Exhibit 99.2
TELEPHONE AND DATA SYSTEMS, INC.
---------------------------------
PRO FORMA FINANCIAL INFORMATION
---------------------------------
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. (AMEX symbol "APP"), are
referred to in this report as the "Company."
From January 1 through June 30, 1994, the Company
acquired controlling interests in eight cellular markets and
several minority cellular interests representing a total of
approximately 1.1 million population equivalents. The total
consideration paid for these acquisitions was approximately
$123.7 million, consisting of $26.1 million in cash, 1.9
million TDS Common Shares, 49,000 USM Common Shares, the
obligation to deliver 42,000 TDS Common Shares in the future
and the cancellation of a note receivable of $1.4 million.
As of June 30, 1994, the Company had pending agreements
to acquire three telephone companies, one paging company and
controlling interests in four cellular markets and one
minority interest in one market representing a total of
approximately 919,000 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 $145.1 million. If these
acquisitions are completed as planned, the Company will issue
approximately 3.1 million TDS Common Shares, 125,000 TDS
Preferred Shares and will pay approximately $9.9 million in
cash.
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:
Telephone and Data Systems, Inc. Unaudited Condensed Pro Forma
Consolidated Financial Statements:
Unaudited Condensed Pro Forma Consolidated Balance Sheet
as of June 30, 1994
Unaudited Condensed Pro Forma Consolidated Statement
of Income for the Six Months Ended June 30, 1994
Unaudited Condensed Pro Forma Consolidated Statement
of Income for the Year Ended December 31, 1993
Notes to Unaudited Condensed Pro Forma Consolidated
Financial Statements
TELEPHONE AND DATA SYSTEMS, INC. AND SUBSIDIARIES
Condensed Pro Forma Consolidated Balance Sheet
June 30, 1994
Unaudited
---------
(In Thousands)
ASSETS
Combined Pro Forma
Completed Adjustments Pro Forma
TDS and Pending Increase TDS
Consolidated (a)Acquisitions (Decrease) Consolidated
-------------------------------------------------------
CURRENT ASSETS $ 191,437 $ 18,283 $ (9)(1) $ 209,711
---------- --------- --------- ---------
INVESTMENTS
Cellular limited
partnership interests 106,715 566 (2,208)(1) 105,073
Cellular license
acquisition costs, net 112,576 1,767 --- 114,343
Marketable equity
securities 21,108 --- --- 21,108
Other 127,546 3,554 --- 131,100
---------- --------- --------- ---------
367,945 5,887 (2,208) 371,624
---------- --------- --------- ---------
PROPERTY, PLANT AND
EQUIPMENT
Telephone plant and
franchise costs, net 639,308 40,372 42,555 (1) 722,235
Cellular telephone plant
and license costs, net 1,149,663 7,459 73,318 (1) 1,230,440
Radio paging, net 56,643 543 11,119 (1) 68,305
Other, net 31,365 --- --- 31,365
---------- --------- --------- ---------
1,876,979 48,374 126,992 2,052,345
---------- --------- --------- ---------
OTHER ASSETS AND
DEFERRED CHARGES 20,138 3,746 --- 23,884
---------- --------- --------- ---------
$ 2,456,499 $ 76,290 $ 124,775 $2,657,564
========== ========= ========= =========
The accompanying notes to condensed pro forma consolidated financial statements
are an integral part of this statement.
