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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
January 24, 1997
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Date of Report (Date of earliest event reported)
360 COMMUNICATIONS COMPANY
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(Exact name of registrant as specified in its charter)
Delaware 1 - 14108 47-0649117
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(State of Incorporation) (Commission File No.) (IRS Employer Identification No.)
8725 W. Higgins Road, Chicago, Illinois 60631
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(Address of principal executive offices) (Zip Code)
(773) 399-2500
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(Registrant's telephone number, including area code)
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Item 5. Other Events.
On November 1, 1996, 360 Communications Company and Subsidiaries
(the "Company") completed its previously announced acquisition (the "ICN
Acquisition") of Independent Cellular Network, Inc. and affiliated companies
which own and operate cellular licenses and related systems and assets in
Kentucky, Ohio, Pennsylvania and West Virginia. On November 7, 1996, the Company
filed with the Securities and Exchange Commission its Current Report on Form 8-K
dated November 1, 1996, which included certain historical financial statements
and pro forma financial information with respect to the ICN Acquisition.
Included herewith under Item 7 are historical financial statements and pro forma
financial information with respect to the ICN Acquisition which supplement such
previously filed financial statements and pro forma information.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Pro Forma Financial Information.
360 Communications Company and Subsidiaries
--Pro Forma Condensed Combined Statement of Operations for the Nine
Months Ended September 30, 1996
--Pro Forma Condensed Combined Balance Sheet as of September 30, 1996
--Notes to Pro Forma Condensed Combined Financial Statements
(b) Financial Statements of Business Acquired.
Independent Cellular Network, Inc. and Affiliates
--Combined Balance Sheets as of September 30, 1996 and December 31,
1995
--Combined Statements of Operations for the Nine Months Ended September
30, 1996 and 1995
--Combined Statements of Cash Flows for the Nine Months Ended September
30, 1996 and 1995
--Notes to Unaudited Combined Financial Statements
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360 COMMUNICATIONS COMPANY AND SUBSIDIARIES
Pro Forma Condensed Combined Financial Statements Introduction
On November 1, 1996, 360 Communications Company and Subsidiaries (the
"Company") completed its previously announced acquisition (the "ICN
Acquisition") of Independent Cellular Network, Inc. and affiliated companies
(collectively, the "Acquired Companies") which own and operate cellular licenses
and related systems and assets in Kentucky, Ohio, Pennsylvania and West
Virginia. The Company acquired the Acquired Companies from Independent Cellular
Network Partners and certain of its affiliates (collectively, "ICNP") for
approximately $514 million, comprised of 6,500,000 shares of the Company's
Common Stock, $0.01 par value, $122 million in aggregate principal amount of the
Company's subordinated non-negotiable promissory notes and the Company's
assumption of $240 million of Independent Cellular Network Partners' senior
debt. The remaining portion of the purchase price was paid in cash. The ICN
Acquisition will be accounted for as a purchase. The following unaudited pro
forma condensed combined financial statements have been adjusted to reflect the
ICN Acquisition.
The unaudited pro forma condensed combined financial statements have been
prepared from the historical consolidated financial statements of the Company.
The ICN Acquisition column in the following unaudited pro forma condensed
combined financial statements reflects the historical combined financial
statements of the Acquired Companies, the combined entities which represent the
operations acquired from ICNP.
The unaudited pro forma condensed combined financial statements assume that
the ICN Acquisition occurred as of January 1, 1996 for the unaudited pro forma
condensed combined statement of operations and as of September 30, 1996 for the
unaudited pro forma condensed combined balance sheet.
In the opinion of management, all adjustments necessary to present fairly
the unaudited pro forma condensed combined financial statements have been made.
