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 December 31, 1993, the Company acquired controlling
interests in four telephone companies, one paging company and 25 cellular
markets and several minority cellular interests representing a total of
approximately 3.8 million population equivalents. The total consideration paid
for these acquisitions was approximately $354.0 million, consisting of 6.8
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 $58.8 million in cash.
As of December 31, 1993, the Company had pending agreements to acquire two
telephone companies and controlling interests in nine cellular markets and a
minority interest in one market representing a total of approximately 1.2
million 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 $181.6 million. If these acquisitions are
completed as planned, the Company and/or USM will issue approximately 3.5
million TDS Common Shares, 49,000 USM Common Shares and will pay approximately
$6.2 million in cash.
1
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
- ---- ----
Telephone and Data Systems, Inc. Unaudited Condensed Pro Forma
Consolidated Financial Statements:
Unaudited Condensed Pro Forma Consolidated Balance Sheet
as of December 31, 1993
Unaudited Condensed Pro Forma Consolidated Statement of Income
for the Year Ended December 31, 1993
Notes to Unaudited Condensed Pro Forma Consolidated
Financial Statements
2
TELEPHONE AND DATA SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1993
UNAUDITED
---------
(IN THOUSANDS)
ASSETS
COMBINED PRO FORMA
COMPLETED ADJUSTMENTS PRO FORMA
TDS AND PENDING INCREASE TDS
CONSOLIDATED (a) ACQUISITIONS (DECREASE) CONSOLIDATED
---------------- ------------ ----------- ------------
CURRENT ASSETS $ 179,556 $ 15,628 $ (71)(1) $ 195,113
-------------- ------------ ---------- ------------
INVESTMENTS
Cellular limited partnership interests 101,210 -- (1,465)(1) 99,745
Cellular license acquisition costs, net 92,277 619 69,016 (1) 161,912
Marketable equity securities 19,368 -- -- 19,368
Other 115,532 3,515 -- 119,047
-------------- ------------ ---------- ------------
328,387 4,134 67,551 400,072
-------------- ------------ ---------- ------------
PROPERTY, PLANT AND EQUIPMENT
Telephone plant and franchise costs, net 638,848 32,424 34,512 (1) 705,784
Cellular telephone plant and
license costs, net 1,014,103 6,435 60,869 (1) 1,081,407
Radio paging, net 52,945 -- -- 52,945
Other, net 32,402 -- -- 32,402
-------------- ------------ ---------- ------------
1,738,298 38,859 95,381 1,872,538
-------------- ------------ ---------- ------------
OTHER ASSETS AND
DEFERRED CHARGES 12,941 3,371 -- 16,312
-------------- ------------ ---------- ------------
$ 2,259,182 $ 61,992 $ 162,861 $ 2,484,035
-------------- ------------ ---------- ------------
-------------- ------------ ---------- ------------
The accompanying notes to condensed pro forma consolidated financial statements
are an integral part of this statement.