TELEPHONE AND DATA SYSTEMS, INC. AND SUBSIDIARIES
Condensed Pro Forma Consolidated Balance Sheet
June 30, 1994
Unaudited
----------
(In Thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
Combined Pro Forma
Completed Adjustments Pro Forma
TDS and Pending Increase TDS
Consolidated(a) Acquisitions (Decrease) Consolidated
-------------------------------------------------------
CURRENT LIABILITIES $ 207,158 $ 17,085 $ 7,525 (1) $ 231,768
---------- --------- --------- ---------
DEFERRED LIABILITIES AND
CREDITS 92,313 5,700 --- 98,013
---------- --------- --------- ---------
LONG-TERM DEBT, excluding
current portion 504,266 35,448 --- 539,714
---------- --------- --------- ---------
REDEEMABLE PREFERRED STOCK,
excluding current portion 15,294 --- 12,508 (1) 27,802
---------- --------- --------- ---------
MINORITY INTEREST in
subsidiaries 248,916 56 --- (1) 248,972
---------- --------- --------- ---------
NONREDEEMABLE PREFERRED
STOCK 16,636 --- --- 16,636
---------- --------- --------- ---------
COMMON STOCKHOLDERS'
EQUITY
Common Shares, par value
$1 per share 45,838 140 2,993 (1) 48,971
Series A Common Shares,
par value $1 per share 6,884 --- --- 6,884
Common Shares Issuable 1,995 --- --- 1,995
Capital in excess of
par value 1,214,324 5 119,605 (1) 1,333,934
Retained earnings 102,875 17,856 (17,856)(1) 102,875
---------- --------- --------- ---------
1,371,916 18,001 104,742 1,494,659
---------- --------- --------- ---------
$ 2,456,499 $ 76,290 $ 124,775 $2,657,564
========== ========= ======== ===========
The accompanying notes to condensed pro forma consolidated financial statements
are an integral part of this statement.
TELEPHONE AND DATA SYSTEMS, INC. AND SUBSIDIARIES
Condensed Pro Forma Consolidated Statement of Income
For the Six Months Ended June 30, 1994
Unaudited
----------
(In Thousands, except per share amounts)
Combined Pro Forma
Completed Adjustments Pro Forma
TDS and Pending Increase TDS
Consolidated Acquisitions (b) (Decrease) Consolidated
----------------------------- --------------------------
OPERATING REVENUES
Telephone $ 141,348 $ 10,362 $ --- $ 151,710
Cellular telephone 146,890 4,365 --- 151,255
Radio paging 44,149 2,309 --- 46,458
---------- --------- --------- ---------
Total operating revenues 332,387 17,036 --- 349,423
---------- --------- --------- ---------
OPERATING EXPENSES
Telephone 95,776 9,873 535 (3) 106,184
Cellular telephone 142,371 4,342 1,202 (3) 147,915
Radio paging 42,931 2,060 519 (3) 45,510
---------- --------- --------- ---------
Total operating expenses 281,078 16,275 2,256 299,609
---------- --------- --------- ---------
OPERATING INCOME 51,309 761 (2,256) 49,814
---------- --------- --------- ---------
INVESTMENT AND OTHER
INCOME (EXPENSE)
Interest and dividend
income 4,504 4 (103)(5) 4,405
Minority share of income (3,885) --- 70 (2) (3,289)
526 (6)
Cellular investment
income, net of license
cost amortization 10,884 --- --- 10,884
Other, net (291) 195 --- (96)
---------- --------- --------- ---------
11,212 199 493 11,904
---------- --------- --------- ---------
INCOME BEFORE INTEREST
AND INCOME TAXES 62,521 960 (1,763) 61,718
Interest expense 18,693 1,157 (103)(5) 20,423
676 (7)
---------- --------- --------- ---------
INCOME BEFORE INCOME TAXES 43,828 (197) (2,336) 41,295
Income tax expense 19,284 546 (1,370)(8) 18,460
---------- --------- --------- ---------
NET INCOME(c) 24,544 (743) (966) 22,835
Preferred Dividend
Requirement (1,137) --- (344)(9) (1,481)
---------- --------- --------- ---------
NET INCOME AVAILABLE
TO COMMON(c) $ 23,407 $ (743) $ (1,310) $ 21,354
========== ========= ======== ===========
WEIGHTED AVERAGE
COMMON SHARES (000s) 52,758 3,397 56,155
========== ======== ==========
EARNINGS PER COMMON
SHARE(c) $ .44 .38
========== ==========
The accompanying notes to condensed pro forma consolidated financial statements
are an integral part of this statement.
