<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: December 14, 1999
(Date of earliest event reported) December 14, 1999
DOBSON COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
OKLAHOMA 333-23769 73-1110531
(State or other jurisdiction (Commission IRS Employer
of incorporation) File Number) Identification No.)
13439 NORTH BROADWAY EXTENSION, SUITE 200
OKLAHOMA CITY, OKLAHOMA 73114
(Address of principal executive offices) (Zip Code)
(405) 529-8500
(Registrant's telephone number, including area code)
<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
Item 5. OTHER EVENTS
Dobson Communications Corporation (the "Company") has initiated an offer to
purchase ("Offer to Purchase") all of its outstanding 11 3/4% Senior Notes due
2007 (the "Notes"). In conjunction with its Offer to Purchase, the Company is
soliciting from the holders of the Notes consents to certain amendments to the
indenture governing the Notes (the "Indenture"). The amendments, if approved,
would eliminate a number of restrictive covenants contained in the Indenture,
including covenants that:
- - limit the ability of the Company to incur indebtedness;
- - limit the ability of the Company to make restricted payments;
- - limit the ability of the Company to pay dividends and impose payment
restrictions effecting its restricted subsidiaries;
- - limit the ability of the Company to issue and sell capital stock of its
restricted subsidiaries;
- - limit the ability of restricted subsidiaries of the Company to issue
guarantees of indebtedness;
- - limit the transactions with stockholders and affiliates of the Company;
- - limit the ability of the Company to put liens upon its assets;
- - limit the ability of the Company to sell assets and to utilize the proceeds
from such sales;
- - require that the Company purchase Notes upon a change of control of the
Company;
- - require that the Company maintain its corporate existence;
- - require that the Company provide the trustee under the Indenture with a
compliance certificate; and
- - require the Company to file reports with the Securities and Exchange
Commission and provide reports to holders of the Notes.
In addition, the proposed amendments, if adopted, would eliminate the
prohibition contained in the Indenture on certain mergers, consolidations and
transfer of assets by the Company. Further, the proposed amendments to the
Indenture would amend the provision entitled "Events of Default" in the
Indenture to delete the clauses making it an Event of Default if the Company
fails to comply with the covenants eliminated by the proposed amendments or the
provision in the Indenture regarding when the Company may merge, consolidate or
transfer assets, or if the Company fails to comply with any other agreements of
the Company, defaults under any instrument governing the Company's other
indebtedness or is subject to certain final judgments.
<PAGE>
The proposed amendments would also waive any requirement of the Company to make
an offer to purchase Notes using the proceeds from any prior sale of assets.
The Company is offering to purchase each $1,000 principal amount of Notes at a
price equal to (i) the present value on the payment date of $1,058.75 per $1,000
principal amount of Notes and the present value of the interest that would be
payable on or accrue until April 15, 2002, the earliest redemption date of the
Notes, in each case, determined on the basis of a yield to such earliest
redemption date equal to the sum of (x) the bid-sale yield on the 6 5/8% U.S.
Treasury Notes due April 30, 2002 (the "referenced yield"), as of 2:00 p.m., New
York City time, on January 10, 2000 plus (y) 62.5 basis points minus the consent
payment of $30 per $1,000 principal amount of Notes, plus accrued and unpaid
interest to but not including, the payment date. In addition, the Company will
pay each registered holder of Notes who validly consents to the proposed
amendments to the Indenture on or prior to December 28, 1999, unless that date
is extended, an amount in cash equal to $30 per $1,000 principal amount of such
holder's Notes for which consents have been validly delivered and not validly
revoked on or prior to the consent date.
The Company's offer to purchase its outstanding Notes will expire on January 12,
2000 unless extended. The last date for consents to be received for the proposed
amendments of the Indenture is December 28, 1999, unless extended.
In connection with its offer to purchase its outstanding Notes, the Company is
providing to the holders of the Notes certain information regarding the Company
which has not heretofore been publicly disclosed. The new information is set
forth below.
THE COMPANY
GENERAL. The Company is a leading provider of rural and suburban cellular
telephone services. As of September 30, 1999, the Company's systems covered a
total population of approximately 5.9 million and it had 424,000 subscribers. On
a proportionate basis, after giving effect to the Company's expected acquisition
of a 50% interest in American Cellular Corporation, the Company's systems would
have covered a net population of approximately 8.2 million and it would have had
623,000 subscribers as of September 30, 1999. For the nine months ended
September 30, 1999, the Company had total revenues of $235.1 million and EBITDA,
or operating income (loss) before depreciation, amortization and nonrecurring
charges, of $105.1 million. On the same proportionate basis, the Company would
have had total revenues of $329.0 million and EBITDA of $162.7 million for the
nine months ended September 30, 1999.
The Company began providing cellular telephone service in 1990 in Oklahoma
and the Texas Panhandle. The Company has expanded its cellular operations
rapidly since then, primarily through the acquisitions of rural and suburban
cellular systems. Since 1996, the Company has completed 13 acquisitions of
cellular licenses and systems, increasing the total population served by its
systems by approximately 5.6 million and significantly expanding the geographic
scope of its operations. The Company believes it has been successful in
integrating acquired systems into its operations.
The Company believes that owning and operating a mix of rural and suburban
cellular systems provides strong growth opportunities because the Company
believes these systems currently have lower penetration rates, higher subscriber
growth rates, a higher proportion of roaming revenues and less competition for
subscribers than cellular systems located in larger metropolitan areas. The
Company focuses on acquiring underdeveloped cellular systems that are adjacent
to major metropolitan areas, which include a high concentration of expressway
corridors and tend to have a significant amount of roaming activity.
