FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 19, 1994
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TELEPHONE AND DATA SYSTEMS, INC.
---------------------------------
(Exact name of registrant as specified in its charter)
Iowa 1-8251 36-2669023
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) No.)
30 North LaSalle Street, Chicago, Illinois 60602
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (312) 630-1900
Not Applicable
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(Former name or former address, if changed since last report)
Item 5. Other Events
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Telephone and Data Systems, Inc. ("TDS"), together with its
majority-owned subsidiaries, TDS Telecommunications Corporation, United
States Cellular Corporation (AMEX symbol "USM") and American Paging, Inc.,
are referred to in this report as the "Company."
From January 1 through September 30, 1993, the Company acquired
controlling interests in two telephone companies, one paging company and
19 cellular markets and several minority cellular interests representing a
total of approximately 3.3 million population equivalents. The total
consideration paid for these acquisitions was approximately $304.1
million, consisting of 5.9 million TDS Common Shares, 30,000 TDS Preferred
Shares, 157,000 USM Common Shares, 29,000 shares of subsidiary preferred
stock (which are exchangeable into approximately 73,000 TDS Common
Shares), the obligation to deliver 140,000 USM Common Shares in the
future, and $55.0 million in cash. The financial statements of the
following companies acquired prior to September 30, 1993, were filed in
the Company's report on Form 8-K dated November 20, 1992: Arizona
Telephone Company, Camden Telephone Company, Inc., Randolph Cellular
Corporation, Cellular of Indiana, Inc., Northern Illinois Cellular
Communications, Inc., RSA II Partnership (d/b/a NC Cellular), and Illinois
Four Limited Partnership. The financial statements of the following
companies acquired prior to September 30, 1993, were filed in the
Company's report on Form 8-K dated February 15, 1993: Oklahoma Cellular,
Inc., G.M.D. Partnership and G.M.D. Partnership II. The financial
statements for JHP Partnership, which was acquired prior to September 30,
1993, were filed in the Company's report on Form 8-K dated July 28, 1993.
As of September 30, 1993, the Company had pending agreements to
acquire two telephone companies and controlling interests in ten cellular
markets and a minority interest in one market representing a total of
approximately 1.3 million population equivalents. From October 1 through
December 31, 1993, the Company entered into additional agreements to
acquire two telephone companies, a controlling interest in one cellular
market and one minority cellular interest representing approximately
70,000 population equivalents. The total consideration to be paid for the
acquisitions described in this paragraph, valued at the time such
agreements were entered into, is approximately $194.7 million. If these
acquisitions are completed as planned, the Company and/or USM will issue
approximately 4.2 million TDS Common Shares, 50,000 USM Common Shares and
will pay approximately $4.6 million in cash. The financial statements for
California Two Cellular Corporation, Winsted Telephone Company and
Tsaconas Cellular, Inc., which are included above, were filed in the
Company's report on Form 8-K dated July 28, 1993. The financial
statements for Mo-Tel Cellular, Inc., Canton Cellular Corporation and The
Vanlue Telephone Company, which are included above, were filed in the
Company's report on Form 8-K dated October 18, 1993. The financial
statements for Arvig Telcom, Inc. and Vernon Telephone Co., Inc. for which
the Company has agreements to acquire are filed under Item 7 of this
report.
Pursuant to Rule 3-05 and Rule 11-01 of Regulation S-X, the
completed and pending acquisitions of businesses described in the
foregoing paragraphs are not individually significant. The following pro
forma financial information is included pursuant to Article 11 of
Regulation S-X:
Item Page
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Telephone and Data Systems, Inc. Unaudited Condensed Pro Forma
Consolidated Financial Statements:
Unaudited Condensed Pro Forma Consolidated Balance Sheet
as of September 30, 1993 4-5
Unaudited Condensed Pro Forma Consolidated Statement of Income
for the Nine Months Ended September 30, 1993 6
Unaudited Condensed Pro Forma Consolidated Statement of Income
for the Year Ended December 31, 1992 7
Notes to Unaudited Condensed Pro Forma Consolidated
Financial Statements 8-9
3
TELEPHONE AND DATA SYSTEMS, INC. AND SUBSIDIARIES
Condensed Pro Forma Consolidated Balance Sheet
September 30, 1993
Unaudited
---------
(In Thousands)
ASSETS
Combined Pro Forma
Completed Adjustments Pro Forma
TDS and Pending Increase TDS
Consolidated(a) Acquisitions (Decrease) Consolidated
--------------------------- --------------------------
CURRENT ASSETS $ 186,743 $ 16,288 $ (129)(1) $202,902
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INVESTMENTS
Cellular limited partnership interests 97,028 361 (1,458)(1) 95,931
Cellular license acquisition costs, net 109,983 1,387 60,619 (1) 171,989
Marketable equity securities 19,994 50 -- 20,044
Other 117,060 3,549 -- 120,609
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344,065 5,347 59,161 408,573
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PROPERTY, PLANT AND EQUIPMENT
Telephone plant and franchise
costs, net 616,961 33,846 41,616(1) 692,423
Cellular telephone plant and
license costs, net 923,245 8,989 75,429(1) 1,007,663
Radio paging, net 53,602 -- -- 53,602
Other, net 32,832 -- -- 32,832
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1,626,640 42,835 117,045 1,786,520
----------- ---------- ---------- ---------
OTHER ASSETS AND
DEFERRED CHARGES 10,324 3,660 -- 13,984
----------- ---------- ---------- ---------
$2,167,772 $ 68,130 $ 176,077 $ 2,411,979
=========== ========== ========== ===========
<FN>
The accompanying notes to condensed pro forma consolidated financial statements
are an integral part of this statement.