The unaudited pro forma condensed combined financial statements should be
read in conjunction with the Company's historical consolidated financial
statements including the notes thereto, set forth in the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1995; the Company's
historical consolidated financial statements including the notes thereto, set
forth in the Company's Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 1996; and Independent Cellular Network, Inc. and Affiliates
historical combined financial statements and notes thereto included in the
Company's Current Report on Form 8-K dated November 1, 1996. The unaudited pro
forma condensed combined financial statements are not necessarily indicative of
the financial position or results of operations had the ICN Acquisition occurred
on the indicated dates nor do they purport to indicate the results of future
operations of the Company.
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<TABLE>
<CAPTION>
360 COMMUNICATIONS COMPANY AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 1996
Unaudited
(Thousands of Dollars, except per share amounts)
360 360
Communications Pro Forma Communications
Company as ICN Acquisition Company
Reported Acquisition Adjustments Pro Forma
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Operating Revenues
Cellular Service Revenues $ 766,133 $ 50,201 $ (1,800)(a) $ 814,534
Equipment Sales 29,411 2,982 32,393
---------------- ---------------- ------------- ----------------
Total Operating Revenues 795,544 53,183 (1,800) 846,927
---------------- ---------------- ------------- ----------------
Operating Expenses
Cost of Service 68,492 5,957 74,449
Cost of Equipment Sales 71,010 6,673 77,683
Other Operations Expense 39,824 2,174 41,998
Sales, Marketing and Advertising Expenses 143,146 5,004 148,150
General, Administrative and Other Expenses 190,287 9,123 (2,849)(b) 196,561
Depreciation and Amortization 104,987 21,385 (11,404)(c)
5,637 (d)
(745)(e) 119,860
---------------- ---------------- ---------------- ----------------
Total Operating Expenses 617,746 50,316 (9,361) 658,701
Operating Income 177,798 2,867 7,561 188,226
Interest Expense, net (78,854) (21,948) 1,851 (f) (98,951)
Minority Interests in Net Income
of Consolidated Entities (38,168) (1,377) (39,545)
Equity in Net Income of
Unconsolidated Entities 40,359 352 40,711
Other Income (Expense), net 423 2,256 (2,256)(g) 423
---------------- ---------------- ---------------- ----------------
Income (Loss) Before Income Taxes 101,558 (17,850) 7,156 90,864
Income Tax Expense (Benefit) 47,407 (1,830)(h) 45,577
---------------- ---------------- ---------------- ----------------
Net Income (Loss) $ 54,151 $ (17,850) $ 8,986 $ 45,287
================ ================ ================ ================
Net Income per Share $ 0.37
================
Weighted Average Shares
Outstanding 123,560
================
The accompanying notes are an integral part of these unaudited pro forma
condensed combined financial statements.
</TABLE>
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<TABLE>
<CAPTION>
360 COMMUNICATIONS COMPANY AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED BALANCE SHEET
September 30, 1996
Unaudited
(Thousands of Dollars)
360 360
Communications Pro Forma Communications
Company as ICN Acquisition Company
Reported Acquisition Adjustments Pro Forma
---------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Assets
Total Current Assets $ 181,761 $ 67,121 $ (52,711)(i)$ 196,171
Property, Plant and Equipment, net 969,030 43,865 (2,534)(j) 1,010,361
Investments in Unconsolidated Entities 344,630 1,781 346,411
Intangibles, net 711,093 136,366 300,657 (k) 1,148,116
Other Assets 18,946 961 (961)(i)
37,017 (l) 55,963
---------------- ---------------- ----------------- ----------------
Total Assets $ 2,225,460 $ 250,094 $ 281,468 $ 2,757,022
================ ================ ================= ================
Liabilities and Shareowners'
and Partners' Equity
Total Current Liabilities $ 258,079 $ 23,449 $ (12,351)(i)$ 269,177
Long-Term Debt 1,362,720 325,466 (325,466)(m)
363,373 (m) 1,726,093
Deferred Credits and Other Liabilities 117,391 117,391
---------------- ---------------- ----------------- ----------------
Total Liabilities 1,738,190 348,915 25,556 2,112,661
Minority Interests in Consolidated Entities 179,115 7,061 (283)(n) 185,893
Shareowners' and Partners'
Equity (Deficit)
Common Stock 1,169 100 (100)(o)
65 (o) 1,234
Preferred Stock 14,900 (14,900)(o)
Additional Paid-In Capital 623,287 150,248 (o) 773,535
Accumulated Deficit (316,301) (69,647) 69,647 (o) (316,301)
Partners' Deficit (51,235) 51,235 (o)
---------------- ---------------- ----------------- ----------------
Total Shareowners' and Partners'
Equity (Deficit) 308,155 (105,882) 256,195 458,468
---------------- ---------------- ----------------- ----------------
Total Liabilities and Shareowners' and
Partners' Equity (Deficit) $ 2,225,460 $ 250,094 $ 281,468 $ 2,757,022
================ ================ ================= ================
The accompanying notes are an integral part of these unaudited pro forma
condensed combined financial statements.