The Company has a strategic relationship with AT&T Wireless Systems, Inc.,
which recently became one of the Company's stockholders. Through this
relationship, the Company has a coast-to-coast roaming agreement that allows its
customers to utilize wireless systems owned by AT&T Wireless, and customers of
AT&T Wireless to utilize the Company's cellular systems, each at favorable
prices. AT&T Wireless customers accounted for approximately 37% of the Company's
roaming revenues, or approximately 17% of the Company's total revenues, in the
nine months ended September 30, 1999. The Company also has roaming agreements
with AirTouch Communications, Inc., Southwestern Bell Mobile Systems, Inc. and
other leading wireless providers.
The Company and AT&T Wireless have entered into an equally-owned joint
venture to acquire American Cellular Corporation for approximately $2.3
billion, before expenses. American Cellular is one of the largest independent
rural cellular telephone operators in the United States. As of September 30,
1999, American Cellular's systems covered a total population of approximately
4.9 million and it had 398,000 subscribers, primarily in rural areas of the
midwestern and eastern United States. Following completion of this acquisition,
the Company will operate American Cellular's systems. American Cellular's
management organization, billing system, network infrastructure and marketing
programs are substantially similar to those of the Company.
3
<PAGE>
CELLULAR MARKETS. The following table sets forth information with respect
to the Company's existing cellular markets and the cellular markets of American
Cellular as of September 30, 1999. Net population represents total population
less minority ownership interests in the Company's licenses. The Company
determines market penetration by dividing total subscribers in each of its FCC
cellular licensed areas at the end of the period by the estimated total
population covered by the applicable cellular license or authorization.
<TABLE>
<CAPTION>
TOTAL NET TOTAL MARKET
CELLULAR MARKETS POPULATION POPULATION SUBSCRIBERS PENETRATION
---------------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
COMPANY
Northern Region........................................ 2,624,000 2,624,000 224,700 8.6%
Central Region......................................... 1,254,000 1,164,000 65,800 5.2%
Western Region......................................... 1,081,000 1,003,000 61,100 5.7%
Eastern Region......................................... 949,000 949,000 72,400 7.6%
---------- ---------- -------
Total--Company Regions........................... 5,908,000 5,740,000 424,000 7.2%
========== ========== =======
AMERICAN CELLULAR
Upper Midwest Region................................... 1,927,000 1,914,000 162,900 8.5%
New York Region........................................ 1,084,000 1,073,000 101,100 9.3%
Kentucky Region........................................ 1,074,000 1,074,000 73,400 6.8%
Mid-Atlantic Region.................................... 854,000 854,000 60,600 7.1%
---------- ---------- -------
Total--American Cellular Regions................. 4,939,000 4,915,000 398,000 8.1%
Company's proportionate interest in American
Cellular...................................... 2,469,500 2,457,500 199,000 8.1%
========== ========== =======
TOTAL COMPANY ON A PROPORTIONATE BASIS................. 8,377,500 8,197,500 623,000 7.4%
========== ========== =======
</TABLE>
The Company has the contractual right to acquire the license for, and
certain assets related to, Pennsylvania 2 RSA and the Company currently controls
and is managing the operation of this market for the seller pending the closing
of the acquisition. As a result, the Company includes the population and
subscriber data related to this market in its population and subscriber data in
its Northern Region. As of September 30, 1999, the Pennsylvania 2 RSA had a
total population of approximately 88,000. In addition to the pending acquisition
of Pennsylvania 2 RSA and American Cellular, the Company has pending
acquisitions that, if completed, would have increased the total population
served by the Company's cellular systems by approximately 0.4 million as of
September 30, 1999.
COMPETITIVE STRENGTHS. The Company believes that its competitive strengths
are:
- its established operating history in rural and suburban markets;
- its proven acquisition and integration capabilities;
- its strategic relationship with AT&T Wireless;
- its experienced management team; and
- its ability to offer a variety of digital services, including digital
voice services, to approximately 85% of its covered population.
COMPANY STRATEGY. The Company's strategy is to capitalize on its
competitive strengths and acquire, develop and operate rural and suburban
cellular systems. The principal elements of its strategy include:
- acquiring additional cellular operations in rural service areas, or RSAs,
and in smaller metropolitan statistical areas, or MSAs, that have
attractive demographics and growth trends, a favorable competitive
environment and that are located adjacent to major metropolitan areas
served by operators with which the Company has established, or with which
it expects to establish, strategic relationships;
4
<PAGE>
- integrating the cellular systems the Company acquires, including American
Cellular, with its existing operations to achieve economies of scale;
- increasing system capacity and coverage and further upgrading the cellular
systems the Company acquires to attract additional subscribers, to
increase the use of its systems by existing subscribers, to increase
roaming activity and to further enhance the overall efficiency of its
network;
- maintaining and expanding strategic relationships with operators of
wireless systems in major MSAs near the Company's cellular systems,
including roaming agreements that allow the Company's subscribers to use
the wireless systems of operators in neighboring MSAs and RSAs at
favorable rates;
- distinguishing the Company in its markets as the leading cellular services
provider by stressing its service quality, local sales presence and
commitment to the community;
- offering distinctive rate plans to attract subscribers who the Company
believes are likely to generate high monthly revenues and low churn rates;
and
- maintaining high levels of customer satisfaction through a variety of
techniques, including the maintenance of 24-hour customer service.