TELEPHONE AND DATA SYSTEMS, INC. AND SUBSIDIARIES
Condensed Pro Forma Consolidated Statement of Income
For the Year Ended December 31, 1993
Unaudited
---------
(In Thousands, except per share amounts)
Combined Pro Forma
Completed Adjustments Pro Forma
TDS and Pending Increase TDS
Consolidated(d) Acquisitions (Decrease) Consolidated
-------------------------------------------------------
OPERATING REVENUES
Telephone $ 268,122 $ 39,182 $ --- $ 307,304
Cellular telephone 214,310 16,837 --- 231,147
Radio paging 75,363 4,618 --- 79,981
------------ --------- -------- ----------
Total operating
revenues 557,795 60,637 --- 618,432
------------ --------- -------- ----------
OPERATING EXPENSES
Telephone 189,012 37,722 1,071 (3) 227,805
Cellular telephone 222,966 14,936 3,087 (3) 240,989
Radio paging 76,084 4,120 1,037 (3) 81,241
------------ --------- -------- ----------
Total operating
expenses 488,062 56,778 5,195 550,035
------------ --------- -------- ----------
OPERATING INCOME 69,733 3,859 (5,195) 68,397
------------ --------- -------- ----------
INVESTMENT AND OTHER
INCOME (EXPENSE)
Interest and dividend
income 8,082 231 (188)(5) 8,125
Minority share of income (475) --- 45 (2) 644
1,074 (6)
Cellular investment
income, net of license
cost amortization 15,704 --- 12 (4) 15,716
Gain on sale of
cellular interests 4,970 --- --- 4,970
Other, net (155) 4,861 --- 4,706
------------ --------- -------- ----------
28,126 5,092 943 34,161
------------ --------- -------- ----------
INCOME BEFORE INTEREST
AND INCOME TAXES 97,859 8,951 (4,252) 102,558
Interest expense 37,466 3,440 (188)(5) 41,652
934 (7)
------------ --------- -------- ----------
INCOME BEFORE INCOME TAXES 60,393 5,511 (4,998) 60,906
Income tax expense 26,497 2,034 (4,061)(8) 24,470
------------ --------- -------- ----------
NET INCOME (c) 33,896 3,477 (937) 36,436
Preferred Dividend
Requirement (2,386) --- (688)(9) (3,074)
------------ --------- -------- ----------
NET INCOME AVAILABLE
TO COMMON (c) $ 31,510 $ 3,477 $(1,625) $ 33,362
============ ========= ======== ===========
WEIGHTED AVERAGE COMMON
SHARES (000s) 47,266 4,922 52,188
============ ======== ===========
EARNINGS PER COMMON
SHARE (c) $ .67 $ .64
============ ===========
The accompanying notes to condensed pro forma consolidated financial statements
are an integral part of this statement.
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 this exhibit.
(b) Includes the income statements of the entities
discussed in the second paragraph of this exhibit 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 is pending as of the date of this Form 10-Q.
(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) Cellular operating revenues and expenses for 1993
have been reclassified to conform to 1994 presentation.
(e) The pro forma adjustments are described in the
following paragraphs:
1) Reflects TDS's acquisition of the telephone,
cellular telephone, and radio paging interests described in
the third paragraph of this exhibit. 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) $145,105
Less: TDS's proportionate share of acquired
companies' equity at June 30, 1994 (18,113)
--------
Purchase price to be allocated $126,992
========
Purchase price in excess of book value--
Cellular operations $ 73,318
Telephone operations 42,555
Paging operations 11,119
--------
$126,992
========
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 loss.
3) Reflects the amortization of assumed costs in excess
of book value. Excess cost amounts are primarily assumed to
be amortized over 5 to 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.
5) Reflects the elimination of intercompany interest
income and interest expense between the Company and acquired
entities. The acquired entities were previously accounted for
by the equity method of accounting (see Note 4).
6) Reflects the minority shareholders' portion of USM's
net loss 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) Reflects the preferred dividend requirement on the
TDS Preferred Shares to be issued.