ATLANTA, May 14 /PRNewswire/ -- Preferred Networks, Inc.
(OTC Bulletin Board: PFNT) (PNI), a leading outsourcing services provider to
the wireless industry, today reported an increase in revenues and improvement
in EBITDA of 9.8% and 24.4%, respectively, for the first quarter of 1999
compared to the fourth quarter of 1998. ("EBITDA" is earnings before
interest, taxes, depreciation and amortization.)
Total revenues for the first quarter of 1999 increased 4.0% to
$9.6 million from $9.3 million for the first quarter of 1998. EBITDA improved
by 8.0% to negative $1.3 million for the first quarter of 1999 compared to
negative $1.4 million for the first quarter of 1998. The net loss from
continuing operations before cumulative effect of change in accounting
principle for the first quarter of 1999 was $3.1 million, or $0.24 per share,
compared to a loss of $3.3 million, or $0.24 per share, for the prior year
period.
Commenting on the results, Chairman and Chief Executive Officer, Mark H.
Dunaway said, "We are pleased with our continued growth in total revenues and
further progress toward profitability. We had a number of exciting
developments during the quarter. We are particularly pleased with the
re-establishment of positive gross margin from our product repair activities
at our wholly owned subsidiary, EPS Wireless, Inc. (EPS). We are also excited
about the pending sale of our technical services wholly-owned subsidiary,
Preferred Technical Services, Inc. (PTS), which will enable us to focus more
on our core business activities and will provide additional capital resources
to PNI."
Dunaway added, "We also announced this week that the U.S. Patent and
Trademark Office has granted all 15 of our patent claims for our Platform1(TM)
switching technology. We announced yesterday the launch of our first related
product, the "iTerminal -- innovation by PNI(TM)", which should greatly expand
our market for new Direct Access network customers by significantly reducing
the entry costs into the lucrative paging market."
Beginning in 1999 and continuing currently, the Company was not in
compliance with certain of the financial covenants under its senior credit
facility and the Company has not made principal payments in 1999 under its
equipment vendor credit facility. These events would allow each lender to
declare an event of default and accelerate the maturity of all of the
Company's debt. As of April 13, 1999, the Company accepted a non-binding
proposal from its senior lender to amend certain terms and conditions of its
senior credit facility and is in negotiations to obtain a waiver and deferral
of unpaid principal with respect to its vendor facility. Management believes
that if this proposal is executed by the lender in the form of an amendment to
its senior credit facility and the waiver is obtained with respect to its
equipment vendor credit facility, the Company will be able to meet its debt
covenants in 1999 and all of its debt would revert to monthly payments of
principal and interest, which the Company believes it would be able to satisfy
in 1999. In addition, on April 19, 1999, the Company reached a definitive
agreement to sell substantially all of the assets of its wholly-owned
subsidiary, PTS, for approximately $5 million, subject to certain price
adjustments. Of the purchase price, $4 million will be paid in cash with the
balance to be paid in the form of credits for maintenance services on the
Company's paging networks, subject to certain purchase price adjustments.
Management believes that the amendment of its senior credit facility, the
consummation of the sale of PTS and the waiver and deferral of unpaid
principal under its vendor facility will occur during the second quarter of
1999, although there can be no assurances that these transactions will be
consummated or that the terms will be as currently desired. Each of these
transactions has significant conditions that must be satisfied by the
consummation of the other transactions.
Dunaway added, "We have made significant progress on closing these
transactions and are pleased with the support we are receiving from our
lenders in working with PNI toward achieving a stronger balance sheet."
At March 31, 1998, PNI's Access Services Division was operating in
28 markets and had 543,496 units in service, a 14.1% increase from
476,476 units in service at March 31, 1998.
Preferred Networks, Inc., headquartered in metropolitan Atlanta, provides
outsourcing solutions to the wireless industry, which allow companies to offer
branded wireless services directly to subscribers, while relying on PNI to
provide high-quality network, technical, and product services. PNI offers its
services through its PNI Access Services Division(SM), a provider of wholesale
paging network services and one of the largest carrier's carriers in the U.S.,
and through its wholly owned subsidiaries: PTS, a provider of paging network
equipment installation, maintenance and engineering services; and EPS, a
national provider of paging and cellular product repair services, sales of
new, used and refurbished paging and cellular products and inventory
management services. PNI's address on the World Wide Web is:
http://www.pni.net.
Safe Harbor Statement Under the Private Securities Litigation Reform Act
of 1995: The statements contained in this release which are not historical
facts, such as those concerning future financial performance and growth, are
forward-looking statements that are subject to risks and uncertainties,
including those identified in the Company's 1998 Annual Report on Form 10-K,
and actual results could differ materially from those anticipated in the
forwarding-looking statements. In particular, statements relating to the
competitive position and performance of Platform1(TM) and iTerminal(TM) and
their expected performance in the market place are forward-looking statements
that are subject to risks and uncertainties. The Company operates in a highly
competitive marketplace and new product developments by competitors can occur
at any time, thereby diminishing the attractiveness of the Company's products.