CERTAIN INDEBTEDNESS
The Company has received a commitment letter for a new credit facility
(the "New Credit Facility") from Bank of America, N.A. The New Credit
Facility will consist of a $300.0 million revolving credit facility and a
$500.0 million term loan facility, each maturing in seven years. The New
Credit Facility will be secured by all of the capital stock of the Company's
subsidiaries. A portion of the proceeds from the New Credit Facility will be
used to fund the Offer and the Solicitation. The Company will also use
proceeds from the New Credit Facility to reference the existing credit
facilities of two of the Company's principal subscribers.
The New Credit Facility will contain affirmative and negative covenants
including the periodic delivery of financial statements and other information to
the lenders, the payment and performance of tax and other material obligations,
the maintenance of existence, qualification, good standing, properties, license
and insurance, compliance with environmental and other laws and regulations and
material agreements, limitations on indebtedness, liens, loans and investments,
asset sales, restructure agreements, transactions with affiliates, mergers and
changes in business, together with various financial covenants.
THE ACQUISITION
OVERVIEW. In October 1999, the Company and AT&T Wireless entered into an
equally-owned joint venture to acquire, own and operate American Cellular. The
aggregate acquisition price for American Cellular is $2.3 billion, before
expenses. American Cellular is one of the largest independent rural cellular
telephone operators in the United States, with cellular telephone systems
located primarily in rural areas of the midwestern and eastern United States.
The financing for the American Cellular acquisition will be provided by a
combination of equity contributions of $372.5 million by each of AT&T Wireless
and the Company, and by borrowings under the joint venture's proposed new $1.75
billion credit facility.
THE JOINT VENTURE AGREEMENT. The Company and AT&T Wireless have formed an
equally-owned limited liability company to acquire American Cellular. The
Company and AT&T Wireless have agreed to each contribute $372.5 million in cash
to the joint venture to provide a portion of the funds to be used to consummate
the American Cellular acquisition. In the event the proceeds of the Company's
public offering of its Class A common stock are insufficient to permit the
Company to fund its entire investment in the joint venture, the Company's
principal shareholder, the Dobson CC Limited Partnership, or the Dobson
Partnership, has agreed to invest up to $200.0 million in the Company to enable
the Company to meet its commitment to the joint venture.
Management of the joint venture will be vested in a four-person management
committee, two members designated by AT&T Wireless and two designated by the
Company. The Company has agreed with AT&T Wireless to be responsible for the
day-to-day operation of American Cellular. If the Company experiences a
5
<PAGE>
change of control and AT&T Wireless and its affiliates own at least 40% of the
joint venture, then AT&T Wireless and its affiliates will have the right to
initiate a buy/sell procedure to acquire the Company's interest in the joint
venture or to require the Company to acquire their interest in the joint
venture. In addition, the Company will lose its right to 50% representation on
the management committee and its power to approve all significant matters.
Before the third anniversary of the American Cellular acquisition, neither
AT&T Wireless nor the Company may transfer any interest in the joint venture
without the consent of the other. Following the third anniversary of the
American Cellular acquisition, each of AT&T Wireless and the Company have the
right to transfer up to 20% of its economic interest in the joint venture,
subject to a pro rata tag-along right in favor of the other party. Any transfers
above that 20% threshold will be subject to a right of first refusal in favor of
the other party. After the fifth anniversary of the American Cellular
acquisition, either AT&T Wireless or the Company may elect to cause the joint
venture to convert to a corporate form and to conduct an underwritten initial
public offering of up to 20% of the common stock of the corporate joint venture.
Additionally, following the fifth anniversary of the American Cellular
acquisition, whether or not an initial public offering has occurred, either AT&T
Wireless or the Company may initiate a buy/sell procedure by proposing a cash
purchase price for all of the interest of the party initiating the procedure.
OPERATING ARRANGEMENTS. In connection with the joint venture, the Company,
AT&T Wireless and American Cellular have entered into a 20-year operating
agreement. So long as American Cellular continues to meet quality standards
established by AT&T Wireless, AT&T Wireless has agreed not to construct, own or
acquire a controlling interest in, or manage a communications system that
provides mobile wireless services in areas in which American Cellular operates
its cellular systems for a period of five years following the closing of the
American Cellular acquisition. However, AT&T Wireless may:
- resell or act as the agent for American Cellular to provide communications
services provided by American Cellular;
- continue to provide wireless services to its customers in American
Cellular's territory;
- provide or resell wireless telecommunications services to or from specific
locations; and
- act as an agent for other carriers in the geographic areas in which
American Cellular operates, but solely for existing national account
customers of AT&T Wireless.
For five years following the consummation of the American Cellular
acquisition,
- the Company will be the preferred provider of roaming services for
American Cellular's subscribers roaming in its markets;
- AT&T Wireless will be the preferred provider of roaming services for
American Cellular's subscribers roaming in AT&T Wireless's markets; and
- American Cellular will be the preferred provider of roaming services for
the Company's and AT&T Wireless's subscribers roaming in American
Cellular's markets.
AT&T Wireless has the right to terminate the roaming preferences described
above upon a merger, consolidation, asset acquisition or other business
combination of AT&T Wireless with a business that:
- has annual telecommunication revenues in excess of $5.0 billion;
- derives less from one-third of its aggregate revenues from wireless
services; and
- owns FCC licenses to offer, and does offer, mobile wireless services
serving more than 25% of the population in the American Cellular markets.