4
TELEPHONE AND DATA SYSTEMS, INC. AND SUBSIDIARIES
Condensed Pro Forma Consolidated Balance Sheet
September 30, 1993
Unaudited
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(In Thousands)
STOCKHOLDERS' EQUITY AND LIABILITIES
Combined Pro Forma
Completed Adjustments Pro Forma
TDS and Pending Increase TDS
Consolidated(a) Acquisitions (Decrease) Consolidated
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CURRENT LIABILITIES $ 169,418 $ 12,999 $ 3,940 (1)$ 186,357
----------- ---------- ---------- ---------
DEFERRED LIABILITIES AND CREDITS 94,190 4,383 -- 98,573
----------- ---------- ---------- ---------
LONG-TERM DEBT, excluding current
portion 522,009 32,250 -- 554,259
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REDEEMABLE PREFERRED STOCK,
excluding current portion 27,674 -- -- 27,674
----------- ---------- ---------- ---------
MINORITY INTEREST in subsidiaries 153,334 -- 1,511 (1) 154,845
----------- ---------- ---------- ---------
NONREDEEMABLE PREFERRED STOCK 15,796 -- -- 15,796
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COMMON STOCKHOLDERS' EQUITY
Common Shares, par value $1 per share 42,265 537 3,710 (1) 46,512
Series A Common Shares,
par value $1 per share 6,877 -- -- 6,877
Capital in excess of par value 1,047,677 4,461 180,416 (1)1,232,554
Retained earnings 88,532 13,500 (13,500) (1) 88,532
----------- ---------- ---------- ---------
1,185,351 18,498 170,626 1,374,475
----------- ---------- ---------- ---------
$2,167,772 $ 68,130 $ 176,077 $ 2,411,979
=========== ========== ========== ===========
<FN>
The accompanying notes to condensed pro forma consolidated financial statements
are an integral part of this statement.
5
TELEPHONE AND DATA SYSTEMS, INC. AND SUBSIDIARIES
Condensed Pro Forma Consolidated Statement of Income
For the Nine Months Ended September 30, 1993
Unaudited
-----------
(In Thousands, except per share amounts)
Combined Pro Forma
Completed Adjustments Pro Forma
TDS and Pending Increase TDS
Consolidated Acquisitions(b) (Decrease) Consolidated
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OPERATING REVENUES
Telephone $ 199,843 $ 31,886 $ -- $ 231,729
Cellular telephone 175,208 12,160 -- 187,368
Radio paging 55,082 485 -- 55,567
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Total operating revenues 430,133 44,531 -- 474,664
----------- ---------- ---------- ---------
OPERATING EXPENSES
Telephone 138,200 26,730 858 (3) 165,788
Cellular telephone 177,800 14,431 3,280 (3) 195,511
Radio paging 56,747 331 214 (3) 57,292
----------- ---------- ---------- ---------
Total operating expenses 372,747 41,492 4,352 418,591
----------- ---------- ---------- ---------
OPERATING INCOME 57,386 3,039 (4,352) 56,073
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INVESTMENT AND OTHER
INCOME (EXPENSE)
Interest and dividend income 5,837 120 (337) (5) 5,620
Minority share of income (1,111) -- (495) (2) (514)
1,092 (6)
Cellular investment income, net of
license cost amortization 10,595 -- (203) (3) 10,649
257 (4)
Gain on sale of cellular
properties and investments 4,970 -- -- 4,970
Other, net (45) 4,680 -- 4,635
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20,246 4,800 314 25,360
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INCOME BEFORE INTEREST
AND INCOME TAXES 77,632 7,839 (4,038) 81,433
Interest expense 27,881 2,633 (337) (5) 31,025
848 (7)
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INCOME BEFORE INCOME TAXES 49,751 5,206 (4,549) 50,408
Income tax expense 21,890 1,882 (3,949) (8) 19,823
----------- ---------- ---------- ---------
NET INCOME 27,861 3,324 (600) 30,585
Preferred Dividend Requirement (1,789) -- -- (1,789)
----------- ---------- ---------- ---------
NET INCOME AVAILABLE TO COMMON $ 26,072 $ 3,324 $ (600) $ 28,796
=========== =========== ========== =========
WEIGHTED AVERAGE
COMMON SHARES (000s) 46,339 5,997 52,336
=========== ========== =========
EARNINGS PER COMMON SHARE $ .56 $ .55
=========== =========
<FN>
The accompanying notes to condensed pro forma consolidated financial statements
are an integral part of this statement.
