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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Form 10-Q

Commission File No. 333-110082

American Cellular Corporation

(405) 529-8500

     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 o          No þ

      The registrant is not subject to filing requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, but files reports required by those sections pursuant to contractual obligations.

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

      As of August 13, 2004, there were 50 shares of the registrant’s $0.01 par value Class A Common Stock outstanding, which are owned of record by Dobson JV Company and 300 shares of the registrant’s $0.01 par value Class B Common Stock outstanding, which are owned of record by Dobson Communications Corporation.

AMERICAN CELLULAR CORPORATION

INDEX TO FORM 10-Q

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PART I.

FINANCIAL INFORMATION

AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES

The accompanying notes are an integral part of these condensed consolidated financial statements.

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AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES

The accompanying notes are an integral part of these condensed consolidated financial statements.

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AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES

The accompanying notes are an integral part of these condensed consolidated financial statements.

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AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES

      The condensed consolidated balance sheet of American Cellular, or ACC, and subsidiaries (collectively with ACC, the “Company”) as of June 30, 2004, the condensed consolidated statements of operations for the three and six months ended June 30, 2004 and 2003 and the condensed consolidated statements of cash flows for the six months ended June 30, 2004 and 2003 are unaudited. In the opinion of management, such financial statements include all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of financial position, results of operations, and cash flows for the periods presented. The Company believes that the presentation is not materially impacted by the change in basis as a result of the August 19, 2003 acquisition. The primary changes are reflected in intangible assets, goodwill, and stockholder’s equity.

      The condensed consolidated balance sheet at December 31, 2003, was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. The financial statements presented herein should be read in connection with the Company’s December 31, 2003 consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003.

      The following Notes relate to both the Company and the predecessor company of American Cellular (“the Predecessor Company”). The Predecessor Company was owned by a 50/50 joint venture between AT&T Wireless Services, Inc. and Dobson Communications Corporation. On August 19, 2003, American Cellular was reorganized and became a wholly-owned subsidiary of Dobson Communications, as described below.

      ACC Escrow Corp., a wholly-owned, indirect subsidiary of Dobson Communications Corporation, or Dobson Communications, was formed on June 23, 2003, and began operations on August 8, 2003, when it completed the sale of $900.0 million 10% Senior Notes, the proceeds of which were used in the Company’s restructuring. On August 19, 2003, ACC Escrow Corp. was merged into the Company in conjunction with the Company’s exchange offer for its existing 9.5% Senior Subordinated Notes due 2009 (the “existing notes”). This exchange offer resulted in the restructuring of the Company’s indebtedness and equity ownership. As part of the restructuring, holders of $681.9 million principal amount of the $700.0 million outstanding principal amount of the Company’s existing notes tendered their notes and, in exchange for the tendered notes, received from Dobson Communications 43.9 million shares of its Class A Common Stock, 681,900 shares of its Convertible Preferred Stock with an aggregate liquidation preference of $121.8 million, convertible into a maximum of 13.9 million shares of Dobson Communications’ Class A Common Stock, and $48.7 million in cash. Dobson Communications also issued an additional 4,301 shares of its Series F Convertible Preferred Stock and 276,848 shares of its Class A Common Stock in payment of certain fees of the restructuring. Upon consummation of the restructuring, on August 19, 2003, the Company became a wholly-owned subsidiary of Dobson Communications. The Company is a provider of rural and suburban wireless telephone services in portions of Illinois, Kansas, Kentucky, Michigan, Minnesota, New York, Ohio, Oklahoma, Pennsylvania, West Virginia and Wisconsin.

      American Cellular Corporation, the Predecessor company, was originally formed on February 26, 1998, to acquire the operations of PriCellular Corporation. On February 25, 2000, American Cellular Corporation and its subsidiaries were acquired by ACC Acquisition LLC, an equally-owned joint venture between Dobson Communications and AT&T Wireless.

      Property, plant and equipment are recorded at cost. Newly constructed wireless systems are added to property, plant and equipment at cost, which includes contracted services, direct labor, materials and

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

overhead. Existing property, plant and equipment purchased through acquisitions is recorded at its fair value at the date of the purchase. Repairs, minor replacements and maintenance are charged to operations as incurred. The provisions for depreciation are provided using the straight-line method based on the estimated useful lives of the various classes of depreciable property. Depreciation expense for the six months ended June 30, 2004 and 2003 totaled $33.1 million and $29.7 million, respectively. Listed below are the gross property, plant and equipment amounts and the related accumulated depreciation for the periods described.