JOINT VENTURE CREDIT FACILITY. The joint venture has received a commitment
from Banc of America Securities LLC and its affiliate, Bank of America, N.A., on
behalf of a group of banks to provide a
6
<PAGE>
$1.75 billion credit facility to the joint venture, the proceeds of which will
be used primarily to consummate the American Cellular acquisition. Based on this
commitment, the Company expects that this credit facility will consist of a
$300.0 million revolving credit facility and three term loan facilities. The
revolving credit facility will mature in 2007. Term loan A, which will mature in
2007, will be a $700.0 million facility; term loan B, which will mature in 2008,
will be a $350.0 million facility; and term loan C, which will mature in 2009,
will be a $400.0 million facility.
Borrowing under these credit facilities will bear interest at variable
rates, subject to reductions based on the joint venture's financial leverage.
Assuming the American Cellular acquisition occurs on or prior to March 31, 2000,
the Company expects that all these term loan facilities will be fully drawn and
that the joint venture will borrow an aggregate principal amount of
$1.57 billion under this credit facility. The joint venture's obligations under
the credit facility will be secured by a pledge of the stock of American
Cellular and its subsidiaries, and liens on all of the assets of the joint
venture and of American Cellular except its FCC licenses.
The joint venture will be required to amortize the term loan facilities
quarterly in amounts ranging from $42.5 million in 2001 to $196.0 million in
2009. In addition, the joint venture will be required to make prepayments of
amounts received from asset sales, excess cash flows and proceeds from new
borrowings or the sale of equity. The joint venture will have the right to
prepay the credit facility in total or in part at any time subject to the
payment of certain fees.
The credit facility will contain restrictive covenants that, among other
things, will limit the ability of the joint venture to incur additional
indebtedness, create liens and pay dividends. In addition, the joint venture
will be required to maintain certain financial ratios, including a ratio of
total indebtedness to EBITDA of 9.5 to 1; a ratio of EBITDA to debt service
requirements of 1.10 to 1; an interest coverage ratio of at least 1.25 to 1; and
a ratio of EBITDA minus capital expenditures to debt service requirements of
greater than 1.0 to 1.
PROPOSED INITIAL PUBLIC OFFERING
The Company expects to raise additional funds through the sale of equity.
The Company has filed a registration statement with the Commission with
respect to a proposed initial public offering of its Class A common stock.
The registration statement has not yet been declared effective by the
Commission. The Company seeks to obtain net proceeds from the sale of shares
of its Class A common stock of approximately $467.0 million after deducting
underwriting discounts and commissions and estimated offering expenses. There
can be no assurance that the common stock offering will be successful.
The Company intends to use $372.5 million of the net proceeds of the
offering as a capital contribution to its joint venture with AT&T Wireless. The
joint venture will use these proceeds, together with an equivalent contribution
to the joint venture by AT&T Wireless and proceeds from the joint venture's bank
credit facility, to acquire American Cellular. The Company intends to use
$99.3 million of the net proceeds of the offering to redeem all outstanding
shares of its Class E preferred stock which will be issued upon conversion of
all outstanding shares of Class D preferred stock in its recapitalization. The
Company intends to use any remaining net proceeds for working capital and other
general corporate purposes.
The closing of the Company's offering of its Class A common stock is not
contingent upon completion of the American Cellular acquisition. If the Company
does not complete the American Cellular acquisition, it intends to use the net
proceeds of the offering allocated for that purpose:
- to reduce its outstanding indebtedness and to potentially redeem a portion
of its senior preferred stock;
- to pay its share of any damages to American Cellular that may arise under
the American Cellular merger agreement; and
- for working capital and other general corporate purposes.
7
<PAGE>
THE RECAPITALIZATION
The Company will complete a recapitalization immediately prior to the
closing of its public offering of its Class A common stock. This
recapitalization will include:
- the conversion of the Company's pre-recapitalization Class A common stock
into new Class B common stock;
- the retirement of 81,198 shares of pre-recapitalization Class A common
stock held as treasury stock;
- the creation of the new Class A common stock to be issued in the Company's
public offering of its Class A common stock;
- a stock split of the Company's new Class B common stock;
- the retirement of each share of the Company's outstanding
pre-recapitalization Class A preferred stock, owned by one of its
subsidiaries;
- the conversion of the Company's outstanding pre-recapitalization Class D
preferred stock into one share of new Class A common stock and one share
of Class E preferred stock;
- the amendment of the Company's 1996 stock option plan to permit the
issuance of options exercisable into new Class A common stock; and
- the conversion of outstanding options exercisable into
pre-recapitalization Class B or Class C common stock into options
exercisable into new Class A common stock.
CAPITALIZATION
The following table sets forth the Company's consolidated capitalization
as of September 30, 1999 and as adjusted on a pro forma basis to reflect:
- the recapitalization described above;
- the consummation of the public offering of shares of the Company's Class A
common stock resulting in net proceeds of approximately $467.0 million;
- the Company's acquisition of a 50% interest in the American Cellular joint
venture and its acquisition of American Cellular;
- the redemption of all of the Company's outstanding Class E preferred
stock;
- the establishment of a new credit facility to replace the existing credit
facilities of the Company's subsidiaries, Dobson Operating Company, or
DOC, and Dobson Cellular Operations Company, or DCOC;
- the purchase of all $160.0 million aggregate principal amount of the
Company's 11 3/4% senior notes using proceeds provided by the New Credit
Facility;
- the purchase by the Company's subsidiary, Dobson Tower Company, of
cellular towers from Sygnet Wireless, Inc., or Sygnet, and the subsequent
sale of those towers to an unaffiliated company and the use of the
proceeds for the repayment of debt and redemption of related preferred
stock of Dobson Tower Company in October 1999; and
- the distribution, prior to the consummation of the Company's public
offering of its Class A common stock, of all of the outstanding capital
stock of its subsidiary, Logix Communications Enterprises, Inc., or Logix,
to the Company's current shareholders.
