SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ------------------- FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 October 15, 1997 ----------------------------------------------------------------------- Date of Report (Date of earliest event reported) 360 COMMUNICATIONS COMPANY ------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 1 - 14108 47-0649117 - ---------------------- ------------------- -------------------------------- (State of Incorporation) (Commission File No.) (IRS Employer Identification No.) 8725 W. Higgins Road, Chicago, Illinois 60631 ------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (773) 399-2500 ----------------------------------------------------------- (Registrant's telephone number, including area code) Item 5. Other Events. On October 15, 1997, 360 Communications Company (the "Company") issued a press release announcing the consolidated operating results of the Company and its subsidiaries for the third quarter and first nine months of 1997. A copy of such press release is attached hereto as Exhibit 1. Item 7. Financial Statements and Exhibits. (c) Exhibits. Exhibit 1: Press Release issued by 360 Communications Company on October 15, 1997 announcing the consolidated operating results of the Company and its subsidiaries for the third quarter and first nine months of 1997. -2- SIGNATURE Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 360 Communications Company By: /s/ Jeffrey R. Gardner Jeffrey R. Gardner Senior Vice President - Finance (Principal Accounting Officer) Date: October 15, 1997 -3- EXHIBIT INDEX Exhibit No. Description of Exhibits - -------- ---------------------------- 1 Press Release issued by 360 Communications Company on October 15, 1997 announcing the consolidated operating results of the Company and its subsidiaries for the third quarter and first nine months of 1997. -4- 360 Communications....Corporate Communications....8725 W. Higgins Road....Chicago, Illinois 60631....(773)399-2200 FOR IMMEDIATE RELEASE MEDIA: Margaret Kirch Cohen (773) 399-2385 ANALYSTS: Linda Wait (773) 399-2284 360 REPORTS RECORD NET INCOME, REVENUES AND CASH FLOW FOR THIRD QUARTER, FIRST NINE MONTHS OF 1997 Achieves Double Digit Market Penetration (Chicago) Oct. 15, 1997 -- Chicago-based 360 Communications Company (NYSE:XO) today reported record net income, revenues and operating cash flow for the third quarter and first nine months of 1997, and produced double digit market penetration for the first time in the company's history. 360 reported record net income of $28.9 million, or 24 cents per share, for the third quarter of 1997, up 26 percent from $22.9 million, or 20 cents per share, for the third quarter of 1996. 360 reported net income of $60.1 million for the first nine months of 1997, compared with $54.2 million for the same period in 1996. Total operating revenues rose 23 percent in the third quarter of 1997 to a record $347.5 million, up from $281.7 million in the same period last year. Service revenues during the quarter were $335.2 million, including $2.4 million for residential long distance, up 23 percent from $271.8 million reported in the third quarter of 1996. For the first nine months of 1997, total operating revenues were $994.6 million, including $5.9 million for residential long distance, up 25 percent from $795.5 million in the same period of 1996. -more- 360 Reports Third Quarter Results Page 2 For the third quarter of 1997, 360 reported record operating cash flow of $130.9 million, including a loss of $3.6 million for residential long distance, compared with $100.4 million reported in the third quarter of 1996. Operating cash flow as a percentage of service revenues was 39.04 percent for the quarter, compared with 36.95 percent for the same period last year. For the first nine months of 1997, operating cash flow was $341.8 million, including a loss of $11.4 million for residential long distance, compared with $282.8 million during the same period in 1996. "360 continues to deliver strong operating results," said Dennis E. Foster, president and chief executive officer of 360 Communications. "We reported our best-ever earnings, revenues and cash flow for the quarter, and we continue to improve our operating margins. We're proud of our results, and our competitive position, in today's heated marketplace." 360 added 87,000 net customers during the third quarter of 1997, compared with 100,000 during the third quarter of 1996. For the first nine months of 1997, 360 added 310,000 net customers, compared with 302,000 in the first nine months of 1996. 