Exhibit 99.2
TELEPHONE AND DATA SYSTEMS INC.
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PRO FORMA FINANCIAL INFORMATION
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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. (AMEX symbol "APP"), are
referred to in this report as the "Company."
From January 1 through September 30, 1994, the Company
acquired two telephone companies and controlling interests in
nine cellular markets and several minority cellular interests
representing a total of approximately 1.2 million population
equivalents. The total consideration paid for these
acquisitions was approximately $189.1 million, consisting of
$30.1 million in cash, 3.4 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 September 30, 1994, the Company had pending
agreements to acquire four telephone companies, one paging
company and controlling interests in five cellular markets and
one minority interest representing a total of approximately
878,000 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 $131.4 million. If these acquisitions are
completed as planned, the Company will issue approximately 2.5
million TDS Common Shares, 125,000 TDS Preferred Shares and
will pay approximately $10.8 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 September 30, 1994
Unaudited Condensed Pro Forma Consolidated Statement of
Income for the Nine Months Ended September 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
September 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 $ 218,330 $ 8,622 $ - $ 226,952
---------- -------- -------- ----------
INVESTMENTS
Cellular limited
partnership interests 115,430 566 - 115,996
Cellular license
acquisition costs, net 115,961 3,487 - 119,448
Marketable equity
securities 22,760 - - 22,760
Other 130,347 756 - 131,103
---------- -------- -------- ----------
384,498 4,809 - 389,307
---------- -------- -------- ----------
PROPERTY, PLANT AND
EQUIPMENT
Telephone plant and
franchise costs, net 715,030 23,535 36,395 (1) 774,960
Cellular telephone
plant and license
costs, net 1,209,209 8,231 76,445 (1) 1,293,885
Radio paging, net 60,864 543 11,119 (1) 72,526
Other, net 35,267 - - 35,267
---------- -------- -------- ----------
2,020,370 32,309 123,959 2,176,638
---------- -------- -------- ----------
OTHER ASSETS AND
DEFERRED CHARGES 11,742 2,057 - 13,799
---------- -------- -------- ----------
$2,634,940 $ 47,797 $123,959 $2,806,696
========== ======== ======== ==========
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
September 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 $ 263,476 $ 11,828 $ 10,855 (1) $ 286,159
---------- -------- -------- ----------
DEFERRED LIABILITIES AND
CREDITS 103,746 2,350 - 106,096
---------- -------- -------- ----------
LONG-TERM DEBT, excluding
current portion 521,046 26,098 - 547,144
---------- -------- -------- ----------
REDEEMABLE PREFERRED STOCK,
excluding current
portion 15,401 - 12,508 (1) 27,909
---------- -------- -------- ----------
MINORITY INTEREST in
subsidiaries 266,129 56 - 266,185
---------- -------- -------- ----------
NONREDEEMABLE PREFERRED
STOCK 16,421 - - 16,421
---------- -------- -------- ----------
COMMON STOCKHOLDERS' EQUITY
Common Shares, par value
$1 per share 47,392 105 2,380 (1) 49,877
Series A Common Shares,
par value $1 per share 6,887 - - 6,887
Common Shares Issuable 1,995 - - 1,995
Capital in excess of
par value 1,277,427 4,595 100,981 (1) 1,383,003
Retained earnings 115,020 2,765 (2,765)(1) 115,020
---------- -------- -------- ----------
1,448,721 7,465 100,596 1,556,782
---------- -------- -------- ----------
$2,634,940 $ 47,797 $123,959 $2,806,696
========== ======== ======== ==========
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 Nine Months Ended September 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 $ 221,321 $ 28,431 $ - $ 249,752
Cellular telephone 236,816 9,861 - 246,677
Radio paging 67,355 3,464 - 70,819
---------- -------- -------- ----------
