FORM 11-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[X] ANNUAL REPORT UNDER SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended: September 30, 1997
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[_] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to _________________
Commission file number: 0-15056
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CommNet Cellular Inc. Employee Stock Ownership Plan and Trust
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(Full title of the plan)
CommNet Cellular Inc.
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(Issuer of the securities held pursuant to the plan)
8350 E. Crescent Parkway
Suite 400
Englewood, Colorado
80111
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(Address of principal executive office)
CommNet Cellular Inc.
Employee Stock Ownership Plan and Trust
Financial Statements
Years ended September 30, 1997 and 1996
CONTENTS
Report of Independent Auditors...................................... 1
Audited Financial Statements
Statements of Net Assets Available for Benefits..................... 2
Statements of Changes in Net Assets Available for Benefits.......... 3
Notes to Financial Statements....................................... 4
Supplementary Information
Schedule of Assets Held for Investment Purposes..................... 9
Schedule of Reportable Transactions................................. 10
Report of Independent Auditors
CommNet Cellular Inc. as Plan Administrator of the
CommNet Cellular Inc. Employee Stock Ownership Plan and Trust
We have audited the accompanying statements of net assets available for benefits
of the CommNet Cellular Inc. Employee Stock Ownership Plan and Trust as of
September 30, 1997 and 1996, and the related statements of changes in net assets
available for benefits for the years then ended. These financial statements are
the responsibility of the Plan's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the CommNet
Cellular Inc. Employee Stock Ownership Plan and Trust at September 30, 1997 and
1996, and the changes in its net assets available for benefits for the years
then ended, in conformity with generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedules of assets
held for investment purposes as of September 30, 1997, and reportable
transactions for the year then ended, are presented for purposes of complying
with the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974, and are
not a required part of the financial statements. The supplemental schedules
have been subjected to the auditing procedures applied in our audit of the 1997
financial statements and, in our opinion, are fairly stated in all material
respects in relation to the 1997 financial statements taken as a whole.
ERNST & YOUNG LLP
Denver, Colorado
January 30, 1998
1
CommNet Cellular Inc.
Employee Stock Ownership Plan and Trust
Statements of Net Assets Available for Benefits
SEPTEMBER 30
1997 1996
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Cash $ -- $ 48
Contribution receivable from CommNet Cellular Inc.
(Note 3) 652,899 652,200
Investment in CommNet Cellular Inc. common stock,
at fair value (86,361 and 74,314 shares at September
30, 1997 and 1996, respectively) 3,028,064 2,145,817
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Net assets available for benefits $3,680,963 $2,798,065
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See accompanying notes.
2
CommNet Cellular Inc.
Employee Stock Ownership Plan and Trust
Statements of Changes in Net Assets Available for Benefits
YEAR ENDED SEPTEMBER 30
1997 1996
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Additions:
Contributions from CommNet Cellular Inc. (Note 3) $ 652,899 $ 653,181
Net unrealized and realized appreciation in the fair
value of CommNet Cellular Inc. common stock 593,645 71,762
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1,246,544 724,943
Deductions:
Distributions to terminated participants 363,646 518,639
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Net increase 882,898 206,304
Net assets available for benefits at beginning
of year 2,798,065 2,591,761
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Net assets available for benefits at end of year $3,680,963 $2,798,065
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See accompanying notes.
3
CommNet Cellular Inc.
Employee Stock Ownership Plan and Trust
Notes to Financial Statements
September 30, 1997
1. DESCRIPTION OF THE PLAN
The following description of the CommNet Cellular Inc. Employee Stock Ownership
Plan and Trust (the "Plan") provides only general information. The Plan is also
known as the Amended and Restated CommNet Cellular, Inc. Employee Stock
Ownership Plan and Trust. Participants should refer to the Plan for a more
complete description.
GENERAL
The Plan is a defined contribution plan adopted effective October 1, 1988, to
enable eligible participants to acquire shares in CommNet Cellular Inc. (the
"Employer"). Anyone employed by the Employer on September 30, 1989, became a
participant on October 1, 1988. Any employee who was not employed on September
30, 1989, is eligible to participate in the Plan as of the earlier of the
October 1 or April 1 following the date on which the individual completes one
year of service, as defined by the Plan. The Plan is subject to the provisions
of the Employee Retirement Income Security Act of 1974 ("ERISA"). The Plan was
amended and restated effective October 1, 1995 to, among other things, change
the Plan's trustee from Colorado National Bank, Colorado, N.A. to Bank One,
Colorado, N.A. effective July 1, 1996, at which time the Plan's assets were
transferred to Bank One, Colorado, N.A. (the "Trustee").