3
TELEPHONE AND DATA SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1993
UNAUDITED
(IN THOUSANDS)
STOCKHOLDERS' EQUITY AND LIABILITIES
COMBINED PRO FORMA
COMPLETED ADJUSTMENTS PRO FORMA
TDS AND PENDING INCREASE TDS
CONSOLIDATED (a) ACQUISITIONS (DECREASE) CONSOLIDATED
---------------- ------------ ----------- ------------
CURRENT LIABILITIES $ 163,531 $ 10,068 $ 5,588 (1) $ 179,187
---------------- ------------ ----------- ------------
DEFERRED LIABILITIES AND CREDITS 90,979 5,602 -- 96,581
---------------- ------------ ----------- ------------
LONG-TERM DEBT, excluding current portion 514,442 28,126 -- 542,568
---------------- ------------ ----------- ------------
REDEEMABLE PREFERRED STOCK,
excluding current portion 25,632 -- -- 25,632
---------------- ------------ ----------- ------------
MINORITY INTEREST in subsidiaries 223,480 -- 984 (1) 224,464
---------------- ------------ ----------- ------------
NONREDEEMABLE PREFERRED STOCK 16,833 -- -- 16,833
---------------- ------------ ----------- ------------
COMMON STOCKHOLDERS' EQUITY
Common Shares, par value $1 per share 43,504 124 3,416 (1) 47,044
Series A Common Shares,
par value $1 per share 6,881 -- -- 6,881
Capital in excess of par value 1,084,211 2,536 168,409 (1) 1,255,156
Retained earnings 89,689 15,536 (15,536)(1) 89,689
---------------- ------------ ----------- ------------
1,224,285 18,196 156,289 1,398,770
---------------- ------------ ----------- ------------
$ 2,259,182 $ 61,992 $ 162,861 $ 2,484,035
---------------- ------------ ----------- ------------
---------------- ------------ ----------- ------------
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 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 $ 41,764 $ -- $ 309,886
Cellular telephone 247,259 18,494 -- 265,753
Radio paging 75,363 485 -- 75,848
---------------- ------------ ----------- ------------
Total operating revenues 590,744 60,743 -- 651,487
---------------- ------------ ----------- ------------
OPERATING EXPENSES
Telephone 189,012 34,993 1,105 (3) 225,110
Cellular telephone 255,915 23,183 4,252 (3) 283,350
Radio paging 76,084 331 214 (3) 76,629
---------------- ------------ ----------- ------------
Total operating expenses 521,011 58,507 5,571 585,089
---------------- ------------ ----------- ------------
OPERATING INCOME 69,733 2,236 (5,571) 66,398
---------------- ------------ ----------- ------------
INVESTMENT AND OTHER
INCOME (EXPENSE)
Interest and dividend income 8,082 156 (351) (5) 7,887
Minority share of income (475) -- (452) (2) 588
1,515 (6)
Cellular investment income, net of
license cost amortization 15,704 -- (204) (3) 16,396
896 (4)
Gain on sale of cellular
properties and investments 4,970 -- -- 4,970
Other, net (155) 4,810 -- 4,655
---------------- ------------ ----------- ------------
28,126 4,966 1,404 34,496
---------------- ------------ ----------- ------------
INCOME BEFORE INTEREST
AND INCOME TAXES 97,859 7,202 (4,167) 100,894
Interest expense 37,466 3,723 (351) (5) 42,088
1,250 (7)
---------------- ------------ ----------- ------------
INCOME BEFORE INCOME TAXES 60,393 3,479 (5,066) 58,806
Income tax expense 26,497 2,285 (5,778) (8) 23,004
---------------- ------------ ----------- ------------
NET INCOME 33,896 1,194 712 35,802
Preferred Dividend Requirement (2,386) -- -- (2,386)
---------------- ------------ ----------- ------------
NET INCOME AVAILABLE TO COMMON $ 31,510 $ 1,194 $ 712 $ 33,416
---------------- ------------ ----------- ------------
---------------- ------------ ----------- ------------
WEIGHTED AVERAGE
COMMON SHARES (000s) 47,266 5,680 52,946
---------------- ----------- ------------
---------------- ----------- ------------
EARNINGS PER COMMON SHARE $ .67 $ .63
---------------- ------------
---------------- ------------
The accompanying notes to condensed pro forma consolidated financial statements
are an integral part of this statement.
5
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 December 31, 1993, or is
pending as of the date of this Form 10-K.
(c) 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) $ 181,653
Less: TDS's proportionate share of acquired companies'
equity at December 31, 1993 (17,256)
----------
Purchase price to be allocated $ 164,397
----------
----------
Purchase price in excess of book value--
Cellular operations--consolidated $ 60,869
Cellular operations--equity method 69,016
Telephone operations 34,512
----------
$ 164,397
----------
----------
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.
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
TELEPHONE AND DATA SYSTEMS, INC.
NOTES TO CONDENSED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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.
7