If the Company does not complete the American Cellular acquisition, cash and
cash equivalents on a pro forma basis would increase by $372.5 million. In that
event, the Company intends to use the net proceeds allocated for the American
Cellular joint venture as discussed above.
The term "restricted investments" includes securities that the Company has
pledged to secure interest payments on 12 1/4% senior notes of its subsidiary,
Dobson/Sygnet Communications, Inc. The September 30, 1999 pro forma information
does not reflect the consummation of the Company's pending acquisitions, which
have an aggregate purchase price of $131.0 million. The Company expects to fund
these acquisitions by drawing on its bank facilities.
8
<PAGE>
The following table excludes shares of common stock that will be issued upon
the exercise of options granted under the Company's 1996 stock option plan.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
-----------------------
ACTUAL PRO FORMA
---------- ----------
(UNAUDITED)
($ IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents................................... $ 339 $ 339
Restricted investments...................................... 57,771 57,771
---------- ----------
Total cash and restricted investments..................... $ 58,110 $ 58,110
========== ==========
Long term debt, including current maturities:
Credit facilities:
Existing DOC and DCOC credit facilities................. $ 272,000 $ --
New credit facility..................................... -- 475,000(1)
Existing Dobson/Sygnet credit facility.................. 406,000 393,769
Dobson/Sygnet notes....................................... 200,000 200,000
Senior notes.............................................. 160,000 --
Other long-term debt...................................... 3,958 3,958
---------- ----------
Total long-term debt.................................... 1,041,958 1,072,727
---------- ----------
Minority interests.......................................... 27,110 19,410
---------- ----------
12 1/4% senior preferred stock, $1.00 par value, 734,000
shares authorized, 265,395 shares issued and outstanding
on an as adjusted and pro forma basis..................... 265,395 265,395
13% senior preferred stock, $1.00 par value, 500,000 shares
authorized, 175,402 shares issued and outstanding on an as
adjusted and pro forma basis.............................. 175,402 175,402
Class E preferred stock, $1.00 par value, 85,000 shares
authorized, 75,093.7 shares issued and outstanding on an
as adjusted basis and none authorized, issued or
outstanding on a pro forma basis.......................... 85,000 --
Total stockholders' (deficit) equity........................ (296,249) 184,333
---------- ----------
Total capitalization.................................. $1,298,616 $1,717,267
========== ==========
</TABLE>
- -----------------
(1) For each $1.0 million aggregate principal amount of Notes which are not
purchased by the Company in the Offer to Purchase, the Company's indebtedness
under the New Credit Facility will be reduced by $1.13 million.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
In addition, the accompanying unaudited pro forma balance sheet as of
September 30, 1999 gives effect to the following transactions as if they had
occurred on September 30, 1999:
- the consummation of the Company's public offering of its Class A common
stock and the receipt of net proceeds of approximately $467.0 million;
- the Company's acquisition of a 50% interest in the American Cellular joint
venture and its acquisition of American Cellular;
- the redemption of all of the Company's outstanding Class E preferred
stock;
- the establishment of a new credit facility to replace the existing credit
facilities of the Company's DOC and DCOC subsidiaries;
9
<PAGE>
- the purchase of all $160.0 million principal aggregate amount of the
Company's 11 3/4% senior notes using proceeds provided by the Company's
new bank credit facility;
- the purchase by the Company's subsidiary, Dobson Tower Company, of
cellular towers from Sygnet and the subsequent sale of those towers to an
unaffiliated company and the use of the proceeds for the repayment of debt
and redemption of related preferred stock of Dobson Tower Company in
October 1999; and
- the distribution, prior to the consummation of this offering, of all of
the outstanding capital stock of the Company's subsidiary, Logix, to
certain of the Company's current stockholders.
The accompanying unaudited pro forma statements of operations give effect
to the above transactions and the following transactions as if each had
occurred on January 1, 1998:
- the Company's second quarter 1999 issuance of $170.0 million aggregate
liquidation amount of its 13% senior preferred stock and the utilization
of the net proceeds from that issuance to redeem all of the Company's
Class F and G preferred stock and to reduce its bank debt; and
- for purposes of the unaudited pro forma statement of operations for the
year ended December 31, 1998, the Company's acquisition of Sygnet and the
related financing transactions in December 1998.
If the Company does not complete the American Cellular acquisition, cash and
cash equivalents on a pro forma basis would increase by $372.5 million. In that
event, the Company intends to use the net proceeds allocated for that purpose:
- to reduce outstanding indebtedness and to potentially redeem a portion of
its senior preferred stock;
- to pay the Company's share of any damages to American Cellular that may
arise under the American Cellular merger agreement; and
- for working capital and other general corporate purposes.
The following unaudited pro forma consolidated financial statements and the
related notes are provided for informational purposes only. The unaudited pro
forma consolidated financial statements are based upon currently available
information and assumptions that the Company believes are reasonable. The
accompanying data do not purport to represent what the Company's results of
operations would have been if the pro forma transactions had been completed on
the dates indicated, nor do they purport to indicate the Company's future
financial position or results of operations.