</TABLE>
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NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
PRO FORMA STATEMENTS OF OPERATIONS
(a) Cellular Service Revenues are adjusted to reflect the reduced rates
the Company charges its customers for roaming in markets within the Company's
service area.
(b) Certain expenses associated with general and administrative services
are duplicative in nature and are eliminated since the Company will not incur
these costs subsequent to the Acquisition.
(c) This entry adjusts to 40 years the amortization period for certain
acquired identifiable intangible assets to conform with the Company's current
accounting policies for amortization of such assets.
(d) This adjustment reflects amortization of the excess of the purchase
price over the fair value of net assets acquired.
(e) Depreciation expense for the Acquired Companies' property, plant and
equipment has been adjusted to reflect the Company's current accounting policies
for depreciable lives. This adjustment also accounts for the effect on
depreciation expense of property, plant and equipment that will be replaced as
described in (j).
(f) This entry reflects the net effect on interest expense resulting from
the debt transactions described in (m). An annual variable interest rate of 6.3%
and an annual fixed rate of 9.5% was used for additional credit facility
borrowings and subordinated debt, respectively. A 1/8% difference in the annual
variable interest rate would have the effect of changing interest expense by
$226,000 for the nine months ended September 30, 1996.
(g) Interest income associated with the nonretained assets of the Acquired
Companies is eliminated.
(h) The provision for income taxes is adjusted to reflect the tax effects
of pro forma adjustments (a) through (g). In addition, pro forma adjustments are
recorded to give effect to the tax provision associated with the historical
operating results of the Acquired Companies.
PRO FORMA BALANCE SHEET
(i) These entries adjust assets and liabilities to reflect net balances
acquired.
(j) To achieve cellular system compatibility and standard customer
functionality it will be necessary for the Company to replace the cell site
equipment and switches of the Acquired Companies. This adjustment represents the
write down of property, plant and equipment that will be replaced to realizable
value.
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(k) This entry adjusts intangibles for the excess of the estimated purchase
price over net assets acquired. The aggregate purchase price is approximately
$514 million. Presented below is a preliminary allocation of the purchase price
as if the ICN Acquisition occurred on September 30, 1996 (in thousands of
dollars).
Tangible Assets Acquired $ 94,539
Intangible Assets Acquired 136,366
Liabilities Assumed (11,098)
Ownership Percentage Adjustment -
Minority Interests (6,778)
----------------
Net Assets Acquired 213,029
Estimated Purchase Price 513,686
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Intangibles $ 300,657
===============
(l) This entry reflects the recording of deferred income tax assets
acquired by the Company in the ICN Acquisition. The deferred income tax assets
were primarily generated by the operating losses of the Acquired Companies and
represent future tax benefits to the extent that realization of such benefits
are more likely than not. The balance recorded includes a valuation allowance in
the amount of $5,010,000 established for the portion of deferred income tax
assets not expected to be realized.
