
Chief Financial Officer

II-4