10
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
DOBSON
COMMUNICATIONS AMERICAN CELLULAR
CORPORATION ADJUSTMENTS SUB-TOTAL ADJUSTMENTS TOTAL
-------------- ----------- --------- ----------------- ---------
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Operating revenues:
Service revenues...................... $117,892 $ -- $117,892 $ -- $ 117,892
Roaming revenues...................... 107,296 -- 107,296 -- 107,296
Equipment sales and other revenues.... 9,952 -- 9,952 -- 9,952
-------- ---------- -------- ----------- ---------
Total operating revenues............ 235,140 -- 235,140 -- 235,140
-------- ---------- -------- ----------- ---------
Operating expenses:
Cost of services...................... 35,762 1,130 (1) 36,892 -- 36,892
Cost of equipment..................... 18,562 -- 18,562 -- 18,562
Marketing and selling................. 34,957 -- 34,957 -- 34,957
General and administrative............ 40,795 -- 40,795 -- 40,795
Depreciation and amortization......... 100,020 (650)(2) 99,370 -- 99,370
-------- ---------- -------- ----------- ---------
Total operating expenses............ 230,096 480 230,576 -- 230,576
-------- ---------- -------- ----------- ---------
Operating income (loss)................. 5,044 (480) 4,564 -- 4,564
-------- ---------- -------- ----------- ---------
Interest expense........................ (82,365) 6,388 (3) (75,977) -- (75,977)
Equity in loss of unconsolidated
subsidiary............................ -- -- -- (22,389)(6) (22,389)
Other income, net....................... 3,411 -- 3,411 -- 3,411
-------- ---------- -------- ----------- ---------
Loss before minority interests and
income taxes.......................... (73,910) 5,908 (68,002) (22,389) (90,391)
Minority interests in income of
subsidiaries.......................... (2,125) -- (2,125) -- (2,125)
-------- ---------- -------- ----------- ---------
Loss from continuing operations before
income taxes.......................... (76,035) 5,908 (70,127) (22,389) (92,516)
Income tax benefit...................... 28,892 (2,244)(4) 26,648 -- 26,648
-------- ---------- -------- ----------- ---------
Loss from continuing operations......... (47,143) 3,664 (43,479) (22,389) (65,868)
Dividends on preferred stock............ (50,513) 3,960 (5) (46,553) -- (46,553)
-------- ---------- -------- ----------- ---------
Loss from continuing operations
applicable to common stockholders..... $(97,656) $ 7,624 $(90,032) $ (22,389) $(112,421)
======== ========== ======== =========== =========
</TABLE>
See accompanying notes to the unaudited pro forma consolidated statement of
operations.
11
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999
(1) This reflects additional cost of service for lease payments on cellular
towers sold to an unaffiliated company.
(2) This reflects the elimination of depreciation and amortization relating to
the sale of the Sygnet towers.
(3) This reflects:
- the elimination of $2.9 million of interest expense as a result of the
redemption of $160.0 million aggregate principal amount of the Company's
11 3/4% senior notes with proceeds from its New Credit Facility having an
assumed weighted average interest rate of 8% per annum (each 1/8% increase
in the assumed weighted average interest rate would increase interest
expense by $0.2 million per nine month period);
- the elimination of $1.8 million of interest expense from the repayment of
$12.2 million of Dobson/ Sygnet bank debt and the $17.5 million Dobson
Tower credit facility with proceeds from the sale of towers sold to an
unaffiliated company;
- the elimination of $2.9 million of interest expense associated with the
repayment of $100.0 million of bank debt from a portion of the proceeds of
the sale of the Company's 13% senior preferred stock; and
- the addition of $1.2 million of amortization of deferred financing costs
related to the new credit facility.
(4) This reflects the tax impact of the pro forma adjustments.
(5) This reflects:
- the elimination of $9.6 million of accrued dividends on the Company's
Class D preferred stock associated with the conversion of its Class D
preferred stock into shares of its Class A common stock and Class E
preferred stock and the redemption of its Class E preferred stock;
- the elimination of $3.1 million of preferred stock dividends associated
with the redemption of the Company's Class F and G preferred stock;
- the addition of $9.3 million of non-cash preferred stock dividend
requirements related to the issuance of the Company's 13% senior preferred
stock; and
- the elimination of $0.6 million of preferred stock dividends associated
with the redemption of $7.5 million liquidation value of preferred stock
of the Company's subsidiary, Dobson Tower Company, with a portion of the
proceeds received from the sale of towers to an unaffiliated company.
(6) This reflects the Company's 50% interest in the pro forma net loss of the
American Cellular joint venture.