      The Company’s long-term debt as of June 30, 2004 and December 31, 2003, consisted of the following:

      On August 8, 2003, ACC Escrow Corp. completed the sale of $900.0 million aggregate principal amount of 10% Senior Notes due 2011. The notes were issued at par and bear interest at an annual rate of 10%. Interest on the notes is payable semi-annually in arrears on February 1 and August 1, commencing February 1, 2004. The Company may, at its option, redeem, with a premium that begins at 110% and declines to 100%, some or all of the notes at any time on or after August 1, 2007. Prior to August 1, 2006, the Company may, at its option, use the proceeds of certain equity offerings to redeem at a premium of 110%, a portion of the outstanding notes as long as at least $600.0 million in aggregate principal amounts of the senior notes remain outstanding immediately after the redemption. The indenture imposes a number of restrictive covenants that, among other things, limit the Company’s ability to incur additional indebtedness, make restricted payments, sell assets, create or incur liens, places restrictions on distributions and other payments, merge or consolidate with or transfer substantial assets to another entity, engage in transactions with related persons or engage in any business other than permitted businesses.

      On August 19, 2003, as described above, the Company’s indebtedness and equity ownership were restructured. Upon consummation of the restructuring, the Company became a wholly-owned, subsidiary of Dobson Communications.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      The purchase price of the Company by Dobson Communications and the allocation of the acquired assets and assumed liabilities (including fees paid in the transaction) for the Company are as follows:

      Dobson Communications acquired the Company’s remaining equity interest to continue the combined strategy of owning rural and suburban wireless telecommunication service areas.

      Prior to the restructuring, the Company had net operating loss, or NOL, carryforwards of approximately $320.0 million. The restructuring transactions resulted in the reduction of those NOL carryforwards by approximately $200.0 million. After the restructuring, approximately $120.0 million of NOL carryforwards remained available to the Company. However, the restructuring also resulted in an ownership change within the meaning of the Internal Revenue Code Section 382 and the regulations thereunder. This ownership change limits the amount of previously generated NOL carryforwards that the Company can utilize to offset future taxable income on an annual basis. The Company has reviewed the need for a valuation allowance against these NOL carryforwards. Based on a review of taxable income, history and trends, forecasted taxable income, expiration of carryforwards and limitations on the annual use of the carryforwards, the Company has not provided a valuation allowance for the NOL carryforwards because management believes that it is more likely than not that all of the NOL carryforwards of the Company will be realized prior to their expiration.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      The Company is party to various other legal actions arising in the normal course of business. None of the actions are believed by management to involve amounts that would be material to the Company’s consolidated financial position, results of operation, or liquidity.

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      The following discussion and analysis presents factors, which we believe are relevant to an assessment and understanding of our condensed consolidated financial position and results of operations. This financial and business analysis should be read in conjunction with our condensed consolidated financial statements and the notes thereto included in Item 1. Except where expressly stated otherwise, the following discussion and analysis relate to American Cellular prior to its merger with ACC Escrow Corp. on August 19, 2003, and to ACC Escrow Corp. and American Cellular following their merger. Wherever the term “predecessor” or “predecessor company” is used, it refers to American Cellular prior to its merger with ACC Escrow Corp. Unless otherwise stated, the terms “we,” “us” and “our” refer to American Cellular prior to its merger with ACC Escrow Corp., and to ACC Escrow Corp. and American Cellular following their merger.

OVERVIEW

      We provide rural and suburban wireless telephone services in portions of Illinois, Kansas, Kentucky, Michigan, Minnesota, New York, Ohio, Oklahoma, Pennsylvania, West Virginia and Wisconsin.