Also, there can be no assurance that the marketplace will find the price and
functionality of the Company's products attractive, which also can adversely
affect product sales.
PREFERRED NETWORKS, INC.
Financial Highlights
(dollars in thousands, except per share data)
Unaudited
Three months ended March 31,
1999 1998
Revenues
Network services $ 3,306 34.3 % $ 3,263 35.2 %
Product sales 3,846 39.9 % 3,895 42.0 %
Other services 2,494 25.9 % 2,118 22.8 %
Total revenues 9,646 100.0 % 9,275 100.0 %
Costs of revenues
Network services 2,125 22.0 % 2,154 23.2 %
Product sales 3,206 33.2 % 3,232 34.8 %
Other services 2,208 22.9 % 1,708 18.4 %
Total cost of
revenues 7,538 78.2 % 7,094 76.5 %
Gross margin 2,108 21.8 % 2,181 23.5 %
Selling, general and
administrative
expenses 3,361 34.8 % 3,544 38.2 %
Depreciation and
amortization 1,396 14.5 % 1,711 18.5 %
Operating loss (2,649) (27.5) % (3,075) (33.1)%
Interest expense (489) (5.1) % (327) (3.5)%
Interest income 37 0.4 % 74 0.8 %
Net loss from continuing
operations before
cumulative effect of
change in accounting
principle(a) (3,101) (32.1) % (3,327) (35.9) %
Net income from
discontinued
operations, net
of tax(b) 61 0.6 % 5 0.1 %
Cumulative effect of
change in accounting
principle(a) (1,832) (19.0) % -- -- %
Net loss $ (4,872) (50.5) % $ (3,322) (35.8) %
Net loss attributable
to Common Stock $ (5,703) (59.1) % $ (3,854) (41.5) %
EBITDA from continuing
operations $ (1,253) (13.3) % $ (1,363) (14.7) %
Net loss per share of
Common Stock:
Continuing operations
before cumulative
effect of change
in accounting
principle(a) $ (0.24) $ (0.24)
Discontinued
operations(b) 0.00 0.00
Cumulative effect of
change in accounting
principle(a) (0.11) --
Net loss per share of
Common Stock $ (0.35) $ (0.24)
Weighted average number of
common shares used in
calculating net loss
per share of Common
Stock 16,265,377 16,179,250
Pro forma net loss
assuming the change
in accounting principle
is applied
retroactively(a) $ (3,040) (31.5) % $ (3,225) (34.8) %
Pro forma net loss attributable
to Common Stock assuming the
change in accounting
principle is applied
retroactively(a) $ (3,871) (40.1) % $ (3,757) (40.5) %
Pro forma net loss
per share $ (0.24) $ (0.23)
(a) In April 1998, the Accounting Standards Executive Committee (AcSEC)
issued Statement of Position 98-5, "Reporting on the Costs of Start-Up
Activities" ("SOP 98-5"). SOP 98-5 requires entities to charge to
expense start-up costs, including organizational costs, as incurred.
In addition, SOP 98-5 requires a write-off of any previously
capitalized start-up or organization costs, and must be reported as
the cumulative effect of a change in accounting principle. SOP 98-5 is
effective January 1, 1999. The Company has adopted SOP 98-5 effective
January 1, 1999 and has written off the unamortized balance of its
market entry costs of $1.8 million and has ceased to capitalize such
costs. Pro forma amounts reflect adjustments to cease capitalization
and amortization as if SOP 98-5 had been adopted prior to 1998.
(b) On April 19, 1999, the Company reached a definitive agreement to sell
substantially all of the assets of its wholly owned subsidiary, PTS.
This subsidiary has been presented as a discontinued operation in the
accompanying condensed financial statements.
PREFERRED NETWORKS, INC.
Balance Sheet Data
(dollars in thousands, except per share data)
Unaudited
March 31, 1999 December 31, 1998
Cash and cash equivalents $ 5,422 $ 6,474
Current assets 14,258 14,659
Property and equipment, net 20,769 21,556
Total assets 56,562 60,033
Total debt 19,046 19,814
Redeemable preferred stock 24,799 23,968
Stockholders' equity 4,869 10,556
Total liabilities and
stockholders' equity 56,562 60,033
SOURCE Preferred Networks, Inc.
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Related links:
http://www.pni.net
Company News On-Call:
http://www.prnewswire.com/comp/109794.html or fax,
800-758-5804, ext. 109794
CONTACT:
Kathryn Loev Putnam, Senior Vice President
and Chief Financial Officer of Preferred Networks, Inc.,
770-582-3507
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