CONTRIBUTIONS
The Employer makes annual discretionary contributions to the Plan, as determined
by its Board of Directors. Employer contributions may be made in cash or in
shares of its common stock. Participants may not contribute to the Plan.
Substantially all assets of the Plan are invested in common stock of the
Employer.
VESTING
Each participant becomes vested in Employer contributions and earnings (losses)
on such contributions at the rate of 20 percent per year for each year of
service by the participant. Full vesting occurs upon completion of five years
of service, at normal retirement age (65), at death, or upon disability as
defined in the Plan.
BENEFITS AND DISTRIBUTIONS
Upon retirement, death, or disability, unless the participant elects otherwise,
and if the participant's vested benefits are greater than $3,500, distribution
of benefits will begin not later than one year after the end of the plan year in
which such event occurred. In the
4
CommNet Cellular Inc.
Employee Stock Ownership Plan and Trust
Notes to Financial Statements (continued)
1. DESCRIPTION OF THE PLAN (CONTINUED)
event of termination of employment for any reason other than retirement,
disability, or death, unless the participant elects otherwise, and if the
participant's vested benefits are greater than $3,500, distribution of vested
benefits will begin no later than one year after the end of the fifth plan year
following the plan year during which termination occurred. Vested benefits are
distributed in cash and/or Employer common stock and, unless the participant
elects otherwise, distribution of vested benefits will be in equal annual
installments over a period not longer than five years. However, if the
participant's vested benefits are $3,500 or less, vested benefits will be
distributed in one lump-sum amount after the event causing the distribution or
after the plan year end, depending on the date of the event.
FORFEITURES
Upon termination of employment, the nonvested portion of a participant's account
is forfeited and is subject to allocation to the remaining participants'
accounts as an additional Employer contribution for the plan year in which the
forfeiture occurs. The forfeiture is considered to have occurred on the earlier
of the date on which there is a distribution of the entire vested portion of a
participant's account, or on the last day of the plan year in which the
participant has incurred five consecutive one-year breaks in service.
PARTICIPANT ACCOUNTS
Separate accounts are maintained for each participant by the Trustee. Each
participant's account is adjusted annually for Employer contributions and
allocated forfeitures based on the ratio each participant's eligible
compensation bears to the total of all participants' eligible compensation for
that plan year. Gains or losses on the Plan's investments are allocated to
participants' accounts based on the ratio that each eligible participant's
account bears to the total of all such accounts.
EXPENSES
All expenses incurred in the administration and management of the Plan have been
or will be paid by the Employer and, accordingly, are not reflected in the
Plan's financial statements.
5
CommNet Cellular Inc.
Employee Stock Ownership Plan and Trust
Notes to Financial Statements (continued)
1. DESCRIPTION OF THE PLAN (CONTINUED)
PLAN TERMINATION AND AMENDMENTS
Upon full or partial termination or upon complete discontinuance of
contributions to the Plan by the Employer, which shall be deemed a termination,
the account balances of all participants shall become 100 percent vested. Upon
such termination of the Plan, the Plan assets can be completely distributed in
cash or in kind, or can remain in the Plan to be distributed as benefits as if
the Plan had not been terminated.
The Employer may amend the Plan at any time, provided that such action does not
reduce a participant's account balance or benefits under the Plan.
On February 10, 1998, AV Acquisition Corp. ("AV"), which is a wholly-owned
subsidiary of Blackstone Capital Partners L.P., merged with and into the
Employer, with the Employer being the surviving corporation in the merger. As a
result of the merger, the shareholders of AV own approximately 87% of the
Employer's common stock and are the controlling shareholder of the Employer.
Upon closing of the merger, the Plan was amended and restated into a profit
sharing plan and trust and the Employer initiated a process whereby all shares
of CommNet Cellular Inc. common stock held by the Plan will be exchanged for
cash. The Plan is scheduled to be terminated and the assets held by the Plan are
scheduled to be distributed to the Plan participants during the third quarter of
fiscal 1998.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT VALUATION
The Plan's investment in CommNet Cellular Inc. common stock is carried at fair
value based on its quoted market price at the dates of the respective statements
of net assets available for benefits.
CONTRIBUTIONS
Contributions are recorded by the Plan after the Board of Directors of the
Employer approves the contribution for that plan year.