6
TELEPHONE AND DATA SYSTEMS, INC. AND SUBSIDIARIES
Condensed Pro Forma Consolidated Statement of Income
For the Year Ended December 31, 1992
Unaudited
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(In Thousands, except per share amounts)
Combined Pro Forma
Completed Adjustments Pro Forma
TDS and Pending Increase TDS
Consolidated (d) Acquisitions (Decrease) Consolidated
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OPERATING REVENUES
Telephone $ 249,928 $ 35,810 $ -- $ 285,738
Cellular telephone 177,946 10,112 -- 188,058
Radio paging 53,928 1,631 -- 55,559
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Total operating revenues 481,802 47,553 -- 529,355
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OPERATING EXPENSES
Telephone 173,135 32,748 809 (3) 206,692
Cellular telephone 197,366 14,454 4,326 (3) 216,146
Radio paging 59,376 991 428 (3) 60,795
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Total operating expenses 429,877 48,193 5,563 483,633
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OPERATING INCOME 51,925 (640) (5,563) 45,722
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INVESTMENT AND OTHER
INCOME (EXPENSE)
Interest and dividend income 7,337 30 (22) (5) 7,345
Minority share of income (2,688) -- (266) (2) (1,307)
1,647 (6)
Cellular investment income, net of
license cost amortization 9,632 -- (379) (3) 9,160
(93) (4)
Gain on sale of cellular properties and
other investments 31,396 -- -- 31,396
Other, net 2,597 494 -- 3,091
----------- ---------- ---------- ---------
48,274 524 887 49,685
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INCOME BEFORE INTEREST
AND INCOME TAXES 100,199 (116) (4,676) 95,407
Interest expense 37,202 2,732 (22) (5) 40,825
913 (7)
----------- ---------- ---------- ---------
INCOME BEFORE INCOME TAXES 62,997 (2,848) (5,567) 54,582
Income tax expense 28,717 783 (4,476) (8) 25,024
----------- ---------- ---------- ---------
NET INCOME (c) 34,280 (3,631) (1,091) 29,558
Preferred Dividend Requirement (2,462) -- -- (2,462)
----------- ---------- ---------- ---------
NET INCOME AVAILABLE
TO COMMON (c) $ 31,818 $ (3,631) $ (1,091) $ 27,096
========== =========== ========= ==========
WEIGHTED AVERAGE COMMON
SHARES (000s) 42,347 6,906 49,253
========== ========= ==========
EARNINGS PER COMMON
SHARE (c) $ .75 $ .55
========== ==========
<FN>
The accompanying notes to condensed pro forma consolidated financial statements
are an integral part of this statement.
7
TELEPHONE AND DATA SYSTEMS, INC.
NOTES TO CONDENSED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(a) Includes the balance sheets of the entities discussed in the
second paragraph of Item 5 of this report.
(b) Includes the income statements of the entities discussed in
the second paragraph of Item 5 of this report prior to the date of
acquisition by the Company, as well as each of the income statements of
the entities for which acquisition by the Company was completed subsequent
to September 30, 1993, or is pending as of the date of this Form 8-K.
(c) Net income, net income available to common and earnings per
share are presented prior to extraordinary items and the cumulative effect
of accounting changes.
(d) Reflects the Pro Forma Consolidated Statement of Income,
including completed audited acquisitions, as shown in the Company's report
on Form 8-K dated July 28, 1993.
(e) The pro forma adjustments are described in the following
paragraphs:
1) Reflects TDS's acquisition of the telephone and cellular
telephone interests described in the third paragraph of Item 5 of this
report. Also reflects the elimination of the equity of these interests in
purchase transactions and the allocation of the purchase price in excess
of book value (in thousands).
