ATLANTA, March 18 /PRNewswire/ -- Preferred Networks, Inc., (PNI)
(Nasdaq: PFNT), a leading outsourcing services provider to the wireless
industry, today announced that it has received $8 million through the sale of
redeemable preferred stock and warrants in a private placement with one new
institutional investor and certain existing shareholders of PNI, including
five institutional shareholders and two executive officers of the company.
The proceeds of the transaction will be used to fund continued expansion of
the company's three business lines: network services, technical services and
product services, and for general working capital purposes.
PNI's Chairman and Chief Executive Officer Mark H. Dunaway said, "This is
a strong vote of confidence in PNI and our position in the marketplace. This
funding occurs at a time of positive change within our industry when wireless
companies are becoming more focused on profitable growth and are increasingly
seeking outsourcing alternatives to reduce costs and focus their capital on
sales and marketing of value-added, branded products and services to
subscribers. PNI's multi-service offering together with the fact that we do
not compete with our customers for their subscribers enables us to work in
partnership with companies to achieve solutions aimed at creating shareholder
value for both our customers and PNI."
PNI announced in mid-1997 a number of initiatives aimed at serving larger
customers, reducing operating costs and expenses and conserving capital
resources. The following summarizes key results of these initiatives:
Serve Larger Customers/Sell Multiple Services
PNI now focuses on maximizing its multi-market and multi-service
business offerings to establish relationships with national companies that
seek single source outsourcing solutions. In the case of network
services, beginning in the fourth quarter of 1997, PNI has executed
national contracts with three of the five largest paging companies and
currently has multi-market network contracts with more than 75 companies.
With the addition of its technical services offered through Preferred
Technical Services, Inc. (PTS) and its product services offered through
EPS Wireless, Inc. (EPS), PNI has expanded its aggregate customer base to
over 2,400 companies nationwide, including twelve of the twenty largest
paging companies, the two largest manufacturers of wireless
infrastructure, PCS companies, network tower site companies and cellular
service and product companies.
Reduce Costs and Operating Expenses
PNI implemented a number of cost reduction initiatives in mid-1997,
which included efforts to reduce its overall product costs. PNI reduced
its pager discounting programs to network customers and focused on its
more profitable product offering through EPS, which sells refurbished
cellular and pager products. These efforts resulted in a modest overall
profit from product sales in 1997, compared to a product loss of
$2.5 million in 1996; overall company gross margin improved to $5 million
for 1997 compared to a negative $262,000 in 1996. In addition, because
PNI's revenue growth does not result in subscriber-related selling,
marketing and customer service expense increases, the company achieved a
reduction in S,G&A expenses as a percentage of sales to 44.6% in 1997 from
62.4% in 1996, a 17.8 percentage point reduction. The aggregate results
of these initiatives combined with its revenue growth enabled PNI to
achieve a $550,000 improvement in EBITDA in the fourth quarter of 1997,
resulting in the first quarterly net loss reduction since beginning its
network expansion in 1995.
Later Stage of Expansion/Reduced Capital Requirements
PNI's rapid expansion of network markets has historically required
significant capital investment, while PTS and EPS have not generally
required this. As of December 31, 1997, PNI had 27 network markets in
service, which are centrally controlled through the company's regional
Technical Control Centers ("TCCs"). As of December 31, 1997, PNI had
completed six of its TCCs, with only one additional TCC planned in its
nationwide expansion of networks to serve the 50 largest metropolitan
markets and adjacent areas. The later stage of PNI's build-out strategy
resulted in $7.8 million of total capital expenditures in 1997,
representing approximately a 50% reduction compared to 1996, with a
continued reduction expected in 1998. The actual timing and construction
of the remaining TCC and network markets will depend on customer
requirements and the timing and availability of capital, among other
things.
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 wholesale paging networks as one of the largest carrier's
carriers in the U.S., and through its wholly-owned subsidiaries: Preferred
Technical Services, Inc., a provider of wireless network equipment
installation, maintenance and engineering services; and EPS Wireless, Inc., 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 September 30, 1997 Quarterly
Report on Form 1O-Q and actual results could differ materially from those
anticipated in the forward-looking statements.
SOURCE Preferred Networks, Inc.
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Related links:
http://www.pni.net
CONTACT:
Kathryn Loev Putnam, SVP and Chief Financial
Officer of Preferred Networks, 770-582-3507
CNOC: http://www.prnewswire.com or fax, 800-758-5804, ext.
109794
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