12
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
DOBSON AMERICAN
COMMUNICATIONS CELLULAR
CORPORATION SYGNET ADJUSTMENTS SUB-TOTAL ADJUSTMENTS TOTAL
--------------- -------- ----------- --------- ----------- ---------
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Operating revenues:
Service revenues............................. $ 69,402 $ 64,786 $ -- $ 134,188 $ -- $ 134,188
Roaming revenues............................. 66,479 28,035 -- 94,514 -- 94,514
Equipment sales and other revenues........... 4,154 7,447 -- 11,601 -- 11,601
-------- -------- -------- --------- -------- ---------
Total operating revenues................... 140,035 100,268 -- 240,303 -- 240,303
-------- -------- -------- --------- -------- ---------
Operating expenses:
Cost of services............................. 33,267 9,433 2,338 (1)(2) 45,038 -- 45,038
Cost of equipment............................ 8,360 10,444 -- 18,804 -- 18,804
Marketing and selling........................ 22,393 12,327 2,603 (2) 37,323 -- 37,323
General and administrative................... 26,051 19,796 (3,435)(2) 42,412 -- 42,412
Merger related costs......................... -- 1,884 (1,884)(3) -- -- --
Depreciation and amortization................ 47,110 27,498 42,441 (4) 117,049 -- 117,049
-------- -------- -------- --------- -------- ---------
Total operating expenses................... 137,181 81,382 42,063 260,626 -- 260,626
-------- -------- -------- --------- -------- ---------
Operating income (loss)........................ 2,854 18,886 (42,063) (20,323) -- (20,323)
-------- -------- -------- --------- -------- ---------
Interest expense............................... (38,979) (27,895) (23,184)(5) (90,058) (90,058)
Merger related costs........................... -- (5,206) 5,206 (3) -- -- --
Equity in loss of unconsolidated subsidiary.... -- -- -- -- (36,661)(8) (36,661)
Other income, net.............................. 3,858 (319) -- 3,539 -- 3,539
-------- -------- -------- --------- -------- ---------
Loss before minority interests and income
taxes........................................ (32,267) (14,534) (60,041) (106,842) (36,661) (143,503)
Minority interests in income of subsidiaries... (2,487) -- -- (2,487) -- (2,487)
-------- -------- -------- --------- -------- ---------
Loss from continuing operations before income
taxes........................................ (34,754) (14,534) (60,041) (109,329) (36,661) (145,990)
Income tax benefit............................. 11,469 -- 30,076 (6) 41,545 -- 41,545
-------- -------- -------- --------- -------- ---------
Loss from continuing operations................ (23,285) (14,534) (29,965) (67,784) (36,661) (104,445)
Dividends on preferred stock................... (23,955) -- (34,007)(7) (57,962) -- (57,962)
-------- -------- -------- --------- -------- ---------
Loss from continuing operations applicable to
common stockholders.......................... $(47,240) $(14,534) $(63,972) $(125,746) $(36,661) $(162,407)
======== ======== ======== ========= ======== =========
</TABLE>
See accompanying notes to the unaudited pro forma consolidated statement of
operations.
13
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(1) This reflects additional cost of service for lease payments on cellular
towers sold to an unaffiliated company.
(2) This reclassifies certain operating expenses of Sygnet to conform with the
Company's historical presentation.
(3) This eliminates costs that Sygnet incurred related to the consummation of
the Company's acquisition of Sygnet.
(4) This reflects:
- the additional $43.3 million of depreciation and amortization resulting
from the allocation of the purchase price attributable to the Sygnet
acquisition of property and equipment, cellular license acquisition costs
and intangible assets; and
- the elimination of $0.9 million of depreciation and amortization relating
to the sale of the Sygnet towers.
(5) This reflects:
- the elimination of $27.9 million of interest expense associated with
Sygnet's senior notes and Sygnet's bank facility that the Company repaid
as part of our acquisition of Sygnet;
- the addition of $62.0 million of interest expense and amortization of
deferred financing costs relating to the Sygnet acquisition;
- the elimination of $8.7 million of interest expense associated with the
repayment of existing bank debt from the proceeds of the Company's May
1999 offering of 13% senior preferred stock;
- the elimination of $3.8 million of interest expense as a result of the
redemption of $160.0 million aggregate principal amount of the Company's
11 3/4% senior notes with proceeds from its New Credit Facility having an
assumed interest rate of 8% per annum (each 1/8% increase in the assumed
weighted average interest rate would increase interest expense by
$0.2 million per annum); and
- the addition of $1.6 million of amortization of deferred financing costs
related to the New Credit Facility.
(6) This reflects the tax impact of the pro forma adjustments.
(7) This reflects adjustments to dividends resulting from the Company's
offerings and redemption of preferred stock, including the amortization of
the issuance costs and the accretion of discounts with respect thereto, as
follows:
- the addition of $23.8 million for the Company's 13% senior preferred stock
offered in May 1999;
- the addition of $10.1 million for the Company's 12 1/4% senior preferred
stock offered in December 1998;
- the addition of $0.9 million for the Company's senior preferred stock
offered in January 1998; and
- the elimination of $0.8 million of dividends on the Class B and C
preferred stock that redeemed in December 1998.
(8) This reflects the Company's 50% interest in the pro forma net loss of the
American Cellular joint venture.
14
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
AS OF SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
DOBSON AMERICAN
COMMUNICATIONS CELLULAR
CORPORATION ADJUSTMENTS SUB-TOTAL ADJUSTMENTS TOTAL
-------------- ----------- ---------- ----------- ----------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets, net of
restricted investments...... $ 64,773 $ 372,500 (1) $ 437,273 $ (372,500)(5) $ 64,773
Restricted investments........ 57,771 -- 57,771 -- 57,771
Property, plant and
equipment................... 187,291 (25,000)(2) 162,291 -- 162,291
Receivable--affiliate......... 8,200 -- 8,200 -- 8,200
Cellular license acquisition
cost........................ 1,227,579 (13,000)(2) 1,214,579 -- 1,214,579
Deferred financing costs...... 69,017 7,254 (3) 76,271 -- 76,271
Other intangibles............. 48,139 -- 48,139 -- 48,139
Investment in unconsolidated
subsidiary.................. -- -- -- 372,500 (5) 372,500
Other assets.................. 3,811 -- 3,811 -- 3,811
---------- --------- ---------- ----------- ----------
Total assets.............. $1,666,581 $ 341,754 $2,008,335 $ -- $2,008,335
========== ========= ========== =========== ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities........... $ 101,885 $ (9,983)(1) $ 73,833 $ -- $ 73,833
(18,069)(2)
Net liabilities of
discontinued operations..... 48,844 (48,844)(2) -- -- --
Long-term debt, net of current
portion..................... 1,039,844 (12,231)(2) 1,070,613 -- 1,070,613
43,000 (3)
Deferred credits.............. 219,350 -- 219,350 -- 219,350
Minority interests............ 27,110 (7,700)(2) 19,410 -- 19,410
Preferred stock............... 525,797 (85,000)(1) 440,797 -- 440,797
Stockholders' (deficit)
equity...................... (296,249) 467,483 (1) 184,332 -- 184,332
(35,746)(3)
48,844 (4)
---------- --------- ---------- ----------- ----------
Total liabilities and
stockholders' (deficit)
equity..................... $1,666,581 $ 341,754 $2,008,335 $ -- $2,008,335
========== ========= ========== =========== ==========
</TABLE>
See accompanying notes to the unaudited pro forma consolidated condensed balance
sheet.
