Exhibit 99.2
UNITED STATES CELLULAR CORPORATION
PRO FORMA FINANCIAL INFORMATION
United States Cellular Corporation (AMEX symbol "USM") is
referred to in this exhibit as the "Company." The Company is an 81.4%-
owned subsidiary of Telephone and Data Systems, Inc. ("TDS").
From January 1 through June 30, 1994, the Company acquired
controlling interests in eight cellular markets and several additional
minority cellular interests representing a total of approximately 1.1
million population equivalents. The total consideration paid for these
acquisitions was approximately $123.4 million, consisting of 3.8 million
Common Shares, an increase in the Company's revolving credit agreement
with TDS (the "Revolving Credit Agreement") of $309,000, the cancellation
of a $1.4 million note receivable and $4.7 million in cash paid by the
Company. Of this consideration, the debt under the Revolving Credit
Agreement and the Common Shares were issued to TDS to reimburse TDS for
TDS Common Shares issued and issuable and cash paid to third parties.
As of June 30, 1994, the Company had pending agreements to
acquire controlling interests in four cellular markets and one minority
interest 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 $53.3 million. If these acquisitions are
completed as planned, the Company will issue approximately 1.8 million
Common Shares and TDS will pay $700,000 in cash (to be treated as an
equity contribution to the Company).
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:
United States Cellular Corporation 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
Operations for the Six Months Ended June 30, 1994
Unaudited Condensed Pro Forma Consolidated Statement of
Operations for the Year Ended December 31, 1993
Notes to Unaudited Condensed Pro Forma Consolidated
Financial Statements
UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES
Condensed Pro Forma Consolidated Balance Sheet
June 30, 1994
Unaudited
---------
(In Thousands)
ASSETS
Combined Pro Forma
Completed Adjustments Pro Forma
USM and Pending Increase USM
Consolidated (a) Acquisitions (Decrease) Consolidated
---------------- ------------- ----------- -------------
CURRENT ASSETS $ 61,066 $ 1,502 $ (9)(1) $ 62,559
---------- ------- ------- ----------
PROPERTY, PLANT AND EQUIPMENT
In service 370,261 9,882 --- 380,143
Less accumulated depreciation 77,958 2,423 --- 80,381
---------- ------- ------- ----------
292,303 7,459 --- 299,762
---------- ------- ------- ----------
INVESTMENTS
Cellular partnerships 95,547 --- (2,208)(1) 93,339
Licenses, net of amortization 935,012 1,767 56,751 (1) 993,530
Marketable equity securities 17,669 --- --- 17,669
Other 11,324 --- --- 11,324
---------- ------- ------- ----------
1,059,552 1,767 54,543 1,115,862
---------- ------- ------- ----------
OTHER ASSETS AND DEFERRED CHARGES 17,368 867 --- 18,235
---------- ------- ------- ----------
$1,430,289 $ 11,595 $ 54,534 $ 1,496,418
========== ======= ======= ==========
The accompanying notes to condensed pro forma consolidated financial statements
are an integral part of this statement.
UNITED STATES CELLULAR CORPORATION 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
USM and Pending Increase USM
Consolidated (a) Acquisitions (Decrease) Consolidated
---------------- ------------ ----------- -------------
CURRENT LIABILITIES $ 86,552 $ 4,255 $ (2,330)(1) $ 88,477
--------- ------- ------- ---------
NOTES PAYABLE --- 326 --- 326
--------- ------- ------- ---------
REVOLVING CREDIT AGREEMENT-TDS 205,470 --- --- 205,470
--------- ------- ------- ---------
LONG-TERM DEBT, excluding
current portion 45,078 10,537 --- 55,615
--------- ------- ------- ---------
DEFERRED LIABILITIES AND CREDITS 3,676 --- --- 3,676
--------- ------- ------- ---------
REDEEMABLE PREFERRED STOCK,
excluding current portion 9,597 --- --- 9,597
--------- ------- ------- ---------
MINORITY INTEREST 15,347 --- 2 (1) 15,349
--------- ------- ------- ---------
COMMON STOCKHOLDERS' EQUITY
Common Shares, par value
$1 per share 44,804 --- 1,845 (1) 46,649
Series A Common Shares,
par value $1 per share 33,006 --- --- 33,006
Additional paid in capital 1,063,715 5 51,489 (1) 1,115,209
Common Shares issuable,
1,038,552 shares 19,739 --- --- 19,739
Retained (deficit) (96,695) (3,528) 3,528 (1) (96,695)
--------- ------- ------- ---------
Total common stockholders'
equity 1,064,569 (3,523) 56,862 1,117,908
--------- ------- ------- ---------
$1,430,289 $ 11,595 $ 54,534 $1,496,418
========= ======= ======= =========
The accompanying notes to condensed pro forma consolidated financial statements
are an integral part of this statement.
UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES
Condensed Pro Forma Consolidated Statement of Operations
For the Six Months Ended June 30, 1994
Unaudited
---------
(In Thousands, except per share amounts)
Combined Pro Forma
Completed Adjustments Pro Forma
USM and Pending Increase USM
Consolidated Acquisitions(b) (Decrease) Consolidated
---------------- ------------ ----------- -------------
OPERATING REVENUES
Service $140,426 $ 2,973 $ --- $143,399
Equipment sales 6,464 220 --- 6,684
--------- ------- ------- ---------
Total Operating Revenues 146,890 3,193 --- 150,083
--------- ------- ------- ---------
OPERATING EXPENSES
System operations 21,804 1,052 --- 22,856
Marketing and selling 30,031 583 --- 30,614
Cost of equipment sold 17,021 504 --- 17,525
General and administrative 43,206 1,232 --- 44,438
Depreciation and amortization 30,309 971 995(3) 32,275
--------- ------- ------- ---------
Total Operating Expenses 142,371 4,342 995 147,708
--------- ------- ------- ---------
OPERATING INCOME (LOSS) BEFORE
MINORITY SHARE 4,519 (1,149) (995) 2,375
--------- ------- ------- ---------
Minority share of
operating (income) loss (2,314) --- 70 (2) (2,244)
--------- ------- ------- ---------
OPERATING INCOME (LOSS) 2,205 (1,149) (925) 131
--------- ------- ------- ---------
INVESTMENT AND OTHER INCOME
Investment income 12,329 --- 39 (4) 12,368
Amortization of license and
deferred costs related to
investments (487) --- --- (487)
Interest income 1,306 3 (103)(5) 1,206
Other (expense), net (800) --- --- (800)
--------- ------- ------- ---------
Total Investment and
Other Income 12,348 3 (64) 12,287
--------- ------- ------- ---------
INCOME (LOSS) BEFORE INTEREST AND
INCOME TAXES 14,553 (1,146) (989) 12,418
Interest expense 8,907 555 (103)(5) 9,431
72 (6)
--------- ------- ------- ---------
INCOME (LOSS) BEFORE INCOME TAXES 5,646 (1,701) (958) 2,987
Income tax expense 1,291 --- --- (7) 1,291
--------- ------- ------- ---------
NET INCOME (LOSS) $ 4,355 $ (1,701) $ (958) $ 1,696
========= ======= ======= =========
WEIGHTED AVERAGE COMMON AND
SERIES A COMMON SHARES 79,092 2,739 81,831
========= ======= =========
INCOME PER COMMON AND SERIES A
COMMON SHARE $ .06 $ .02
========= =========
The accompanying notes to condensed pro forma consolidated financial statements
are an integral part of this statement.
UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES
Condensed Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 1993
Unaudited
-----------
(In Thousands, except per share amounts)
Combined Pro Forma
Completed Adjustments Pro Forma
USM and Pending Increase USM
Consolidated (c) Acquisitions (Decrease) Consolidated
---------------- ------------ ----------- -------------
OPERATING REVENUES
Service $ 203,800 $ 11,848 $ --- $215,648
Equipment sales 10,510 300 --- 10,810
--------- ------- ------- ---------
Total Operating Revenues 214,310 12,148 --- 226,458
--------- ------- ------- ---------
OPERATING EXPENSES
System operations 34,301 5,211 --- 39,512
Marketing and selling 43,478 1,572 --- 45,050
Cost of equipment sold 25,688 1,144 --- 26,832
General and administrative 74,472 4,602 --- 79,074
Depreciation and amortization 45,027 2,407 2,673 (3) 50,107
--------- ------- ------- ---------
Total Operating Expenses 222,966 14,936 2,673 240,575
--------- ------- ------- ---------
OPERATING (LOSS) BEFORE
MINORITY SHARE (8,656) (2,788) (2,673) (14,117)
Minority share of operating
(income) loss (3,496) --- 45 (2) (3,451)
--------- ------- ------- ---------
OPERATING (LOSS) (12,152) (2,788) (2,628) (17,568)
--------- ------- ------- ---------
INVESTMENT AND OTHER INCOME
Investment income 16,922 --- (68)(4) 16,854
Amortization of license and
deferred costs related to
investments (917) --- --- (917)
Interest income 2,652 229 (188)(5) 2,693
Other (expense), net (915) (8) --- (923)
Gain on sale of cellular
interests 4,851 --- --- 4,851
--------- ------- ------- ---------
Total Investment and
Other Income 22,593 221 (256) 22,558
--------- ------- ------- ---------
INCOME (LOSS) BEFORE INTEREST AND
INCOME TAXES 10,441 (2,567) (2,884) 4,990
Interest expense 33,190 1,602 (188)(5) 34,977
373 (6)
--------- ------- ------- ---------
(LOSS) BEFORE INCOME TAXES (22,749) (4,169) (3,069) (29,987)
Income tax expense 2,692 --- --- (7) 2,692
--------- ------- ------- ---------
NET (LOSS) $ (25,441) $ (4,169) $ (3,069) $(32,679)
========= ======= ======= =========
WEIGHTED AVERAGE COMMON AND
SERIES A COMMON SHARES 57,152 5,633 62,785
========= ======= =========
(LOSS) PER COMMON AND SERIES A
COMMON SHARE $ (.45) $ (.52)
========= =========
The accompanying notes to condensed pro forma consolidated financial statements
are an integral part of this statement.
UNITED STATES CELLULAR CORPORATION
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) Service revenues and system operations expenses for 1993 have
been reclassified to conform to 1994 presentation.
(d) The pro forma adjustments are described in the following
paragraphs:
(1) Reflects the Company's acquisition of the cellular 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 to cellular license acquisition costs
(in thousands).
Purchase price (aggregate) $ 53,339
Plus: acquired companies' negative equity at
June 30, 1994 3,412
-----------
Purchase price to be allocated $ 56,751
===========
Purchase price in excess of book value--
Cellular operations--consolidated $ 56,751
Cellular operations--equity method ---
-----------
$ 56,751
===========
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 and the elimination of the minority shareholders'
portion of net income of companies in which the Company acquired
additional minority interests.
(3) Reflects the amortization of assumed costs in excess of book
value. All excess cost amounts are 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 Operations.
(5) Reflects the elimination of intercompany interest income and
interest expense between the Company and several acquired entities. The
acquired entities were previously accounted for by the equity method of
accounting (see Note 4).
(6) Reflects the estimated interest expense incurred as a result
of increases in the Revolving Credit Agreement in connection with the
acquisitions included in the Condensed Pro Forma Consolidated Statements
of Operations.
(7) The Company is included in a consolidated federal income tax
return with other members of the TDS consolidated group. TDS and the
Company entered into a Tax Allocation
UNITED STATES CELLULAR CORPORATION
NOTES TO CONDENSED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Agreement (the "Agreement") effective July 1, 1987. The Agreement
provides, among other things, that the Company and its subsidiaries be
included in a consolidated federal income tax return with the TDS
affiliated group unless TDS requests otherwise. The Company and its
subsidiaries calculate their losses and credits as if they comprised a
separate affiliated group. Under the Agreement, the Company is able to
carry forward its losses and credits and use them to offset any future
income tax liabilities to TDS. Accordingly, no pro forma income tax
benefits arising from the pro forma effects of acquisitions have been
recorded in the Condensed Pro Forma Consolidated Statements of Operations.