Purchase price (aggregate) $ 194,701
Less: TDS's proportionate share of acquired
companies' equity at September 30, 1993 (17,037)
-----------
Purchase price to be allocated $ 177,664
===========
Purchase price in excess of book value--
Cellular operations--consolidated $ 75,429
Cellular operations--equity method 60,619
Telephone operations 41,616
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$ 177,664
===========
The pro forma allocations of the purchase prices to the acquired
entities' assets as set forth above are based upon preliminary estimates
of the values of those assets.
2) Reflects the minority shareholders' portion of acquired
companies' net income.
3) Reflects the amortization of assumed costs in excess of book
value. Excess cost amounts are primarily assumed to be amortized over 40
years.
4) Reflects the elimination of the equity-method losses of
acquired entities which are consolidated in the Pro Forma Consolidated
Statements of Income.
8
TELEPHONE AND DATA SYSTEMS, INC.
NOTES TO CONDENSED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
5) Reflects the elimination of intercompany interest income and
interest expense between the Company and an acquired entity. The acquired
entity was previously accounted for by the equity method of accounting
(see Note 4).
6) Reflects the minority shareholders' portion of USM's net
income due to the addition of the cellular entities and the related pro
forma adjustments in (2)-(4) above.
7) Reflects the estimated interest expense incurred as a result
of increases in Notes Payable in connection with the acquisitions included
in the Condensed Pro Forma Consolidated Statements of Income.
8) Reflects the estimated income tax effects of the pro forma
adjustments in (2)-(4) and (7) above.
9
Item 7. Financial Statements, Pro Forma Financial Information and
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Exhibits
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(c) The following exhibits are filed as a part of this report and
incorporated herein by reference:
Exhibit
No. Description
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23 Consents of Independent Accountants
99.1 Audited financial statements of Arvig Telcom, Inc. and Subsidiaries
pursuant to Rule 3-05 of Regulation S-X.
Independent Auditors' Reports including Independent Auditors
Reports on the Financial Statements of three subsidiaries not audited by
Arvig Telcom, Inc.'s auditors
Financial Statements:
Statements of Income for the Years Ended December 31,
1992, 1991 and 1990
Statements of Cash Flows for the Years Ended December
31, 1992 and 1991 and 1990
Balance Sheets as of December 31, 1992 and 1991
Statements of Stockholders' Equity for the Years Ended
December 31, 1992, 1991 and 1990
Notes to Financial Statements
99.2 Unaudited interim financial statements of Arvig Telcom, Inc. and
Subsidiaries pursuant to Rule 3-05 of Regulation S-X
Financial Statements:
Statements of Income for the Nine Months Ended September
30, 1993 and 1992
Statements of Cash Flows for the Nine Months Ended
September 30, 1993 and 1992
Balance Sheets as of September 30, 1993 and December 31,
1992
Notes to Unaudited Financial Statements
10
Exhibit
No. Description
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99.3 Audited financial statements of Vernon Telephone Company, Inc.
pursuant to Rule 3-05 of Regulation S-X
Independent Auditors' Report
Financial Statements:
Statement of Income for the Years Ended June 30, 1993
and 1992
Statement of Cash Flows for the Years Ended June 30,
1993 and 1992
Balance Sheets as of June 30, 1993 and 1992
Statement of Retained Earnings for the Years Ended June
30, 1993 and 1992
Notes to Financial Statements
99.4 Unaudited interim financial statements of Vernon Telephone Company,
Inc. pursuant to Rule 3-05 of Regulation S-X
Financial Statements:
Statements of Operations for the Three Months Ended
September 30, 1993 and 1992
Statements of Cash Flows for the Three Months Ended
September 30, 1993 and 1992
Balance Sheets as of September 30, 1993 and June 30,
1993
Notes to Unaudited Financial Statements
11
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, thereto duly authorized.
Telephone and Data Systems, Inc.
(Registrant)
Date: January 19, 1994
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By: /s/ GREGORY J. WILKINSON
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Gregory J. Wilkinson
Vice President and Controller
(principal accounting officer)
INDEX TO EXHIBITS
Exhibit
No. Description Page
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23 Consents of Independent Public Accountants
99.1 Audited financial statements of Arvig Telcom, Inc. and Subsidiaries
99.2 Unaudited interim financial statements of Arvig Telcom, Inc. and
Subsidiaries
99.3 Audited financial statements of Vernon Telephone Company, Inc.
99.4 Unaudited interim financial statements of Vernon Teleophone Company,
Inc.