15
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
AS OF SEPTEMBER 30, 1999
(1) This reflects:
- the Company's public offering of its Class A common stock resulting in net
proceeds of approximately $467.0 million;
- the interim increase in cash that would occur if the Company does not
complete the American Cellular acquisition (see "--Initial Public
Offering" for a discussion of how the Company intends to use the net
proceeds from this offering if the Company does not complete the American
Cellular acquisition); and
- the conversion of the Company's Class D preferred stock into shares of
Class A common stock and Class E preferred stock and the redemption of the
Company's Class E preferred stock.
(2) This reflects:
- the sale of the Sygnet towers;
- the repayment of the $17.5 million Dobson Tower credit facility and bank
debt under the Dobson/ Sygnet Credit facility; and
- the redemption of the Dobson Tower preferred stock accounted for as
minority interests.
(3) This reflects:
- the net impact of the elimination of deferred financing costs associated
with the redemption of $160.0 million aggregate principal amount of the
Company's 11 3/4% senior notes with funds borrowed under the Company's New
Credit Facility;
- the elimination of $8.7 million of deferred financing costs associated
with the refinancing of the current DOC and DCOC credit facilities and the
Company's senior notes; and
- the capitalization of $16.0 million of costs related to the Company's New
Credit Facility.
(4) This reflects the distribution of all of the outstanding capital stock of
Logix to the Company's current shareholders.
(5) This reflects the Company's purchase of a 50% interest in the American
Cellular joint venture.
For each $1.0 million aggregate principal amount of Notes that are not
purchased by the Company pursuant to the Offer to Purchase, the Company's
indebtedness under the New Credit Facility would be reduced by $1.13
million.
16
<PAGE>
(c) Exhibits
The following exhibit is filed as a part of this report:
Exhibit
NO. DESCRIPTION
99.2 Press Release of the Company,
dated December 14, 1999
- -----------------
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
December 14, 1999 Dobson Communications Corporation
(Registrant)
By /s/ Everett R. Dobson
------------------------------
Everett R. Dobson
President and Chief
Executive Officer
<PAGE>
EXHIBIT 99.2
DOBSON COMMUNICATIONS COMMENCES TENDER OFFER FOR $160
MILLION OF ITS OUTSTANDING 11 3/4% SENIOR NOTES
OKLAHOMA CITY, Ok., December 14, 1999 -- Dobson Communications
Corporation announced today that it has commenced a tender offer and consent
solicitation for any and all of its outstanding $160 million 11 4/4% Senior
Notes due 2007 (the "Notes").
The tender offer and consent solicitation are subject to the terms and
conditions in the Offer to Purchase and Consent Solicitation Statement dated
December 14, 1999. The tender offer will expire at 12:00 midnight, New York
City time, on Wednesday, January 12, 2000, unless extended. The consent
solicitation will expire at 5:00 p.m., New York City time, on Tuesday,
December 28, 1999, unless extended (as so extended, the "Consent Solicitation
Expiration Date").
The total consideration offered in the tender offer and the consent
solicitation will be determined based on the yield to the earliest redemption
date using a fixed spread of 62.5 basis point over the bid side yield on the
6-5/8% U.S. Treasure Note due April 30, 2002, plus accrued and unpaid
interest, and will be calculated on the second business day immediately
preceding the expiration date of the offer.
Dobson Communications is also seeking consents from the registered
holders of the Notes to certain proposed amendments to the indenture relating
to the Notes. The amendments will eliminate substantially all restrictive
relating to the Notes. Holders will be required to tender their Notes in
order to consent to the proposed amendments, and holders will be required to
consent to the proposed amendments in order to tender. Holders who deliver
consents on or prior to the Consent Solicitation Expiration Date will receive
a consent payment of $30 per $1,000 principal amount of Notes. The total
consideration for timely tender and consent includes the $30 consent payment.
Holders who tender their Notes after the Consent Solicitation Expiration
Date will receive the total consideration minus the consent payment.
Payment for tendered Notes and consents will occur promptly after the
expiration date of the offer.
Dobson Communications is a leading provided of rural and suburban
cellular telephone services.
<PAGE>
Lehman Brothers Inc. is the Dealer Manager for the tender offer and the
consent solicitation. Lehman Brothers can be reached at (212) 528-7581 or
(800) 438-3242. Requests for assistance or additional sets of the tender
offer and consent solicitation materials may be direct to MacKenzie Partners,
Inc. at (212) 929-5500 or (800) 322-2885.
This announcement is not an offer to purchase, a solicitation of an
offer to purchase or a solicitation of consents with respect to, the Notes.
The tender offer and consent solicitation are being made solely by the Offer
to Purchase and Consent Solicitation Statement dated December 14, 1999.
Certain statements contained in this release are forward looking and
involve risks and uncertainties. Those risks and uncertainties include, but
are note limited to, the effect of general economic conditions, impact of
competitive products and pricing, general product demand, industrial
production and the other factors disclosed in Dobson Communications' filings
with the Securities and Exchange Commission.