(m) Under the terms of the transaction, the Company issued $122 million in
aggregate principal amount of subordinated non-negotiable promissory notes to
ICNP. These notes initially bear interest at 9.5%, which may be reduced to 9.0%
upon the occurrence of certain specified events, payable semiannually. Fifty
percent of the interest payments will be capitalized and become part of the
outstanding principal balance. In addition, the Company assumed $240 million of
Independent Cellular Network Partners' senior debt. On the acquisition date, the
Company refinanced the senior debt and funded the remaining purchase price by
borrowing under its existing revolving bank credit facility. Prior to the ICN
Acquisition, the Company's revolving bank credit facility was amended and
restated to permit, among other things, the ICN Acquisition and increase its
borrowing capacity from $800 million to $1.0 billion. This entry eliminates the
long-term debt of the Acquired Companies and replaces it with the subordinated
debt and additional credit facility borrowings.
(n) This entry reflects the minority partners pro rata share of the write
down of certain property, plant and equipment as described in (j).
(o) Reflects the issuance of 6,500,000 shares of the Company's Common
Stock, $0.01 par value, ("Company Common Stock") issued in connection with the
ICN Acquisition and eliminates the capital accounts of the Acquired Companies.
EARNINGS PER SHARE
(p) Net Income per Share for the nine months ended September 30, 1996 was
computed using weighted average shares outstanding, including common stock
equivalents, and assumes the 6,500,000 shares of Company Common Stock issued in
connection with the ICN Acquisition had been outstanding since the beginning of
the period.
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<TABLE>
<CAPTION>
Independent Cellular Network, Inc. and Affiliates
Combined Balance Sheets
(Thousands of Dollars)
September 30, December 31,
1996 1995
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(Unaudited)
ASSETS
------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 7,458 $ 2,370
Accounts receivable, less allowance
of $321 and $683 12,692 9,796
Due from affiliates 45,398 29,903
Cellular telephone inventory 1,382 2,665
Other 191 365
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Total current assets 67,121 45,099
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Property and equipment 88,557 86,973
Less: Accumulated depreciation (44,692) (38,079)
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Property and equipment, net 43,865 48,894
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Licenses, net of accumulated amortization
of $49,349 and $39,140 131,376 141,586
Non compete agreements, net of accumulated
amortization of $20,010 and $15,991 4,990 9,009
Deferred costs, net of accumulated
amortization of $257 and $154 961 985
Investment in unconsolidated
cellular partnerships 1,781 1,834
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Total other assets 139,108 153,414
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Total assets $ 250,094 $ 247,407
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LIABILITIES AND SHAREHOLDERS' AND
---------------------------------
PARTNERS' EQUITY (DEFICIT)
--------------------------
CURRENT LIABILITIES
Accounts payable $ 4,543 $ 7,554
Accrued expenses 17,207 9,803
Due to affiliates 1,194 882
Customer deposits 505 384
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Total current liabilities 23,449 18,623
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LONG TERM DEBT 325,466 311,131
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MINORITY INTEREST 7,061 5,684
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SHAREHOLDERS' AND PARTNERS' EQUITY (DEFICIT)
Common stock, no par value; 2,000 shares author-
ized; 1,000 shares issued and outstanding 100 100
Preferred stock, no par value; 2,000 shares
authorized; 1,000 shares issued and
outstanding 14,900 14,900
Accumulated deficit (69,647) (69,147)
Partners' equity (deficit) (51,235) (33,884)
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Total shareholders' and partners'
equity (deficit) (105,882) (88,031)
---------- ------------
Total liabilities and shareholders'
and partners' equity (deficit) $ 250,094 $ 247,407
========== =============
The accompanying Notes to Combined Financial Statements are an integral part of
these balance sheets.