360 closed the period with 2.45 million customers, up 32 percent from 1.85 million a year ago. "Despite aggressive promotions from new and existing competitors, we were able to achieve an overall market penetration rate that is among the highest in the industry," Foster said. "In fact, we have nearly doubled our customer base in just two years." The company reported a double digit market penetration rate of 10.11 percent at Sept. 30, 1997, compared with 8.84 percent at Sept. 30, 1996. At Sept. 30, 1997, 360 had more than 15 percent penetration in 13 markets, four of which exceeded 20 percent. Market penetration represents the total number of customers as a percentage of potential customers. The company's average monthly churn rate, which measures the percentage of customers who discontinue service, was 1.90 percent for the third quarter of 1997, compared with 1.86 percent during the same period last year. -more- 360 Reports Third Quarter Results Page 3 During the quarter, 360 acquired minority interests in 10 of its controlled markets in Pennsylvania, Florida and Indiana, bringing 360's ownership interest in those markets to 100 percent and increasing its potential customer base (POPs) by 340,000. In addition, 360 sold its 100 percent ownership interest in the Dothan, Ala., market, reducing its POPs by 136,000. In late September, 360 achieved the highest customer satisfaction rating among service providers in Las Vegas, Nev., in the third annual J.D. Power and Associates Wireless Customer Satisfaction Study. Las Vegas was the only 360 market among 18 major markets surveyed throughout the country. Chicago-based 360 Communications, which had revenues of more than $1 billion in 1996, provides wireless voice and data services to 2.45 million customers in more than 100 markets in 15 states. The company also offers residential long distance and paging services. 360 Communications' stock is listed on the New York, Chicago and Pacific stock exchanges under the symbol XO. ### To obtain copies of the company's Form 10-K, 10-Qs, or copies of quarterly earnings and other recent news releases issued by the company, please call toll-free 1.888.360.INFO (1.888.360.4636), 24 hours a day, seven days a week. 360 Communications' news releases are also available through PR Newswire and can be obtained by calling (800) 578-7888, #111849. 360's Internet address is www.360.com. 360 COMMUNICATIONS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) (Unaudited) For the Three Months For the Nine Months Ended September 30, Ended September 30, ---------------------- ---------------------- 1997 1996 1997 1996 ---------- ---------- ---------- ---------- Operating Revenues Service revenues $ 335,245 $ 271,819 $ 958,049 $ 766,133 Equipment sales 12,264 9,857 36,568 29,411 ---------- ---------- ---------- ---------- Total operating revenues 347,509 281,676 994,617 795,544 ---------- ---------- ---------- ---------- Operating Expenses Cost of service 37,127 24,148 118,899 68,492 Cost of equipment sales 28,486 25,046 81,329 71,010 Other operations expense 19,177 15,498 51,182 39,824 Sales, marketing and advertising expenses 54,438 48,527 170,692 143,146 General, administrative and other expenses 77,399 68,030 230,698 190,287 Depreciation and amortization 45,376 36,833 137,738 104,987 ---------- ---------- ---------- ---------- Total operating expenses 262,003 218,082 790,538 617,746 ---------- ---------- ---------- ---------- Operating Income 85,506 63,594 204,079 177,798 Interest expense (33,570) (24,752) (97,603) (78,854) Minority interests in net income of consolidated entities (13,534) (13,843) (39,451) (38,168) Equity in net income of unconsolidated entities 16,536 16,339 44,454 40,359 Other income, net (1) 73 101 3,060 423 ---------- ---------- ---------- ---------- Income before income taxes 55,011 41,439 114,539 101,558 Income tax expense 26,132 18,552 54,408 47,407 ---------- ---------- ---------- ---------- Net income $ 28,879 $ 22,887 $ 60,131 $ 54,151 ========== ========== ========== ========== Earnings per share $ 0.24 $ 0.20 $ 0.49 $ 0.46 ========== ========== ========== ========== Weighted average shares outstanding 121,875 117,086 122,626 117,060 ========== ========== ========== ========== (1) In January 1997, the Company recognized a gain of $3 million ($2 million, net of tax) in connection with the divestiture of its ownership interests in two of its unconsolidated entities. 360 COMMUNICATIONS COMPANY AND SUBSIDIARIES CONSOLIDATED OPERATING DATA (Unaudited) For the Three Months Ended and as of September 30, ------------------------------ 1997 1996 -------------- -------------- Consolidated EBITDA (in thousands) $ 130,882 $ 100,427 EBITDA margin 39.04% 36.95% Capital expenditures (in thousands) $ 64,714 $ 49,601 Cellular Controlled POPs 24,222,292 20,938,734 Controlled customers 2,449,996 1,850,528 Gross customer additions 230,640 204,437 Net customer additions 87,367 100,199 Average customers 2,409,635 1,799,913 Churn 1.90% 1.86% Penetration 10.11% 8.84% Service revenue per average customer per month $ 46.12 $ 50.34 EBITDA margin 40.34% 37.28% Cost to acquire a new customer $ 301 $ 312 Long Distance Revenue (in thousands) $ 2,369 $ 31 EBITDA (in