      ACC Escrow Corp. was formed on June 23, 2003, as a wholly-owned, indirect subsidiary of Dobson Communications and began operations on August 8, 2003, when it completed the sale of $900.0 million of 10% Senior Notes, the proceeds of which were used in our restructuring. Prior to August 19, 2003, we were owned by a joint venture, which was equally owned by Dobson Communications and AT&T Wireless. On August 19, 2003, we restructured our indebtedness and equity ownership. To effect this restructuring, ACC Escrow Corp. was merged into us, and we completed an exchange offer for our existing 9.5% Senior Subordinated Notes due 2009, which we refer to as our existing notes. In the exchange offer, the holders of $681.9 million of the $700.0 million outstanding principal amount of our existing notes exchanged those existing notes and received 43.9 million shares of Dobson Communications’ Class A Common Stock, 681,900 shares of Dobson Communications’ Series F Convertible Preferred Stock having an aggregate liquidation preference of $121.8 million and convertible into a maximum of 13.9 million shares of Dobson Communications’ Class A Common Stock, and $48.7 million in cash. In addition, Dobson Communications issued an additional 4,301 shares of its Series F Convertible Preferred Stock and 276,848 shares of its Class A Common Stock in payment of certain fees of the restructuring. We used a portion of the proceeds from the sale of ACC Escrow Corp’s 10% Senior Notes to fully repay our existing credit facility. Upon consummation of the restructuring on August 19, 2003, we became a wholly-owned subsidiary of Dobson Communications. To provide a more comparable basis for our Management Discussion and Analysis, we have presented our results of operations for the three and six months ended June 30, 2004, for comparison with the Predecessor Company’s results of operations for the three and six months ended June 30, 2003. We believe that the operating presentation is not materially impacted by the change in basis as a result of the August 19, 2003 acquisition. The primary changes are reflected in intangible assets, goodwill, and stockholder’s equity.

CRITICAL ACCOUNTING POLICIES AND PRACTICES

      We prepare our consolidated financial statements in accordance with general accepted accounting principles (“GAAP”). Our significant accounting polices are discussed in detail in our Management’s Discussion and Analysis and in Note 2 to the consolidated financial statements, both included in our Annual Report on Form 10-K for the year ended December 31, 2003.

      It is necessary that we use estimates in the presentation of our financial statements with respect to the effect of matters that are inherently uncertain. Our use of estimates and assumptions affects the reported amounts of assets, liabilities, and the amount of revenue and expenses we recognize for and during the reporting period.

      Our general and administrative expenses and certain other operating expenses include all infrastructure costs, including costs for customer support, billing, collections and corporate administration, all of which are provided by our parent, Dobson Communications. We share corporate and call center costs with Dobson Communications, which costs are allocated primarily based on the subscribers and populations in our

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RESULTS OF OPERATIONS

      The following table summarizes our key operating data for the periods indicated:

(1)	Represents the population in our licensed areas, or POPs, for the period indicated and is based upon the Claritas 2000 Bureau of Census results, adjusted to exclude those portions of our rural service areas, or RSAs, and metropolitan service areas, or MSAs, not covered by our licenses.
(2)	Market penetration is calculated by dividing ending subscribers by market population.
(3)	Average monthly service revenue per subscriber is calculated by dividing service revenue by average subscribers and dividing by the number of months in the period. We exclude roaming revenue from this calculation, since roaming revenue is not derived from our subscribers.
(4)	Post-paid churn represents the percentage of the post-paid subscribers which deactivate service each month. The calculation divides the total post-paid deactivations during the period by the average post-paid subscribers for the period.

Subscribers

      Our subscriber base contains three types of subscribers; post-paid, reseller and pre-paid. At June 30, 2004, post-paid subscribers accounted for 93.5% of our subscriber base. These subscribers pay a monthly access fee for a wireless service plan that generally includes a fixed amount of minutes and certain service features. In addition to the monthly access fee, these subscribers are typically billed in arrears for long-distance charges, roaming charges and rate plan overages. Our reseller subscribers are similar to our post-paid subscribers in that they pay monthly fees to utilize our network and services. However, these subscribers are billed by a third party (reseller), who has effectively resold our service to the end user (subscriber). We, in turn, bill the third party (reseller) for the monthly usage of the end user (subscriber). At June 30, 2004, the reseller base accounted for 4.7% of our subscriber base. Our pre-paid subscribers, which at June 30, 2004 accounted for 1.8% of our subscriber base, are subscribers that pre-pay for an agreed upon amount of usage.