</TABLE>
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<TABLE>
<CAPTION>
Independent Cellular Network, Inc. and Affiliates
Combined Statements of Operations
(Thousands of Dollars)
(Unaudited)
Nine Months Ended September 30,
--------------------------------
1996 1995
---------- ----------
<S> <C> <C>
OPERATING REVENUES
Cellular service revenues $ 50,201 $ 43,558
Equipment sales 2,982 2,578
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Total operating revenues 53,183 46,136
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OPERATING EXPENSES
Cost of service 5,957 6,631
Cost of equipment sales 6,673 5,554
Other operations expenses 2,174 2,091
Selling, general, administrative
and other expenses 14,127 12,981
Depreciation and amortization 21,385 24,544
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Total operating expenses 50,316 51,801
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Operating Income (Loss) 2,867 (5,665)
Interest income 2,256 277
Interest expense (21,948) (20,674)
Equity in net income of uncon-
solidated cellular partnerships 352 703
Minority interest in net income
of consolidated entities (1,377) (837)
---------- ----------
Loss before income taxes (17,850) (26,196)
Income tax expense - -
---------- ----------
NET LOSS $ (17,850) $ (26,196)
========== ==========
The accompanying Notes to Combined Financial Statements are an integral part of
these statements.
</TABLE>
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<TABLE>
<CAPTION>
Independent Cellular Network, Inc. and Affiliates
Combined Statements of Cash Flows
(Thousands of Dollars)
(Unaudited)
Nine Months Ended September 30,
-------------------------------
1996 1995
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (17,850) $ (26,196)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 21,385 24,544
Interest capitalized as long term debt 7,249 13,891
Minority interest, net 1,377 837
Equity in net income of unconsolidated
cellular partnerships, net (423) (703)
Changes in assets and liabilities:
Accounts receivable and due from
affiliates (18,391) (13,020)
Cellular telephone inventory 1,283 (676)
Other current assets 174 (5)
Accounts payable and due to affiliates (2,223) 3,917
Accrued expenses 14,491 102
Customer deposits 121 56
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Net cash provided by
operating activities 7,193 2,757
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CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment, net (2,026) (3,720)
Other (79) 8
Proceeds from exchange of assets - 2,376
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Net cash used by investing activities (2,105) (1,336)
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from debt - (1,405)
Payments of debt - -
---------- ----------
Net cash used by
financing activities - 1,405)
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NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 5,088 (16)
CASH AND CASH EQUIVALENTS,
beginning of period 2,370 1,878
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CASH AND CASH EQUIVALENTS,
end of period $ 7,458 $ 1,894
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
Cash paid during the period for interest $ 518 $ (365)
========== ==========
Prior year accrued interest capitalized
as long-term debt $ 7,087 $ 9,912
========== ==========
The accompanying Notes to Combined Financial Statements are an integral part of
these statements.
</TABLE>
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Independent Cellular Network, Inc. and Affiliates
Notes to Unaudited Combined Financial Statements
Note 1. Basis of Combination and Presentation
Independent Cellular Network, Inc., Ohio Cellular RSA L.P. and
Cellular Plus L.P. ("the Companies"), affiliated through common
ownership, provide wireless voice telecommunications services. The
Companies operate as general and limited partners and majority
owners of cellular systems in various metropolitan and rural
service areas in Kentucky, Ohio, Pennsylvania and West Virginia.
The accompanying unaudited combined financial statements include
the accounts of the Companies and their wholly-owned and majority
owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
The unaudited combined financial statements have been prepared in
conformity with generally accepted accounting principles and are
presented in accordance with the rules and regulations of the
Securities and Exchange Commission applicable to interim financial
information. In the Companies' opinion, the unaudited combined
financial statements include all adjustments necessary to present
fairly the financial position and results of operations for the
interim periods presented. All such adjustments are of a normal
recurring nature. These financial statements should be read in
conjunction with the combined financial statements, including the
notes thereto, for the fiscal year ended December 31, 1995.
Note 2. Sale of Assets
The Companies have entered into an Exchange and Merger Agreement
dated May 31, 1996 with 360 Communications Company for the sale of
all the assets and rights related to the Companies cellular
telephone systems and related business in all their collective
markets. The transaction, valued at approximately $514 million,
closed on November 1, 1996.
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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
/s/ Gary L. Burge
By:____________________________________
Gary L. Burge
Senior Vice President - Finance
Date: January 24,1997
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