thousands) $ (3,637) $ (909) For the Nine Months Ended and as of September 30, ----------------------------- 1997 1996 -------------- ------------- Consolidated EBITDA (in thousands) $ 341,817 $ 282,785 EBITDA margin 35.68% 36.91% Capital expenditures (in thousands) $ 154,234 $ 193,543 Cellular Controlled POPs 24,222,292 20,938,734 Controlled customers (1) 2,449,996 1,850,528 Gross customer additions (2) 704,076 582,227 Net customer additions (2) 310,143 302,124 Average customers 2,319,821 1,684,336 Churn 1.82% 1.80% Penetration 10.11% 8.84% Service revenue per average customer per month $ 45.69 $ 50.54 EBITDA margin 37.03% 37.03% Cost to acquire a new customer $ 298 $ 317 Long Distance Revenue (in thousands) $ 5,927 $ 31 EBITDA (in thousands) $ (11,448) $ (909) (1) Controlled customers include 46,647 customers added through acquisitions which were completed in the first quarter of 1996. (2) The 1996 amounts exclude customer base acquired. 360 COMMUNICATIONS COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) September 30, December 31, 1997 1996 ------------- ------------- ASSETS Cash and cash equivalents $ 5,772 $ 2,554 Accounts receivable, less allowances of $7,300 and $5,730, respectively 99,002 102,483 Other receivables 36,153 27,090 Unbilled revenue 33,000 35,712 Inventory 32,314 35,908 Deferred income taxes 11,700 8,462 Prepaid expenses and other 9,286 16,634 ------------- ------------ Total current assets 227,227 228,843 ------------- ------------ Property, plant and equipment 1,627,781 1,499,407 Less: accumulated depreciation 521,466 415,981 ------------- ------------ Property, plant and equipment, net 1,106,315 1,083,426 ------------- ------------ Investments in unconsolidated entities 461,385 349,231 Intangibles, net 1,150,661 1,136,587 Other assets 17,349 13,982 ------------- ------------ Total assets $ 2,962,937 $ 2,812,069 ============= ============ LIABILITIES AND SHAREOWNERS' EQUITY Current Liabilities Trade accounts and other payables $ 172,862 $ 227,654 Short-term borrowings 29,175 43,750 Advance billings 31,045 28,314 Accrued taxes 22,082 17,951 Accrued agent commissions 7,648 12,089 Other 29,960 21,090 ------------- ------------ Total current liabilities 292,772 350,848 ------------- ------------ Long-term debt 1,849,643 1,699,778 ------------- ------------ Deferred Credits and Other Liabilities Deferred income taxes 144,065 113,005 Postretirement and other benefit obligations 6,133 5,855 ------------- ------------ Total deferred credits and other liabilities 150,198 118,860 ------------- ------------ Minority interests in consolidated entities 170,238 180,083 ------------- ------------ Shareowners' Equity 500,086 462,500 ------------- ------------ Total liabilities and shareowners' equity $ 2,962,937 $ 2,812,069 ============= ============ 360 COMMUNICATIONS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) For the Nine Months Ended September 30, --------------------------- 1997 1996 ------------ ------------ Operating Activities Net income $ 60,131 $ 54,151 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 137,738 104,987 Deferred income taxes 27,822 19,119 Gain on sale of cellular investments (3,029) Equity in net income of unconsolidated entities, net of distributions (24,639) (25,104) Minority interests in net income of consolidated entities 39,451 38,168 Changes in operating assets and liabilities, excluding acquisitions Receivables, net 4,115 (16,009) Other current assets 2,551 (1,410) Trade accounts and other payables (48,771) 1,825 Accrued expenses and other current liabilities 9,353 10,267 Noncurrent assets and liabilities, net (3,985) (868) Other, net 2,453 5,266 ------------ ------------ Net Cash Provided by Operating Activities 203,190 190,392 ------------ ------------ Investing Activities Capital expenditures (154,234) (193,543) Acquisitions and divestitures (57,797) (109,613) Investments in unconsolidated entities and other (80,735) (14,709) ------------ ------------ Net Cash Used for Investing Activities (292,766) (317,865) ------------ ------------ Financing Activities Net (payments) borrowings under bank revolving credit facility (50,000) 465,000 Proceeds from long-term debt 200,000 900,000 Debt issuance costs (1,609) (15,229) Net short-term (payments) borrowings (14,575) 45,650 Purchases of common stock for treasury (24,152) Increase in advances from affiliates 135,892 Contributions from minority investors 100 4,881 Distributions to minority investors (17,878) (9,275) Repayment of advances from affiliates (1,400,000) Other, net 908 (8,600) ------------ ------------ Net Cash Provided by Financing Activities 92,794 118,319 ------------ ------------ Increase (Decrease) in Cash and Cash Equivalents 3,218 (9,154) Cash and Cash Equivalents at Beginning of Period 2,554 19,023 ------------ ------------ Cash and Cash Equivalents at End of Period $ 5,772 $ 9,869 ============ ============