      Until the three months ended June 30, 2004, we had been experiencing a decline in our gross subscriber additions as a result of increased competition attributable to an accelerating pace of improvements in the quality of digital technology, and increased products offered to the consumer. Many of our competitors already market enhanced data services, such as single carrier radio transmission technology, or 1XRTT. However, we recently completed the process of upgrading our network to Global System for Mobile Communication, or GSM, and General Packet Radio Service, or GPRS, with an Enhanced Data for GSM Evolution, or EDGE and are beginning to experience an increased rate of our gross subscriber additions, as a result of new services that will be available with GSM/ GPRS/ EDGE technology. We expect the rate of increase in our gross subscribers additions to continue through-out the remainder of 2004.

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Revenue

      Our operating revenue consists of service revenue, roaming revenue, and equipment and other revenue.

      We derive service revenue primarily by providing wireless services to our subscribers. The wireless industry and we have experienced declining average revenue per minute as competition among wireless service providers has led to reductions in rates for airtime. These declines have generally been offset by significant increases in average minutes-of-use per subscriber. As a result, our average monthly service revenue per subscriber has remained constant. We believe there is an opportunity in the remainder of 2004 for our average monthly service revenue per subscriber to increase from current levels primarily due to additional voice and data services available through our GSM/ GPRS/ EDGE network.

      We derive roaming revenue by providing service to subscribers of other wireless providers when those subscribers “roam” into our markets and use our systems to carry their calls. Roaming revenue has traditionally had higher margins than revenue from our subscribers. We achieve these higher margins because we incur relatively lower incremental costs related to network operations, billing, customer service and collections in servicing roaming customers as compared to our home subscribers. However, our roaming margins are declining and are becoming more comparable to margins from our subscribers due to increased market pressures and competition among wireless providers, resulting in reduced rates. Our roaming yield (roaming revenue, which includes airtime, toll charges and surcharges, divided by roaming minutes-of-use) was $0.15 for the three months ended June 30, 2004, $0.23 for the three months ended June 30, 2003, $0.15 for the six months ended June 30, 2004 and $0.23 for the six months ended June 30, 2003. Even though our significant roaming contracts provide for decreasing rates over time, we believe these roaming contracts are beneficial because they secure existing traffic and provide opportunity for a continuing increase in traffic volumes. Roaming revenue tends to be impacted by seasonality. Historically, we have experienced higher roaming minutes-of-use and related roaming revenue during the second and third quarters of each year, as users tend to travel more and, therefore, use their wireless phones more during the spring and summer months.

      We include long-distance revenue in service and roaming revenue. Equipment revenue is revenue from selling wireless equipment to our subscribers. Equipment revenue is recognized when the equipment is delivered to the customer.

Costs and Expenses

      Our primary operating expense categories include cost of service, cost of equipment, marketing and selling costs, general and administrative costs and depreciation and amortization.

      Our cost of service consists primarily of costs we incur to operate and maintain our facilities utilized in providing service to customers and amounts paid to third-party wireless providers for providing service to our subscribers when our subscribers roam into their markets, referred to as “roaming” costs. Consistent with the trend of declining roaming revenue per minute, our roaming expense per minute has declined as well.

      Our cost of equipment represents the costs associated with wireless equipment and accessories sold. We, like other wireless providers, have continued the use of discounts on phone equipment and free phone promotions for phones sold to our customers, as competition between service providers continues to intensify. As a result, we have incurred, and expect to continue to incur, losses on equipment sales. While we expect to continue these discounts and promotions, we believe that these promotions will result in increased revenue from increases in the number of our wireless subscribers.

      Our marketing and selling costs include advertising, compensation paid to sales personnel and independent dealers and all other costs to market and sell our wireless products and services, and certain costs related to customer retention. We pay commissions to direct sales personnel and independent dealers for new business generated.

      Our general and administrative costs include all infrastructure costs, including costs for customer support, billing, collections, and corporate administration.

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      Our depreciation and amortization expense represents the costs associated with the depreciation of our fixed assets, including our network assets, and the amortization of certain intangible assets. However, we do not amortize our wireless license acquisition costs or goodwill. Rather these assets are subject to periodic evaluation.

Results of Operations for Three Months Ended June 30, 2004 Compared to Three Months Ended June 30, 2003

      In the text below, financial statement numbers have been rounded; however, the percentage changes are based on the actual financial statement numbers.