Total operating revenues 525,492 41,756 - 567,248
---------- -------- -------- ----------
OPERATING EXPENSES
Telephone 153,808 23,546 1,102 (3) 178,456
Cellular telephone 221,202 11,288 2,054 (3) 234,544
Radio paging 66,870 3,090 778 (3) 70,738
---------- -------- -------- ----------
Total operating expenses 441,880 37,924 3,934 483,738
---------- -------- -------- ----------
OPERATING INCOME 83,612 3,832 (3,934) 83,510
---------- -------- -------- ----------
INVESTMENT AND OTHER
INCOME (EXPENSE)
Interest and dividend
income 7,652 5 (120)(5) 7,537
Minority share of income (7,495) - 132 (2) (6,488)
875 (6)
Cellular investment
income, net of license
cost amortization 19,702 - (102)(4) 19,600
Other, net 588 479 - 1,067
---------- -------- -------- ----------
20,447 484 785 21,716
---------- -------- -------- ----------
INCOME BEFORE INTEREST
AND INCOME TAXES 104,059 4,316 (3,149) 105,226
Interest expense 28,760 2,553 (120)(5) 32,154
961 (7)
---------- -------- -------- ----------
INCOME BEFORE INCOME TAXES 75,299 1,763 (3,990) 73,072
Income tax expense 33,132 1,440 (2,275)(8) 32,297
---------- -------- -------- ----------
NET INCOME(c) 42,167 323 (1,715) 40,775
Preferred Dividend
Requirement (1,733) - (516)(9) (2,249)
---------- -------- -------- ----------
NET INCOME AVAILABLE
TO COMMON(c) $ 40,434 $ 323 $ (2,231) $ 38,526
========== ======== ======== ==========
WEIGHTED AVERAGE
COMMON SHARES (000s) 53,121 3,829 56,950
========== ======== ==========
EARNINGS PER COMMON
SHARE(c) $ .75 .67
========== ==========
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 Acquisitions(b) (Decrease) Consolidated
-------------------------------------------------------
OPERATING REVENUES
Telephone $ 268,122 $ 45,291 $ - $ 313,413
Cellular telephone 214,310 18,639 - 232,949
Radio paging 75,363 4,618 - 79,981
---------- -------- -------- ----------
Total operating revenues 557,795 68,548 - 626,343
---------- -------- -------- ----------
OPERATING EXPENSES
Telephone 189,012 38,239 1,633 (3) 228,884
Cellular telephone 222,966 21,436 3,704 (3) 248,106
Radio paging 76,084 4,120 1,037 (3) 81,241
---------- -------- -------- ----------
Total operating expenses 488,062 63,795 6,374 558,231
---------- -------- -------- ----------
OPERATING INCOME 69,733 4,753 (6,374) 68,112
---------- -------- -------- ----------
INVESTMENT AND OTHER
INCOME (EXPENSE)
Interest and dividend
income 8,082 265 (188)(5) 8,159
Minority share of income (475) - 45 (2) (1,701)
(1,271)(6)
Cellular investment
income, net of license
cost amortization 15,704 - (124)(4) 15,580
Gain on sale of cellular
interests 4,970 - - 4,970
Other, net (155) 4,890 - 4,735
---------- -------- -------- ----------
28,126 5,155 (1,538) 31,743
---------- -------- -------- ----------
INCOME BEFORE INTEREST
AND INCOME TAXES 97,859 9,908 (7,912) 99,855
Interest expense 37,466 4,114 (188)(5) 43,511
2,119 (7)
---------- -------- -------- ----------
INCOME BEFORE INCOME TAXES 60,393 5,794 (9,843) 56,344
Income tax expense 26,497 2,403 (5,115)(8) 23,785
---------- -------- -------- ----------
NET INCOME (c) 33,896 3,391 (4,728) 32,559
Preferred Dividend
Requirement (2,386) - (688)(9) (3,074)
---------- -------- -------- ----------
NET INCOME AVAILABLE
TO COMMON (c) $ 31,510 $ 3,391 $ (5,416) $ 29,485
========== ======== ======== ==========
WEIGHTED AVERAGE COMMON
SHARES (000s) 47,266 5,890 53,156
========== ======== ==========
EARNINGS PER COMMON
SHARE (c) $ .67 $ .55
========== ==========
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) $ 131,424
Less: TDS's proportionate share of acquired
companies' equity at
September 30, 1994 7,465
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Purchase price to be allocated $ 123,959
=========
Purchase price in excess of book value--
Cellular operations $ 76,445
Telephone operations 36,395
Paging operations 11,119
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$ 123,959
=========
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.