INCOME TAX STATUS
The Internal Revenue Service has issued a determination letter dated April 14,
1997, that the Plan qualifies, in form, as a stock bonus plan under Section
401(a) and as an
6
CommNet Cellular Inc.
Employee Stock Ownership Plan and Trust
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
employee stock ownership plan under Section 4975(e)(7) of the Internal Revenue
Code (the "Code"), and the underlying trust is, therefore, exempt from federal
income taxes under Section 501(a) of the Code. The Plan is required to operate
in accordance with the Code to maintain its tax qualification. The Plan
Administrator is not aware of any course of action or series of events that have
occurred which might adversely affect the Plan's qualified status.
3. EMPLOYER CONTRIBUTION RECEIVABLE
The Employer's Board of Directors determined to contribute (in shares of its
common stock, valued at the closing price at the Plan's year end) an amount
equal to five percent and six percent of each participant's eligible
compensation during the plan years 1997 and 1996, respectively. Accordingly, at
September 30, 1997 and 1996, the Plan recorded a receivable from CommNet
Cellular Inc. amounting to $652,899 and $652,200, respectively.
4. BASIS OF PRESENTATION
The financial statements have been prepared in accordance with generally
accepted accounting principles, which is an acceptable basis pursuant with the
financial reporting requirements of ERISA.
5. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The following is a reconciliation of net assets available for benefits per the
financial statements to the Form 5500:
SEPTEMBER 30
1997 1996
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Net assets available for benefits per the financial
statements $3,680,963 $2,798,065
Amounts allocated to withdrawn participants (252,222) (305,230)
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Net assets available for benefits per the Form 5500 $3,428,741 $2,492,835
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7
CommNet Cellular Inc.
Employee Stock Ownership Plan and Trust
Notes to Financial Statements (continued)
5. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500 (CONTINUED)
The following is a reconciliation of distributions to terminated participants
per the financial statements to the Form 5500:
YEAR ENDED SEPTEMBER 30
1997 1996
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Benefits paid to participants per the financial
statements $ 363,646 $ 518,639
Add: Amounts allocated to withdrawn participants at
end of year 252,222 305,230
Less: Amounts allocated to withdrawn participants at
beginning of year (305,230) (347,573)
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Benefits paid to participants per the Form 5500 $ 310,638 $ 476,296
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Amounts allocated to withdrawn participants are recorded on the Form 5500 for
benefit claims processed and approved for payment, but not yet paid, prior to
September 30.
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CommNet Cellular Inc.
Employee Stock Ownership Plan and Trust
Schedule of Assets Held for Investment Purposes
Item 27(A)
September 30, 1997
EIN: 84-0924904
Plan Number: 002
(A) (B) (C) (D) (E)
DESCRIPTION OF CURRENT
IDENTITY OF ISSUE INVESTMENT COST VALUE
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* CommNet Cellular Inc. common stock 86,361 shares $1,794,517 $3,028,064
* CommNet Cellular Inc. is a party-in-interest to the Plan.
9
CommNet Cellular Inc.
Employee Stock Ownership Plan and Trust
Schedule of Reportable Transactions
Item 27(D)
Year ended September 30, 1997
EIN: 84-0924904
Plan Number: 002
CURRENT
VALUE OF
COST ASSET ON NET
IDENTITY OF PARTY PURCHASE SELLING OF TRANSACTION GAIN
INVOLVED DESCRIPTION OF ASSETS SHARES PRICE PRICE ASSET DATE (LOSS)
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Category (i) Individual transaction in excess of five percent of Plan assets
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Employer (CommNet CommNet Cellular
Cellular Inc.) Inc. common stock 22,587 $652,200 $ - $652,200 $652,200 $ -
Category (iii) - Series of securities transactions
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Terminated participants CommNet Cellular
Inc. common stock 10,540 $ - $363,646 $233,623 $363,646 $130,023
Employer (CommNet CommNet Cellular
Cellular Inc.) Inc. common stock 22,587 652,200 - 652,200 652,200 -
There were no category (ii) or (iv) reportable transactions during the 1997 plan
year.
10
FORM 11K (CONT.)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Plan
has duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
CommNet Cellular Inc. Employee Stock Ownership Plan and Trust
March 26, 1998 By: /s/ Daniel P. Dwyer
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Date Signature
Daniel P. Dwyer
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Print Name
Executive VP - CommNet Cellular Inc. - The Plan Sponsor
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Title