      To provide a more comparable basis for our analysis set forth below we have presented our results of operations for the three and six months ended June 30, 2004, and the results of operations for the Predecessor Company for the three and six months ended June 30, 2003.

      Operating revenue. For the three months ended June 30, 2004, our total operating revenue decreased $10.0 million, or 8.6%, to $106.9 million from $116.9 million for the comparable period in 2003. The following table sets forth the components of our operating revenue for the periods indicated:

      For the three months ended June 30, 2004, our service revenue increased $1.7 million, or 2.2%, to $79.8 million from $78.1 million for the three months ended June 30, 2003. The increase was primarily attributable to increased market penetration. Our average total subscriber base increased 2.4% to 711,100 for the three months ended June 30, 2004, from 694,800 for the three months ended June 30, 2003.

      For the three months ended June 30, 2004, our roaming revenue decreased $13.3 million, or 38.4%, to $21.4 million from $34.7 million for the three months ended June 30, 2003. This resulted from our roaming revenue per minute-of-use decreasing by 35.6% due to decreases in our contractual rates during 2003 and 2004. Our roaming minutes were comparable for the three months ended June 30, 2004 and 2003.

      For the three months ended June 30, 2004, our equipment and other revenue increased $1.6 million, or 38.2%, to $5.7 million from $4.1 million for the three months ended June 30, 2003. This increase in equipment revenue is primarily a result of increased purchases of new handsets due to an increase in the number of customers upgrading to new rate plans, including our new GSM rate plans.

      Cost of service. For the three months ended June 30, 2004, our total cost of service decreased $1.3 million, or 5.0%, to $23.6 million from $24.9 million for the comparable period in 2003. The following table sets forth the components of our cost of service for the periods indicated:

      For the three months ended June 30, 2004, our network costs, which are the costs we incur in operating our wireless network and providing service to our customers, increased $1.4 million, or 10.0%, to $15.1 million

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      For the three months ended June 30, 2004, our roaming costs decreased by $2.6 million, or 23.5%, to $8.5 million from $11.1 million for the same period in 2003. This decrease was the result of a 27.4% decrease in roaming costs per minute-of-use, offset by a 5.4% increase in the minutes used by our customers on third-party wireless providers networks.

      Cost of equipment. For the three months ended June 30, 2004, our cost of equipment increased $3.6 million, or 39.7%, to $12.8 million from $9.2 million compared to the same period in 2003. This increase in cost of equipment is due to an increase in the average cost of handsets sold to customers, along with increased purchases of new handsets due to an increase in the number of customers upgrading to new rate plans, including our new GSM rate plans.

      Marketing and selling costs. For the three months ended June 30, 2004, our marketing and selling costs increased $2.8 million, or 22.6%, to $15.2 million from $12.4 million for the three months ended June 30, 2003, due primarily to an increase in spending on advertising to launch our new GSM rate plans.

      General and administrative costs. For the three months ended June 30, 2004, our general and administrative costs increased $4.4 million, or 25.7%, to $21.7 million from $17.3 million for the three months ended June 30, 2003. This increase is a result of increased infrastructure costs such as customer service, billing, bad debt, business taxes and administrative costs as a result of the overall growth of our business.

      Depreciation and amortization expense. For the three months ended June 30, 2004, our depreciation and amortization expense increased $3.3 million, or 19.0%, to $20.9 million from $17.6 million for 2003. The increase was the result of additional depreciation on fixed assets acquired or constructed in 2003 and the first six months of 2004.

      Interest expense. For the three months ended June 30, 2004, our interest expense decreased $7.5 million, or 24.1%, to $23.7 million from $31.2 million for the three months ended June 30, 2003. This decrease primarily resulted from the reduction of our total debt outstanding.

      Net (loss) income. For the three months ended June 30, 2004, our net loss was $7.5 million. Our net loss increased $9.6 million, from a net income of $2.1 million for the three months ended June 30, 2003 primarily due to a decrease in our operating income, offset by a reduction in our interest expense.

Results of Operations for Six Months Ended June 30, 2004 Compared to Six Months Ended June 30, 2003

      Operating revenue. For the six months ended June 30, 2004, our total operating revenue decreased $16.6 million, or 7.4%, to $206.8 million from $223.4 million for the comparable period in 2003. The following table sets forth the components of our operating revenue for the periods indicated:

      For the six months ended June 30, 2004, our service revenue increased $3.9 million, or 2.5%, to $157.2 million from $153.3 million for the six months ended June 30, 2003. The increase was primarily attributable to increased market penetration. Our average total subscriber base increased 2.5% to 710,400 for the six months ended June 30, 2004 from 693,300 for the six months ended June 30, 2003.

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      For the six months ended June 30, 2004, our roaming revenue decreased $22.9 million, or 36.7%, to $39.5 million from $62.4 million for the six months ended June 30, 2003. This resulted from our roaming revenue per minute-of-use decreasing by 35.5% due to decreases in our contractual rates during 2003 and 2004. Our roaming minutes were comparable for the six months June 30, 2004 and 2003.

      For the six months ended June 30, 2004, our equipment and other revenue increased $2.4 million, or 30.5%, to $10.1 million from $7.7 million for the six months ended June 30, 2003. This increase in equipment revenue is primarily a result of increased purchases of new handsets due to an increase in the number of customers upgrading to new rate plans, including our new GSM rate plans.

      Cost of service. For the six months ended June 30, 2004, our total cost of service decreased $2.6 million, or 5.5%, to $45.8 million from $48.4 million for the comparable period in 2003. The following table sets forth the components of our cost of service for the periods indicated:

      For the six months ended June 30, 2004, our network costs, which are the costs we incurred in operating our wireless network and providing service to our customers, increased $2.5 million, or 9.4%, to $29.1 million from $26.6 million for the comparable period in 2003. This increase was primarily due to credits received for the six months ended June 30, 2003 from certain of our network service providers, along with the addition of new circuits and cell sites related to our new GSM network during the six months ended June 30, 2004.

      For the six months ended June 30, 2004, our roaming costs decreased by $5.1 million, or 23.6%, to $16.7 million from $21.8 million for the same period in 2003. This decrease was the result of a 26.0% decrease in roaming costs per minute-of-use, offset by a 3.3% increase in the minutes used by our customers on third-party wireless providers networks.

      Cost of equipment. For the six months ended June 30, 2004, our cost of equipment increased $4.9 million, or 26.9%, to $23.0 million from $18.1 million compared to the same in 2003. This increase in cost of equipment is due to an increase in the average cost of handsets sold to customers, along with increased purchases of new handsets due to an increase in the number of customers upgrading to new rate plans, including our new GSM rate plans.

      Marketing and selling costs. For the six months ended June 30, 2004, our marketing and selling costs increased $3.7 million, or 14.6%, to $28.5 million from $24.8 million for the six months ended June 30, 2003, due primarily to an increase in spending on advertising to launch our new GSM rate plans.

      General and administrative costs. For the six months ended June 30, 2004, our general and administrative costs increased $8.8 million, or 25.1%, to $43.7 million from $34.9 million for the six months ended June 30, 2003. This increase is a result of increased infrastructure costs such as customer service, billing, bad debt, business taxes and administrative costs as a result of the overall growth of our business.

      Depreciation and amortization expense. For the six months ended June 30, 2004, our depreciation and amortization expense increased $6.5 million, or 19.0%, to $41.1 million from $34.6 million for 2003. The increase was the result of additional depreciation on fixed assets acquired or constructed in 2003 and the first six months of 2004.

      Interest expense. For the six months ended June 30, 2004, our interest expense decreased $15.1 million, or 24.2%, to $47.4 million from $62.5 million for the six months ended June 30, 2003. This decrease primarily resulted from the reduction of our total debt outstanding.

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      Net (loss) income. For the six months ended June 30, 2004, our net loss was $14.9 million. Our net loss increased $14.6 million from $0.3 million for the six months ended June 30, 2003 primarily due to a decrease in our operating income, offset by a reduction in our interest expense.

Liquidity and Capital Resources

      We have required, and will likely continue to require, substantial capital to further develop, expand and upgrade our wireless systems and those we may acquire. We have financed our operations through cash flows from operating activities, and when necessary, bank debt, the sale of debt securities and infusions of equity capital from our parent company, Dobson Communications. Although we cannot provide assurance, assuming successful implementation of our strategy, including the continuing development of our wireless systems and significant and sustained growth in our cash flows, we believe that our cash on hand and cash flows from operations will be sufficient to satisfy our currently expected capital expenditures, working capital and debt service obligations over the next year. The actual amount and timing of our future capital requirements and expenditures may differ materially from our estimates as a result of, among other things, the demand for our services and the regulatory, technological and competitive developments that may arise.

      We currently expect that we may have to refinance our debt at its final maturities, beginning in 2011. Sources of additional financing may include commercial bank borrowings, vendor financing and the sale of debt securities. Some or all of these financing options may not be available to us in the future, since these resources are dependent upon our financial performance and condition, along with certain other factors that are beyond our control, such as, economic events, technological changes and business trends and developments. Our parent, Dobson Communications, is not obligated to contribute equity capital or provide any other financing to our subsidiaries or to us. Thus, if at any time financing is not available on acceptable terms, it could have a materially adverse effect on our business and financial condition.

      At June 30, 2004, we had a working capital deficit of $16.0 million, a ratio of current assets to current liabilities of 0.8:1 and an unrestricted cash balance of $15.2 million, which compares to a working capital deficit of $1.7 million, a ratio of current assets to current liabilities of 1:1, and an unrestricted cash balance of $27.5 million at December 31, 2003.

      Our net cash provided by operating activities totaled $15.2 million for the six months ended June 30, 2004 compared to $23.5 million for the six months ended June 30, 2003. The decrease in net cash provided by operating activities is primarily due to an increase in our loss from continuing operations.

      Our net cash used in investing activities totaled $27.5 million for the six months ended June 30, 2004 compared to $19.5 million for the six months ended June 30, 2003. This decrease is related primarily to the negative change in payables/ receivables-affiliates during the two periods. Capital expenditures were $26.2 million for the six months ended June 30, 2004 compared to $28.3 million for the six months ended June 30, 2003, net of $30.0 million of principal repayments.

      Our net cash used in financing activities was $0.1 million for the six months ended June 30, 2004 compared to net cash provided by financing activities of $3.2 million for the six months ended June 30, 2003. This decrease is primarily due to the maturities of restricted investments totaling $33.3 million for the six months ended June 30, 2003.

      In August 2003, as part of our restructuring, holders of $681.9 million outstanding principal amount of our 9.5% Senior Subordinated Notes surrendered their senior notes and received approximately $48.7 million in cash, 43.9 million shares of newly issued shares of Dobson Communications’ Class A Common Stock, and 681,900 shares of Dobson Communications’ Series F Convertible Preferred Stock, which has an aggregate liquidation preference of approximately $121.8 million and is convertible into a maximum of 13.9 million shares of Dobson Communications’ Class A Common Stock. Dobson Communications also issued

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      On August 8, 2003, we and ACC Escrow Corp., a newly formed, wholly-owned, indirect subsidiary of Dobson Communications, completed a private offering of $900.0 million aggregate principal amount of 10% Senior Notes due 2011. The senior notes were sold at par, are unsecured and bear interest at an annual rate of 10%. The net proceeds from the sale of the notes were used to (i) repay in full all amounts owing under our bank credit facility and (ii) pay a portion of the fees of our restructuring. The notes rank pari passu in right of payment with any of our existing and future indebtedness and are senior to all existing and future subordinated indebtedness.

      In connection with the closing of the sale of our 10% Senior Notes, we entered into an indenture dated August 8, 2003 with Bank of Oklahoma, National Association, as Trustee. The indenture contains certain covenants including covenants that limit the ability of us and our restricted subsidiaries to:

	•	incur indebtedness;
	•	incur or assume liens;
	•	make restricted payments;
	•	impose dividend or other payment restrictions affecting our restricted subsidiaries;
	•	issue and sell capital stock of our restricted subsidiaries;
	•	issue certain capital stock;
	•	issue guarantees of indebtedness;
	•	enter into transactions with affiliates;
	•	sell assets;
	•	engage in unpermitted lines of business;
	•	enter into sale or leaseback transactions; and
	•	make payments for the consent, waiver or amendment of any of the provisions of the indenture.

      Our capital expenditures were $26.2 million for the six months ended June 30, 2004. We plan to spend approximately $40 million to $55 million for capital expenditures during 2004. The majority of these planned expenditures that occurred during the first half of 2004, were in relation to the build-out of our GSM/ GPRS/ EDGE network. The amount and timing of capital expenditures may vary depending on the rate at which we expand and develop our wireless systems, new regulatory requirements, and whether we consummate additional acquisitions.

      We have not had a material change in the resources required for scheduled repayment of contractual obligations from the table of Contractual Cash Obligations included in Management’s Discussion and Analysis included in our Annual Report on Form 10-K for the year ended December 31, 2003. As of June 30, 2004, we do not have any contractual purchase obligations, other than those with payment terms less than 60 days after delivery of the equipment.

      We do not have any off-balance sheet financing arrangements or liabilities. In addition, we do not have any majority-owned subsidiaries or any interests in, or relationships with, any material special-purpose entities that are not included in the consolidated financial statements.

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Forward-Looking Statements

      The description of our plans set forth herein, including planned capital expenditures and acquisitions, are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These plans involve a number of risks and uncertainties. Important factors that could cause actual capital expenditures, acquisition activity or our performance to differ materially from the plans include, without limitation, our ability to satisfy the financial covenants of our outstanding debt instruments and to raise additional capital; our ability to manage our rapid growth successfully and to compete effectively in our wireless business against competitors with greater financial, technical, marketing and other resources; changes in end-user requirements and preferences; the development of other technologies and products that may gain more commercial acceptance than those of ours; and adverse regulatory changes. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to update or revise these forward-looking statements to reflect events or circumstances after the date hereof including, without limitation, changes in our business strategy or planned capital expenditures, or to reflect the occurrence of unanticipated events.

      Previously, our primary market risk related to changes in interest rates. Market risk is the potential loss arising from adverse changes in market prices and rates, including interest rates. We do not enter into derivatives or other financial instruments for trading or speculative purposes. The objective of our financial risk management is to minimize the negative impact of interest rate fluctuations on our earnings and equity. All of our outstanding senior notes bore interest at fixed rates. At June 30, 2004, we were not involved with any derivatives or other financial instruments.

      At June 30, 2004, we had long-term debt outstanding of $913.3 million, all of which bears interest at fixed rates.

      As of the end of the period covered by this report, an evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as required by Rule 13a-15(b). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective. We did not effect any changes in our internal controls and procedures during the quarter ended June 30, 2004.

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PART II. OTHER INFORMATION

      We are not currently aware of any pending or threatened litigation against us or our subsidiaries that could have a material adverse effect on our financial condition, results of operations or cash flows.

      Not applicable

      Not applicable

      Not applicable

      Not applicable

      (a) Exhibits

	The following exhibits are filed as a part of this report:

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*	Confidential treatment has been requested for a portion of this document.
(1)	Filed as an exhibit to the Registrant’s Registration Statement on Form S-4 (registration No. 333-59322), as the exhibit number indicated in brackets and incorporated by reference herein.
(2)	Filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001, as the exhibit number indicated in brackets and incorporated by reference herein.
(3)	Filed as an exhibit to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2001, as the exhibit number indicated in brackets and incorporated by reference herein.
(4)	Filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2002, as the exhibit number indicated in brackets and incorporated by reference herein.
(5)	Filed as an exhibit to the Registrant’s current report on Form 8-K on December 12, 2002, as the exhibit number indicated in brackets and incorporated by reference herein.
(6)	Filed as an exhibit to the Registrant’s current report on Form 8-K on July 28, 2003, as the exhibit number indicated in brackets and incorporated by reference herein.
(7)	Filed as an exhibit to the Registrant’s Registration Statement on Form S-4 (no. 333-110082) as the exhibit number indicated in brackets and incorporated by reference herein.
(8)	Filed herewith.

      (b) Reports on Form 8-K

      None

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SIGNATURES

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

	AMERICAN CELLULAR CORPORATION

Date: August 13, 2004

	/s/ EVERETT R. DOBSON
	Everett R. Dobson
	Chairman of the Board, President
	and Chief Executive Officer
	(Principal Executive Officer)

Date: August 13, 2004

	/s/ BRUCE R. KNOOIHUIZEN
	Bruce R. Knooihuizen
	Executive Vice President and
	Chief Financial Officer
	(Principal Financial Officer)

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INDEX TO EXHIBITS